Genentech marketing case study Unit

GENENTECH

Genentechmarketing case study

Unit

Executivesummary

GenentechInc is arguably one the leading inventors in the pharmaceuticalindustry and the leading biotechnology firm in the world. It employsover 12,000 people including more than 1,100 researchers. Thisemphasis on research as shown by the large number of researchersenables the firm to be supply side-oriented through research whichpowers innovation which is the source of competitive advantage forthe firm. Again, this approach differs from the demand-orientationapproach for used by majority of other industry players. The industrythough is highly competitive has strong barriers of entry attributedto the long FDA approval process. One of the key management andmarketing approaches that has enabled the firm to be successful inR&ampD is on reliance on recruiting top talents and creating a workenvironment that fosters creativity and innovation. This has beencritical in the value addition in the firm’s processes. The growingpopularity of generic medicine has decreased the market and revenuesfor the players. Politicians, health insurance firms and somehealthcare providers seem to increasingly favor generic medicine dueto their lower cost. It is thus recommended that the firm shouldexplore a demand-driven approach to rely on its strong brand name. Itis also recommended that in order to expand globally better, the firmshould split from Roche.

Analysis

Porter’sFive forces analysis

Marketentry barriers

  • Economies of scale- The industry requires a huge initial capital outlay to start up.

  • FDA licensing takes 10 years that can take a toll on a firm’s finances.

  • Relationships in the industry tend to lock out new players.

  • Major healthcare providers alongside pharmacies and other retailers serve as key distribution channels.

  • Strong financial backing that can withstand regulatory requirements and enforce patents.

Buyerbarging power

  • Buyers are fragmented into end users (patients), physicians who prescribe drugs, pharmacies that stock drugs, and hospital boards. Patients have little power are they have little knowledge on drugs and rely on prescriptions and health insurance cover.

  • Pharmacies and hospital capable of bulk purchases have immense power as they can switch suppliers and the switching cost is very low.

Supplierbargaining power

Asa seller of innovation and R&ampD, Genentech deals with smallerbiotech companies and has set various alliances and acquisitions tohandle their power. Consequently, suppliers have little bargainingpower.

Substitutes

Substitutiontakes in place in form of competition from other players withoperating in specific drug markets, generic drugs and herbalmedication

Rivalry

Theindustry is highly fragmented and highly competitive. Not one singleplayer controls more than 9% of the market share. Rivalry is based onquality over price thus players go for product differentiationthrough intensive branding, innovation, advertising and acquisitions.

PESTEL

Political

  • The biotechnology industry is subject to government regulation through laws and government agencies such as FDA.

  • Expansion into new markets will be largely influenced by political stability in those markets.

  • Federal government healthcare plans affect market access and movement of its products.

Economic

  • Fluctuations in the global economy.

  • Growing cost of labor.

  • Economic indicators such as inflation affect pricing of raw materials.

Socio-cultural

  • Growing popularity in herbal medication shrinks the market.

  • Fear of addiction from prescription drugs has seen a huge section of the market seek traditional options.

Technological

  • Rapid changes in technology require massive investment as technologies become obsolete rapidly.

  • Investment in R&ampD in technology allows the firm pioneer and first-mover advantage.

Environmental

  • The firm is subject to environment laws that regulate waste disposal.

  • Consumers are more interested in buying from organizations committed to the environment

  • Increased costs in instituting “green” processes.

Legal

  • Patent wars with competitors drain resources (Holman, 2010).

  • Legal recognition and popularity of generic drugs denies Genentech revenues.

SWOT

Strengths

  • Strong financial strength more so after acquisition by Roche.

  • Has a very strong reputation in various fields especially oncology.

  • Strong alliances with pharmaceutical firms and distributors.

  • Good reputation as an employer thus attracts top talents.

Weaknesses

  • Engages in specialized training as opposed to mass recruitment hence incurs huge. costs

  • Relationship with Roche prevents the firm’s expansion into Europe.

Opportunities

  • Growing prevalence and rising number of incidences of diseases present growth opportunities for the firm to develop new drugs.

  • Expansion into new global markets.

Threats

  • Given that the huge market entry barriers lock many newcomers, the greatest threat is from competitors such as Pfizer and Amgen.

  • Generic drugs are gaining increased political support thereby shrinking markets and profits in the industry.

Structureconduct performance

Themarket structure is that of perfect competition. The top 20 playersin the market control less than 60% of the market (Holman 2010). Toattain competitive advantage, the firm has adopted an accommodatingorganizational structure that is based on creating an informalworkplace environment that is guided by experts in the industry. Thefirm does not rely on mass marketing hence there is littledifferentiation in the various specific markets categorized by typesof diseases. The firm thus markets the products to physicians whoprescribe the drugs to patients. Collusion, though illegal, is commonin the industry and only last year Genentech was charged withcollusion in the Italy. The firm should thus seek a differentapproach that seeks to exemplify the benefits to bulk purchases(Phillippidis, 2014).

StrategicGroups

  • The firm has made strategic alliances with major academic institution in the US to offer Clinical Research Fellowship deserving learners.

  • Competitors in the industry have informally agreed to compete on quality over price as there are rare cases of competitive pricing.

  • Grouping with suppliers and distributors lowers costs and expands market.

CompetitiveAdvantage (CA)

Thefirm’s main source of CA is innovation driven by intensive R&ampD.This allows the firm to obtain numerous patents and enjoy pioneeringadvantage.

ValueChain

Genentechis supply side oriented through R&ampD and Technology. The firminvests in R&ampD to obtain patents. In technology, it recruits toptalents and establishes critical connections with the academic world.As employees it creates a dynamic environment that inspirescreativity and innovation.

