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Contents
Contemporary drivers that changes present day businesses: Novartis ....................................................... 2 1.1 Introduction ........................................................................................................................................ 2 1.2 Background of Novartis International AG ........................................................................................... 2 1.3 Operation of Novartis in open system ................................................................................................ 3 2. Todays Driver of Change ........................................................................................................................... 4 2.1 SWOT Analysis Of Novartis ................................................................................................................. 4 2.2 Porters five forces model: .................................................................................................................. 6 3. Mitigate against negative forces of change/responding creativity against turbulent changes. .............. 8 Conclusion: .................................................................................................................................................... 9 References .................................................................................................................................................. 10

Contemporary drivers that changes present day businesses: Novartis

1.1 Introduction: This assignment is done only to serve the academic purpose. As a student
of London School of Business & Law, I Md Nurun Nabi has been assigned this paper as a requirement for the program BA Hons in Business Administration Yr. at UCLan. This assignment has been conducted under the supervision of B. Marong (BM) for the module contemporary issues in business. After complete acknowledgement from the assessor, I have decided to consider Novartis International AG as an exemplary organization. With reference to the objective of the assignment I have focused on the innovative strategies used by Novartis International AG is a Swiss multinational pharmaceutical company based in Basel, Switzerland, which ranks number two in sales (46.806 billion US$) among the world-wide industry in 2010.

1.2 Background of Novartis International AG

Novartis was created in 1996 from the merger of Ciba-Geigy and Sandoz Laboratories, both Swiss companies with long histories. Ciba-Geigy was formed in 1970 by the merger of J. R. Geigy Ltd (founded in Basel in 1758) and CIBA (founded in Basel in 1859). Combining the histories of the merger partners, the company's effective history spans 250 years, a summary of which is show below

Currently Novartis AG is a Swiss publicly traded holding company that operates through the Novartis Group; Novartis AG and all the companies worldwide belonging to the Novartis Group. The businesses of Novartis are divided into six operating divisions: Pharmaceuticals, Alcon (eye care), Vaccines and Diagnostics, Sandoz (generics), Consumer (divided into two divisions: Overthe-Counter and Animal Health). Novartis which operates directly and through dozens of subsidiaries in many countries around the world, each of which fall under one of the divisions, and that Novartis categorizes as fulfilling one or more of the following functions: "Holding/Finance: the entity is a holding company and/or performs finance functions for the Group; Sales: the entity performs sales and marketing activities for the Group; Production: the entity performs manufacturing and/or production activities for the Group; and Research: the entity performs research and development activities for the Group." Presently Novartis Corporation handles administration, sales, and marketing for a vast product line of prescription drugs, vaccines, consumer medicines, and veterinary products. Moreover they oversee the Novartis Institutes for Biomedical Research and charged with the job of discovering new medicines to add to the company's ever-expanding pipeline. Hence to remain competitive and

1.3 Operation of Novartis in open system

Novartis AG is an organization which is heavily reliant on innovation and research oriented sector. It primarily deals with medicinal product and hence the very nature of it requires the company to operate in a open system where the company interacts with environment, by receiving inputs from and delivering outputs to the outside. The organization possesses permeable boundaries that permit interaction across its boundary, through which new information or ideas are readily absorbed, permitting the incorporation and diffusion of viable, new ideas. With several research lab and the final product which deals with curing diseases to pesticide a relentless need to interact with the environment is of utmost importance.

2. Todays Driver of Change

Novartis strategy is based on focused diversification. Our uniquely broad business portfolio focuses on science-based healthcare sectors that are growing, reward innovation and improve the lives of patients. Innovation is core to their business. In 2012, the company invested $9.1 billion (USD) across our divisions in R&D and we plan to sustain our high level of investment. Novartis is consistently rated as having one of the industrys most respected pharmaceutical development pipelines with 144 projects in pharmaceutical clinical development. Novartis has a long-established track record of leadership in pharmaceutical research. They have also leveraged this core R&D competence across other divisions, sharing research findings and knowledge throughout our organization.

