Strategic Management Report

Strategic Management Report

Group Members:Ajeet Kumar 1325145Manesh Kumar 1325162Kanwal1325158Shakeel Ahmed 1325177BakhatHussain1325151

Submitted To:Sir Naveed A. KhanDated:Nov, 30, 2013

Table of Contents

History2Introduction4Abbot Pakistan5Vision and Mission Statement5Products and Services of the Company6Financial Analysis7BCG8IFE9EFE10SWOT Matrix11CPM12Space Matrix13Evaluation of Business Model14Blue Ocean Strategy15Conclusion15

History In 1888 at the age of 30, Dr.Wallace C. Abbott(1857-1921), an 1885 graduate of theUniversity of Michigan, founded theAbbott Alkaloid Company. At the time, he was a practicing physician and owned a drug store. His innovation was the use of the active part of amedicinal plant, generally analkaloid(morphine,quinine,strychnineandcodeine), which he formed into tiny pills which he called "dosimetric granules". This was successful since it allowed more consistent and effective dosages for patients. As the company's overseas sales and reputation was growing, Abbott had to consider new ways to organize its sections.International expansion began in 1931 when Abbott formed its first international office in Montreal, Canada. Expansion continued in 1962 when Abbott entered into a joint venture with Dainippon Pharmaceutical Co., Ltd., of Osaka, Japan, to manufacture radio-pharmaceuticals. During this year, Abbott's expansion projects in England, Italy and France were also completed. With all these developments abroad, Abbott adopted an International Division Structure. Under this organization of management, Abbott simply added another division to the three product based divisions to be responsible for all foreign operations. This international division is itself divided regionally, with each country reporting to the international management.In 1967, the company successfully challenged the FDA on labeling regulations before the Supreme Court inAbbott Laboratories v. Gardner.In 2009, it unsuccessfully attempted to bar other pharmaceutical companies from producing a drug it had a patent on inAbbott v. Sandoz. However, it was determined that Abbott had patented the drug by a specific process of creation and the other companies were not infringing on the patent when they used a different process to arrive at the same final product.Abbott's core businesses focus on pharmaceuticals, medical devices and nutritional products, which have been supplemented through several notable acquisitions. The firm currently divides itself into several divisions: Pharmaceuticals: Localized Innovation Animal Health:anesthesiafor animals, liquid animal diets and other veterinary products Diagnostics:Hematology, immunodiagnostic,oncologyand clinical chemistry (including the i-Stat) Medical Devices Nutrition:baby nutrition(Similac, Isomil, and Gain), adult health products (Ensure and ZonePerfect) and special dietary needs (Glucerna)It has also divested itself of less profitable businesses through sales and spinoffs. In 1964, it acquired Ross Laboratories, making Ross a wholly owned subsidiary of Abbott. In 2001, the company acquired Knoll, the pharmaceutical division ofBASF. In 2002, it divested theSelsun Bluebrand toChattem. Later in 2002, the company soldClear EyesandMurinetoPrestige Brands.In 2004, it spun off its hospital products division into a new 14,000 employee company namedHospira, and acquired TheraSense, adiabetes-care company, which it merged with its MediSense division to become Abbott Diabetes Care. In 2006, Abbott assistedBoston Scientificin its purchase ofGuidantCorporation. As part of the agreement, Abbott purchased the vascular device division of Guidant. In 2007, Ross was renamed Abbott Nutrition.In January 2007, Abbott Laboratories agreed to sell its in vitro diagnostics and Point-of-Care diagnostics divisions toGeneral Electricfor more than $8 billion. These units were slated to be integrated into theGE Healthcarebusiness unit. The transaction was approved by the boards of directors of Abbott and GE and was targeted to close in the first half of 2007. However, on July 11, 2007, Abbott announced that it had terminated its agreement with GE because both parties could not agree on terms of the deal.[4]On September 8, 2007, the company completed the sale of the UK manufacturing plant atQueen boroughto Aesica Pharmaceuticals, a private equity-owned UK manufacturer. No announcements have been made restricting the movement of staff to Abbott unlike other sell outs. On February 26, 2009, the company completed its acquisition ofAdvanced Medical Opticsbased inSanta Ana, California. The acquisition gives Abbott a Vision Eye Care division.In February 2010, Abbott completed its $6.2 billion (EUR 4.5 billion) acquisition of Solvay Pharmaceuticals.This provided Abbott with a large and complementary portfolio of pharmaceutical products and also expanding its presence in key emerging markets.On March 22, 2010, the company completed its acquisition of aHollywood, Florida-basedLIMScompanySTARLIMS. Under the terms of the deal, Abbott Laboratories acquired the company for $14 per share in an all-cash transaction valued at $123 million.On April 21, 2010, Abbott has completed its acquisition of Facet Biotech Corporation, strengthening its pharmaceutical pipeline in immunology and oncology.On May 21, 2010, Abbott Laboratories said it will buy Piramal Healthcare Ltd.'s Healthcare Solutions unit for $2.2billion to become the biggest drug company in India.On October 19, 2011, the company announced that it planned to separate into two companies, one in medical products and the other in research-based pharmaceuticals. Both are now publicly traded. The medical products company retained the Abbott name. The research-based pharmaceuticals company is namedAbbVie.In preparation for this reorganization, Abbott has "drastically cut expenses" and taken aUS$478 millioncharge in Q3-2012 to pay for the restructuring.The separation was effective as of January 1, 2013.AbbVie was officially listed in theNew York Stock Exchangeon January 2, 2013.Abbott, located in the north suburbs of the Chicago area, previously announced the splitting of the company. It did not become official until nearly a month and a half after it was mentioned. On November 28, 2012, Abbott publicly stated in theChicago Tribunethat once it company splits into two on January 1, the shareholders of the company would receive one share of AbbVie common stock for each share that they owned of Abbott. This deal was approved on November 28. This announcement was viewed as very important by Abbott because it begins an important objective of the separation of the business.Abbott also announced the shareholders of the company will receive their one share of AbbVie common stock beginning on January 1, the day the company will split. Only the shareholders who are listed as owning a share of Abbott by December 12 will be able to receive one share of AbbVie. The new company, AbbVie, whose symbols are, ABBV, is expected to begin trading on the New Year Stock Exchange on January 2. Abbott will continue to be run by Miles White, the chairman and chief executive of the company. AbbVie will be led by new named CEO, Richard Gonzalez, previous executive of Abbott. AbbVie will featureHumira, a drug that is expected to produce more than 9 billion dollars and expected to bring them much success.

