You are on page 1of 56

Executive Summary

Its starts in 1894 when cousins Charles Pfizer and Charles Erhart founded a
pharmaceutical company that has remained dedicated to developing and discovering new and
better ways to prevent and treat disease and improve health of wellbeing.
Pfizer, Inc., incorporated on June 02, 1942, is one of the worlds largest multinational
pharmaceutical company engaged in the discovery, development, manufacture, and marketing of
prescription drugs for humans and animals worldwide. It operates its business through three
segments, namely, Pharmaceuticals, Animal Health, and Corporate & Other. Pfizer is recognized
for its prescription and over-the-counter drugs. Some of its well-known products are Lipitor,
Viagra, Lyrica, Zeldox, and Aricept.
Despite the economic recession, Pfizer is still in a strong position to recover from
decreasing revenues. The market outlook seems to be positive based on opportunities available,
such as entry to biologics market, mergers/acquisitions, and strategic agreements, despite many
threats that the company will face over the coming years, such as loss of patent protection, global
pricing pressure, and increasing competition.
Pfizer has a major advantage in the pharmaceutical industry because of its global brand
recall, possibly increased by its continued acquisition of other pharmaceutical companies.
However, tougher competition may limit its market share growth. To counter this, the firm will
have to stop depending too much on their leading brand products, and explore emerging markets.

To recuperate from its decline in overall revenue, Pfizer must take advantage of available
opportunities, harness its strengths, mitigate its weakness, and avoid threats.
In 2009, Pfizer proposed the Acquisition of Wyeth, a company based in Madison, New
Jersey, for a cash and stock price of $68 billion. The acquisition would enable Pfizer to enter the
biologics market and would diversify Pfizers product offerings.
The acquisition would also enable Pfizer to get hold of Wyeths ongoing research and
increase the likelihood of producing successful products. It will also result to enhanced presence
in emerging markets, such as China, India, Brazil, Turkey, and Philippines.
This paper will present Pfizers company profile, external and internal analysis, strategy
formulation, implementation, and evaluation.

Table of Contents
I.

Introduction-Challenges and issues pertaining to company under study

II.

Vision/Mission Statements

III.

External Analysis

IV.

V.

VI.

A.

General Environment

B.

Industry Analysis

C.

Competitive Analysis

D.

Summary and conclusion

Internal Analysis
A.

Management

B.

Marketing

C.

Finance / Accounting

D.

Production / Operations

E.

Research and Development

F.

Management Information Systems

G.

Summary and conclusion

Strategy Formulation
A.

The Threats-Opportunities-Weaknesses-Strengths (TOWS) Matrix

B.

The Strategic Position and Action Evaluation (SPACE) Matrix

C.

The Boston Consulting Group (BCG) Matrix

D.

The Internal-External (IE) Matrix

E.

The Grand Strategy Matrix

F.

The Quantitative Strategic Planning (QSPM) Matrix

Strategic Objective and the Recommended Strategies


A.

Strategic and Financial Objectives

B.

Recommended Business and Organizational Strategies

C.

Financial Projections and Overall Evaluation of the Strategies Proposed

VII.

Action Plans and Departmental Programs

VIII.

Strategy Evaluation, Monitoring and Control


Appendices
Bibliography
3

I. Introduction
Recovering from the aftermath of the great recession, Pfizer must take actions to improve
its market presence and increase its revenues. However, this will not be without any challenges.
Competition is tougher. Regulatory authorities are becoming more stringent. Research is
unsuccessful. Pfizer needs to formulate and implement a suitable strategy to respond to these
challenges.
A. Company Profile
Pfizer Inc., the worlds largest research-based pharmaceutical company, discovers,
develops, manufactures and markets prescription medicines in 11 therapeutic areas including
oncology, cardiovascular, pain, neuroscience, and infectious diseases, including HIV/AIDS.
Pfizer is also the worlds largest animal health company. Pfizer is committed to applying science
and global resources to improve health and well-being at every stage of life.

Pfizer Inc. employs approximately 90,000 colleagues worldwide, all of whom are
devoted to working for a healthier world. Pfizer conducts more biomedical research than any
other organization, and has 12,000 professionals working in six major R&D sites worldwide,
including Sandwich in Kent. Pfizer offers a diversified product portfolio in three business
segments: (1) Pharmaceuticals; (2) Animal Health; and (3) Corporate & Other. The
Pharmaceuticals segment offers products for the treatment of cardiovascular diseases, central
nervous system disorders, arthritis and pain, infectious and respiratory diseases, urogenital
conditions, cancer, eye disease, endocrine disorders, and allergies, among others. The Animal
Health segment offers medicines for livestock and pets. The Corporate & Other segment
comprises of empty gelatin capsules, producing contracts, and bulk pharmaceutical chemicals. It
only constitutes 3% of Pfizers total sales.
4

In the companys global biopharmaceutical businesses, the company promotes its


products to healthcare providers and patients. Through its marketing organizations, the company
explains the approved uses, benefits, and risks of its products to healthcare providers, such as
doctors, nurse practitioners, physician assistants, pharmacists, and the managed care
organizations that provide insurance coverage, such as hospitals, integrated delivery systems,
pharmacy benefit managers, health plans, employers, and government agencies. The company
also markets directly to consumers in the U.S. through direct-to-consumer advertising that
communicates the approved uses, benefits, and risks of its products. The company serves
wholesalers, retailers, hospitals, clinics, government agencies, pharmacies, and individual
provider offices, as well as centers for disease control and prevention.

Pfizer, relative to its competitors, has distinct competitive advantages. Being in the
market for more than one and a half century, Pfizer had already established its name as a reliable
pharmaceutical company dedicated to help mankind in battling diseases that threaten our
existence. Moreover, Pfizer had also proved to be one of the leading, if not best, pharmaceutical
companies to develop new medicines. This had been possible because of Pfizers dedicated and
competent research and development teams and Pfizers access to needed resources. Pfizer also
had the opportunity to participate in collaborative research works enabling them to obtain
research data with promising potential.

In terms of market share, Pfizer serves the largest portion compared to its competitors.
Pfizer operates in 180 countries worldwide and focuses on emerging markets like China, India,
Philippines, Turkey, among others.

The companys revenues are primarily contributed by international operations. The


detailed information of revenues by segment and geographic is presented below:

The United States has historically been the industrys largest and most profitable market,
but now pharmaceutical companies are looking more and more to developing countries. Sales in
developing countries significantly increased in the past years. The acquisition of Wyeth will
prove advantageous to Pfizers dedication to develop in the emerging markets.
B. Paper Design and Methodology
The aim of this strategic management plan is to gather qualitative and quantitative data
that will lead to the formulation of a successful and feasible strategy for Pfizer, Inc. The
quantitative data were obtained from studying and analyzing the information presented in the
case. Additional information was also collected from Pfizers company website in the form of
financial statements, annual reports, newsletters, financial diagrams, among others. To ascertain
credibility of information, financial information about Pfizers performance was collected from
Bloomberg. Information about Pfizer, Inc.s operations, history, strategies, and other qualitative
data was obtained from news articles, company profile, and other reportorial statements of the
company obtained from credible internet sites.
6

The following tools and processes were used to analyze gathered data:
Framework

Tools

Activities

Output

EFE

Societal Environmental
Analysis

Opportunities and
Threats

STEP

Social, Cultural and


Demographic
Technological
Economic
Political, Government
and Legal
Porters 5 forces
Core Competencies

Matrices

EFE and CPM


IFE
ThreatsOpportunitiesWeaknessesStrengths (TOWS)
Matrix
Strategic Position
and Action
Evaluation
(SPACE) Matrix
Boston Consulting
Group (BCG)
Matrix
Internal-External
(IE) Matrix
Grand Strategy
Matrix
Quantitative
Strategic Planning
(QSPM) Matrix

Functional Areas of
Management
Financial Projections

Industry Analysis
Company Analysis

Strengths and
Weaknesses

Strategy
Formulation

Strategies

Prioritization of
Strategies

Prioritized Strategies

Strategy
Implementation
Strategy Evaluation
and Control

Programs
Control Standards

Balanced Scorecard

II. Vision and Mission Statements


A. Current Vision and Mission Statements
Vision
We dedicate ourselves to humanitys quest for longer, healthier, happier lives through
innovation in pharmaceutical, consumer, and animal health products.
Mission
We will become the worlds most valued company to patients, customers, colleagues,
investors, business partners, and the communities where we work and live.
B. Critiquing of the Current Vision and Mission Statements
The current vision statement of Pfizer answers what the company wants to become. It is
concise and well put together in a single sentence. On the other hand, the companys mission
statement does not articulate three essential components of a mission statement which are the
companys concern for employees, technology, and the concern for its survival, growth, and
profitability.
C. Recommendation of Revised Vision and Mission Statements
In line with the previous observations pointed out, we have decided to keep Pfizers
vision statement and to add a few words to its mission statement.
Vision
We dedicate ourselves to humanitys quest for longer, healthier, happier lives through
innovation in pharmaceutical, consumer, and animal health products.

