Solvay Pharma B.V.
Keeping the options open…
An Analysis of
Developments in the Pharmaceutical Market
S.C.A.H. Scheffers
Solvay Pharma B.V.
Keeping the options open…
An Analysis of Developments in the Pharmaceutical Market
S.C.A.H. Scheffers
Student Number: 1008900
Graduation report
Rijksuniversiteit Groningen
Faculty of Business Administration Specialisation: International Business
First university supervisor: Drs. C.I. Quispel
Second university supervisor: Dr. C.Carroll
Supervisor Solvay Pharma B.V.: V.A.G. Franssen
Deurne/Groningen, July 30
th2002
‘The future is determined by what we do today’
M. Gandhi
‘The author is responsible for the content of the graduation report;
the copyright of the graduation report is vested in the author’
Preface
Writing this report marks the end of my graduation period at Solvay Pharma B.V.
With that, it also means finishing my Business Administration education at the Rijksuniversiteit Groningen.
At the end of this period my thoughts go back to the beginning of September 2001, when I went for an acquaintance conversation to Weesp. It was a nice day. However, the busses that were supposed to drive me to Solvay Pharma B.V., did not exist anymore. I had to find a bus, which would bring me somewhere in the neighbourhood of Solvay Pharma B.V. When Vincent Franssen and I met, one of the first things I said to him was, that the little map with route information, that had been sent to me, was not up-to-date anymore. Thereupon, one of the first things he said to me was
‘You are not even working here, however, you are having comments already.’ To me, this little event is characteristic of my supervisor, Vincent Franssen. With a joke, but seriously when necessary, he has helped me during my graduation period at Solvay Pharma B.V. Hereby I want to thank him for his help, his contribution to my research and the time he has made available for me. Vincent, I will recall your lessons in marketing when needed.
I want to thank some other people of Solvay Pharma B.V. as well. I want to thank Ans Vernooy for her time, contribution and her interests in the progress of my research. I thank Gemmy Pagel and Christina Mandalidis for the small things they have done for me. Together these small things have meant a lot.
Next to the people of Solvay Pharma B.V., I would like to thank my university supervisors, Caroline Quispel and Charles Carroll, for their contributions, advises and feedback.
Lastly, I want to thank my parents and Bianca and Rik for their support, their listening skills and their faith in that everything would turn out fine. Thank you all.
Sylvia Scheffers
Groningen, July 30th 2002
Executive summary
Solvay Pharma B.V.1 is the Dutch marketing and sales organisation of Solvay Pharmaceuticals, which is one of the four divisions of the worldwide represented Solvay Group. Solvay Pharma B.V. is responsible for the distribution, marketing and sales of Solvay Pharmaceuticals’ prescription-only products in the Netherlands.
Within Solvay Pharma B.V. it is expected that the environment in which the organisation operates, is going to change. However, at this moment it is uncertain what developments and trends will change the environment, what these changes involve, how they will impact the organisation and how the organisations has to prepare for them. Therefore this research is performed. The research question is:
‘What is the view of Solvay Pharma B.V.’s stakeholders on developments taking place within her environment and how can Solvay Pharma B.V. prepare for and adapt to these developments?’
The research is divided into five phases:
1. Orientation
The goal of this phase is to get to know the research assignment, the organisation and the pharmaceutical market. By means of desk- research, literature research and expert interviews data are obtained (see: Chapters I, III and IV).
2. Literature study
In this phase relevant literature concerning strategy, environmental analysis, trends and developments is studied. Literature about strategy and environment is used to provide a literature background to the problem at stake and to answer the question why the problem of the principal is of concern. Naisbitt (1982), Naisbitt et al. (1990) and Popcorn (1991) are used to provide an introduction into general trends. They each give ten trends that are taking place in society. For an overview of these trends refer to Chapter II, in which the literature review is given.
Furthermore, Appendix III gives the original list with trends and developments that is made up in this phase.
3. Preparation of the interview topics
During this phase the semi-structured interviews of the field research have been prepared. By means of literature study (see: Previous phase) and structured interviews a new list with trends and developments (see: Appendix IV) and a list with eight overarching issues have been identified (see: Appendix five). These eight issues play in Solvay Pharma B.V.’s environment. They are:
1. Globalisation and concentration of pharmaceutical industry, pharmaceutical wholesalers and insurers.
2. European integration and her consequences for price transparency, free movement of medicines, European tender and local social insurance systems.
3. The introduction of an open market in health care and the leading part of health care insurance companies.
4. Increasing costs of health care as a consequence of demographics, technology and prosperity developments.
1 For an explanation of abbreviations see: Appendix I: List of abbreviations. Appendices are enclosed as a separate annex to this report.
5. Internet and E-commerce and the increasingly emancipated consumer.
6. The role of biotechnology in the development of medicines.
7. The increasing pressure on pharmaceutical companies to provide medicines cheaper to developing countries.
8. The decreasing amount of blockbusters from classical R&D.
On the basis of these eight issues the interview schemes, with which semi- structured interviews are held, are made up (see: Appendices VII and VIII).
4. Conducting the interviews
The actual conducting of the interviews is divided into two parts. First of all semi- structured interviews are held with respondents, that do not work for Solvay (external respondents). External respondents have been selected on the basis of Figure 4.1: Solvay Pharma B.V. and her context. It is tried to involve representatives of every market party present in this overview in this research.
Examples of external respondents are pharmaceutical wholesalers, pharmacists, insurers. They are asked to evaluate the eight issues. Hereafter semi-structured interviews with respondents working for Solvay are performed. Internal respondents include people working at local marketing and sales organisations, but also people working for Solvay Pharmaceuticals as a whole. They are asked for their comments on outcomes of interviews with external respondents. Next to this they are asked for their opinion with regard to aspects of the eight issues as well. In so doing it is tried to further the strategic conversation taking place at Solvay Pharma(ceuticals). (see: Chapters V up to and including IX).
5. Writing and reporting
In this phase the report that is a result of the research is written. Furthermore, the findings of the research are presented to Solvay Pharma.
Outcomes of the literature study (Chapter II) are that strategic management stresses the monitoring and evaluating of opportunities and threats in the environment of an organisation in light of internal strengths and weaknesses (Hunger et al., 2001: 2).
Furthermore, it has become clear, that it is important that an organisation understands her environment in order to devise a successful strategy. In other words environmental analysis precedes strategy formulation (Fahey et al., 1986: 32). Macro environmental analysis is of concern since developments in the macro environment affect industries and hence destinies of the firms making up the industry. The environmental analysis provides for important intelligence for strategic decision makers. Furthermore, the environmental analysis can further strategic thinking within an organisation. The organisation in this research is viewed as an open system in continual relation with her environment (see: Figure 2.2). Developments and trends taking place within this environment are therefore of influence on the organisation.
