Analysis of Strategic Issues, Justification, and Evaluation of the Choice of Analytical Models - Assignment Example

Strategic Management College: Part Analysis of current strategic issues, justification, and evaluation of the choice of analytical models Key Strategy Issues Opportunities The Company has a strong product pipeline that focus on American Food and Drug Administration (US-FDA) and Medicine and Health Products Regulatory Agency (UK-MHRA) providing the firm with an opportunity for approved quality products in critical therapeutics as oncology and diabetes. The firm’s facilities in Jordan and Saudi Arabia have been successfully inspected by the FDA that provides the capability to produce products for the United Sates Markets as well as in the MENA region at lower costs. Threats Fierce competition from competitors coming up effective drugs Analytical models: SWOT and Porters’ Five SWOT Model of Hikma SWOT analysis is an organized planning method used to scrutinize the strengths, weaknesses, opportunities and threats involved in a particular project in a business undertaking. In this case, the SWOT analysis is advantageous to help me develop a strong Hikma business strategy by making sure that I have considered all business strength and weakness besides opportunities and threats it faces in the marketplace. SWOT analysis will help Hikma Pharmaceutical to assess a changing environment and respond proactively by using the noted strengths to maximize the opportunities (strength-opportunities strategies), and using the strengths to minimize the threats (strength-threats strategies) and using the opportunities identified to design strategies that will minimize weaknesses (weakness-opportunity strategies) as well as avoid threats (weakness-threats strategies). Strength The Company has a powerful combination of quality products and extensive sales and marketing capabilities that gives the firm a competitive advantage in the Middle East and North Africa (MENA). In addition, the Company possesses a successful research and development team and has attractive licensing partners. The Company identifies and develops new generic pharmaceutical products. Weaknesses The company chief weaknesses are its large reliance on the UK’s market for revenue generation, high reliance on few blockbuster drugs and limited presence in the emerging markets. Opportunity The Company has a number of opportunities that can make it strategically develop. The company partners with multinational pharmaceutical companies seeking access to the fast growing MENA markets (Hitt, Hoskisson & Ireland, 2013). In addition, the company has a strong product pipeline that is focused on FDA approved and high-quality products in critical therapeutic areas such as diabetes, cardiovascular disorders as well as oncology (Darwazah 2010, p. 34). The firm’s facilities in Jordan and Saudi Arabia have been successfully inspected by the FDA that provides the capability to produce products for the United Sates Markets as well as in the MENA region at lower costs. The company faces such threats of stringent drug developments guideline. In addition, there is a fierce competition for the products arising from the coming up effective drugs from such competitors like Abbott Laboratories Ltd, 3M Health Care Ltd and Allen and Hanburys Ltd. The strict government policies relating to the pharmaceutical industry is also a threat to the Hikma Pharmaceuticals Porters Five Forces Model for Hikma The models are helpful to marketers and business managers to determine the balance of power in a market between different types of organizations and to analyze the attractiveness and potential profitability of an industry sector. It is a strategic tool designed to give a global overview, rather than detailed business analysis technique. It is relevant in this discussion to help me review the strengths of a market position based on the five forces. Bargaining Power of Supplier Hikma has slighter bargaining as the competition is high and hence a need to capture the market through considerable increasing its market share Bargaining Power of Buyers The bargaining power of buyers is high since there are a lot of players in the market offering similar medicines Threat of Substitutes The threat of substitutes is high since there are many players and all of them come up with effective products after Research and Development Threats of New Entrants There is high competitive rivalry due to many players in the market. There are companies competing with Hikma Sanofi-Aventis, GlaxoSmithKline, Novartis, Spimaco, Pharco, Johnson & Johnson, Bayer, and AstraZeneca. Rivalry amongst other Firms As more and more companies are in existence or entering the sector, competition among the firms will increase which will culminate to a cut-throat competition to the pharmaceutical industries. Part 2: Critical analysis of expansion strategy and application of the chosen model From the key strategies identified the Company needs to expand through maximizing the opportunities. The firm’s facilities in Jordan and Saudi Arabia have been successfully inspected by the FDA that provides the capability to produce products for the United Sates Markets as well as in the MENA region at lower costs (Oxford Business Group, 2007). The SWOT analysis reveals that Hikma Pharmaceutical stands a better chance of expanding to United Sates based on the opportunity presented by the inspection and approval by FDA (Darwazah 2010, p. 76). On the other hand, Potters Five analysis revealed that the Company suffers from the threats of new entrants as well as that of close substitutes ()Gore, 2014. Therefore, the firm must just expand to United States where it will produce at lower costs to increase its productivity and hence profitability. The Company should employ strength-opportunities strategies as revealed by the SWOT analysis. The Company needs to capitalize on such strength as possession of a successful research and development team and has attractive licensing partners. Through the successful R&D team, the company must undertake a thorough analysis of the United Markets and MENA regions and maximize on the low-cost