Category: Pfizer

Introduction

Organizational management involves bringing employees together and working towards the realization of the organization’s goals and objectives. It involves planning, organizing, controlling, guiding and managing the firm’s staff.

The aim of the paper is to explore ways by which a company can manage its staff through outsourcing.

Discussion

Pfizer found out that the professional staff they employed was not doing the job for which they were employed. Instead of developing strategies and innovating, the executives were participating in menial jobs like researching, preparing PowerPoint presentations and the like. Upon realizing this, Pfizer’s senior director of organizational effectiveness Jordan Cohen turned to two outsourcing companies in India whose charges were not as high as those of other companies in the US like charged $215 per hour. This concept of outsourcing work to external firms is known as OOF (Office of the Future), when a Pfizer executive finds some task to be done, he simply contacts the firm in India (OOFs) and informs them about the task. They then agree on the cost of the project and once negotiations are done, the Indian begins the project (Vision, 2008).

This concept has great advantages to the executives and lower-cadre employees of the company. Benefits include time saving as tasks that were initially done in six months now take half the time to complete, this relieves pressure off the employees who have time to work on other important tasks and employees meet the deadlines.

The financial benefits are also remarkable, ROOF’s charges are as low as a tenth of the cost that other management consulting firms would charge, yet the work is of the same quality. The outsourcing firms also undertake financial analyses and market research projects at much lower costs and their work is impressive.

The employees at Pfizer have also benefited from the OOF idea, they now have more freedom to perform other core tasks for which they were contracted. They get analyses complete with PowerPoint presentations and this makes their work easier (Vision, 2008).

The OOF idea has been so successful with Pfizer that other US companies have adopted it through virtual assistants, customer service and web programmers.

The OOF approach has both positive and negative implications on the organizational structure. This approach promotes work specialization in a firm since the employees can perform the task for which they were contracted i.e. each employee does the task for which he/she is good at. There was no specialization before the adoption of this approach since the employees used to engage in menial tasks like Googling and making PowerPoint presentations. Once the outsourcing firms do these tasks, Pfizer employees are able to use these results to develop strategies and find innovative methods.

This approach makes product departmentalization rather difficult since the manager to whose control OF falls will find it difficult to check on the progress of the work going on. Communication between the OOF firms and the departmental head is not direct, unless he can travel to the country of residence of the OOF company. This limits the span of control of the managers and the company (Vision, 2008).

Formalization may also prove to be a challenge during the early stages of adoption of the OOF concept as Pfizer experienced. Initial projects carried out by the Indian firms were unusable and not correctly analyzed though this was because the Pfizer employees did not specify what they needed. A correction for this is by having test runs before full implementation of the approach.

Almost all types of organizations can apply the OOF concept whether they are in the initial stages of development or fully established. A start-up organization like a software firm can apply multisourcing- using both the outsourcing firm and staff from the service provider. This speeds up the time for launching their products, they can also hire more than one outsourcing firm to handle each aspect of the project, from design to sales and marketing.

Companies have stated that cost cutting is not the main aim for outsourcing, rather it also functions as a marketing strategy which can be applied by organizations.

Restrictions can however be placed on organizations that manufacture sensitive products like drugs and military wares. Outsourcing firms that are contracted by such organizations must be thoroughly scrutinized by the relevant authorities and must conform to set rules and regulations. Such regulations may hamper the outsourcing process.

Organizational structure dictates how an organization plans, categorizes and assigns tasks to realize their objectives. These structures identify the people that are involved in decision-making and how the decisions are realized. Organizational structures determine how authority is distributed in an organization. Issues such as whether the lower cadre employees should be involved in decision-making or just reserved for the departmental heads determine how the organization pursues its goals. The mode of assignment of duties and specific tasks to employees are governed by the organizational structures and determines how the employees work together to realize the company’s vision.

These structures therefore lead to a company’s efficiency and effectiveness towards the realization of the goals.

Conclusion

Organizational management is the basis of creating an environment that promotes the growth of an organization and its staff. Each organization requires a set of leaders with proper management skills to implement structures that will maintain the firm’s operational functions and manage the human resource effectively to ensure that the company retains or achieves competitive advantage.

Reference

Vision. (2008). Pfizer OOF Office of the Future Program. Web.

Introduction

Pfizer is one of the most recognizable pharmaceutical companies worldwide since its medical developments have significantly spread its influence over the last decade. The corporation has become increasingly impactful during the coronavirus pandemic due to the eponymous vaccine’s introduction (“Global Commercial Business”). Even though Pfizer is known for pharmaceutical advances, its matrix organizational structure deserves a closer look since it helped the company’s establishment in the market.

Discussion

Primarily, it is vital to understand the concept of matrix structure in management. It is a lattice structure in which department heads carry out the organization of management by function. Meanwhile, the project execution is organized by the project managers. It is based on the principle of double subordination of performers: on the one hand, to the direct head of the active service, on the other hand, to the project manager.

The former is endowed with the necessary powers in accordance with the planned deadlines for the implementation of this project. With such a system, the project manager has two groups of subordinates: permanent employees of the project team and employees of other functional departments who temporarily report to them. In the meantime, they maintain their administrative subordination to the direct heads of functional departments. Special staff bodies are introduced into the created linear-functional structure. It coordinates the existing horizontal relations for the implementation of a specific program (project) while maintaining the vertical relations inherent in this structure.

Pfizer strictly follows this structure as it has a hierarchical order of people and departments. The former ones are led by chief executives, while the entire company includes large and small-molecule divisions. Management teams operate these divisions wisely, increasing accountability, setting solid strategies, and ensuring better operation flow.

