Pfizer case study analysis

Pfizer, a worldwide producer of health products for people and animals, must develop a solution that allows it to maintain its brand reputation and profitability in its animal health business despite growing price pressure in the cattle market. The cattle market, where Pfizer sells premium pharmaceutical products that are used by ranchers, has been beset by price pressures including the increase of cheaper imported cattle from Canada and Mexico; a monopoly in the meat-packing industry; and decreased beef consumption (Cravens and Piercy, 508).

Situation Analysis

Pfizer's Animal Health Group has achieved a place of industry prominence by selling premium pharmaceuticals to veterinarians, distributors and other resellers, for eventual sale to ranchers. Pfizer primarily gets its products to market through veterinarians, distributors and supply stores, although regional sales representatives and managers visit ranchers to learn about ranching, provide support, and receive feedback on Pfizer products (Cravens and Piercy, 514).

Pfizer's primary strengths are the consistent quality of its products; its ability to introduce innovative products, such as a pour-on vaccine; its support of industry initiatives, such as conferences; and its ability to offer technical support through a hotline (Cravens and Piercy, 512). Pfizer was able to develop these strengths, which clearly differentiate Pfizer from its competitors, because of the premium pricing Pfizer receives for its products.

Pfizer's main weakness is the cost of its premium products. Competitors such as American Home Products and Bayer sell cheaper, and often generic, products to the market (Cravens and Piercy, 511-513). Although competing products have had mixed records on quality control and are often not as innovative as Pfizer's products, they are still less expensive and Pfizer can not compete on cost and still invest in its core advantages, such as research and development (Cravens and Piercy, 512).

Not only do Pfizer's competitors undercut Pfizer on price, but they also provide better incentives to veterinarians and distributors to push their products (Cravens and Piercy, 514-515). Because of their superior products, Pfizer has still been able to compete well in the cattle market, but times are indeed changing.

Pfizer believes its ability to sell premium products to cattle ranchers may be adversely affected by numerous problems currently impacting that market. The North American Free Trade Agreement has allowed large quantities of less expensive beef to pour into the United States from Canada and Mexico, and efforts by American ranchers to stem the tide have been, for the most part, ineffective (Cravens and Piercy, 510). In addition, medical breakthroughs and better prenatal care have allowed cow productivity to increase, but demand for beef has decreased as consumers plan meals less frequently and purchase more chicken and pork products (Cravens and Piercy, 509). In addition to this supply-demand imbalance, which is suppressing price, a monopoly among four meatpackers has tremendous influence over beef pricing (Cravens and Piercy, 509). These meatpackers try to buy beef as inexpensively as possible and sell it for an amount that delivers a high margin. This formula is good for the meatpackers, but bad for the ranchers.

Pfizer is concerned that these price pressures being faced by ranchers will make them less likely to invest in premium pharmaceutical products for their cows, opting for cheaper generics instead. Pfizer is not in a position to lower its prices, because compressing its margins would force Pfizer to cut back on the critical research and development investments Pfizer needs to differentiate itself from its competitors (Cravens and Piercy, 508).

Fortunately for Pfizer, it has an opportunity to respond to this impending problem before sales are too negatively impacted. Because Phizer is taking a proactive, rather than reactive, strategy toward protecting its share of the cattle pharmaceuticals market, it has a good opportunity to implement changes that will safeguard, and possibly grow, sales.

Major Strategic Alternatives

Pfizer has a number of major strategic alternatives it can pursue in order to protect sales in the face of price pressure in the cattle market. As was mentioned, Pfizer has ruled out lowering prices, as such a move would undermine Pfizer's unique value in the market.

One alternative is to do nothing, as the problem has not yet fully materialized. The advantage of this move is that it requires no major organizational changes, while the disadvantage is that it may force Pfizer to react to the problem too slowly when it does fully manifest itself, thereby impairing sales.

