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STRATEGIC MANAGEMENT
SEPTEMBER2015
NAME:
IC NO:
MATRIC NO:
Case Abstract
Bristol Meyers Squibb (BMY) is a comprehensive strategic management case that
includes the companys year-end 2010 financial statements, organizational chart,
competitor information and more. The case time setting is the year 2011. Sufficient
internal and external data are provided to enable students to evaluate current strategies
and recommend a three-year strategic plan for the company. Headquartered in New York,
New York, BMYs common stock is publicly traded under the ticker symbol BMY.
Headquartered in New York City, Bristol-Myers Squibb is a huge pharmaceutical firm
with such blockbuster cardiovascular drugs as Plavix and Avapro for hypertension. BMY
also produces antipsychotic medication Abilify and HIV treatments Reyataz and Sustiva.
BMY also has excellent products in immunoscience, metabolics, neuroscience, oncology,
and virology. BMY has 12 manufacturing plants worldwide and conducts research and
development in four countries, sells its products globally; the US accounts for two thirds
of BMYs sales. The case explained about Bristol-Myers Squibb (BMS), a global
biopharmaceutical company that discovers and delivers medicine and it has to face stiff
competition from competitors or risk going back out of the business due to several
reasons. The leading and largest product of BMS, Plavix which is use for treatment of
hypertension and diabetic, faces a patent expiration. It is very difficult for BMS to be on
par with the rest of its competitors in the industry due to the continuing rise of its R&D
costs apart from facing a rigid competition from generic drug makers
ii.
iii.
Customers
Products or services
Markets
Technology
Concern for survival, growth, and profitability
Philosophy
Self-concept
Concern for public image
Concern for employees
v. EFE Matrix
vi.
Internal Audit
Strengths
1.
2.
3.
4.
others.
5. Low debt to equity ratio of 0.34.
6. Plavix provides protection against heart attack and stroke accounts for $6 billion in
sales annually.
7. Many key drugs were approved in 2011 and many more are expected to be approved
in 2012.
Weaknesses
0.34
2.0
1.8
Profitability Ratios
Return On Equity
20.5
Return On Assets
15.2
Return On Capital
19.3
Return On Equity (5-Year
18.8
Avg.)
Return On Assets (5-Year 11.5
Industry
6.00
NA
S&P 500
14.50
NA
64.80
47.20
7.59
8.31
2.49
8.76
9.90
5.70
69.7
-28.9
15.6
39.8
18.2
13.2
71.2
39.8
1.03
0.8
0.7
1.00
1.3
0.9
30.0
8.8
11.4
26.0
8.9
11.8
22.9
23.8
10.3
8.0
Avg.)
Return On Capital (5-Year
Avg.)
Efficiency Ratios
Income/Employee
Revenue/Employee
Receivable Turnover
Inventory Turnover
15.3
13.8
10.8
180,407
774,111
10.1
4.1
90,604
652,532
5.6
2.7
126,905
1 Mil
15.4
12.5
ix.
SWOT
SO Strategies
1. Add 2 new manufacturing plants in China (S1, O1, O2).
2. Product generic versions of Lipitor and Zyprexa (S1, O3).
WO Strategies
1. Increase R&D by $200M for the production of specialty drugs (W1, W2, O2, O4).
2. Produce drugs losing their patents status in Japan and Europe (W4, O6).
ST Strategies
1. Initiate a $200M advertising campaign to market new drugs before they hit the
market (S7, T2).
2. Start production of generic OTC drugs (S1, T6).
WT Strategies
1. Add a division for the production of OTC drugs for $200M (W4, T6).
SWOT Analysis
Strength
3. Company layoffs and post retirement plans may affect employee relations.
1. Security technologies to make packaging and products less vulnerable to
counterfeiting and to secure their movement within the supply chain
2. An integrated team addresses counterfeiting, product tampering, theft and
diversion issues
Opportunity
Threats
x.
