Case Study Description of Roche Holding AG: Funding the Genentech Acquisition
This case examines the decision by the Swiss pharmaceutical Roche Holding AG (Roche) to offer a record $42 billion bond in February 2009. In light of a pending acquisition of U.S. biotechnology leader, Genentech, Roche management planned to sell $32 billion in bonds at various maturities from 1 year to 30 years and in three different currencies (U.S. dollar, euro, and British pound). In a context of substantial uncertainty in both world financial markets and the value of the Genentech deal, students are introduced to the pricing of corporate bonds by being invited to price Roche's bold global offering.
Authors :: Michael J. Schill, Brett Durick, Drew Chambers
Swot Analysis of "Roche Holding AG: Funding the Genentech Acquisition" written by Michael J. Schill, Brett Durick, Drew Chambers includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Roche Genentech facing as an external strategic factors. Some of the topics covered in Roche Holding AG: Funding the Genentech Acquisition case study are - Strategic Management Strategies, Financial markets, Health and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Roche Holding AG: Funding the Genentech Acquisition casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, geopolitical disruptions, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China,
increasing household debt because of falling income levels, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Roche Holding AG: Funding the Genentech Acquisition
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Roche Holding AG: Funding the Genentech Acquisition case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Roche Genentech, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Roche Genentech operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Roche Holding AG: Funding the Genentech Acquisition can be done for the following purposes –
1. Strategic planning using facts provided in Roche Holding AG: Funding the Genentech Acquisition case study
2. Improving business portfolio management of Roche Genentech
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Roche Genentech
Strengths Roche Holding AG: Funding the Genentech Acquisition | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Roche Genentech in Roche Holding AG: Funding the Genentech Acquisition Harvard Business Review case study are -
Diverse revenue streams
– Roche Genentech is present in almost all the verticals within the industry. This has provided firm in Roche Holding AG: Funding the Genentech Acquisition case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Learning organization
- Roche Genentech is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Roche Genentech is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Roche Holding AG: Funding the Genentech Acquisition Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Roche Genentech is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Michael J. Schill, Brett Durick, Drew Chambers can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Innovation driven organization
– Roche Genentech is one of the most innovative firm in sector. Manager in Roche Holding AG: Funding the Genentech Acquisition Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Finance & Accounting industry
– Roche Holding AG: Funding the Genentech Acquisition firm has clearly differentiated products in the market place. This has enabled Roche Genentech to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Roche Genentech to invest into research and development (R&D) and innovation.
Organizational Resilience of Roche Genentech
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Roche Genentech does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Roche Genentech has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Effective Research and Development (R&D)
– Roche Genentech has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Roche Holding AG: Funding the Genentech Acquisition - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Roche Genentech in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Roche Genentech has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Roche Genentech has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Strong track record of project management
– Roche Genentech is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Roche Genentech has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Roche Genentech to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Roche Holding AG: Funding the Genentech Acquisition | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Roche Holding AG: Funding the Genentech Acquisition are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Roche Holding AG: Funding the Genentech Acquisition, is just above the industry average. Roche Genentech needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Roche Holding AG: Funding the Genentech Acquisition, in the dynamic environment Roche Genentech has struggled to respond to the nimble upstart competition. Roche Genentech has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Roche Genentech has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Roche Genentech supply chain. Even after few cautionary changes mentioned in the HBR case study - Roche Holding AG: Funding the Genentech Acquisition, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Roche Genentech vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– After analyzing the HBR case study Roche Holding AG: Funding the Genentech Acquisition, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Workers concerns about automation
– As automation is fast increasing in the segment, Roche Genentech needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Roche Holding AG: Funding the Genentech Acquisition, it seems that the employees of Roche Genentech don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow to strategic competitive environment developments
– As Roche Holding AG: Funding the Genentech Acquisition HBR case study mentions - Roche Genentech takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High bargaining power of channel partners
– Because of the regulatory requirements, Michael J. Schill, Brett Durick, Drew Chambers suggests that, Roche Genentech is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Lack of clear differentiation of Roche Genentech products
– To increase the profitability and margins on the products, Roche Genentech needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Roche Genentech is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Roche Genentech needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Roche Genentech to focus more on services rather than just following the product oriented approach.
Opportunities Roche Holding AG: Funding the Genentech Acquisition | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Roche Holding AG: Funding the Genentech Acquisition are -
Developing new processes and practices
– Roche Genentech can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Roche Genentech can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Leveraging digital technologies
– Roche Genentech can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Buying journey improvements
– Roche Genentech can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Roche Holding AG: Funding the Genentech Acquisition suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Using analytics as competitive advantage
– Roche Genentech has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Roche Holding AG: Funding the Genentech Acquisition - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Roche Genentech to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Roche Genentech can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Roche Genentech is facing challenges because of the dominance of functional experts in the organization. Roche Holding AG: Funding the Genentech Acquisition case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Roche Genentech in the consumer business. Now Roche Genentech can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Roche Genentech has opened avenues for new revenue streams for the organization in the industry. This can help Roche Genentech to build a more holistic ecosystem as suggested in the Roche Holding AG: Funding the Genentech Acquisition case study. Roche Genentech can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Roche Genentech can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Roche Genentech can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Roche Genentech to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Roche Genentech to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Roche Genentech to increase its market reach. Roche Genentech will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Manufacturing automation
– Roche Genentech can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats Roche Holding AG: Funding the Genentech Acquisition External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Roche Holding AG: Funding the Genentech Acquisition are -
Environmental challenges
– Roche Genentech needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Roche Genentech can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Technology acceleration in Forth Industrial Revolution
– Roche Genentech has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Roche Genentech needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Roche Genentech in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing wage structure of Roche Genentech
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Roche Genentech.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Roche Genentech in the Finance & Accounting sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Roche Genentech is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Roche Genentech with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
High dependence on third party suppliers
– Roche Genentech high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Roche Genentech.
Consumer confidence and its impact on Roche Genentech demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Stagnating economy with rate increase
– Roche Genentech can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Roche Holding AG: Funding the Genentech Acquisition Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Roche Holding AG: Funding the Genentech Acquisition needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Roche Holding AG: Funding the Genentech Acquisition is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Roche Holding AG: Funding the Genentech Acquisition is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Roche Holding AG: Funding the Genentech Acquisition is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Roche Genentech needs to make to build a sustainable competitive advantage.