The macro environmental model (Fahey et al., 1986: 29) decomposes the environment into four categories, social, economic, political and technological developments (see: Figure 2.3). The trends and developments that have been identified in the literature study by reading books, of which Naisbitt (1982), Naisbitt et al. (1990) and Popcorn (1991) are the most important ones, are divided into these four classes as well (see: Paragraph 2.3.2.1 and Table 2.1).
As becomes clear from chapter four, the pharmaceutical market differs from ‘normal’
markets. Information asymmetry exists particularly between the pharmaceutical industry and prescribers and between prescribers and patients. Furthermore, a limited
number of producers dominate sub-markets with. Prescribers, patients (and until recently health care insurance companies) are not aware of the costs involved. The market is unique in that the one ‘consuming’ products, is neither the same as the one deciding what to consume nor the same as the one paying (directly) for the products.
Within this market much is happening and is going to happen. The earlier mentioned eight issues that have been identified are discussed with external as well as internal respondents. The following main conclusions are drawn based on these interviews:
Both external and internal respondents agree, that the pharmaceutical industry needs to be global in order to survive. The sale of the pharmaceutical part by chemical companies is also recognised by both parties. Some external respondents can imagine the pharmaceutical industry integrating forwardly. Focussing on core competencies is for both groups the reason why pharmaceutical companies should not engage on forward integration.
Some external respondents agree with internal respondents, that European integration influences the transparency of prices of medicines. The same goes for whether free movement of medicines exists within the EU. Internal as well as external respondents think, that in the future Europe will have single pricing for medicines. Furthermore, they agree, that one day Europe will have one social insurance system.
Some internal respondents agree with external respondents, that at present health care insurance companies do not have the knowledge or expertise with regard to the purchasing of medicines. Others, however, disagree with this opinion. The conviction of most external respondents is that in the future, health care insurance companies will play a much more determining part. Respondents of Solvay Pharma B.V. disagree on this.
Both groups of respondents agree, that costs of health care increase. The following causes are identified:
1. An ageing population 2. Biotechnology
3. Demand side driven care 4. The knowledge society
5. A changing mentality of people 6. Increasing technology
Internal as well as external respondents concur, that patients in general have become more emancipated. By some internal respondents, however, it is questioned whether the emancipated, well-informed patient has priority with regard to marketing.
The emancipated consumer buys OTC-products even though he has to pay for it. The switch from prescription medicines to OTC-products is expected to go on, according to external as well as internal respondents. Internal respondents see OTC-products as falling beyond the core competencies of pharmaceutical companies.
The bad image of the pharmaceutical industry is identified by both groups. They both acknowledge that the industry needs to work on this. However, some internal respondents question the use of a better image.
With regard to biotechnology, opinions of external and internal respondents differ. By external respondents it is noted, that biotechnology has the future. Therefore, it would be wise for classical, pharmaceutical companies to engage on biotechnology as well.
Internal respondents note, that being involved in biotechnology via partnerships will suffice for the future.
External as well as internal respondents disagree with each other whether classical, pharmaceutical companies are facing problems concerning their research pipeline. By some it is noted, that improvements of existing medicines are also worthwhile.
External and internal respondents agree, that parallel trade is a problem, when providing medicines cheaper to developing countries. They differ in their opinion, whether it is allowed to infringe patents.
On the basis of this research eighteen recommendations are made to Solvay Pharma and Solvay Pharmaceuticals.
Recommendations for Solvay Pharma B.V. are:
1. Watch developments with regard to European unification and harmonisation 2. Show your competencies
3. Watch developments with regard to the introduction of an open market in health care and the leading part of health care insurance companies and start preparing for them
4. Adjust marketing activities
5. Consider entering other fields of care
6. Look around in Solvay Pharmaceuticals for experience and knowledge 7. Get involved in pharmaco-economic studies
8. Perform research into the way demographic changes influence the use of medicines
9. Work on the concept of the informed patient 10. Work on the bad image
11. Profile the organisation with improvements of existing products Recommendations for Solvay Pharmaceuticals are:
12. Consider making Solvay Pharmaceuticals a full pharmaceutical subsidiary 13. Keep OTC-activities
14. Work on the bad image
15. Reconsider biotechnology decision
16. Keep putting medicines at the disposal of developing countries 17. Support basic research
The overall recommendation for Solvay Pharma B.V. and Solvay Pharmaceuticals is:
18. Keep options open
Recognising the need for an environmental analysis by Solvay Pharma B.V. is a step in the right direction. This because it is important that an organisation understands her environment in order to devise a successful strategy. Understanding changes and developments that take place in one’s environment is an important guide to anticipate the future. Furthermore, the environmental analysis can further strategic thinking within an organisation. This is one of the aims of this research. By having put outcomes of external interviews before internal respondents and by showing them differences and similarities between their own ideas, views and opinions with regard to the eight issues and those of external respondents, it is tried to foster the strategic conversation within Solvay Pharma(ceuticals). The strategic conversation is of importance, because she helps to recognise opportunities and threats within the environment of an organisation. Now that the environmental analysis has been performed, Solvay Pharma as well as Solvay Pharmaceuticals are advised to look for ways to turn the outcomes to good account.