Since the company deals with large product manufacturers, it has established two research centers for developing and investigating pharmaceuticals and biological products. Therefore, these management teams operate in these departments as well. More precisely, Martin McKay, the head of PharmaTherapeutics Research & Development Group, is concerned with the research of small molecules (“Global Commercial Business”). In the meantime, Mikael Dolsten, the Biotherapeutics Group, focuses on the development of vaccines (“Global Commercial Business”). These research teams are led by influential experts whose aim is to deliver a high-quality product on behalf of Pfizer. They are also accountable for enriching their portfolio with both small and large-molecule projects.

The teams are trying hard to attract top-notch academicians and researchers to accelerate the investigation and release of new medicine. In terms of matrix structure, it is a wise move to attract stakeholders to their projects to boost the developmental processes. The company generally incorporates nine global businesses making the matrix structure hybrid (“Global Commercial Business”). It allows a company to pay as much attention to a specific product, consumer, or geographical region as a small specialized company does, as a result of which it is possible to respond to changes faster. Since all divisions are located in different countries, they are monitored by the head office.

Conclusion

In conclusion, Pfizer is a large pharmaceutical manufacturer with a well-developed matrix organizational structure. Despite the fact that the company has numerous divisions worldwide, its management teams work orderly as they are united by the same aim – the development and release of advanced medical technologies. All departments are ruled by the heads who work on separate projects yet contribute to the realization of a common goal.

Work Cited

“Global Commercial Business.” Pfizer. Web.

The Competitive Forces and Value Chain Models

Pfizer as an investor in the pharmaceutical has made great advances that will help it continue to lead in supplying medicine over a long period of time despite competition. Industry attractiveness and the profitability of long-run industry are determined by five competitive forces as described by Porter (tutor2u, n.d.). Pfizer’s business is faced with a wide range of threat that can be grouped in the above five groups. The medicine industry is attracting more and more people for investments. As the government continues to support efforts to have more participants in the provision of health for the people, the barriers to enter the industry are being minimized and this is exposing Pfizer to more dangers of competition. The access to the distribution channels and the market itself is becoming easier on a daily basis, making it favorable for new players to enter the industry. Some of the competitive advantages that Pfizer may continue enjoying include the already established channels of distribution. It is already marketing eight of the world’s top 25 medicines (Barry, 2003). With that, new entrants may find it harder to compete with Pfizer where they have already gained grounds. The rivalry between the competing players is set to increase with the rise of population, among other favorable factors. However, Pfizer is set to encounter the competition challenge with an already established strategy of acquiring leading competitors. One of the companies it has acquired include Wyeth, whose acquisition was completed in 2009 (Pfizer, 2009).

The acceptance of over-the-counter drugs has been instrumental in the business of the pharmaceutical companies over the years. Therefore, each and every player is set to gain from such moves. Pfizer has been a strong bargainer for policies that will favor the pharmaceutical industry and has sought to take advantage of them after adoption. Having already taken over distribution of a substantial amount of drugs in the market such as huge chunks of over-the-counter (OTC) drugs market, existing competitors may find it difficult to eliminate Pfizer in the market.

Of course, it has taken advantage in the provision of the most wanted drugs in terms of demand, such as antidepressants and pain killers. On a consumer perspective, usage of these drugs is high as compared to the past, following favorable factors such as increasing population, increase of complications from illnesses and increase of illnesses themselves-for example cancer and mental disorders among others. Customers in the pharmaceutical industry have been won through advertisement with every $1 spent on direct-to-customer advertising gains $4.20 in sales (Barry, 2003). On the side of suppliers, there has been an increase in investment of suppliers in the field of over-the-counter drugs in the market.

The drug market has always been faced with the probability of customers shifting to using substitutes. Substitutes in the case of over-the-counter drugs are very conspicuous. Pfizer has invested in a wide range of drugs that may provide a shock absorber incase some of its drugs fail to sell because of increased competition from the substitutes. In particular, the OTC market is always faced with a threat of having people going to hospital, and there is always a call for people to have medical attention before using these drugs. However, the possibility to have customers access these drugs even after medical check-up may assist the company to continue gaining more market for its products. Diversity has been ensured by investment into the area of consumer health care products.

Knowledge Management Systems

Any faster, efficient mechanism that allows production of better quality and more products may be perceived as supporting the company’s strategies. There is a substantial interest in investing in management systems that support research and documentation. Knowledge management systems have been applied to assist in the compliance with internal/regulatory standards as well as managing internal resources (New Information Paradigms, 2010). Embracing these systems in the pharmaceutical industry is important because it represents a modern way of handling the processes in the industry. These systems are increasing the efficiency and speed of handling information and data in the various processes. Companies are also realizing easier or simplified processes in the handling of information. Production efficiency and product quality are also emanating to be of paramount importance in the industry and usage of and investment in systems that improve on these factors is becoming important. Even governments are changing or adopting regulations that once resisted the usage of electronic documentation for signature validation and audit, for instance. However, there are changes expected because such regulations are still to cover all aspects of electronic knowledge management (Zimmerman, 2003).

Research and documentation is of paramount importance in the pharmaceutical industry. This is because it can help in replicating past success and learning from the past projects, even failures. The documentation is important to be able to spot patterns and trends. Pfizer is a company that is involved in the development of new drugs as well as research for new solutions. Knowledge management may be utilized to deal with the problem of staff turn-over, because the drug development process can take up to 15 years and few researchers may be involved from start to the stop of this process. Another important aspect of knowledge management systems is that they make data available at all times, and the data is reliable and trustworthy to some level since it is subject to less human error. The gathering of information for research is also important, but there is need to ensure that the information is sourced from a wide range of sources such as newswire, websites and peer-reviewed literature. Knowledge management systems simplify the process because the information will need not be read by human, and that they are able to categorize this information intelligently and make it relevant for individual use (Zimmerman, 2003). Knowledge management systems end up with providing essential information for product adjustment and improvement, quick supply for pharmaceutical, and taking more care during production processes among other things. Adopting knowledge management systems allow the integration of various processes in the handling of pharmaceuticals. Sharing of information is becoming an important aspect of every industry. Pfizer can benefit by sharing information on processing and research, with its suppliers and partners. In addition, provision of accurate information is of importance to any investor and customer in the industry, as well as for making important managerial decisions.

