Strategic ManagementNeha kalal2nd Semester (2016)DOPM, NIPER

Flow of Presentation

What Is Strategic Management?

Stages of Strategic Management

Hierarchy of Strategy

Benefits to a Firm That Does Strategic Planning

Why Some Firms Do No Strategic Planning

Case study: Sun pharma’s growth model

What Is Strategic Management?

Defining Strategic ManagementStrategic management can be defined as the art and science formulating implementing evaluating cross-functional decisions that enable an organization to achieve its objectives.

Stages of Strategic Management

Strategy formulation

Strategy implementation

Strategy evaluation

Strategy formulation

Where do we want to be? Vision Mission External opportunities and threats Internal strengths and weaknesses Long-term objectives Generating alternative strategies

Vision & Mission

Mission

Vision

Vision without Action is a Daydream,Action without Vision is a Nightmare.

“What do we want to become?”

“What is our business?”Vi

sion

Mission

Vision

We want to become the indisputable leader in our industry- not simply in terms of size, but in how we use that size to achieve our mission and improve the quality of human life

Lupin pharmaceuticals is committed to bringing

innovative products for the healthcare professional to improve the health and well being of individuals

To become a center of excellence in the manufacturing of quality, affordable and newer medicines

Mission

Our global quest is to improve the quality of human life by enabling people to do more, feel better and live longer

Lupins mission is to become a transnational pharmaceutical company through the development and introduction of a wide portfolio of branded and generic products in key markets

To sustainably avail affordable and efficacious medicines in order to improve the quantity and quality of life

Key External ForcesEconomic forces

Social, cultural,demographic, and natural environment forces

Political, legal, and governmental forces

Technological forces

Competitive forces

Competitive Analysis: Porter’s Five-Forces Model

Strategic

management

Finance/accounting

Integratingmgmt

Marketing

Production/operation

R & D

Information systems

Key Internal forces

Strategy implementation

Often is called the “action stage” How do we get there? Establish annual objectives Devise policies Motivate employees Allocate resources

Types of Strategies

1.Vertical integration strategies

Forward Integration Gaining ownership or increased control over

distributors or retailers in late 2009, PepsiCo acquired and combined its two

largest independent bottlers for $7.8 billion–PepsiAmericas and the Pepsi Bottling Group.

Backward Integration

Seeking ownership or increased control of a firm’s suppliers

The acquisition of Indian API manufacturers by Mylan and Watson, both large US finished formulation companies

Backward integration strategies that some hospitals are pursuing include acquiring ambulance services, waste disposal services, and diagnostic services

Horizontal Integration

Seeking ownership or increased control over competitors

Pfizer acquires Wyeth for $64.2 billion in cash and stock in 2009, both are huge drug companies

2. Intensive Strategies

Market Penetration Seeking increased market share for present products

or services in present markets through greater marketing efforts

Coke spending millions on its new slogan “Open Happiness”

Market Development

Introducing present products or services into new geographic area

Sun Pharma buys Novartis brands for Rs 1,900 cr

Dilip Shanghvi, Managing Director, Sun Pharma, said that Japan was a strategic market for the company.

“This acquisition marks Sun Pharma’s foray into the Japanese prescription market and provides us an opportunity to build a larger product portfolio in the future,” he added

Product Development

Seeking increased sales by improving present products or services or developing new ones

Akumentis pharma’s Newbona jelly was a modification in the existing anti-osteoporotic alendronate tablet formulation.

3. Diversification Strategies

Related Diversification

Adding new but related products or services

Eli Lilly also complements its drug business with an animal health unit that brings in more than $2 billion annually.

J&J operates in consumer, pharmaceutical and medical devices and diagnosis segment

Roche’s full takeover of Genentech re-emphasized its focus on biological products to treat cancer

Unrelated Diversification

Adding new, unrelated products or services

Cadila pursued an aggressive and imaginative new product planning and development strategy and reaped rich dividends.. But they tried to diverisfy in totally unrelated areas of manufacturing colored television and mopeds.

A pharma company diversifying into OTC healthcare products, hospital products and medical devices and animal healthcare products are recommended diversification strategy

4. Defensive Strategies

Retrenchment

Regrouping through cost and asset reduction to reverse declining sales and profit

Novartis chairman vows to preserve top R&D budget in retrenchment

The new strategy--overseen by a unique special committee--has already led to some significant alterations, especially with the closure of its research unit in Horsham, U.K., and some shifting of jobs and personnel in the U.S. The company has reportedly laid off thousands of staffers in recent months, including 500 at its home base in Basel

In the face of fierce competition from generic drug makers.

Pfizer's decision to cut 10,000 jobs worldwide, which will save up to $2 billion a year.

Divestiture

Selling a division or part of an organization

Allergan divested its generic business to TEVA pharmaceuticals for $40.5 billion

Liquidation

Selling all of a company’s assets, in parts, for their tangible worth

The Strategy-Formulation Analytical Framework

STAGE 1: THE INPUT STAGE •External Factor Evaluation (EFE) Matrix

•Competitive Profile Matrix (CPM)•Internal Factor Evaluation (IFE) Matrix

STAGE 2: THE MATCHING

STAGE

•SWOT Matrix•Strategic Position and Action Evaluation (SPACE) Matrix•BCG Matrix•Internal-External (IE) Matrix•Grand Strategy Matrix

STAGE 3: THE DECISION STAGE

•Quantitative Strategic Planning Matrix (QSPM)

Strategy evaluation

Reviewing external and internal factors that are the bases for current strategies

Measuring performance Taking corrective actions

Success today is no guarantee of success tomorrow!

