Case Study: NOVARTIS AG
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Case Study: NOVARTIS AG
Abstract
Novartis AG is a multinational company that is based in Switzerland. The firm has a lot of critical issues that must be addressed to continue generating revenue in the market. Critical issues facing the company include regulatory hurdles, medicine expiration, portfolio diversification, global competition, and investment in research and development. The company’s SWOT analysis shows the strengths, weaknesses, opportunities, and threats facing the company. Furthermore, the case study of the company provides discussion questions and answers. Lastly, various recommendations are provided in the report that can help the company tackle its challenges.
Introduction
Novartis AG is a Swiss multinational pharmaceutical company that has established itself as a global leader in healthcare. It is working hard to facilitate innovative discoveries in the field of medicine that are aimed at extending the quality of human lives. Being one of the largest pharmaceutical companies in the world, Novartis is an entity that works in the healthcare industry and specializes in searching for new drug candidates, their development, their production, and the marketing of innovative medications and treatments. The company handles various human conditions, including mutations, eye care, and drug development. The firm’s mission is to constantly embark on quests for new improvements and new ways to help individuals live longer and better. The center, built on the pillars of innovation, scientific advancement, and societal benefits, will drive the development and implementation of novel solutions. Guided by ethical principles and the concept of sustainability, Novartis is not just a provider of medical goods but a trusted partner in healthcare, promoting healthy communities around the globe. Supported by a never-ending thirst for unique discoveries, Novartis demonstrates its example with the innovative medicine of the industry it writes about, seeking to increase the quality of life for people around the globe. The company’s case study is concerned with the analysis of critical issues currently present in the company, the SWOT analysis of the firm, discussion questions about the organization, and recommendations that it needs to implement to avoid various challenges it faces in the market.
Critical Issues
Patent Expirations
The company, one of the world’s largest pharmaceutical firms, manufactures a variety of drugs such as Sandostatin, Entresto, and Afinitor. One of the current issues at the company is that the drugs it manufactures have expiration dates (Stangel et al., 2024). There are certain situations where the drugs that it makes are not all sold. Since drug development requires many resources, the company usually needs more when drugs expire before being consumed by patients. Therefore, the company must implement corrective measures to prevent losing money due to drug expiration.
Regulatory Hurdles
Another current issue that the company faces is regulatory hurdles. Since Novartis AG is a multinational company, it must meet numerous regulations. The firm operates in more than 150 countries, making it one of the largest in the healthcare business. For the organization to operate in all the countries, it must meet all the conditions set by the countries. For instance, the drug regulation laws in the United Kingdom differ from those in the United States. As a result, the company requires different drug distribution strategies in the two countries. Complying with all the regulations the company needs to meet in all countries is challenging since it requires resources and time.
Research and development investment
Any business organization’s resources are always allocated for research and development of new projects. Researching new ideas is vital, ensuring the firm remains in business. In the pharmaceutical industry, much competition arises from companies formed yearly (Johnston et al., 2021). However, allocating funds from resources and development only sometimes indicates that the results will be positive. For instance, in the case of Novartis, finding a balance between investing in research and the development of new products is a challenge. There are many risks associated with investing resources in research and development. The company must balance the two sectors to ensure it remains supplying healthcare equipment and materials.
Portfolio Diversification
Portfolio diversification is another critical issue in the company. Since the company manufactures many medicines, sorting and grading the drugs in terms of popularity and usage is vital. Sorting the medicines can help the firm predict the amount of money that it will collect. Also, sorting the drugs helps the firm know the market trends and future behavior of consumers. Furthermore, the company can gain insight into how to design medicines that consumers prefer.
Global Competition
Lastly, global competition is a major, critical issue the company faces daily. Novartis is a multinational company that is present in more than 150 countries. In each country where the company conducts business, it faces competition from other big brands such as Sanofi, Pfizer Inc., Roche Holding AG, and Bayer AG. As a result, Novartis AG invests many resources in researching and developing new medicines.