An automatic way of handling the process of drug development is very important because it is prone to errors. Knowledge management systems may be applied to detect unexpected results and allow rectification of the process to give better results. This is, for example, because they can be applied in the monitoring of chemical processes and reactions (Russell, 2006). At the same time, knowledge management systems at Pfizer may help save time because they are faster than normal ways of handling information and data. Usually, if the information being handled is bulky and very complicated, or undergoing through several processes, crucial information may be omitted or overlooked, and this can only be detected through knowledge management.

Ambiguous and endless federal regulations may be tracked and there adherence enhanced by the utilization of knowledge management systems.

References

Barry, C. (2003). Pfizer’s strategy is good medicine: Drug Packager of the Year. Web.

New Information Paradigms. (2010). New information paradigms-transformative metasystems for collaborative teams. Web.

Pfizer. Pfizer reports fourth-quarter and full-year 2009 results. Web.

Russell, J. (2006). Pfizer’s pursuit of technology. Web.

Tutor2u. (n.d.). Strategy-analyzing competitive industry structure. 2010. Web.

Zimmerman, K. (2003). Learning from success…and failure: Pharmaceuticals make the most of knowledge management. Web.

Summary of Problems, Opportunities, Solutions

Business Plan Report

Sustainable development is vital in a business environment. Reflectively, this concept defines the feasibility of a company and its solvency within a specified period of time. In the contemporary society, the term sustainability refers to the ability to survive within a profitability model.

In business environment, sustainability is affected by forces in the market, decision science, corporate structure, and real financial management, in short and long term. Pfizer Company has a very weak communication system that verifies risk preparations before informed decisions are made.

This procedure is necessary in monitoring decision science and distribution of risk elements and forecasting into future swings in the economic climate market. Thus, Pfizer Company should embrace quality operations management model that supports communications culture, efficiency, and optimal resource use in it’s production lines.

Basically, the operations management systems at Pfizer Company should include an aspect of cost, dependability, speed, quality, and flexibility. These variables determine success or failure in business. These variables are achievable through value delivery, value addition, and creativity.

The company has poor functionality within a competitive advantage parameter. In order to achieve this, its existing forms of system monitoring should be periodically upgraded to introduce multiple operating system models such as ratio analysis in operation management that is compatible with tracking and analysis within and without the company across the three major segments (Pfizer 2011).

For implementation of the strategy, the management is to balance both the short term and long term consideration towards decision making. Management that ensures long term obligations are fulfilled considers mostly the role played by resources invested in technology, continued innovations in the production of new products, and conducting intensive researchers in the market to identify fresh market niches.

Despite having this efficient operations management system, the company has not fully established a mechanism for monitoring progress at micro level and majorly depends on macro auditing in decision making but has to deal with the risk of internal fraud and redundancy.

The major part of the success puzzle for operations management delivery operates on the periphery of the soft skills involving the timeless vision of organizational principles, defining value of the business, determining requirements, clarifying the vision, building teams, mitigating task, resolving issues, and providing direction.

Thus, the company should create a decentralized system to ensure that decision making process is shortened thus, avoidance of the bureaucracy in its product lines. In the success measurement parameters, the operations management systems of the company should incorporate planning, development, implementation, and discovery scores.

Reflectively, the process captures organization chart, status reports, process map, compliance requirements, review structure, activities, dates, and resources employed within a specified period of time (Murphy 2010). After the quantitative analysis, it is apparent that the company should invest further in technology for its own production sustainability.

Besides, the technology will work alongside labor efficiency strategy to create an all rounder, relevant, and practical marketing system. Since operations management system determines the success of business decisions, the company should introduce a micro auditing unit for internal decision making rather than depending majorly on the macro market environment.

In addition, the decisions made should be dependent on available resources such as investment portfolio, infrastructure, personnel size, experience and efficiency, for a specialized high skill assignment requiring specific qualifications. These results would provide an in-depth estimation of distribution of probability for future expected returns (MacKay & McKiernan 2004).

References

MacKay, B. & McKiernan, P. (2004). The role of hindsight in foresight: refining strategic reasoning. Futures, 36, 161-179.

Murphy J. (2010). Organization theory and design. Hampshire: Cengage Learning EMEA.

Pfizer: Our Priorities and Strategies. (2011). Web.

Executive summary

With the advent of innovative technologies and recent shifts in the consumers’ culture, more and more companies realize the importance of effective operations management.

Due to the present day realities of intense competition in the pharmaceutical arena, the leading companies cannot afford to put emphasis on only one aspect of quality improvement. Underestimating the significance of any of the company’s many sectors may result in decrease in the company’s revenues and lack of customers’ trust in the brand.

Taylor (1998) noted that in the case of private-sector companies, the mission of the operations function is usually expressed in terms of profits, growth and competitiveness; in public and voluntary organisations, it is often expressed in terms of providing value for money (p. 74).

The mission of pharmaceutical companies such as Merck & Co. and Pfizer Inc. requires their commitment to public health. The strategies of quality improvement and increasing benefits are inseparable and interrelated. In fact, Merck always emphasizes a quote from its founder, George Merck: “We try never to forget that medicine is for people. It is not for the profits.

