The Philosophers Stone

Outline

1. DEFINE PROBLEMS:

• Uneasy internal environment

• Demoralized, pessimistic employees, aftermath of CEO suddenly resigning

• Employees loyal to the prior leadership

• Uncertainty about effect of new foreign CEO

• Trust issues (earning trust, Deepak has to prove himself), cultural issues (Avoiding social risks), language barrier, etc.

→ Recommendations:

• Employees: Show knowledge, experience, expertise, achievements of Deepak

• Training for Deepak: mandarin course & Social, cultural business practices of Chinese people
• New vision of company, leadership style, motivation amongst employees

• Losing competitiveness in industry

• AdNike has low market share

• Low commercial presence in China

• increasing competition (domestic & international)

• Competition on price in the chronic disease segments (strength area of AdNike)
• Counterfeit products
• Lack of innovation

• No new products in the pipeline

• Stagnating growth
• lack of forward thinking leadership in the existing company structure

→ Recommendations (Main problem here is innovation)

• For more innovation:

• High investment in Entrepreneurship (Role model: Johnson&Johnson)
• Pharmerging (Buying small but highly valuable, tech-skilled Biotech startups, since they have not enough resources for large scale)
• Look to universities, combine young chinese talents and experienced foreign scientists

• CFDA made new regulations that threaten core product

• Old existing core products are not positioned to meet new CFDA (Chinese Food & Drug Administration) regulations.
• →  Investments needed for product growth and to save the core products.

• Needed is investment in technology AND manufacturing
• → Such investments need board approval!

→ Recommendations:

• New investments:

• As AdNike is a Global company, adjust product requirements and quality next to chinese standards also to global standards, branded products are

• Competitive advantage compared to domestic competition that have non-tested products  by gaining more trust of clients (avoid scandals)
• Also argument for high investments in technology and manufacturing process

• Approval from board:

• Overcome short term vision (cultural characteristic), convince of long-term strategy

• External Uncertainty

• Regulations change constantly (weekly!)
• Long approval timelines for new products
• Lack of relationships to regulators & key players in government (especially as a foreign CEO)

• Bureaucracy: (Maze within a maze), expertise needed

• Corrupt officials (CFDA chief in 2007) create mistrust and uncertainty

• Anti-graft campaign leaves uncertainty how to react/ behave now

• Drug approval process is given, not problem per se, but: Distribution

• Relies on traditional distributors, "army" of sales representatives (huge costs!)

→ Recommendations:

• Establish relationship with government departments (not too close → see Alibaba)
• Process improvement of how information flows through the company, corporate entrepreneurship thought amongst employees (be flexible, adapt to changes)
• Assume that new chinese regulations are not stronger than global regulations, so less fear of surprises
• Strong chinese board of Lawyers, who know exactly what is allowed, grey zone, forbidden

• Make use of Greyzone, as bribery still embedded in culture, careful to not lose reputation

• Army of sales problem: Start from customer (Other end of value chain), instead of focus on doctors, let customer demand our products

• Marketing & branding
• Patient advocacy (new concept): Pharma world is changing, doctors are getting bombed from all sides with sales reps, new concept: instead of investing in sales representatives invest in relation with customer, (gives voice to patients, informing public, health care providers, insurances) → goes beyond focusing on one person

1. STRATEGIC ANALYSIS:

Value chain, Resources & capabilities, financial analysis)

• External: (too little information for full 5F)

• General environment: Pharma Industry China (Macro factors)

• Main Trends in industry
• News
• Political: Corruption
• Legal issues with regulations        

• Short Analysis of competition in pharmaceutical industry in China

• main players
• Substitutes

• Internal:

• Value chain:

• Consider drug approval process,
• Outbound logistics: Distribution chain of drugs (Relationships needed)
• Brand: Reputation as ethically correct and praised products by Ministry of Health
• 100 Years of experience (global network), 40 years in China
• Human capital: High investments were made in training (nurses, physicians)
• Social capital: Relations to important hospitals

• Sustainable resources of AdNike (Resource-based view see Table in Book)

1. OPTIONS / LIST OF RECOMMENDATIONS: (🡪 See 1))

• Weaknesses & strengths of each solution

• Can we afford it, enough capabilities etc.?
• Employees reaction to change?

• Culture changes?

• Does it match vision of AdNike?
• Other stakeholders reation / effect?

1. RECOMMENDATIONS BASED ON ANALYSIS:

• What needs to be done

• On business level:

• Cost leadership or differentiation?
• More entrepreneurial orientation within firm

• On corporate level:

• Related or unrelated diversification?

• M&A,
• alliances

• Why / how does it solve the problems in 1)?
• How to implement solution?