Does Genzyme’s focus on orphan drugs make sense? Do you think Genzyme has a long-term strategic intent?
The fact that Genzyme focused on orphan drugs can be doubtful, but I believe that such an approach was rather lucrative for the organization. Of course, it cannot be denied that it was rather risky to consider only orphan drugs because some other company might have the same focus, which would lead to conflict and great competition. Except for that, the drugs could be imitated or/and brought to the US from abroad.
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Finally, such a product may require a new different technology that is not present in Genzyme. Still, such an approach meant that the organization could focus on narrowly targeted needs instead of grasping numerous capabilities. It can save spending using small-scale production equipment. The number of personnel can also be limited, and advertising costs reduced. Moreover, these drugs do not need much investment in clinical testing facilities.
I believe this focus was a long-term strategic direction, which showed that the company is struggling to offer a treatment that can help people who have some rare healthcare problems. This market is not as competitive as others; that is why Genzyme is likely to receive great profit. It has good chances to become a leader in the market that is neglected by other organizations due to the low competition.
A long-term strategic direction can also be proved by the division of the businesses in different areas of medicine, as Genzyme can reach more customers in this way, adapting to their needs. Except for that, it ensures the acquisition of blockbusters and receives previously unapproachable opportunities due to the patents under the Orphan Drugs Act (Schilling 2010). Thus, it seems to be more logical to consider that the company has long-term intent.
Why do you think Genzyme has diversified into other areas of medicine? What are the advantages and disadvantages of this?
To my mind, the decision made by the organization to diversify into different areas of medicine was made in order to become a leader in the biotech market and improve its performance, receiving a reliable source of finances. Genzyme pays much attention to its research and development department, which allows creating a new medicine for rare illnesses, so it got an opportunity to support it with additional funds. Such diversification was also beneficial as it enabled to omit technology licensing. Now the organization can produce and sell the treatment without external help utilizing their own discoveries and innovations.
Of course, it may be riskier than licensing because no one can be 100% sure of the outcomes and say that in the future is drugs will be in demand. However, the amount of investment is likely to be appropriate. In the case of the drug being successfully sold, Genzyme will have increased income that will remain within the company as it is doing its own production and sales. Unfortunately, it may be difficult for the organization to find a pharma partner due to its new focus.
Research and development costs will be increased but nor spent on open innovation. Finally, the core organizational strategy may pale into insignificance because the focus on orphan drugs requires enormous efforts and lots of alterations. Still, Genzyme received an opportunity to develop its own unique medicines meant to treat many different diseases and illnesses. The company found new ways to capture more market share and became independent from other organizations that previously affected its operations, which improved its competitive advantage (Schilling 2010). It received a strong, focused strategic direction that ensures future profitability and sustainability and allows to dominate the market in future.
Schilling, M 2010, Strategic management of technological innovation, McGraw-Hill Higher Education, New York.