The profits follow, and we have remembered that, they have never failed to appear”. With the aim of meeting the growing demands of present day pharmaceutical market, the companies should couple the R&D effort with strategically savvy marketing to develop and market products.

Effective operations management requires integrative approach to development of various sectors of a firm. This paper discusses the comparative analysis of operations management strategies of the world’s leading pharmaceutical companies Merck & Co. and Pfizer Inc., critical evaluation of their effectiveness, and recommendations for improving their operations focus.

Introduction

Effective operations management is important for the success of any organization. Operations management in the pharmaceutical sector focuses on carefully managing the processes to develop and market products and services. A great deal of focus is on efficiency and effectiveness of processes. At the present moment the issue of operations management is more topical than ever being at the center of all business modifications and Enterprise Resource Planning.

Due to the recent shift in customer preference and advent of innovative technologies, the prompt response to these changes and continual improvement of quality became the primary goal of operations managers. The questions about quality are central to all stages of operations management.

Slack et al (2010) noted that “it is they [operations managers] who must find the solutions to technological and environmental challenges, the pressures to be socially responsible, the increasing globalization of markets and the difficult-to-define areas of knowledge management” (p. 8).

The main principles of Total Quality Management, such as customer satisfaction, employees’ involvement and continuous quality improvement, are areas of focus at these companies. Operations management is therefore critical to organizational success for these companies. There are various stages of operations management starting from the conception / designing of a product until it’s delivery to the market.

Within the birth stage, where a product is conceptualized, most innovations take place. The second phase is that of growth. This is a very critical stage for operations management. Langabeer (2008) noted that “The highest level of risk and investment is performed early in the supply chain, significantly prior to the commercialization and full-scale production and distribution” (p. 346).

Previously the pharmaceutical companies considered this principle while developing their operations strategies and making a decision to give preference either to Research and Development (R & D) sphere or to strategic marketing of their products. For example, Collis and Smith (2007) noted that “Merck was known for its research expertise, while Pfizer was considered a marketing powerhouse” (p. 1).

This difference in strategic focus for the companies had a significant impact on the direction they took viz-a-viz innovation, change and competitiveness. However, despite the differences in their strategies, both drug manufacturers faced similar difficulties and had to look for ways to enhancing efficiency, improving the quality and increasing consumers’ satisfaction with the products and services provided.

Drug development strategies

The innovative method of combinatorial chemistry and advent of computer modeling stimulated the development of new drugs, accelerating the research process and allowing pharmaceutical companies to screen thousands of new compounds every year. For this reason, within the recent decade the approach to drug development has been revolutionized.

Previously most drug compounds could be isolated from natural elements or synthesized, but the recent technological and scientific progress changed the existing state of affairs. At the present moment these elements may be designed, and pharmaceutical companies cannot afford to underestimate the importance of investing into the R & D sphere.

Nevertheless, Collis and Smith (2007) noted that “the focus of clinical trials had shifted from proving safety and efficacy to generating a label that favorably positioned the drug against competitors” (p. 3). At present, alongside research of new disease pathways, creating of me-too drugs takes a significant focus of the R&D effort.

One of the considerations of the R&D departments is designing the drug similar to the blockbusters of other companies so as to compete with them in the market. This results in more intense competition in the sector as the period within which a drug can benefit from its exclusivity in the market has decreased significantly. Collis and Smith (2007) noted that “only about 14% of drugs approved by the FDA between 1998 and 2002 were considered by the agency to be ‘a significant improvement’ over products already on the market” (p. 3).

R & D at Merck & Co. and Pfizer Inc.

Merck & Co. with its focus on research has always been known as a science-driven company that made initial breakthrough in the development of antibiotics, hormones and streptomycin, as well as innovative treatment for tuberculosis. The company has been a leader in its sector.

In the1990s, Merck’s senior management decided to sell its generics division with the aim of focusing on designing novel mechanism of action (MOA) drugs. Pfizer, another of world’s leading pharmaceutical companies, succeeded mostly through its acquisitions and effective brand marketing. This company was defined by Collis and Smith (2007) as a “hunter, not a gatherer of new drugs” (p. 12).

Merck & Co. always had a high rate of FDA regulatory approval of its products. The primary goal of Merck was to develop blockbuster drugs in diverse therapeutic areas. Merck’s R & D focus has been to investigate new MOA drugs and diseases pathways. Collis and Smith (2007) noted that “Its willingness to exploit science outside of its traditional expertise allowed Merck to enter new fields, such as diabetes in 1986, bone disease in 1991, and cancer in 2004” (p. 10).

Over the years, the company’s Human Resources Department has also focused on hiring the best scientists from diverse areas of research expertise. Merck’s eventual fall in stock price by 2005 was caused by the failure of two potential blockbuster drugs in late stage of clinical development as well as troubles with Vioxx withdrawal in 2004.

As noted in Merck’s 2009 Annual Report, the investment in R & D has been increased and “for the first time in its history, Merck is conducting studies on ten products in the final phase of clinical testing prior to a potential market launch” (p. 16). The company’s continued focus will be on nine key disease areas: cancer, heart disease, diabetes and obesity, infectious diseases, neuroscience and eye diseases, respiratory and immune-related disorders, women’s health and hormonal conditions.

According to Merck’s 2009 Annual report, the emphasis on innovative thinking and emerging new growth markets will be beneficial for development of new drugs. Improvement of human health and well-being remains the main focus of Merck; the company joined the Wellcome Trust organization and participates in not-for-profit mission of development of vaccines for the poor.

As opposed to Merck, Pfizer grew quickly mainly through mergers and acquisitions, although, recent investments in developing and launching new drugs has been disappointing. Collis and Smith (2007) noted that “Pfizer had not developed a blockbuster drug in its own lab since 1998 when it launched Viagra” (p. 12).