MVV

Mission:to develop drugs to address significant unmet medical needs

Values:

Passion-use our drive and commitment to energize, engage and inspire others.

Courage-we are entrepreneurial and thus take risks, reach beyond boundariesand experiment.

Integrity-we are consistently open, honest, ethical and genuine.

Vision:Utilize the science of biotechnology to revolutionalize managingdiseases

Scenarios

Thefirm faces a huge threat from generic medicine that capitalizes onexpiry of patents. Furthermore the growing popularity of genericmedicine currently being sponsored by politicians in the US and inthe global scene serves to reduce the market share.

BusinessModels

Thefirm employs the focus business model. This allows the firm to targeta niche market of a certain medical condition whereby it can investin and attain competitive advantage.

Anothermodel applied is first mover advantage. By investing in research, thefirm develops new inventions that are protected by patents.

UpdatedResearch

Thefirm seeks to explore new niche markets by exploring seriousillnesses that have no cure. This way, the firm seeks to stay aheadin research. Currently, the firm is investing heavily in cancerresearch in light of growing incidences and deaths from cancerglobally.

PersonalExperience

Thefirm allows researchers’ personal space and freedom similar touniversity labs to inspire them to deliver. The firm clearly statesthat job seekers looking for a 9-5 job should seek elsewhere.

Creativity&amp Imagination

Thefirm has consistently sought to create an informal workplaceenvironment that inspires knowledge sharing, creativity andimagination from its employees.

IntellectualConnections

Thefirm allows its employees the time and space to conduct and publishresearch articles in peer reviewed journals. This empowers employeesand increases employee satisfaction.

Options

  1. The firm faces the option of marketing of pharmaceutical drugs following the steps of its competitor Pfizer. This follows the growing threat of generic drugs and the expiry of several of the firm’s patents. This will increase require the firm to venture into mass marketing taking advantage of expired patents from other competitors to widen its product portfolio.

  2. The second option the firm faces is expanding into the equipment manufacturing market especially in MRI and related technologies. One of Genentech greatest strength lies in its research in the provision of medication used in the management fo cancer. Based on past success in this industry, the firm should expand into equipment manufacturing more so in the MRI manufacturing process. Expansion into the industry will largely rely on the firm’s history, expertise and success in managing cancer and manufacturing drugs used in cancer management. Growth in this front is possible with a strong financial backing given that the firm has and experience and reputation in the industry. On the other hand, the firm can rely on horizontal integration through acquisition of firms already in the industry of manufacturing MRI machines and related equipments.

  3. The firm also faces the option of severing its association with Roche which for some legal reason has curtailed the expansion of the Genentech in foreign markets especially in Europe.

Recommendations

  1. The firm should venture into manufacturing of medical equipments. The fact that the current industry in which the firm operates in faces a huge threat in the form of generic medicine means that the market is rapidly shrinking. The best option for the firm is to expand its product portfolio. With the current reputation in the labor field, the firm can attract the best minds and talents in the field to help it move ahead in this field.

  2. The firm should intensify on organizing industry seminars and workshops to offer its researchers a platform to share their ideas. Such platform will offer resident researchers a larger platform through which they interact with professionals in the industry through sharing of knowledge.

  3. The firm should pursue new fields. The fact that the firm has relied on innovation as opposed to mass marketing means that the firm should indentify new niche markets. As it is, there are several medical conditions that are yet to obtain a cure. This includes cancer, HIV-AIDS amongst several others. It is therefore recommended that the firm should explore new drugs in this front. The recent case of an Ebola pandemic points to the need for industry players to address pressing problems in the field.

  4. The firm should intensify its expansion strategies which currently rely in acquisitions and joint venture. In the past, the firm has successfully managed to acquire a number of small players in the industry. This will enable the firm to address competition by way of increasing its market share and also increase its product portfolio.

References

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http://www.pharmaprojects.com/company_analysis/genentech-by-the-power-of-grey-cells.htm

“Genentech:Advantaged In the Middle.” Business and Medicine Report. Windhover.com Jan 200. p23

Holman(2010). Glaxo Fires Latest Shot in Patent Battle with Genentech overTherapeutic

MoleculeAntibodieshttp://holmansbiotechipblog.blogspot.com/2010/09/glaxo-fires-latest-shot-in-patent.html

Levinson,Arthur. “For Success, Focus your Strength.” Nature. 2008.Retrieved from

http://www.nature.com/bioent/2003/030101/full/nbt0598supp_45.html

McAfee,P. (2002). CompetitiveSolutions: The Strategist`s Toolkit,Princeton University

Press.

“OurAlliance Strategy.” Genentech.com Jun 27, 2004. Retrieved from

http://www.gene.com/gene/about/collaborations/

“PfizerPipeline: Our Medicine in Development as of Febuary 28, 2008”Retrieved from

http://www.pfizer.com/research/pipeline/research_pipeline.jsp#

Phillippidis,A. (2014).Novartis, Roche Fined $250M for Collusion in Italy.Retrieved from

http://www.genengnews.com/gen-news-highlights/novartis-roche-fined-250m-for-collusion-in-italy/81249580/

PRNewswire – Financial. Retrieved from

http://studio-5.financialcontent.com/prnews?Page=Quote&ampTicker=DNA

Scott,Brett. “Celgene, Genentech, Gilead: Is Biotech Weakness Creating aBuying

Opportunity”.05. Retrieved from

http://seekingalpha.com/article/40073-celgene-genentech-gilead-is-biotech-weaknesscreating-a-buying-opportunity

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