Pharmaceutical industries have to operate in an environment that is highly competitive and subject to a wide variety of internal and external constraints. In recent times, there has been an increasing trend to reduce the cost of operation while competing with other companies that manufacture products that treat similar afflictions and ailments. The complexities in drug research and development and regulations have created an industry that is subject to intense pressure to perform. The amount of capital investment investments required to get a drug from conception, through clinical trials and into the market is enormous. The already high-strung pharmaceutical industry is increasingly investing greater amounts of resources in search of the next "blockbuster" drug that can help them gain market position and profits. Laws, regulations and patents are important to the industry while spending billions of dollars in ensuring the copyright of their products.
It is the intention of this thesis to study the ability of Sanofi-Synthelabo-Dubai, an affiliate of Sanofi-Synthelabo a French multinational pharmaceutical company, in creating an effective and productive market for the products of the company in the Persian Gulf region. The company first desires to concentrate its efforts in the United Arab Emirates (U.A.E.) is first desired and then spread out to the rest of the Middle Eastern region. Drugs are neither manufactured not produced in this region. And as such, the company desires only to improve its market presence for the sale of the company's drugs in the region. In essence, this is a marketing project and not a research and development one. At present, the company has a vast portfolio of products in the area. The company is however, unable to differentiate and distinguish its products from those of its other competitors to truly enable the company to enjoy an overwhelming market monopoly. This thesis will identify some of the salient macro and microenvironments that the company faces in achieving this endeavor. The objective of the research is to introduce a more sophisticated marketing function to the marketing department of the company. Redefining the marketing responsibility within the company to emphasize the concept that every one in the company is required to perform to attain the company's goals.
CHAPTER 1: INTRODUCTION
OVERVIEW OF THE THESIS
The aim of this introductory chapter is to give the reader an overview of the work that was undertaken in this thesis. The concept of "how to maintain a competitive advantage in the pharmaceutical business, based upon a market driven strategy?" is analyzed using tools whose results have been well established by management, economics and financial experts for the Persian Gulf pharmaceutical market. The company considered for this project is Sanofi-Synthelabo-Dubai. Sanofi-Synthelabo is a well-established multinational pharmaceutical company that has operations and markets all over the world. The company already has a market presence in the region. The purpose of this paper is to study the marketing requirements that the needed for the company to be truly successful.
To make the study comprehensive, it is necessary to analysis the entire pharmaceutical industry at a macro level. There are many external constraints that have a tremendous influence of the marketability and success of any product in a given market. Many of these external factors may be common to all markets while a few may be very specific to a local or regional market. The ability of any company to understand these external factors and use the information distilled to attain success of a product is very important in the current market. Inter-relationships between different external factors also exist. The environment can become more complicated as these factors blend and integrate within (and without) the organization.
There are also many internal factors -- the microenvironment of the organization that also needed to be analyzed. Often, organizations can control these factors and modify them to best serve the market and the customer. In the age of globalization and multinational corporations, local cultures, beliefs and norms play an important role in establishing the image of the company. While there are many benefits to globalization, cross boundary corporations are often faced with creating polices and regulations that are in compliance with the laws and requirements of the state in which they operate.
A preliminary S.W.O.T analysis will help identify the current performance of the marketing department and the current business strategy. This analysis will serve as a benchmark for the company in implementing a practical application of this thesis. Factors such as strategic brand management and product differentiation become important factors in the success of the organization. The market integration understanding will be undertaken in three arenas: dimensional, strategic and operational. The thesis will address marketing function not only as an action-oriented process, but equally important as a business philosophy, that emphasizes the strategic choices upon which market driven management is based.
The key theories that going to be covered in this thesis are:
Environmental analysis using the PESTLE analysis for the macro environment and the 7Ss method for the internal environment affect the organization.
Competitive analysis of the industry using Porters Five-force analysis to comprehend the importance of product differentiation and threats
Marketing philosophies -- passive marketing, operational marketing and strategic marketing that the company can utilize in attaining the desired results
Understanding the need for market driven strategies in the company
Market-driven strategy development. Setting the specific tasks to be performed by strategic marketing that identify potential product segments on the basis of analysis of the customer's needs which need to be met, evaluating the attractiveness of the market, then evaluating the competitiveness level of Sanofi-Synthelabo
Change management theories that are commonly used
PROPOSED METHODOLOGY FOR THE THESIS
Two types of data will be analyzed for the purpose of this thesis: primary data and secondary data. Primary data will be gained through qualitative research that will be conducted as individual in-depth interviews (questionnaire-based interviews), with medical representatives, sales managers and the product managers working for Sanofi-Synthelabo-Dubai. Individual in-depth interviews are interviews that are conducted face-to-face with the respondent. Here the subject matter of the interview is explored in detail. There are two basic types of in-depth interviews. They are nondirective and semi-structured; and, their differences lie in the amount of guidance the interviewer provides. In nondirective interviews, the respondent is given maximum freedom to respond, within the bounds of topics of interest to the interviewer. The success of this type of an interview depends on:
Establishing a relaxed and empathetic relationship with the interviewee
Being able to probe in order to clarify and elaborate on interesting responses, without biasing the content of the responses given The skill of the interviewer in guiding the discussion back to the topic outline when digressions are unfruitful and always pursuing reasons behind the comments and answers qualitative method for interviewing was chosen since qualitative data is collected to know more about things that cannot be directly observed and measured like feelings, thoughts and intentions. Understanding the aspect of the topic from the interviewee's point-of-view is important without confusing the thoughts and opinions of the interviewer in the process. This task may sound very simple. But in reality, the process can become very complicated and views and opinions that are not directly related to the topic may get intertwined in the answers.
This method of research will address the efficacy of the marketing function within the organization.
Some of the questions that may be asked may be perceived as an invasion of privacy or extensive probing into issues best left untouched. Other questions might be embarrassing and may generate a sense of resentment therefore affecting the quality of the responses, which may not be truthful. If however, in the course of this process, the marketing department can identify the areas where improvements can result in the growth of the market, the process may be worth the effort.
Approximately, 15-20 individuals will be interviewed for this purpose. The individuals will be selected randomly and without any prejudice. The aim of the interviews will be to identify the individual perception of different staff tasks and responsibilities within the company regarding the marketing function used by the organization. Determining the effectiveness and the application of the marketing function will also be analyzed.
Secondary data was obtained through research of published literature such as books, journals, papers and the Internet. There is a normal assumption that personal opinions and viewpoints are an integral part of any printed and published opinions. Sufficient collaborative information was verified for any given point-of-view prior to introducing the concept in the thesis. The variables discussed in this thesis are not completely exhaustive. In addition to the variables that affect the marketing department, and Sanofi-Synthelabo-Dubai as a whole, there are other external and global variables that may have an indirect effect on the organization and the image of the company. The environments that organizations work in are also very dynamic and constantly changing -- making decision-making and implementation of new ideas more intricate.
LIMITATIONS OF STUDY
Organizations have their own individuality and style -- just like people. There is no blue print that can be considered a universal fit for all organizations. The data that was evaluated was a combination from book, journal articles, review papers and the Internet. The information reviewed pertained to a wide variety of situations and industries. There were some common trends observed in all the material. The commitment of the management and the involvement of the worker are critical no matter what the condition of the external and internal environment the company faces. Integrating the core function -- marketing and sale of products along with the goals and the objectives of the organization is the new route the organization has to now follow.
A distillation of the interviews will be provided in Chapter 2.
CHAPTER 2: LITERATURE SURVEY -- ANALYSIS OF FACTORS AFFECTING THE PHARMACEUTICAL COMPANY AND THE INTERVIEWS
Understanding the main driving factors for marketing a commodity in the market is very important. The ideals and concepts supporting the growth and prosperity of firms generate considerable interest and debates within the academic and the business community. The impact of social science, economic, strategy, public and government policies all are considered to play a significant role in the success or failure of an organization. In the modern market place, no fixed and definite strategy is identified as being the most effective. What may be appropriate for one company in the same industry may not exactly work for another company. The key components that result in the success or failure of an organization are the organizational goals and objectives. (Morgan, 1997) Without aims (for an organization) there is no logical reason for bringing people, money, and other resources together. The ideal utilization of material resources required; maximizing the performance and the productivity of the organization, while at the same time reducing cost, are the important guidelines. External and internal variables also play a very important role in the success of the organization. Contemporary management theories place great emphasis on these variables, consequently marketing strategies also uses many of these theories to understand and evaluate the market for the product and services of the organization.
HISTORY OF SANOFI-SYNTHELABO
The history of Sanofi-Synthelabo is filled with many mergers and acquisitions over the years. Over the year Sanofi has relied on external mergers and acquisitions for its growth in the market. (O'Sullivan, 2001) Sanofi was established in 1973. Pierre Guillaumat, chairperson of the Societe Nationale des Petroles d'Elf Aquitaine, in France appointed Rene Sautier to develop and create new channels of business for the company. Sautier selected Jean Francois Dehecq to help him with this project. The idea at the start of this new process was developing a commercial business that would be both global in nature and generate profits for the company.
There were different business segments that the two business planners Sautier and Dehecq investigated in the course of their selection many business that they thought might be profitable and innovated. The sector that they finally selected was one of personal care and healthcare. The official name of the company was "Omnium Financier Aquitaine pour L'Hygiene et la Sante" but the name Sanofi for the company was better used. Very soon, the company had portfolios that ranged from healthcare products, cosmetics and animal nutritional products. Sanofi, in a very short time, became very well established in the market and symbolized quality and reliable healthcare to its clients. The company selected for its logo inverted blue and green retorts. Labaz and Yves Rocher became the first two companies that merged into the Sanofi portfolios and their colors, blue and green respectively, became the colors of the new company. The retorts in the logo symbolizes that the main goals and mission of the company which is research and development. The main business strategy of the company was to develop pharmaceuticals and beauty products for the commercial market. The strategy that the company used was to develop a market base for its products and encourage the growth of the company in intensive research and development programs.
The history of the pharmaceutical division of the company can be traced to the initial acquiring of Labaz Group, the pharmaceutical subsidiary of the renowned "Belge de l'Azote" with sales of 370 million francs.
This company already had a global presence and was heavily invested in the research and development of two products: the antiarrhythmic Cordarone (amiodarine) and the anti-epileptic agent Depakine (sodium valproate.) The second division of the company was the beauty and personal care company of Yves Rocher. This company was very famous for its herbal and natural-based beauty products. It was also famous for the marketing plan of using mail order to sell its products in addition to the traditional methods of marketing. In 1979, ELF Aquitane, the nationally owned French petroleum-based organization that initially speared on the creation of Sanofi, spun the unit off as an independent division to manage and regulate its own growth while still under the main umbrella of ELF Aquitane. In 1988, Sanofi acquired the cosmetic portfolio of Nina Ricci; and, in 1993, the perfume portfolio of Yves St. Laurent. In the 1990s, Sanofi divested its animal nutritional products and veterinarian portfolios that it had acquired due to the series of acquisitions of smaller companies. It also began to separate the biotech operations from the research and development units of the pharmaceutical division and the biotech operation were also divested in due time. By the mid 1990s, the beauty and cosmetics divisions of the company were also incurring losses and were not performing as desired. Nina Ricci was the first to be sold in 1996; this was followed by the sale of other product lines and business units of the beauty portfolio.