Mission
Pfizers mission is to become the worlds most valued company to patients,
customers, colleagues, investors, business partners, and the communities where we work and
live. We will strive for a continuous improvement in our performance, profitability, financial
stability, technology, and measuring results carefully, ensuring that integrity and respect for
people are never compromised. We also believe that leaders empower those around them by
sharing knowledge and rewards in outstanding individual effort and therefore providing
opportunities for leadership at all levels in our organization.

D. Current Strategies of the Company


Horizontal Integration
Horizontal integration is a strategy seeking ownership or increased control over a
firms competitors. Pfizer is capitalizing on this tactic to keep its growth steady. It allows the
company to increase its economies of scale which provides a major competitive advantage
and enhances resource transfer. Acquiring a competitor is more likely to create efficiencies,
since Pfizer has not had a breakthrough since Viagra. The reason for this is the greater
potential for gaining the acquired companies researches, facilities, and market. With 80,250
employees and $97.13 billion in market capitalization, Pfizer is an organization that have
both the capital and human talent needed to successfully manage an expanded organization.
The procurement of Warner-Lambert and Pharmacia shows how Pfizer has the ability to
successfully manage its acquisitions.

Product development
This strategy seeks to increase sales by improving or modifying present products or
services. This is usually the strategy implemented with regards to pharmaceutical companies
because of the nature of this industry. Because of rapid technological developments, high
competition in the industry exists. High growth rate of product development is essential to
sustain Pfizer in the race. Since competitors like Novartis and Merck & Co. can create and
offer quality products at comparable prices, Pfizer uses product development to counter those
threats. Product development is also used by Pfizer to replace their currently successful
products that are nearing the expiration of their patent rights.
Market Development
Market development involves introducing present products or services into new
geographic areas. Pfizer is currently capitalizing on this strategy because it has the excess
production capacity, capital needed and human resources to manage expanded operations.
Since the markets are unsaturated in some areas it is easy for Pfizer to implement this kind of
strategy and also at the same time, the fact that the organizations basic industry is rapidly
becoming global in scope makes it even easier. Lastly, since Pfizer is obviously successful at
what it does, this is a big factor in the effectiveness of this strategy.
Currently, Pfizers international operations contributed $27.9 billion in revenues in
2008 as compared to the $20.4 billion generated in the United States. The double digit
decline in the U.S. sales of Pharmaceuticals has been offset by the double-digit growth in
international sales. One of the struggles that Pfizer currently facing on its international
operations is the multiple and diverse regulatory environments it contends with.

10

Global companies like Pfizer are subject to unexpected changes in revenues and
profits resulting from unpredictable currency fluctuations. Because of these problems,
Pfizers consolidated Balance Sheet shows that total assets shrunk from $113.84 billion in
2006 to $111.15 billion in 2008, and total liabilities increased from $43.38 billion in 2006 to
53.59 billion in 2008. Stockholders equity also fell 19.34 percent, from $71.36 billion in
2006 to $57.56 billion in 2008.
Pfizer is looking more and more to developing countries like Venezuela. Sales of
prescription drugs in developing markets increased to $152.7 billion in 2008, up from 76.2
billion in 2003. This number should reach $265 billion in 2013, according to IMS Health. In
addition to Venezuela, Pfizer is expanding rapidly into China, India, Brazil, Russia, and
Turkey. During the first quarter of 2009, Pfizers revenues from emerging markets were $1.4
billion, out of $10.8 billion total Pfizer revenues that quarter. Rather than focusing on
middle- and upper-class people, Pfizer and its rival firms are now also focusing on lowerclass people in emerging countries.

11

III. External Analysis


A. General Environment
1. Social, Cultural, and Demographic Environment (And economic)
The worlds pharmaceutical industry affects the society as a whole. It employs
millions of people directly, tens of millions indirectly. Its products have transformed
society, bringing undreamed-of levels of healing and continuous renewal of wellbeing,
changing the ways people live and work. The social value of the elevated sense of health
and cure that this industry brings involves the value of the people being able to live a
healthier lifestyle and that those on the brink of illnesses or even death can be nursed
back to health, among many others. There are, on the other hand, social issues to address.
One of those issues are the cultural differences. With other peoples beliefs differing with
modern treatment methods, there is a barrier stopping the pharmaceutical industry in
reaching more conservative countries.
In the context of Pfizer, the world is in continuous need of quality medicines and
healthcare products. Though the world contains varied audiences, it universally a fact that
most people would like to live longer or healthier. No matter what concept or religion
they believe, a community in need will always seek out the help of medicine.
2. Technological Environment
The level and diversity of technologies that the pharmaceutical industry must
deploy are increasing. To maintain a companys position in the industry, it must make a
number of discoveries in a span of a few years in between.

12

The key is to make advances and ensure that the market receives it well. Pfizer is
always on the edge; always on the verge of creating new products with the intent to help
the debilitating sickness that mankind succumbs to everyday. Due to the advent of new
technology, it will be easier to create quality products which would aid the continuous
search for immunity to diseases. The aid of technology has brought new hope to people
around the world who are down with sickness and disease.
The industry uses manufacturing technology that is the cutting edge of science.
Nowadays, energy is getting more and more scarce and expensive. In order to sustain the
companys production and operations, they must find a way to get a large supply of
energy. There are numerous additional near-term technological opportunities to adapt the
automobile to changing energy availability. The possibilities suggest that pharmaceutical
industry is unexpectedly robust and provides a powerful defense against energy
starvation even if the real price of energy climbs steadily during the next couple of
decades.
3. Economic Environment
With the Great Recession plaguing the United States, the pharmaceutical industry,
along with a great number of other industries, has suffered losses. Pfizer has sacrificed
and cut back its operations in a few places to ensure that the company has funds to
sustain the company. The troubled economy has slowed down drugs sales. More
unemployed people also means a drop in the number of insured Americans. In turn they
worry about costs and therefore cut their spending on health care. Due to this, more and
more people rely on over-the-counter or generic drugs. The latter are on the rise due to
the fact that a lot of patents for brand names have or are about to expire.
13

Consumers are also more aware of the possible side effects of drugs, especially
concerning medications for depression or other mental disorders. Pfizers investments in
different countries have contributed a lot to prevent the pharmaceutical giants ship from
sinking. Pfizers international operations contributed $27.9 billion in revenues in 2008 as
compared to the $20.4 billion generated in the United States. The double digit decline in
the U.S. sales of Pharmaceuticals has been offset by the double-digit growth in
international sales.
4. Political, Governmental, and Legal Environment
The government fights for the wellbeing of its constituents. It is only fair that
those that put the people at risk are held accountable. Pfizer has been a repeat offender in
illegal marketing of their products. The US government did not tolerate Pfizers slip up
and filed for a lawsuit which cost Pfizer 2.3 billion dollars. This has been the largest
criminal fine in the US history. Along with this, the US government will also supervise
the companys behavior in the next five years. This lawsuit, even if it has been only a
small blow on Pfizers earnings, was disparaging to its public image. Many citizens have
expressed that Pfizer has not been punished enough.
The company has promised to strengthen its internal controls and pioneer new
procedures to ensure that they not only comply with state and federal laws, but also meet
the high standards that patients, physicians, and the public expect.

