Novartis: Leading a Global Enterprise Case Solution

Introduction

Establishment of Novartis in 1996 was based on the merger between Sandoz and Ciba-Geigy, which were a perfect match in consideration with their innovative capabilities, financial strengths and professional skills. The organization of Novartis was categorized mainly in three major business domains including healthcare, agribusiness, and nutrition with estimated sales of about 59 percent, 28 percent, and 13 percent respectively. Due to its estimated sales; Novartis became the largest agribusiness company and second largest pharmaceutical company throughout the world. In addition to that, it is also considered to be the largest producer of health food in Europe with quite differentiated management approaches of both the operational areas.

Leadership of Novartis resulted with the workforce of about 127,000 employees with 153 nationalities within about 140 states. Novartis was thus ranked as the world’s largest and most profit generating firm with $56.7 billion revenues and $9.6 billion net income in 2012. The mission of Novartis is mainly to transform from a pharmaceutical organization into a global company of healthcare, which should be able to dominate the culture of the business with an estimated 57 percent sales of the organization.

Problem statement:

Although Novartis has been a leading firm throughout the world but due to the challenges in the national systems of healthcare such as the Act of Affordable care in the United States is known to develop pressure to bring changes in the prices and the payment strategies followed by the organizations to pay for the outcomes of the patients, which has not been considered yet. Thereby, Novartis is working to expand its services in the developing world.

Star Analysis Framework:

Situations:

Transformation of the organization into a result-oriented one for being highly competitive throughout the world and a successful global reputation with launch of break-through products. As the top priorities of Novartis were primarily the development of new models of business as well as spirit of innovation. While, in 1988, Novartis had experienced decline in the sales of pharmaceutical products with expectation of losing its ground in the United States – the most profitable market.

Therefore, in the early start of the new century, Novartis decided to shift its focus from health sciences to healthcare segment with a self-made challenge that the company created for itself to go beyond its limit by focusing on the diseases of the patients in small populated areas, in the emerging markets. The occurrences of rare diseases were the main reason in the downturn of the commercial level. Similarly, there was a need for Novartis to develop a shareholder base at global level. Thereby, the expansion of healthcare portfolio was required to strengthen the product portfolio of Novartis.

Tasks:

Development of a new culture requires creation of dynamic global organization, which has a further requirement of the realization of cultural differences for building strengths of each of its business areas. Building of global structure also required creation of a meritocracy providing advanced opportunities to the professionals regardless to their origin of nation. Due to risks of further decline in the pharmaceutical sales of Novartis in the United States, it required consideration over new drugs and either merger or acquisition (Martin, 2016).

With an intention to shift the entire business on health care, there was a strong need of acquisition, and reorganization of the business towards its strongest product division with change in the structure of management. Scientists’ team at Novartis began their practices in testing of 400 different molecules to treat CML (Chronic Myelogenous Leukaemia) with an estimation of patients i.e. about 28000 throughout the world.

For the attraction to best scientists to work for Novartis, they tried to seek of expert scientists in the United States despite of its headquarter in the Basel for investigation and development of new products.

Action:

During the development of new culture, Dan hired a large number of professional employees from outside. Additionally, for close monitoring of the performance of the organization, the installation of new controls and reporting for the performance management system was done. Similarly, in order to overcome its decline sales in the US., Novartis had doubled its expenditures on research and development for an acceleration in the manufacture of its products pipeline.

Merger of Novartis with an Anglo-Swedish organization – the business of AstraZeneca for the formation of the new organization i.e. Syngenta took place in 2000. Re-organization of the business through changes in the leadership management was based on the replacement of Jerry Karabelas with Thomas Ebeling to bring in responsibility for management of their product portfolio.

Operational practices for the research on development of product to treat CML led to the discovery of Gleevec, with a set target to treat the genetic defect leading to malignancy. Due to the small market of the CML, it is decided by Vasella to opt for an acceleration of the Gleevec development regardless of the concern associated with the high production cost, which requires multiple clinical trials. Continually, with the commitment to develop products for the treatment of other diseases such as malaria and leprosy.

Novartis decided to shift its research headquarter from Basel to the United States through the establishment of NIBR – Novartis Institute for Biomedical Research in Cambridge with the initial investment of about $1 billion. With the idea of closing its headquarter in Basel, the idea of establishing a research site in Boston-Cambridge a matter of conflict. Due to the shift in the mission approach of NIBR – Fishman cancelled its 30 percent projects.

Novartis listed its shares on NYSE in 2000 was based on its simplification of the structure of the share and re-purchase share-program of $2.5 billion. Similarly, the realization of attracting the new and best talent needs consideration of the rules and legislations from the United States.

Results:

Despite the mistakes in the hiring of people, Dan wanted to create a culture offering open debate to take people out from retaining themselves in their comfort zone. Such culture practice for a continuous period of three years based on the performance management was fully held. Additionally, with increased investment in R&D, Novartis had been successful in launching new products which were estimated to every 100 days i.e. launch of 3 or 4 products a year from 2000 to 2003 as compared to other organizations’ one product a year…………

 

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