Towards the latter part of the 1990s, many pharmaceutical companies all over the world were consolidating their portfolios and divesting units that were not a part of the core competencies of the organization. The formation of the European Union and the constant economic growth spurt in the mid-1990 created organizations that had divisions and business units that were not considered core competencies of the companies that they were a part of. Natural growth within an organization involves the investment of resources for extensive planning, development and the implementation a new project. This concept is called internal growth. An acquisition or merger can however, help an organization achieve growth quickly by acquiring trained personnel, systems, technology and expertise. In the 1990s, mergers and acquisitions also introduced deregulation and market-globalization. The shrinking of the procedural (process) life cycles from raw material to final product and to the customer has made competition even more aggressive.
In 1996, Ciba-Geigy and Sandoz merged to create Novartis. Industries in many European countries and the U.S. were deregulated and made independent from government control. ELF Aquitane was deregulated and now called TotalFinaElf. TotalFinaElf realized that it wished to identify itself as an energy-based company with a portfolio of energy generation, scouting and development. Sanofi, as a result, was not considered to be part of the core competencies of the new company. With this in mind, the company decided to divest this unit. L'Oreal was undergoing similar transformations in its business portfolio and chose to identify itself as beauty and pharmaceutical organization. Thus, the merger of the pharmaceutical divisions of Elf Aquitaine -- Sanofi with the L'Oreal division occurred in 1999. The new company formed was called Sanofi-Synthelabo. (Mirasol, 1999) Sanofi-Synthelabo is headquartered in Paris, France. It has also identified four core segments for itself in the pharmaceutical industry for drug research and manufacturing:
Cardiovascular drugs
Central nervous system
Oncology
Internal medicine formulations
At present, Sanofi-Synthelabo has a portfolio of around 50 compounds in development programs. Around half of these are in phase II or III clinical trials.
At the time of the merger, Sanofi was the second largest drug company in France and Synthelabo was the third. Synthelabo was founded in 1970, from the merger of Laboratoires Dausse and Laboratoires Robert et Carriere. In 1973, L'Oreal bought a 53% interest in the company. In 1980, the company bought the drug firm Metabio-Jouillie. Other acquisitions followed throughout the 1980s. There were also several joint ventures established, including those with Mitsubishi Chemical Industries and Tanabe Seiyaku. In the early 1990s, the company acquired several smaller French companies; and later, in 1997, the Sanorania Pharma division from Pharmacia & Upjohn. This helped Synthelabo become a major player in the drug industry around the world.
The histories of the two companies were fairly similar both in age and in culture. Both companies, at the time of the merger, had strong portfolios with no overlap of product families. Most change is generally accompanied by problems. The adoption of new management methods, their implementation, changing past routines to suit the new methods of management is often a long and tedious process.
The management, during this stage, must practice what it preaches. It is obliged to do what it saya (and say what it does) to gain the confidence of both parties involved in the merger. The ability to find and solve problems quickly that may arise during the initial period shortens the adjustment time for the implementation of change.
The period following the merger Sanofi-Synthelabo began to reorganize itself into a pharmaceutical specialist. In the following years, Sanofi-Synthelabo began to target the U.S. And the global market and strove to increase its sales and marketing strategies in these new areas. Understanding the constant need to have new drugs in the pipeline and effective market drugs that have patents is important for any pharmaceutical company around the world.
At the end of 2003, the company had a global presence in approximately 100 countries all over the world. The sales for the company for 2003 were established to be 3903 million euros, with 621 million euros being spent on the research and development of new drugs. At present, the company is ranked among the first 20 worldwide pharmaceutical companies in terms of profits and sales. It is sixth best in Europe and the second in France. (Sanofi-Synthelabo, 2003) The company is publicly traded on the European stock exchange and supports 14 research centers all over the world. (Sanofi-Synthelabo, 2004a) The company trading and stock market performance is as shown below.
(Sanofi-Synthelabo, 2004b)
The company has also proved to be headed on the right path in the past few years. In 2002, the company enhanced its capabilities with an alliance with Immuno-Designed Molecules, a biotechnology firm that developed cancer drugs. In the U.S., the Food and Drug Administration (FDA) approved Eligard for the treatment of advanced prostate cancer, and obtained supplementary U.S. patents for the Eloxatin and Elitek active ingredients. The FDA also gave marketing approval in major indication extensions for Plavix in acute coronary syndrome and for Aprovel in diabetic nephropathy (kidney disease) in patients with high blood pressure and type 2 diabetes. In March 2003, the FDA granted ARIXTRA (fondaparinux sodium) a six-month priority review for the new indication prophylaxis of deep venous thrombosis, which may lead to pulmonary embolism, in patients undergoing hip fracture surgery, including extended prophylaxis.
NEED FOR MERGERS AND DIVERSIFICATIONS IN ORGANIZATIONS
Alfred Chandler was the first to identify the motive and strategy of diversification in industry. His work on strategy and structure laid the foundation for all subsequent studies that were conducted to understand the impact of markets and products. (Chandler, 1962) He was also the first to note the movement of organization from simple, single business firms to functional to multi-dimensional. In this situation the organizations were controlled either by one office or by independent freestanding control areas that followed directives from a central office. In most situations, the directives and management principles were from the top. Directives were followed exactly. Chandler drew this conclusion based on historical reviews of companies such as Sears, GM and Dupont, which were very well established large corporation at the time. In his study, Chandler viewed diversity in terms of product lines that an organization manufactured or supported. Products and service production and sales is the main driver for the organization to be in business
In the journal article, "What is strategy?" The author, Porter, states that the current environment in which organizations operates are very dynamic and highly volatile. Every organization has a unique and individual business structure in the market place. As a consequence, the structure resembles a puzzle that needs to be solved from within the organization. Modern organizations are challenged constantly by a combination of technology changes, market changes, logistic challenges, customer demands and human resource challenges. (Kotler, 2000) Physical markets are referred to as market places where goods are physically available for customers to evaluate and identify with. Virtual markets are those that have been created by the Internet and the web.
Markets and the nature of markets are important for organization. "An increase in the heterogeneity of markets served by an individual firm" can also help an organization to diversify their products further in the market. (Rumelt, 1974)
Rumelt studied the effect of diversification and profitability in an organization. (Penrose, 1959) This was very clearly observed in the case of Sanofi during the initial growth of the company in the 70s and 80s. Initial high marketing, and research and development costs are some of the major reasons for poor performance on profits for organizations that are still growing. Extensive research has been carried out in this field by obtaining consensus. This has however, has been very difficult. For a new entrant into the market, identifying the critical niches of the other competitors in the field is the singular factor that will ensure success or failure of the organization.
Diversification of product lines and/or services over a wider base can help organizations manage their business risks and reduce the quantifiable likelihood of loss or less-than-expected returns. Diversification reduces the downside potential and allows for more consistent business performance under a wide range of economic conditions. Of Porter's four types of diversification: Portfolio, Restructuring, Sharing activities and Transferring Know-how, Sanofi-Synthelabo appears to have chosen the Restructuring model.
Firms diversify either proactively or as a defense mechanism. (Samuels, 1971) The impact can be in the form of fear, distrust, 'identification crisis' and disharmony within the organization. (Levinson, 1970) merger process and the volatility of the share can create an environment not conducive to trading. This erodes market confidence. (Dev, 1970) The merger and takeover process very often is financially beneficial for the shareholders, employees, the location of operation of the industries and the organization as a whole. (Jensen, 1988)
As companies begin prospering, they grow and expand by diversifying into closely related businesses. If success is quickly and easily attained, the firm may try their hand at more related businesses. Doing the right thing for customers, associates, communities and shareholders often drives mergers that are performed for the vertical economies reasons. By getting the economies to scale at manufacturing plants, companies involved in the mergers/acquisition can save manufacturing and selling costs. Possessing greater geographical market coverage and acquiring businesses making different, but complementary types of product are also key factors for diversification. The customer is increasingly becoming the driver behind all changes undertaken by an organization. In addition, there has been a growing demand for specialized products with shorter lead times. Supply-chain management is becoming increasingly complex; and dependency on suppliers often drives manufacturing and production schedules. Performance targets and bottom line profit realization are forcing supply chains to integrate either forwards or backwards or both ways to improve their levels of control over quality and service and to increase the added value retained by them.
THE SWOT ANALYSIS FOR SANOFI-SYNTHELABO-DUBAI
SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis of the organization is also an important part of understanding the organization. SWOT analysis should be done at the corporate level, the department level and the various product-departments of Sanofi-Synthelabo-Dubai. At the corporate level, all the departments and business units should work together to present the best and most accurate portrait of the organization. Carrying out an analysis using the SWOT framework will reveal changes that can be accomplished; as opposed to those changes that appear to be optimal solutions initially but would not be as effective in the long run. Being realistic when evaluating variables affecting the organization's function and its future is very important in order to make the SWOT analysis exercise effective. Areas of improvements, problems faced, badly executed decisions and avoidable choices made have to be evaluated. The opportunities and the areas where the company can grow and improve should also be evaluated along with real and perceived threats that face the company. Identifying methods for creating an effective team performance across job-function strata in the organization; analyzing the methods for assigning responsibilities and duties is important.
STRENGTHS OF SANOFI-SYNTHELABO-DUBAI
Highly trained and skilled employees in the marketing and sales department: Labor and employee requirement is an important intrinsic factor that affects the internal environment in an organization. Having a trained and experienced workforce can help Sanofi-Synthelabo-Dubai achieve the best output in a very competitive market.
Ability to satisfy the customer's requirements: Sanofi-Synthelabo, from its very inception, has kept its finger on the pulse of the market and creates products that are well received in the market. It has reacted quickly enough to all the trends and changes in the pharmaceutical market.
Constant use of new and innovate technology to achieve the desired results: This requires long-term commitment to the achieving the mission and goal of the organization.
The company has constantly sought to broaden its markets and its R & D. program internationally. Attracting and retaining the talent required for any task can only be done if understanding of the market is also done simultaneously wide range of products and services that support a range of products, which meet the needs of its clientele
The organization has dedicated and committed leaders who are willing to analyze the market they face critically and change the organization to make it competitive in new and changing markets.
Knowing when to divest a division or department of the company has helped the organization cut its losses over the years.
Keeping true to the core business of R&D has helped the company stay focused globally
The presence of research centers and production facilities all over the world
WEAKNESSES OF SANOFI-SYNTHELABO-DUBAI
The company is a multinational corporation having branches worldwide. Controlling and monitoring the company can become a problem.
Extensive regulation and organizational structure control
Centralized control structure where worker input is not expected or desired.
High dependency of very skilled and talented labor and trends in the Persian Gulf labor market may not support the requirements for the skill levels without importing skills.
Low morale and motivation among the marketing and sales department in the company
Not many new products and services are generated for marketing and sales
Cultures and norms differences between the parent company and the subsidiary also affecting the motivation of the workers.
The constant changes in the organization produced by mergers and acquisitions has created a disillusion workforce
For a long time, Sanofi was a part of a government entity and true import of management styles and decisions were felt when the company was spun off The extent of employee buy-in and participation in the company is not very high; this creates dissonance at different levels of the company
OPPORTUNITY FOR SANOFI-SYNTHELABO-DUBAI
The main focus for the subsidiary was in introducing new products into the market and maintaining the sales of existing products. The products over the period of time have also lived up to the market expectations.
