Sanofi Aventis is one of the largest pharmaceutical organizations with respect to annual sales figure and yearly profits. At the global scale, the company has been ranked at number five. Sanofi-Aventis has been widely known at the international level for the distinction of its R&D function and its mass marketed product solutions (Sanofi Aventis, 2012). There are seven divisions in which the operations of the company have been divided. The scale of operations of the company has been termed as huge and Sanofi Aventis is responsible for improving the lives of millions of consumers worldwide.
Sanofi-Aventis reported in 2011 to having spent 4.58 billion euros in research and development of new drugs in its annual report (Sanofi Aventis, 2012). Sanofi operates a strategic research site which carries all the steps of new product development ranging from drug discovery and development, to the testing of functional genomics and clinical trials. However, there have been significant job cuts in the R&D functions of Sanofi Aventis in recent years. Sanofi’s global operations focus on seven therapeutic areas:
The proposed research intends to carry out an analysis of the competitive positioning of Sanofi Aventis and to device strategic direction for the company. The objective of the analysis is to identify growth areas for Sanofi Aventis in the perspective of the seven divisions in which it operates and to resolve issues of low growth.
A number of strategic issues are faced by Sanofi Aventis which relate to sustainability of leadership of the organization at the global level in the perspective of the growing competition. In addition, patents on a number of star products of the company is about to expire during the year 2015-2018. This will create a significant reduction in the cashflows of the organization because consumers would be able to secure lower cost alternatives for those products. For this reason, it is necessary for the organization to continue to grow its product portfolio to make up for anticipated shortfall in the revenues.
No imminent product launch is in sight according to the current state of the product development at Sanofi Aventis. Sanofi had a workforce of 12,200 employees at the end of 2008 in Research and Development functions worldwide. A reorganization of the R & D group has resulted in a 22% decrease in the number of R & D between 2008 and 2011 (Darroch and Miles, 2011). 23 sites for Research and Development worldwide have been closed, including 8 in France. In addition, the organization needs to choose a strategic direction for the long-term sustainability of its business because resource allocation decisions are highly important for the organization which operates at such a huge scale as Sanofi Aventis (Fisher and Ronald, 2010). Sanofi Aventis needs to choose the business areas in which it needs to expand its business operations.
The validity and reliability of analysis of the proposed research depends on the data used for the analysis. The data for the report is entirely derived from secondary sources since it is not possible to collect primary data due to time and resource constraints. The data for the report is derived from industry reports and official website of Sanofi Aventis. Prominent data sources are listed below:
The suggested methodology for the research is secondary data analysis from credible sources and analyzes the data using theoretical models. Theoretical models used for analysis of secondary data are the one which relate to strategic management. The rationale for using secondary data analysis is to work within the time resource limitations. Also, it is not possible to collect primary data given the scope of the research. The consideration in utilization of secondary data is to use credible data sources, for instance, peer-reviewed journals, official website of the company, published financial statements of the company, industry reports, etc.
Since the form of the issues at Sanofi Aventis is strategic, the proposed theoretical frameworks and tools for analysis of the problem are also strategic. The two proposed key strategic tools which are considered highly appropriate for the analysis are discussed below:
BCG Matrix is a strategic analytical tool used in business strategy that can justify choices of resource allocation between different activities of a diversified company. Since, Sanofi Aventis’ business interests are highly diversified, BCG matrix is a highly appropriate tool for the task. This tool also has extensive use in marketing to evaluate the product portfolio of the company.
BCG matrix is used to position business interests of a company in two ways. The first dynamic is the relative market share of the organization compared to the market leader or with respect to number two in the market (if the company itself leader). BCG matrix allows classification of products according to their ability to generate cash, while taking into account the growth of the market, as well as their relative market share (Kolassa, Perkins and Siecker, 2002). The four matrices of BCG framework are:
: is the business segment which is characterized by high market growth, as well as, a considerably large market share of the firm. This relates to a strong need for investment of resources to continue growth of the business in the particular category
- Cash Cow
Figure 1 - BCG Matrix (self-drawn)
: is the business segment which is characterized by only a modest growth phase in the overall size of the industry while the market share of the company is fairly large. In majority of cases, the company is among the top three players in the industry. The strategy recommended by BCG model for such business segment is to make little new investment and to utilize financial flows from the business divisions to be reinvested in a growth oriented segment
- Question Marks
: are those industry segments which are characterized by very high growth in the overall size of the industry, yet the future growth of the individual firm is uncertain. This business segment may even be characterized by unprofitable operations and deficit in terms of financial flows. The recommended strategy according to the model for this category of business is to acquire a good competitive position
: the segment of the business of the conglomerate which very little potential for growth, with a small market share and does generate stable cash flows. Divestment is the recommended strategic alternative for such divisions.
