Strategic Management Report

Group Members:

Ajeet Kumar 1325145

Manesh Kumar 1325162

Kanwal 1325158

Shakeel Ahmed 1325177

BakhatHussain 1325151

Submitted To:

Sir Naveed A. Khan

Dated: Nov, 30, 2013

Table of Contents

History 2

Introduction 4

Abbot Pakistan 5

Vision and Mission Statement 5

Products and Services of the Company 6

Financial Analysis 7

BCG 8

IFE 9

EFE 10

SWOT Matrix 11

CPM12

Space Matrix 13

Evaluation of Business Model 14

Blue Ocean Strategy 15

Conclusion15

1

History

In 1888 at the age of 30, Dr. Wallace C. Abbott (1857-1921), an 1885 graduate of the University of Michigan, founded the Abbott Alkaloid Company. At the time, he was a practicing physician and owned a drug store. His innovation was the use of the active part of a medicinal plant, generally an alkaloid (morphine,quinine, strychnine and codeine), which he formed into tiny pills which he called "dosimetric granules". This was successful since it allowed more consistent and effective dosages for patients.

As the company's overseas sales and reputation was growing, Abbott had to consider new ways to organize its sections.International expansion began in 1931 when Abbott formed its first international office in Montreal, Canada. Expansion continued in 1962 when Abbott entered into a joint venture with Dainippon Pharmaceutical Co., Ltd., of Osaka, Japan, to manufacture radio-pharmaceuticals. During this year, Abbott's expansion projects in England, Italy and France were also completed. With all these developments abroad, Abbott adopted an International Division Structure. Under this organization of management, Abbott simply added another division to the three product based divisions to be responsible for all foreign operations. This international division is itself divided regionally, with each country reporting to the international management.

In 1967, the company successfully challenged the FDA on labeling regulations before the Supreme Court in Abbott Laboratories v. Gardner.In 2009, it unsuccessfully attempted to bar other pharmaceutical companies from producing a drug it had a patent on in Abbott v. Sandoz. However, it was determined that Abbott had patented the drug by a specific process of creation and the other companies were not infringing on the patent when they used a different process to arrive at the same final product.

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Abbott's core businesses focus on pharmaceuticals, medical devices and nutritional products, which have been supplemented through several notable acquisitions. The firm currently divides itself into several divisions:

Pharmaceuticals: Localized Innovation Animal Health: anesthesia for animals, liquid animal diets and other

veterinary products

Diagnostics: Hematology, immunodiagnostic, oncology and clinical chemistry (including the i-Stat)

Medical Devices Nutrition: baby nutrition (Similac, Isomil, and Gain), adult health

products (Ensure and ZonePerfect) and special dietary needs (Glucerna)

It has also divested itself of less profitable businesses through sales and spinoffs. In 1964, it acquired Ross Laboratories, making Ross a wholly owned subsidiary of Abbott. In 2001, the company acquired Knoll, the pharmaceutical division of BASF. In 2002, it divested theSelsun Blue brand to Chattem. Later in 2002, the company sold Clear Eyes and Murine to Prestige Brands.

In 2004, it spun off its hospital products division into a new 14,000 employee company named Hospira, and acquired TheraSense, adiabetes-care company, which it merged with its MediSense division to become Abbott Diabetes Care. In 2006, Abbott assisted Boston Scientific in its purchase of Guidant Corporation. As part of the agreement, Abbott purchased the vascular device division of Guidant. In 2007, Ross was renamed Abbott Nutrition.

In January 2007, Abbott Laboratories agreed to sell its in vitro diagnostics and Point-of-Care diagnostics divisions to General Electric for more than $8 billion. These units were slated to be integrated into the GE Healthcare business unit. The transaction was approved by the boards of directors of Abbott and GE and was targeted to close in the first half of 2007. However, on July 11, 2007, Abbott announced that it had terminated its agreement with GE because both parties could not agree on terms of the deal.[4]

On September 8, 2007, the company completed the sale of the UK manufacturing plant at Queen borough to Aesica Pharmaceuticals, a private equity-owned UK manufacturer. No announcements have been made restricting the movement of staff to Abbott unlike other sell outs. On February 26, 2009, the company completed its acquisition of Advanced Medical Optics based in Santa Ana, California. The acquisition gives Abbott a Vision Eye Care division.

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In February 2010, Abbott completed its $6.2 billion (EUR 4.5 billion) acquisition of Solvay Pharmaceuticals.This provided Abbott with a large and complementary portfolio of pharmaceutical products and also expanding its presence in key emerging markets.