The need for quality of life drugs and emergency medicine drugs will increase as the population ages and the region becomes more established
Growth of hospitals and healthcare facilities in the region is predicted
The company also has a very good reputation as a premier pharmaceutical organization in the region. Its market image is one of reliability and dependability. It is known to strive to achieve the best for all the stakeholders.
The staff in the region is well trained. This expertise can be used to constantly launch new products and maintain market share.
The company has procedures and documentation for most tasks. This historical data can be used for predicting trends and shifts in the market for both top management and department heads. These can be used in planning strategies and goals for the organization.
THREATS FACED BY SANOFI-SYNTHELABO-DUBAI
Instability in the region.
Strong competitors for the same market
Inability to differentiate product line in the market
Threat from generic producers and illegal imports
The brand loyalty and customer loyalty of the past is not as assured for the future
No new drugs for launching in the market
EXTERNAL FACTORS AFFECTING THE PHARMACEUTICAL INDUSTRY IN U.A.E.-- MACRO-ENVIRONMENTAL ANALYSIS:
To strategize and plan an effective and practical marketing plan for any product it is important to understand and evaluate the various internal and external factors that help or harm the manufacturing, production and sales of the product in any region. These factors may not always appear to have a direct correlation to sales and marketing of any product but hidden and unclear intertwining of local beliefs, cultures, laws and regulations may all have a profound effect on the final sales. The pharmaceutical industry is very competitive and the drive to excel and gain market control is very important for all organizations. In the past century, the mantel of number one pharmaceutical company in the world has changed so many times and so frequently that no company can rest on the laurels of past achievements. Patents for drugs and the regulation of the sales of drugs also affect the sales and marketing of any product from a pharmaceutical setting. At present, Pfizer is the leading company in the industry with great amounts of the profits being diverted back into research and development. In addition, many companies are also evaluating specific markets and the requirements that the markets may have that might be unique and representative of the region or country. Constant self-assessment within a company helps in the implementation of improvements in market-share and profitability. (Evans, 2001) Organizational learning is generally a four-stage "learning cycle" that includes planning, execution of plans, assessment of progress, and revision of plans.
For an organization that has undergone a change, this learning cycle can help the company rally more efficiently and generate a more stable environment for the company to flourish.
Two different tools for analyzing the macro environment are utilized in this paper -- the PESTLE analysis and the 7S methods. The objective is to capture as much of the essence of the factors in a comprehensive manner so as to be able to look at as many variables as possible. Many of these variables may not always impact the marketing plan, but being aware of them can help avoid mistakes and error. Marketing mistakes are often very costly. They are time consuming to rectify. It is easier and more sensible to understand the situation early on and work towards the final goal. For example, Gerber, manufacturers of baby food had a very harrowing marketing experience when it attempted to sell its products in Africa. The company traditionally has a picture of a baby on the label with the ingredients of the contents of the bottle listed on the label. In Africa however, the labels on any product give pictorial description of the contents of the product inside the package. The labeling therefore sent the wrong impression to the customers who refused to purchase the product. It was only after considerable analysis that the company realized the errors of its ways and rectified the problem sustaining loss of customers and revenue in the process.
Very often, organizations find it practically impossible to change the macro environment in which they operate. Rather organizations have to be flexible and adaptable to change when faced with new circumstances and situations. Change management within the organization becomes an important part of the process and will be discussed in depth in the "Change Management" section of this study.
P.E.S.T.L.E. ANALYSIS OF THE PHARMACEUTICAL INDUSTRY IN U.A.E.:
POLITICAL ANALYSIS OF U.A.E.
Political stability: The United Arab Emirates (U.A.E.) is a federation of seven Emirates located on the Arabian Peninsula and is approximately 30,000 sq mi. The city of Abu Dhabi is the capital. U.A.E.'s coastline covers both the entrance to the Persian Gulf and the Strait of Hormuz. The other neighboring states are Oman to the south, Saudi Arabia to the south and the west, and Qatar to the northwest. The seven Emirates are Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Qaiwain, Fujairah, and Ras Al Khaimah. A sheikh rules each individual Emirate. Every sheikh enjoys a great amount of political power to rule and make his own decisions for his Emirate. All emirates are not equally wealthy as the distribution of petroleum is not uniform in the region. Abu Dhabi is the richest of the seven and is approximately 80% of the country, followed by Dubai. The Sunni Muslim Arabs are the indigenous population of the region and the official language is Arabic. A very comprehensive and extensive welfare system is in effect in the U.A.E. To care for the U.A.E. nationals. These include loans, grants and free medical visits to hospitals. The government that oversees the ruling of the region employs most nationals. The estimated population of the country was 2,925,000 in 1995. Approximately 80% of the population is foreigners who can also avail of many subsidized services and benefits such as health, water and electricity. U.A.E. is run on the traditional concepts of a feudal society with absolute power in the hands of the sheikh and his ministers. Overall, governmental authority is invested in the Supreme Council, which consists of the seven sheikhs. A majority of five (including both Abu Dhabi and Dubai) must agree to any action if it has to take effect in the region. All emirates have secular and Islamic law for civil, criminal, and high courts. During the initial formation of the country in 1971, there were tensions between the different emirates. The oil boom brought overall prosperity to the region and opened the country to foreign trade relationships. U.A.E. per capita income is comparable with any of the industrialized nations of the world. Compared to the rest of the Middle Eastern countries the U.A.E. has a more moderate foreign and domestic policy. Zayid bin Sultan Al Nuhayyan, ruler of Abu Dhabi is the President of the country and Maktum bin Rashid al-Maktum, ruler of Dubai is the Vice President. MAKTUM bin Rashid al-Maktum also serves as the Prime Minister for the country. The president of the country appoints the council of ministers. The Federal Supreme Council (FSC) comprising of all seven emirates is the highest constitutional authority in the U.A.E.. The FSC establishes the rules and regulations for the country with the rulers of Abu Dhabi and Dubai having veto powers. The FSC meets four times a year. The president and the vice president are elected by the FSC for a period of five-year terms. The President of the U.A.E. elects the Prime minister and the Deputy prime minister. There are no political parties or elections in the region. The President appoints all members of the judicial branch.
Risk of military invasion: The Middle East has traditionally always been a region of high political and military instability. In the 1960's many of the Persian Gulf countries got their independence from the colonial rule -- however, they have never really accepted many of the boundaries and limits of other neighboring country. Locations of boundary with Saudi Arabia and Oman have been constantly debated over the years. Disagreements on claim to two islands in the Persian Gulf are also disputed with Iran. In the U.A.E., for example, Abu Dhabi and Dubai were not exactly cooperative with each other during the initial formative years of the country. There is also a very high risk of military invasion from foreign countries in the neighborhood. The invasion of Kuwait by Iraq as late as 1991 is testament to this fact. Many countries in this region have the military support of many Western countries and the United States; this does not however, always guarantee safety in the region. In recent times, especially in the Post 9/11 political environments support from western countries may only harm the situation. MNC are increasing weighing the risks of operating in politically unstable regions of the world.
Trade regulations & tariff: The sheikh has the authority to regulate all natural resources in his territory. This includes oil and natural gas. This power makes the sheikh extremely powerful. He has the ability to change and modify production and distribution of the petroleum reserves in his emirate. The political system in the gulf countries allows international organization to exist inside their countries. International organizations however, have to be under an umbrella of a native pharmaceutical agency. A part of the company revenue goes to the agency, and in return this agency is expected to provide the company with strong level of connection within the country. This connectivity is required to ensure ideal distribution of goods and services of the company in the region. Having a local pharmaceutical agency therefore becomes critical for the company operating in any of the U.A.E. emirates.
Developing trust and working relationships are also of utmost importance when dealing with corporations that span international boundaries. Trust plays an important role in Multinational Corporations (MNC). And, organizations have to spend a lot of time and effort in developing trust. (Child, 2001) In the business sense, trust is having confidence in the partner or workers to conduct and perform their task in a manner agreed on. Organizations are faced with two types of uncertainties when undertaking collaborations -- the uncertainties of the future contingencies and the reaction of the business partner to the future contingencies that may occur. In recent times, the U.A.E. has limited free medication and hospital use for its native citizens only. This new policy has reduced the sales and distribution of drugs in the region affects the profits and revenues of the pharmaceutical companies. The country is also encouraging local indigenous drug manufacturer like Gulphar & Global to produce and sell generic brands of the drugs that have completed their patent cycle. The reduction of sales in the public and government hospitals has force MNCs in the pharmaceutical industry to target the private sectors. These include pay-for-services medical facilities and private health insurance hospitals that are increasingly appearing in the U.A.E. For expatriates and foreign workers in the country. U.A.E. is encouraging many foreign countries to establish operation in the region. Business organizations can be established in the following forms and are governed by Federal Law No. 8: 1) Public Shareholding Companies; 2) Private Shareholding Companies; 3) Limited Liability Companies; 4) General Partnerships; 5) Limited Partnerships; 6) Partnerships Limited by Shares; and 7) Shareholding Companies. All companies have to be licensed and registered with the U.A.E. Federal Ministry of Economy and Commerce. In addition, all companies have to be authorized to operate in any emirate by the appropriate local authority in the Emirate in which its office will be located. If citizen of the U.A.E. participate in any organization, their holding has to be 51% of the company. Foreigners and foreign companies can posses only 49% of the company. For public shareholding companies, the chairperson of the board of directors and a majority of the members of the board has to be U.A.E. citizens. (Infoprod.co.il, 2004) Only U.A.E. nationals can form partnerships agreements.
Favored trading partners: The total export in 2000 was approximately $46 billion in crude oil, natural gas, re-exported products and fish. The major export markets for U.A.E. are Japan, India, Singapore, South Korea and Oman. The import for 2000 was $34 billion: basic manufactures, food and animals, chemicals, machinery, transport equipment. The major suppliers were Japan, U.S., UK, Italy, Germany and South Korea. (MeSteel.com, 2004) On the pharmaceutical trade, U.A.E. imports 95% of all the medication and drugs used for treatment of patients from Europe. In 2000, it was estimated that U.A.E. imported U.S. $190 million of pharmaceutical products.
Internationally, pharmaceutical sales increased by 12% from U.S. $321.8 billion in 2000 to U.S. $364.2 billion. At present, the Middle East is seen as a potential pharmaceutical market for approximately U.S. $4 billion. U.A.E. does not have any internal expertise for manufacturing pharmaceutical drugs and is very dependent on imports to satisfy the demands. This market is seen as a potential for generating tremendous rewards and profits for global pharmaceutical industries. If U.A.E. decides to become self-reliant in the pharmaceutical arena, it will have to procure expertise in labor, knowledge and equipment requirements. U.A.E. has imposed policies that restrict the drugs and medication that expatriates can get into the country thereby increasing the revenues that the local-based pharmaceutical companies can generate. Per capita drug consumption in the U.A.E. is approximately U.S. $77.7 for the expatriate population who has to pay for medication received.
