Internal and External Assessment of Pfizer

¶ … business model canvas developed by Osterwalder and Pigneur in order to evaluate and diagnose Pfizer Inc. organizational model. This is done to provide recommendations for improvements as identified using the canvas model. Key areas of internal assessment include its products and services offerings, key resources, capabilities and competitive advantages. Key areas of external assessment include Porter's five forces, including but not limited to, key products, major competitors, new entry and market dynamics, suppliers and customers.

Company Overview

Pfizer Inc. has its headquarters in New York City. It has a staff of about 115,000 people. It is involved in the manufacture of pharmaceutical products for both animals and humans.

Principal Services and Product-line

The company manufactures 31 different products, which are categorized into ten different divisions. Each division has a major product that it promotes as follows:

Cardiovascular and Metabolic Diseases (Lipitor, Caduet, Norvasc)

Central Nervous System Disorders (Aricept, Geodon, Lyrica, Zoloft)

Diabetes (Exubera)

Arthritis and pain (Celebrex)

Infectitious and Respiratory Diseases ( Diflucan, Zithromax)

Urology (Detrol, Viagra)

Oncology (Sutent)

Opthalmolgy (Macugen)

Endocrine Disorders (Genotropin)

All Other (Chantix, Zyrtec)

Pfizer also has other products which it sells and which are in the late stages of its research and development program. These products are:

UK-427,857 for HIV therapy.

Parecoxib for the treatment of acute pain.

Edotecarin for the treatment of colorectal cancer.

Torcetrapib/Lipitor for the treatment of heart disease.

Asenapine fir the treatment of the bipolar disorder.

Zithromax-chloroquine for the treatment of malaria.

Present Financial Condition

Currently, Pfizer is overall not financially stable. However, compared to preceeding years, 2014 has been an improvement (Research and Markets, 2014b). The reason for the better performance is the major products in the company's pipeline. For the year 2006, the company has intentions of bringing six new products to the market, three of which are projected to be worth billions. An examination of the company's money will include revenues as well as growth, price of stocks, net profits, budget for research and development, cash flow and ESPS. First, the company has experienced a drop in revenue growth in recent years. For example, the revenues for 2010 were $51,298, a drop of 2.4% in comparison to 2008.

The overall revenues for the first quarter of 2014 were an increase compared to 2013. There was an increase of 3% in revenues in the human health department, which recorded revenues of $11 billion. Secondly, despite the increase in revenue during the first quarter of 2014, Pfizer is still experiencing low prices in stocks which are selling at $25.98, a situation that has lasted for the last eight years (Research and Markets, 2014b). Third, in 2012 the net income for the company dropped by 29% compared to 2011, and amounted to $8,085 million. Fourth, the company is the leading spender in the R&D industry, and no other pharmaceutical company can match it in this respect ($7.7 billion in 2011).

In terms of cash flow, Pfizer is expected to reach a cash flow of $34 billion in the next 30 months (after capital expenditures as well as dividends). Finally, Due to expired inimitability on drugs, the company's EPS growth has dropped in about the last one year. However, in the latest quarterly results, the EPS growth has increased by 15.2% (Research and Markets, 2014a).

Mission Statement

The company aims to turn into the world's most esteemed company to patients, customers, colleagues, patrons, business associates and the communities where they operate (Research and Markets, 2014a).

Company Objectives

The objectives set for 2014 should accommodate some factors such as the fact that the company has been very large in size. Other factors the objectives need to consider include increasing generic competition, the fact that the company has a number of its drugs going off patent and it has light product pipelines (Research and Markets, 2014a). The objectives are as follows:

First is to make acquisitions on an ongoing basis to drive growth for the company's business in the long-term. Pfizer has set aside $17 billion which is intended to be used in acquiring products and technologies over the next 30 months (Research and Markets, 2014a).

The company is interested in inventing new technologies and building existing ones, especially R&D productivity, growth of important in-line medicines and any new information they can get from new medicines (Research and Markets, 2014a).