14

B. Industry Analysis
1. Threat of New Entrants
Moderate to High - Companies such as Pfizer, Merck, Novartis and Bayer have
substantial engineering capabilities that are hard to replicate; their products are protected
by patents and have larger marketing budgets to protect their brand. Only legislations,
such as 1984 Waxman-Hatch Act, has made it easier for generic drug companies to enter
the market.
2. Rivalry Among Competitors
High - There are many players in the pharmaceutical industry that have revenues of over
$3 billion. The pharmaceutical industry is expected double its revenues in emerging
markets in the near future. Companies are finding ways to differentiate their products
from competitors. Limited patient numbers have also tightened the competition.
Companies are in a race to get their patents approved so that their drug reaches the
market first.
3. Threat of Substitutes
Moderate to High - Patents protect a companys products only for a certain number of
years. Once it expires, the products basic formula is open for the public to see. These are
when generic drugs pop out, the cheaper version that may be substituted with the
companys products. Another type of substitute may be herbal remedies which are
gaining popularity these days.
4. Bargaining Power of Suppliers
High With the pharmaceutical industrys nature, supplies are very important. Since
these supplies may be rare materials of chemicals, the companys production hangs in the
15

balance if or when suppliers suppress the supply. The patients who participate in trials
may also be considered as suppliers. These patients have the power to ask for more
compensation, demand supplement resources and not fully cooperate with the
experiment. This will have an effect on the companys ongoing researches.
5. Bargaining Power of Buyers
Moderate to high - Buyers can negotiate a price reduction or threaten to go to rival
companies or generics if their needs are not meet. If this happens, sales will decrease.
Hospitals and health care buy in bulk and ensure that pharmaceutical companies keep
prices in check.

6. Summary of Porters Five Forces of Competition

Potential Development of Substitute


Products
MODERATE - HIGH

Bargaining Power of
Suppliers

Rivalry among
Competing Firms

Bargaining Power of
Consumers

HIGH

HIGH

MODERATE - HIGH

Potential Entry of New Competitors


HIGH

16

C. Competitive Analysis
1. Profile of Competitors
Merck & Co. (MRK)
Merck & Co. (established in 1891) is an American pharmaceutical company with
headquarters located in Kenilworth, New Jersey. Merck is one of the world's largest
pharmaceutical company by market capitalization and revenue. Its products consist of
vaccines (BCG Vaccine, MMR II, and Rota Teq); prescription drugs (cardiovascular
disease, respiratory disease, oncology, neuroscience, infectious disease, immunology, and
women's health); animal health products (vaccines, anti-infection, anti-parasitic). Merck
uses different strategies to maintain their competitive advantages. These include mergers
and acquisitions, product development, market development, and partnerships.
Bayer AG
Bayer AG is a German multinational chemical and pharmaceutical company
headquartered in Leverkusen, Germany. It is well known for its original brand of aspirin.
Bayer's primary areas of business include Bayer HealthCare (hematology, cardiology,
oncology, anti-infective, contraceptives, and gynecological therapies); Bayer Crop
Science (high value seeds, crop protection solutions like fungicide, herbicide, insecticide,
seed treatment); Bayer Material Science (coatings, adhesive, polycarbonates, and
polyurethanes). The 150 year old company implements strategies like corporate social
responsibility, unrelated diversification, mergers and acquisitions, product development,
and market development.

17

Novartis AG
Novartis International AG is a Swiss multinational pharmaceutical company
based in Basel, Switzerland. It is Pfizers strongest competitor, ranking just below the
number one spot. It has several divisions that include Pharmaceutical (cardio metabolic,
respiratory, neurosciences, immunology, dermatology, oncology, and cell & gene
therapy); Alcon - Eye care (surgical products, ophthalmic pharmaceuticals, vision care);
Sandoz Generics and OTCs (cough, cold, respiratory, pain relief, digestive health,
smoking cessation, and supplements); Vaccines. Novartis, being the second largest
pharmaceutical company in the industry implements the following strategies: product
development, related diversification, and mergers & acquisitions.

18

2. Competitive Profile Matrix (CPM)

PFIZER
Critical Success
Factors
Advertising

MERCK &
Co.

NOVARTIS

BAYER

Weight Rating Score Rating Score Rating Score Rating Score


0.05

0.20

0.15

0.15

0.15

0.10

0.30

0.30

0.40

0.30

0.09

0.36

0.18

0.36

0.27

Store Locations

0.04

0.16

0.08

0.12

0.08

R&D

0.14

0.42

0.56

0.56

0.42

Employee
Dedication

0.09

0.27

0.18

0.36

0.27

Financial Profit

0.10

0.40

0.40

0.20

0.40

Customer
Loyalty

0.06

0.18

0.12

0.18

0.18

Market Share

0.10

0.40

0.30

0.20

0.20

Product Quality

0.09

0.27

0.27

0.27

0.27

Top Management

0.05

0.15

0.15

0.10

0.10

Price
Competitiveness

0.09

0.27

0.36

0.27

0.27

Totals

1.00

Market
Penetration
Customer
Service

3.38

3.05

3.17

2.91

The most important factor to being successful in the industry is the Research and
development as indicated by weight of 0.14. We can notice that Pfizer has the best market
advertising, customer service, store locations, financial profit and market share but they were
defeated in terms of research and development which we note as the most important factor.
Overall Pfizer is still the best among its competitors with a score of 3.38 and Novartis as its
strongest rival with 3.17 weighted score.

19

D. Summary and Conclusion


1. Summary of Key External Factors
Opportunities
1. Strategic agreements with other pharmaceutical companies and organizations to
boost its research.
2. Increasing awareness of people about their healthcare needs
3. Global penetration through mergers and acquisitions
4. Increasing demand for quality healthcare solutions
5. Restructuring strategy designed to cut costs and leaner company
6. Funding available to facilitate product/company
7. Acquisitions (Wyeth) and in-licensing/co-development opportunities
8. Expansion into biologics market
9. E-Commerce
10. High profits, revenues and funds are available to uplift the companys progress
Threats
1. Risk of unsuccessful new products
2. Regulatory environment is becoming more & more stringent
3. Economic slowdown in European markets
4. Increased market competitions
5. Losing of patent individuality by focusing on one product
6. Loss of patent protection of major products
7. Risk of Eisai terminating long-standing partnership
8. Outstanding competition of regional markets along with emerging markets of
India and China
9. Negatively publicized by being sued by their customers
10. Healthcare reform in the US affects revenue growth

20

2. External Factor Evaluation (EFE) Matrix


Opportunities
Strategic agreements with other pharmaceutical
companies and organizations to boost its research.
2. Increasing awareness about healthcare needs
3. Global penetration through mergers and acquisitions
4. Increasing demand for quality healthcare solutions
Restructuring strategy designed to cut costs and
5.
leaner company
6. Funding available to facilitate product/company
Acquisitions (Wyeth) and in-licensing/co7.
development opportunities
8. Expansion into biologics market
9. E-Commerce
High profits, revenues and funds are available to
10.
uplift the companys progress
1.

Threats
1.

