Introduction
AstraZeneca Plc is a world leading multinational pharmaceutical company based in the UK and Sweden. It is an international, innovation-driven biopharmaceutical business. The company is science-led biopharmaceutical organization employing about 61,500 employees worldwide. Millions of patients around the globe use its innovative medicines. AstraZeneca activities span the whole life cycle of a drug, from development and research to supply and manufacturing to international sales and marketing of specialty care medications that transform lives and offering primary care. AstraZeneca’s focus is the discovery, development, and monetization of prescription drugs for six vital areas of healthcare are respiratory and inflammation, neuroscience, gastrointestinal, cardiovascular, oncology, and infection.
The company has a presence in more than 100 countries and millions of patients use its innovative medications globally. The huge size of big pharmaceutical companies (like AstraZeneca) and the increasing complexities of the technologies and processes involved in their daily operations present numerous organizational and managerial challenges. For AstraZeneca, its global business strategy is efficient and sustainable, mainly because the existing distribution system is highly costly and complex due to the scale of their operations and modus operandi. The objective of this paper is to analyze the effectiveness of AstraZeneca’s global business strategy vis-à-vis the company’s sustainability, in order to identify existing management challenges and possible solutions. The company’s existing business model and supply chains are two important business functions that will be used to analyze the sustainability of AstraZeneca’s global business strategy.
Brief History of Astrazeneca
AstraZeneca’s origin can be traced back to the years 1913 when Astra was an independent and relatively localized company based within Sodertalje, Sweden. During its initial years, the company focused mainly on retail and distribution of drugs. It was not until the late 1930s that AstraZeneca begun its first small-scale research initiatives. In 1939 and 1942, AstraZeneca acquired a number of factories, gradually making it the largest pharmaceutical company in Germany. Since the 1990s, AstraZeneca Inc. experienced an exponential rise in the costs of producing new drugs. The company’s leadership team begun to search for strategic partners believing that AstraZeneca required a more international platform for the future. Within a rather short period, AstraZeneca became a huge conglomerate and emerged as an industry leader in the global pharmaceutical industry. According to Mordock (2016), through mergers and acquisition AstraZeneca evolved relatively fast from a medium size company in Sweden to one of the fourth biggest pharmaceutical company globally. From that period of initial growth, AstraZeneca adopted mergers and acquisition as its preferred method of growth and penetration into new markets.
The integration of the two companies’ worldwide organizational activities post-merger called for some major structural changes. Consequently, the integration led to the formation of a new group arrangement, whereby a much-widened geographical scale was realized. Specifically, while a new focus was starting to be placed on the Asia Pacific, Latin America, and the Middle East as younger markets with greater growth potential in the long term, the USA, Canada, and Europe remained the three largest and most mature markets for the group. Hence, across these six markets, the overall emphasis was still placed on the North and three worldwide strategic innovation centers in Sweden, the UK and the USA were responsible for the most advanced drug research for the Northern market. This period of operation can be characterized as a part of the North-North wave, with the main objective of HBKA-N. The next section focuses on exploring R&D activities of AZin China in the context of the North-South, South-South, and South-North waves, and HBKE-S, LBKE-S, and HBKA-S objectives respectively.
Astrazeneca’s Global Business Strategy
AstraZeneca declared mission is ‘to make a meaningful difference to patient health through great medicines that bring benefit for patients and add value for the stakeholders and society’. The strategy developed by the company on this purpose includes a series of key directions meant to ensure excellent productivity in R&D (research and development), increased external collaboration, global orientation, stronger customer orientation, operational efficiency with a flexible cost basis’. The foundations of the business model are cemented in sustainability; by providing healthcare to millions of people, they are already contributing to the third United Nations Sustainable Development Goal of “Good Health and Well-Being.”
Additionally, AstraZeneca has three main sustainability and responsibility goals. These are depicted in the infographic and they centered on increasing the volume of healthcare provided around the globe, minimizing their environmental impact, and promoting ethics and transparency in all communities. The pharmaceutical industry is in a state of rapid change and internationalization and is constantly being impacted by the dynamic shifts in the market. Like all other companies in this industry, AstraZeneca is not exempt from industry shifts: For example, its current business model of vertical integration from the laboratory the pharmacy is evolving to a more fragmented model with different players active in all segments of the value chain. Characteristically, the operating and business models used by pharmaceutical companies have been extremely complex.
