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Takeda Pharmaceutical Company (A) Case Solution & Answer

Takeda Pharmaceutical Company (A) Case Solution

PESTLE Analysis

Political

Increased political stability has provided a friendly business environment for the pharmaceutical company, asthe market’s trends are growing on a daily basis.  However, when there is a political disturbance between the Japan and China; then it investors get affected and stakeholders become reluctant from trusting on the business environment’s stability. Currently, Takeda pharmaceutical company is operating in various countries and each of these countries is having a different level of political tension. Growing instabilities in the market can last negative impact on the company’s growth and its opportunities. The changing policies can also affect the operations of Takeda Company. It should study the current trends of the market in which it is operating taking place and its associated government regulations. If Takeda wants to enter in a new market, then it should analyze its corrupt system as well, because in future, a corrupt system can threaten the company’s sustainability in the new market.

Economical

The economic conditions influence the company’s performance.  Growing economyin the country offers Takeda pharmaceutical company with a wide range of opportunities. Takeda has an ability to pursue the long-term goals and growth strategies. Globalization has directed Takeda to the path of selling its products in an open economy,and high GDP drives the consumers to buy more products being offered by Takeda. Takeda should consider its interest rate and its influence on the investment and borrowing power. If the interest rate is high in the industry,it will encourage the company’s investment and growth opportunities. The frequent fluctuation of currency can lead towards serious concerns for the Takeda Company.

Social

Social factor is an important factor of pestle analysis. The organization’s culture has a strong influence on the company’s performance, as it derives the social norms, values, demographic trends and pattern of consumers’ spending. The rising inequalities in many countries can cause power distance, which can have serious implications on the Takeda’s business. Takeda should first manage and practice its management skills before entering into a new market or making any further acquisition. Takeda should develop efficient pharmaceutical medicines which should be in reach of the customers belonging to every economic group.With an increasing population;the trend for healthcare is also increasing, which is accelerating the demand for healthcare products and medicines among people.

Technological

Social networking is increasing now a days, and the social networking platforms have become an essential part of promoting awareness regarding the medicinal products. Social networking has turned out to be an effective way for the pharmaceutical companies to interact with their customers. New technologies have brought a change in the organization and has minimized the costs and expenses. To achieve certain business advantages; Takeda pharmaceutical company should apply the technological trends. Technological improvement can leverage the company’s opportunities to increase its market share.

Adoption of technology has decreased the new product’s life cycle, as products are developed very quickly and vendors are gaining more power. This factor has pressurized Takeda to produce anew product range on frequent basis, with innovation and diversity.  By doing so, the company would be able to develop good relationships and strong business with the value chain members.

Environmental

Environmental factors that influence Takeda are: waste management, renewable technology and environmental regulation. Takeda adopts strict norm to avoid the waste materials and protect its urban areas from waste through having an effective waste management process.  Takeda heavily invest into the renewable technologies to ensure its long-term growth. This investigation can increase the trust of stakeholders on the company, resulting in an expansion of its consumer base.

The excessive depletion of resources by Takeda creates a negative response from environment protection teams, media and general public. The company should first understand the environment regulation of other market in order to avoid getting in trouble with environment activists.

Legal

Takeda ensures its customer protection law and also the compliance. It has a strict regulations for labor protection and securing the work environment. Takeda is very particular about its intellectual property rights, as it has a strong patent which other fraudulent companies cannot acquire easily.  If Takeda’s intellectual property rights have a weak patent then it might lose its competitive edge and its brand image.

Ans off Model

From Ansoff matrix, Takeda applies two approaches:

Market development

Takeda is always involved in expanding its business in new markets. It expands its products to new markets by entering in both domestic as well as international markets. Takeda has been widely distributing its products in numerous countries despite of its products being same in every country.

Diversification

Takeda pharmaceutical company should use diversification strategy, as the product and market both are new. While acquiring the Shire Plc, diversification strategy can be used by Takedato adjust in the industry. By using diversification strategy; the market and customer segment will change for the company and it will have entirely different distribution channels.Takeda is applying concentric diversification, in which products are new but are closely related to the existing products, but they are anyway introduced in the new market.

Financial Analysis

According to the financial analysis which is conducted through excel sheet (Exhibit 1), it is concluded that Takeda paid an underpayment of around $16 billion for Shire Plc. The company’s worth was up to $20 billion, which has given a benefit of being cost effective toTakeda.

Decision

Acquisition of Shire Plc. seems to be beneficial for Takeda, as it is pursuing the acquisition with relative strength. The deal can be done on the basis of diversification as the company’s product and geography is different. It can provide powerful cash flows Takeda and can result in  positive net value for the company. The market’s reaction is also positive towards Takeda, so it would be suitable for Takeda to acquire the Shire Plc.

Appendixes

Exhibit 1

Data and Assumptions
Data
  2016 2017  
Revenues CAGR 11396.6 15160.6 33%
EBIT as % of Revenues   2455 16%
US Share Shire Case A Exhibit 8 64%    
Assumptions
Discount Rate Assumed 10%    
Tax Rate Assumed 30%    
Depreciation as % of Revenue Assumed 0.10%    
Increase in NWC as % of Sales 7%    
Terminal Growth 1%    

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