Weight

Rating

Weighted
Score

0.09

0.27

0.06
0.07
0.07

3
4
3

0.18
0.28
0.21

0.03

0.09

0.02

0.06

0.07

0.28

0.05
0.03

3
2

0.15
0.06

0.04

0.16

Weight

Rating

Risk of unsuccessful new products


0.04
Regulatory environment is becoming more & more
2.
0.05
stringent
3. Economic slowdown in European markets
0.03
4. Increased market competitions
0.06
Losing of patent individuality by focusing on one
5.
0.08
product
6. Loss of patent protection of major products
0.07
7. Risk of Eisai terminating long-standing partnership
0.04
Outstanding competition of regional markets along
8.
0.03
with emerging markets of India and China
Negatively publicized by being sued by their
9.
0.04
customers
10. Healthcare reform in the US affects revenue growth
0.03
TOTALS
1.00
The table illustrated above shows that Pfizer got a total weighted

Weighted
Score
0.08

0.15

2
3

0.06
0.18

0.24

4
3

0.27
0.12

0.06

0.16

0.09
2.88
score of 2.88 for its

External Factor Evaluation (EFE) matrix, which shows an above average response to its existing
opportunities and threats in the industry. The current strategies that the company is using is
satisfactory, but these will need to be improved for Pfizer to keep the top position among its
competitors.
21

IV. Internal Analysis


A. Management
A company as large as Pfizer would never reach its prime without the semblance of any
structure. It is evident that the company uses strategic management concepts in every aspect. The
companys functional organizational structure helps delegate work and responsibility to its
divisions around the world. The only fault we can find with it is Mr. Jeff Kindler holding both
the positions of CEO and Chairman of the Board of Directors. To ensure that the companys
interests are put first, it is best to segregate these duties distribute the power.
Up to now, Pfizer employs and takes care of 80,250 people and their families. It provides
plenty of benefits and fitting wages to all of its employees. Since the company depends upon its
employees to ensure that their products are of great quality, they make sure that the employees
are well taken care of.
B. Marketing
Pfizers markets are segmented carefully to ensure profitability in different parts of the
world. It currently holds the top position in the pharmaceutical industry. The company is
interested in bagging emerging markets such as China, India, and parts of Africa. Since these
places have large populations, if Pfizer succeeds to capture these markets, it will bring a huge
increase in its earnings.
Pfizer is known to reach out to its consumers directly. Usually, it enlists doctors to help
market their products to patients. This method has earned the company the top spot in sales and
marketing. On the other hand, Pfizers TV advertisements are not very many, but the most
popular ones can be seen as those that do not talk about their products.

22

These popular TV ads reach consumers by reaching through their emotions. A great
example of this is the Be Brave commercial which emphasizes that it takes more than
medication to get well from any sickness. Pfizer wants its customers to see that their goal is not
to sell medicine, but to keep the world healthy.
C. Finance/Accounting
For the years 2006 to 2008, Pfizers assets decreased and its liabilities increased due to
the Great Recession that plagued the United States. Pfizer has discontinued a few of its
operations to pay off its debts and to sustain most of its operations. This is why its net income
has dropped from 19 billion in 2006 to 8 billion in 2008.
We have gathered data from Pfizers financial statements and determined its financial
ratios (See Appendix C). Its current ratios have dropped from 2.2 in 2006 to 1.6 in 2008. This
means that the companys ability to pay its current obligations have lessened. The debt-to-equity
ratios have climbed up from 0.1 in 2006 to 0.3 in 2008. We can deduce from here that the funds
provided by creditors have increased marginally from the funds provided by the shareholders.
This is parallel to the tremendous increase of 6 billion in the companys long term debt. Its return
on investment has decreased from 0.2 to 0.1. This means that after tax profits for every dollar of
asset has decreased. The return on the stockholders equity is in the same situation. The
tremendous decrease in net income influenced this drop.
The economy in the US has forced Pfizer to take different measures to keep the company
going. It has discontinued some operations to raise needed short-term capital and ensure that it
has enough working capital. Seeing that the company has managed to maintain a substantial
amount of net income, we can assume that its budgeting procedures have been effective.

23

With the stockholders and the investors support, Pfizer has gone through the recession,
though not exactly unscathed, well enough. Despite these difficulties, Pfizer still remained on top
compared to the others in the industry.
D. Production/Operations
The Great Recession has also impaired the Pfizers production. The company had to close
several facilities to keep up with the declining economy. This has hindered the company
operations, though not by much since the company only shut down those facilities which are too
costly but do not earn much.
E. Research and Development
Pfizer has several R&D state-of-the-art facilities located optimally around the world.
These facilities employ top-notch scientists and doctors known internationally. These 10
facilities are strategically located in optimal places. One might think that Pfizers R&D is very
extensive, but for a company with this size, it is hardly sufficient. In the pharmaceutical industry,
to maintain the top position, one must make a few breakthroughs in the course of a few years.
But Pfizer has not discovered a single drug since Viagra. The budget in R&D has not been very
hefty, considering the companys size, if compared with the R&D of other companies in the
industry.
F. Management Information System
Priss is Pfizers 600,000 project information and support system jointly developed with
Atlantic Global PLC has allowed the informatics department to stretch itself across the very
diverse range of demands that are placed on it.

24

Being able to see how those demands line up against each other has helped us to talk
about priorities in a way we would not have been able to before. This information system has
helped Pfizer consolidate with its previous acquisitions.
G. Summary and Conclusion
1. Summary of Key Internal Factors
Strengths
1. One of the largest pharmaceutical company in the world and spread over more than
50 countries
2. Excellent research and development (R&D) creating innovative and breakthrough
products
3. Mergers and acquisitions with big pharmaceutical companies increasing brand
reputation
4. Has over 100,000 employees as a part of the organization
5. Strong brand name and recall globally
6. Number one pharmaceutical from sales point of view and its marketing infrastructure
is well established throughout the world
7. Therapeutic coverage is very large and the innovative researchers are broadening it
further
8. Well established reputation for years on number of products
9. Wide range of area being worked, that includes human health, animal health,
customer health, and corporate groups
10. Involved in licensing agreements with different companies for collaborative research
work

25

Weaknesses
1. Tough competition from other major pharmaceutical brands means limited scope for
market share growth
2. Negative brand image due to involvement in largest healthcare fraud of marketing its
drug illegally
3. Very limited penetration of biologics market
4. Marketing with other companies and merging with other pharmaceuticals can halter
its global popularity
5. Overreliance on the mature market (U.S.) and a small number of distributors
6. Irrational drug policies such as bringing over 70 percent of the drugs under price
control
7. Inadequate infrastructure for fermentation-based drug remedies and effluent treatment
plants
8. Lack of or inadequate subsidies and fiscal incentives for the industry
9. Inadequate quality testing facilities for the regulatory authorities, which have more
administrative and less technical capabilities as a result
10. Limited emission rights

26

2. Internal Factor Evaluation (IFE) Matrix

Strengths
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

One of the largest pharmaceutical company in the world and spread over
more than 50 countries
Excellent research and development (R&D) creating innovative and
breakthrough products
Mergers and acquisitions with big pharmaceutical companies increasing
brand reputation
Has over 100,000 employees as a part of the organization
Strong brand name and recall globally
Number one pharmaceutical from sales point of view and its marketing
infrastructure is well established throughout the world
Therapeutic coverage is very large and the innovative researchers are
broadening it further
Well established reputation for years on number of products
Wide range of area being worked, that includes human health, animal health,
customer health, and corporate groups
Involved in licensing agreements with different companies for collaborative
research work
Weaknesses

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Tough competition from other major pharmaceutical brands means limited


scope for market share growth
Negative brand image due to involvement in largest healthcare fraud of
marketing its drug illegally
Very limited penetration of biologics market
Marketing with other companies and merging with other pharmaceuticals
can halter its global popularity
Overreliance on the mature market (U.S.) and a small number of distributors
Irrational drug policies such as bringing over 70 percent of the drugs under
price control
Inadequate infrastructure for fermentation-based drug remedies and effluent
treatment plants
Lack of or inadequate subsidies and fiscal incentives for the industry
Inadequate quality testing facilities for the regulatory authorities, which have
more administrative and less technical capabilities as a result
Limited emission rights
TOTALS

