Valeant Pharmaceuticals International, Inc.: Case (B) Corporate Crisis in 2015 and 2016 SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study SWOT Analysis Solution
Case Study Description of Valeant Pharmaceuticals International, Inc.: Case (B) Corporate Crisis in 2015 and 2016
Supplement to case HEC199. 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 (B) Corporate Crisis in 2015 and 2016" 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 (B) Corporate Crisis in 2015 and 2016 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 (B) Corporate Crisis in 2015 and 2016 casestudy better are - – increasing household debt because of falling income levels, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, technology disruption, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies,
customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Valeant Pharmaceuticals International, Inc.: Case (B) Corporate Crisis in 2015 and 2016
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 (B) Corporate Crisis in 2015 and 2016 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 (B) Corporate Crisis in 2015 and 2016 can be done for the following purposes –
1. Strategic planning using facts provided in Valeant Pharmaceuticals International, Inc.: Case (B) Corporate Crisis in 2015 and 2016 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 (B) Corporate Crisis in 2015 and 2016 | 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 (B) Corporate Crisis in 2015 and 2016 Harvard Business Review case study are -
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.
Sustainable margins compare to other players in Finance & Accounting industry
– Valeant Pharmaceuticals International, Inc.: Case (B) Corporate Crisis in 2015 and 2016 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.
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.
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 (B) Corporate Crisis in 2015 and 2016 Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Valeant Pharmaceuticals International, Inc.: Case (B) Corporate Crisis in 2015 and 2016 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 (B) Corporate Crisis in 2015 and 2016 - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Valeant Valeant's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Valeant Valeant's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Ability to lead change in Finance & Accounting field
– Valeant Valeant's is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Valeant Valeant's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
Weaknesses Valeant Pharmaceuticals International, Inc.: Case (B) Corporate Crisis in 2015 and 2016 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Valeant Pharmaceuticals International, Inc.: Case (B) Corporate Crisis in 2015 and 2016 are -
Lack of clear differentiation of Valeant Valeant's products
– To increase the profitability and margins on the products, Valeant Valeant's needs to provide more differentiated products than what it is currently offering in the marketplace.
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 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 (B) Corporate Crisis in 2015 and 2016, 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.
Slow to strategic competitive environment developments
– As Valeant Pharmaceuticals International, Inc.: Case (B) Corporate Crisis in 2015 and 2016 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.
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 (B) Corporate Crisis in 2015 and 2016 should strive to include more intangible value offerings along with its core products and services.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Valeant Pharmaceuticals International, Inc.: Case (B) Corporate Crisis in 2015 and 2016, it seems that the employees of Valeant Valeant's 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Yee-Ching Lilian Chan suggests that, Valeant Valeant's 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.
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.
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 (B) Corporate Crisis in 2015 and 2016 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Valeant Pharmaceuticals International, Inc.: Case (B) Corporate Crisis in 2015 and 2016 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.
Opportunities Valeant Pharmaceuticals International, Inc.: Case (B) Corporate Crisis in 2015 and 2016 | 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 (B) Corporate Crisis in 2015 and 2016 are -
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Valeant Valeant's 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 Valeant Valeant's to hire the very best people irrespective of their geographical location.
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 (B) Corporate Crisis in 2015 and 2016 - 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.
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. Valeant Valeant's 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. Valeant Valeant's 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.
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Valeant Valeant's to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
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.
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.
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 (B) Corporate Crisis in 2015 and 2016 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.
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.
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.
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 (B) Corporate Crisis in 2015 and 2016 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.
Threats Valeant Pharmaceuticals International, Inc.: Case (B) Corporate Crisis in 2015 and 2016 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 (B) Corporate Crisis in 2015 and 2016 are -
Consumer confidence and its impact on Valeant Valeant's 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.
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.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Valeant Valeant's will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing wage structure of Valeant Valeant's
– 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 Valeant Valeant's.
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 (B) Corporate Crisis in 2015 and 2016, 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.
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 (B) Corporate Crisis in 2015 and 2016 .
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.
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.
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.
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.
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.
Weighted SWOT Analysis of Valeant Pharmaceuticals International, Inc.: Case (B) Corporate Crisis in 2015 and 2016 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 (B) Corporate Crisis in 2015 and 2016 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 (B) Corporate Crisis in 2015 and 2016 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 (B) Corporate Crisis in 2015 and 2016 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 (B) Corporate Crisis in 2015 and 2016 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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