Table of contents
EXECUTIVE SUMMARY ... VI
CHAPTER I: INTRODUCTION INTO THE RESEARCH ASSIGNMENT ...1
1.1: INTRODUCTION...1
1.2: BACKGROUND...1
1.3: PROBLEM DEFINITION...2
1.4: METHODS AND APPROACH...4
1.5: CONCLUDING REMARKS...8
CHAPTER II: LITERATURE REVIEW ...9
2.1: INTRODUCTION...9
2.2: STRATEGIC MANAGEMENT...9
2.3: ENVIRONMENT...11
2.3.1: Environmental analysis ... 11
2.3.2: A conceptual framework for analysis of the environment ... 13
2.3.3: Relation to strategic management ... 15
2.4: TRENDS AND DEVELOPMENTS...17
2.4.1: Introduction ... 17
2.4.2: Megatrends, Ten New Directions Transforming Our Lives ... 17
2.4.3: Megatrends 2000, Ten New Directions for the 1990’s... 21
2.4.4: The Popcorn Report ... 26
2.4.5: Other trends and developments... 31
2.4.6: Concluding remarks ... 35
2.5: CONCLUSIONS...35
CHAPTER III: THE ORGANISATION ...39
3.1: INTRODUCTION...39
3.2: THE SOLVAY GROUP...39
3.3: SOLVAY PHARMACEUTICALS...40
3.3.1: Introduction into Solvay Pharmaceuticals ... 40
3.3.2: Strategic outline of Solvay Pharmaceuticals... 41
3.4: SOLVAY PHARMA B.V...41
3.5: CONCLUDING REMARKS...42
CHAPTER IV: THE PHARMACEUTICAL MARKET IN THE NETHERLANDS AND HER PLAYERS ...43
4.1: INTRODUCTION...43
4.2: GENERAL CHARACTERISTICS OF THE PHARMACEUTICAL MARKET...43
4.2.1: The pharmaceutical market in general... 43
4.2.2: Demand for medicines ... 44
4.3: GOVERNMENT...45
4.4: PRODUCERS...45
4.4.1: Introduction ... 45
4.4.2: The Dutch pharmaceutical industry specifically ... 47
4.5: DISTRIBUTORS...47
4.5.1: Wholesalers ... 47
4.5.2: Pharmacies ... 48
4.6: PRESCRIBERS...49
4.7: CONSUMERS...50
4.8: HEALTH CARE INSURANCE COMPANIES...50
4.9: CONCLUDING REMARKS...53
CHAPTER V: RESULTS OF INTERVIEWS HELD WITH EXTERNAL RESPONDENTS ...54
5.1: INTRODUCTION...54
5.2: AD 1: GLOBALISATION AND CONCENTRATION OF PHARMACEUTICAL INDUSTRY, PHARMACEUTICAL WHOLESALERS AND INSURERS...54
5.2.1: Pharmaceutical industry ... 54
5.2.2: Pharmaceutical wholesalers... 55
5.2.3: Insurers... 55
5.3: AD 2: EUROPEAN INTEGRATION AND HER CONSEQUENCES FOR PRICE TRANSPARENCY, FREE MOVEMENT OF MEDICINES, EUROPEAN TENDER AND LOCAL SOCIAL INSURANCE SYSTEMS...56
5.3.1: Price transparency... 56
5.3.2: Free movement of medicines ... 56
5.3.3: European tender ... 57
5.3.4: Local social insurance systems ... 57
5.4: AD 3: THE INTRODUCTION OF AN OPEN MARKET IN HEALTH CARE AND THE LEADING PART OF HEALTH CARE INSURANCE COMPANIES...57
5.5: AD 4: INCREASING COSTS OF HEALTH CARE...61
5.6: AD 5: INTERNET AND E-COMMERCE AND THE INCREASINGLY EMANCIPATED CONSUMER...62
5.7: AD 6: THE ROLE OF BIOTECHNOLOGY IN THE DEVELOPMENT OF MEDICINES...64
5.8: AD 7: THE INCREASING PRESSURE ON PHARMACEUTICAL COMPANIES TO PROVIDE MEDICINES CHEAPER TO DEVELOPING COUNTRIES...65
5.9: AD 8: THE DECREASING AMOUNT OF BLOCKBUSTERS FROM CLASSICAL R&D...66
5.10: CONCLUSIONS FROM THE INTERVIEWS HELD WITH EXTERNAL RESPONDENTS..67
CHAPTER VI: RESULTS OF INTERVIEWS HELD WITH INTERNAL RESPONDENTS ...69
6.1: INTRODUCTION...69
6.2: AD 1: GLOBALISATION AND CONCENTRATION OF PHARMACEUTICAL INDUSTRY...69
6.3: AD 2: EUROPEAN INTEGRATION AND HER CONSEQUENCES FOR PRICE TRANSPARENCY, FREE MOVEMENT OF MEDICINES, EUROPEAN TENDER AND LOCAL SOCIAL INSURANCE SYSTEMS...71
6.3.1: Price transparency... 71
6.3.2: Free movement of medicines ... 71
6.3.3: European tender ... 72
6.3.4: Local social insurance systems ... 72
6.4: AD 3: THE INTRODUCTION OF AN OPEN MARKET IN HEALTH CARE AND THE LEADING PART OF HEALTH CARE INSURANCE COMPANIES...73
6.5: AD 4: INCREASING COSTS OF HEALTH CARE...76
6.6: AD 5: INTERNET AND E-COMMERCE AND THE INCREASINGLY EMANCIPATED CONSUMER...76
6.7: AD 6: THE ROLE OF BIOTECHNOLOGY IN THE DEVELOPMENT OF MEDICINES...78
6.8: AD 7: THE INCREASING PRESSURE ON PHARMACEUTICAL COMPANIES TO PROVIDE MEDICINES CHEAPER TO DEVELOPING COUNTRIES...79
6.9: AD 8: THE DECREASING AMOUNT OF BLOCKBUSTERS FROM CLASSICAL R&D...80
6.10: CONCLUSIONS FROM THE INTERVIEWS HELD WITH INTERNAL RESPONDENTS...81
CHAPTER VII: DISCUSSION ...83
7.1: INTRODUCTION...83
7.2: SIMILARITIES AND DIFFERENCES...83
7.3: CONSEQUENCES AND SUGGESTIONS...84
7.4: CONCLUDING REMARKS...86
CHAPTER VIII: CONCLUSIONS ...87
8.1: INTRODUCTION...87
8.2: CONCLUSIONS...87
8.3: JUSTIFICATION...91
CHAPTER IX: RECOMMENDATIONS ...93
9.1: INTRODUCTION...93
9.2: RECOMMENDATIONS...93
BIBLIOGRAPHY ...103
APPENDICES ...110
Chapter I: Introduction into the research assignment
Paragraph 1.1: Introduction
This chapter provides an orientation into the research. This is done by giving the background of the research assignment in paragraph 1.2. Hereafter the problem definition is stated. The methods of and the approach to this research are given in paragraph 1.4. The last paragraph offers some concluding remarks.
Paragraph 1.2: Background
The research of which this report tells, has been performed for the marketing manager of Solvay Pharma B.V. This organisation is the Dutch marketing and sales organisation of Solvay Pharmaceuticals, which is a division of the Solvay Group.
Solvay Pharma B.V.2 is responsible for the distribution and the marketing and sales of Solvay Pharmaceuticals’ prescription-only products in the Netherlands.3
The general manager and the marketing manager of Solvay Pharma are of the opinion, that the current situation between the different players within the pharmaceutical market will cease to exist. At this moment there exists a balance between the players in this market. However, developments are taking place and are expected to take place that will change the pharmaceutical market.4 Van Leeuwen (2000: 9) writes ‘[…] it is quite obvious that the marketplace for pharmaceutical companies in The Netherlands is likely to change over the next few years substantially. […] Pharmaceutical companies in The Netherlands are facing substantial changes, which will change the external environment in which they compete quite dramatically. […] However, at this moment in time, it is not yet clear, how the market will look like in five years time’.
