Pfizer Pharmaceutical Company SWOT Analysis

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PFIZER SWOT ANALYSIS

PfizerPharmaceutical Company SWOT Analysis

AlthoughPfizer Pharmaceutical Company has achieved tremendous success in theindustry, continued problem in its leadership has posed a greatchallenge to the future success of the organization. Having been inthe industry for over 150 years, Pfizer has grown to become one ofthe leading pharmaceutical organizations in the world especiallybecause of its extensive investment in research and development(Pfizer Company, 2016). The engagement in extensive research hashelped Pfizer to innovate various blockbuster drugs such as Viagraand Lipitor. However, even with effective drug innovation, leadershipof the organization has not managed to keep the organization at parwith the increased competition in the industry. Pfizer faces stiffcompetition from some of the key players in the industry that includeMerck, Johnson &amp Johnson and Novartis Company and other new smallentrants into the industry. Pfizer has been able to maintain itsmarket share by having a strong brand with high customer loyalty,through continuous product promotion. However, the different changesthat are taking place in the pharmaceutical industry such as theshifting from one-size fit all drugs to DNA based drugs means thatthe leadership of Pfizer Company should embraced new strategies toalign its operation of the organization with the new changes in theindustry (Tempest, 2011).

Thisresearch paper provides a SWOT analysis of Pfizer putting more focuson different leadership issues facing the organization. The paperpresents some of the internal and external challenges that are facingthe organization because of lack of effective leadership in theorganization. Without a concerted effort by the leadership of theorganization to put the strategic plan, vision and mission intoeffect, it will be difficult for the organization to reach its fullpotential.

  1. Internal Strengths and Weakness

Strength

Oneof the factors that have enabled Pfizer to favorably compete in themarket is its high investment in research and development. For over150 years that Pfizer Company has been in the industry, it hascapitalized its success on blockbuster drugs (Pfizer Company 2016).The innovation of Lipitor and Viagra was a game changer that PfizerCompany was able to increase its revenue. The company has a highoperating capital and a team of highly competent personnel thatenables it to initiate new projects with ease. The long time thatPfizer Company has been in the industry has enabled it to develophigh brand equity and high customer loyalty which has been enables itcontrol a significant market share (Porter &amp Kramer, 2002).

Weakness

Oneof the major challenges facing the organization is its weak internalleadership. The leadership of the organization has not been effectivein keeping the operations of the organization at par with the changestaking place in the industry. Although the organization has beensuccessful in developing some of the top drugs in the market, themanagement has not maintained a pipeline of drugs which only leadsthe organization into reduced performance once patent is removed onits drugs. The leadership of the organization has not been able toachieve effective cost management in order to have enough resourcesto fund its research and development. According to Fayardet al (2012), one of the major challenges facing the pharmaceuticalorganization is the ever-rising cost of developing new drugs. Apartfrom the cost of R&ampD, Pfizer’s cost of operations comes fromthe inefficiency and the underperformance of some of its employees,because of lack of an effective system to monitor performance of theemployees. Although the large size of the Pfizer gives it theadvantage of conducting major projects in the industry, bigbureaucratic infrastructure is a weakness because it preventseffective communication and decision making in the Pfizer Company.

Analysisof the Opportunities and Threats based external environment

Opportunities

Changingindustry presents a good opportunity for Pfizer to expand itsoperations and reach a wider market. First and foremost, there hasbeen a high demand for quality drugs that has been contributed by theincrease in accessibility of information about drugs. Although Pfizeris one of the leading pharmaceutical Companies in the world, locatedin the United States, it has not managed to take strong roots in somemarkets in various parts of the world such as Asia and South America(Jain2016).In China, Pfizer operates in 30 cities but it has not enlarged itwidely in India and other countries in Asia. This shows that there isa room for improvement through mergers and acquisition, Pfizer has agreat opportunity to take over new markets across the world.

