Sunday, June 5, 2016

Adjust strategy to adapt the current market trend


For this week, in reading the article “Seven Ways to Fail Big” it came to my attention that developing strategy is very important, especially in the high executive level who need to be extremely thoughtful when expanding business and consider business growth strategies.  When considering acquisition or capital investment, executives need to fully understand the futures market as well as their core business. As stated in this article, there are seven ways in which an organization can fill or fail big due to bad decision.  I believe that it will be it is imperative for an organization if executives underestimate the significance of market changes.  An organization should stay active monitoring market trend and adjust their strategy accordingly. 

This article let me recall an acquisition that the pharmaceutical giant Pfize made a few years ago about diabetes drug Exubera [1].  In 1995, Pfizer invested in a small drug company, Nektar, for developing Exubera, recombinant human insulin with particle diameters between 1 and 5 mm.  Exubera was approved in 2006 but Pfizer walked away with total loss of $2.8 billion in pretax charges and total investment of 10 billion from 1995 to 2007.  This is one of the worst deals Pfizer CEOs have been made.  What happened? I think first, Pfizer’s strategy is to search a blockbuster drug to replace Lipitor with 13 billion peak sale, and then aimed to diabetes drugs market because of its market capacity, but Pfizer did not do a full market analysis and consider patients’ needs well. Exubra need to be taken using a Nektar’s instrument big as a flashlight.  Its size makes unwilling and inconvenient for patient to use or carry.  Second, from 1995 to 2006, during this 11 year time, the method of injecting insulin evolved a lot.  For instance, patients could carry a very small box to take a shot once a day.  At the same time, Alkermes/Lilly developed a much smaller one.  The new technologies changed the market and make fewer patients eager to use inhale instrument.  Exubera is no longer attractive and then loses competency. Pfizer should consider the market changes and adopt new strategies to adapt the change.   

However, Pfizer did not change its original plan but rather increased its investment for the insulin plant in 2006 when Exbura was approved.  The merely sale of $12 million for the first 9 month of 2007 forced Pfizer to quit and stop the blooding.  This is the root of Pfizer’s failure that gains are not expected to materialize as stated in the article.  From Pfizer’s failure on Exbrua, I think we can learn something when developing a strategy as in this article.  Executives should ask them “Is this a realistic strategy for long-term success”.  Not only they should ask this question but also when the market changes or new technologies emerge, they should ask and evaluate their original strategy. In addition, a company should analyze the current market trend and reevaluate the products compete advantage regularly.  Once they find the market changes they should adjust their strategies accordingly.     


Ref [1]: http://www.nature.com/nbt/journal/v25/n12/full/nbt1207-1331.html

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