Discussion
The internationalization of firm has been a major topic in international business studies. Multinational companies dominate the pharmaceutical industry. The largest firms are based in a small number of countries, mainly the US, the UK, Japan, France, Germany, and Switzerland. All major companies have substantial operations in several countries. R&D activities still tend to be concentrated to a few countries, whereas sales and marketing units are spread worldwide. The industry is founded on its research and development (R&D) and almost all new drugs that reach the market are the result of private R&D (Sun 2013). The individual pharmaceutical companies base their competitiveness, in particular, on their capability to produce new inventions that are patentable and can generate new medicines and drugs (Yeoh and Roth 1999). Long run success requires a steady stream of new medicines and drugs, of which some must generate substantial profits when they are marketed to cover the high R&D costs. This implies that the pharmaceutical industry is an industry characterized by a high degree of novelty compared to other industries (Górak-Sosnowska 2016). Another defining characteristic is that a high share of the profits is ploughed back in the R&D process.
Challenges Faced by the Company
While a number of issues witnessed by the pharmaceutical company stem from its management strategy, the main challenge is on the receptiveness as it tries to expand to foreign countries. The increasing competition has forced the firm to reconsider its approaches inside the target market and think about venturing into new areas as it tries to promote its products. However, the enterprise has experienced challenges stemming from client loyalty and the attitude towards its products. Sun (2013) explains that instead of buying medicine provided by the AstraZeneca, many target clients choose those offered by their home-based service providers. The challenge is similar to that faced by other multinationals globally who have witnessed a negative attitude after venturing into foreign nations. Many countries in new destinations prefer using medications that do not originate from western regions. Such a move has affected AstraZeneca’s plan and intention to be a leader in provision of medicine to individuals around the globe.
Another issue that has complicated the challenges faced by the company in some foreign destination is diplomatic relationships. While these disharmonies may not be pronounced, they greatly influence the buying behavior of individuals. Some countries in Islamic nations have a negative attitude towards medications offered by countries from Europe and North America. Cultural and religious differences are often the main factors that complicate the negative relationships evident among these countries (Górak-Sosnowska 2016). Due to the poor relationships, countries such as India and Cuba prefer using medicine manufactured in the country as compared to those from foreign destinations. The challenge continues to affect large companies such as AstraZeneca who have faced high competition within their home country and in other favorable destinations. One of the examples that signify the severity of poor diplomatic relationships on companies such as AstraZeneca is the disharmony that lowered willingness of Chinese nationals from purchasing drugs from Europe and the United States. Therefore, these complications have hindered the company’s ability to venture into new destinations.
Besides, the company has over the recent past suffered greatly from generic competition. Many of its leading drugs have become redundant after its competitors introduced substitutes at fair rates. Sun (2013) asserts that Nexium that focuses on gastrointestinal disorders, Seroquel, an antipsychotic, and Crestor, which lowers cholesterol are some of those affected by generic competition. These three drugs placed the company above its competitors such as Pfizer, GlaxoSmithKline, and Merck. However, in the recent times, these products have experienced declining sales, in a move that has significantly affected its position in the market. Such a development has also limited its bid to venture into new destinations and expand its market share. Apparently, the drugs outlined above accounted for more than 30% of the company’s revenue. Therefore, a decline in their sale implied that it has to suffer from high losses. Such challenges have led to dismissals of about 2,300 employees in a bid to minimize the cost of production and reduce additional losses (Sun 2013). The move is a complication, especially at a time when the company plans to broaden its market.
Corporate Functions to Tackle the Challenge
Some vital strategies that the company can take to minimize the challenge it faces comprise downsizing its foreign operations and studying the market trends. These strategies are useful if the corporation plans to outsmart competition and regain its dwindling dominance in the market. Already the firm has begun disposing some of its properties in regions such as the United States. The move aims at addressing the challenge and reducing the rising losses incurred by the firm. Mordock (2016) explains that the enterprise sold its headquarters in Delaware at a cost of $50 million in 2017 and its molecular antibiotics business in 2016 to Pfizer at $1.6 billion. Such strategies could help the firm sustain its operations as it tries to tackle generic competition. The move to layoff some employees is also a practical approach that the pharmaceutical enterprise utilized to address the current challenge.
