Takeda Pharmaceutical Company (A) Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Takeda Pharmaceutical Company (A) Case Solution

Introduction

A case study is a research method for gaining a comprehensive, multi-faceted understanding of a complicated subject in its actual setting. It is a well-established research strategy that is widely utilizedin many fields, especially when it comes to social sciences (evion, 2019).

Takeda pharmaceutical company was founded by Chobei Takeda in 1781. The company started its business by selling Chinese and Japanese herbal and traditional medicines in Doshomachi, which was the center of medicine business in Japan. Takeda was known for its high quality products and always valued the integrity which was handed over to the generations of Takeda family.

Takeda expanded its business to Asian markets in 1962. Takeda established a marketing and manufacturing company in Taiwan, South Asia, Thailand and Indonesia. The company further drove its globalization through acquisition. As of 2008, Takeda acquired a pharmaceutical company known as Millennium, which was the largest acquisition for Takeda pharmaceutical company in 2008.Further, Takeda made an acquisition with Swiss pharmaceutical company whose products were privately labeled and were branded generically. After this acquisition; Takeda further expanded market to additional 70 countries. Swiss pharmaceutical company was the huge acquisition for Takeda in terms of products and capital.

Problem Statement

This case is based on Takeda pharmaceutical company, as its CEO: Christophe Weber has aimed to acquire Shire Plc. Shire Plc is a biotech company which is located in Ireland. This acquisition can bring the Takeda Company among the list of top ten pharmaceutical companies. But, there are other potential companies which are also showing interest in this acquisition. The acquisition requires a huge amount of funds to be invested. For many years, Takeda has remained the world’s best company in accelerating the globalization, andthe two third portion of the company’s revenue is generated through the acquisitions which it has made outside Japan alongside its diverse products. So, here we have to analyze that whether the company should go for this huge acquisition or not and what would be the implications to acquire the Shire Plc.

Situational Analysis

Porters five forces model is used to analyze the market situation of Takeda, through which, the company’s threats and opportunities are analyzed.

Porter’s Five Forces Model

Competitive Rivalry

In 2018, the pharmaceutical companies generated the global annual revenue of 1.2 billion, which accelerated the competition in the market and created a massive competitive advantage to the company. Takeda is a strong player in the pharmaceutical industry which gives tough competition to its rivals operating in the same industry, which can be observed from the revenue of $18.9 million which the company generated in 2019. Global giants like Novartis, and Pfizer are giving tough completion to Takeda, as they are leading the market by having largest market shares.Both the rivals, i.e. Novartis and Pfizer generated $50.21 and $53.66 billion sales, respectively, in 2019. The American pharmaceutical companies have highest market share as half of half of the market portion is captured by the North America pharmaceutical companies. If Takeda acquires the Shire Plc. then its objective of taking advantage of American distribution channels will be fulfilled, and Shire’s presence in the market will turn out to be effective for Takeda.

Threat of Substitutes

There are many suitable alternatives available in the market, but there are few-substitution threats in the industry. The closest substitute is the homeopathic medicines. Many practitioners use Japanese herbs in the healing process. It is well-known in many countries that people living at Japan use homeopathic medicines but it is not considered as big as allopathic medicines. So, the real threat from homeopathic medicine is low. Knock-off medicines also pose threat to the company. Many pharmaceutical companies spend significantly on numerous resources in research and development of medicines who then market these medicines, but a few copycats in the market acquire the name of medicine and formulate the fake medicines. They infringe the company’s patent and sell the medicines to earn cash, which cannot fully replace the drug.

Threat of New Entrants

The basic barriers that are faced when entering the pharmaceutical industry are: product differentiation, capital and environmental regulatory bodies. Due to a massive turnover; many companies wants to shift their businesses to the pharmaceutical industry. The capital costs that are required by the companies are directly related to the analyzed cost of product and research and development in pharmaceutical companies. If the company comes up with a productive idea, its capital cost would be financed by the venture, but sometimes for the company; the duration from research and development to production phase gets unreliable and infinite. Additionally, there is a requirement of strict regulation for trials of medicines and then their approval. Pharmaceutical companies offer the highest payday when it comes to public critical insights. Their huge profits are sometimes considered as immoral and unethical, which can make the new entrants reluctant to enter the industry, causing lower threat.

Bargaining Power of Buyers

Takeda has a unique landscape in the pharmaceutical industry, in terms of customers. Its first customer is patient who doesn’t have any bargaining power. Medicine is the need of customer and he doesn’t have any expertise to ease his condition through other means. The second customer is a doctor who prescribes the medicine and ethically restricts to collaborate with these pharmaceutical companies. But many companies sells their product directly to the doctors and they sign contracts and earn on each buy, which is unethical. Doctors have the low to moderate level of bargaining power. The others customers are: pharmacies, hospitals and distribution channels, as they buy in the bulk quantity and have the stricter control on quality. They do not have that much bargaining power to gain, which is why the pharmaceutical industry has low to moderate bargaining power.

Bargaining Power of Suppliers

The sources for the pharmaceutical company's supply are: chemist, raw material and instruments. The raw material that is used by Takeda is also used by other companies operating in the industry. These materials are easily available to other vendors and can be purchased globally. The suppliers have nothing more special to sell the companies than Takeda, which is why there is an absence of bargaining power. Machinery that is used by the companies is also of similar nature, but chemist are in demand, as the experienced chemist’s cost is higher in comparison to those who are less experienced. So the chemist can charge a significant amount to work for the company. Takeda has enough resource to pay the chemist and there is a less bargaining power of supplier in the industry.............................

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Takeda Pharmaceutical Company (A) Harvard Case Solution & Analysis