(OEROnline.com, 2004)
Labor and expertise growth: It is expected that the U.A.E. economy will constantly grow. U.A.E. citizens are guaranteed employment; and the government is ensuring that the illegal workforce in the country is reduced. It is hoped that in the future unemployment levels will not increase. The wealth of the workers is extensively based on the oil and gas industry and production. In little over 30 years since the discovery of oil, the country has gone from a small impoverish desert population that was extensively scattered and living off the land to a modern country with a high quality and standard of living. The government, in a farsighted mission, is developing the country and infrastructure to reduce sustenance on revenues form oil and gas only. (Focus, 2004) The U.A.E. is also investing and encouraging businesses to make investment in local-based pharmaceutical companies that can manufacture and distribute commonly used drugs more effectively in the region. The main objective of the recently created Dubai Technology Park is to attract bio-medical, pharmaceutical and research companies to the U.A.E.. The country has also slated many other initiatives to increase the role of the healthcare industry in the region. The Dubai Healthcare City and the Palm Islands in the U.A.E. are being set up with the idea of creating a regional hub for medical services in the Middle East and increase "medical tourism" in the region.
Professional regulation: U.A.E. has requirements and laws in place for professionals working within the country. Architects, engineers, business consultants, doctors, legal and accounting firms and other professionals and consultants are required to have a license to operate in the country. Trade licenses are also required to conduct business -- to import, sell, export and conduct general business with regard to certain identified goods or product lines.
Intellectual property protection: Trade Related Aspects of Intellectual Property Rights (TRIPS) intellectual property includes: Copyright and Related Rights, Trademarks, Geographical Indications, Industrial Designs, Patents, Layout-Designs (Topographies) of Integrated Circuits, Protection of Undisclosed Information and Control of Anti-Competitive Practices in Contractual Licenses. (Ashour, Obeidat, Barakat, & Tamimi, 2004) U.A.E. does not have very robust and foolproof pharmaceutical patent protection like those in place in Europe and the U.S. The only protection that pharmaceuticals enjoy at this point in the U.A.E. is process patents and not actual complete product patents. This seriously impacts the rapidly growing pharmaceutical industry, which is unable to obtain the manufacturing and R & D. incentives from the parent pharmaceutical companies. (Tamimi, 2001)
Pricing policies and product labeling: all products and services sold in U.A.E. are required to have the information printed on the packaging in either Arabic or English. It is observed that the government in the Persian Gulf has been able to restrict the price increase of the drugs sold to them by the pharmaceutical companies and many of these countries boast some of the lowest prices for medication in the world. This low price benefit is however not passed on to the customer of the product. Rather, the product is sufficiently marked up to support the local drug manufacturers in the region. U.A.E. however, has the highest price for medication in the region. U.A.E. reduced the buying price by 15% from the drug companies in 2001. This seriously affected the revenues of 17 international pharmaceutical companies. Recently, there was an intensive crack down in the pharmacy distribution chain when it was observed that expired medication was being sold in packaging that provided wrong information. (Fananews.com, 2003) There have been new laws and regulation put into effect to help reduce similar incidents from recurring in the industry.
Industrial safety regulations: Workplace health and safety committees to ensure the health and safety of the workers. It is estimated that U.A.E. has 1.4 million workers between the ages of 15 and 64. There is no clear and well-defined legal requirement for documenting accidents and deaths in the pharmaceutical industry in U.A.E..
Government budgeting: U.A.E. does not get any external aid and supports internal growth and development from surpluses of its own budget. The inflation rate in 2000 was estimated to be 4.5%. In the past prior to the discovery of oil, the region did not have any sustainable economic industries. The U.A.E. government is presently working very hard to ensure that after the oil reserves are depleted the country sill has a sustainable economy to support the population used to the new life styles.
ECONOMIC ANALYSIS OF U.A.E.
Type of economic system: U.A.E. has traditionally been a sustenance-based economy where people were primarily engaged in fishing, data farming, camel husbandry, trading, and pearl gathering from the seas surrounding the region. The terrain of the country is sandy deserts and salt plain. This did not support large-scale agriculture. The nomadic population that inhabited the region was well versed in handling the harsh climatic conditions and frequent dust storms. The identification of oil reserves in the region drastically changed the economy of the region. Petroleum products are main drivers of the industrialized era of today and the transportation sector is very dependent of the supply of crude petroleum. Tourism and trade are increasingly becoming important service sector in the region. Supporting infrastructure is also being rapidly built to keep pace with the economic expansion in the region. With increase in population health and medical service requirements will also increase.
1997*
1990-1994**
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Consumer Prices (percent average change)
Fiscal Balance (percent of GDP)
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Government intervention in the free market of the region: The Dubai port and other seaports in the region are becoming increasing areas of trade and transportation through the region. The U.A.E. government has also implemented an open and trade friendly economic policy for the country. Capital can be easily moved and financial stability is promoted. The U.A.E. is one of the few countries in the Middle East that is not borrowing from international commercial banks to support growth and development in the region. The government however control and can use funds from the local banks in the country. The true extent of the borrowing patter from within will only be realized over longer periods of time.
Free trade policies: Free Trade is theoretically defined as: "open trade between countries with no government regulation or restraint." By this definition, trade between nations is not restricted by quotas, licenses, taxes, safety concerns, inspections, or limits of any kind. In the modern world, government creates markets. To keep the market healthy, information is required about different products. Money, laws and regulations are all needed. The government plays an important role in these variables. The U.A.E. government is still very protective of its local and regional industries. Laws to keep control over the businesses in the region have promoted polices where 51% of the business has to be owned by a native. It is unclear if the government will truly allow free trade in the pharmaceutical industry without attempting to subsidize raw materials and impose tariffs on foreign imports. The country showed strong growth of over the past two years; however, this is considerably lower than the growth observed in the late 1970s. The fluctuating economic growth pattern seen in the gulf countries reflects mainly movement in the oil market on which mainly it strongly depends. The aggressive price monitoring system followed by the Gulf countries has not instilled a lot of confidence in the MNC in the pharmaceutical industry that may want to set up operations in the region. The presence of a free trade zone in Jebel Ali has also created an environment for free flow of goods through the country.
Comparative disadvantages of U.A.E. For the pharmaceutical industry: Although other countries like Oman and Egypt have the internal expertise and knowledge to manufacture and produce generic products, U.A.E. has not built sufficient capabilities to produce research and development centers that support scientist and researchers. The knowledge base is also lacking in other areas of marketing and sales and the country has to rely heavily on expatriates and foreign citizens to perform many of the services required for a healthy economy. The pharmaceutical industry requires more than just manufacturing and production facilities. Marking and sales work involves educating doctors, nurses and health care professionals about the advantages and benefits of the drugs available. In addition, it is also important to encourage the general population about new drugs and treatments for diseases. All marking requirement need the setting up of sufficient infrastructure to deal with the logistics, planning and distribution of drugs. In addition, training and continuous education are very important. U.A.E. has still not addressed the need for constantly educating and keeping its citizens informed about invention of new drugs and procedures.
Efficiency of financial markets: For a region to become economically prosperous the financial industry plays a very major role. Banking and finance are the backbones needed to support any growth. At present finance and insurance sectors in the country constitute only 5.6% of the Gross National product (GNP) of the country. The government-banking sector includes the accounts of the federal government as well as accounts of the seven individual Emirate governments. The federal budget is not made public to the citizens of the region. Although there are public stock companies in the U.A.E., there is no official stock exchange in the country. Trade and sales of stock is undertaken personally; public company stocks are traded through private agencies. There is no formal share-price information and the cost of the share of the last transaction is generally held as the cost of the share.
Infrastructure quality: U.A.E. is constantly involved with improving communication and transportation infrastructure in the country.
Pharmaceutical companies rely very heavily on these infrastructures to educate the population and move the products throughout any region where the company operates. The building of hospitals and medical facilities is also required if the use of medicine has to become more wide spread in the region.
Skill level of workforce and labor cost: U.A.E. has to depend on imported skilled labor for any business in the region. The same is also true for the pharmaceutical industry. The social climate is also one in which workers are not expected to provide a lot of input and work tasks and duties are generally defined by executives of the organization. The controlling factors at the executive level (51% owned by natives) can also make decision-making slow and sluggish and reduce the effectiveness of the decisions made.
Unemployment rate: All U.A.E. citizens are employed in government agencies. Employment of female native population is not generally done.
SOCIAL ANALYSIS OF U.A.E.
Demographics: The 2001 census estimated that the population was approximately 2,407,460 of which 1,576,472 were non-native population. The population growth was approximately 1.59%. 29% of the population was below the age of 14, 69% was between the ages of 15 and 64 and the rest of the population was over 65. The life expectency of the population was 71.84 years for males and 76.86 years for females. 96% of the population were Muslims with 16% of this populationbeing shia muslims. The remaining 4% were a combination of other religions. Arabic is the official language of the population. (MeSteel.com, 2004) The age structure in the gulf countries is significantly younger than the global average, with about 26% of the population under the age of 15. The dependency ratio (the ratio of economically inactive to the working age population, defined as those 15 to 64 years of age) are lower in the gulf countries than else where in the Arab world, owing to the presence of a large numbers of foreign workers. Further more, it is estimated that the proportion of the population age 65 or older will increase in the gulf countries to up to 9% in 2020, according to the United Nations Developmental Program.
Education: 79.2% of the total population can read and write. Arabic and English are the spoken. 78.9% of the male population and 79.8% of the female population is literate. The population is constantly becoming aware of the improvement in the quality of life that can be offered by use of drugs and medication. In addition, elective surgery and emergency medicine is also being increasing relied upon by the population. This projects a long and steady growth of demand for pharmaceutical drugs and services in the region.
Class structure & Culture: The Arab culture has very well defined cultural norms and behavior patters for its population. While the society has changed and embraced modernism, man is still considered the head of the household and the women assumes the role of caregiver. With the enormous influx of foreign labor, some of the social structures of the general population are more homogeneous and not well defined. The native of U.A.E. are generally richer and can avail of free medical services at any of the countries hospitals. They can also avail of free or price controlled drugs when needed. The most commonly used and more popular drugs in the U.A.E. include Augmentin, Panadol, Brufen, Xenical, Viagra, Voltaren, Claritine, Ponstan and Zantac. Anti-infective drugs and gastro-intestinal problems drugs are the two with the highest market share. The majority of the population in these countries is expatriates, with a high percentage among them being low-income level Asians. These individuals cannot avail of the same medical benefits as the citizens of the country in recent times as medical benefits have been revoked. As such, overall demand for drugs and medication for brand name product have dropped due to the inability of the customer to pay the premium prices. Social class structure therefore has no impact on the population of the expatriates.
Attitudes (health, environmental consciousness & beliefs): The native population is very proud of their heritage and observes rituals and routines that may appear complex and intimidating to an outsider. People are also very superstitious and religious observing all religious obligations when needed. In this environment, if the public losses trust in the effectiveness of any medication serious overall failure of the product in the region may be experienced.
Leisure interests: The U.A.E. is becoming increasingly a destination for shopping and social activities. The growth of the hotel and the tourism industry in recent times and the government sponsorship of conferences, symposiums and trade shows in a variety of fields has drawn foreigner to the country. The government hopes that a good medical infrastructure can help boost the confidence of travelers into the country
TECHNOLOGICAL ANALYSIS OF U.A.E.
