Teva and Netflix: divergent strategies in competitive markets

Tera vs. Netflix

TEVA VS. NETFLIX

Teva, which you likely do not even know (Northrup, 2010), has won its business game by betting its success on products with a true future, while Netflix, stuck with a well-known brand name, appears to be dying the death of overconfidence. Technically, Teva could still do less well than anticipated because the market they are in -- the production of generic drugs and the ingredients that allow for making generic drugs -- is coming up for grabs. But right now they are seen as a clear success. Netflix, on the other hand, has not actually failed -- at least not yet. But they do seem to be doing their best to act like they should. At least one well-known investor has sounded my warnings and believes that Netflix has all but disappeared, even in the face of a number of possible industry opportunities (ChartProphet, 2011).

Teva and Netflix are incredibly different companies and might not normally be compared and contrasted. However, they each share some common circumstances and have opted to follow significantly different paths -- one of which is working and one of which appears to be falling short. Their common elements center on their size and position in their respective global sectors. Their differences have much to do about their slow and steady planning or their leap of faith that more of the same is essentially always the best path to growth.

COMPARABLES

TEVA Pharmaceuticals, Ltd. -- Teva has earned itself a position of recognition in a number of the global assessments of the pharmaceutical and biotechnology industries. This is the case because, even as its corporate website demonstrates, it has the numbers for success:

Teva manufactures 71 billion tablets a year in 77 pharmaceutical and API facilities around the world. Over 1.5 million Teva prescriptions are written each day in the U.S. alone, 1,052 prescriptions per minute. Our numbers speak for themselves, more generic medicines mean more health for more people. This is what we do: we make quality healthcare accessible to more people worldwide, every single day for over a century, so you can live your life (Teva Website, 2012).

The company began as a relatively small drug production company in the early years of the 20th century. Since that time it has grown continuously in a cautious way but without giving up its confidence in staying what it likes to say is a small business at hear.

Small in this sense clearly has little to do with the business as an operational entity. The company has hundreds of sites and it makes thousands of products. It's basic focus is on developing, inventing, manufacturing and, most recently, merging with and acquiring other businesses that are affiliated with pharmaceutical production, biogenerics and the engineering of active pharmaceutical ingredients, which are the compounds that enable companies to make "biosimilar" agents for challenging brand-name medicines (IMAP, 2011: 10). A Krause Fund investor communication in 2010 describes the company as having facilities in 60 countries. It employs some 36,000 people (2010:6). It is generally agreed that it has effective control of the majority of generic drugs that are used in the U.S., and its relatively new and intensive merger and acquisition practices have ensured that it has ownership control over some of the best companies across the planet that are trying to get into the healthcare game of the future (IMAP, 2011:11). In the U.S., insurance companies favor generics to try to reduce their costs. In other countries, such as in Japan, generics have not been as popular though that market is now opening to new opportunities. In both cases, more generic alternatives seem to be the desire for the best returns into the distant future -- and Teva is by far well positioned for leading this charge (IMAP, 2011:11).

Netflix -- Most people know Netflix as being the convenience movie company. Its website says that it is, "With more than 23 million streaming members in the United States, Canada, Latin America, the United Kingdom and Ireland, Netflix, Inc. [Nasdaq: NFLX] is the world's leading internet subscription service for enjoying movies and TV series" (Netflix, 2012).

Why it is seen as being such a significant player is that its business model seeks to allow all types of connectivity technologies to pull from its databanks. It has been estimated by Netflix that more than 700 of the current generation of entertainment devices have the ability to pull from its materials reserves. This includes most of the Apple products, the Microsoft Xbox series, Google TV, home theatre systems, etc. All Macs and PCs and most TVs are seen as compatible. And, at least until recently, it was seen as attractive because of the fact that it had lucrative contractual relationship with notable Hollywood movie and broadcast companies.

NETFLIX TURNAROUND

Netflix was likely a company that served a purpose for a while but may now find itself in such a poor place as a business that it will never recover. If it had approached its challenges in different ways, it might have been able to stay away from this free fall of failure (ChartProphet, 2010):

First, it should never have moved into the streaming video area without testing it first and seeing what costs were involved and how it could negotiate a different relationship with its subscribers. Simply jumping in with a poorly thought out approach and then asking for forgiveness gave consumers the chance to start looking for a better dance partner.

Second, it needed to learn to live the game of humility. Their most recent quarterly statements openly attack the trajectory of companies like Xfinity because of their use of valuable broadband capacities (Quarterly Statement, 2012:4). This kind of approach leaves Netflix open to being seen as a sore leader, especially in light of their management and PR missteps they clearly made.

On the front page of the company website for Teva, its CEO, Shlomo Yanai offers this philosophical foundation for his company's achievements. It seems like good thinking that Netflicks might well have wished it had contemplated more on when it had the chance:

We don't rest on our laurel; we don't assume success is inevitable. We know we must always find a better way, a smarter way; we know that no matter how large we grow we must retain the leanness and agility of a smaller company. All of these are crucial elements of our success and our leadership (Teva Webside, 2012).