Introduction
One of the international pharmaceutical companies struggling to compete in the pharmaceutical market is AstraZeneca International. Operating in over 100 countries, it can reach sales of billion, with an operating profit of .5 billion (AstraZenca, 2006). This case study explores the company, specifically how it operates under the growing but pressured pharmaceutical industry. It explores the basic structure of AstraZenca, as well as the key external drivers that impacts upon it. It also explores and discusses how the organization adds value to its products and services. The future strategic directions of the organization are also identified. Suggestions are provided, on how the organization can improve and can rise above the competition.
AstraZenca International: Profile and Organization Structure
AstraZenca International claims to be one of the world’s leading pharmaceutical companies, dedicated to the discovery, development, manufacturing and marketing of high quality, effective prescription medicines that bring benefit for patients and add value for shareholders and wider society (AstraZenca International, 2006). However, it seems that those statements were not merely blind claims as the company has evidences of its success. Their products are available in over 100 countries (AstraZenca International, 2006). In 2005, the totaled sales reached billion, with an operating profit of .5 billion (AstraZenca International, 2006).
Albeit the issue of limited research and development of pharmaceutical companies (Piachaud, 2002), AstraZenca International is one of the companies that basically invests considerably on R&D. The company spends over million every working day on the research and development of new medicines that meet patient needs (AstraZenca International, 2006). Also, it employs 12,000 people in research and development at 11 R&D centres in seven countries: Sweden, the UK, the US, Canada, France, India and Japan (AstraZenca International, 2006). Furthermore, the company has some 14,000 people at 27 manufacturing sites in 19 countries, and generally employ over 65,000 people worldwide: 58% in Europe, 28% in the Americas and 14% in the rest of the world (AstraZenca International, 2006). Although the company is headquartered in London, and has the R&D headquartered in Sweden, it currently enjoys a major presence in the United States (AstraZenca International, 2006).
Aside from its handful of employees, AstraZenca International is of course made up of Board and Senior Executive Team (AstraZenca International, 2006b). The Senior Executive Team is composed of: David Brennan (Chief Executive Officer); Bruno Angelici (Executive Vice President for Europe, Japan, Asia Pacific and ROW); John Lundberg (Executive Vice President, Discovery Research); Martin Niklasson (Executive Vice President, Global Marketing and Business Development); Barrie Thorpe (Executive Vice President, Operations); Tony Bloxham (Executive Vice President, Human Resource); Tony Zook (Executive Vice President, North America); Jonathan Symonds (Chief Financial Officer); and Barry Patterson (Executive Director Development) (AstraZenca International, 2006b).
On the other hand, the Board of the company consists of positions such as Non-Executive Chairman of the Nomination Committee, Non-Executive Deputy Chairman, Non-Executive Director, Executive Director Development, Executive Director and Senior Non-Executive Director (AstraZenca International, 2006b). The Board Committee is basically made up of four departments, which are: Audit Committee, Nomination Committee, Remuneration Committee, and Science Committee (AstraZenca International, 2006b). Several core remit of the committee include review and report to the board on: the scope of and plans for audits of the Group by the external auditor and the internal audit function; the implementation of the external and internal audit plans and the handling of any material issues arising from those audits; etc. It also brings attention to the board issues such as: any significant concerns of the external auditor about the conduct, results or overall outcome of the annual audit of the Group; any significant concerns of the Chief Internal Auditor about the conduct, results or outcome of internal audits; etc. (AstraZenca International, 2003a). The group is also responsible on: overseeing the establishment, implementation and maintenance of the Group’s Code of Conduct and other related policies and establishes procedures for the receipt and handling of complaints concerning accounting or audit matters; appointing and agreeing the compensation for the external auditor subject; and reviewing and approving the appointment and any dismissal of the Chief Internal Auditor (AstraZenca International, 2003a).
The Nomination Committee has a different responsibility. It is responsible on making proposals to the Board for any new appointments of Executive or Non-Executive Directors of the Company (AstraZeneca, 1999a).
