An Analysis of Novartis International AG Healthcare Provider

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About the Report

The foremost aim of this report is to study about a global healthcare leader, Novartis International AG in the aspect of being a multinational pharmaceutical company that attains to be one of the best in the industry.

At the outset, this report would be able to exhibit the current situation of the company itself by addressing the detailed history and the strategic posture of the company. The strategic posture of the company would also include the mission and the business strategy of Novartis which would provide insights on the approaches that is being used to sustain their position in the industry.

As it is undeniable that there is an intense competitiveness among pharmaceutical industry related companies, this report would highlight the threats and opportunities encountered by Novartis. Apart of that, the strategic alternative of this company would also be addressed with respect to the strategic problem encountered. The report would be extensively providing insights on the internal environment of Novartis as it is crucial in order to learn more about this company.

Due to certain disclosure policies of Novartis, I was not able to interview any of the company staff for any information that would aid in my research and analysis. Thus, most of the information contributed for this report was gathered from their official website and Novartis Associates' Orientation File.

What is Novartis?

Novartis, also known as a global healthcare leader, is a company that has one of the most exciting product pipelines in the pharmaceutical industry today. Focused solely on healthcare, this company offers a diversified portfolio to best meet these needs of innovative medicines, cost-saving generic pharmaceuticals, preventive vaccines, diagnostic tools and consumer health products.

The headquarters of Novartis International AG is located in Basel, Switzerland. Where else, the Novartis Singapore Pharmaceutical Manufacturing Pte Ltd (NSPM) in Singapore has new facility which is designed to manufacture drug products which contributes substantially to Novartis AG. With more than 98,000 associates sited around the globe in over 140 countries, Novartis is recognised for its novelty.

Company History

The following was extracted from Novartis's website which provides a brief history on the initiation of the company:

Learning that in December 1996, Novartis was created through the merging of the Ciba-Geigy and Sandoz, it is vital to comprehend the development of Novartis at the early years.

In the midst of development of Novartis into worlds' largest healthcare companies (1996-2001), there are certain accomplishments/events that led the pathway of success for the company.

At the outset, Sygenta (currently, a world-leading agri-business company) was created through the merger of the agribusiness units of Novartis and AstrZeneca. Where else, Novartis acquired the antiviral products Famvir and Vectavir/Denavir from SmithKline Beecham (GSK). On the other hand, Novartis American Depositary Shares (ADSs) were listed on the New York Stock Exchange (NYSE). Meanwhile, Dr. Daniel Vasella became the Chairman of the Board of Directors, retaining his position as a Chief Executive Officer in Novartis. The great step that brought the company ahead in the healthcare industry was that the Novartis Research Foundation announced the establishment of the Novartis Institute for Functional Genomics and also an agreement to acquire Merck's crop protection business.

The rich and diverse history of the company does provide a better foundation for Novartis. Nonetheless, healthcare company like Novartis whose stakeholders are mainly patients should always consider improvisation and adaptation to the evolving needs.

Achievements of Novartis in the Recent Years

With the advancement of technology in these recent years, Novartis has greatly contributed to the pharmaceutical industry and sustained its reputation being a global healthcare leader with the attainments of the company.

Rankings and Awards

The Scientist Best Places to Work in Industry 2010

National Organization for Rare Disorders Corporate Awards

DiversityInc Top 10 Global Diversity Companies

Vaccine Industry Excellence Awards

Fortune's World's Most Admired Companies

The Scientist's Best places to Work for Postdocs

Fast Company's World's Most Innovative Companies

Dow Jones Sustainability Indexes

PharmaVOICE's Top 100 List

MedAdNews' the Most Admired Pharmaceutical Company

Universum's World's Most Attractive Employers

With these, it is undeniable that experts and associates perceive Novartis as a best workplace for them. On the other hand, Novartis can also be concluded to be well-known for its innovation amongst the products.

