Case Study Description of Valeant's Battle for Allergan
On April 21, 2014 two companies, Valeant Pharmaceuticals and Pershing Square, announced an unsolicited merger offer for Allergan Pharmaceuticals. The unsolicited offer quickly turned into a hostile acquisition. The following months saw a raging public debate over the future control of Allergan and its primary product, Botox, as well as the business strategies and philosophies of the two offering firms and their CEOs.
Swot Analysis of "Valeant's Battle for Allergan" written by Michael Moffett includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Allergan Unsolicited facing as an external strategic factors. Some of the topics covered in Valeant's Battle for Allergan case study are - Strategic Management Strategies, Mergers & acquisitions and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Valeant's Battle for Allergan casestudy better are - – increasing household debt because of falling income levels, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, increasing energy prices, increasing transportation and logistics costs, technology disruption,
customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Valeant's Battle for Allergan
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Valeant's Battle for Allergan case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Allergan Unsolicited, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Allergan Unsolicited 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's Battle for Allergan can be done for the following purposes –
1. Strategic planning using facts provided in Valeant's Battle for Allergan case study
2. Improving business portfolio management of Allergan Unsolicited
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 Allergan Unsolicited
Strengths Valeant's Battle for Allergan | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Allergan Unsolicited in Valeant's Battle for Allergan Harvard Business Review case study are -
Successful track record of launching new products
– Allergan Unsolicited has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Allergan Unsolicited 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.
Diverse revenue streams
– Allergan Unsolicited is present in almost all the verticals within the industry. This has provided firm in Valeant's Battle for Allergan 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.
Superior customer experience
– The customer experience strategy of Allergan Unsolicited in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Allergan Unsolicited 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 Allergan Unsolicited is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Valeant's Battle for Allergan Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Finance & Accounting field
– Allergan Unsolicited 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 Allergan Unsolicited in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Allergan Unsolicited 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)
– Allergan Unsolicited 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's Battle for Allergan - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Allergan Unsolicited
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Allergan Unsolicited does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Allergan Unsolicited in the sector have low bargaining power. Valeant's Battle for Allergan has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Allergan Unsolicited to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Allergan Unsolicited has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Allergan Unsolicited to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Finance & Accounting industry
– Valeant's Battle for Allergan firm has clearly differentiated products in the market place. This has enabled Allergan Unsolicited to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Allergan Unsolicited to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Valeant's Battle for Allergan 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.
Weaknesses Valeant's Battle for Allergan | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Valeant's Battle for Allergan are -
Slow decision making process
– As mentioned earlier in the report, Allergan Unsolicited has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Allergan Unsolicited even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Allergan Unsolicited 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.
Products dominated business model
– Even though Allergan Unsolicited 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's Battle for Allergan should strive to include more intangible value offerings along with its core products and services.
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 Allergan Unsolicited supply chain. Even after few cautionary changes mentioned in the HBR case study - Valeant's Battle for Allergan, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Allergan Unsolicited vulnerable to further global disruptions in South East Asia.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Valeant's Battle for Allergan 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 Allergan Unsolicited has relatively successful track record of launching new products.
High cash cycle compare to competitors
Allergan Unsolicited has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Valeant's Battle for Allergan, is just above the industry average. Allergan Unsolicited 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.
Lack of clear differentiation of Allergan Unsolicited products
– To increase the profitability and margins on the products, Allergan Unsolicited needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– It come across in the case study Valeant's Battle for Allergan 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's Battle for Allergan can leverage the sales team experience to cultivate customer relationships as Allergan Unsolicited is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Allergan Unsolicited, firm in the HBR case study Valeant's Battle for Allergan needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Valeant's Battle for Allergan HBR case study mentions - Allergan Unsolicited 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.
Opportunities Valeant's Battle for Allergan | 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's Battle for Allergan are -
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 Allergan Unsolicited in the consumer business. Now Allergan Unsolicited can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Allergan Unsolicited can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Allergan Unsolicited 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.
Manufacturing automation
– Allergan Unsolicited 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Allergan Unsolicited 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 Allergan Unsolicited to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Allergan Unsolicited has opened avenues for new revenue streams for the organization in the industry. This can help Allergan Unsolicited to build a more holistic ecosystem as suggested in the Valeant's Battle for Allergan case study. Allergan Unsolicited can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Allergan Unsolicited to increase its market reach. Allergan Unsolicited 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Allergan Unsolicited 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.
Developing new processes and practices
– Allergan Unsolicited 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.
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. Allergan Unsolicited 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, Allergan Unsolicited is facing challenges because of the dominance of functional experts in the organization. Valeant's Battle for Allergan 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.
Loyalty marketing
– Allergan Unsolicited has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Leveraging digital technologies
– Allergan Unsolicited 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.
Threats Valeant's Battle for Allergan External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Valeant's Battle for Allergan are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Allergan Unsolicited 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's Battle for Allergan .
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. Allergan Unsolicited 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
– Allergan Unsolicited 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. Allergan Unsolicited can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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 Allergan Unsolicited business can come under increasing regulations regarding data privacy, data security, etc.
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. Allergan Unsolicited 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.
Shortening product life cycle
– it is one of the major threat that Allergan Unsolicited is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Allergan Unsolicited needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
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.
Consumer confidence and its impact on Allergan Unsolicited 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Allergan Unsolicited with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Allergan Unsolicited in the Finance & Accounting sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Allergan Unsolicited 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.
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. Allergan Unsolicited needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Valeant's Battle for Allergan 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's Battle for Allergan 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's Battle for Allergan 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's Battle for Allergan 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's Battle for Allergan 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 Allergan Unsolicited needs to make to build a sustainable competitive advantage.