The Remuneration Committee, then, is responsible on making recommendations to the Board of Directors on the Company’s policy for executive remuneration and to determine, on behalf of the Board, the entire individual remuneration package, including the terms and conditions of employment and the retirement/severance provisions (AstraZenca, 1999b). This Committee is also responsible on making recommendations to the Board for the Company’s Executive Share Option Scheme and Employee and Executive Performance Bonus Schemes (and any other similar schemes) and to exercise the powers of the Directors under the rules of such schemes (AstraZenca, 1999b).
Finally, the Science Committee review and assess the international competitiveness and quality of science within the Company. Specifically, it covers the strengths and limitations of the Company’s R&D science in the Research / Therapy Areas in which the Company is active or is considering becoming active; and enabling Science and Technology (AstraZenca, 2003b). It also considers the effectiveness of the Company’s delivery on specific projects in those areas, and the adequacy of the Company’s R&D skills base in those areas. It also handles significant scientific advances and their potential impact on the Company, and any other significant developments in the scientific environment which may affect its interests (AstraZeneca, 2003b).
SWOT Analysis
The strengths and weaknesses of AstraZeneca International were derived from the annual reports and articles about the company that are readily available in the Internet.
Interestingly, the company claims that its core strength is derived from its outstanding portfolio of products, its global reach and, above all, the creativity and commitment of its employees. It has ten products each with global sales of over billion i.e. products such as Nexium, Seroquel, Crestor, Arimidex and Symbicort (McKillop, 2005). The global reach of the company is also becoming strong, as it is starting to show signs of success in China, growing their business there by over 200% over the past five years. Strong growth is also being achieved in other Asian countries, in Latin America and in Eastern Europe (McKillop, 2005).
On the other hand, there are also several weaknesses that serve as barriers for the success of AstraZeneca. One of them is some failures of gambles on important pipeline medicines. Specifically, one case that tells this is the gamble of the company on Iressa – a supposed-to-be breakthrough cancer drug. The drug failed to show a survival benefit. There have been safety flags raised with Crestor, for cholesterol, and with experimental drugs Exanta, a blood thinner, and diabetes drug Galida (Forbes.com, 2004). It may create a reputation for the company as a business making unsafe or ineffective drugs (Forbes.com, 2004).
Another weakness of the company is that it is also being affected by the drug shortage crisis. For instance, AstraZeneca has discontinued its Cefotan products. Cefotan has been in short supply due to manufacturing problems and there came a point when the company had reached zero supply (American Society of Health-System Physicians, 2006).
In terms of opportunities, the company has many to be glad about. First, its recent success in countries such as China, Latin America, and Eastern Europe can open up many possibilities. Another opportunity for the company is the increasing need for innovative drugs, especially on diseases that are currently difficult to cure such as cancer and diabetes. The company has the potential to create breakthrough drugs as shown in their development of Galida and Crestor.
Finally, threats for the company are plenty, specifically the current condition of the pharmaceutical industry. One problem is the increasing cost of prescription drugs. There has been more and more demand for budgets of those who have been paying for healthcare (AstraZeneca Annual Report, 2005).
Pricing pressures were placed on the industry through legislation not only in major established markets, but also in China and India (AstraZeneca Annual Report, 2005). There are also concerns on productivity and innovation, as well as on drug safety, competition, reputation, and regulation AstraZeneca Annual Report, 2005). These threats, if not carefully planned and addressed, may hamper the growth of AstraZeneca to a great extent. Many pharmaceutical companies are struggling to meet these demands just to survive.
Drivers
There are four main drivers of pharmaceutical industry. Piachaud (2002) stated: “From the standpoint of the pharmaceutical industry, the impetus for change is the result of a combination of political, economic, technological and social factors; all of which have helped redefine the dynamics of this particular industry”. Those were the same factors that affect the operations of AstraZeneca.
Political
The company is obviously being influenced in the political perspective. In the previous years, the issue on whether or not Crestor or Galida is safe has been a political issue in the United States. There were basically different factions that are against or favor the drugs, affecting the whole marketing strategy of the company.
Economic
AstraZeneca is being affected by the economics of the pharmaceutical industry in terms of increasing prices of drugs as well as increasing demands. There has been an increasing need to demonstrate the economic as well as the therapeutic value of their medicines to those who pay for healthcare (AstraZeneca Annual Report, 2005).