Contribution of the Company to the Industry of Pharmaceutical and Biomedical Sciences

Being a pharmaceutical company with advanced technology, Novartis has a lot of prospects to contribute to the industry of pharmaceutical and biomedical sciences.

At the outset, Novartis converge part of its attention into research and early development of treatments against neglected diseases. Novartis Institute for Tropical Diseases (NITD), a new research centre was established and is solely dedicated for researches on dengue fever, malaria and drug-resistant tuberculosis (TB).

Apart of that, diabetes being the fourth leading cause of death globally, Novartis addressed the issue by providing innovative therapies for diabetes' treatment.

Holistically, this company became a factor in improvising the world's health by developing in these areas; pharmaceuticals, vaccines and diagnostics, Sandoz and consumer health.

Novartis Model

Novartis International AG has developed a model to support managers build organization capability and develop individuals. It also provides a common language across the company. Following are certain elements that are employed in this model:

Mission of Novartis International AG

We want to discover, develop and successfully market innovative products to prevent and cure diseases, to ease suffering and to enhance the quality of life.

We also want to provide a shareholder return that reflects outstanding performance and to adequately reward those who invest ideas and work in our company.

Novartis Core Competencies

Results Driven

Can be relied upon to exceed targets successfully

Does better than competition

Pushes self and others for results

Customer/Quality Focus

Assigns highest priority to customer satisfaction

Listens to customer and creates solutions for unmet customer needs

Establishes effective relationships with customers and gain their trust and respect

Monitors quality standards to enhance customer satisfaction

Innovation and Creative

Comes up with a lot of new and unique ideas

Challenges "status quo"; does not settle for the first right idea

Makes new connection work by seeing relationships between seemingly disconnected elements synthesizes odd combinations

Leadership

Establishes clear directions and sets stretch objectives

Aligns and energizes associates behind common objectives

Champions the Novartis Core Competencies

Rewards/encourages the right behaviours and correct others

Fast/Action-oriented/Initiative/Simplicity

Is action-oriented and full of energy to face challenging situations

Is decisive, seizes opportunities and ensures fast implementation

Strives for simplicity and clarity. Avoids "bureaucracy"

Empowerment/Accountability

Sets clear performance targets and a well defined "playing field" with corresponding personal accountability

Defines clear-cut, flexible involvement process (involves the right associates in the right situation at the right time)

Fully utilizes diversity of team-members to achieve superior business success

Shares consequences of results with all involved

Commitment/Self-discipline

Fully supports and implements decisions

Is 100% committed to achieve agreed-upon targets (strives to achieve the "slightly impossible")

Pursue targets with a need to finish. Does not give up, especially in the face of adversity

Mutual Respect/Candour/Trust/Integrity/Loyalty

Establishes mutual respect and trust in dealing with others

Acts and behaves in accordance with his/her words

Commits to honesty/truth in every facet of behaviour and demonstrates ethical conduct

Keeps confidences, admits mistakes and does not misrepresent self personal gain

Open Communication/Collaboration/Compassion

Communicates in open, clear; complete, timely, and consistent manner

Listens effectively and invites response

Genuinely cares for people and demonstrate empathy

Is a team player

From the mission and values initiated by the company, it is obvious that Novartis has realised that a common set of deeply held beliefs and associated actions is very crucial to achieve their competitive success. They also greatly emphasize their customers' expectation towards their associates and products in the Novartis Model which can explain the success of the company sustaining its standing as one of the best in pharmaceutical industry.

An In-Depth Look

External Environment

A company does not function in vacuum. External factors or influences which require companies to react towards it would affect the main internal functions of the business and possibly the objectives and its strategies. Similarly, Novartis International AG has certain external environment factors that may lead to the following statistics shown:

Unlike other industries, pharmaceutical industry's market share is not controlled by only four or five companies. However, about 200 major companies make up this industry. From the analysis, it is evident that Novartis holds a significant percentage; 5.00% of the market share in the global pharmaceuticals yet loses out to companies like Pfizer, GSK and Sanofi-Aventis.

