Invitrogen
Student’s Name
Institutional Affiliation
Date
Invitrogen
- Introduction and Decision Problem
Invitrogen is a leading consumables company that has its headquarters in Carlsbad, California, with Greg Lucier as its chairman and CEO. In 2008, the company managed to grow by 11 percent and emerged with $1.2 billion in revenue. Acquisitions have always been part of the company’s growth, as it has previously acquired more than ten companies successful, some of them being four times its size. Currently, Invitrogen aims to venture into the healthcare industry to serve patients and physicians with focus on the new technology, next-generation sequencing (NGS) that can potentially reduce the cost and time of sequencing. The company also aims to expand and commercialize its instrumentation field with more production and sales. The transition, however, is not clearly stipulated and the company is stuck with several options to choose from. Invitrogen has to choose the best option, either an acquisition (several competitive companies exist to choose from), or to optimize its research and development and develop a third-generation sequencing technology that can compete in the healthcare market.
- Situation Analysis (SWOT)
- Internal Analysis (Company)
- Strengths
As a company, Invitrogen has its areas of strength that gives it a competitive edge in the market. The company has an already established market base for its molecular biology, biochemistry, and cell culture reagents, which are offered at affordable prices. Under the leadership of Lucier, the company has also been able to successfully acquire over ten other companies in the same industry, thus increasing its product base to over 35,000 products as well as consume base, which is up to tens of thousands. Over time, the company has made remarkable progress in terms of streamlining costs and integrating companies. The company also launches several products every quarter and handles thousands of orders of per day.
- Weaknesses
The main weakness of Invitrogen is its over-reliance on government-funded research, which could limit its growth and expansion. Some of the company’s acquisitions were also not viable, including the acquisition of Bioreliance for around $500 million in 2004 and divesting it for around $210 million in 2007. This approach had a significant effect on the company’s finances as it also slowed its growth. The company also had a low market share of only 12 percent since most of the research funding was being funding was being channeled toward instrumentation purchases. The company also lacks a reliable technology to enable it to venture into the healthcare industry, hence making it rely on acquisitions.
- External Analysis
- Analysis of General Environment (Opportunities/Threat)
Opportunities
Invitrogen boasts of several external opportunities, including a large production capability, as it produces thousands of daily orders. The company also controls a significant amount of consumers thanks to its Supply Centers that provide onsite refrigerated kiosks strategically located near customer laboratories. This opportunity enables the company to maintain a large customer base and maintain as well.
Threats
Invitrogen faces an external threat of barrier to entry into the healthcare industry since it lacks the required technology to delve into the market. Next generation sequencing (NGS) is the company’s target field, but it experiences stiff competition from other potential companies like Applied Biosystems, Illumina, and Pacific Biosciences.
- Analysis of Industry Environment (Five Forces Model)
- Buyer Power
Buyer power is more favorable in situations where the buyer has a variety of options to buy from and less favorable when fewer choices are available. Next generation sequencing healthcare industry has the potential of attracting masses of people to $5.5 trillion when every person is sequenced.
- Supplier Power
Supplier power is high since the target for achieving a faster and cheaper sequencing technology seem to require extensive research and whoever conquered the market had more influence over the supply, quality, and price of the products.
- The Threat of Substitute Products or Services
Threat of substitute is high when the product or service has more alternatives to choose from. Next generation sequencing (NGS) has no close substitute since the same product is advanced each year to create a cheaper and faster sequencing.
- The Threat of New Entrants
The NGS healthcare industry has higher barriers to entry, hence reducing the threat for new entrants in the market. Companies have to undergo extensive research to achieve a cheaper and faster sequencing, which requires huge sums of funding.
- Rivalry among existing competitors
Rivalry is high in the NGS healthcare industry since there are many competitors in the market, and each is striving to gain a significant market share. The NGS healthcare industry has several competitors, including Roche, Applied Biosystems, Pacific Biosciences, and Illumina.