SPACE Matrix
xi.
Segment
US
Europe
Japan, Asia, Canada
Latin America, Middle East,
2010 Revenue
$12,613
$3,448
$1,651
$856
Africa
Emerging Markets
Other
$804
$112
QSPM
xii.
Recommendations
1.
2.
3.
4.
Epilogue
For Q3 of 2011, BMY reported a 2 percent increase in profit, as price increases and
higher sales of most key medicines were nearly offset by higher R&D and marketing
spending. BMSs net income in Q3 was $969 million, or 56 cents per share, up from
$949 million, or 55 cents per share, a year earlier, while the companys revenue rose 11
percent to $5.35 billion. The company did acknowledge though that two provisions of
the U.S. health care overhaul cut profit by about 4 cents a share in Q3. The two
provisions were: 1) an annual fee on pharmaceutical companies, and 2) new discounts
for Medicare patients who hit the prescription coverage gap. Despite these new laws,
BMY at Q3 2011 raised the low end of its full 2011 EPS forecast from $2.25 to $2.30 per
share.
As Q3 2011 ended, CEO Lambertville Andreotti told analysts that BMY made five
important deals recently that led to its second straight quarter with double-digit sales
growth, a rarity in this industry. In September 2011, BMS bought Amira Pharmaceuticals,
a developer of treatments for the fatal lung disease pulmonary fibrosis and other
disorders. During Q3, Bristol made deals with three other companies to develop new
drugs for cancer, diabetes and other diseases. BMY also secured a licensing deal to
develop a once-a-day HIV pill combining its Reyataz and a Gilead Sciences Inc. drug
now in testing.
The Food and Drug Administration (FDA) recently pushed back its review deadline until
January 2012 for a much-anticipated new type of diabetes drug. In July 2011, the FDA
advisers recommended against approving dapagliflozin, a drug developed by BMS and
partner AstraZeneca PLC. The ruling was due to higher rates of bladder and breast
cancer seen in patient testing. The Type 2 drug works by eliminating excess blood sugar
via urine.
For Q3 2011, BMYs U.S. sales totaled $3.5 billion; foreign sales hit $1.9 billion. Sales
were led by Plavix, the world's second-best-selling drug, up 8 percent to $1.79 billion.
Another BMY drug, Abilify, for schizophrenia and bipolar disorder, saw sales rise 14
percent to $691 million. HIV drugs Reyataz and Sustiva both increased about 5 percent,
for a total of $750 million. Yervoy, the first drug to improve survival in malignant
melanoma patients, had $121 million in sales in its second quarter on the market. But
during Q3, sales of blood pressure drugs Avapro and Avalide fell 29 percent, to $216
million. That's because they have generic competition in Canada, a rival's similar drug
has generic competition in many countries and one of the three dosage forms isn't
available since a recall a year ago.
During Q3, BMYs spending on marketing, sales and administration jumped 14 percent,
to $1 billion, partly because of costs to launch new products, including Yervoy. Research
and development costs increased 18 percent, to $973 million, mostly for expensive latestage human testing.
Conclusion
Growth in private healthcare sector is expected to continue as demand for medical healthcare is
increase, mainly due to an aging population and changing lifestyle. On the other hand, healthcare
tourism is fast developing sector in healthcare industry which have large market potential in
earning revenue, BMS, combining its groups strength in travel, leisure and hospital sectors,
should focus its strategy on capturing market share of this healthcare tourism, which is expected
to be a main growth driver for this industry.
Considering its strength and weakness compare with key players or competitors in the
industry, BMS should opted for the Blue Ocean business strategy by aims for niche market
which the key idea is specialization, invest in special medical equipments for special critical
diseases treatment where other hospitals cant offer locally.
BMS must continue deliver high quality of healthcare services responds to external and
internal challenges maximize the use of ICT in their operations and re-engineering organization
management is necessary to enhance and improve their competitiveness advantages and generate
greater revenue.