Threats

Oneof major threats facing Pfizer Pharmaceutical Company is the growingcost of conducting business. Pfizer’s success has majorly beenbased on introduction of blockbuster drugs which helps theorganization to control a wider market. However, the increase in thecost of developing new drugs means that Pfizer may face challenges intrying to develop new drugs. The expiring of patents on Pfizer’sdrugs is posing a great threat to the organization because it isleading to increase in generic drugs in the market. Increase ingeneric drugs in the markets affect sales of original drugs thusleading to low revenue. The adoption Medicare part D is also a threatto the performance of Pfizer because of the influence that theFederal government has acquired on the pharmaceutical industry.Medicare part D has made the government to become among the leadingpurchases of drugs thus acquiring strong market influence (WeWork for Health Organization, 2016).In addition, improvement in technology is also a threat because newentrants have acquired the ability to develop drugs that are based onthe DNA of the patients. This means, by embracing the new technology,small pharmaceutical companies are also able to pose a threat to theestablished organization like Pfizer.

Evaluationof SWOT Analysis

PfizerCompany has been successful in the industry by engaging in constantdevelopment of new drugs thus enabling the company to favorablycompete with its rivals in the industry. The increase in innovationis attributed to the extensive investment in research and developmentby the company. However, the large size and success of theorganization has come with equal challenges especially in leadership.The management of the organization has not been effective in aligningthe operations of the organization with the changes that are takingplace in the industry. This proves that overhauling the leadership ofthe company and involving new effective leadership strategies canhelp the organization to counter the stiff competition as well asadjust to the changing business environment (Jain2016).However, there are various opportunities that the management canembrace to improve the performance of the organization. These includelooking for ways to reduce the cost of production, expanding to newmarkets through mergers and acquisitions in addition to embracingmethods of maintaining its market share and customer loyalty. On theother hand, there are various threats that may pose a challenge tothe future success of the organization. Firstly, stringent lawsenacted the government and general interference of the government onthe pharmaceutical industry reduces power of the pharmaceuticalcompanies to control the industry. The other threat is the increasein stiff competition and the high cost of operation, combined threatfrom issues facing the employees in the organization. However, Pfizercan convert its threats into opportunity such as looking for ways toreduce the cost of production such as downsizing and outsourcing someof its core functions (Porter&amp Kramer, 2002).

Competitiveanalysis

Internalrivalry

AlthoughPfizer has been in the industry for over 150 years, it is still facedwith stiff competition from other key players in the industry such asMerck, Novartis and Johnson &amp Johnson (Davidson &amp Greblov2005). Pharmaceutical industry is faced with a high level of rivalrybecause firms are in a constant battle to release the next effectivedrug and control a big share of the market. Companies in the industryengage in extensive competition in order to produce the nextblockbuster drug that will enable the company to have a stream ofrevenue and a wider customer. Unlike other industries, in thepharmaceutical industry, even small firms can effectively competewith well established companies such as Pfizer because clients areincreasing turning to the use of customized drugs. Clients are nowshifting from buying drugs from organizations that make drugs in bulkto those that can customize the drug to the DNA of the client (Porter&amp Kramer, 2002).

Barriersto entry

Thereare various factors that influence the barriers to entry theyinclude a high cost of running a pharmaceutical company, thestringent regulation and the market share. Before a new firm isestablished in the market, it has to conduct extensive research thatwill enable it to develop a drug that will solve a particular medicalproblem. The problem is that firms require a lot of resources toconduct an effective research, a factor that prevents new firms fromentering the industry. Government agencies take part in blocking newfirms from entering the market by enacting strict laws, this isusually meant to safeguard the industry and ensure that the playersthat are already in the industry benefits from their operations.Another issue that promotes barriers to entry is the market share.Entering and taking base in the market requires time and investmentin product and brand promotion in order to take a share of the market(WeWork for Health Organization, 2016).New entrants are therefore not much of a threat to the alreadyestablished firms because they have to spend huge resources and takea long time before they can establish their brands in the market.