2.1 SWOT Analysis Of Novartis

Strengths: An inner strength which is often observed for Novartis is its strong research and development capability with a highly productive product pipeline that generates safe and effective medicines for patients of all income groups. This pipeline is one of the strongest in the industry and has generated in the past highest approval numbers. Furthermore Novartis has created over the years an attractive healthcare product portfolio which is much diversified. Its portfolio covers patent protect-pharmaceuticals, generic pharmaceuticals, vaccines and consumer health. After the acquisition of Alcon, a new part of the portfolio is created in the area of eye care. This made Novartis a global market leader in this product segment. The company also recognized the development in emerging markets early on and is already heavily engaged in these markets. since the emerging markets will be the market of the future. Novartis also has very dedicated employees who are highly competent in the fields of research and development and sales and marketing. This is also proven by the high market share which is over 5% of global pharmaceutical sales. In terms of market share Novartis is among the top five companies together with Pfizer and GlaxoSmithKline. They are also concerned about continuous improvement of its operations in order to avoid contentment. Finally, it can be noted that Novartis has achieved an impressive brand image and reputation around the globe.

Weaknesses: Even though Novartis is a successful pharmaceutical company, it also has to deal with certain weaknesses. One weakness is the fact that the company is vulnerable to exchange rate of currencies because it operates globally and is doing business in many countries. Even though the company is trying to hedge this risk, currency fluctuation can have significant impact on its operation. Another weakness in the past has been the companys mediocre share performance despite strong end year results. Even though share price decreased in 2012-13, probably due to the global economy downturn and financial crisis in several countries, investors are not confident in investing for pharmaceutical companies. Hence Low share price can often pose as a threat of external takeover of the company. Opportunities: In regards to the external environment, there are a number of aspects that might influence Novartis positively to acquire new opportunities. One such is changing is the demographics and lifestyle of the global citizen. As the total population of the world is growing and there is an increasing number of aging populations, this indicates that the circle of potential patients will require medicines by Novartis. Furthermore, the deteriorating human lifestyle of less physical activity combined with an unhealthy diet is increasingly leading to more people having problems with diabetes or cardiovascular diseases. These people will require effective and advanced medication hence more potential consumer of medicines. The growing economic wealth of countries in emerging markets will present opportunities for Novartis because these countries will be able to afford high quality medical treatment and medicines & at the same time the overall global economic situation is hinting to stabilize and might eventually improve in the coming years leading to global economic recovery. Even though medicinal products are somewhat more independent of economic condition unlike other industries, but global economic growth will certainly add positive impulses. Further opportunities can be derived from advances in new technologies that will enable Novartis to develop new medicines more cost effectively. Moreover the company will be able to develop new drugs that have not been possible up until today. Lastly opportunities may lie in acquisitions or strategic alliances in order to gain access to new technologies, markets or to benefit from shared cost burden in research and development.

Threats: External threats that Novartis has to face are increasing stringent regulations that the company has to comply with developing new drugs, which makes it even more expensive and time consuming, possibly leading to lowered number of drugs being approved. Furthermore, pharmaceutical companies including Novartis will face increasing pressure in the future from governments around the world to lower drug prices and increase availability to patients. This might have significant effect on profit margin & overall sales quantity, hence making it difficult for Novartis to recover the investments in development of drugs. Illegal copies of drugs in emerging markets, generics competition and better drugs developed by competitors are also possible threats that need to be monitored. Furthermore, the number of lawsuit and legal litigation has also increased over the past possibly leading to a greater loss in brand image than the cost of legal procedures especially for drugs which might have unwanted side effects.

2.2 Porters five forces model:

This model assists in understanding the competitive environment of a company which can have various implications. The goal of the Five Forces Analysis is to investigate how a company can develop opportunities in its environment while protecting itself against market competition as well as other threats. These parameters are: Bargaining power of suppliers Threats of potential new entrants Bargaining power of buyers Threats of substitute products Rivalry among existing firms

In the following these five key parameters are explained with regard to the pharmaceutical company like Novartis AG