Strategy-Evaluation Framework

Strategy evaluation• ABC• ROI• EPS• ROE

Measuring performance

• Financial performance• Customer knowledge• Internal business perspective

• Innovation & Learning

Balanced Scorecard

• Evaluate Current Performance Results

• Scan and Assess the internal & External Environment

• SWOT

Strategic Audit

29

Hierarchy of Strategy

Functional

Business

Corporate

Grand Strategies• Growth• Stability• Retrenchment

Generic Strategies• Low cost• Differentiation• Focus

Functional Strategies• Marketing• Product• Financial etc

Strategies Tools of Analysis

• Industry Analysis• SWOT Analysis

• SBU Analysis (BCG Matrix)

• Functional Analysis

Benefits to a Firm That Does Strategic Planning

Financial Benefits

Businesses using strategic-management concepts show significant improvement in sales, profitability, and productivity compared to firms without systematic planning activities

High-performing firms seem to make more informed decisions with good anticipation of both short- and long-term consequences

Nonfinancial Benefits

It allows for identification, prioritization, and exploitation of opportunities.

It provides an objective view of management problems. It represents a framework for improved coordination and

control of activities. It minimizes the effects of adverse conditions and changes. It allows major decisions to better support established

objectives. It allows more effective allocation of time and resources to

identified opportunities. It allows fewer resources and less time to be devoted to

correcting erroneous or ad hoc decisions.

Why Some Firms Do No Strategic Planning

Lack of knowledge in

strategic planning

Poor reward structures Firefighting

Waste of time Too expensive Laziness

Content with success Fear of failure Overconfidenc

e

Knoll pharma (1996)

Tamilnadu Dadha

pharmaceuticals (1997)

Natco pharma (1998)

Gujrat Lyka Organics (1999)

Milmet (1999)

Pradeep drug company

(2000)

MJ Pharma (2002)

Phlox Pharma (2004)

Women first healthcare

(2004)

ICN (2005)ABLE

Laboratories Inc (2005)

Chattem Chemicals Inc

(2008)

Inwood Laboratories

(2009)

Taro (2010)

Caraco (2010) MSD (2011)

Dusa pharmaceutic

al (2012)

URL Pharma (2013)

Ranbaxy Lab (2014)

InSite Vision (2015)

Case study: Sun pharma’s growth strategy

(1996) Knoll PharmaBuys an API plant in Ahmednagar, Maharashtra from

Knoll Pharma

(1997) Tamilnadu Dadha Pharmaceuticals LimitedAcquires Tamilnadu Dadha Pharmaceuticals Limited,

initiating entry into oncology and gynaecolog

1998Natco Pharma Ltd.

Acquires select products from Natco Pharma, initiating entry into chest and respiratory therapy areas

(1999) Gujarat Lyka OrganicsCompletes 100 % takeover of Gujarat Lyka Organics.

Acquire Cephalexin and 7ADCA actives manufacturing site. Initial stake investment in 1996

(1999) MilmetAcquires Milmet Laboratories, India

initiating entry in ophthalmology

(2000) Pradeep Drug CompanyAcquires Pradeep Drug Company, India

(2002) MJ PharmaCompletes 100 % acquisition of MJ Pharma, having

a plant with US FDA and UK MHRA approvals for oral dosage forms. Initial stake investment in 1996

(2004) Phlox PharmaAcquires Phlox Pharma, a manufacturer of

cephalosporin API, holding USA and European approvals

(2004) WOMEN'S FIRST HEALTHCAREAcquires products from Women's First

Healthcare

(2005) ICNAcquires Alkaloida’s controlled substance API

and dosage form manufacturing plant

(2005) Able Laboratories Inc.Acquires the controlled substance

manufacturing assets of Able Laboratories Inc.

(2008) CHATTEM CHEMICALS INCBuys Chattem Chemicals, Inc., a manufacturer

of controlled substances with an API facility

(2009) INWOOD LABORATORIES, INC.Acquires products from Forest Lab's Inwood Division

(2010) TaroAcquires majority stake in Taro Pharmaceutical

Industries Limited, a multinational generic manufacturer with an established North American presence and a strong franchise in dermatology

(2010) CaracoCompletes 100 % acquisition of Caraco

Pharmaceutical Laboratories. Initial stake investment in 1997

(2011) MSDSigns joint venture with MSD with a focus on

emerging markets

(2012) Dusa PharmaceuticalsAcquires a developer of a

dermatological device used to treat actinic keratoses

(2013) URL PharmaAcquires a comprehensive list of

ANDAs and generic products from Takeda Pharmaceuticals

(2014) Ranbaxy Laboratories Limited

Acquires Ranbaxy in a US$ 4 billion landmark transaction to create the

world’s fifth largest speciality generic pharma company