BBPS4103

STRATEGIC MANAGEMENT
SEPTEMBER2015

NAME:
IC NO:
MATRIC NO:

Bristol Meyers Squibb Company 2011

i.

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.

Vision Statement (proposed)

According to the case study, BMS does not publicly have available vision statement.
After detailed discussion and research, the researcher has decided to propose and
effective vision statement for BMS company that fits its image as one of the big dogs in
the pharmaceutical business.

iii.

Mission Statement (proposed)

We at Bristol-Myers Squibb pride ourselves with providing high-quality and innovative
medicines (2) for our customers (1). We globally (3) perform research to aid in the
finding of cures for serious ailments. We use the most advanced equipment (4) and
people to ensure the most promising product development (7). We keep our eyes open for
opportunities in acquiring new firms to expand our company and product base, in turn
securing and maximizing our shareholders wealth (5). We believe with power comes
great responsibility (6) and we are focused on educating in health concerns and
promoting awareness. We embrace a diverse workforce (9) with a inclusive culture in
which the health, professional development, safety, work-life balance, and respectful
treatment of our employees (8) are among our highest priorities.
1.
2.
3.
4.
5.
6.
7.
8.
9.

Customers
Products or services
Markets
Technology
Concern for survival, growth, and profitability
Philosophy
Self-concept
Concern for public image
Concern for employees

iv. Competitive Profile Matrix

v. EFE Matrix

vi.

Internal Audit
Strengths
1.
2.
3.
4.

BMY has 12 manufacturing plants worldwide and conducts R&D in 4 countries.

Inventory turnover of 4.1 versus industry average of 2.7.
BMY bought Amira Pharmaceuticals in 2011.
Produce a wide range of drugs to treat, HIV, Diabetes, Bi Polar Disorder among many

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

1. Plavix accounts for 31% of revenue.

2. Revenue isnt competitive enough to compete with R&D expenditures such as other
top companies like Pfizer and Merck.
3. Goodwill and intangibles account for over 50% of equity.
4. BMY is not in the top 10 of US based sales in 2010 for pharmaceutical companies.
5. Have not expanded into emerging markets well enough.

Financial Ratio Analysis

Growth Rate Percent
BMY
Sales (Qtr vs year ago qtr)
11.40
Net Income (YTD vs YTD)
NA
Net Income (Qtr vs year ago
2.30
qtr)
Sales (5-Year Annual Avg.)
0.93
Net Income (5-Year Annual
1.69
Avg.)
Dividends (5-Year Annual
2.87
Avg.)
Profit Margin Percent
Gross Margin
73.0
Pre-Tax Margin
32.5
Net Profit Margin
23.3
5Yr Gross Margin (5-Year
70.3
Avg.)
Liquidity Ratios
Debt/Equity Ratio
Current Ratio
Quick Ratio

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

Net Worth Analysis (in millions)

viii. IFE Matrix

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

1.Deliver new medicines regularly

2. Provide free medications to qualifying patients with financial problems in the
U.S.
3. Employ 44000 people all over world, strong global footprint

4. Corporate strategy with the acquisition of many other companies

5. String of new technologies, alliances has strengthened the brand
6. Co-development and co-commercialization agreements with companies have
boosted image
1.Strong dependence on working with third parties to improve and enhance
abilities
2. Substantial drop in sales for two key drugs: Plavix, a blood thinner, and
Pravachol, a cholesterol-lowering drug.
Weakness

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

3. Expand access to its products through strategic acquisitions & partnerships.

1. The company acquires biotech companies, technology and expertise and
hence a threat to its culture is infused ever more deeply.
2. Counterfeit drugs and product tampering, theft or diversion represent a
threat
3. Pricing pressures

Threats

x.

4. Global economic slowdown

SPACE Matrix

xi.

Grand Strategy Matrix

The Internal-External (IE) Matrix

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.

Add 2 new manufacturing plants in China for $200M.

Product generic versions of Lipitor and Zyprexa for $100M.
Increase R&D by $200M for the production of specialty drugs.
Add a division for the production of OTC drugs for $200M.

EPS/EBIT Analysis (in millions)

Amount Needed: $700
Stock Price: $32.77
Shares Outstanding: 1,690
Interest Rate: 5%
Tax Rate: 25%

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.