A case study Teva Pharmaceutical Industries, Ltd - Essay Example

A case study Teva Pharmaceutical Industries, Ltd. Summary and problems Israel was one of the largest consumer markets for the American products (Brinerman). With the international trade, Israel had the opportunity of making relationship with U.S. and European countries. The Teva Pharmaceutical was the first and the biggest company to enter into the U.S. and European markets to enhance their geographical reach for their marketing business. Teva was the world’s biggest producer of generic pharmaceuticals. Avoiding the traditional conglomerate model, Teva became the country’s largest public company and a true multinational company. It showed a high rate of increase in total revenue, from $91 million in 1985 to an estimated $8.5 billion in 2006 (Khanna, Palepu, Madras). Teva introduced lots of business development in their process and currently almost all developing countries, like, India, Japan, are using the same process. They also had gone through some difficulties earlier.  Teva has become one of the most widely known generic companies of the world. The company has become successful with the development of the business in the countries of USA. With the implementation of the Hatch-Waxman act in 1984, U.S. produced the world’s largest generics market. The act contained two important provisions. First, it introduced the abbreviated New Drug application (ANDA) process (Khanna, Palepu, AND Madras) which allowed generic drug to shortcut the lengthy drug approval process required by food and drug administration. Second, this act allowed generics companies to challenge innovative drugs long before patent expiration. The present revenue is $13.9 billion and the net income is $2.000 billion. Labour force is one of the main input for Teva and the current number of employees is 35,089. Comparing the cost structure for innovative and generic cost structure for the year 2005, the net sale was cent percent for the both but the gross profit was lower  for the generic with respect to the innovative. However, the rate of growth of total sales was higher for generic than the innovative. There was a positive correlation between gross profit and R&d expenses, SG & A expenses (Bank of America Securities). The revenue was gradually increasing til 2005 in U.S., Western Europe and rest of the world (Medical and healthcare marketplace guide). The annual sale of Teva is highest comparing with its all competitors. Teva has sold a large proportion of their total production in U.S.(Medical and healthcare marketplace guide). In number of employees and market capitals, Teva was maintaining the leading position. Comparing the strategic position with its competitors, we can say that there were considerable differences in case of total market share in U.S., growth in U.S., number of products in U.S. and also the FDA approvals (Medical and healthcare marketplace guide) in 2005. Teva maintained the leading position in all these strategic position as well as in the case of profitability. Revenue growth and net income growth is incomparably higher than its competitors are.        In 2005, Teva made a deal with highest value worth $ 7,367 million (Windhover’s strategic intelligence system ) which could not be compared with its previous deal values. As the acquired company, Ivax, was located in U.S., Teva got that opportunity to have such kind of highly valued deal. This acquisition with Ivax brought them in the top position in the list of generics. Comparing all pharmaceutical companies and only the generics in U.S., we can find that for both the cases the total participation, growth and share were at the leading position (IMS).  Analyzing Teva cost and output trend from 1998 to 2005, we can easily state that there is a positive correlation between the total production of tablets and the total number of employees, total production of cost and total cost of production. There was also a negative correlation between the total production and the cost per tablet.   The main problem of Teva has been the degeneration of the generics department. The other companies have been investing a substantial portion on the research and the development process. However, the company has not given much importance to the innovation department. The business development is another concern. To have a business development, there is a need of innovative newer ideas which can help to minimize the expected cost of production and maximize the total production and profit of the firm. For Teva, there were enough chances to have this type of development but there were lots of problems as well. The gradual increase of the production of the labor was a problem for Teva. Teva employed a huge number of workers and the cost of the workforce was huge. Moreover, the price of the components was increasing and the company had to sell the medicines at loss. This had a huge effect on the financials of the company. Business culture of the Israeli people Israel is dominated by the people of the Jewish origin. The people give special importance to the employees. There is a practice of forming unions in the companies of Israel. The management has the controlling power and takes all the important decisions. The management is authoritarian and the power is concentrated on a group of people. In the case of Teva, the problem was the whims of the management in not allowing the company to tread into the innovative drugs market. The cost of the labor was definitely a problem but it was not the main problem. The management took all the decisions of the company and never took suggestions from the employees. (Davidmann) Recommendations The main problem of the company has been the style of management. The management is authoritarian and takes all the major decisions. It is not open to the recommendations of the employees. The management has to change their stance and get involve in the participatory style of management. The management should look into the feedbacks of the employees. The relevance on one department has been a bane to Teva. The management should invest a substantial amount of money in the R & D process to make the innovation department work. This will help in developing the image of the company in the market. This will also mean that the pressure of performance will not be entirely on one department. The number of employees cannot be a problem for the company. In fact, the company has the option to make use of the employees in the business development process. The main sphere of operations of the company has been USA. The company can look into the other markets to increase the business. It can use the existing employees in the process. However, the main criteria for the development of the business will be the investment in the research and the development process. If the company makes forays into the innovation field, it will benefit and will be able to capture the other markets as well. The innovation will enhance the brand value of the firm and this will be a boon for the development of the business. This will mean that the company will be able to make forays into the newer markets seamlessly. The huge pool of employees can then be made into good use. The number of employees will not be a problem. In fact, it will be a big advantage for the company in the long run.       References  1. Brinerman, Joel. Israel, International business: strategies for the global marketplace, May/ June, 1998. Available at: http://web.ebsocohost.com (Accessed on 5th June, 2010) 2. Teva acquisitions from 1985 to 2005. Windnover’s strategic intelligence systems, Tnomson financial. 3. Teva total generics prescriptions. Teva, primary: IMS, June, 2006. 4. Innovative and generics cost structure comparison. Bank of America Securities, 2003. 5. Generics industry revenues. Medical and healthcare marketplace guide, 2004. 6. Hoovers, Competitor information. W.R. Hanbrecht, June, 2006. 7. Khanna, Tarun, Krishna Palepu, Claudine Madras. Teva Pharmaceutical Ondustries, Ltd. Harvard Business School. Available at: http://www.hbsp.harvard.edu.(Accessed on 5th June, 2010) 8. Windhover’s strategic intelligence system. 9. Davidmann, Manfred. Style of management and leadership. Available at: http://www.solhaam.org/articles/clm2.html (Accessed on 5th June, 2010)         Read More