Recent technological developments: U.A.E. is using all the latest and modern technology in the medical industry. The use of modern technology for treatments and blood transfusions are also increasingly being used. (Middleeastmedical.com, 2004) The country has not as yet investing heavily on the R & D. departments, but with more manufacturing and production, the country will soon have to invest in these supporting infrastructures. The country being primarily a sustenance-based economy is investing in modernizing and providing innovations to develop a farming industry. Pharmaceutical technology is not developed extensively in the U.A.E.; rather the country depends on foreign companies to provide them with the necessary requirements. Arab countries have some of the lowest level of research funding in the world, according to the 1998 world science report of the United Nations educational, scientific and cultural organization (UNESCO). R & D. expenditure as a percentage of GDP was a mere 0.4% for the Arab world in 1996 compared to 2.35% in 1994 for Israel, according to the United Nations developmental programme. Technological changes are not expected to take place swiftly in the region. As such, local companies will not be a threat or possess the necessary competencies to compete against an international and very intensive R & D. based companies like Sanofi-Synthelabo. There is however, the threat that once the patents on many of the commercial profitable drugs expire, local companies will cut into the market share of the MNC. In addition, they will not have to invest in R & D. required for new pipeline drugs making the profit generating risk free. They will also be able to provide cheaper drugs to the public as compared to larger corporations that may have higher overhead costs.
LEGAL ENVIRONMENT OF U.A.E.
The government of U.A.E. has a set of regulations in order to control the behavior of the pharmaceutical industry. Julphar - a Gulf-based pharmaceutical company has currently created an image that can cause the long-term negative effects in the U.A.E. pharmaceutical industry. Julphar claims that the "U.A.E.'s commitments and adherence to international obligations are not yet due" and as such they can be free to reverse engineer drugs and sell them in the U.A.E. (Ashour et al., 2004) Intellectual property right issues can create a high level of distrust among countries. In addition, MNC having facilities at many locations around the world may have reservations in dealing with their colleagues in these locations creating a work place that is not comfortable and worker friendly. Laws and regulations of the country may also harm the organizations ability to develop trust. Child (the author) states that trust has to be first built on some basic calculation (expectations) that both parties have of each other. Mutual understanding and respect for the individual and the organization should also exist. The third stage in this trust building is establishing psychological bonding between partners. The last two stages take time and effort. Quick conflict resolution and communication flow is important in maintaining trust and respect between partners. The legislative arm of the government in U.A.E. also plays a role in pricing medicines and assuring the rights for the patients receive an honest data about the medicine from the company of manufacture in case he or she requests to have them. The government also mandates standards of quality control that have to be maintained for the production and sales of any medication.
Any MNC doing business in U.A.E. has to ensure that it is aware of rules and regulations that are required from them in order to do business in the region. The company's success depends on the level of mutual accountability of its workers, contribution and shared values that the members feel towards achieving the goals of the company while always following the letter of the law.
ENVIRONMENTAL ANALYSIS OF U.A.E.
Urbanization and modernization in the 20th century has put enormous strain on the ecology of the areas where large-scale development has occurred. Cases of asthma and other lung related ailments are on the rise in many cities and towns due to high levels of pollution and contamination. They put a huge stain on the medical facilities in these regions. More industrialized nations often consume and utilize more of the natural resources than the remaining nations. Resources are constantly shrinking; and, nations that control these scare resources may face hostilities from countries facing a shortage in these resources. (Darvill, 1997) Fresh water is one good example. An economy will be sustainable only if there is long-term viability of the prevalent culture. When the culture can show a close relation between a thriving economy and maintaining the environment, only then will the people 'buy' this new idea. If the community feels no tangible effects where these new ideas and thoughts are being developed, they will not show long-term success.
The transport, industrial and energy sectors have had substantial effect on the environment (United Nations developmental programme2002.P, 45). Sanofi-Synthelabo is giving a great deal of attention to the environmental and safety issues that the company faces at all its locations around the world. The HSE (health, safety and environmental) department within the company is devoted to insure the higher environmental standards for the country to observe. Contamination problems will also be on the rise due to the increase in the factories and industries and the increasing dependencies on chemicals to provide substitutes for maintaining the quality of life.
Ethical issues arise in organizations due to different social, cultural and economic factors. What may be acceptable and legal in one society may not hold true for another. Cultural values are important for any society. These are portrayed in the morals, laws, customs, and practices of that society. Individualism (self-interest)-collectivism (group interest) behavior can also impact the effectiveness of groups and teams that an organization set up in any country. Multinational organizations are faced with the task of understanding the cultures in which they operate and ensure that these foreign cultures do not offend the sensibilities of the society in which they are incorporated. While no simple and universal ethical solution is possible in all situations, a compromise should not appear one sided or biased. The three main factors in selecting the strategy were stated to be moral significance, power and influence the organization wielded and urgency of the situation. (Buller, Kohls, & Anderson, 2000)
Companies, like people, are bound by ethical requirements -- a responsibility to consumers and customers. Companies are expected to do follow up on the promises of their advertisers. All companies make ethical declarations as part of their vision and operational philosophy, but quite a few to do little to live up these declarations. Most companies define their ethical principles as: honesty, integrity, responsibility, trust, and respecting of the laws in the country where they operate. The ethical manifest of Sanofi-Synthelabo states that it will comply with all the laws and regulations of the state or country in which it operates and also hold the company to a higher standard in case the environmental and ethical laws are not as well defined in the country. Every product that the company launches will be subjected to a safety, health and environmental risk assessment. All factors, scientific and technical, that are required for the creation of the drug will be investigated and evaluated to insure that complete compliance is achieved. In addition, optimizing the use of raw materials, reducing waste and controlling the emission of gaseous, liquid and solid waste as a part of the production are also mottos that the organization follows.
Globalization has brought to the doorstep of many organizations cultural and social issues that did not exist as recently as 20-30 years back. International isolation had not prepared individuals to understand and comprehend other cultures and norms that exist around the world. The number of macro-environmental factors is virtually unlimited. In practice, pharmaceutical companies must prioritize and monitor those factors that directly influence it. Even so, it may be difficult to forecast future trends with an acceptable level of accuracy. In this regard, pharmaceutical companies may turn to scenario planning techniques to deal with high levels of uncertainty in important macro-environmental variables.
INTERNAL FACTORS AFFECTING THE SANOFI-SYNTHELABO CORPORATION-MICRO ENVIRONMENT ANALYSIS
While the PESTLE analysis of the external environment helped identify many of the variables that the company could not control and had to be aware of in order to conduct business in the U.A.E., there are additional internal factors that also play a very significant role in the success or failure of the organization. Often, companies can control these internal factors very effectively if they follow and implement good planning and control in the organization. Recognizing the role of an organization in the environment both internal and external is important. The environment is not a separate entity -- a world out there; rather, it is an amalgamation of all the factors affecting an organization (Morgan, 1997) The traditional definition of an environment is: "All the elements that lie beyond the boundary of the organization and have the potential to affect all or a part of the organization. (Daft 1997, p. 82)"
THE 7S ANALYIS
The 7S analysis is used to identify the critical internal factors in the organization. The factors analyzed are strategy, structure, systems, style, staff, skills and shared values of the organization.
STRATEGY OF SANOFI-SYNTHELABO
Strategies for any organization have to be employed based on the type of product, the life cycle of the product and the process involved in marketing of the product. Strategy for an organization is the determination of basic long-term goals and objectives of the organization and adoption of a course or courses of action and the allocation of resources necessary for carrying out the goals and objectives.
The strategy in the Gulf subsidiary of Sanofi-Synthelabo for marketing purposes is to devise strategic initiatives and approaches to manage the geographical area where the company hopes to do business. The important start of any marketing plan is to identify the geographical area and the target market in this area to which the product is being marketed. In this case five small countries (UAE, Kuwait, Oman, Qatar and Bahraini) in the Persian Gulf area is the defined and selected marketing area. After defining the overall area of marketing identifying the day-to-day operational requirements for creating an effective network for marking and selling the product is important. Operating strategy for marketing has to include the entire supply chain operational function in the organization. It is of no significance if the marketing department and sales persons bring in orders for U.S. $100,000 worth of products but the company is unable to deliver the products to the customer at the desired time due to lack of inventory at either the local marketing office or the company warehouse in the region.
The marketing plan will also have to include the nature of customers to be targeted. Identifying if the company wants to target the members of the medical profession such as doctors and nurses, or hospitals and healthcare providers or the general public or all of the three is also important. Advertising campaigns will have to be suitably designed for each segment of the population and these campaigns may differ radically in the intensity of marketing or the information that is required to be provided in the campaign. The medium of advertisement also becomes important. In regions of low literacy levels, radio and television campaigns may be more effective than fliers and printed material. Doctors may require additional information about drug interactions and side effects while all details may not be considered necessary in a television ad campaign. Identifying and creating a chart that identifies the market segmentation with the information needs can help marketing personnel carry out their task effectively. Strategies associated with market segmentation will have to be refined over time to ensure maximum benefits of the plan. When conducting one-on-one marketing campaigns, building interpersonal relationships with the customer may also help boost the image of the organization. This is especially effective when marketing of high cost quality of life drugs that require prescription for use.
Allocating appropriate manpower for territory coverage optimization is also important. Time management skills become especially important when the sales force have to cover large areas of the country personally. Training and educating the sales force is very important -- training ultimately determine the performance of the employees in the organization. It is always very difficult for an organization to quantify the improvements made by training in very clear and definite terms. Organizations often use training strategies to keep their best talent. Training needs have to be evaluated in the context of the company's strategic objectives. Every employee contributes to the organization's adaptability to change, overall success and survivability over the years. The employees generally come into an organization either because they possess special skills and advantages or fresh entry-level candidates who have to be given special training in the field where they will be employed. The success of a company lies in its ability to adapt and evaluate new strategies based on the type of employees hired and the type of jobs that they will be handling. All employees, irrespective of their education and experience, require periodic refresher courses and training. These refresher courses can bring previously unknown ideas and inventions to employees. When companies invest in training their workforce, the benefits are observed in increased productivity and a more confident and knowledgeable workforce.
Motivating and mentoring subordinates and new members of the sales force is also important. The task of finding, hiring, and keeping employees who show pride in their work and loyalty toward the company is becoming very difficult. Organizations very often fail to reward hard workers for their good performance and often lose them to other companies who will reward their efforts. The loss of good and valuable marketing personnel can set a marketing plan back for months. In the marketing field trust and familiarity with a customer are more important that any other asset that the sales person can have. An individual can only develop trust and familiarity over a period of time.
Imparting this knowledge to new recruits and constantly evaluating the performance of current employees can help marketing managers gain an objective view of the environment that they are dealing with.
Understanding products and their application to the society is also important. The marketing force is the company's eyes and ears in determining the most effective product. Marketing staff is in constant contact with the end user of the product and can obtain feedback, questions and grievances if any from the user. Communicating this to the company and analyzing the actual realistic needs of the customer can help the company serve the population better. Sanofi-Synthelabo had already identified the areas of drug research that they would concentrate on in its R & D. strategy. By using customer feedback, they can make the drug more effective and appropriate for use. It may be a simple suggestion such as modification of a package for the medication to facilitate easy opening or providing the medication in convenient multiples so as to prevent waste of unused medication. These modifications do not change the product but they do help in pleasing the customer.
Documentation and records by the marketing department can also help the organization identify the most profitable product and the least profitable product for any given region in the target market area. In this manner, the marketing personnel can identify the products that are the most desired and concentrate maximum effort of these products. All strategies at any level are dependent on the individual planning the strategies. When all involved in the process are invited to share their views and opinions the planning process can be made more accurate and relevant. No two marketing plans are ever the same and even if similar plans are used the outcomes can be radically different depending on the environment and the type of product marketed.