Socio-Cultural Analysis

The following PEST analysis shows how political-legal, economic, socio-cultural and technological forces affect Novartis in terms of business and development of the company and what are some of the Novartis approaches to tackle these forces:

Political-Legal

With exhaustive need for new development of medicines to meet all the medical requirements, Novartis requires political and legal support in order to venture into this pharmaceutical and biomedical industry. Besides, Novartis being a MNC, it needs to accordingly abide to the legislations of different countries. This would greatly influence the development of Novartis when it's one of the emerging global healthcare leaders.

There is a factual article that claims that Novartis has achieved certain degree of stability in the political involvement in most of the countries by being part of public affairs operations in Basel, Switzerland; Brussels, Belgium; and Washington D.C., in the US under Novartis Global Public Affairs department.

Novartis has also been actively deploying ethical and legal tools for their research and development in pharmaceutical sectors with active involvements of people who are members of certain trade union who contributes to achieve common goal together in developing new medicines.

Economic

The global economic crisis would greatly impact the trust of the society towards Novartis. The people believes that the above mentioned crisis might lead the business and its entrepreneurs to be involved in misleading factors such as scandals, bankruptcies and unethical practices.

Nonetheless, Novartis had been engaged in Novartis Foundation for Sustainable Development (NFSD) with associative alliances with ethicist, economist and business people to show how they are tackling the current economic crisis. With above said involvement, they are ensuring consumer needs, truthful business practices, use of natural resources without destroying the ecological balance are met ethically.

On the other hand, globalisation which is always been emphasized nowadays would influence Novartis business unconstructively if there is no adaptation is made as advancements are being declared.

Socio-Cultural

In those days, consumers were not aware of proper ethical guidelines in order to get the right pharmaceutical products which only caused problems and resulting in higher expenditures of resolution in the end. Though, nowadays consumers prioritize the quality of the product in terms of overcoming the current health concerning issues with less expenditures and proper prescriptions. This change in consumers perspective has also manipulated as in enhanced the quality of products being developed by Novartis International AG.

In which Novartis had undertaken a lot of measures in order to ensure good medicines are developed with high quality values and at the same time ensuring that they are affordable to the society. They continue to venture into this journey by promoting their products extensively. A factual report shows that in 2009 they have deployed an estimation of USD 1.5 billion contributions for more than 70 over million patients around the world through access-to-medicine programs.

Technological

As for Novartis which has an extensive involvement in research and development, innovation in technology would affect the business and development to the highest degree.

Understanding this, Novartis has always been ensuring that the instrumentations as well as pipelines of theirs are brought up to date from time to time with the maximum efficiency to enhance the productivity of the company.

Task Environment Analysis

Now, let's look at state of the forces of consumers, competitors, intermediaries and suppliers of the company in the form of Porter's Fiver Forces Model.

Barriers to Entry is High

In order for a company to successfully enter the pharmaceutical industry, Research and Development and also patent for their products is very vital. However, the capital for the Research and Development to be initiated is very high which bequeath the new companies with barriers to enter this industry. The patent limitations are also hurdles for the new company to emerge in the pharmaceutical industry. These factors support Novartis constructively whereby there would be low threat from new entrants.

Buyer Power is Low

Due to the scattered distribution of buyers throughout the world for Novartis, there isn't much bargaining leverage for them. On the other hand, as the products of Novartis is all protected by patents, there isn't much of a choice for the buyers to ponder upon which would not influence the pricing of the products.

Supplier Power is Low

There are numerous suppliers that have registered in the portal of Novartis which aims to do business with Novartis. This actually initiates a sense of competitiveness within them due to the very fact that Novartis can switch from their suppliers without incurring a very high cost. Therefore, it is not easy for the supplier to drive up their prices.