Pfizer’s 2009 Annual Report does note that “we must take prudent risks… recognize that not every investment will succeed in this business; carefully monitor our investments and know when to stop funding projects that are not meeting their goals” (p. 17). The senior management gives emphasis to investing with the aim of winning. In 2009, “sharply focusing on customer needs”, two development research units were formed within the company.

These were Pharma Therapeutics R&D and Bio Therapeutics R&D, at the present moment working on 133 programs at various stages of clinical development. Oncology, analgesics, Alzheimer’s disease, diabetes and psychoses are the six “invest to win” areas on which Pfizer’s internal R&D efforts are focused. In addition, Pfizer’s R & D units are partners with other world class scientific teams in other companies, academic and government organizations.

Marketing strategies at Merck & Co. and Pfizer Inc.

Historically, Merck’s management was inclined to underestimate the importance of implementing strategic marketing strategies. As cited in Collis and Smith (2007), one of the company’s marketing managers admitted that they could sell only the best drugs while “Marketing was ‘allowed’ in much later in the process.

It was a good strategy, it worked at the time” (p. 11). However, the case with its blockbuster drug Zocor proved that this strategy was ineffective. This drug was aimed at reducing cholesterol and became a blockbuster in its sector on the market since its introduction in 1991.

However, Lipitor, similar but more concentrated formulation introduced by Pfizer in 1996 became more popular due to the company’s marketing efforts focused on demonstrating its benefits. Merck has since put more emphasis on customer relationship management and innovative marketing strategies, realizing the importance of influencing the health care professionals’ as well as consumers’ opinion.

Implementing the new data-driven and customer centric approach, the teams at Merck were organized around the main blockbusters, more interactions with health care providers were planned and more public attention was drawn to raising awareness of clinical trials. As noted in Merck’s 2009 Annual Report, marketing expenses have increased by 6.8 %, while their ratio to total revenues increased insignificantly (from 28 % to 29 %).

On the other hand, Pfizer’s marketing strategies have been rather effective and could be even defined as aggressive. Collis and Smith (2007) noted that “Pfizer was known for having effective marketing and had the largest sales force in the industry with nearly 9, 000 reps” (p. 12). Pfizer invests much of its operating cost on training its marketing representatives. Thus, every rep has to fill a daily report including number of calls and visits to doctors.

The training of new reps is intensive presupposing about 40 simulated calls to doctors and learning and presenting 30-second briefs. The company’s mission is focused on influencing the doctors’ prescribing behavior at least for me-too drugs, identical to products of other companies.

In Pfizer’s 2009 Annual Report, the priorities of the company were defined: “Pfizer is working in partnership with patients, caregivers, physicians, payers, health ministries and local health care providers around the world, leaving them better equipped to meet their most basic challenge – keeping people healthy” (p. 64).

This logo demonstrates the company’s aim in paying more attention to every element of the drug manufacturing chain and increasing its efficiency. Pfizer is registered on Facebook and Twitter taking advantages of social media with the aim of establishing rapport with potential consumers and health professionals as well as providing additional information on its products.

Mergers & Acquisition and External Collaborations at Merck & Co. and Pfizer Inc.

Merck managed to avoid merging with other large drug companies because it contradicted the company’s growth philosophy. The company’s management gave preference to organic growth and increasing the R & D budgets.

As discussed in Collis and Smith (2007), Merck’s management believed in science as the primary value of the company but “left the option of a merger on the table: ‘It’s evident to us that large-scale mergers haven’t been very successful in the pharmaceutical industry, but we will still consider any situation that might make sense for us” (p. 10).

However, the top managers were coming around on the importance of external partnership with the aim of gaining competitive edge in the market. In 2009, to grow and diversify, with a deeper pipeline, Merck and Schering-Plough merged to create a new kind of healthcare company.

The senior management of the two merging companies concentrated on reasonable integration of their operations and human resources. Merck and Schering-Plough combined their efforts putting trust in R & D for the purpose of developing a stronger product portfolio, new areas included cardiovascular, infectious diseases and women’s health). Merck has since also signed over 50 licensing and alliance agreements since last year.

At present Merck takes lead in doing pharmaceutical licensing deals. Zhong (2010) noted that “Figures from global consultancy Deloitte revealed that between January 2005 and September 2009, Merck announced about 130 pharmaceutical licensing deals, followed by F. Hoffmann-La Roche Ltd. and Pfizer Inc. with no less than 100 licensing deals each” (International Information Group). Merck’s active collaboration with pharmaceutical companies and academic institutions is an essential component of the company’s operations management strategies.

Today Merck is seen as a global healthcare company implementing the solutions-oriented approach to providing healthcare services instead of developing drugs only.

The merger of Merck and Schering-Plough is hoped to result in global growth and penetration into new world’s markets. In 2009 both companies launched a number of new products independently from each other, while several products were launched due to their combined efforts (for example, Januvia aimed at treatment of type 2 diabetes).

The successful merger has resulted in increased annual sales of the 10 blockbuster brands of their portfolio (more than USD 1 billion for the combined portfolio in 2009). The worldwide sales of the combined companies were raised up to USD 27.4 billion. Looking beyond 2010, Merck is driving towards a leaner, more flexible cost structure.

Pfizer is known for its aggressive acquisition(s) of other drug manufacturers to boost revenues and filling gaps created by drug patent expirations. The first acquisition of Warner-Lambert in 2000 was preceded with their cooperation on marketing Lipitor, the market blockbuster.