Life cycles of drugs are becoming increasingly short and the sales force has to be constantly trained to handle new products being launched. Creating a constant learning environment within the workforce can help make the process easier on the workforce. Knowledge about the rules and regulations of the area along with in depth understanding of the culture and norms of the region can help create a marketing team that is truly effective in the region.
At present, the marketing team of Sanofi-Synthelabo follows a growth strategy aimed at communicating the uniqueness of the company's product to the customer. By differentiating the product from other products of similar nature, the company hopes to create a customer base that is faithful and brand loyal. Thus, the company can continue to grow both in market share and revenue.
STRUCTURE OF SANOFI-SYNTHELABO
Structure is an entity (such as an organization) made up of elements or parts (such as people, resources, aspirations, market trends, levels of competence, reward systems, departmental mandates, and so on) that impact each other by the relationship they form. A structural relationship is one in which the various parts act upon each other, and consequently generate particular types of behavior. (Ferrell & Hirt, 2002)
Acquisition and/or mergers helped Sanofi-Synthelabo achieve growth quickly by acquiring trained personnel, systems, technology and expertise. Sanofi-Synthelabo has a vertical functional structure (Daft.P,316) with a clear and well-defined chain of command and reporting structure. It is observed that the organization has a very detailed and hierarchical type of organizational structure. Medical representatives of each country report to and are held accountable by one national manager. The national manager reports to the area manager about the progress of the work. Members of the medical marketing department also report directly to the area manager.
Organizational structures are generally traditional, bureaucratic, system-oriented, project-oriented, networked, market-oriented or matrix in nature. Any position in an organization, from the CEO to the production-line worker, plays a unique role in the smooth and efficient in an organization's operation. Everyone has to work to his or her full potential in order for the organization to be successful. In Sanofi-Synthelabo, authority and decisions flows down the hierarchy from the position of the area manager, down to the supervisors and finally to the medical representatives. The medico-marketing department has both staff and functional authority over the national managers and the medical representatives.
The market-oriented organizational structure is identified as one where most tasks are increasingly being considered as individual projects mainly driven by the market or a specific customer need. This type of situation generally occurs in various decentralized locations using the expertise and knowledge of a few key individuals who help shape and determine the success or failure of the project. The earnings and profits from the success of the task or project determine the longevity of the group and organization as a whole. Here, the important binding component between the team and group of people is the individual economic success of the individual entities in the operation. Analysis of the marketing and sales team of Sanofi-Synthelabo appears to utilize this form of organizational structure.
One national manager is responsible for the medical representatives in Oman, Qatar and Bahrain. The national managers enjoy a wide span of control with their medical representatives within each country (average 5 reps / country.) The organizational structure is based on a feudalistic concept. Authority and power rested in the hand of the corporation's President or CEO. Most decisions were top down. No input or feedback was expected from the employee, who was not expected to "think." Upward vertical communication has little or no significance in this structure and regional and national managers follow an autocratic style of leadership. Autocratic (authoritarian) leaders are leaders who make most of the decisions themselves instead of allowing their followers to participate in them. An individual who displays leadership by viewing job performance as a series of transactions with subordinates' uses the "transactional" form of leadership. Such leaders and are also classified as autocratic leaders. Leadership in any organization is also seen as a power relation between two or more people. Raven and French define leadership in terms of differential power relationships among members of a group. (Raven & French, 1960) They identify five types of power: legitimate, reward, coercive, expert and referent.
Gender, race, culture and cognition play a major role in forming the style of management preferred by individuals. It is assumed that the marketing team generally is male dominated in the U.A.E. Men practice a power and knowledge-based form of leadership in most situations. The status and hierarchical position in the organizational structure is important for a man and he will try and maintain the status in the organization. In addition, he will also be constantly trying to advance his position up the organizational structure in a very focused and aggressive manner. Leaders are individuals who are aware that a mission needs to be accomplished or a change needs to be undertaken. They can inspire and motivate others using any of the personality, leadership and cognitive styles they are most comfortable with to achieve the goal.
Napoleon Hill, the author of "Think and Grow Rich" states: "The most powerful instrument we have in our hand is the power of our mind." Mr. Hill further elaborated that man could create nothing if he did not have first conceive it as a thought. If an individual cannot believe that he or she can succeed, then that person will most likely not succeed in achieving set goals. The individual should however, have realistic goals and ambitions. These goals should be attainable, though it may take effort and determination. The ability to recognize, relate, assimilate and apply principals to achieve any goal whatsoever that doesn't violate the Universal Law -- the Law of God and the rights of fellowman is acceptable. Honesty and integrity is also important; it should be pursued in all ventures undertaken. (Hill, 2001) It is important that managers and decision makers at Sanofi-Synthelabo understand the important of effective leadership in the organization.
Kreps identifies two basic types of communication within organizations -- formal communications and informal communications. (Kreps, 1986) Kreps and Hellweg identified two types of formal communications within organizations: vertical and horizontal communications. (Byers, 1997) Two further subdivisions within the vertical communication format: Downward communication and upward communication are observed.
In downward communication, all information transfer is sent from the management to the workers. The employees lower down the hierarchal chain are constantly provided information with regards to what needs to get done, how it should get done and the time frame within which it has to get done. Little or no feedback is expected from the employee who receives the message. In reality, it is observed that very often the message can get complicated and distorted as the level of complexity of the job increase or the levels through which the information flows. Most organizations traditionally followed this form of communication. The role of managers and supervisors in this setup is that of the thinker for the organization. The employees are encouraged not to think but only to follow the directives. In the "bottom up" form of communication, thinking is expected from all employees in the organization and interaction is considered.
In horizontal communication, individuals at different levels of the organization interact to share information, tactics and discuss options. The silo effect of organizational work can create extremely limited focus in workers. Horizontal communication at equal levels helps the worker or manager or department head understand how decisions and task undertaken by them affect the organization as a whole. While downward communications are still important, organizations are realizing that this type of information flow can only be completely effective if the other two, upward and horizontal communication flow also exist simultaneously and are given equal importance. In the past upward and horizontal communication flow was limited. Workers were nervous about losing their jobs or being discriminated against if they tried to obtain clarifications for the tasks handed to them or if they offered suggestions that could do the task more efficiently. Identifying the direction of communication flow, the nodes and the gatekeepers can help companies stay informed of all the changes taking place within the organization.
The grapevine is the informal internal communication that organizations posses.
It is only since organizations have begun to value the opinions and ideas of their workers have the grapevine become a new tool for organizational communication by the management. The validity of the information through the grapevine is never doubted as constant and periodic confirmation of the information is obtained at every transfer point. The strength of this type of communication is that anyone, at any level or department within the organization can start the communication and this type of communication is not restricted by vertical or horizontal direction of communication flow when compared to formal communications within the organization. Long-term vision and foresight from managers at all levels of the organization is required to promote alternative methods of communication.
After visionary and dynamic leadership, most organizational goals and objectives are key components that either result in the success or failure of an organization. Managers and change agents should also realize that all employees are not the same. This human variance in any industry can result in either the success or failure of the change. In the article "Change for the better," Mittler used an example where an employee was not happy with the new freedom and accountability attitude practiced by the new CEO of the company. The employee was happier with the old rules of being told what to do and when to do the task and how to do the task. He wanted no part of personal accountability in the workings of the company. Mittler went on to state that the employee left within a few months. (Mittler, 2003)
Leadership accounts for the greatest variance in the organizational structure. No matter what the type of structure a leader, with a clear vision of the final goal will be able to motive and take his team to the goal. Emotional intelligence and involvement by the leader or managers of the team, group of department can greatly help the morale and productivity of the department. Externally oriented leaders may typically have short-range views and may appear to be successful in the immediate future. Good leaders have to go one-step further. They make decisions that are long-term and these decisions should be made after proper evaluation of all material available. (Hunsicker, n.d.) No matter what the type of company organizational structure, it should eventually help make the workplace a comfortable and safe environment for all the employees.
SYSTEMS AT SANOFI-SYNTHELABO
Reporting and documentation of tasks is an important way of reviewing and understanding operations in any organization. Sanofi-Synthelabo in the gulf has implemented a formal system of reporting that is done on a daily basis. The market for any industry is very dynamic; and organizations have to improve their products and services constantly to satisfy the market. Good management of assets can help any organization accumulate and retain the revenue that sales of the product or services generate. In addition, sound financial management of a publicly traded company helps generate trust in the shareholders and the market. The reliability and trust that Sanofi-Synthelabo can generate in Europe has helped it move to international market with little difficulties. The company provides all the financial information required as per law in any state or country that it operates.
The financial system records all expenses regularly and identifies expenses to its related activity and related products. This allows the company to have a general overview of resource allocation and utilization based on product family, location and market segment.
These trend analyses can help Sanofi-Synthelabo make calculated decisions about the amounts and limits of resource adjustments and product life cycle planning that may be required to generate profits for the organization. Budget planning and fund allocation is an important management task in any organization. At the time of budget planning and forecasting, past historical records can serve as good benchmarks for the company. Forecasting and setting realistic sales targets can help organization determine the funds and labor resources needed to achieve the final goals of the company.
With organizations becoming more global in nature organizations are realizing the important of creating standard operating procedures (SOP) for similar tasks performed at different regions around the world. The idea of doing this is to maintain some form of standardization and quality performance at all locations. By providing procedures and guidelines to the workers the company can maintain control over the operational system in the organization. SOPs are not static entities but rather change and evolve based on the environment, the culture and norms and the type of product marketed in the region. Sufficient latitude should be offered to the worker performing the task to gain worker involvement. The human element in any organization is the most valuable and self-assessment encourages organizational learning.
Organizations use various methods to compensate and reward their employees. They play a major role in the performance of an employee. In the past, many organizations were hierarchical in nature. Often, punishment -- threat methods were used to ensure that the workers performance was maintained. In the past century, organizations shifted from this form of performance generation tactic to one of positive reinforcement where rewards, bonuses and praise are used together to ensure that the worker performs. Rewards for a task well done may have different values depending on the person receiving the reward and the manner in which the reward is offered. A pay-raise may please one employee and much as a public acknowledgement of a task well done may please another. Often, companies use the annual job review technique that has main pitfalls. Some of the factors that are evaluated at the employee review stage are -- knowledge of work, quality of work, quantity of work performed, cooperation and team involvement, problem solving, communication, problem solving and attendance and punctuality. The goal of conducting a review is to judge in an un-biased manner if the performance of the employee matches the goals and objectives of the organization. (Heathfield, 2003)
Rewards are generally classified into formal and informal rewards. A formal reward generally is offered in monetary form. Informal rewards can be any type of acknowledgement offered by management to the worker and this can include praise by management and coworkers, recognition awards and client acknowledgement. Informal rewards are very often tied to formal rewards making them more meaningful for not only the moment but also long-term as the worker generally enjoys the benefits of better training and educational support, eligibility for upward mobility and higher wages. Organizational salary slabs are becoming more rigid due to a stagnating and slow economy. And salaries and increments are not as widely offered as in the past decade. This has prompted organization and the human resources department to come up with new and innovate ways in which they can raise the morale of the workers and therefore improve the overall productivity of the organizations. The age of long-term employment and organizational loyalty no longer exist. The enthusiasm displayed by workers generally wanes over extended periods of time if they are not offered sufficient incentive. Offering rewards should be done solely on the basis of merit; only then will the rewards whether formal or informal really be valued by the employees. Rewards should be tailored towards an individual. (Daniels, 2003)
STYLE OF Management AT SANOFI-SYNTHELABO
Historically, successful decision makers have been characterized as decisive, analytical, individualistic, powerful, and willing to make the hard decisions when required. People opinions and perspectives have changed over the last few decades and society now prefers leaders who help build 'learning organizations.' In this new organizational setup, the decision maker will have to help people expand and increase their own individual capabilities with the belief that an individual who is constantly growing and developing is an asset both for the company and for the society as a whole. Management concepts are not new theories developed in just the past two centuries.
