Case Study Description of Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance
From 2008 to 2015, Valeant Pharmaceuticals International Inc. (Valeant) was a Wall Street darling under the leadership of CEO Michael Pearson. The company's stock price soared as Pearson went on an acquisition spree. Critics questioned Valeant's capacity for organic growth and its lack of commitment to research and development (R&D). In October 2015, investors began losing confidence when Valeant was subpoenaed to testify before the U.S. Senate Committee about its price-gouging practice. On-going investigations by the U.S. House Committee and Attorney's Offices regarding Valeant's patient assistance program and business relationships with Philidor Rx Services also contributed to the company's downfall. In May 2016, Valeant hired Joseph Papa to replace Pearson as CEO. One of Papa's top priorities was to pay down the $30 billion debt amassed to finance the company's acquisitions. In Case (A), students learn about the company's executive incentive compensation philosophy, acquisitions, and governance practices and are asked to assess the financial impact of Valeant's acquisitions. In Case (B), students are asked to identify the factors driving Valeant's stock price down and to assess the company's ability to pay down its $30 billion debt.
Swot Analysis of "Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance" written by Yee-Ching Lilian Chan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Valeant Valeant's facing as an external strategic factors. Some of the topics covered in Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance case study are - Strategic Management Strategies, Ethics, Financial management, Health, International business, Mergers & acquisitions and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, technology disruption, wage bills are increasing, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization,
increasing transportation and logistics costs, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Valeant Valeant's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Valeant Valeant's 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 Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance can be done for the following purposes –
1. Strategic planning using facts provided in Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance case study
2. Improving business portfolio management of Valeant Valeant's
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 Valeant Valeant's
Strengths Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Valeant Valeant's in Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance Harvard Business Review case study are -
Ability to recruit top talent
– Valeant Valeant's is one of the leading recruiters in the industry. Managers in the Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Highly skilled collaborators
– Valeant Valeant's has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Valeant Valeant's is one of the most innovative firm in sector. Manager in Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Superior customer experience
– The customer experience strategy of Valeant Valeant's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Valeant Valeant's 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.
Successful track record of launching new products
– Valeant Valeant's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Valeant Valeant's 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.
Learning organization
- Valeant Valeant's 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 Valeant Valeant's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Valeant Valeant's 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 Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Valeant Valeant's is present in almost all the verticals within the industry. This has provided firm in Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance 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.
Low bargaining power of suppliers
– Suppliers of Valeant Valeant's in the sector have low bargaining power. Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Valeant Valeant's to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Finance & Accounting industry
– Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance firm has clearly differentiated products in the market place. This has enabled Valeant Valeant's to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Valeant Valeant's to invest into research and development (R&D) and innovation.
Weaknesses Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance are -
Low market penetration in new markets
– Outside its home market of Valeant Valeant's, firm in the HBR case study Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance, in the dynamic environment Valeant Valeant's has struggled to respond to the nimble upstart competition. Valeant Valeant's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 Valeant Valeant's supply chain. Even after few cautionary changes mentioned in the HBR case study - Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Valeant Valeant's vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the segment, Valeant Valeant's 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.
Skills based hiring
– The stress on hiring functional specialists at Valeant Valeant's has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance, 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.
Need for greater diversity
– Valeant Valeant's has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Capital Spending Reduction
– Even during the low interest decade, Valeant Valeant's has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Valeant Valeant's has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Valeant Valeant's 's lucrative customers.
Aligning sales with marketing
– It come across in the case study Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance can leverage the sales team experience to cultivate customer relationships as Valeant Valeant's is planning to shift buying processes online.
Opportunities Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance | 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 Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance are -
Creating value in data economy
– The success of analytics program of Valeant Valeant's has opened avenues for new revenue streams for the organization in the industry. This can help Valeant Valeant's to build a more holistic ecosystem as suggested in the Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance case study. Valeant Valeant's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Valeant Valeant's can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Valeant Valeant's to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Valeant Valeant's in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
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. Valeant Valeant's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Valeant Valeant's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Valeant Valeant's 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.
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 Valeant Valeant's in the consumer business. Now Valeant Valeant's can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Valeant Valeant's to increase its market reach. Valeant Valeant's 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.
Buying journey improvements
– Valeant Valeant's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance 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.
Building a culture of innovation
– managers at Valeant Valeant's can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Low interest rates
– Even though inflation is raising its head in most developed economies, Valeant Valeant's 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.
Manufacturing automation
– Valeant Valeant's 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 Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance are -
Technology acceleration in Forth Industrial Revolution
– Valeant Valeant's has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Valeant Valeant's 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Valeant Valeant's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Valeant Valeant's.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Valeant Valeant's needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Valeant Valeant's 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.
Environmental challenges
– Valeant Valeant's 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. Valeant Valeant's can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Valeant Valeant's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance, Valeant Valeant's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Shortening product life cycle
– it is one of the major threat that Valeant Valeant's is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Valeant Valeant's 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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Valeant Valeant's can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance .
Stagnating economy with rate increase
– Valeant Valeant's 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.
Weighted SWOT Analysis of Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance 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 Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance 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 Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance 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 Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance 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 Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance 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 Valeant Valeant's needs to make to build a sustainable competitive advantage.
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