The general manager and the marketing manager do not have the time to investigate what developments and trends will occur, how they are capable of influencing the future and how Solvay Pharma needs to go along with them. Furthermore, they want somebody with a fresh view to take a look at this. Therefore, the researcher has been offered this research assignment.
As a whole the Solvay Group acknowledges, that the world surrounding her is changing rapidly. She knows that, in order to survive as a company, she has to adjust herself to this changing environment (Solpharia, 2001: 3). The Solvay Group recognises, that a company needs to be responsive and anticipatory towards its environment. The sooner Solvay Pharma knows how to fit her strategy to her environment, the better it is for the company. For it is a company, that has insight in the developments and trends that take place or are going to take place and the related possibilities and dangers, that is able to think about ways to prepare for and anticipate
2 From now on called Solvay Pharma.
3 For a description of the organisation refer to Chapter III: The organisation.
4 For an introduction into this topic refer to for example: Een helder recept, (‘A clear prescription’) by De Vries et al. (1999). This report has been written for the Ministry of VWS. Geneesmiddel Verzekerd, (‘Medicine in-/ensured’) by The Boston Consulting Group B.V. (1999) on assignment of ZN and the research performed by the MDW-werkgroep Geneesmiddelen (Market principles, Deregulation and Quality of legislation) (Annink et al., 1999).
on them (Van Gorp et al., 2002). This is why Solvay Pharma wants to have insight in the developments and trends taking place within the pharmaceutical market.
Furthermore, she wants to know the views and opinions of players within the pharmaceutical market with regard to these developments and trends. It is of importance to get to know their evaluations of the developments and trends.
Paragraph 1.3: Problem definition
Resulting from the above-described background of the research assignment, the problem definition of the research is stated below. This problem definition consists of the objective of the research, the research question, the constraints and delimitation of the research (De Leeuw, 1996). At the end of this paragraph the conceptual model of the research is given.
Objective
To inform Solvay Pharma B.V. about her stakeholders’ view on market developments and to give recommendations to Solvay Pharma B.V. about how to anticipate and deal with these developments.
Research question
What is the view of Solvay Pharma B.V.’s stakeholders on developments taking place within her environment and how can Solvay Pharma B.V. prepare for and adapt to these developments?
This research question is divided into the following sub-research questions:
1. What literature supports this research?
2. What does the market in which Solvay Pharma B.V. operates look like and who are stakeholders?
3. How do selected external stakeholders evaluate developments taking place in this market?
4. How do internal respondents evaluate these developments and respond to the evaluations of external respondents?
5. What can be concluded from sub-research questions three and four?
6. What recommendations based on this research can be made to Solvay Pharma B.V.?
Stakeholders are ‘those groups who can directly or indirectly place demands on the organization’ (Fahey et al., 1986: 199). In the case of this research, examples of stakeholders are the government, distributors and patients.
Constraints and delimitation
The constraints and delimitation of this research include:
• The research is limited to Solvay Pharma. However, when necessary, Solvay Pharmaceuticals as a whole is considered as well.
• The research takes into the account the market for prescription-only medicines.
• According to Aaker (1992), the external analysis takes the customer, the competitive, the market and the environmental analysis into account. This research, however, will look at the environmental analysis on her own.
• The research considers market developments with a timeframe of approximately twenty years.
• The research should be executed within approximately ten months, starting from October 2001.
Conceptual model
The conceptual model of this research looks like Figure 1.1 shows:
Environment
Literature concerning:
- Strategic management
- Strategic conversation
- Environmental analysis
Figure 1.1: Conceptual model5 Explanation of the conceptual model
An organisation stands in direct relation with her environment. As will become clear from the literature review in Chapter two, environmental analysis is of influence on and precedes strategy formulation. Developments and trends taking place within the environment of Solvay Pharma are capable of influencing the organisation. Solvay Pharma may also have an influence on developments and trends taking place in her environment. External stakeholders of Solvay Pharma have their opinion with regard to the developments and trends. Internal respondents view these trends and developments also in their own way. Furthermore, they have their ideas about the evaluations of external respondents with regard to the trends and developments. From these views and the conclusions that can be drawn from the ways internal stakeholders respond to the evaluations of external stakeholders, recommendations for
5 For an overview of illustrations in this report see Appendix II: List of illustrations.
Solvay Pharma
B.V.
Developments
& Trends - Naisbitt (1982) - Naisbitt et al.
(1990) - Popcorn (1991)
External stakeholders’
view
Internal stakeholders’
view
Recommen- dations
Solvay Pharma can be withdrawn. One of the aims of this research is to further the strategic conversation at Solvay Pharma. This is done by putting the evaluations of external stakeholders before internal stakeholders and ask them for their reactions.
Paragraph 1.4: Methods and approach
This research is of a policy-supportive nature (De Leeuw, 1990). This means, that this research is intended to provide information about facts (and opinions etceteras) and relations that are relevant for taking specific policy concerned decisions. One remark has to be made here. According to De Leeuw (1990), policy-supportive research does not yield recommendations, but information. This research, however, is intended to provide recommendations for the client as well.
In order to obtain the required data for this research, use is made of several data collection methods. Next to desk- and literature research, empirical research is performed. The following phases of the research and methods can be distinguished.
Phase 1: Orientation; October 2001
By means of desk research, literature research and expert interviews an orientation into the research assignment, the Solvay Group and the pharmaceutical market has been acquired. Expert interviews have been held with the marketing manager of Solvay Pharma and experts in the field of trends, developments and context analysis.
The results of this phase can be read in this chapter (Chapter I: Introduction into the research assignment), in Chapter III: The organisation and in Chapter IV: The pharmaceutical market in the Netherlands and her players. Figure 4.1: Solvay Pharma B.V. and her context, is also an outcome of this phase. This figure is a graphical overview of the context, in which Solvay Pharma operates. At the end of this phase the second sub-research question of this research is answered.
Phase 2: Literature study; November 2001-December 2001
In the second phase relevant literature concerning strategic management, environmental analysis and trends and developments has been studied. It is focussed on researches performed in the field of possible developments in the pharmaceutical market (see: Footnote four), position papers issued by players in the pharmaceutical market and institutions connected to the government, advises made by committees and literature focusing on trends and developments and theories of use.