Archeological and historical remains from the time ancient world like the Coliseum, the Pyramids, the Great Wall of China are all testament to the fact that large groups of individuals had to be managed and directed by a few to achieve the results desired. Management theories however became more defined and structured with the onset of the industrial revolution. The scientific management theory proposed by Taylor was instrumental in launching the mass production era in the U.S. He was among the first to introduce the concepts of specialization of labor and breaking down of tasks into discrete and independent functions that could be taught and performed repeatedly by the individual performing the task. Many of these concepts helped revolutionize the manufacturing industry and improve production. There were many down sides to this method of management as well; the worker involvement was reduced in the entire process and the skill set requirement was also equalized. The constant repetitive nature of the task also introduced boredom and resentment towards the work process. As worker time and not skill became the driving factor for compensation, highly skilled workers were not happy with this method of management. Little or no worker input made workers resent the people who forced or expected them to behave or perform in a certain manner.
There were many good things that the scientific management theory introduced. The standardization of tasks and the quantifiable time requirement (standard time) for any task brought a level of control in the organization.
These tools helped companies and managers determine the approximate time and labor requirement for any tasks. Records and documentation introduced as a result of the process provided historical data for review at later stages. Benchmarking helped companies identify the competition and areas where they could improve. Concentration on the workflow and material flow through the system became important. Scientific management required a lot of support staff, which was not present in the past. The increase in mid-level managers, record keepers and office staff was observed in companies that employed Taylor's ideas. Management functions of control, planning and strategizing became more defined and were separated from the other tasks of production and manufacturing. Many of the concepts that Taylor introduced are still used in a modified form and with a more humane approach in work places today. Companies still set standard times for production, managers are still involved with the strategizing and planning process and workers are still often reviewed for performance based on the quantity and not quality of the work performed.
Elton Mayo was the first to bring the human element into the equation of management. While Maslow and McGregor would later identify and postulate the motivational theories for individuals, Mayo believed that worker satisfaction and performance were interdependent. The working conditions, the management attitudes and the quality of life within the organization were all important factors. Where "Taylorism" appeared to be beneficial for the business owner, Mayo's theories looked into the welfare and well-being of the workers as well. Negative effects of coercion and power control were easy to identify. It was observed that management could achieve a lot more if they were sympathetic to the worker needs and the work environment. The influence of peer pressure and group conformity was also identified as important in managing people and situations. At this point, management theories began to place equal emphasis on the quality of work for the worker and ways that could be used to improve it.
In the 1960s, management using numbers became more common. Statistics was effectively used by the Japanese to ensure the quality of their products. Till then the U.S. manufacturers relied on the concepts of Acceptable Quality Levels (AQL), however once the Japanese were able to use the concepts of Statistical Process Control (SPC) to eliminate defects in the manufacturing process the American companies has to change their management styles to include these new ideas.
Performance or product perception. It is very clear that defining quality is difficult; even more difficult however, is maintaining quality levels within an organization.
All the contemporary management theories place high emphasis on employee training and skill development. Since the 1990s, there has been an emerging approach to manage organizations using an "engaged learning system" coupled with a continuous learning environment through all ranks of the organization. Globalization and the Internet have made the trade and commerce across geographical distances possible. Transportation and logistics capabilities have also improved and advanced in recent time. The set up of decentralized and independent work centers and factories divisions of multinational corporations all over the world are becoming increasingly familiar. In this environment, it is important that all employee of the organization at different locations around the world performing the same task do so in a manner that is consistent and of the same quality.
Leadership style is taken to mean a particular behavior emphasized by the leader to motivate his or her group to accomplish eventual ends (Hanson, 1979). Most types of leadership styles elucidated are based on two broad dimensions: people-oriented and task-oriented. The people-oriented style emphasizes the human aspects and is more concerned with interpersonal relationships. Leaders who are people-oriented have strong concern for the human relations approach and try to maintain friendly supportive relations with their followers. They are expressive and tend to establish social and emotional ties. They view people as the best asset the organization, schools and society may have and constantly work towards developing this asset. The task-oriented style emphasizes the technical or task aspects of the job and is concerned mainly with the accomplishment of tasks. Leaders who are task-oriented have strong concern for the group's goals and the means to achieve the goals. Their behaviors reflect their interest in completing assignments and getting the work done. They concentrate on methods for assigning and organizing work, making decisions, and evaluating performance. These types of leaders may not always demonstrate concern and look for the success and individual development of others if this is not always tied in with the task at hand.
The important variable affecting the leadership style practiced is the maturity and working knowledge expertise of the people the leader is directing. Members of an organization that are more experienced and ready need less directive and control from a leader. (Ubben & Hughes, 1992) Rewards such as praise, recognition, and attention are sources of personal power possessed by the leader as an individual. In addition, a leader also usually controls certain organizational rewards, such as pay rises and promotions. These are sources of power that depend upon the leader's position in the organization.
STAFF AT SANOFI-SYNTHELABO
Motivation is very important; individuals will work to their full potential only if their very basic needs are satisfied. Abraham H. Maslow and Douglas M. McGregor both believed that in order for people to work to their full potential, theirre basic needs had to be satisfied. (Maslow, 1954) In recent times, with the workforce more knowledgeable about their rights, and an increasing focus by management in keeping their workers happy, the balance of power has shifted. All changes have to be beneficial to both the management and the worker.
The journal article "Maslow revisited: building the employee commitment pyramid" evaluates motivation from the perspective of the employee/employer dynamic and not just the individual's relation to the environment. (Stum, 2001) Many of these factors of motivations change over the period of employment. It is easy to observe and comprehend that the Workforce Commitment Index (WCI) will change. The WCI identifies five different workforce needs: Safety/security (safe environment for the worker to work in physically and psychologically), Rewards (Compensation and benefits -- an extrinsic factor), Affiliation (a sense of belonging to the organization), Growth (the growth of both the individual and the organization) and Work/life harmony (balancing of personal life and work responsibility) It is true that as workers move up the hierarchical ladder of the organization the needs they expect also tend to change and move for the next level. Balancing the need for providing these services with the organization's needs can be difficult. Allowing managers and supervisors to understand the WCI and the role of the needs in improving the motivation of the employees is also important.
Understanding Maslow's hierarchy of needs in different cultures is important. (Vires & Florent-Treacy, 2002)
During the inception of the establishment of a formal work-setting (1500-1700), the laborer was not well respected. Factory owners believed that wages should be intentionally kept low, so that the worker was forced to come back to work the next day to maintain even his basic needs. It was believed that higher wages would increase idleness and irresponsible behavior in the worker. It was generally assumed that the worker would spend more if he earned more and that it was better for the worker not to have extra money to spend more. The view that a lot of social problems would be avoided if the laborer were constantly occupied was the norm of the time. Adam Smith postulated that self-interest can help individuals and nations accumulate wealth and prosperity. Adam Smith and Thomas Robert Malthus' ideas helped in the foundation of the school of thought of wages. Thus, the Wages Fund Theory was developed. John Stuart Mill reasoned that wages would depend on the supply and demand of the labor workforce in the region and the skill set that was required for any period of time for a specific task. For example, in the horse and carriage days, blacksmiths and ironsmiths were important. After the automobile came along, the demand for this type of labor decreased significantly. (Groat, 2003)
Research in the socialization field indicates that interpersonal communication of both the formal and informal nature can help teach new employees in an organization their tasks and duties. (Robinson, Kraatz, & Rousseau, 1994) An individual also has the same expectations of wealth and personal success that any organization has.
No matter where the location or the type of organization some of the listed below tools can be used to help the organization. Information should be collected about cultures and norm of the region where the organization is planning to do business. Workers should be encouraged to empathizing with the conditions that exist at the various locations rather than just reviewing the existing conditions. Leaders and managers should talk to workers at locations to evaluate the style of leadership that will be the most appropriate for the local culture and work towards developing the skill set needed. The organization should also look for metrics that measure the evaluation of the core competencies of the organization and align it with the values of the worker. Knowing and understand the requirements needed to succeed in the mission no matter where the location is also important.
As decision-making and risk levels change depending on the position of the manager in the organizational structure, understanding basis concepts of chain of command and power and expert knowledge is very relevant to the manager. For example, in a very strict and rigid power structured organization, reporting and tasks-transfer protocols may be very important to ensure that no feelings are hurt. When dealing with a global environment, it is important that managers and leaders be able to identify the best form of leadership style for the organization based on the location. For example, an organization performing the same tasks may place different emphasis on employee behavior. In China, the UAE or Russia, for example, a leader may choose the transactional style of leadership where the culture of region emphasis the need for tasks to be dictated and spelt out to the workers. (Vires & Florent-Treacy, 2002) Worker in these countries if given the tool of empowerment may not understand how to use it effectively; in a more drastic situation, the worker may perceive the empowerment tool as scary and even resent the implications that it may have on the performance. The culture of the region may be more suited to follow directions rather than creating an individual though process. Transplanting leaders that may have performed exceptionally well at the company's head office in Paris to a foreign office in UAE may defeat the purpose and not generate the same results. For example, some countries around the world may refuse to do business with women -- not for any thing lacking in the female leader but more due to the local culture that does not give women the appropriate positions of power.
SKILL REQUIREMENTS AT SANOFI-SYNTHELABO
Understanding the importance of skill development in an industry like the pharmaceutical one is very important. Knowledge management and labor management are one of the defining assets for any organizations in the modern world. Knowledge management is especially gaining importance due to the fact that mheany midlevel management jobs have become redundant; consequently, the worker is being made more accountable. In the current market place, employers have expectations of the type and nature of work that they expect their employees to perform. Depending on the type of job, skill requirements may differ. For example, workers in a research and development department may benefit extensively from more training and education.
Knowledge is a dynamic blend of structured expertise, values, contextual information and insight. It provides a framework for evaluating and integrating experiences and information. Knowledge defines the intellectual assets of an organization. The four knowledge transfer channels identified are: externalization, combination, internalization, and socialization. Various facets, levels and types of knowledge have been identified in management theory literature. In any organization, knowledge, over a period of time gets absorbed into the routines and operations of the organization. Over time, this knowledge may get so infused that it is difficult to separate it from the organization. For example, when one refers to Intel as a company, the first thing that comes to mind is computer chips and processors.
Knowledge can be classified as "Explicit" and "Tacit" knowledge. Explicit knowledge is the knowledge that is objective and rational and can be expressed in formal and systematic language. Tacit knowledge is subjective, experiential and hard to formalize and communicate. Knowledge transfer occurs in one of four forms: from tacit to tacit; from explicit to explicit; from tacit to explicit; or from explicit to tacit. Knowledge transfer is a two-part process, sending and receiving. Knowledge transfer can only take place when knowledge is transmitted by the sender and received by the receiver. The concept of "intellectual capital" is attributed to the economist John Kenneth Galbraith who coined the term in 1969 (Svelby, 2001). Intellectual capital is knowledge that is considered an asset to the organization. There are four types of intellectual capital: human capital, structural capital, customer capital, and social capital. Knowledge transfer channels and the exchange of intellectual capital by individuals within an organization play an important role in the success of the organization. The collective knowledge in the organization, the duties and function of harvesting the talent and managing that intellectual capital for the benefit of the shareholders, the employees and the management becomes an important for a company to succeed.