Similar was the case of merging with Pharmacia after effective cooperation for selling Cox-2, drug aimed at treating arthritis. Though some scientists were lost after the reorganization of these companies, Pfizer continued research on more than 75 % of Pharmacia’s projects.

In 2009 Wyeth was acquired for the purpose of expanding the products pipeline. The main benefits of Pfizer’s merger with Wyeth was broadening and diversifying of the company’s product portfolio. For example, providing other health care services besides drugs became a new source of revenue for Pfizer, while its dependence on sales of blockbuster Lipitor as the main source of income was decreased significantly.

Response to current challenges at Merck & Co. and Pfizer Inc.

In 2006 Merck faced the litigation liability for its product Vioxx. The drug was voluntarily withdrawn from the market by the company. There were around 30, 000 law suits which the company decided to fight on a case by case basis initially. Miller and Jentz (2010) noted that after undergoing years of litigation, Merck agreed “in November 2007, to settle all outstanding cases concerning Vioxx for USD 4.85 billion” (p. 62).

Another important issue was expiration of several significant drug patents, such as for Zocor and Fosamax. In 2005, in anticipation of the revenue loss, Merck started a restructuring program. According to this plan, five plants were to be closed and about 7,000 employees were to be let go in a phased manner. Nine priority disease areas were chosen instead of dissipating R&D efforts on numerous small development programs.

Pfizer’s management has also been struggling against the imminent patent expirations of such blockbusters as Lipitor and Celebrex. The patents for Bextra and Zoloft were lost causing notable loss in the company’s revenues. In 2005 the company announced the beginning of the cost-cutting program presupposing plant closings and reduction in human resource.

Table 4 Comparative analysis of Merck and Pfizer.

Recommendations for improvement of the existing quality approach

Though both Merck & Co. and Pfizer Inc. can be defined as the world’s leading pharmaceutical companies with a number of new molecular entity drugs in the pipeline, their approaches to operations management are different.

Pfizer and Merck should strike the right balance between investing into R & D as well as their global marketing approach for the purpose of implementing the systematic principle of quality management.

Merck’s focus on science and research is praiseworthy, however, it has to adapt to the realities of the contemporary world and focus on innovative and strategically savvy marketing and customer relationship management. Merck could adopt Pfizer’s experience of involvement of employees through reps’ training and raising awareness of the products influencing the doctors’ prescriptions as well as making inroads via social media.

Pfizer’s emphasis on acquiring and commercializing products and merging with other companies (with the aim of expanding the pipeline) appears to be effective, although one has to wait to confirm whether this strategy will ultimately succeed in filling huge gaps in revenue. Hartmann (2002) noted that continuous quality improvement requires taking preventive measures and proper planning of the company’s development strategies. (p. 5)

Despite the fact that Pfizer’s revenue-focused philosophy has been rather effective, adapting to the realities of the current intense competition in the sphere, the company should put more emphasis on conducting trials in its own labs, while the principle of continual quality improvement is of crucial importance for quality management.

Though Pfizer is a for profit company, it should not loose focus on organic R&D efforts as well collaborating with scientific partners to develop novel drugs. Pfizer’s significant dependence on its main blockbuster Lipitor is rather unwise as its patent expiration can cause serious gaps in revenue for the company.

Pfizer’s merger with Wyeth is attempting to address this issue by widening and diversifying the company’s pipeline, adding new sources of income besides Lipitor sales to the company’s total revenues. Evens (2007) noted that “The axiom, “an ounce of prevention is worth a pound of work or problems”, is an excellent justification for risk management” (p. 29). It is important to look for new opportunities for expanding one’s pipeline and improving the quality of the provided services and increasing customer’s satisfaction.

Merck & Co. and Pfizer Inc. should continue to focus on effective operations management, combining the R & D efforts with strategically savvy marketing, broadening the companies’ pipelines and making contribution to the general well-being of patients.

These leaders in the world’s pharmaceutical arena implement certain principles of quality management, such as customer focus and continual improvement (Merck) and mutually beneficial supplier relationship and factual approach to decision making (Pfizer).

However, they could benefit from adopting the whole range of effective operations management principles, such as mutually beneficial supplier relationships, factual approach to decision making, continual improvement, system approach to management, involvement of human resource and customer focus in the companies’ global strategies.

Personal reflection

Pfizer Inc. and Merck Co have been kind of ‘specializing’ more in particular areas of the pharmaceutical drug arenas. It is in these areas that they have concentrated most of their efforts. In general terms and principles, they both envision their role as part of the communities they are trying to serve and their ‘duty’ to help them improve their general health and well being.

In this respect, operations management is essential to deliver the adequate products and offer quality services in order to achieve stable and positive results. Thus, the role of operations management is crucial; especially when one considers dealing with products and services that affect individual’s health directly and that of the community.

In terms of operation management, Pfizer Inc. and Merck Co have been traditionally somewhat different inputting emphasis on different aspects of the drug development process and companies’ organization. Preference to organic R & D efforts (Merck) or focusing on brand marketing and merger and acquisition strategies (Pfizer) have been a paradigm shift for both companies.

Both strategies could be effective in their own way resulting in these companies’ leadership in their sector. However, with the present day intense competition in the market, effective quality operations can result in a company’s success. Customers’ satisfaction can be measured by the gap between their perception and expectations.

Merck and Pfizer should set high quality standards and make continuous quality improvement the basic principle of the company’s philosophy. In the operations management of both companies there is scope for further improvement. Critical analysis of the current state of affairs considering the main principles of effective operations management is required for further development of their strategies.

Pfizer’s focus on brand marketing and customer relationship management has contributed to more quality exchange as well as its increased sphere of influence for both consumers and health care providers. Focusing to enhance communication between doctors and patients, Pfizer has been a conduit for influencing public opinion and effectiveness of company’s products and services.