Weight

Rating

Weighted
Score

0.03

0.12

0.05

0.15

0.07

0.28

0.04
0.07

3
3

0.12
0.21

0.05

0.20

0.03

0.09

0.05

0.15

0.04

0.16

0.07

0.21

Weight

Rating

Weighted
Score

0.08

0.16

0.05

0.10

0.09

0.18

0.05

0.15

0.02

0.04

0.03

0.12

0.04

0.12

0.03

0.09

0.08

0.32

0.03
1.00

0.09
3.06

The table illustrated above shows that Pfizer got a total weighted score of 3.06 for its
Internal Factor Evaluation (EFE) matrix, which shows an above average response to its existing
Strengths and weaknesses inside the company. Pfizer tries its best to capitalize on its strengths
and eliminate its weaknesses.
27

V. Strategy Formulation
A. Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix
1. SO Strategies
It can use its reputation as one of the largest pharmaceutical company in the world to
gain strategic agreements with other companies such as Wyeth and other
organizations to boost its research (S1, O1)
It can use its fully integrated manufacturing facilities to expand into the biologics
market like vaccines, blood or blood components, allergenics, somatic cells, gene
therapies, tissues, recombinant therapeutic protein, and the living cells used in cell
therapy. (S10, O8)
It can use its marketing infrastructure to have a marketing agreements with the
industries leading companies in terms of marketing such as Sanofi and AstraZeneca
(S6 O10)
2. ST Strategies
It can use its excellent research and development (R&D) program to reduce the
threats or unsuccessful new products introductions (S2 T1)
It can use its strong mergers and acquisitions strategies against the industries leading
pharmaceutical companies such as Wyeth to abate the increasing market competition
(S3 T4)
Its strong brand name and recall globally can reduce the threats given by increasing
entries of private individuals (S5 T9)

28

3. WO Strategies
Use E-commerce to reduce reliance to US markets and small number of distributors
(W6 O8)
Marketing agreements with Wyeth or Sanofi to broaden the scope of market share
growth in the Northeastern and Mid-Atlantic regions of the United States (W1 O10)
Use excess funds to penetrate into the biologics market specifically vaccines and the
living cells used in cell therapy which is highly in demand in the African regions
specially in the Central and Northern Africa (W3 O6)
4. WT Strategies
Allocate further research efforts before new inductions in the market specifically into
the biologics market which requires keen and thorough studies (W6 T1)
Fund capital expenditures on infrastructures for fermentation-based drug remedies
and effluent treatment plants (W7 T1)
Provide added marketing efforts to regain an acceptable public image for previously
sued products through using different promotional tools like traditional media such as
TV, radio and newspaper advertising and product placement. (W1 T7)

29

B. Strategic Position and Action Evaluation (SPACE) Matrix

Financial Position

Stability Position

Return on Investment (ROI)

Rate of Inflation

-4

Leverage

Technological Changes

-3

Liquidity

Price Elasticity

-4

Working Capital

Competitive Pressure

-4

Cash Flow

Barriers to Entry into Market

-3

Financial Position (FP) Average

4.6

Competitive Position

Stability Position (SP) Average

-3.6

Industry Position

Market Share

-2

Growth Potential

Product Quality

-3

Financial Stability

Customer Loyalty

-2

Ease of Entry into Market

Technological Know-how
Control Over Suppliers and
Distributors

-4

Resource Utilization

-2

Profit Potential

Competitive Position (CP) Average

-2.6

Industry Position (IP) Average

4.0

These values that have been averaged for the Financial, Stability, Competitive, and
Industry Position will be used to compute for the coordinates. These coordinates are computed as
illustrated below:

X AXIS =

CP + IP

Y AXIS =

SP + FP

(-2.6) + 4

(-3.6) + 4.6

1.4

1.0

30

Integration Strategies
Market Penetration
Market Development
Diversification
Strategies

The Space matrix illustrated tells us that Pfizer should pursue an aggressive strategy
because it is financially strong in achieving competitive advantage in a growing and stable
industry. Pfizer should use integrative and intensive strategies. They can also use diversification
strategies to maintain its position should the first two fail. They can use their internal strengths to
take advantage of the opportunities, to overcome their weaknesses and avoid threats.

31

C. Boston Consulting Group (BCG) Matrix

US

International

The graph above illustrates the geographical divisions of Pfizer. It can be observed from
the information provided that the international division has greater sales volume and profit
compared to US division. Even with this given information, we cannot simply discount the
merits of the performance of the US division. If we look at it from a different perspective, the
international division covers the rest of the world, while the US division only covers 50 states.
We can safely say that Americans patronize Pfizer compared to any other country in the whole
world.

32

Pharmaceuticals

Animal Health

Corporate

In contrast with the previous graph, this illustration above give information on the
companys divisions by their products. It can be observed from this graph that Pharmaceutical
products are the stars of the company while its Animal Health and Corporate are its cash cows.
Pharmaceuticals, being the companys star, has a large market share and shows the greatest
potential for growth among other divisions. The other two segments, while having large market
shares, show low levels of growth. The pie slices within the circles also reveals the percent of
corporate profits contributed by each division. This shows that Pharmaceuticals contributed most
profits, with Animal Health in second, and Corporate bringing up the rear.

33

D. Internal-External (IE) Matrix

IFE 2.88
EFE 3.06

Pharmaceuticals

Grow and Build


Integration Strategies
Intensive Strategies

From matching Pfizers IFE of 2.88 and EFE of 3.06, the IE Matrix above shows that
Pfizer falls in cell number II. This which shows that the company should grow and build its
operations. Integrative and intensive strategies are the most appropriate strategies for this
sections.

34

E. Grand Strategy Matrix

Integration Strategies
Intensive Strategies
Related Diversification

Pfizer has high enough cash flows that even though there are direct and rising competitors,
it still grows. Because of its strong competitive position and rapid market growth, Pfizer can
employ integration and intensive strategies in order to boost its sales and market share, as well as
to fulfill its goal of becoming the leading biopharmaceutical company.

35

F. Quantitative Strategic Planning Matrix (QSPM)

Increase
R&D funds
to increase
probability
of
developing
new
products

Key Factors

Opportunities
1. Strategic agreements with other
pharmaceutical companies and orgs to
boost its research.
2. Increasing awareness about healthcare
needs
3. Global penetration through mergers
and acquisitions
4. Increasing demand for quality
healthcare solutions
5. Restructuring strategy designed to cut
costs and leaner company
6. Funding available to facilitate
product/company
7. Acquisitions (Wyeth) and inlicensing/co-development
opportunities
8. Expansion into biologics market
9. E-Commerce
10. High profits, revenues and funds are
available to uplift the company's
progress
Threats
1. Risk of unsuccessful new products
2. Regulatory environment is becoming
more & more stringent
3. Economic slowdown in European
markets
4. Increased market competitions
5. Losing of patent individuality by
focusing on one product
6. Loss of patent protection of major
products

Market
Developme
nt
specifically
on
Emerging
Markets
(China,
India)

Acquisition
of Wyeth

Weig
ht

AS

TAS

AS

TAS

AS

TAS

0.09

0.36

0.09

0.27

0.06

0.18

0.18

0.12

0.07

0.21

0.14

0.28

0.07

0.14

0.21

0.21

0.03

0.09

0.09

0.12

0.02

0.08

0.06

0.08

0.07

0.21

0.21

0.28

0.05
0.03

2
2

0.1
0.06

3
2

0.15
0.06

3
2

0.15
0.06

0.04

0.08

0.12

0.12

0.04

0.12

0.08

0.12

0.05

0.1

0.15

0.15

0.03

0.09

0.06

0.09

0.06

0.12

0.18

0.24

0.08

0.16

0.16

0.16

0.07

0.14

0.14

0.28
36

7. Risk of Eisai terminating longstanding partnership


8. Outstanding competition of regional
markets along with emerging markets
of India and China
9. Negatively publicized by being sued
by their customers
10. Healthcare reform in the US affects
revenue growth