Pfizer is committed to providing solutions for physicians and advanced treatment options for patients. For example, it will offer training for physicians to be able to diagnose diseases better, and at the same time provide support programs for patients (Research and Markets, 2014a).

Pfizer must look for ways to cut on costs and maximize profits so that shareholders can reap greater benefits from their investments in the company. One way the company has strived to do this is by sending a memo to all its employees, requesting them to make decisions which help in reducing costs and increasing the efficiency in operations. The memo was sent by the new CEO, Jeffrey Kindler (Research and Markets, 2014a).

External Analysis

This pharmaceutical company can be evaluated using Porter's five forces model of competitive pressure. The forces are divided into sources of horizontal competition and sources of vertical competition. Horizontal competition includes product substitutes, current rivals in the market and new entrants. Vertical competition includes bargaining power of suppliers and bargaining power of buyers.

Competition from Product Substitutes

If a product is unique to the industry, the danger paused by substitution of products is minimal. However, if there are other medicines which serve the same purpose as the medicine that Pfizer offers, then there is a possibility of substitution of products, especially if they are marketed in a better way. An example of a Pfizer drug which is faced by a threat from product substitutes is Zyrtec, an allergy medicine. This danger is posed due to availability of generic and over-the-counter allergy medicine. Pfizer deals with the problem of competition from product substitutes by creating the generic subsidiary named Greenstone, through which they manufacture and promote generic versions of their products. Through this generic subsidiary, Pfizer is making a generic version of their Zoloft drug (Research and Markets, 2012).

Competition from Established Rivals

The pharmaceutical industry is highly competitive due to a number of reasons. Firstly, there are too many firms in the industry. Secondly, the drugs being produced by the firms serve the same purposes, and lastly, due to the presence of exit barriers. There are currently over 500 companies in the pharmaceutical industry. These firms are all competing for the same markets, resources and superiority in the market. It is therefore very hard to enter the industry. The companies who are already in the industry are finding it hard to survive due to the large amounts of revenue they have to spend on marketing their products in a way that makes the product look different from all the others. Lastly, the high exit barriers exist due to the high costs required to get rid of a specific product, or service or a subsidiary (Research and Markets, 2012).

Competition arising from New Industry Entrants

Four key factors lead to high competition from new entrants in the pharmaceutical industry. They include cost barriers, capital needs, product uniqueness (brand awareness), along with government policies. New entrants in the industry are required to find distribution channels hire many employees and deal with overhead expenses before they can be allowed to sell any drugs. Secondly, new entrants are required to have large capital requirements in order to invest in new technologies, machineries and raw materials if they expect to have any benefits from their firm. Thirdly, they have to invest heavily in advertisements in order to make their product look different from those of their competitors. Lastly, the government applies heavy regulations to the pharmaceutical industry before they can finally sell their products in the market, to ensure that the products being distributed to the market are safe for use (MarketLine, 2014).

Bargaining Power of Suppliers

Suppliers of raw materials in the pharmaceutical industry are many. Therefore, they generally don't have much bargaining power. If they were few, they probably would have a lot of bargaining power (Research and Markets, 2013a).

Bargaining Power of Buyers

The bargaining power of buyers is high when there is a large supply of drugs. It is low when there is a drug which is unique in the market, such as Pfizer's Viagra which had been priced highly when it was first launched in the market (Research and Markets, 2013a).

Internal Analysis

Key Resources

Resources are assets that a certain company owns and Pfizer's main resources are tangible, intangible, along with human resources. Its tangible resources are mainly in the finances they own and its free cash flow. Recently, Pfizer sold its consumer products department to J & J. For nearly seventeen billion dollars. This money will be used to invest in new opportunities as well as add to the cash flow in the company. According to the company's vice chairman, the company has engaged in operations which are expected to increase the company's cash flow to over $20 billion in 2015. The intangible resources that the company owns are connected to its intellectual property as well as research and development. The company has many patents, licenses and copyrights. The company has recently had new products approved which are Celebrex, Geodon, Lyrica, and Stutent. It also has new launches in line which are Eraxis, Exubera, and Chantix. Pfizer has more money set aside to be used in the development of new medicines, over seventeen billion dollars, which is the highest money that any pharmaceutical company within the U.S. has intentions of spending (Research and Markets, 2013a).

