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Feedback Balancing
Introduction
In feedback loop, information related to the actions is sent back to the input system in the form of input data. A feedback is said to be positive if it speeds up the alteration in the similar direction. On the other hand, If the result of the data is produced in the reverse direction to previous results, they are regarded as negative feedback and they have the capability to stabilize the system.
Two types of Feedback loops that exist in this organization are: balancing loop and reinforcing loop.
Balancing loop: The balancing loop represents the situations where goal is to be achieved by appropriate action. For example, if a decision is taken to enhance the sales by ten percent, it is called a balancing loop. In this loop, two types of state exist, the desired state and the current state. The interaction between these states produces a gap; this gap acts as the motivating factor for performing the action. Balancing loop functions when goal seeking behavior is required (Galbraith, 1999).
Reinforcing loop: Reinforcing feedback is generally known as positive or amplifying; this does not carry any value judgment. This is not a tool for value judgment. It can be defined as a change in one part of the system that creates a change in another part of the system, which intensifies the change in the first system. The present structure of the pharmaceutical industry like Pfizer rests on three key reinforcing loops:
Get help with your essay from our expert essay writers...1. R&D investment –R&D investments are the main source of intellectual property and patents. Patents offer a legal barrier to entry to competition, which permits the firm to completely extract the high consumer surplus generated by the high willingness to pay. As the direct cost of manufacturing drug is relatively low, it allows large investments in R&D.
2. Marketing Spending – (Increased Market Size and Share). Doctors and consumers’ awareness of drugs is increased through high marketing spending. Increase in market share results in additional acceptance of the drugs because both doctors and consumers consider the increase in market share as a confirmation of the drug’s safety and superiority. Firms have strong incentives to attain fast acceptance through marketing efforts because of time pressure imposed by patent expiry.
3. Complementary Assets – (Economies of Scale and Scope -Broader Product Offering)
Strong complementary assets development, such as a global sale & distribution network, an enormous clinical development capability and branding offer an opportunity for economies of scale and scope in the development and commercialization of new drugs. This permits big firms to carry out those tasks at a lower cost in comparison to start-ups by biotechnology firms, providing large firms with a strong value proposal for commercializing their inventions. This procedure assists the big firms to add new products to their portfolio, which results in the opportunities to strengthen the position of the organization.
Reason for selection: feedback loop plays an important role in guiding the behavior of the individual in the organization to produce the required outcome. Efforts are required to improve the behavior so as to increase the performance and establish the market position. Therefore, the proper understanding of these feedbacks is required (Personalized Medicine and the Future of the Pharmaceutical Industry, 2005)
Organizational effectiveness
These feedback loops play an important role in increasing the organizational effectiveness. These feedback loops are interconnected with the diverse characteristics of intricate co-evolving systems. These loop leads to the exploration of variant actions and are responsible for balancing the input and output effectively and efficiently (Manning & Masia, 2008). The outcomes obtained by implementing these loops lead to the production of better quality product along with the innovation. For example: in reinforcement loop, investments in R&D are responsible for the intellectual property and patents. Legal barrier offered by the Patents blocks the entry to competition, which permits the firm to completely extract the high consumer surplus generated by the high willingness to pay. In this, the direct cost of producing medicines is linked with the manufacturing drug, as the direct cost is relatively low; it allows large investments in R&D.
These feedback loops also lead to the increase in the market share, sales generation and also leads to the exploration of new opportunities. Hence, it contributes to an increase in the organization effectiveness.
Recommendations
Pfizer being the world’s largest pharmaceutical company should give prime considerations to the communication strategy and must focus on the target customers. Marketing plays an important role in giving a constructive impact, in order to have an access on new medicines. So, proper allocation of funds must be done for the entire department. Research teams play a vital role in the sustainability of the company. Therefore, company expenditure on the R&D is justified. The marketing activities generate the awareness among the customers. On the other hand, the advertising provides information about the quality of products to the target customers and also provides information related to the sale terms and product characteristics.
To promote the products, company should give the Samples that provide the doctors with a chance to see the effectiveness of the medicines in fulfilling the requirements of the patients. Apart from this, the Pfizer should go for the Direct to Customer or DTC marketing. The advertising is effective if it leads to an increase in the customer base and not merely focuses on the increase in market share (Manning & Masia, 2008). The company should improve its performance and must capitalize on the opportunities by driving innovation in the healthcare unit. Pfizer long term success depends on the public policies. Therefore, it is advisable that the company policies must be high risk oriented and look for the long-standing pharmaceutical research and development that can boost the innovation in the products.
References
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