Innovation & Growth - A case study of Pfizer

Table of Contents

1. Introduction

2. Pfizer Inc
2.1 Mission Statement - Pfizer
2.2 Strategic Statements & Layers of Pfizer
2.3 Operational Dimension of Pfizer

3. Executive Summary

4. Comparison: Microsoft & Pfizer

References

Appendix 1: The Global top 50 companies by R&D

Appendix 2: The World’s Most Innovative Companies 2006

Appendix 3: Porter’s Five Forces Model

1. Introduction

In this assignment, Pfizer Inc. will be taken as case study for an innovative company. Firstly, the author will look at its mission statement in relation to its key stakeholders. Secondly, the company’s overall strategy will be outlined regarding its positioning on the market as well the linkage to key theories which will be discussed and applied. The third part focuses on Pfizer’s operational issues. Finally a comparison of the strategic performance and application of theories between Microsoft and Pfizer, both, two highly innovative companies, will be made.

Pfizer, as the main case study, was chosen, because it can be defined as a highly innovative company, ranking globally the second by R&D expenditure on the DTI R&D scoreboard (see Appendix 1). However, according to the ‘Business Week’ the company ranks only on place 55 in the world’s most innovative companies, with a margin growth of 1.8% and stock returns of 9.9% between 1995 till 2005. (Business Week, 2006) This provides the evidence that Pfizer is an innovative company.

However, when talking about the pharmaceutical industry, an enlarging innovation gap can be identified due to the limited number of drug approvals. Even though, “the pharmaceutical sector is a highly R&D intensive industry”, post-patent expiry, intense competition, “a decline in the overall lifecycle of newly launched product” and the demand from the healthcare sector to lower prices, is resulting in pressure on the ‘big pharma’. High expenditures on R&D are necessary to sustain competitive on the global market but also reflect the importance of innovation to the country. The OECD Factbook (2007) states, that the “expenditure on Research and Development (R&D) is a key indicator of government and private sector efforts to obtain competitive advantage in science and technology.” The R&D of an innovative pharmaceutical usually takes up to 12 years with an average cost of US $ 800 million.

(Scrip Reports, 2003)

2. Pfizer Inc.

Pfizer Inc was founded in 1849 in New York, which is still has its headquarters and, according to the company’s webpage, “is dedicated to better health and greater access to healthcare for people and their valued animals”. (Pfizer Inc., 2007) Pfizer is the world’s largest research-based pharmaceutical company, employing 106,000 people in 180 countries and helping about 38 million patients every day. The company develops, manufactures and markets prescription and over-the-counter pharmaceuticals for humans and animals and the best known products are “erectile dysfunction therapy Viagra, pain management drug Celebrex, antidepressant Zoloft, and cholesterol-lowering Lipitor”, which is the largest-selling medicine worldwide. (Yahoo Finance, 2007) Pfizer has about 70 manufacturing facilities, 9 R&D sites in five countries.

Pfizer is constantly innovation new pharmaceuticals and in terms of R&D activities, was with $ 7.7 bn and 12,500 scientists in 2004, the leading investor of the US industry, which invested $ 39 bn in total. (PhRMA, 2005) Figure 1 outlines the key data of Pfizer, showing that R&D expenditure dramatically increased respectively to an increase in revenues.

The company can be divided in five divisions which are Pfizer ‘Global Research & Development’ (PGRD), ‘Global Manufacturing’ (PGM), ‘Global Pharmaceuticals’ (PGP), ‘Animal Health’ (PAH) and ‘Consumer Health Products Company’ (PCH).

Figure 1: Pfizer data 2002 -2004

illustration not visible in this excerpt

Source: Pfizer, 2007

According to the Euromonitor (2006), the world’s OTC healthcare market are expected to strongly continue to grow, which is only profitable for Pfizer as they can benefit from its size and economies of scope and scale.

Pfizer’s biggest market is the US, accounting for 52 % of sales, which however declined due to patent losses. Japan’s sales, as the second largest market, grew by 10 % in 2005 and also sales around the world increased up to $21 bn.

2.1 Mission Statement - Pfizer

The company’s mission is to “become the world’s most valued company to patients, customers, colleagues, investors, business partners, and the communities where we work and live”. (Pfizer, 2007)

When building up organisational strategies, it is crucial to understand the responsibility towards a firm’s internal and external stakeholders, because each of these different groups has other expectations in the organisations’ performance. (Polonsky, 1995, p.29) Freeman and Reed (1982, p.58) argue that it has long be the gospel that “corporate action or inaction is to be driven by attention to the needs for its stockholders, usually thought to be measured by stock price, earnings per share, or some other financial measure.” Freeman and Reed (1982, p.59) state, that the corporation is not only responsible to the shareholder, but also to everyone how has a stake in the corporation, which include shareowners, customers, suppliers, lenders, society and employees. Management theorists therefore suggest that considerations about all the stakeholders groups are necessary for an organisation to develop an appropriate strategy. (Polonsky, 1995, p.29)

Pfizer undoubtedly outlines its stakeholder focus in the above mentioned mission statement as the company only mentions them and not any other strength, future achievements or strategies they want to follow. However, the company clearly outlines in its online self description, that they put high emphasis on its investors as they state “…work in partnership with governments, individuals, and other payers for healthcare to treat and prevent illnesses”. (Pfizer, 2007) Therefore, shareholders can be identified as the company’s key stakeholders, which can be proved by the given facts in figure 2.

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