A Study on the Core Competence and Growth Trajectory of Multinational Pharmaceutical Companies in Taiwan
Date Issued
2011
Date
2011
Author(s)
Wang, Ming-Hsin
Abstract
Pharmaceutical market growth significantly slowed down during the past five years and it is expected to continue to 2014. This is caused by patent expiry of blockbuster drugs, tightening healthcare expenditure set by governments, decline in patient affordability due to global economic recession as well as delay in new drug launch due to stricter regulations, among others. Such a critical situation constitutes a great challenge to many multinational pharmaceutical companies. Even though many large multinational pharmaceutical companies (MPC) have adopted different level of diversification strategies to branch out into business opportunities beyond pharmaceuticals, most companies still choose to focus on investing in drug development to avoid dilution of profitability. In this context, cost reduction to improve productivity, shift in marketing high-value specialty product or biological drugs and expansion into emerging markets have became main source of business growth.
MPCs in Taiwan not only have to implement their global strategy, but also have to consider the characteristics of local market. Taiwan’s highly developed healthcare environment greatly affect MPC''s operation and hence their financial performance which is related to its ability to leverage their core competence, grasp the differences in individual disease areas and to develop core competence-based diversification strategy.
To reveal how MPCs in Taiwan respond to these challenges, we attempt to explore the growth trajectory of the top ten MPCs in Taiwan, with a special emphasis on the linkage between their competence leverage and business performance. Following are the conclusions generated by this research:
1.Performance of the MPCs positively relate to the number of core technological areas. A high performing company continuously re-invests its core businesses through launching new drug, strengthen their marketing capability and strategic alliances with other pharmaceutical companies.
2.Operational performance of a MPC is positively correlated to its competitive channel and customer advantage. An excellent company usually has the ability to maintain or even create channel and customer dominance; oppositely a poor pharmaceutical company often loses its channel and customer advantage.
3.Launching new drug in the non-core area usually leads to higher risks, which including a slow and unpredictable market introduction as well as low return on investment. Therefore, non-core technology often cannot bring in immediate and significant revenue growth for MPCs. In addition to core technology, finding the right leverage with core channel or customer may help to reduce risk.
4.A successful MPC with sustainable growth not only continuously strengthens its core competencies, but also develops new competence which could potentially contribute to future growth.
5.It is challenging for MPCs to generate significant growth from the core where the market potential is limited.
Subjects
Multinational Pharmaceutical Company
Core Competency
Growth Trajectory
Type
thesis
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