IntroductionAbbott Laboratoriesis an American globalpharmaceuticalsandhealth careproducts company. It has 90,000 employees and operates in over 130 countries.The company headquarters are in Abbott Park,North Chicago, Illinois. The company was founded by ChicagophysicianWallace Calvin Abbottin 1888. In 2010, Abbott had over $35 billion in revenue.In 1985, the company developed the firstHIVblood-screening test. The company's drug portfolio includesHumira, a drug forrheumatoid arthritis,psoriatic arthritis,ankylosing spondylitis,Crohn's disease, moderate to severe chronicpsoriasisandjuvenile idiopathic arthritis;Norvir, a treatment for HIV;Depakote, ananticonvulsantdrug; andSynthroid, a syntheticthyroid hormone. Abbott also has a broad range of medical devices, diagnostics andimmunoassayproducts as well as nutritional products, includingEnsure, a line of meal replacement shakes; andEAS, the largest producer of performance-basednutritional supplements.The company's in vitro diagnostics business is a world leader in immunoassays and blood screening. Its broad range of medical tests and diagnostic instrument systems are used worldwide by hospitals, laboratories, blood banks, and physician offices to diagnose and monitor diseases such as HIV, hepatitis, cancer, heart failure and metabolic disorders, as well as assess other important indicators of general health. Abbott Point-of-Care manufactures diagnostic products for blood analysis to provide health care professionals critical diagnostics information accurately and immediately at the point of patient care. Abbott also provides point-of-care cardiac assays to the emergency room

Abbott PakistanAbbott Pakistan is part of the global healthcare corporation of Abbott Laboratories, Chicago, USA.Abbott started operations in Pakistan as a marketing affiliate in 1948; the company has steadily expanded to comprise a work force of over 1500 employees. Currently two manufacturing facilities located at Landhi and Korangi in Karachi continue to use innovative technology to produce top quality pharmaceutical products.Abbott Pakistan has leadership in the field of Pain Management, Anesthesia, Medical Nutrition and Anti-Infectives. Our wide range of products is managed and marketed through three marketing arms.On June 29, 2005 Abbott Pakistan Achieved Class 'A' accreditation against the Oliver Wight ABCD Check list. This was an outstanding achievement, which puts Abbott Pakistan amongst some of the best global companies in terms of operational excellence.A continuous process of innovation, research and development at Abbott's worldwide facilities enables Abbott Pakistan to offer effective solutions for various healthcare challenges, with products and services that are well focused, within the customer's reach and contribute to improved health care of the people of Pakistan.Abbott believes that Corporate Social Responsibility is fundamental to earning and deepening the trust of the people it serves, an integral part of its commitment to improve lives has contributed to a number of humanitarian causes and supported various institutions in various fields including health and education.