On March 22, 2010, the company completed its acquisition of a Hollywood, Florida-based LIMS company STARLIMS. Under the terms of the deal, Abbott Laboratories acquired the company for $14 per share in an all-cash transaction valued at $123 million. On April 21, 2010, Abbott has completed its acquisition of Facet Biotech Corporation, strengthening its pharmaceutical pipeline in immunology and oncology. On May 21, 2010, Abbott Laboratories said it will buy Piramal Healthcare Ltd.'s Healthcare Solutions unit for $2.2 billion to become the biggest drug company in India.

On October 19, 2011, the company announced that it planned to separate into two companies, one in medical products and the other in research-based pharmaceuticals. Both are now publicly traded. The medical products company retained the Abbott name. The research-based pharmaceuticals company is named AbbVie. In preparation for this reorganization, Abbott has "drastically cut expenses" and taken a US$478 million charge in Q3-2012 to pay for the restructuring. The separation was effective as of January 1, 2013. AbbVie was officially listed in the New York Stock Exchange on January 2, 2013.

Abbott, located in the north suburbs of the Chicago area, previously announced the splitting of the company. It did not become official until nearly a month and a half after it was mentioned. On November 28, 2012, Abbott publicly stated in the Chicago Tribune that once it company splits into two on January 1, the shareholders of the company would receive one share of AbbVie common stock for each share that they owned of Abbott. This deal was approved on November 28. This announcement was viewed as very important by Abbott because it begins an important objective of the separation of the business.

Abbott also announced the shareholders of the company will receive their one share of AbbVie common stock beginning on January 1, the day the company will split. Only the shareholders who are listed as owning a share of Abbott by December 12 will be able to receive one share of AbbVie. The new company, AbbVie, whose symbols are, ABBV, is expected to begin trading on the New Year Stock Exchange on January 2. Abbott will continue to be run by Miles White, the chairman and chief executive of the company. AbbVie will be led by new named CEO, Richard Gonzalez, previous executive of Abbott. AbbVie will feature Humira, a drug that is expected to produce more than 9 billion dollars and expected to bring them much success.

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Introduction

Abbott Laboratories is an American global pharmaceuticals and health care products company. It has 90,000 employees and operates in over 130 countries. The company headquarters are in Abbott Park, North Chicago, Illinois. The company was founded by Chicago physician Wallace Calvin Abbott in 1888. In 2010, Abbott had over $35 billion in revenue.

In 1985, the company developed the first HIV blood-screening test. The company's drug portfolio includes Humira, a drug for rheumatoid arthritis, psoriatic arthritis,ankylosing spondylitis, Crohn's disease, moderate to severe chronic psoriasis and juvenile idiopathic arthritis; Norvir, a treatment for HIV; Depakote, an anticonvulsant drug; andSynthroid, a synthetic thyroid hormone. Abbott also has a broad range of medical devices, diagnostics and immunoassay products as well as nutritional products, including Ensure, a line of meal replacement shakes; and EAS, the largest producer of performance-basednutritional supplements.

The company's in vitro diagnostics business is a world leader in immunoassays and blood screening. Its broad range of medical tests and diagnostic instrument systems are used worldwide by hospitals, laboratories, blood banks, and physician offices to diagnose and monitor diseases such as HIV, hepatitis, cancer, heart failure and metabolic disorders, as well as assess other important indicators of general health. Abbott Point-of-Care manufactures diagnostic products for blood analysis to provide health care professionals critical diagnostics information accurately and immediately at the point of patient care. Abbott also provides point-of-care cardiac assays to the emergency room

Abbott PakistanAbbott Pakistan is part of the global healthcare corporation of Abbott Laboratories, Chicago, USA.

Abbott started operations in Pakistan as a marketing affiliate in 1948; the company has steadily expanded to comprise a work force of over 1500 employees. Currently two manufacturing facilities located at Landhi and Korangi in Karachi continue to use innovative technology to produce top quality pharmaceutical products.

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Abbott Pakistan has leadership in the field of Pain Management, Anesthesia, Medical Nutrition and Anti-Infectives. Our wide range of products is managed and marketed through three marketing arms.

On June 29, 2005 Abbott Pakistan Achieved Class 'A' accreditation against the Oliver Wight ABCD Check list. This was an outstanding achievement, which puts Abbott Pakistan amongst some of the best global companies in terms of operational excellence.

A continuous process of innovation, research and development at Abbott's worldwide facilities enables Abbott Pakistan to offer effective solutions for various healthcare challenges, with products and services that are well focused, within the customer's reach and contribute to improved health care of the people of Pakistan.

Abbott believes that Corporate Social Responsibility is fundamental to earning and deepening the trust of the people it serves, an integral part of its commitment to improve lives has contributed to a number of humanitarian causes and supported various institutions in various fields including health and education.

Vision

To be the most Admired HealthcareCompany in Pakistan.

Mission

To deliver consistently superiorproducts and services whichcontribute significantly to improvingthe quality of life for consumers.Mission Statement Components are following:

Product & Service, Customers, Concern for public image, Concern for Survivalgrowth. Philosophy.