Literature concerning strategic management has been used, since the problem at stake takes place at a strategic level. Furthermore, the research is aimed at furthering the strategic conversation at Solvay Pharma(ceuticals). Therefore, it is important to know what strategic management means. It has become clear, that environmental analysis is important for an organisation in order to devise a successful strategy. Environmental analysis is about what trends and developments are taking place within the environment of an organisation. Books have been studied concerning trends and developments, of which Naisbitt (1982), Naisbitt et al. (1990) and Popcorn (1991) are the most important ones. With the collected information from the desk- and literature research concerning trends and developments a list has been edited that includes twenty-three general trends and developments. These general trends and developments take place in the macro environment of Solvay Pharma. Not all trends
and developments mentioned by Naisbitt (1982), Naisbitt et al. (1990) and Popcorn (1991) are included in this list. Yet, the literature review gives their background. This has been done, since it provides the principal with information concerning other general trends that, although in this research not recognised as most important for the pharmaceutical market, may be of influence on his business.
At the end of this phase the first sub-research question is answered. The result of this phase can be read in Chapter II: Literature review and in Appendix III: Original list with trends and developments.
Phase 3: Preparation of the interview topics; January 2002-February 2002
During this phase the semi-structured interviews of the research have been prepared.
This has been done by means of the literature study about trends and developments and by holding five structured interviews. During the structured interviews of this phase use has been made of the original list with trends and developments (see:
Appendix III). During each interview the same questions have been asked. First the respondent has been asked to point out, from the list with twenty-three trends and developments, those trends and developments of which he thought, that are of the most importance for or are capable of influencing the pharmaceutical market the most in the future. Furthermore, the respondent has been asked to justify his answers. The last question considered whether the respondent was of the opinion, that an important trend or development was missing on the list. Again he had to justify his answer.
Some of the mentioned additions have been included. During the interviews, it has become clear how the respondent thought the trends and developments are related.
One remark has to be made here. In a strict sense structured interviews make us of closed questions with predetermined answer alternatives in a certain strict sequence, whereby one is not allowed to explain the questions and answers (Van der Velde et al., 2000: 106). In this case respondents have also been asked to justify their answers.
Therefore, the data collection method has been of a mixed character; in between structured and semi-structured of nature.
With the trends and developments, that have been chosen the most or of which it had been said, that they were connected to influential trends and developments, a new list has been made. This list includes sixteen trends and developments (see: Appendix IV:
New list with trends and developments).
On the basis of this ultimate list with trends and developments and with the input from respondents about how they thought the trends and developments were mutually connected to each other, a list with eight issues has been composed. This list covers all sixteen trends and developments (see: Appendix V). Furthermore, this list specifies the rather general trends and developments into specific market developments for the pharmaceutical market. The list with eight issues has been the basis of the interviews held in the next phase. Appendix VI provides an overview of how the trends and developments from the new list make up the eight issues.
The results of this phase are the new list with trends and developments (see: Appendix IV), the list with issues (see: Appendix V) and Appendix VI, that forms the justification of how the eight issues are made up by the trends and developments.
Next to this, interview schemes have been drawn up on the basis of the problem
definition and the list with issues. Since a distinction has been made with regard to interviews held with external respondents (respondents that do not work for Solvay) and internal respondents (respondents that work for Solvay) two different interview schemes have been drawn up (see: Appendix VII: Interview scheme external respondents and Appendix VIII: Interview scheme internal respondents).
Phase 4: Conducting the interviews; March 2002-April 2002
During this phase semi-structured interviews have been held. According to Saunders et al. (2000: 243), semi-structured interviews involve interviewing people by using ‘a list of themes and questions to be covered although these may vary from interview to interview.’ This involves that the researcher ‘may omit some questions in particular interviews, given the specific organisational context which is encountered in relation to the research topic. The order of questions may also be varied depending on the flow of the conversation’ (Saunders et al., 2000: 244). Semi-structured interviewing gives the researcher the opportunity to get to know the ideas and explanation of the interviewees concerning the topics and themes discussed (Saunders et al., 2000). In this research this is needed, since respondents have been asked for their opinions and ideas.
In totality forty-five people have been interviewed. These people have been divided into three categories:
1. People working for Solvay (in total eight respondents).
2a. Representatives from parties from within the pharmaceutical market, such as a physician, pharmacists, representatives from pharmaceutical wholesalers, health care insurance companies and umbrella organisations (in total twenty-four respondents).
2b. People from universities, institutions and research organisations (in total thirteen respondents).
A great variety of respondents with different backgrounds has been included in the research. This in order to get as many different ideas and opinions about the concerned issues as possible. Figure 4.1: Solvay Pharma B.V. and her context, on page fifty-two of this report, is an outcome of the first phase of this research. Next to this, this figure has stand at the basis of selecting external respondents. Respondents belonging to eleven of the seventeen boxes (representing different market parties) in this figure have participated in the research. With regard to internal respondents, people from different functional areas within Solvay Pharmaceuticals have been involved in the research. People from local marketing and sales organisations, an employee from the International Marketing department and a former R&D-employee have been interviewed. For a division of respondents in different categories see Appendix IX: Participants in the research.
Thirty-three interviews have been held with external respondents (compare categories 2a and 2b). Eight interviews have been held with internal respondents (category 1).
There is a difference in questions asked at these two groups of respondents. The list with issues (see: Appendix V) has been the basis of the interview schemes that have been used. The questions have been clustered around these eight issues. For the larger part internal respondents have been asked questions concerning outcomes of the interviews with external respondents. This has been done in order to get to know from internal respondents, what Solvay has done or is doing concerning certain outcomes
of the interviews with external respondents or what their opinion is concerning certain outcomes. They have been asked after Solvay’s strategy concerning these outcomes.
One of the aims of this research is to start a strategic conversation within Solvay Pharma and Solvay Pharmaceuticals. Therefore, outcomes of external interviews have been put before internal respondents in order to let these last think about these outcomes and to try to get them to talk about them during the interviews, but also afterwards with each other.
The interview schemes have been divided into ten parts. The first part included the introduction. Here the respondent has been asked after his background, function in the organisation and relevant other activities. This is of importance, because what he may say may be coloured by his background (see: Appendix IX). The next eight parts focussed on the different eight issues that are the outcome of phase three of this research. It has been tried to get a clear insight in what ideas and opinions of actors are concerning the issues and how these are able of colouring the future. Furthermore, insight has been sought in how actors see mutual relationships and connections, whether these relations are about to change in the future and if yes, how they will change. Interviews have been held according to an on forehand drawn up list of questions. The order of questions changed on the basis of the progress of the interview. Not all of the interviews handled all of the topics. For every interview relevant topics have been selected from the list with issues (see: Appendix V), on the basis of the preparatory study and the information provided by the respondents themselves. Some respondents were of the opinion, that they were not able to provide valuable information on every issue. They have made clear, which issues they wanted to discuss. Time restraint is another reason, why not every issue or every question is handled fully during each interview. The last part of the interview included questions for ending the interview.