Substitutes

Threatfrom substitute drugs depends on the current position of the drugwhether it is patented or not. If the drug is patented, it is saferfrom threat of substitutes because there are no other drugs tocompete its effectiveness in the market. However, once patent isremoved, the door opens for generic drugs that flood the market thusbecoming a threat to original brand drugs (Jain 2016). This is themain reason that keeps pharmaceutical firms in a constant researchmode in order to develop drugs that will be patented. Substitutes ofdrugs can also come by embracing a healthy lifestyle. When clientsengage in healthy diet, low consumption of fats and other healthyfoods, it becomes like a substitute to drugs because they tend tospend less on drugs. However, threat from substitutes is furtherreduced by the fact the patients and customers do not have muchknowledge about drugs and thus rely on physicians for knowledge(Magretta,2013).This means, pharmaceutical companies can collaborate with physiciansto promote their drugs in the market.

SupplierPower

Mostpharmaceutical companies do not rely on suppliers in theirproduction. All functions involved in the production are conduct bythe organization thus giving supplier a very low power in theindustry. However, just as any other organization, pharmaceuticalfirms rely on labor force, both skilled and semi-skilled, to achieveits production and operations. The other advantage is that most ofthe processes of production are automated thus further reducing theirreliance on human labor (Magretta,2013).

Buyerpower

Buyerpower is intermediate because of the influence from the federalgovernment and medical institutions. The expansion of Medicare tocover part D in 2006 increased the power of the government toinfluence prices of drugs because they are among the major buyers ofdrugs (Magretta,2013).On the other hand, physicians are more focused on quality over price,thus do not have much power to influence on prices. Patients on theother hand rely on doctors for prescription this again preventspatients from having enough power to control the price of drugs inthe market.

Recommendations

Pfizerperformance has mostly relied on blockbuster drugs that enable thecompany to outperform its rivals and control a wider share of themarket globally. Blockbusters drugs are patented thus helping thefirms to enjoy high revenues and wider market base. Althoughinnovation of blockbusters drugs is an effective strategy, the expiryof the patent makes drug vulnerable to generic drugs. According toIreland&amp Webb (2007),Pfizer lost its patent on Lipitor in 2010, Viagra in 2012, Celebrex I2014 among other previous blockbuster drugs. Because of the chancesof losing the market performance, Pfizer should focus on establishinga steady flow of products. This will help ensure that theorganization is constantly at the top of its performance in theindustry. This means as some patent expires on some of its productssuch as Lipitor Pfizer should release new products market with newpatents into the market. In addition, Pfizer should not rush intoreleasing new products at the same time to prevent them from losingtheir patent simultaneously.

Themanagement should work with various institutions and physicians tomaintain the performance of the products in the market. Since Pfizeris a larger organization and has been in the industry for a very longtime, it is at a better position to lobby and seek support from thegovernment to safeguard its operations in the industry. The Medicarepart D has given the government power to have control in thepharmaceutical industry thus Pfizer can achieve much success when itsproducts are backed by the government. In addition to being one ofthe largest employers in the country, the management should work withlobbyists and fund the campaign of legislators and donating funds togovernment projects this will give it the power to manipulate thedecision making of the government. In lobbying the government, themanagement should seek to convince the government to increase theprices of drugs, and include Pfizer drugs into the portfolio of drugscovered in Medicare Part D. Apart from influencing prices themanagement should seek extension of patents on its products by somemore years. Extending the patent by a year or two can have asignificant to boost the performance on the organization. Inaddition, to working with the government, Pfizer should stillmaintain its image in the industry by engaging in socialresponsibility activities, engaging in PR campaign and extensiveproduct promotion to win more clients.

AlthoughPfizer Company has over the years been successful in independentlyconducting most of functions from research and development,production and packaging to marketing, the rising cost of operatingin the industry means that the company should consider outsourcingsome of its functions. According to Uysal(2014),outsourcing helps reduce the cost of production in addition to givingthe business and opportunity to focus on the core objective of theorganization. Pfizer should outsource some of its functions such asresearch and development and production in regions with relativelycost of production such as Asia. Apart from outsourcing, themanagement should engage in new acquisitions and mergers especiallywith Companies in countries that Pfizer has not taken strong marketbase. This will be a good strategy to expand the market operations toenter in new markets across the world.