Modified Mission Statement:

To deliver consistently superiorproducts and services globally through combination of R&D ( advanced technology) and positive workforce, whichcontribute significantly to improvingthe quality of life forconsumers.

Missing Components

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Market

Technology

Employees

Self-Concepts

Products and Services of the Company

Pharmaceuticals: Localized Innovation

Nutrition: Worldwide Leader In Nutrition

Diagnostics: Pioneering Medical Diagnostic

Animal Health Products

Medical Devices

Major Business Components

PHARMACEUTICALSArinac,Bejectal, Burnol, Cecon, Klaricid, Lucrin, Protium, SurbexTrividox, Tronolane

DIAGNOSTICSAssays (AIDS, hepatitis,cancer, thyroid,fertility, Clinical Chemistry, Hematology, etc.)& instruments (e.g, AxSYM)Glucose monitoring

HOSPITAL PRODUCTS

Anesthetics, delivery systems, injectablesgenerics, IV solutions, imaging, blood vesselsurgical closure devices

NUTRITIONALSSimilac, Isomil, Ensure, Glucerna, Pedialyte

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Financial Analysis

Ratios 2012 2011Sales 15,216,253 12,946,968NPM 13.7 12.7

ROE31.7 31.2

ROA22.4 22.2

C.R 2.71 2.42

NI 2,090,095 1,644,586

EPS 21.35 16.80

2013: Sales for this quarter increased by 17% compared to the same quarter last year mainly

driven by Pharmaceutical and Nutritionals.Selling and distribution expenses increased 19% mainly due to inflation and escalation in energy cost.Administration expenses increased by 6% due to domestic inflation. Higher provision for Workers Profits Participation Fund, Workers Welfare Fund and Central Research Fund, in line with increased profit, led to an increase in other charges.

2012:

The increase in profit after tax by 27% compared to prior year is mainly attributable to unit growth, improved product-mix and full year impact of the acquisition of Legacy Solvay brands.

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Favorable product-mix and effective cost control strategies pursued by the company have resulted in improved gross profit and net profit margin.- As a result of the above, earnings per share also increased from Rs. 16.80 in 2011 to Rs. 21.35 in 2012.

Net sales for the year increased 18% over prior year. Gross Profit ratio at 37% was 1% better than previous year, primarily due to favourable product-mix and effective cost controls.Segment-wise Sales and Market PerformancePharmaceutical sales for the year increased by 16% over prior year mainly due to unit growth, improved product-mix and full year impact of the acquisition of Legacy Solvay brands. Progesterones, pain management, anti-infectives, and gastro preparations recorded strong double-digit growth.Nutritional sales for the year posted 21% growth over prior year due to volume and selective price increases on certain products.General Health Care (GHC), Diagnostic and Diabetes Care sales for the year grew by 29% over prior year due to focus on marketing of Mospel and its enhanced distribution coverage.

BCG Matrix

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INTERNAL FACTOR EVALUATION MATRIX (IFE Matrix ABBOTT)

STRENGHTS WEIGHT

RATING

WEIGHTEDAVERAGE

1. Global presence 0.10 4 0.402. Strategic alliances and

acquisitions 0.15 4 0.35

3. Diversified portfolio 0.07 4 0.304. High margins 0.07 4 0.255. Over 100 year experience 0.08 4 0.266. Strong research and

development 0.07 3 0.20

7. Innovation Leader 0.07 3 0.208. Strong brand name 0.06 4 0.28

WEAKNESSES1. R & D investment not to the

level of competitors 0.05 2 0.10

2. Marketing expenses lower than competitors

0.05 2 0.10

3. Labor turnover 0.07 1 0.054. Expiring patents 0.05 2 0.105. Declining market share 0.06 2 0.106. Allegations of illegal marketing 0.05 2 0.10

TOTAL 1 2.79

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EXTERNAL FACTOR EVALUATION MATRIX (EFE Matrix ABBOTT)

OPPORTUNITIES WEIGHT

RATING

WEIGHTEDAVERAGE

1. Population growth 0.12 2 0.302. “Quality of life” demand 0.07 3 0.203. Scientific discoveries 0.07 3 0.204. Treatment required for diseases

like cancer, aidsetc0.06 3 0.25

5. Health care sector expansion in Pakistan

0.05 4 0.20

6. Market growth 0.05 3 0.157. Internet utilization for sales

purpose0.07 3 0.15

8. Half of the population have no access on modern medicines.

0.08 4 0.15

THREATS1. Strict regulations 0.05 2 0.102. Intense competition 0.07 2 0.153. Competition from generic

products 0.07 3 0.21

4. Law and order situations 0.06 3 0.255. Copy products 0.08 2 0.146. Threats of substitutes like

herbal and homeopathic products

0.05 2 0.15

7. Increasing raw material costs 0.05 2 0.15TOTAL 1.00 2.75

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SWOT MATRIX (ABBOTT)