The interviews have been fully recorded on tape. A full record of the interview has been drawn up as soon as possible. This in order to preserve the exact nature of explanations and general points provided.
The main outcomes of the interviews held with external respondents can be read in Chapter V: Results of interviews held with external respondents. A more complete description of these results can be obtained in Appendix XIV: Results of interviews held with external respondents. Chapter VI gives the main outcomes of interviews held with internal respondents. Appendix XV: Results of interviews held with internal respondents, provides a more complete description of results obtained during internal interviews. Because of privacy reasons respondents are not mentioned by name, but only by means of their profession or the organisation they are working for.
By putting outcomes of external interviews and internal interviews next to each other, it can be analysed what differences and similarities are between opinions and ideas of the two categories of respondents and what conclusions can be drawn from that.
Chapter VII presents the discussion of the results of the interviews. Hereafter chapter VIII gives the conclusions of this research. In the last chapter of this report recommendations to Solvay Pharma and Solvay Pharmaceuticals are given.
At the end of this phase sub-research questions three up to and including six are answered.
Phase 5: Writing and reporting; May 2002-July 2002
The last phase of the research involves the rounding off of it. This means writing this report and presenting the findings to Solvay Pharma. It also involves recommending courses of action to the principal of this research.
Paragraph 1.5: Concluding remarks
This chapter has given an introduction into the research assignment. It has become clear, that the general manager and the marketing manager expect that the pharmaceutical market will change in the future cased by developments taking place in this market. In order to survive, a company has to adjust to her changing environment. It needs to be responsive and anticipatory towards its environment.
The next chapter has, among other things, the relationship between environmental analysis and strategic management as a focus. This chapter answers the first sub- research question by providing a review of relevant literature, which supports this research. In this review the concept of strategic management is considered.
Furthermore, the role of environmental analysis and her linkage to strategic management are discussed.. Furthermore, an introduction into general trends and developments is given, since they are part of the environmental analysis and lie at the basis of this research. This introduction gives the principal of this research insight in which general trends and developments are taking place in society.
Chapter II: Literature review
Paragraph 2.1: Introduction
This chapter provides the literature background of this research. Relevant literature has been found concerning three different areas. These areas are elaborated on in the following paragraphs. Paragraph 2.2 gives an introduction into strategic management.
Hereafter paragraph 2.3 elaborates on the concept of the environment and her importance for strategic management. Literature concerning trends and developments is given in paragraph 2.4. Paragraph 2.5 gives the conclusions of this chapter.
Paragraph 2.2: Strategic management
‘Strategic management is that set of managerial decisions and actions that determines the long-run performance of a corporation. It includes environmental scanning (both external and internal), strategy formulation (strategic or long-range planning), strategy implementation, and evaluation and control. The study of strategic management therefore emphasizes the monitoring and evaluating of external opportunities and threats in light of a corporation’s strengths and weaknesses’ (Hunger et al., 2001: 2).
The primary value of strategic management is to help the organisation to function in a successful way in her environment.
According to Van der Heijden (1996: 23) over the years three different schools of thought have developed ‘to interpret the way managers and entrepreneurs think about their daily business’. These are the rationalist, the evolutionary and the processual school of thought. Although different divisions exist, these can be mapped on these three schools.
Within the rationalist school thought and action are separated. ‘The tacit underlying assumption is that there is one best solution, and the job of the strategist is to get as close to this as possible, within the limited resources available’ (Van der Heijden, 1996: 23). The evolutionary school focuses upon ‘the complex nature of organisational behaviour, beyond the realms of rational thinking’ (Lindblom, 1959;
Mintzberg et al., 1985; both cited by Van der Heijden, 1996: 24). In this view strategy emerges and a winning strategy can be only viewed like that in retrospect. For an overview of the rationalistic and the evolutionary schools of thought refer to Van der Heijden (1996).
The processual school takes an in-between position. ‘It suggests that while it is not possible to work out optimal strategies through a rational thinking process alone, managers can create processes in organisations that will make it more flexible and adaptable, and capable of learning from its mistakes’ (Van der Heijden, 1996: 24) This view ‘starts from the premise that business success cannot be codified, but requires an original invention from the people involved. This implies that the resource the company needs to mobilize is the brain power of its people and their networking and observational skills. The organisation needs to engage in a process to make room for ideas. Any inventive idea directed towards improving the match between the organizational competencies and the business environment needs to be surfaced and considered, wherever these may originate in the organisation’ (Van der Heijden,
1996: 36). The organisation is seen as a complex adaptive system. She is an open system and she adjusts her activities with regard to what happens in the outside world.
One of the core aspects of the processual paradigm is conversation. According to this paradigm, organisations learn by having experiences, by reflecting upon them, by developing new ideas or theories about the world and how these need to change as a result of the reflections, by planning new steps and obtaining new experiences as a result of actions (Van der Heijden, 1996). According to the processual paradigm elements of observation and thought can be structured and embedded in the organisational theories of use only by conversation. Next to this ‘new perceptions of opportunities and threats, based on the reflection on experiences obtained in the environment can only become institutional property through conversation’ (Van der Heijden, 1996: 41-2).
The view that organisations must learn is shared by Hunger et al. (2001), who note that organisations must develop strategic flexibility. This is ‘the ability to shift from one dominant strategy to another’ (Hunger et al., 2001: 3). This flexibility demands that the organisation becomes a learning one. This involves being skilled at creating, acquiring and transferring knowledge and at changing her behaviour to show new knowledge and insights.
As said before, strategic management consists of four elements:
1. environmental scanning 2. strategy formulation 3. strategy implementation 4. evaluation and control
Figure 2.1 shows how these elements interact.
Figure 2.1: Basic Elements of the Strategic Management Process (Source: Hunger et al., 2001: 6) 1. Environmental scanning
This is ‘the monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the corporation’ (Hunger et al., 2001: 5). A division can be made into opportunities and threats stemming from the external environment and into strengths and weaknesses coming from the internal environment of an organisation.