0.04

0.12

0.12

0.16

0.03

0.09

0.12

0.09

0.04

0.08

0.12

0.08

0.03

0.09

0.09

0.09

1
Strengths
1. Largest pharmaceutical company in
the world and spread over more than
50 countries
2. Excellent R&D creating innovative
and breakthrough products
3. Mergers and acquisitions with big
pharmaceutical companies increasing
brand reputation
4. Has over 100,000 employees as a part
of the organization
5. Strong brand name and recall globally
6. Number one pharmaceutical from
sales point of view and its marketing
infrastructure is well established
throughout the world
7. Therapeutic coverage is very large
and the innovative researchers are
broadening it further
8. Well established reputation for years
on number of products
9. Wide range of area being worked, that
includes human health, animal health,
customer health, and corporate groups
10. Involved in licensing agreements with
different companies for collaborative
research work
Weaknesses
1. Tough competition from other major
pharmaceutical brands means limited
scope for market share growth
2. Negative brand image due to
involvement in largest healthcare
fraud of marketing its drug illegally
3. Very limited penetration of biologics
market

2.62

2.53

3.15

0.03

0.09

0.09

0.06

0.05

0.2

0.15

0.15

0.07

0.21

0.21

0.28

0.04

0.12

0.12

0.08

0.07

0.21

0.21

0.21

0.05

0.2

0.2

0.15

0.03

0.09

0.06

0.09

0.05

0.15

0.1

0.1

0.04

0.12

0.12

0.12

0.07

0.14

0.14

0.28

0.08

0.16

0.24

0.32

0.05

0.15

0.15

0.2

0.09

0.27

0.36

0.36
37

4. Marketing with other companies and


merging with other pharmaceuticals
can halter its global popularity
5. Overreliance on the mature market
(U.S.) and a small number of
distributors
6. Irrational drug policies such as
bringing over 70 percent of the drugs
under price control
7. Inadequate infrastructure for
fermentation-based drug remedies and
effluent treatment plants
8. Lack of or inadequate subsidies and
fiscal incentives for the industry
9. Inadequate quality testing facilities
for the regulatory authorities, which
have more administrative and less
technical capabilities as a result
10. Limited emission rights
TOTAL

0.05

0.05

0.15

0.2

0.02

0.04

0.02

0.06

0.03

0.06

0.06

0.09

0.04

0.08

0.08

0.12

0.03

0.09

0.03

0.06

0.08

0.24

0.16

0.24

0.03
1

0.09
2.76
5.38

0.06
2.71
5.24

0.09
3.26
6.41

From the previous matrices from the matching stage, namely the SWOT matrix, SPACE
matrix, BCG matrix, IE matrix and Grand Strategy Matrix, we came up with three alternative
strategies to help secure Pfizers position in the industry. These matrices all suggest having an
integrative strategies and intensive strategies. For the first one, we have an integrative strategy
which is the horizontal integration. Specifically, this is the acquisition of Wyeth. Secondly, we
have an intensive strategy which is product development. To specify, this strategy pushes for the
increase in the R&D funds to help develop new products. Lastly, we have another intensive
strategy, which is market development on emerging markets.

Based on the Total Attractiveness score of 6.41, acquiring Wyeth is the most preferred
and beneficial strategy that will maximize the use of its strengths, weaknesses, threats and
opportunities for Pfizer. This strategy will help cover the lack of breakthroughs currently, and
mitigates the impact of the recession and the expiration of the patents of its top selling products.
38

VI. Strategic Objective and the Recommended Strategies


A. Strategic and Financial Objectives
Financial Objectives
1. To reposition that no single drug will account for more than 10% of the company's
revenue.
2. To contain costs resulted from the patent expiration of its major products especially the
Lipitor which is the biggest contributor of the company's revenue.
3. To expand the revenue produced from the rest of the world.
4. To raise stock price and improve cash flows.
5. To reduce the costs and risk associated with time extensive process of R&D for
producing new drug.
Strategic Objectives
1. To soften the impact of the patent expiration of top selling products
2. To pursue emerging markets.
3. To cater to unmet medical needs.
4. To continue its extensive efforts in creating a huge impact in the international market
through its effective marketing strategies.
5. To formulate ways to strictly comply with the different regulatory hurdles that often leads
to litigation.
B. Recommended Business and Organizational Strategies
Strategy in Entering Emerging Markets
1. The acquisition of Wyeth allows Pfizer to an effective entry to emerging markets and can
be used to grow the existing business in new segments.

39

2. The most relevant emerging pharmaceutical markets where Pfizer should focus
investments are Brazil, Russia, India, China, Mexico, South Korea and Turkey. Together,
these markets are forecasted to grow at a compounded growth rate of 13-16% over the
next 5 years, compared to 4-7% for the overall market.
3. Chief among the market opportunities is China where private incomes are growing and
government announced a significant healthcare expansion plans.
R&D Product Development
1. Develop various medicines which caters to the therapeutic opportunities in the emerging
markets such as large pediatric populations, infectious diseases, respiratory diseases due
to high rate of smoking, and etc.
Marketing and Sales
1. Tailoring marketing to targeted customer segments maximizes returns. In particular it is
important to avoid pricing out mass markets.
2. Targeting promotions according to private, public, or mixed healthcare which will be an
essential part of sales strategies which will vary by country. Rather than hiring thousands
of sales representatives, they will have to employ specialists who can negotiate and talk
to qualified managers.
Regulation
1. Address additional emerging market security risks: security of data and manufacturing
supply chain, protection of company image and reputation, and protection of assets.
2. Tailored approach in formulating and implementing policies regarding regulatory hurdles
as larger companies often have varying regional regulations and segments.

40

C. Financial Projections and Overall Evaluation of the Strategies Proposed

Projected Income statements


Period
Total revenue
Cost of revenue
Gross Profit
Operating expenses:
Research and Development
Selling and general administrative
Non recurring
Others
Total operating expense
Operating Income or Loss
Income from Continuing Operations
Total Other Income/Expense Net
Earnings Before Interest and Taxes
Interest Expense
Income Before Tax
Income Tax Expense
Minority interest
Net income from Continuing Ops
Non-recurring Events:
Discontinued operations
Extraordinary items
Effects of Accounting Changes
Other Items
Net income from continuing ops
Preferred stock and other adjustments
Net income aplicable to common shares

2008
48,296,000.00
8,112,000.00
40,184,000.00

2009
82,096,000.00
26,912,000.00
55,184,000.00

2010
74,231,340.00
25,201,232.00
49,030,108.00

2011
72,013,208.00
23,093,034.00
48,920,174.00

7,945,000.00
14,537,000.00
3,308,000.00
2,668,000.00
28,458,000.00
11,726,000.00
-1,516,000.00
10,210,000.00
516,000.00
9,694,000.00
1,645,000.00
-23,000.00
8,026,000.00

10,328,500.00
20,351,800.00
2,900,000.00
3,090,800.00
36,671,100.00
18,512,900.00

10,431,785.00
18,316,620.00
2,023,012.00
2,400,783.00
33,172,200.00
15,857,908.00

12,518,142.00
18,316,620.00
1,098,343.00
1,093,433.00
33,026,538.00
15,893,636.00

1,390,900.00
19,903,800.00
1,314,981.00
18,588,819.00
2,950,105.00
-33,731.00
15,604,983.00

-1,463,534.00
14,394,374.00
1,070,406.00
13,323,968.00
2,114,556.32
-37,731.00
11,171,680.68

-1,453,453.00
14,440,183.00
890,670.00
13,549,513.00
2,150,351.03
-15,000.00
11,384,161.97

78,000.00
8,104,000.00
8,104,000.00

0.00
15,604,983.00
15,604,983.00

1,109,000.00
12,280,680.68
12,280,680.68

500,940.00
11,885,101.97
11,885,101.97

The projected income statement respectively for 2009, 2010, and 2011 with the last years actual 2008
income statement is based on the assumptions and projections:

In 2009, The Acquisition of Wyeth will increase the revenue of Pfizer by its product by 23 billion
dollars and additional 10.8 Billion dollars increase in revenue coming from the entrance to emerging
markets and will continue to increase by 10% each year.
The expiration of Lipitor and Aricept which contribute around 15 billion of its revenues will
decrease by 60% for additional generic products will come to the market on 2010. In addition, the
expiration of its patent Xalatan on 2011 will also decrease its revenues by half billion dollars.
Cost of revenue is increase by the acquisition and making of more products for Wyeth and the
emerging markets and will be base on the number of sales on the upcoming years being a variable
expense.
The Research and development cost will be increase by 30% in 2009 for utilizing of acquisition of
Wyeth, 1% in 2010 for reduction of cost and 20% in 2011 for the expiration of patent of Lipitor and
Aricept.
Selling and administrative expense will increase by 40% on 2009 for the acquisition of Wyeth but
should be decrease by 20% on 2010 and 2011 for the reduction of expenses in consideration of fall
down in revenues.
The interest expense is base on its current and projected Long term debt multiply by 3.5%
The income tax expense is base on its current and projected Income before tax multiply by 17%
The net Operating income will increase largely on 2009 through the acquisition of Wyeth but the
expiration of the patent of Lipitor and Aricept will decrease the revenue in 2010 and 2011 which will
41

be compensated by a reduction of expenses on various items that will make the Net Operating
Income stable for the year 2010 and 2011.