Bargaining Power of Suppliers: Novartis is a very large corporation with operations worldwide which also enables the company to source necessary suppliers from different parts of the world. Furthermore, the necessary ingredients for drugs are largely of found in nature where the real competence lies in the exact chemical composition. All due to these reasons Novartis is estimated to have a very good bargaining power over its suppliers. However, it should be noted that whenever a strategic cooperation is made with a supplier, dependence on this supplier eventually increases and thus the bargaining power of the supplier. Threat of New Entrants: The threat of potential new entrants in the pharmaceutical industry is estimated to be small, Primary reason being high initial costs, especially for research and development and the years of experience and trust that existing industry participants have on its customers is difficult to surpass. In the pharmaceutical industry it is important for companies to be perceived as reliable and trustworthy by patients and establishing such image requires a long time and a lot of financial expenditure. Bargaining power of buyers: Buyers in the pharmaceutical industry are considered to be governmental and public healthcare institutions of various types and majorly patients as end consumers. Bargaining power of patients is assessed to be low to medium because if a patient relies on a certain medicine that is even protected by a patent, bargaining power is relatively low. The only power the patient has is to express their opinion, in case they are dissatisfied with the product or the company. However this can affect the brand image of the particular company in the long run, on whom the allegation has been made. Governmental and public healthcare institutions have more negotiating power because of the size of their organization and sheer volume of their purchase. Especially governmental healthcare regulatory institutions put more pressure on pharmaceutical companies to lower prices and increase product safety and availability.

Substitute Products: The threat posed to Novartis and other industry peers based on substitution by other products is considerably low. First of all if substitution means product copies, patent laws protect new pharmaceutical products for extensive periods of time. Furthermore, enforcement of patent laws throughout the world has become more effective due to agreed treaties between many countries to protect intellectual property. Secondly, if substitution means to substitute one medicine for another from a rival company, problems can occur with patients tolerance. Some patients cannot tolerate other equal medicines due to various problems such as side effects, which make switching of products difficult or impossible. Rivalry among existing firms: The pharmaceutical industry has various fields of special expertise, such as pharmaceuticals, generics, vaccines or over-the-counter medicines that make it impossible to make an overall assessment of competition. In the vaccines and patent protected pharmaceuticals part of the industry competition is low to medium because products are much diversified. On the other hand competition in the generic pharmaceutical industry is very high and intense (Novartis,). In this segment of the industry competition is mostly based on prices because these products are considered commodities. Furthermore, efforts to shift more healthcare costs to patients further intensify competition based on price. In the over-the-counter medicines market, competition is also high but the organization focuses more on consumer brand acceptance and loyalty than on price.

3. Mitigate against negative forces of change/responding creativity against turbulent changes.

There is several aspects of changes that can affect a pharmaceuticals company like Novartis AG, mostly on its the fresh medicines which are invented after several years of experimentation. When medicines are made of expensive ingredients then the overall purpose of curing disease is blunt as few can afford to purchase such medicines and avail the treatment. So Novartis should always consider in coming up with products that are affordable yet effective.

There has been a growing tendency of Pharmaceuticals Company to produce medicines for niche markets, for example some companies has only been focusing on research to find medicine for cancer or similar diseases. However any company which wants to operate globally should produce differentiated products of common medicines so that it can attain a greater market share in emerging countries. Moreover when a new medicine is tested on animals and later to human beings, proper cautious measures should be taken by the company just in case there is irreparable damage to health. The company should make sure such tests are made abiding all the legislative procedure. Price war among competitors often tend to lower the quality of medicine being sold, which should strictly be avoided as a very sensitive issue of human health has been considered here. Many of the ingredients needed to produce medicine are widely available in developing nations and hence the company can look forward to those suppliers who will provide them with fair price. Moreover those small suppliers would be more encouraged to work and learn the business while working with Novartis. Laws and litigation are only imposed on companies which are absolutely required hence any company with clear intention to do business will be willing to abide by the law while supplying the medicines even with slightly added cost. Although companies could take adequate measures to reduce their cost in other departments of business (for e.g distributional cost) to remain competitive.

Conclusion:
Novartis is a company which thrives on innovation, in almost every aspect of his business operation. The company takes ideal steps to attain sustainable growth and expand its business venture efficiently. Moreover any recent advancement in pharmacology is quickly adopted by the company. Lastly the company's portfolio across key growth segments in healthcare provides Novartis a leading position in the respective market segments.

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References

1. Company History Novartis 2. Focused diversification - Novartis 2. Novartis ANNUAL REPORT 2012 3. Stock Price Fluctuation of Novartis AG - Bloomberg