- Analysis of Competitors
The NGS industry has several competitors who strive to achieve a faster genome at a cheaper price. The competition is high, and each company aims at gaining a higher market power with affordable products. One of the companies the Applied Bisosystems which has a good reputation due to its automated DNA sequencing technology that has once been applied under the government’s Human Genome Project. The company also has extensive and commercialized instrumentation and reagents with sales of up to $2.2 billion. Illumina is also a competitor in the NGS industry that has grown from a revenue of $1.3 million in 2000, to $184 million in 2006 and an acquisition of Solexa company with an aim to exceed $100,000 genome milestone. Pacific Biosciences also competes in the NGS industry, and it aims at producing a third-generation sequencing technology by 2010. This technology can achieve a $1,000 genome in a span of 15 minutes.
- Strategic Options
Invitrogen can go ahead and acquire Applied Biosystems, which is almost twice its size and merger to enable a larger instrumentation productivity and join forces with the research and development (R&D) of the company to achieve more milestones in third generation sequencing. The company can also acquire Illumina, which has a commercial infrastructure that could support capital equipment. The can also opt to diversify its R&D and develop its own third generation sequencing without making any acquisition.
- Intra-Option Analyses
- Option 1: Acquiring Applied Biosystems
Pros
It would complement Invitrogen’s instrumentation capacity and commercialize it. Invitrogen would gain a milestone in the field of healthcare GNS by merging with the team from Applied Biosystems. It could access the team of expert engineers from Applied Biosystems and improve its research and development sector for quality and improved outcomes.
Cons
Huge debts are necessary for the acquisition to be successful since Applied Biosystems is almost twice the size of Invitrogen. Invitrogen will have to lay off some of its employees, which is unnecessary. Invitrogen is not experienced in the new approach used in instrumentation in terms of R&D, marketing and sales.
- Option 2: Acquiring Illumina
Pros
It would incur less financial burden compared to acquiring Applied Biosystems. Illumina also sold capital equipment as Invitrogen, and had the service and sales infrastructure that could support a worldwide stall base of up to 300 instruments. It was attractive for its ability to sell 40 orders in 30 days with the launch of its 1G Genome Analyzer.
Cons
Illumina had already acquired Solexa based in California and was merging to produce a cheaper and faster genome sequencing. Competition for the leadership of both companies can also be challenging since both CEOs. Invitrogen is researching on a third generation sequencing technology while Illumina is hoping to venture into the second generation sequencing technology.
- Option 3: Increase R&D and no acquisition
Pros
The company will reduce on the potential of acquiring debt to finance the acquisitions. The company can achieve its third generation sequencing technology through more investments into R&D. Invitrogen can avoid site closures and unnecessary layoffs.
Cons
Lack of potential growth due to reduced capital and investment growth. Might lag behind in achieving a cheaper and faster genome. Invitrogen might face competition from other companies that merge, like Illumina merging with Solexa.
- Inter-Option Analysis and Recommendation
In terms of economic growth and increase in revenue sales, option 1 rates 8 option 2 rates 7 while option 3 rates 6. In terms of debt liabilities, option 1 rates 5, option 2 rates 6 while option 3 rates 8. In terms of market share, option 1 rates 8, option 2 rates 7, while option 3 rates 6. Total rates for option 1 is 21, option 2 rates 20, while option 3 rates 20 as well. The first option is recommended.
- Implementation Plan
To acquire Applied Biosystems, Invitrogen will have to secure a loan because the former is almost twice its size. The move, however, will not be in vain as Invitrogen is likely to benefit from Applied Biosystem’s ability to commercialize the increased instrumentation production. Invitrogen will have a majority of the stakes and can choose to either maintain or alter the structure of Invitrogen.
- Plan for assessing the performance of the Invitrogen after the acquisition
To assess the performance of the acquisition, Invitrogen can quantify the total revenues acquired after a period of two years to determine their progress and performance in terms of sales, marketing, and R&D.
Conclusion
Invitrogen is a company that has large investments in instrumentation and the manufacture of reagent. It faces a problem of delving into the industry of healthcare GNS with a decision between which option is the best for acquisition or to rather withdraw from it. The best option for the company would be acquire Applied Biosystems since it would complement its instrumentation sector and improve its commercialization as well as production. The acquisition, however, would cripple the company’s stock performance due to the higher debt needed.