A pharmaceutical company places great emphasis on skills and knowledge of the worker in the organization at all levels. The marketing staff has to be very competent and knowledgeable of the products that the company markets. Often, pharmaceutical organizations may have very extensive product lines that are markets to different segments of population. Sales and marketing staff are generally product-based occupation, when complete understanding of one or two specific product may be provided to the medical representative. Medical representative claiming complete ignorance about the benefits of other products of the company may seriously harm the image and reputation of the organization in the long run.
SHARED VALUES AT SANOFI-SYNTHELABO
For an organization to work to its full potential, the values and goals of all the stakeholders in the organization should be the same. All organizations define their stakeholders as their employees, customers, shareholders, managers and the market in general. In addition, very often, the social and economic of the area are also impacted by the organization. A company may choose to invest in the region or area to help develop supporting business and industries. Culture had been defined not as the behavior of the people living in it; it is the "it" in which they live. The culture of an organization includes the language, dress codes, and habits of the operations, value systems, an ethics' code, attitude and interactions between various strata of the organization and work principles. Norms-are the organized and shared ideas of what the members in the organization do and feel, and how these norms should be regulated. Many of the individual needs get infused from the individuals that work in the organization into the culture of the organization.h
In recent times, managements, by using the avenues of downsizing or reengineering, are also changing the image of many organizations in the eyes of their workers. Downsizing is often done in an attempt to increase the bottom line and the profits of the company. Downsizing involves decreasing the number of employees in the organization. Layoffs proceed from downsizing. In some cases, jobs and tasks formerly done in-house may be outsourced to subcontractors and smaller firms. This helps reduce the overhead for the organization. In some cases, however, downsizing may, in the long run, damage the capabilities of the organization and in turn the profits. Reengineering, if well implemented by the organization and the HR department, can help reorganize the human and equipment resources that the organization possesses in a manner such that the organization gets the best possible resource utilization. Often, organizational reengineering involves a radical redesign of core business processes to achieve dramatic improvements in productivity, cycle times, and quality. All these improvements are generally long-term. They can help an organization that is getting too sluggish. They aid in reevaluating and understanding core business -- a return to first principles. As many of these re-engineering processes result in the loss of jobs, it is a very difficult and stressful time for both the workers and the HR department. If the HR department is sufficiently vigilant however, the officials in the department will know in advance where head count and overhead costs are excessive. This knowledge, if properly transmitted to the executive management, can help them make appropriate decisions at the right time. This thereby effectively reduces the problem of laying off excess staff.
When workers in the organization are explained the need for conducting any changes in the organization the change is better accepted and resentment or hurt against the management is not observed. Sanofi- Synthelabo has been able over the years to maintain the trust and respect of the workers in the organization constantly.
COMPETITIVE ANALYSIS OF THE INDUSTRY
MICHAEL PORTER'S FIVE-FORCE ANALYSIS
The ideals and concepts that support the growth and prosperity of firms generate considerable interest and debates within the academic and the business community. The impact of social science, economy, strategy, public and government policies all play a significant role in the success or failure of an organization. Continually published material on strategic management has resulted in an abundance of models that range from the structure-conduct-performance model to evolutionary economics, from ecological models of strategy to network models of strategy, and cognitive perspectives on strategy to learning models of strategy. (Greenwood & Carter, 1997) Structure-conduct performance paradigm (SCP) was used by Porter to design the five-force business strategy model that has become the foundation of business strategy studies. (Bain, 1954) Analysis of the worldwide pharmaceutical industry based on Porter's framework reveals the following:
INTERNAL RIVALRY
The great emphasis on quality and longevity of the human life has spurred on tremendous investment in R & D. centers by all the global pharmaceutical companies. Positioning, which was once the core of strategic management does not work any longer. And pharmaceutical companies have to work harder at maintaining their status in the industry. It is estimated that it cost approximately $500 million U.S. To introduce a new product into the market. The current international patent laws provide a ten-year protection from the synthesis to the market sales of the product. (Chemsoc.org, 2002) Intense rivalry to launch new products first into the market exists in the pharmaceutical industry. It is estimated that any drug generates the highest revenue in the first three years of its market introduction. In the past 30 years, the pharmaceutical industry has experienced extensive mergers and acquisitions in both Europe and the U.S. The pharmaceutical industry was however in the past characterized as being a very fragmented industry. Mergers and acquisitions have creating a number of 'mega-companies' with tremendous capabilities and resources. An industry which in the past had never been subjected to take-over-bids in the stock markets is now being threatened by bigger competitors in the field. Examples of takeovers in the past 10 years are Pfizer with Warner-Lambert, Pharmacia & Upjohn with Monsanto and Glaxo Wellcome with SmithKline Beecham. If the industry continues to expand in this manner, extensive instability and demoralization will occur in the workforce. Some of the factors that are creating this behavior pattern in the over all industry are:
Slowing sales growth for products all over the world
Shareholders and management drives to contain costs
Few or very ineffective pipeline drugs in big pharmaceuticals
Shorter life cycles of drugs in the market. Extensive reverse engineering by countries not having robust patent laws and generic drug productions
Fewer "blockbuster" drugs developed in recent times
Higher costs of drug discovery technologies
Price wars and excessive marketing and advertisement costs
Illegal imports of drugs and no effective control of drugs movement worldwide
Stricter clinical trial regulations resulting in the drugs spending more time drug testing
Very few spin-offs from existing drugs after patents expire
Due to all the above factors investment in R&D is at a record high worldwide. In 2001 the industry spent over $30,000 million on R&D as compared with $2000m in 1980.
R&D investments by research-based pharmaceutical companies
Sources: PhRMA, 2002; U.S. FDA, 2000. *Estimated http://www.chemsoc.org/chembytes/ezine/2002/salvage_may02.htm
The competition between companies is generally on the bases of therapeutic category, for examples anti-hypertensive drugs, anti-thrombosis drugs. Some therapeutic categories have very few players in the field due to the high risks and uncertainties involved in the process. The Baycol experience of Bayer is one such example, where a potential blockbuster drug had to be recalled due to prescription errors and subsequent loss of life. Another example is the anti-cholesterol drug market which is an oligopolistic market where the number of competitors is low (Pfizer, Novartis, BMS and recently Astra Zeneca) and the degree of differentiation between the products is high. Environments and variable factors are easy to identify in these markets and all competitors are always poised to react in very short periods of time. The Internet and the growth of rouge industries has further complicated the market by introducing counterfeit drugs into an establish playing field. Small drug manufacturers also have the benefits of not investing in contemporary advertisement and marketing but use the free medium of the Internet to market the product.
BARRIERS TO ENTRY:
The barriers to entry of players in the pharmaceutical industry are very high. High capital requirement for R & D. And manufacturing and production is required. In addition, a very complex and well-defined system for marketing and sales during the initial introduction of the product is required to ensure acceptance in the market. However, many small drug companies with only one product line are slowly entering the market. This is forcing many of the large companies to buyout these small companies before they become a substantial threat to the organization. Introducing a single drug in the market can cost from $600 million to $1 billion from conception to launch. A concern of economies to scale in the production and manufacturing has also forced many organizations to consolidate their efforts. The patents and approvals required by licensing boards are also become more stringent and complex. Managing and creating knowledge in the pharmaceutical organizations are becoming critical to the long-term success of the organization. International regulation, tariffs and laws also make working across many geographical boundaries very difficult.
SUBSTITUTES AND COMPLEMENTS:
Substitute products are products that can perform the same function for the same customer groups, but are based on different technologies. Drugs that are unique and appropriate for specific illnesses generally have no substitutes. Key areas of research such as cardiology and oncology however, have many competitors who are constantly developing new products for the industry. For example heart beat irregularity diseases (Cardiac arrhythmias) are now treated with pharmaceutical products as a first line of therapy, before use of any equipment such as I.C.D (Intra cardiac defibrillators).
There is also however, the fear that advancement in medical equipment technology can pose a threat to pharmaceutical products in certain specialties of medicine. The cost of production and sales of the potential threats are also high. Drugs can however be also used as complements for improving the quality of life -- Viagra marketed by Pfizer is one such example. It is not a life saving drug but it has managed to create a sufficient market for itself. In UAE, the government with various laws and regulations has managed to control the substitute drugs that are available to the public.
BUYER POWER IN THE UAE
Unforgiving health regulatory regimes have put an enormous pressure on pharmaceutical prices and have reduced the profit margin of firms within this industry. Brands with premium prices have to be endorsed by key opinion leader doctors, who influence the purchase of such products, and the practice of other doctors. Furthermore, medical associations, international or local can influence to great extent the prescription habit of physicians and consequently the sales of a given pharmaceutical product. Medical guidelines and recommendations have always been one of the major drivers of any pharmaceutical product. Recently, with the era of the Internet and the easiness of access to information regarding pharmaceutical products and pharmaceutical companies, has empowered end users i.e. patients role in choosing their medicine, and is becoming more and more important. A well-informed patient is increasingly becoming a decision maker regarding which drug to use.
The general population is very interested in obtaining a higher quality of life compared to the previous generation. Standard of living in the UAE is sufficiently high to allow the average person the capability to purchase the drugs desired. Although there is a sizable population that may not be able to afford drugs if they are not subsidized the impact of this segment of the market on the overall sales of the product is questionable.
BARGAINING POWER OF SUPPLIERS
Suppliers can exert bargaining power in the pharmaceutical industry either by rising prices of their raw materials or through reducing quality. This has lead to wide scale vertical integration within the pharmaceutical industry. For example, a big pharmaceutical company may acquire or collaborate with a biotech company to obtain enabling technologies or to enrich its own R&D pipeline or the company may buy out their raw material supplier to control the cost and maintain economies to scale. The pharmaceutical industry is very complex and requires a wide variety of resources and logistics to keep it running efficiently. There are tremendous demands on all the companies involved to maintain the logistics and supply chain efficiently. Labor, marketing and advertisement costs are important factors in this industry and the restricted supply of any of these commodities can seriously impact the industry.
MARKETING THEORIES:
Peter Drucker stated that markets are not passive entities beyond the control of the entrepreneur or organization; rather they are very interlinked and can be influenced. (Hesselbein, 1998).
A mission statement is required.
The mission statement of the company defines the company, and its aims and goals. The reasons for choosing a particular method of operation for the organization should be clear, to the point and easily understood by all.
CHANGE Management IN THE ORGANIZATION:
Any change that may be required to achieve the goals of the firm should again be clear -- the reasons for the change should not focused and comprehensible. Changes, whose final aim is not tangible or clear to the people on whom this change is implemented, create distrust and a sense of uncertainty. This affects the productivity, and therefore the profitability of the organization.
Communicating the need for change and the speed at which this change will be implemented is important. The degree of agreement between the values, cultural norms, and attitudes that are required for implementation of the proposed change and the organization staff's existing attitudes, values, philosophy, and operating style also determines the success of any change that can be implemented.
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