SO STRATEGIES

1. Through R & D find solutions for the diseases like cancer and aids with the help of scientific discoveries. ( S6, O3, O4)

2. Innovative products having less side effects will be helpful in meeting the demands of customers. (S7,O2)

3. Develop new research products to take the advantages of increasing market growth ( S6, O6)

4. Expand the distribution to access the demand for modern medicines ( S2, O6)

WO STRATEGIES

1. Expansion in health care sector will help in increasing the revenue which can be utilized on R & D and marketing. (W1, W2, O5)

2. Social sites can be used for promotion & marketing.( W2, O 7)

3. Spent more money on research and development for the development of new products to capture the market share.(W1,O6)

4. More CSR activities should be done for the promotion (W6,O6 )

ST STRATEGIES1. Lower the margins to overcome

the issue of increasing raw material cost. (S4,T7)

2. Lower the prices to beat the competition. (S4, T2)

3. Develop the products having negligible side effects to face the competition from herbal and homeopathic products. ( S6, S7, T6)

WT STRATEGIES1. Increase the marketing &

promotional expenditure to face the issue of copy products.

(W2,T5)2. Relaunch the patent expired

products with some modifications to beat the competition.(W4, T5)

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Competitive Profile MatrixCPM Abbott GSK Pfizer

Critical Success factors

Weight Rating Score Rating Score Rating Score

Advertising 0.06 2 0.12 3 0.18 3 0.18

Product Quality 0.09 3 0.27 3 0.27 3 0.27

Price Competitiveness

0.07 2 0.14 3 0.21 3 0.21

Management 0.12 3 0.36 3 0.36 3 0.36

Financial Position 0.08 2 0.16 3 0.24 3 0.24

Customer Loyalty 0.06 2 0.12 3 0.18 3 0.18

Global Expansion 0.10 3 0.3 3 0.3 4 0.4

Market Share 0.08 2 0.16 3 0.24 3 0.24

Research & Development

0.17 2 0.34 2 0.34 3 0.51

Employee Turnover 0.07 3 0.21 4 0.28 3 0.21

Brand 0.10 2 0.2 3 0.3 4 0.4

Totals 1.00 2.38 2.9 3.2

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6

5

4

3

2

1

-6 -5 -4 -3 -2 -1 1 2 3 4 5 6-1

-2

-3

-4

-5

-6

FSConservative Aggressive

Defensive Competitive

IS

ES

CA

5 -34 -35 -26 -54 -3

4.8 -3.2

-3 6-2 6-3 4-3 5-3 5

-2.8 5.2

Control over Suppliers and Distributors Profit Potential

Market Share Growth PotentialProduct Quality

Financial Stability

Environmental Stability (ES) Average

Financial Strength (FS) Average

Competitive Advantage (CA) Average

Industry Strength (IS) Average

Customer Loyalty Ease of Entry into MarketTechnological Know-how Resource

Utilization

Competitive Advantage (CA)

Industry Strength (IS)

Working CapitalCash Flow

Competitive PressureBarriers to Entry into Market

Environmental Stability (ES)Rate of InflationTechnological ChangesPrice Elasticity of Demand

Financial Strength (FS)Return on InvestmentLeverageLiquidity

Space Matrix

y-axis = FS + ES = 6.0 + (-3.2) = 2.8

x-axis = CA + IS = -2.8 + (+5.2) = 2.4

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Evaluation of Business Model

Business Model Element ABBOT

1. Value Proposition committing to the highest standards of quality, excellencein personal relationships, and behavior characterized by honesty, fairness and integrity.

2. Customer Segments Pharmaceuticals, Nutrition, Diagnostics.B2B

3. Channels Owned distributors, Selling by retailers.

4. Customers Relationship Providing manual with each product, Seminars, Personal Assistance by skilled employees, FAQs online.

5. Revenue Streams Varies by countries, and according to cost of investment,

6. Key Resources Most advanced Technology, Penetration business with potential growth.

7. Key Partners Global and Innovative, Related business,

8. Cost Structures High, due to advance technological, to achieve economies of scale, global investment.

9. Key Activities Research on latest and innovative life healthy production, also focus on devices to easily diagnosis.

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Blue Ocean Strategy

HIV protease inhibitors were first invented by researchers working for the pharmaceutical companies. Abbott Laboratories and Merck & Co Inc. HIV protease inhibitors are used in the treatment of patients with AIDS and were considered the first breakthrough in over a decade of AIDS research.

Conclusion

The company should come up with new research products to beat thecompetition from copy products as well as to avail the opportunities like population and market growth.The company should access new geographical areas to enhance the sales. Company should also take steps to avoid the labor turnover.

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