production opportunity noted. In addition, Hikma Pharmaceutical PLC should approach the United Sates market through its strength of identifying and developing new generic pharmaceutical products (Darwazah 2010, p. 34). From the case study, Hikma Pharmaceuticals PLC is a multinational group focusing on the developing, manufacturing and marketing a number of both branded and non-branded generics as well as in-licensed Pharmaceutical products and it is noted to be currently operating in United States, MENA and Europe. The Company strength-opportunity strategy should help focus on United States and MENA as these other places are already saturated. In addition, the case study reveals that Hikma has acquired Promopharm in MENA. The Company should employ the opportunities revealed the SWOT analysis based on strength-opportunity strategy to maximize its profitability in the MENA markets that have continued to be underpinned by the promising demographic of young and fast growing population with an increasing life expectancy in MENA creating a large population of ageing population that further presents potential markets for the products (Darwazah 2010, p. 45). Hikma should also employ its strength of R&D experts to ascertain the how opportunities of producing generic diabetes medicines will be produced in order to meet the ever changing lifestyles in MENA that have culminated into increased incidences of chronic diseases (MEED, 1985). Hikma should also adopt strength-threats strategy to compete favorable in the global market. The SWOT and Potter’s Five model reveals that Hikma faces fierce competition with competitors coming up with effective substitute products. On the other hand, SWOT model uncovers that Hikma has strength of attractive licensing partners and a powerful combination of quality products and extensive sales and marketing capabilities that gives the firm a competitive advantage in the MENA region (Darwazah 2010, p. 39). Accordingly, the case study unearths that Hikma developed a successful partnership at a global level that culminated into increased penetration and supported investment in manufacturing large volume of innovative and generic pharmaceuticals. The company should thus weed out the threats of new entrant and fierce competition by exerting more efforts to these partnerships. As revealed by Potter’s Five analysis, competing in quality may not work since there is higher bargaining power of both suppliers and buyers. The firm can maximize on such partnership in order to maximize its penetration and trashing out the competitors that have invested in equal measures on R&D hence coming up with effective drugs. The firm thus should enter into more partnership besides Zentaris (perifosine) and Vifor Pharma (Ferinject) since this strategy will help the firm minimize the threats that of new entrants and rivals among the firms. Thus, Hikma’s expansion is greatly embedded in the development of successful partnership that will culminate into increased access to new products as well as new technologies besides giving the firm a competitive advantages to encounter its competitors (Darwazah 2010, p. 93). Potter’s Five model with respect to bargaining power of suppliers reveals that Hikma has slighter bargaining as the competition is high and hence a need to capture the market through considerable increasing its market share (Darwazah 2010, p. 54). On the same levels, SWOT model based weaknesses reveals that the company chief weaknesses are its large reliance on the UK’s market for revenue generation, high reliance on few blockbuster drugs and limited presence in the emerging markets. Based on this position, the firm should employ the opportunities identified to design strategies that will minimize weaknesses (weakness-opportunity strategies) in order to expand globally. Accordingly, the Company seemed to have noted this with a lot of concern based on Mr. Khalid Nabilisi, Chief Financial Officer’s remarks, ‘we do not want to be viewed as a MENA company anymore, we want to be viewed as emerging markets company, so we established a Joint Venture in Ethiopia and looking into more countries like Russia and Eastern EU companies, so we are looking ahead to be an EMEA company.’ Based on this fact, the Company should use such lucrative opportunities it has to eliminate weakness noted. The company should expand globally through strength-opportunities strategies like manufacturing capabilities, expert R&D teams and marketing personnel as well successful partnering to achieve a global image. In addition, from the SWOT model, the company has a promising opportunity for a range of multinational pharmaceutical companies’ partners seeking access to the fast growing MENA markets (Darwazah 2010, p. 42). Consequently, Hikma should use this opportunity to ensure an exchange partnership where it will be able to allow these partners to penetrate MENA markets as it penetrates their respective countries markets. In so doing, the firm a successful opportunity to expand and acquire a global rankings (Darwazah 2010, p. 60). In addition, this weakness-opportunity strategy will enable the firm to eliminate being perceived as MENA but EMEA. Therefore, the company will not be threatened by reliance on UK markets for revenue generation as well the less bargaining power it has with respect to suppliers and buyers (Gillespie & Hennessey, 2011). The firm will thus be able to attract many buyers on a globally perceptive leading to increased revenue based on this support its expansion. In addition, the firm can weed out the dependency in UK by maximizing on the Generic products in United States as per the FDA (Hill & Jones, 2012). Particular with the noted increased competition in United States, weakness-opportunities can still be applied to face the competitive market. The firm has developed a leading generic injectable venture driven by highest quality products (Darwazah 2010, p. 29). Through this opportunity, and with the Company’s higher manufacturing capability, the firm can develop the products portfolio, manufacturing capacity, global footprint as well as technical capability. The Company should maximize on the