Pfizer has a reputation both as a company which employees enjoy to work and for the quality of products which they manufacture. The company dates back to 1849 and has built its name over the years. A major product that has given a good reputation for Pfizer is Viagra which has made it get associated with a major scientific breakthrough. Its reputation was boosted by its recognition by Working Mother Magazine as one of the '100 Best Companies' which favors working women for eight consecutive. The human resource of Pfizer is employed based on education, experience and collaborative skills. The company focuses on developing all its 100,000 who are employed all over the world. In a survey, the company was ranked the best in the compensation of women, further building its positive reputation. Its scientists are paid a lot of money, as much as five million dollars. The company's new CEO has set new standards through a memo sent to every employee of the company. The standards are meant to create a culture where every employee is expected to make decisions which will minimize costs and maximize profits. This will help the company to deal with pressures to be the first to market their products, competition from generics and managed care companies (Research and Markets, 2013a).

Capabilities

Using Robert M. Grant's Contemporary Strategy Analysis, capabilities can be defined as the actions that the firm can take with the resources. The strengths of Pfizer in terms of capabilities lie in two areas; development of new products and a solid marketing strategy (Research and Markets, 2013a).

The capability based on new product development is strengthened by the company's commitment to research and desire to acquire new technologies and new research collaborations. Although the company is projected to lose revenues due to the expiration of patents, but due to these acquisitions it is still going to be stable financially. In line with this projection, a number of commentators have asserted that the company was in the process of becoming a drug development giant, which will make major ailments like cancer, diabetes and many others into manageable diseases (Research and Markets, 2013a).

Getting new technologies to bring about long-term growth in the company is one of the top priorities as stated in the objectives of the company. Consequently, the company has set aside more than $17 billion dollars towards product development, which is expected to be used over the next 30 months. Due to the sixteen billion dollars that the firm will acquire through the sale of some of its assets, it will be possible to invest in acquisition of better technologies. Moreover, Pfizer has decided to sell the consumer healthcare division to enhance the output of the R&D department (Research and Markets, 2013a).

The solid marketing strategy which Pfizer has applied is seen as a capability because it results in more sales for the company's products. The staff in a pharmaceutical firm is important because, due to their sales efforts, the company is able to grow. It also offers training to physicians, consequently making the community within which the company operates stays healthy. A reconfiguration of the sales team took place in Pfizer in 2012, with the intention of reducing the number of sales professionals, which would reduce the number of professionals visiting the same doctors. The reconfiguration resulted in improved interactions between the sales staff and customers. The sales force in Pfizer was voted as the most beneficial to customers, better than any other sales staff in all the other key pharmaceutical firms. The reconfiguration also led to improved revenue generation in 2013 compared to 2012. For instance the revenue generated from the sales of nine major products such as Lipior, Celebrex, and Geodondouled in that period (Research and Markets, 2013a).

Competitive Advantages

One of the competitive advantages that Pfizer has is the new product development because of a number of reasons. First, there is the focus on research which creates an opportunity for the firm to grow in the long-term. Secondly, the company has set aside a seventeen billion dollars for the development of new products, which cannot be matched by any other pharmaceutical firm. Third, the idea of developing new products is unique to the company, and every product that is created as a result of this plan is greatly valued by the whole organization, and patents and licenses are applied for the product to make sure that it is not imitated by the competition. Creating new products improves the portfolio of the company. The strategy to develop new ideas has been imitated by other companies in the world. In the past, these ideas which are unique to Pfizer have been imitated in other parts of the world such as in India where Viagra was imitated and the people responsible for doing so made a lot of money, because the counterfeit drug business is a huge business worldwide. Pfizer is working with law enforcement agencies to fight the threat of counterfeiting (Research and Markets, 2013b).