2. Strategy formulation
This is ‘the development of long-range plans for the effective management of environmental opportunities and threats, taking into consideration corporate strengths and weaknesses’ (Hunger et al., 2001: 6). It is made up by the mission, objectives, developed strategies and set policy guidelines (Hunger et al., 2001).
Environmental Scanning
Strategy Formulation
Strategy Implementation
Evaluation and Control
3. Strategy implementation
Strategy implementation involves ‘the process by which strategies and policies are put into action through the development of programs, budgets, and procedures’
(Hunger et al., 2001: 9).
4. Evaluation and control
This is ‘the process by which corporate activities and performance results are monitored so that actual performance can be compared with desired performance’
(Hunger et al., 2001:10). Information from this phase of strategic management can make it necessary to begin the process of strategic management again, since it can point to weaknesses in implemented plans.
As can be seen in Figure 2.1 information from each element of the process of strategic management is used as a possible alteration of foregoing elements. The process includes therefore the possibility to learn.
Paragraph 2.3: Environment
The foregoing paragraph pointed to the issue of environmental scanning as an element of the strategic management process. This paragraph elaborates on the environment of an organisation. This is done by giving in paragraph 2.3.1 an introduction into environmental analysis. The following paragraph provides a conceptual framework for analysis of the macro environment. Paragraph 2.3.3 explains how environmental analysis and strategic management are linked.
Paragraph 2.3.1: Environmental analysis
Paragraph 2.3.1.1: Introduction
There has been an increasing recognition, that one needs to understand the environment of an organisation in order to devise a successful strategy. Johnson et al.
(1988), for example, give eight characteristics that are usually associated with
‘strategy’ and ‘strategic decisions’. The following is of special importance, when taking the subject of this report into account: ‘Strategy is to do with the matching of the activities of an organisation to the environment in which it operates’ (Johnson et al., 1988: 6).
The recognition, that one needs to understand the environment of an organisation in order to devise a successful strategy, is visible in a shift in the view of organisations as closed systems to a view that sees them as open systems. This shift is illustrated by for example Harrison’s (1994) open system model. This model provides ideas and guidelines for diagnosing organisations. It takes the environment into account by acknowledging that external conditions influence the flow of inputs, affect the reception of outputs and can affect internal operations and that an organisation’s success depends on its ability to adapt to her environment. For an explanation of this model see paragraph 2.3.1.2.
Efforts to take environmental analysis into account in the formulation of strategy have always been present in organisations according to Fahey et al. (1986: 2). However, until the seventies these efforts had been sporadic, but since then have begun to receive increased attention because of increased turbulence in the environment of
organisations. Since then organisations began to undertake environmental analysis as an integrated effort. According to Fahey et al. (1986: 2), the organisation was once considered primary, but since the seventies and eighties of the last century the environment is the focus point and the core ‘problem’ of strategic management: the organisation is seen as organising her activities in order to meet the challenges brought forward by the environment.
The interest of environmental analysis lies according to Aaker (1992: 110) ‘in environmental trends and events with the potential to affect strategy either directly or indirectly’. Macro environmental analysis is of concern, because of the assumption that developments in the macro environment affect industries and hence destinies of the firms making up the industry. ‘We conceive of the macroenvironment as consisting of four segments or sets of forces: social, economic, technological, and political. Macroenvironmental analysis is thus the analysis of current and potential change in these segments and the assessment of their implications for strategic management’ (Fahey et al., 1986: 3).
Environmental analysis has three goals (Fahey et al., 1986). First of all after an environmental analysis, one should be able to understand current and potential changes taking place in the environment. The understanding of changes, that are taking place now, is an important guide to anticipate the future. Environmental analysis is supposed to identify trends and events and assess their likelihood and impact (Aaker, 1992: 110). Next to this the environmental analysis should provide important intelligence for strategic decision makers. It is important to consider that, notwithstanding the fact that the analysis on its own is interesting, the primary goal of the analysis is that the generated information is of use in determining and managing a firm’s strategies. Thirdly, the environmental analysis should facilitate and further strategic thinking within an organisation. ‘It should challenge the current wisdom by bringing fresh viewpoints into the organisation’ (Fahey et al., 1986: 4). The environmental analysis provides a basis for organisational learning (Fahey et al., 1986: 4).
Paragraph 2.3.1.2: The open system model
In paragraph 2.3.1.1 it has been mentioned, that there has been a shift in the view of organisations as closed systems to a view that sees them as open systems. An example of a view that sees organisations as open systems is Harrison’s (1994) open system model. This model provides ideas and guidelines for diagnosing organisations and takes the environment into account by acknowledging that external conditions influence the flow of inputs, affect the reception of outputs and can affect internal operations and that an organisation’s success depends on its ability to adapt to her environment.
The organisation in this model is viewed as an open system, in continual relation with her environment (see: Figure 2.2, on the next page). In this view the organisation on the one hand obtains raw materials, money, people, equipment, information, knowledge and legal authorisations from her environment. On the other hand, the organisation transfers its products, services and ideas back to the environment. Other main elements in this view are technology, the environment, goals and strategies, culture, structure and behaviour and processes (Harrison, 1994).
ENVIRONMENT
ENVIRONMENT
Figure 2.2: Organisations as open systems (Source: Harrison, 1994: 29)
This approach contains several important ideas for diagnosing an organisation:
• external conditions influence the flow of inputs to organisations, affect the reception of outputs and can directly affect internal operations
• organisations are changing. Several ways of changing exist, of which the anticipatory changing is important for this research, because it aims at improving environmental; standing or internal operations before problems arise.
• an organisation’s success depends heavily on its ability to adapt to her environment- or to find a favourable environment in which to operate.
Paragraph 2.3.2: A conceptual framework for analysis of the environment
The foregoing paragraph introduced the concept of environmental analysis. This paragraph presents a framework that forms the basis for the analysis of the macro environment (Fahey et al., 1986). The framework gives the constructs that are necessary in order to understand the elements of the macro environment, the relationship between them and their evolution.
The framework for analysis consists of four constructs:
1. Levels of environment
2. A model of macro environment
3. Constructs for describing environmental evolution 4. Linkages to a firm
Of this model, construct one is not discussed. This because it is not considered to be of relevance for this research. The other three constructs are examined below.
Goals Culture
And Strategies
Behaviour And Processes
Technology Structure
Inputs (resources) Outputs
Paragraph 2.3.2.1: A model of the macro environment
The model of macro environment decomposes the relevant environment of an organisation into four categories: social, economic, political and technological. The social segment focuses in the original model on demographics, life-styles and social values of a society. The economic category looks at the general set of economic factors and conditions that all industries confront. Political factors are in the original model concerned with political processes that occur in a society and with regulatory institutions shaping codes of conduct. The technological segment takes technological progress or advancements that take place into account.
