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 - – wage bills are increasing, there is increasing trade war between United States & China, increasing energy prices, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption,
competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, 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 -
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.
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.
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.
Organizational Resilience of Valeant Valeant's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Valeant Valeant's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Valeant Valeant's 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 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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Valeant Valeant's are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Valeant Valeant's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Valeant Valeant's has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
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.
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 -
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.
Increasing silos among functional specialists
– The organizational structure of Valeant Valeant's is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Valeant Valeant's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Valeant Valeant's to focus more on services rather than just following the product oriented approach.
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.
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.
Products dominated business model
– Even though Valeant Valeant's has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance should strive to include more intangible value offerings along with its core products and services.
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.
Slow to strategic competitive environment developments
– As Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance HBR case study mentions - Valeant Valeant's 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.
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.
Interest costs
– Compare to the competition, Valeant Valeant's 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.
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.
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.
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 -
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Valeant Valeant's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Valeant Valeant's is facing challenges because of the dominance of functional experts in the organization. Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance 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.
Developing new processes and practices
– Valeant Valeant's 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.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Valeant Valeant's can use these opportunities to build new business models that can help the communities that Valeant Valeant's operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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.
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.
Using analytics as competitive advantage
– Valeant Valeant's 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 Valeant Pharmaceuticals International, Inc.: Case (A) Incentive Compensation, Acquisitions, and Financial Performance - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Valeant Valeant's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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 -
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.
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.
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 .
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.
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.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Valeant Valeant's business can come under increasing regulations regarding data privacy, data security, etc.
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.
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 .
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.
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.
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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