A second alternative is to raise prices in international markets where Pfizer sells its products to the cattle market, such as Canada. An advantage of this strategy is that it could drive up prices of Canadian cattle, preventing Canadian ranchers from under-cutting their American counterparts. The disadvantage, obviously, is that it could leave Pfizer vulnerable to cheaper competitors in those markets.

A third alternative is to use Pfizer's corporate muscle to lobby for more government intervention to protect American ranchers and beef prices. An advantage of this strategy is that it could protect beef prices and win Pfizer good will with ranchers. The downside is that it puts control of the situation out of Pfizer's hands and could take a great deal of time.

Another strategic alternative would be to offer better incentives to veterinarians, distributors and supply stores. The advantage is that many ranchers rely on veterinarians, distributors and supply stores for advice and Pfizer's competitors have been doing a better job providing incentives to these groups (Cravens and Piercy, 514-515). The disadvantage is that any financial incentive, obviously, will eventually impact margins.

A final alternative is to help ranchers build value for their beef. Currently, beef is a commodity product where cheaper is better. Experts predict that the beef industry will engage in more marketing and more development of ready-to-eat products in the near future, and perhaps consumers will be interested in branded beef that they know is of a high quality (Cravens and Piercy, 509). The advantage of this strategy is that it could ease pressure on beef prices and even force ranchers to use Pfizer's premium products to meet the new standards. The disadvantage is that there is a risk that consumers and meatpackers won't be interested in the program.

Decision Criteria

Pfizer believes that the unique market advantages it enjoys, such as strong investment in research and development, technical support, and industry outreach initiatives, are made possible by the pricing on its premium products. If that pricing is eroded, Pfizer may have to scale back some of these advantageous services (Cravens and Piercy, 512).

Therefore, we will use two decision criteria when analyzing our major strategic alternatives. First, the alternative we select must not result in lower prices. Second, it must provide Pfizer the ability to at least maintain, and preferably grow, division sales.

Analysis of Alternatives

Given our decision criteria, it is clear that doing nothing is a poor strategic option. While doing nothing allows Pfizer to maintain its pricing, if price pressures force ranchers to move away from premium products, Pfizer will suffer a sales decrease.

Raising prices in Canada is an interesting option because it allows Pfizer to maintain its pricing in the U.S. And enjoy more robust pricing in Canada. However, such a move leaves Pfizer strategically vulnerable in Canada and could hurt Canadian sales. Further, if Canadian ranchers move to cheaper alternatives, Pfizer's move will have completely backfired and will provide no relief to American ranchers.

Lobbying also is an interesting option, because it will not impact pricing and will build good will with ranchers, assuming Pfizer makes the ranchers aware of its efforts. However, lobbying has produced only mixed results in the past and has historically failed to stem the influx of cheap beef into the United States (Cravens and Piercy, 510). Also, lobbying takes time to produce results and Pfizer could lose sales during this period. Therefore, lobbying does not completely satisfy our decision criteria and is not a complete solution.

Offering better incentives to veterinarians, distributors and supply stores must be ruled out as well. Although it could increase sales, such a move would hurt margins. In short, if we are offering kick-backs (even in the forms of discounts, bonus points, etc.) to resellers, that money has to come from somewhere. Pfizer has a more limited incentive program already in place, and has decided it can live with that program. For now, that is as far as Pfizer should go.

The final alternative is to help ranchers build value through a branded beef program, perhaps de-commoditizing beef. The branded beef program would require a standard of care for the cattle, including premium medical care using products such as Pfizer's (Cravens and Piercy, 511). This program would allow Pfizer to maintain, or perhaps even increase, its pricing, as it would eliminate some of the cost pressures on ranchers. Also, the program has the potential to increase sales or, at the very least, have a neutral effect. Undoubtedly, there will still be ranchers who only care about a cheap products and who opt not to participate in branded beef. But the ranchers who do participate may end up purchasing exclusively Pfizer products, which would be excellent for sales.