SWOT Analysis
Strengths
Diverse Portfolio of Products
Consumers regard the company as one of the largest in the world since it produces a variety of medicines that can be used to treat various diseases associated with the immune system, cancer, and the circulatory system. As a result, the company enjoys a wide range of capital generation opportunities, enabling it to remain in business for a long time.
Intense research and development channel
The company’s research and development team is one of the best in the pharmaceutical business. The team constantly allows the company to manufacture new products that consumers prefer (Garriga, 2020). One of the company’s critical visions is innovation through empowering researchers and developers of new medicines. Continuous innovation of new medicines is a strength that the firm uses to remain in the market.
Global Presence
The company is available in more than 150 countries, allowing its products to penetrate the market quickly. The firm shares a large market it accesses through its presence in many countries. The prominent market allows the company to sell its products quickly, generating much money. The vast amount of money the firm generates yearly can be attributed to its presence worldwide.
Brand Reputation
The quality of the company’s products makes it one of the best in the business. Many consumers believe that the products that Novartis manufactures are the best for treating diseases. The company, therefore, uses its brand image in public to control the market.
Weaknesses
Patent Expirations
Since the company’s diversified portfolio, it is involved in manufacturing many products. It is essential to understand that the medicines the company manufactures are not guaranteed to be consumed (Thajer et al., 2020). Factors such as consumers’ behavior and the availability of capital determine the behavior of the market. Therefore, patent expiration is one of the areas in which the company can improve. There are many medicines that the company manufactures that expire before reaching the market. Patent expiration is a weakness of the company since it makes the firm lose much money.
Regulatory Compliance
The company has a presence in many countries governed by different regulations. It is vital to acknowledge that drug development requires many regulations. Each stage of drug development requires approval from relevant authorities. Novartis AG usually needs help complying with all the regulations that different governments require. As a result, it is realistic to find some drugs from the company that are not available in some countries. Regulatory compliance is a weakness of the company, as it limits its revenue.
Dependency on Key Products
The company’s decision to diversify its portfolio is an advantage, but it also comes at a cost. Although the company manufactures medicines, it also uses ingredients from other companies that manufacture medicines. Examples of such companies include Lonza Group, Fareva, and Cambrex Corporation. Experts do not recommend Depending on such companies as they make less profit. As a result, Novartis AG’s profit depends on the price of raw materials.
Opportunities
Expansion in Emerging Markets
In the healthcare sector, there are many opportunities that the firm can exploit to increase its revenue. Examples of such opportunities include an increase in population and medical expenses. Currently, countries such as India, China, and Brazil can act as a ready market for the company’s products. The aforementioned countries have large populations that can act as a ready market for the company’s products.
Advancements in Biotechnology and Gene Therapy
Advancements in gene therapy and biotechnology provide an opportunity for the company to cut costs of manufacturing medicines and develop drugs for difficult-to-treat diseases. Developing drugs using bacteria is always difficult, as it requires a lot of resources and time. Gene therapy can act as a shortcut since it uses a specific gene that codes for a disease. The firm can exploit such an opportunity to cut costs and increase revenue.
Strategic partnerships and collaborations
Lastly, another opportunity the company can exploit is collaboration and forming partnerships with other companies. Novartis AG can join forces with other companies that can help it develop cheap new medicines. As a result, the firm can save much money that it always uses to manufacture drugs that expire in stores without generating money.
Threats
Generic Competition
Many pharmaceutical companies pose a threat to Novartis AG. Examples include Pfizer, Inc., and Saroni. These companies are threats as they provide similar products that Novartis AG also provides (Quan et al., 2023). Novartis AG can deal with such a threat by making numerous products that its competitors do not. Portfolio diversification can help the company increase its revenue despite intense competition from the market.
Healthcare Reforms and Pricing Pressures
Recently, different players in the healthcare sector have been pressuring governments to regulate the price of medicines. Governments are pushing such reforms to make medicine as accessible to as many people as possible. The governments’ decisions are valid, but their impacts threaten pharmaceutical companies such as Novartis AG. It is realistic to understand that developing medicine takes time and resources. The government must provide cheap raw materials that help pharmaceutical companies reduce the price they charge for purchasing drugs.