Projected Balance Sheets


Period
Assets
Current Assets
Cash and cash equivalent
Short Term Investments
Net recievables
Inventory
Other Current Assets
Total Current Assets
Long Term Investments
Property Plant and Equipment
Goodwill
Intangible Assets
Accumulated Amortization
Other Assets
Deferred Long Term Asset Charges
Total Assets
Liabilities
Current Liabilities
Accounts Payable
Short/ Current Long Term Debt
Other Current Liabilities
Total Current Liabilities
Long Term Debt
Other Liabilities
Deferred Long term Liability Charges
Minority Interest
Negative Goodwill
Total Liabilities
Stockholder's Equity
Misc. Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock
Retained Earnings
Treasury Stocks
Capital Surplus
Othe Stockholders' Equity
Totatl Stockholders' Equity
Total Liabilities and SE

2008

2009

2010

2011

2,122,000.00
22,433,000.00
13,992,000.00
4,529,000.00
43,076,000.00
11,478,000.00
13,287,000.00
21,464,000.00
17,721,000.00
4,122,000.00
111,148,000.00

2,023,023.00
29,342,200.00
23,909,734.00
11,590,456.00
66,865,413.00
21,908,808.00
29,456,372.00
29,009,402.00
28,003,427.00
9,034,394.00
184,277,816.00

2,343,432.00
31,023,232.00
20,984,125.00
12,803,045.00
67,153,834.00
22,984,343.00
35,093,443.00
30,100,232.00
20,940,393.00
10,329,324.00
186,601,569.00

2,042,984.00
30,930,304.00
21,032,043.00
11,908,303.00
65,913,634.00
24,093,283.00
36,098,343.00
30,203,940.00
22,904,930.00
8,930,334.00
188,144,464.00

6,233,000.00
9,320,000.00
11,456,000.00
27,009,000.00
14,531,000.00
8,909,000.00
2,959,000.00
184,000.00

9,157,125.00
12,094,043.00
16,764,000.00
38,015,168.00
37,031,000.00
9,606,900.00
5,647,394.00
207,000.00

7,094,939.00
11,032,343.00
14,093,203.00
32,220,485.00
30,143,560.00
10,232,343.00
8,034,834.00
213,233.00

6,233,000.00
10,904,323.00
13,090,940.00
30,228,263.00
25,089,303.00
10,000,100.00
7,003,022.00
300,000.00

53,592,000.00 90,507,462.00 80,844,455.00

72,620,688.00

73,000.00
443,000.00
49,142,000.00
-57,391,000.00
70,283,000.00
-4,994,000.00
57,556,000.00
111,148,000.00

110,000.00
750,000.00
71,909,323.00
-54,093,003.00
73,004,015.00
2,090,019.00
93,770,354.00
184,277,816.00

130,000.00
760,000.00
73,094,094.00
-46,309,303.00
79,085,023.00
-1,002,700.00
105,757,114.00
186,601,569.00

132,000.00
780,000.00
79,094,332.00
-45,873,922.00
82,425,289.00
-1,033,923.00
115,523,776.00
188,144,464.00

42

The projected balance sheet respectively for 2009, 2010, and 2011 with the last years actual 2008
balance sheet is based on the assumptions and projections:

The funding methods to be use in acquisition of Wyeth will composed of 22.5 billion from cash,
22.5 billion as part of equity and 23 billion as Pfizer stock for the price of 68 billion dollars, thus will
increase its debt and common stock on 2010.
Short Term and Long term investment will be increase by investing to it competitors in pursuing its
strategy to enter the emerging markets such as China, India, Brazil and Turkey.
Net Receivables, Inventory, and Property Plant and Equipment will increase due to the acquisition of
Wyeth as more products and manufacturing sites will now be owned by Pfizer.
The acquisition will arise to goodwill since the Fair market Value of Wyeth Net Asset is greater than
the cash price.
Intangible will be increase by additional patents and products of Wyeth.
The total asset will be increase by 73 Billion dollars coming from the Acquisition of Wyeth,
additional investments in emerging markets, goodwill and acquisition of additional assets and the
company aim to increase it by 2 billion dollar per year.

Current Ratio

Quick Ratio

3.0
2.0

2.2

2.7

2.1
1.6

1.8

2.1

2.0

1.0
2007

2008
0

1.9

2006

2007

1.4

1.5

1.7

2008

2009

2010

2.2

0.0
2006

1.9

1.0

0.0

3.0

2009
0

2010

2011

2011

With this projected balance sheet, Pfizer current ratio will also increase from 1.5 to 1.8 on 2009, 2.1
on 2010 and finally 2.7 on 2011.The current ratio is a liquidity ratio that measures the companys
ability to pay its short term obligations. In addition it will also increase its quick ratio from 1.4 to 2.2
on 2011.Quick ratio is also a liquidity measures but it uses only the most liquid assets of the
company excluding its inventories.
Pfizers liabilities will increase because Pfizer will assume Wyeths current liabilities and other
litigation expense but will pay this liabilities as soon as possible to decrease its liabilities back to
normal to have a good credit rating in Moodys and S&P.
Its Common stock is increase by the issuance in the acquisition of Wyeth and aims to limit the
issuance of stock by certain amount not exceeding 1 Billion dollar.
Its retained earnings is increase by the net income from 2009, 2010 and 2011
Overall, Pfizer aims to increase its assets and decrease its liabilities. It also aims to utilize the
acquisition of Wyeth in becoming the premiere biopharmaceutical company in the world and
increase its investment in emerging markets.

43

VII. Action Plans and Departmental Programs

Plan of action

Activity

Timetable

Person/Unit
Responsible

2 weeks

Accounting
Department,
Finance
department

Approved
Funding Mix that
will be used in
acquiring Wyeth

1 day

Accounting
Department,
Finance
department,
Board of
Directors

Contract of
Acquiring Wyeth

1 day

Executives of
Wyeth and
Pfizer

Expected Output

A. Combine the right


mix of funds such as
debt and issuance of
equity
Planning the
components of the
funds that will be
used in acquiring
Wyeth

B. Identify the pros


and cons of each
funding method
C. Vote and choose
from the proposed
funding mix that will
be used in acquiring
Wyeth

Planned Funding
Mix that will be
used in acquiring
Wyeth

A. Presentation of
Planned Funding
method for acquisition
of Wyeth

Presentation and
Approval of the
planned Funding
Method to the
board of directors

Meeting with
Wyeth Executives
for finalizing the
acquisition

B. Suggestions and
Recommendations
from the board of
directors
C. Revision of
planned funding
methods
D. Approval of the
Planned Funding
Method by the board
of directors
A. Finalize the terms
of agreement in the
contract
B. Propose the
approved budget
C. Sign the contract of
acquisition

44

Negotiating and
solving the
misapprehension
with Eisai
regarding the
Wyeth acquisition