acquisition of injectable manufacturers to increase its productivity with the condensed overhead costs, headcount, upgrade the facilities as well as expand the firm’s product portfolio to a global degree. Such a strategy will eliminate its weakness of relying on UK markets as revealed by the SWOT models leading to increased transformational impact on the firm’s global injectable venture by a continuous doubling of sales and manufacturing capacity. The injectable business seems lucrative as it has been thumped by Mr. Nassar on his remarks affirming the feasibility of the injectable due to the penetration of some Indian pharmaceuticals firms. Such Indians firms promote generics and compete through pricing strategies in various markets. The firm should counteract such competition through acquisition of a specialized lyophilisation plants. Based on the SWOT analysis, the firm has a strength of manufacturing quality pharmaceuticals. However, the firm faces a threat as revealed by Potter’s Five model and SWOT of stringent government regulation (Darwazah, 2010, p. 67). In order for Hikma to penetrate the US market, there is a need to use the US-FDA approved firms and seek to register every firm with the Ministry of Health and get approvals from US-FDA. Also, the Company and its acquired manufacturers must ensure compliance with FDA in every aspect of its operation right from molecules, manufacturing process, raw material, and clinical bioavailability test. In so doing, the Company will be perceived as the highest quality manufacturing and will be deemed fit for penetrating United States markets. Accordingly, the Company shall have used its strength to maximize on the opportunity and minimized its threats (Reuters, 2014). In addition US-FDA approval is a two-fold package; the Hikma brand image will be enhanced via quality as consumers are aware of the stringent compliance requirement thus necessitates documentation hence a good reputation of the firm culminating to increased penetration and thus market share. On the other hand, FDA approval will directly allow the Company to penetrate the market as it present avenues for setting necessary guidelines depicting high-quality manufacturing. Part 3: Recommendation and Conclusion In my recommendation, I use the Potters Generic model to focus on competitive strategies. The pharmaceutical industry is saturated, and hence the Hikma’s profitability is strongly embedded on the firm’s attractiveness (Quelch, 2001). Accordingly, the significance secondary determinant is the Hikma’s position within the Pharmaceutical industry. As revealed in the SWOT model, the company has attractive strengths that if leveraged well will help Hikma’s positions itself effectively in the industry. The firm’s strengths shrink into the cost advantage and differentiation that help effectively compete in the saturated industry. Application of the firm strength thus leads to three generic strategies as cost leadership, focus, and differentiation (Kossowski, 2007). The three strategies are applicable at the firm’s level since they are not firm or industry dependent. However, in this context I will recommend differentiation strategy for Hikma Pharmaceutical PLC as a competitive strategy. Hikma should develop differentiated products with unique attributes based on their strength such as R&D team, expert sales and marketing personnel, high manufacturing capability and high manufacturing quality and ability to control some niches both in MENA and US markets. The customers will thus perceive such products as the best and differentiated from competitors (Thomas, 2014). Accordingly, the firm may charge extra prices to offset differentiation costs. In addition, the firm should mainly focus on the injectable as generic product market is saturated by Indian firms competing in pricing strategies (Jamali & Sidani, 2012). Differentiation may help Hikma overcome the higher bargaining power od supplier even when suppliers raise prices as it can pass the burden to customers who may then fail to find the products’ substitutes (Sadler & Craig, 2003). Hikma will thus develop such internal strengths as access to leading scientific research, high skilled and creative product development team, as well as corporate reputation for quality and innovation (Smith, 2002). In addition, the firm will benefit from the increased strong sales team accompanied by the ability to successfully communicate the perceived strengths of the products. Reference Darwazah, S. (2010). Building a Global Success: the Story of Samih Darwazeh and the Rise of Hikma. Hudson Books, Gillespie, K., & Hennessey, H. D. (2011). Global marketing. Australia: South-Western Cengage Learning. Gore, K. (2014). WKRB. Hikma Pharmaceuticals Plc Rating Reiterated by Oriel Securities Ltd (HIK), 2-3. Hill, C. W. L., & Jones, G. R. (2012). Strategic Management. Cengage Learning. Hitt, M. A., Hoskisson, R. E., & Ireland, R. D. (2013). Strategic management: Competitiveness & globalization : cases. Mason, OH: South-Western, Cengage Learning. Jamali, D., & Sidani, Y. (2012). CSR in the Middle East: Fresh perspectives. Basingstoke: Palgrave Macmillan. Kossowski, A. (2007). Strategic management: Porters model of generic competitive strategies - theory and analysis. München: GRIN Verlag GmbH. MEED. (1985). London: Middle East Economic Digest. Oxford Business Group. (2007). The Report: Emerging Jordan 2007. London: Oxford Business Group. Quelch, J. A. (2001). Cases in strategic marketing management: Business strategies in Muslim countries. Upper Saddle River, NJ: Prentice Hall. Quelch, J. A., & Bartlett, C. A. (2006). Global marketing management: A casebook. Australia [etc.: Thomson. Reuters. (2014). Hikma Pharma Says U.S. FDA Issues Warning On Portugal Plant. Business Insiders , 1-2. Sadler, P., & Craig, J. C. (2003). Strategic management. London: Kogan Page. Smith, M. C. (2002). Pharmaceutical marketing: Principles, environment, and practice. New York: Pharmaceutical Products Press. Thomas, H. (2014). Pharma Firm Hikma Could Suffer Drug-Withdrawal Pain: Firms Fortunes in 2014 Could Rest on Sales of Antibiotic Doxycycline. The Wall Street Journal , 1-3. Read More