Threat of Substitute Products is Medium

As mentioned earlier, Novartis' products are all offered with patent protection. This ascertains that there is no replacement of those respective products that can be developed and manufactured by the rivalries. However, patents are only valid for a limited period of time. As soon as the patent expires, the rival companies can take advantage of making the first move to get the patency for that subsequent product resulting Novartis's products to be substituted.

Rivalry among Existing Firms is High

Pharmaceutical industry is an industry concentrated with emerging companies. At such, companies like Pfizer; GSK has already begun to attempt to monopolize the industry with continuous development of products.

In these circumstances, Novartis does encounter an intense competitiveness from these various companies in terms of obtaining patency for the products, marketing its products and trying to increase the market share that Novartis hold in global pharmaceuticals.

Internal Environment

Management

Novartis Organizational Structure

The following chart shows the organizational structure of Novartis International AG:

From this main organizational structure of the company, it can be deduced that the various departments of Novartis such as Novartis Institutes for BioMedical Research (NIBR), Pharma, Sandoz and Vaccines and Diagnostics are being led and managed by respective Directors. This actually allows Novartis to be expanding in terms of different departments in a systematic strategy. Whereby, each Director converges in emerging their own department yet there are still the Executive Committee of Novartis (ECN) members who have a holistic view of the development in terms of business operations of the company.

Emerged Culture

There is a well-defined culture composed among the associates of Novartis due to the shared vision of theirs - a better today and tomorrow for patients that was initiated by the top management. This vision that has been inculcated into the 100 000 associates in 140 countries worldwide eventually shaped the performance-oriented culture among themselves as well. Thus, the associates of Novartis have claimed that their greatest job satisfaction would be improving the quality of life for patients with increasing precision and efficiency through breakthrough science and innovation.

Marketing

To understand how well is the company performing in terms of market position and marketing mix, I have done a comparison between Novartis and Pfizer as follows:

Novartis

Pfizer

Place

Operates in 140 countries.

The global headquarters is located in Basel, Switzerland.

Operates in over 150 countries.

The headquarters is located in New-York (USA), and the European headquarters- in Brussels (Belgium)

Promotion

Invested $665.6 million (2007) to promote the products of theirs through media.

Method of personal selling is greatly employed. Based on SDI Report, Novartis sale representatives have increased calls to the health providers by 7%.

The Novartis Care CardSM is created to offer eligible Medicare recipients' savings of 25% or more on select Novartis outpatient prescription products.

Shelled out approximately $1.253 billion (2007) to advertise the pharmaceutical products in the aspect of magazines, newspaper, TV, radio and Internet.

The Pfizer for Living Share Cardâ„¢ Program is worked out for eligible participants to obtain Pfizer medications at their pharmacies by paying $15 for a 30-day supply of each medication.

Price

Most of the products are subsidized in order to provide maximum access to consumers.

Products are charged with high prices to put large portions of revenue in research and development.

Product

Most of the products are developed to satisfy an identified public health need.

Most of the products are invented to address the need of identified consumer.

From this analysis, it can be inferred that Novartis has skewed its marketing strategy to social marketing. Unlike Pfizer that greatly employs commercial marketing strategy. Due to the social marketing strategy, in terms of generating profit, Novartis loses out to Pfizer.

On the other hand, the distribution of the Novartis' offices is also not as increased as Pfizer which lead to the thought where Novartis being an emerging pharmaceutical company with prominent marketing mix, should greatly consider in expanding the offices to a wider range of locations throughout the world.

SWOT of Novartis

Strengths

Excellent reputation among customers

Novartis featured in many of the global business rankings such as 'The World's Most Respected Companies 2005' that reinforce their reputation in the business world. This earns the recognition for their products among the customers which substantially lead them to excel in their business.

Patents protection

All the innovative products of Novartis have patency protection that ensures the good market of the product by excluding others from inventing that product by any means.

Fairly good access to natural resources

Novartis is committed to Convention on Biological Diversity (CBD) where this guarantees a continual access to the biological resources in the developing nations for the usage of Research and Development.