McKinsey 7’S Framework
Figure 2 - McKinsey 7'S Framework (self-drawn)
The McKinsey 7S model is a strategic management tool which measures the quality of the services that a company provides. The seven S's factors are divided into seven categories, three of which are termed as 'hard' – strategy, structure and systems – and four are termed as "soft" – style, significant common values, key competencies and staff. The model recommends that the interrelationships between all organizational factors must be taken care of for an optimum performance of the organization. A successful organization will view these key factors as a sort of compasses with a view to effective integration (Lukkari and Parvinen, 2008). The seven fundamental factors of the framework are explained briefly below:
– The McKinsey 7S model places the component of ‘Shared Values’ right at the center of the model. The reason for the central position of this component is that it relates to the core concept of the business, its corporate identity and the vision which drives the business philosophy. .
– represents the actions and decisions of the management of the organization. The component of comprises of the stated goals and mission statement of the entire organization, and tactics and methods through which the organization plans to reach those objectives.
- pertains to the hierarchical structure of the organization and the reporting lines. Some organizations are strictly hierarchical in their reporting structure while and others are termed as flat with low distinction between hierarchical levels.
– of an organization includes all those formal and informal procedures and systems of communication with the internal, as well as, external stakeholders of the organization. The objective of these systems to facilitate decision making and functioning of different departments
– is the component of McKinsey 7S model which pertains to the the management methodology adopted within the organization. Whether a delegation approach to management is utilized or decision making is concentrated in the top management of the company.
– is another variable in the model which analyzes the profiles of the management of the company and the staff. These variables are important because they directly impact the organizational performance. The human resource structure of the organization which is used for recruitment, assessment and motivation of employees is also part of the staff component.
– are the core competencies of the organization, or those proficiencies in which the organization perform better than its competitors.
The research questions suggested for the research defines the scope and depth of analysis. Research questions are given as under:
Whether the Research and Development expenditure at Sanofi Aventis is at par with industry standards or not?
Does the internal processes and management methods at Sanofi Aventis supports its mission?
Which business divisions of Sanofi Aventis are in growth phase, and which of the business division are in maturity or declining stage of product lifecycle?
What is the proposed strategic direction for Sanofi Aventis given the changes in external environment and the internal resources and capabilities of Sanofi Aventis?
The proposed hypotheses for the research problem are given below:
The Research & Development spending at Sanofi Aventis is below the standards of pharmaceutical industry and lag behind other competitors.
The internal processes and management methods at Sanofi Aventis supports the mission of the organization
Cardiovascular and metabolic business division of Sanofi Aventis are in growth phase, while oncology, internal medicine and vaccine divisions are in maturity or decline stage of product lifecycle
: The proposed strategic direction for Sanofi Aventis is seeking collaboration with other pharmaceutical organizations
The anticipated outcome of the analysis is drafting a strategy for Sanofi Aventis which enables the organization so sustain and strengthen its leadership in pharmaceutical industry at the global level. Also, the business should be able to fulfill its mission and vision statements to realize the corporate goals it has set for itself.
The timescale for the research comprises of two weeks in which data is collected from credible and peer-reviewed sources. In case of quantitative data, the data is tabulated in a spreadsheet and statistical inference tools are applied to it, which will comprise of one week. Qualitative data will be analyzed according to theoretical framework which will take an additional five days of time. Two days will be required for creation of strategic alternatives and the course of action for the organization. At the end of the two weeks’ time, the complete report with analysis and recommended strategy will be completed.
Ethical considerations for the research comprises of concern for validity and reliability of data so that the inferences which are drawn from the research are justified. Also, adequate credit is given to the creators of information, when concepts and ideas are borrowed from an author.
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