Employeesform a pertinent part of every organization which is why it isimportant for organizations to incorporate effective strategic humanresource management in every department. According to Budhwar &ampAryee (2008), strategic human resources management focuses onsupporting the long-term objective of the organization by aligningthe objectives to the strategic plan. Currently, Pfizer Company has atotal number of 78300 employees, which means the organization shouldfocus what every employee is contributing to the success of theperformance of the organization. The management should promote thehuman resource management in order to ensure that the employees areworking towards achieving the objectives of the organization.Introducing an employee’s performance system is a good strategythat the management should take to monitor the performance.

Conclusion

Theresearch on Pfizer Company shows that its competitive advantage andstrength is based on its extensive investment on research anddevelopment that has led to innovation of some of the top drugs inthe industry such as Viagra and Lipitor. In addition, the company hasa high operating capital that enables it to easily launch itsprojects, combined with a strong brand equity that provides a readymarket for its products. However, the problem is that the leadershipof the organization has not been able to effectively align theoperations of the organization with the changes taking place in theindustry. The changes taking place in the industry presents bothopportunities and threats to the company. For instance, one of theopportunities for the company is the increase in the demand forquality healthcare solution which is threatened by the fact thegovernment regulations are hindering pharmaceutical organization fromfully taking the advantage. The demand for customized drugs meansthat even small organizations will also be equally able to competewith well-established organizations. In order to improve theoperations of Pfizer with the changes taking place in the industry,the leadership should develop new strategies that will improveefficient and effectiveness in the operations of the organization.This includes incorporating situational leadership style that willfocus on addressing the situation at hand. The management shouldfocus on improving the performance of the drugs in the market byworking with government agencies, physicians and engaging in mergersand acquisition to expand its market operations. In addition, themanagement should be keen on reducing the cost of production in orderto effectively engage in price competition in the industry.

References

Budhwar,P., &amp Aryee, S. (2008). An introduction to strategic humanresource management. StrategicHuman Resource Management: Building Research-based Practice,9-32.

Davidson,L., &amp Greblov, G. (2005). The pharmaceutical industry in theglobal economy. summer www. bus. indiana.edu/davidso/lifesciences/lsresearchpapers/pharmaceutical% industry12aug. doc.

Fayard,D., Lee, L. S., Leitch, R. A., &amp Kettinger, W. J. (2012). Effectof internal cost management, information systems integration, andabsorptive capacity on inter-organizational cost management in supplychains. Accounting, Organizations and Society, 37(3), 168-187.

Ireland,R. D., &amp Webb, J. W. (2007). Strategic entrepreneurship: Creatingcompetitive advantage through streams of innovation. BusinessHorizons, 50(1), 49-59.

Jain.S. (2016). Emerging Pharmaceutical Markets: Industry Challenges.Retrieved November 7, 2016, fromhttps://www.raps.org/WorkArea/DownloadAsset.aspx?id=5219

Magretta,J. (2013). Understanding Michael Porter: The essential guide tocompetition and strategy. Harvard business press.

PfizerCompany (2016). History of Pfizer Company. Retrieved November 7, 2016from http://www.pfizer.com/about/history/all

Porter,M. E., &amp Kramer, M. R. (2002). The competitive advantage ofcorporate philanthropy. Harvard business review, 80(12), 56-68.

Tempest,B. (2011). The Structural Changes in the Global PharmaceuticalMarketplace and Their Possible Implications for IntellectualProperty. UNCTAD-ICTSD Project on IPRs and Sustainable Development,Policy Brief, (10).

Uysal,G. (2014). Stages, Content, and Theory of Strategic Human ResourceManagement (SHRM): An Exploratory Study. Journalof Modern Accounting and Auditing,10(2),252.

WeWork for Health Organization. (2016). Medicare Part D: Success andThreats. RetrievedNovember 7, 2016, fromhttps://weworkforhealth.org/upload/files/WWFH_-_MedicarePartD-SuccessAndThreats_-FINAL.pdf