The focus on marketing and sales function has been an advantage for Pfizer, and should be adopted by other companies. At the same time lack of company’s internal R& D growth and investment results in significant decrease of revenue. Risk management techniques could be helpful for estimating the company’s losses caused by emphasis put on one or two blockbuster drugs.

Going from one end to another, Merck’s strategies have been focused on science and R & D. The excellence in scientific R & D should be coupled with innovative marketing strategies, otherwise the potential of new products will not be fully realized.

The comparative analysis of Pfizer Inc. and Merck Co operations management strategies proves that only an integrative approach, implementing the whole range of quality management principles, paying enough attention to R & D, marketing and employees’ involvement and customer focused and other strategies, can be beneficial for quality improvement, enhancing customers’ satisfaction and increasing the company’s revenues.

Reference List

Collis, D. and Smith, T. (2007). Strategy in the twenty-first century pharmaceutical industry: Merck & Co. and Pfizer Inc. Harvard Business School.

Evens, R. (ed.) (2007). Drug and biological development: From molecule to product and beyond. New York, Springer.

Finance Yahoo. Merck & Co. Inc. (MRK). Web.

Finance Yahoo. Pfizer Inc. (PFE). Web.

Galloway, P. 1998. Principles of operations management. New York: ITP Press.

Hartmann, M. (ed.) (2002). Fundamental concepts of quality improvement. Milwaukee, American Society for Quality Press.

Langabeer, J. (2008). Health care operations management: a quantitative approach to Business and Logistics. Sudbury, Jones and Bartlett Publishers.

McLaughlin, P & Kaluzny, D. Continuous quality improvement in health care. Sudbury, MA: Jones and Bartlett Publishers.

Merck & Co. Annual report. (2009). Web.

Merck & Co. Discovery and Development. Web.

Miller, R. & Jentz, G. (2010). Fundamentals of business law: Summarized cases. New York, NY: Cengage Learning.

Pfizer Inc. Annual review. (2009). Web.

Pfizer, Inc. Research & Development at Pfizer. Web.

Slack, N. et al. (2010). Operations Management. 6-th edition. Edinburgh, Pearson Education Ltd.

Taylor, F. (1998) Principles of scientific management). Detroit: Dover Publications.

Zhong, K. (2010) Pharma companies driving R & D through partnership. International Information Group. Web.

Introduction

The term vertical integration describes a process of reducing the hazards that may befall the company with regards to quality problems, cutting off of important material supplies and increase of cost. It deals with all the control measures that require implementation throughout the production process of the firm. Several benefits accrue to a firm that implements vertical integration.

The aspect of cost control is one benefit. Self-manufacturing takes away the supplier’s power and, in return allows the firm to gain crucial information. This further reduces the cost of purchasing the information which reduces the negotiation cost.

The other benefit of vertical integration is that it offers economies of combined operations. These two benefits lower the cost of manufacturing and allow a steady supply of crucial information that reduces the businesses’ risks. Vertical integration can either be backward or forward depending on what the firm prefers.

Identify problems related to the vertical integration process

The first problem in the firm is squeezing of profits. Affiliated companies are gaining ground as they convince purchasers to save money. Products of the firm are expensive, and purchasers prefer acquiring drugs that are cheap from the firm’s competitors so as to save a part of their earnings. A clear indication is visible in Lipitor. It is a firm’s drug that account for $13 billions of the firm’s revenue.

Its sale is missing the firm’s own targets since competitors are producing the generic drugs (Harrigan, 2003). The second dispute associated with vertical integration in the firm is that, it traps the company in the box of sales and marketing. This switches input from research and results in a backlash.

This is because the firm undergoing integration lacks full visibility of its assets to quickly and efficiently mitigate issues that arise during the integration. This makes it difficult for the firm to sell its quality products in the market. Additionally, there is no access to vital information that can aid the firm to outperform its weaknesses. The third problem is that, the firm is getting it harder and costly to establish new treatments (Peres, 1990).

Solutions to problems facing Pfizer organization’s

The organization can introduce backward vertical integration due to the benefits that it provides. This will improve workforce safety and productivity by giving the firm critical information that is vital in making effective decisions. This will also improve governance and reporting by capturing information at the point of selling and marketing. This will save on time and eliminate the aspect of entering data twice (Hill & Jones, 2012).

If the firm relies heavily on its own information without involving expertise in making substantial decisions, it might end up suffering considerable loss. However, if there is involvement of expertise, the opposite will be true. The firm can also engage new superiors to assist in changing things. These new bosses can use their skills and experience to solve the problems that the firm is facing (Peres, 1990).

The firm can further solve the problems it is facing by reacting to real-time conditions to optimize its operations and utilize the transformation network. This will minimize costs while keeping adequate levels of the firm’s reserve. In addition, the firm can accurately forecast and optimize demand response in order to plan in advance. This will help gap any issues that arise out of the firm’s operations (Hill & Jones, 2012).

References

Harrigan, K. R. (2003). Vertical integration, outsourcing, and corporate strategy. Washington, D.C: Beard Books.

Hill, W. L., & Jones, G. R. (2012). Essentials of strategic management. Mason, Ohio: South-Western/Cengage Learning.

Peres, W. (1990). Foreign direct investment and industrial development in Mexico. Paris, France: Development Centre of the Organization for Economic Co-operation and Development.

Appendix

Summary of Problems, Opportunities, Solutions

(Fill out as many cells as needed in the matrix below and add rows, if needed).