Vision

To be the most Admired HealthcareCompany in Pakistan.

Mission

To deliver consistently superiorproducts and services whichcontribute significantly to improvingthe quality of life for consumers.Mission Statement Components are following: Product & Service, Customers, Concern for public image, Concern for Survivalgrowth. Philosophy.

Modified Mission Statement:To deliver consistently superiorproducts and services globally through combination of R&D ( advanced technology) and positive workforce, whichcontribute significantly to improvingthe quality of life forconsumers.Missing ComponentsMarketTechnologyEmployeesSelf-ConceptsProducts and Services of the CompanyPharmaceuticals: Localized InnovationNutrition: Worldwide Leader In NutritionDiagnostics: Pioneering Medical DiagnosticAnimal Health ProductsMedical DevicesMajor Business Components

PHARMACEUTICALSArinac,Bejectal, Burnol, Cecon, Klaricid, Lucrin, Protium, SurbexTrividox, Tronolane

DIAGNOSTICSAssays (AIDS, hepatitis,cancer, thyroid,fertility, Clinical Chemistry, Hematology, etc.)& instruments (e.g, AxSYM)Glucose monitoring

HOSPITAL PRODUCTS

Anesthetics, delivery systems, injectablesgenerics, IV solutions, imaging, blood vesselsurgical closure devices

NUTRITIONALSSimilac, Isomil, Ensure, Glucerna, Pedialyte

Financial Analysis

Ratios20122011

Sales15,216,25312,946,968

NPM

13.712.7

ROE31.731.2

ROA22.422.2

C.R

2.712.42

NI2,090,0951,644,586

EPS21.3516.80

2013: Sales for this quarter increased by 17% compared to the same quarter last year mainly driven by Pharmaceutical and Nutritionals.Selling and distribution expenses increased 19% mainly due to inflation and escalation in energy cost.Administration expenses increased by 6% due to domestic inflation. Higher provision for Workers Profits Participation Fund, Workers Welfare Fund and Central Research Fund, in line with increased profit, led to an increase in other charges.

2012: The increase in profit after tax by 27% compared to prior year is mainly attributable to unit growth, improved product-mix and full year impact of the acquisition of Legacy Solvay brands.Favorable product-mix and effective cost control strategies pursued by the company have resulted in improved gross profit and net profit margin.- As a result of the above, earnings per share also increased from Rs. 16.80 in 2011 to Rs. 21.35 in 2012.

Net sales for the year increased 18% over prior year. Gross Profit ratio at 37% was 1% better than previous year, primarily due to favourable product-mix and effective cost controls.Segment-wise Sales and Market PerformancePharmaceutical sales for the year increased by 16% over prior year mainly due to unit growth, improved product-mix and full year impact of the acquisition of Legacy Solvay brands. Progesterones, pain management, anti-infectives, and gastro preparations recorded strong double-digit growth.Nutritional sales for the year posted 21% growth over prior year due to volume and selective price increases on certain products.General Health Care (GHC), Diagnostic and Diabetes Care sales for the year grew by 29% over prior year due to focus on marketing of Mospel and its enhanced distribution coverage.

BCG Matrix

INTERNAL FACTOR EVALUATION MATRIX (IFE Matrix ABBOTT)

STRENGHTSWEIGHTRATINGWEIGHTEDAVERAGE

1. Global presence 0.1040.40

2. Strategic alliances and acquisitions 0.1540.35

3. Diversified portfolio 0.0740.30

4. High margins 0.0740.25

5. Over 100 year experience 0.0840.26

6. Strong research and development 0.0730.20

7. Innovation Leader0.0730.20

8. Strong brand name0.064 0.28

WEAKNESSES

1. R & D investment not to the level of competitors 0.0520.10

2. Marketing expenses lower than competitors 0.0520.10

3. Labor turnover 0.0710.05

4. Expiring patents0.0520.10

5. Declining market share0.0620.10

6. Allegations of illegal marketing 0.0520.10

TOTAL 12.79

EXTERNAL FACTOR EVALUATION MATRIX (EFE Matrix ABBOTT)

OPPORTUNITIESWEIGHTRATINGWEIGHTEDAVERAGE

1. Population growth0.1220.30

2. Quality of life demand0.0730.20

3. Scientific discoveries0.0730.20

4. Treatment required for diseases like cancer, aidsetc0.0630.25

5. Health care sector expansion in Pakistan 0.0540.20

6. Market growth0.0530.15

7. Internet utilization for sales purpose0.0730.15

8. Half of the population have no access on modern medicines.0.0840.15

THREATS

1. Strict regulations 0.0520.10

2. Intense competition0.0720.15

3. Competition from generic products 0.0730.21

4. Law and order situations 0.0630.25

5. Copy products0.0820.14

6. Threats of substitutes like herbal and homeopathic products 0.0520.15

7. Increasing raw material costs0.0520.15

TOTAL1.002.75

SWOT MATRIX (ABBOTT)

