Novartis – an internal scanning of a pharmaceutical company

Table of contents

Table of  figures  II

  I. Introduction  1

  II. Company Background  1

2.1  Current Performance and Results  3

2.1.1  Results 1998 2003  3

2.1.2  Key financial developments in 2003 (nine month results) vs 2002  4

2.2.  Strategic Posture  5

2.2.1.  Mission  5

2.2.2  Objectives and Strategies  5

  III. Internal Scanning  7

3.1  Structure analysis: Corporate structure  7

3.2  Culture analysis: Corporate culture  8

3.3  Internal Analysis of Resources and Functions  9

3.3.1.  Internal Resource Analysis  9

3.3.1.1.  Financial Resources  9

3.3.1.2.  Human Resources  10

3.3.1.3.  Intangible Resources: Knowledge Networking  12

4.3.2  Analysis of functional areas  12

3.3.2.1.  Marketing  13

3.3.2.2.  Research and Development  13

3.4  Competitive advantages of Novartis  15

  IV. Conclusion  16

  V. Bibliography  17

Appendix 1:  Key marketed products of the division Pharmaceuticals  19

Appendix 2:  Key marketed products of the division Consumer Health  20

Appendix 3:  US Pharmaceuticals Pharmaceutical Executive Ranking (09 2003)  21

Appendix 4:  Regional Corporate Citizenship Status  22

Appendix 5:  Planned Filing (2004 2007)  23

Appendix 6:  Broad Scope of Research Collaborations and Alliances  24

I

Table of figures

  Figure 1: Performance of top ten products  1

  Figure 2: World-wide Market Shares of the 9 largest pharmaceutical companies  2

  Figure 3: Novartis Financial Development 1998 2002 (in USD)  3

  Figure 4: Sales by Division  4

  Figure 5: Sales by region  4

  Figure 6: Novartis structure  7

  Figure 7: Total assets  9

  Figure 8: Total equity and liabilities  10

  Figure 9: Employees by function and region (2002 averages)  11

  Figure 10: Female employees by region  11

  Figure 11: Portfolio rejuvenation  14

  Figure 12: Novartis Pipeline is among the Best in Industry  15

II

I. Introduction

There is great value in reviewing the road an organization has travelled to get it to the place it is today. Accordingly, the process of identifying where you have been is both a qualitative and quantitative process. This study will analyse the background of the company and determine in detail the internal resources.

II. Company Background

The company Novartis was formed from the merger of the Swiss companies Ciba-Geigy and Sandoz in 1996. Today, it engages in the research and development of products to protect and improve health and well-being.

Novartis’ businesses are organized into two divisions: Novartis Pharmaceuticals and Novartis Consumer Health. Novartis Pharmaceuticals engages in the discovery, development manufacture and marketing of prescription drugs (c.f. appendix 1). The Consumer Health division of Novartis focuses on a variety of differentiated drugs that restore, maintain or improve consumer or animal health and well being (c.f. appendix 2). Some of the most successful products are shown in figure 1.

Figure 1: Performance of top ten products

Source: Novartis (2003d)

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The organisation operates though 360 independent affiliates in 140 countries and employs approximately 74,000 people worldwide. According to Fortune (2003) Novartis is one of the ten best companies to work for in Europe. Fortune, as the Financial Times, publishes several ranking lists to business issues. Novartis is one of the top 5 companies in the healthcare sector (Med Ad News, 2003), where the main competitors are among others Merck & Co., Johnson & Johnson, GlaxoSmithKline and Pfizer (c.f. figure 2 and appendix 3).

Figure 2: World-wide Market Shares of the 9 largest pharmaceutical companies (2002 vs. 2003)

Source: Novartis (2003d)

Daniel Vasella is Chairman as well as CEO of Novartis, which show that the company does not follow the European norm of separating these roles (Morningstar, 2003). It is the view of the board of directors that this dual role ensures effective leadership and communication between the shareholders, the board and the management (Novartis, 2003a).

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2.1 Current Performance and Results

2.1.1 Results 1998-2003

In the following an overview of the financial development of Novartis, from 1998 to 2002 including also the nine months figure of 2003 (01/03 – 09/03).

Figure 3: Novartis Financial Development 1998 – 2002 (in United States Dollars (USD))

Source: Adapted from http://www.hoovers.com (2003); data of Novartis Annual Reports

Novartis divests its agri and industry business in 2000 due to its focus on pharmaceuticals as its core business. For this reason, the number of employees went down from 81,854 in 1999 to 67,653 in 2000. Furthermore, Novartis increased its Operation Income Rate by 4.6 % within five years time.

It seems that Novartis has taken the right decision to separate from non-profitable parts of the business or parts, which are not according to their definition of their core businesses.

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