Pfizer’s Organizational Structure

Organizational structure is a hierarchical arrangement of people and departments within a company (Druckman et al., 1997). It comprises board of directors, managers, subordinate staff and shareholders. Pfizer has re-structured its divisions into more specialized departments led by chief executives that report directly to Pfizer Chairmen and the Chief Executive Officer. The company is separated into two divisions large-molecule and small-molecule. Separated divisions have established management team and increased accountability, clear strategies, and better management on capital and cost (Triano et al., 2008).

The structure of the company is a framework because the company manufactures several products. Being the world’s largest pharmaceutical company, Pfizer deals with different pharmaceutical products company (Druckman et al., 1997). There are two distinct research organizations PharmaTherapeutics Research & Development Group and BioTherapeutics Research & Development Group, which include nine commercial operating businesses: Animal Health and Capsugel, Consumer Healthcare, Nutrition, Established Products, Emerging Markets, Specialty Care, Primary Care, and Oncology. Pfizer accelerates research and development of new medicine by including top academic public-sector and private-sector institutions. Separation of divisions ensures stronger management team, increased accountability, clear strategies and a better way to manage capital and cost.

Financial management

• Sales/revenues for Pfizer increased by 39% in 2011 from 2007.
• Cash revenues is generated from the sale of company’s products.
• Utilizing Fund transfer is a pricing mechanism which maintains high stock prices.
• The company’s major expansion strategies are based on long-term debts.
• Pfizer’s opportunity for quick expansion is based on their many financial instruments.
• The stock prices for Pfizer Inc. in 2007 ranged from a low of $22.56 and a high of $23.79. In 2011, the lowest price was $17.62 and the highest was $18.38. 2012 has been promising for Pfizer as their stock price has risen to $26.83 at its highest point (“Analysis tools –”,2012).
• The company uses both the debt instruments and the equity debts to address its financial needs and enhance the efficiency of its operations.
• Pfizer’s borrowing ability is focused on generating revenue for its research operations.
• The solution to the possible challenges facing its pricing strategy is to focus on enhancing the level of efficiency and cost effectiveness.
• Pfizer has statistical data which allows any solutions dealing with financials to be accurately tracked.
• Pfizer shares have returned 21.8 percent over the past 12 months with 3.6 percent dividend yield.

The idea on borrowing presents financial constraints to the company’s demand to expand its operations and infrastructure development. The company does not have a huge borrowing capacity due to previous loans.

These yearly balance sheets will be the validation for effectiveness. Moreover, all the large corporations have individual departments that evaluate its effectiveness in all its categories. For example, there will be a department to strictly evaluate its current fixed and liquid assets. This department will advise its executive teams to increase or decrease specific categories that will make the company more profitable. Ultimately, all the companies are in business to make money.

Improvement

• Changes in its current operational strategies include increase in fixed assets, decrease its debt level, increase product line revenues, and manage pricing structures.
• Capitalization on its current emerging markets results in increase in the overall sales.
• The company ventures into new Research and Development drugs with patent control.
• The management of its expenses is done effectively.

Learning Points

• Pfizer’s financial stability is dependent on its ability to be proactive and reactive to current issues.
• Reaction to real-time conditions and application of right metrics.
• Learning from SAP ERP (enterprise resource planning) which contains programs used for evaluating business.
• Learning from alliances.

The firm can accurately forecast and optimize demand response in order to plan in advance. This will help solve any issues that arise out of the firm’s operations.

Specifically, there are 3 programs that can directly increase Pfizer’s operational efficiencies. Customer Relationship Management (CRM) helps Pfizer identify and retain customers, and gain marketing and customer insight. Product Lifecycle Management (PLM) helps Pfizer manage products through its entire lifecycle from conception to delivery. Supply Chain Management (SCM) helps Pfizer manage its supply chain business from raw material to finished goods.

Pfizer cannot operate without alliances. They have integrated some type of strategic alliances into their discovery, development, manufacturing, and distribution networks.

Opportunities for Improvement

• Obtaining more fixed assets that would help generate income (MacKay & McKiernan 2004)
• Opportunity for improvement suggests the company should pursue markets in underdeveloped states across the globe.
• Minimize short-term debts and instead utilize long-term debts such as government and corporate bonds.
• Further investment in technology for production sustainability
• Introduction of a micro auditing unit for internal decision making.
• Implementation of Situational Leadership II (SLII) to all managers.
• Development of more specialized training programs.

Long term debts have a long maturity period with low interest rates. Hence, borrowing should be restricted to acquiring finances aimed at expanding company operations. Borrowing should also be restricted to improve the state of infrastructure and enhancing the level of manufacturing and cost effectiveness in Pfizer’s business operations.

Presently, the company depends mostly on the macro market environment. The decisions made should depend on available resources, such as investment portfolio, infrastructure, personnel size, experience and efficiency for a specialized high skill assignment requiring specific qualifications. These results provide an in-depth estimation of distribution of probability for future expected returns (MacKay & McKiernan 2004)

Situational Leadership II provides an effective way to manage and develop people, time, and resources. It is built on open communication and developing self-reliance. This increases frequency and quality of conversations between managers and employees, which improves performance and development. SLII develops its employee competence, which in turns increases commitment, which develops into employee retention.

As it upgrades its current IT operations, employees are to be trained. Unless training is effective, there will be no benefits and the company will lose money. Technology and medicine should go hand in hand.

References

Druckman, D., Singer, J. E., Van, C. H. P., & National Research Council (U.S.). (1997). Enhancing organizational performance. Washington, D.C: National Academy Press.

MacKay, R. B., & McKiernan, P. (2004). The role of hindsight in foresight: refining strategic reasoning. Futures, 36(2), 161-179.

Triano, C., Kindler, J., D’Amelio, F., Read, I., Mackay, M., & Schulman, A. (2008). PFE – Q3 2008 Pfizer Earnings Conference Call. Web.