A. Propose a new
agreement to Eisai
that will allow the
partnership to
continue even with the
acquisition of Wyeth
B. Pay the necessary
expenses for the new
agreement and terms
C. Sign the new
contract with Eisai to
carry on the
partnership
A. Become a leader in
biologics with the use
of Wyeths Enbrel
manufacturing
excellence and
pipeline

Utilizing the
benefit of
acquiring Wyeth

Pursuing and
entering the
emerging markets

B. Establishing a
lower and more
flexible cost base
using Wyeth to
promote long term
growth and stability

New contract with


Eisai for
continuing
Partnership

Increased income
generation of
Pfizer that will
contribute in
promoting the
long term growth
and stability of the
company

C. Increase the
breadth and depth of
portfolio for
established products
A. Enter the vaccines
market with the use of
Wyeths Prevnar
which has a strong late
stage pipeline
Increased income
generation of
B. Invest in acquiring Pfizer and
competitors in Brazil, increased market
Russia, India, Mexico, share around the
South Korea, and
world
Turkey

1 day

Executives of
Wyeth and
Pfizer

1 to 3
years

Research and
Development
Department,
Operations
Department,

1 to 5
years

Marketing
department,
Operations
Department,
tactical
Managers

C. Invest in ways to
penetrate the market
45

in China where private


incomes are growing
and its government
announced significant
healthcare expansion
plans.
A. Develop medicine
that caters to
therapeutic
opportunities in the
emerging markets

Focusing on
product
development
through using the
newly acquired
company - Wyeth

Improving
Marketing, Sales
and following
Legal Regulations

B. Invest more in
areas which augments
in line and pipeline
portfolios in
inflammation,
neuroscience,
oncology and
infectious diseases

Increased product
line for major
disease problems
around the world
to retain Pfizers
standing as
number the
primary care
company

C. Add Consumer and


Nutritionals
businesses and
strengthen Animal
Health Business
A. Settle the necessary
expenses (interest and
damages) from
litigations, which will
help the company
Decreased income
regain its good image for upcoming year
in the public
for the increase in
expenses but will
B. Increase
be compensated
advertisements in
by the increase of
emerging markets but sales which will
avoid exaggerated
also contribute to
advertisement
the good
reputation of the
C. Increase sales and company in the
income generating
upcoming years
products by promoting
and developing
additional products in
the market

1 to 5
years

Research and
Development
Department

5 years

Marketing
Department,
Sales
Department,
Operations
Department

46

A. Extend Global
health care leadership
in different countries
Making Pfizer the by increasing
corporate social
worlds Premiere
Biopharmaceutical responsibility projects
to the community
Company
B. Enhance the ability
to satisfy unmet needs
of patients, physicians
and other customers

Monitoring and
controlling of the
strategies

C. Strengthen
platforms for
improved, consistent
and stable earnings
growth
A. Matching the
expected results from
the achieved results
and taking necessary
actions

Maintained top
position in
primary care and
become the
Worlds Premiere
Biopharmaceutical
company

Evaluation and
Monitoring Paper

3 to 7
years

Annually

Top managers

Operating
Managers

47

VIII. Strategy Evaluation, Monitoring, and Control


Pfizers patent problem is shared by other big drug makers, like Merck, Bristol-Meyers
Squibb and Eli Lily, which will face major revenue losses in the next few years it certainly is
challenged. They are facing unprecedented patent expirations. Lipitor is simply the largest in
terms of loss of sales. But, as mentioned, all the major pharmaceutical companies are looking at
billions of dollars of lost revenue. What most of them are trying to do is fill those foregone sales
with new products that they bring in either by licensing from smaller companies or acquiring
smaller companies.
Based on the result of the QSPM that we have made, the acquisition of Wyeth Company
garnered the highest score. The Pfizer's acquisition of Wyeth makes strategic sense by expanding
the company into a range of new areas, and by helping make up for an expected loss of more
than $12 billion in annual revenues once its Lipitor patent expires in 2011. If Pfizer will not push
through into the acquisition, they would have been in deep trouble because they would have lost
one quarter of their revenue in two years from Lipitor. Moreover, Pfizer cannot develop a
product easily to replace their major product due to the costly and time extensive process of their
R&D for producing new drugs.
Wyeth brings both the products that are already on the market, and significant capability
in biologics that they have built up over the years. They were one of the first pharmaceutical
companies to move fairly aggressively into biologics. This is an area Pfizer has also invested in.
All the drug companies have moved in the direction of switching from chemistry-based
drugs to biologics. But Wyeth was one of the earliest, and they have done that both with their
main portfolio, but also with their vaccine division. That is a strength that they certainly will
bring to Pfizer.
48

One of Wyeths strengths is not just marketing biologicals, but manufacturing


biologicals. Many people can develop biologicals. But manufacturing these on a very large scale
consistently requires a lot of skill. And Wyeth's manufacturing capabilities in biologicals are
unmatched. Pfizer definitely needed that. To get into this business fast, you need the
manufacturing capabilities.
Pfizer can get new drugs. Pfizer has always been a very strong marketing company. They
have taken other peoples products to levels which other companies could not. For example,
Lipitor, had it been in the hands of Warner-Lambert, would have probably been a $5 billion
product. With Pfizer, it was $13 billion and will do the same thing with Wyeth products.
On the other hand, Pfizer and Wyeth are geographically reasonably closely situated and
having similar cultures. It is expected from them to move very quickly in trying to take out
unnecessary duplicated functions. Having said that, they have to make significant cuts, not just in
the traditional marketing area, but also in administration and even in R&D. So it will certainly
produce a much leaner company if they do go ahead with the sort of projected cuts as proposed.
Today, the combined revenues are about $70 billion. But two years down the road, $15 billion
will be gone. So one way or the other, they will have to reduce their expenses significantly and
there will be a lot of cuts on the marketing side also.
There are clearly difficulties in the acquisition, but also a lot of opportunities. Such as an
aging population, the rest of the world with incomes growing, and the European companies
becoming very strong in R&D. At the end of the day, if governments start evaluating products
for their innovativeness, the strong, large companies will have a better day because they can
afford to be more innovative. And they can afford to spend the monies.

49

Looking at the history, Pfizer has been able to historically do better with existing
products than other companies. So if Lipitor is an example, most probably Pfizer could take
Wyeth's products to new heights. If Pfizer can help take these products to market faster by being
a very strong marketing company, everyone could stand to gain, including the shareholders.
BALANCE SCORECARD

50

Appendices
Appendix A: Company Products
Cardiovascular and Metabolic Diseases
Lipitor
Norvasc
Chantix/champix
Caduet
Cardura
Central Nervous System Disorders
Lyrica
Geodon/Zeldox
Zoloft
Aricept
Neurontin
Xanax/ Xanax XR
Relpax
Arthritis and Pain
Celebrex

Infectious and Respiratory Diseases


Zyvox
Vfend
Zithromax/Zmax
Diflucan
Urology
Viagra
Detrol/Detrol LA
Oncology
Sutent
Camptosar
Aromasin
Endocrine Disorders
Genotropin
Zyrtec/Zyrtec D

Opthalmology
Xalatan

51

Appendix B: Organizational Structure

52

53

Appendix C: Financial Ratios

54

55

Bibliography
http://www.pfizer.com/
http:// youtube.com/ Pfizer
http://en.wikipedia.org/wiki/Pfizer
http://www.nytimes.com/2009/01/26/business/26drug.html?pagewanted=all&_r=0
http://www.scribd.com/doc/35918806/Pfizer-Wyeth-Case-Study#scribd
http://www.slideshare.net/AileenMarshall/business-report-on-pfizer
http://www.scribd.com/doc/31759261/Pfizer-Business-Report-Aileen-Marshall#scribd
http://ivythesis.typepad.com/term_paper_topics/2009/08/strategic-analysis-for-pfizerincorporated.html
http://www.businesswire.com/news/home/20091015005867/en/Pfizer-Completes- AcquisitionWyeth#.VRA3FuEwBUs
http://seekingalpha.com/article/976561-pfizer-company-is-still-cleaning-up-after-wyeth- megamerger

56