Social
The social concern of the company is how well the consumers will accept and see their products. Drug safety is one issue here. Accordingly, decisions on acceptable benefit/risk profiles for medicines have the potential to be positively or negatively affected by a number of factors. These include pre- and post-marketing clinical data and regulatory judgments that reflect society’s concerns and aspirations (AstraZeneca Annual Report, 2005). The norms of people toward drugs can also be an issue, as there are some who do not take drugs seriously, resulting in the decrease of market share.
Technological
The pharmaceutical industry is characterized by stiff competition. The international competitors of AstraZeneca are international, research-based pharmaceutical and biotechnology companies that also sell branded, patent-protected, prescription medicines (AstraZeneca Annual Report, 2005). Being ahead in R&D, specifically in technologies, is a must because it will leverage a company to the top. Technologies may ease working loads; make them faster and more accurate.
Added Value
The added value that AstraZeneca offers to its customers are: patient benefit and safety continue to be the core priority; Safety, health and environmental issues remain a fundamental Company consideration; the individuality, diverse talent and creative potential that every employee brings to the business are fully valued and respected; they maintain high ethical standards in their research and development of new medicines; they maintain high ethical standards of sales and marketing practices in all countries of operation; they make a positive contribution to the communities in which they operate; as a minimum, they meet national and international regulations; their CR or customer responsibility commitments are expanded by encouraging their suppliers to embrace standards similar to their own; and new and emerging issues relating to CR are dealt with appropriately and effectively.
Future Strategic Directions
The company has 5 main strategic priorities, which are: products; pipeline; productive use of resources; people; and reputation. In products, the company plans to maximize sales growth by: releasing the full potential of their marketed brands throughout their lifecycle; growing their position in existing markets; expanding their presence in key emerging market; and vigorously defending their legitimate intellectual property rights (AstraZeneca Annual Report, 2005). In pipelines, the plan is to deliver a portfolio of differentiated medicines that meet patient needs by: successfully delivering the next wave of products in development; further improving the productivity and efficiency of their drug discovery and development; strengthening the pipeline through appropriate external targeted acquisition, licensing and partnership opportunities; and rigorous management of their portfolio of products in development, to mitigate risks associated with new innovative products (AstraZeneca Annual Report, 2005). In terms of productive use of resources, the company plans to improve its leadership, maintain best practice, and develop new practices. People are also a concern, as the company plans to strengthen more the company culture and create more programs to motivate employees. Finally, as a remedy to one of their weaknesses – reputation- the company sought to maintain the trust and confidence of patients, customers, employees, shareholders, regulators and wider society by: understanding their needs; ensuring that they deliver on their business promises; and living up to their core values and publicly stated standards of ethical behaviour, wherever they have a presence or an impact (AstraZeneca Annual Report, 2005).
Based on the reports, the main aim of the company is to improve its management and marketing strategies. In the next years, it can be predicted that the company will become more concerned with its employees and customers, and will release programs to inform them how important they are to the company. Furthermore, the company will also become aggressive in marketing as it tries to sort out loopholes and problems in areas of distributions such as in the United States and China.
Conclusion
So far, as can be reflected from the paper, AstraZeneca International is fairly successful in meeting its endeavors as an international pharmaceutical company. Its strengths such as being able to reach more global scale, strong product portfolios, and the ability to convince customers can be attributed with the main drivers that were discussed earlier. For instance, the strong product portfolio or the popularity of the company’s products may be due to the fact that some of its products have been given enough media exposure of their controversial characteristics. Positive or negative, the company had enjoyed being recognized because of those exposures. The good thing is, some of the issues are not yet closed and in most of them, the company won the case. Being able to increase distribution into past places where sales were down can also be due to the increasing demand in prescribed drugs, and the increasing cases of cancer and diabetes around the world. The issue on high cost of drugs can also be pinpointed as factors as consumers look for better alternatives if not on price, on the cost and quality. On the contrary, the company has to work on and improve its R&D so as to avoid similar incidents such as that of Crestor and Galida. R&D should firstly conclude and proven that the products being developed are safe and will not be the object of criticism by medical experts. The company should also work on its reputation. Fortunately, they already figured this out. A good Public Relations practitioner should be hired to clear the name of the company. The company should also improve its logistics to keep in track and manage drugs that are difficult to obtain and are limited in supplies.
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