Another solution that may help AstraZeneca Inc. tackle the challenge it currently faces is a careful scrutiny on market trends. By analyzing the industry extensively, the firm can project when to introduce new drugs and how to deal with the high competition posed by rival companies and generic developers. Overreliance on drugs such as Crestor and Nexium constitute some of the issues that plunged the enterprise into the current crisis (Sun 2015). As such, the pharmaceutical organization needs to look in to the changes in the market and develop products on time and as expected by the customers. Recently, some of its drugs have enjoyed a positive reception in the market and implication that with the right initiatives, the enterprise may address its challenges.
Lynparza and Tagrisso are some of the new creations that have generated significant revenues to the company in 2016-2017. These cancer treatments have enabled the company sustain some of its operations. Mordock (2016) asserts that in 2015, Tagrisso helped the company realize revenue totaling $133 million. The company management project that the newly developed drugs may help the company pass the $50 million mark by 2023, in a move that can help it restore its former position. In justifying, the essence of studying market trends the CEO, Pascal Soriot noted that AstraZeneca has started focusing on the right priorities and diversification strategies. According to the company management, the initiative has helped the firm reduce its production costs and sustain its operations even in the face of declining revenues.
Recommendations
The solutions outlined above are pivotal in addressing the challenges faced by the company as competition heightens. With the right guidelines, the enterprise can restore its declining sales and dominance in the market. Downsizing for instance has numerous benefits for enterprises, especially during challenging times. Bowers et al. (2017) argue that through the sale of redundant properties and dismissal of some staff members, firms acquire additional resources that can help them sail through the difficult times. The approach also helps companies reflect and devise new strategies useful in solving the present challenge. In the context of AstraZeneca Inc., the move is essential as it introduces additional revenues and helps it work on other productive approaches.
During the process of downsizing, the company released drugs that include those that generated additional revenues to the enterprise. Lynparza and Tagrisso emerged at a time when the firm was restructuring its operations and workforce (Mordock 2016). These drugs have helped the pharmaceutical company to sustain its operations. Therefore, the move is essential and wise, especially during modern times when pharmaceutical enterprises are under tight competition from generic and mainstream rivals. Market scrutiny is vital because it guides the activities initiated by the management in pharmaceutical organizations. Without the right planning, these firms may experience issues similar to those witnessed by AstraZeneca Inc. Due to poor planning from the management that led to overreliance on some drugs the company gradually lost its dominance in the market and incurred huge losses.
Such challenges would be minimal if the enterprise focuses on measures that help them analyze the market changes carefully. With the right knowledge on the trends in pharmaceutical industry, the organization can devise new approaches to deal with competitors that have greatly interfered with its activities. Imperatively, these initiatives are vital even for companies operating in other fields. Mahlich (2019) asserts that without effective research and development programs, enterprises are unable to withstand the complexities evident in modern markets. Therefore, to address the modern challenges effectively, AstraZeneca Inc. needs to improve its R&D operations so that they can understand the ever-changing client trends and new ways of managing competition.
Conclusion
The challenges and strategic issues faced by pharmaceutical companies imply that the industry will go through structural changes. The strategic choices for pharmaceutical companies comprise a large set of factors. For Sweden, an important consequence is that the companies need to make location choices and build networks that secure accessibility to knowledge, embodied by universities, biotechnology firms and other pharmaceutical firms. Industry conditions – including the increased costs associated with developing and marketing treatments, and the increased impacts of generics as licenses expire – are forcing AstraZeneca to prioritize operational efficiencies, as is the case with all other pharmaceutical firms. Given the workforce diversity AstraZeneca Global has to cope with, its overall policies have been adapted to the large variety of its employees’ background, educational and cultural differences, work experience, and skills. Therefore, the company has put a significant emphasis to implement its strategies on the workforce wellbeing at AstraZeneca Bulgaria and, in most of the cases; they constituted a step ahead and a model for similar undertakings in the region.
Reference List
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