Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal
This case has been developed to facilitate a negotiation exercise related to the formation of partnership deals in the healthcare industry. It is based on actual information, but reflects a hypothetical situation involving two companies and a product that have all been disguised. The scenario described within the case involves Pharmac, a large pharmaceutical company, and Respire, a small medical start-up. Pharmac and Respire began negotiating a partnership to develop and eventually market an inhaled form of parathyroid hormone (PTH) to treat osteoporosis. If successful, this product would improve the available options for the treatment of osteoporosis. It was also expected to produce "blockbuster" sales since it would make PTH, an already extremely effective treatment option, more convenient and appealing to a large segment of untreated patients who were injection-averse (injection was the standard delivery mechanism for this drug). Development of the product was highly speculative and was expected to take six to seven years due to early stage development of the inhalable delivery system and the multi-year Phase III fracture trials required for approval. Pharmac had released the first man-made, injectable form of parathyroid hormone, called Strocal, in 2002. However, no one had yet developed a non-injectable version of PTH, despite efforts by Pharmac and other companies that spanned more than a decade. Respire's goal was to be the first company to solve this problem by developing an inhaled formulation and a device to deliver Strocal through the lungs in a safe, effective, and reproducible manner. Enough information is provided within the case to enable students to negotiate terms for royalties, milestones, exclusivity provisions, and an equity investment. At the end of OIT-81A, information known to Pharmac (but not to Respire) is provided. In OIT-81B, information known to Respire (but not to Pharmac) is given.
Authors :: Stefanos Zenios, Robert Chess, Sara Gaviser Leslie, Lyn Denend
Swot Analysis of "Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal" written by Stefanos Zenios, Robert Chess, Sara Gaviser Leslie, Lyn Denend includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Pharmac Respire facing as an external strategic factors. Some of the topics covered in Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal case study are - Strategic Management Strategies, Negotiations and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal casestudy better are - – increasing commodity prices, technology disruption, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, there is backlash against globalization,
increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Pharmac Respire, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Pharmac Respire 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 Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal can be done for the following purposes –
1. Strategic planning using facts provided in Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal case study
2. Improving business portfolio management of Pharmac Respire
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Pharmac Respire
Strengths Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Pharmac Respire in Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal 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.
High switching costs
– The high switching costs that Pharmac Respire 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.
Sustainable margins compare to other players in Leadership & Managing People industry
– Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal firm has clearly differentiated products in the market place. This has enabled Pharmac Respire to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Pharmac Respire to invest into research and development (R&D) and innovation.
Innovation driven organization
– Pharmac Respire is one of the most innovative firm in sector. Manager in Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Pharmac Respire 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 Leadership & Managing People segment
- digital transformation varies from industry to industry. For Pharmac Respire digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Pharmac Respire 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.
Organizational Resilience of Pharmac Respire
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Pharmac Respire does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Pharmac Respire has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Superior customer experience
– The customer experience strategy of Pharmac Respire in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Pharmac Respire has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Pharmac Respire 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
– Pharmac Respire is present in almost all the verticals within the industry. This has provided firm in Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal 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.
Highly skilled collaborators
– Pharmac Respire 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 Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal, is just above the industry average. Pharmac Respire 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.
Interest costs
– Compare to the competition, Pharmac Respire has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High cash cycle compare to competitors
Pharmac Respire 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.
Slow decision making process
– As mentioned earlier in the report, Pharmac Respire 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. Pharmac Respire 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal, it seems that the employees of Pharmac Respire 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.
Products dominated business model
– Even though Pharmac Respire 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 - Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, firm in the HBR case study Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal 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 Pharmac Respire 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Pharmac Respire 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.
Aligning sales with marketing
– It come across in the case study Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal 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 Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal can leverage the sales team experience to cultivate customer relationships as Pharmac Respire is planning to shift buying processes online.
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 Pharmac Respire supply chain. Even after few cautionary changes mentioned in the HBR case study - Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Pharmac Respire vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal, in the dynamic environment Pharmac Respire has struggled to respond to the nimble upstart competition. Pharmac Respire has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Opportunities Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal | 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 Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal are -
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 Pharmac Respire 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.
Manufacturing automation
– Pharmac Respire can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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 Pharmac Respire has opened avenues for new revenue streams for the organization in the industry. This can help Pharmac Respire to build a more holistic ecosystem as suggested in the Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal case study. Pharmac Respire can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Pharmac Respire 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
– Pharmac Respire can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Buying journey improvements
– Pharmac Respire can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Pharmac Respire 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. Pharmac Respire 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.
Developing new processes and practices
– Pharmac Respire can develop new processes and procedures in Leadership & Managing People industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Pharmac Respire 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.
Loyalty marketing
– Pharmac Respire 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Pharmac Respire can use these opportunities to build new business models that can help the communities that Pharmac Respire operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Learning at scale
– Online learning technologies has now opened space for Pharmac Respire 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.
Better consumer reach
– The expansion of the 5G network will help Pharmac Respire to increase its market reach. Pharmac Respire 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.
Threats Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal are -
Consumer confidence and its impact on Pharmac Respire 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal, Pharmac Respire may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Pharmac Respire can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Pharmac Respire in the Leadership & Managing People industry. The Leadership & Managing People 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.
Regulatory challenges
– Pharmac Respire 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 Leadership & Managing People industry regulations.
Shortening product life cycle
– it is one of the major threat that Pharmac Respire is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Pharmac Respire 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.
Stagnating economy with rate increase
– Pharmac Respire 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Pharmac Respire with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Pharmac Respire business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Pharmac Respire has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Pharmac Respire needs to keep up with the evolution of technology in the Leadership & Managing People 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.
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. Pharmac Respire needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal 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 Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal 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 Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal 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 Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal 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 Negotiating Partnerships in the Healthcare Industry (B): The Pharmac and Respire Deal 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 Pharmac Respire needs to make to build a sustainable competitive advantage.
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