SO STRATEGIES

1. Through R & D find solutions for the diseases like cancer and aids with the help of scientific discoveries. ( S6, O3, O4)2. Innovative products having less side effects will be helpful in meeting the demands of customers. (S7,O2)3. Develop new research products to take the advantages of increasing market growth ( S6, O6)4. Expand the distribution to access the demand for modern medicines ( S2, O6)WO STRATEGIES1. Expansion in health care sector will help in increasing the revenue which can be utilized on R & D and marketing. (W1, W2, O5)2. Social sites can be used for promotion & marketing.( W2, O 7)3. Spent more money on research and development for the development of new products to capture the market share.(W1,O6)4. More CSR activities should be done for the promotion (W6,O6 )

ST STRATEGIES1. Lower the margins to overcome the issue of increasing raw material cost. (S4,T7)2. Lower the prices to beat the competition. (S4, T2)

3. Develop the products having negligible side effects to face the competition from herbal and homeopathic products. ( S6, S7, T6)

WT STRATEGIES1. Increase the marketing & promotional expenditure to face the issue of copy products. (W2,T5)2. Relaunch the patent expired products with some modifications to beat the competition.(W4, T5)

Competitive Profile MatrixCPMAbbottGSKPfizer

Critical Success factorsWeightRatingScoreRatingScoreRatingScore

Advertising0.0620.1230.1830.18

Product Quality0.0930.2730.2730.27

Price Competitiveness0.0720.1430.2130.21

Management0.1230.3630.3630.36

Financial Position0.0820.1630.2430.24

Customer Loyalty0.0620.1230.1830.18

Global Expansion0.1030.330.340.4

Market Share0.0820.1630.2430.24

Research & Development0.1720.34 20.3430.51

Employee Turnover0.0730.2140.2830.21

Brand0.1020.230.340.4

Totals1.002.382.93.2

Space Matrix

654321-6-5-4-3-2-1123456-1-2-3-4-5-6FSConservativeAggressiveDefensiveCompetitiveISESCA

5-34-35-26-54-34.8-3.2-36-26-34-35-35-2.85.2Control over Suppliers and DistributorsProfit PotentialMarket ShareGrowth PotentialProduct QualityFinancial StabilityEnvironmental Stability (ES) Average Financial Strength (FS) AverageCompetitive Advantage (CA) AverageIndustry Strength (IS) AverageCustomer LoyaltyEase of Entry into MarketTechnological Know-howResource UtilizationCompetitive Advantage (CA)Industry Strength (IS)Working CapitalCash FlowCompetitive PressureBarriers to Entry into MarketEnvironmental Stability (ES)Rate of InflationTechnological ChangesPrice Elasticity of DemandFinancial Strength (FS)Return on InvestmentLeverageLiquidity

y-axis = FS + ES = 6.0 + (-3.2) = 2.8x-axis = CA + IS = -2.8 + (+5.2) = 2.4

Evaluation of Business ModelBusiness Model ElementABBOT

1. Value Propositioncommitting to the highest standards of quality, excellencein personal relationships, and behavior characterized by honesty, fairness and integrity.

1. Customer SegmentsPharmaceuticals, Nutrition, Diagnostics.B2B

1. ChannelsOwned distributors, Selling by retailers.

1. Customers RelationshipProviding manual with each product, Seminars, Personal Assistance by skilled employees, FAQs online.

1. Revenue StreamsVaries by countries, and according to cost of investment,

1. Key ResourcesMost advanced Technology, Penetration business with potential growth.

1. Key PartnersGlobal and Innovative, Related business,

1. Cost StructuresHigh, due to advance technological, to achieve economies of scale, global investment.

1. Key ActivitiesResearch on latest and innovative life healthy production, also focus on devices to easily diagnosis.

Blue Ocean Strategy

HIV protease inhibitors were first invented by researchers working for the pharmaceutical companies. Abbott Laboratories and Merck & Co Inc. HIV protease inhibitors are used in the treatment of patients with AIDS and were considered the first breakthrough in over a decade of AIDS research.

Conclusion

The company should come up with new research products to beat thecompetition from copy products as well as to avail the opportunities like population and market growth.The company should access new geographical areas to enhance the sales. Company should also take steps to avoid the labor turnover.7