Intellectual property challenges
The drug manufacturing process struggles against intellectual property challenges. Infringements, patent infringement, and regulatory barriers are among them. However, these challenges may obstruct the market release of brand-new drug molecules and biosimilar novelty drugs, so Novartis’s expected income forecast and precisely designed product lifecycle management are ruined. Addressing those risks requires proper actions, such as reinforced intellectual property policies, the elasticity of regulatory compliance frameworks, and intelligent partnership agreements.
Discussion Questions with Answers
- What is Novartis’s financial strategy during the expiration period of the patents?
To counter the threat of revenue loss, Novartis implements lifecycle management policies, works out new indications for approved drugs, and invests in promising pipeline products. Thus, these preventive measures provide businesses with a continuous standard of competitiveness in the market and keep their profit streams sustainable amidst the shifting landscape of global pharmacies.
- What are the significant advantages and disadvantages of Novartis compared to other pharmaceutical companies?
Novartis’s competitive position is built on its research and development capability, unique products that connect with customers’ needs, communication strategies that emphasize the selling points of its products, meeting high regulatory requirements, and flexibility that enables organizations to promptly adapt to market changes. These elements, combined, grant a company a firm stand and ensure its longevity against the changing conditions in the pharmaceutical sphere.
- How does the company address its portfolio?
Novartis actively seeks out acquisition opportunities with good prospects for growth potential, divesting assets that are not pertinent to the primary purpose of the business and strategically investing in innovative medicines that ensure a competitive advantage. It comprises cultivating strategic alliances, chasing acquisitions, and internal research and development projects that help sustain innovation and long-term value creation in the pharmaceutical industry.
- How do hidden regulatory fees play the most negative role in Novartis’ global operations?
The regulatory barriers impede new drug launches and necessitate Novartis, the pharmaceutical company, to spend substantial money on regulatory affairs. Regulatory authorities may become overwhelmed by the variety of innovations and their unpredictability, which illustrates the significance of building a solid regulatory framework and an active liaison with regulatory bodies to compute timely approvals and compliance.
Conclusion
Within the healthcare sector, Novartis AG is one of the leading companies that provide drugs to many people worldwide. The analysis of the company has revealed that it faces many challenges, including global competition, regulatory hurdles, drug expirations, and research and development challenges. Despite the challenges, the analysis has indicated that the company is vital in the market due to its strong brand image and portfolio diversification. Furthermore, the company has a lot of opportunities, such as gene therapy, the advancement of other biotechnological techniques, an expanding market, and the formation of partnerships that it can use to advance its influence in the market. On the contrary, the firm still faces threats such as generic competition, healthcare reforms, and the struggling intellectual property system. By devising a sound strategic plan, paying attention to regulatory compliance, and committing to constant innovations, Novartis can deal with the threats and remain one of the biggest pharmaceutical companies in the world.
Recommendation
- Organizations should aim to develop strategic partnerships as one way to diversify offerings and boost market presence.
- For the business to succeed, sustainability and ethical business values must be emphasized in all company activities.
- The company should devise life cycle management policies to deal with revenue loss occasioned by patent expiry.
- The company should steadily review different portfolio diversification techniques to do business better.
- The firm should consider the notion of corporate culture orientation to potential change and be resilient to the constantly changing market environment.
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References
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Quan, N. H. K., Singh, H., Khanh, T. H. T., & Rajagopal, P. (2023). A SWOT Analysis With A Digital Transformation: A Case Study For Hospitals In The Pharmaceutical Supply Chain. Journal of Informatics and Web Engineering, 2(1), 38–48. https://doi.org/10.33093/jiwe.2023.2.1.4
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Thajer, A., Sommersguter-Reichmann, M., & Löffler-Stastka, H. (2020). Implementing a clinical research department to support pediatric studies: a SWOT Analysis. International Journal of Environmental Research and Public Health, 17(17), 6211. https://doi.org/10.3390/ijerph17176211