Weaknesses

High cost structure

The extensive product pipelines of the company contribute to the increase in cost structure. This relatively becomes a weakness for the company to cover its cost of investments and generate better profit.

Discontinuation of products

The products that are manufactured to meet the current needs may be discontinued from development in the latter stage of development. This would also incur a certain amount of loss to Novartis.

Opportunities

Arrival of new technologies

In this advancing era, new technologies are being introduced now and then. This creates a big prospect for Novartis in terms of manufacturing drugs, vaccines and also developing the Research and Development sector.

Demand for global health products

Due to the raising health issues and epidemic diseases that is encountered by the people around the world, Novartis being a pharmaceutical company has great opportunity in developing business by manufacturing functional and high-quality healthcare products with reliable research and assurance given to it.

Threats

Political and legislation effects

If the patent protection is not been issued to Novartis due to the legislation and political considerations of the different countries, the competitor company can easily copy the product and market it for a reduced price which would interrupt the business of Novartis intensely.

Rivalry

Pharmaceutical industry is an industry which is made up of about 200 major companies, whereby all the companies are driving their business based on inventions of new healthcare products that can relate to the situation of the society. At such instance, instant emergence of any existing companies by developing and manufacturing drugs or vaccines which stand a better function than that of Novartis' products, the business of Novartis would be affected greatly as well.

Observations and Conclusions

Critical Success Factors

To determine the critical success factors of Novartis we have to once again look at Novartis's mission.

We want discover, develop and successfully market innovative products to prevent and cure diseases, to ease suffering and to enhance the quality of life.

Invest on Research and Development which focuses on neglected diseases and also address the ageing population

Extend product pipelines for good quality products

Employ expertise which could contribute to the innovation element in the product developed

Expand the Novartis offices' throughout the world prioritizing the Third World Country

We also want to provide a shareholder return that reflects outstanding performance and to adequately reward those who invest ideas and work in our company.

Invest more on marketing the products of Novartis

Performance of associates is reviewed in regular basis to guarantee consistent approach in the business

Progress of business and development in the prospect of global pharmaceuticals is measured and valued

Gold Certificates are awarded to internal and external associates which is identified to invest constructive ideas and consistent work performance in the company

Strategic Problem and Alternative

As of now, the major strategic problem of Novartis is the social marketing style that has been adopted. Whereby, this strategy does not guarantee a good yield of profit for the amount of research and effort that is being put into the products. This style is good in the viewpoint of people in the society, yet as a company which is facing intense competition among the rivals alternative strategy has to be considered.

One of the alternatives that can be deliberated would be adoption of commercial marketing strategy at least to an extent. This can be achieved by increasing the investments for advertising the products and also partly focus on healthcare products with an identified consumer needs (e.g. Pfizer's Viagra product).

Conclusion (Recommendations and Implementations)

Novartis International AG has a well-defined framework in all the different aspects which is consent to a pharmaceutical company. With clear and distinct mission and core competencies, the management has empowered the associate's take on investing ideas and work for the company. It is also commendable that as of now, Novartis being a MNC has complement with all the different countries' legislations in manufacturing drugs and carrying out researches.

Nevertheless, there are some recommendations that Novartis could implement in order to shape an even better pharmaceutical company with excellent progress in business and development. At the outset, Novartis should review and restructure (if necessary) the proportion of focus that has to be given to the different sectors in this company. As of now, Research and Development sector has been prioritised too much. In latter stages, there may be a possibility for Novartis to encounter high rate of discontinuation in pre-approval products.

Apart of that, I also recommend Novartis to focus on resources management. One of the implementation that they can uphold is to analyse their resources well and identify the rate of resource wastage. As soon as they have recognised this factor, they would be able to systematically distribute the resources for future researches.

In conclusive, I would like to quote that Novartis International AG has the potential to develop to be the world's largest pharmaceutical company if they have employed a better marketing strategy and a comprehensive review system in all the aspect that would affect their business and development.

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