For this research the original model has been adapted. In this research the macro environment is classified according to the ‘September-formula’ (Van der Heijden, 1996: 155), which categorises the environment in societal, economic, political and technological developments. These two frameworks boil down to the same. An adapted version of the model of macro environment of Fahey et al. (1986: 29) is presented in Figure 2.3: A model of macroenvironment (adapted).
Figure 2.3: A model of macroenvironment (Source: Fahey et al., 1986: 29; adapted) As can be seen in the figure, the model is also made up by various relationships between the four categories. These relationships make clear that the macro environment can be understood only in a systemic way. In other words, ‘the macro environment is presented as a system of interrelated segments; every segment is related to and affects every other segment’ (Fahey et al., 1986: 28).
Paragraph 2.3.2.2: Constructs for describing environmental evolution
The original framework by Fahey et al. (1986) presents three constructs for describing changes in environmental segments: types of change, forces driving change and type of future evolution. In this research only the second construct is of relevance and therefore taken into account. For analytic purposes it is of importance to consider the forces driving change or forces behind the trends and developments. Figure 2.3 showed that the four categories are related to each other in a systemic way. Forces driving change in one category often lie in changes in other categories. It is, however,
Societal develop- ments
Economic develop-
ments
Technolo- gical develop-
ments Political develop- ments
also possible that the forces driving change or developments are located in the segment itself. Therefore, it is important to analyse changes in categories independent of each other and in concurrence in order to distinguish the underlying forces. Hereby it is important to know that driving forces often interact with each other. For a further explanation on the constructs for describing environmental evolution refer to Fahey et al. (1986).
Paragraph 2.3.2.3: Linkages to a firm
Between an organisation and her macro environment two kinds of relationships exist;
indirect and direct. Indirect linkages take place when a macro environmental change has influence on competitive/industry environments and as a consequence has implications for the organisations task environment. In this the competitive or industry environment ‘comprises a firm or a business unit and its competitors functioning in the same industry’ (Fahey et al., 1986: 25). The task environment is seen as ‘the set of customers, suppliers, competitors, and other environmental agencies such as trade associations directly related to the firm’ (Fahey et al., 1986:
25). Furthermore, macro environment may have direct implications for the task environment of an organisation without being of influence on an industry in general.
Two remarks are in order here. First of all, the relationships can be considered as threats as well as opportunities to organisations, having as a consequence responses.
Next to this, the direction of relationships is unspecified. The framework allows consideration of both of the environments affecting organisations and vice versa. ‘The theme of linkages lies at the core of strategy formulation and implementation’ (Hofer et al., 1978; cited by Fahey et al., 1986: 32) and is elaborated on below.
Paragraph 2.3.3: Relation to strategic management
The reason why macro environmental analysis is useful is primarily because it serves as a key input into strategic management. The set of key linkages is presented in Figure 2.4: Linkage to Strategic Management on the next page. This figure presents a simplified version of strategic management presented by Hofer et al. (1978; cited by Fahey et al., 1986: 32). There exist three key areas of linkage. First of all, macro environmental analysis offers inputs into the formulation and implementation of strategy. Therefore, it should go before attempts at strategic analyses. Secondly, macro environmental analysis has implications for as well the content as for the process of strategic management. Concerning the former, current and future patterns in macro environment set the stage for strategies that are pursued by organisations:
product-market strategies and political strategies for example (Hofer et al., 1978;
MacMillan et al., 1986; both cited by Fahey et al., 1986). Furthermore, going along with these strategies, outputs of an analysis have implications for organizational structures that are adopted by a firm (Galbraith et al., 1986; cited by Fahey et al., 1986: 32). The latter, the process of strategy formulation and implementation, is influenced by the macro environmental analysis and her outputs, since these outputs condition the vision of the top decision maker’s vision of the future. Thirdly, notwithstanding the fact that environment is supposed to be analysed independently of organisations, various issues that come about during strategy formulation and implementation sometimes generate such analysis. (Fahey et al., 1986).
Indicates key areas of linkage between macroenvironmental analysis and strategic management.
Linkages delineated in strategic management.
Induced triggers for macroenvironmental analysis.
Figure 2.4: Linkage to Strategic Management (Source: Hofer et al., 1978; cited by Fahey et al., 1986:
34; a simplified version of strategic management)
Organisations are alerted by environmental analysis to prospective action domains available to them or that are worthwhile to be explored. These action domains are most of the time not covered expansively during strategy formulation without the inputs coming from a macro environmental analysis. This makes it therefore different from a mainly inside-out focus.
Environmental analysis is part of an overall external analysis (Aaker, 1992). The external analysis is made up further by a customer analysis, a competitive analysis and a market analysis.6 According to Aaker (1992) the external analysis should be prompted by a desire to have an influence on strategy. As can be seen in Figure 2.5:
The role of external analysis, on the next page, an external analysis can play a part in strategy indirectly by distinguishing:
• ‘Significant trends and future events
• Threats and opportunities
• Strategic questions, key areas of uncertainty that could affect strategy outcomes’
(Aaker, 1992: 45).
6 These three analyses are not included in this research.
Macroenviron- mental Analysis
Current
& Future
Patterns Strategy Formulation &
Evaluation Process
Product-Market Strategy
1. Corporate Level 2. Business Unit Level 3. Functional Level
Political Strategies
Strategy Implementation Process
Organization Structure
1. Business Unit 2. Corporate Unit &
Corporate–Business Unit Linkage
Strategic decisions Where to compete
How to compete External
analysis
Identification Analysis
Trends/future events Information-need areas Threats/opportunities Scenario analysis Strategic questions
Figure 2.5: The role of external analysis (Source: Aaker, 1992: 45) As has become clear in this paragraph the interest of environmental analysis lies ‘in environmental trends and events with the potential to affect strategy either directly or indirectly’ (Aaker, 1992: 110). Macro environmental analysis is of concern, because of the assumption that developments in the macro environment affect industries and hence destinies of the firms making up the industry. Environmental analysis is supposed to identify trends and events and assess their likelihood and impact (Aaker, 1992: 110). The next paragraph, therefore, gives an overview of trends and developments, which are described in literature. A short background is given to each of the trends. In so doing it can be assessed what the trends involve.
Paragraph 2.4: Trends and developments Paragraph 2.4.1: Introduction
Naisbitt (1982), Naisbitt et al. (1990) and Popcorn (1991) are trend-forecasting books that describe what general trends are shaping the future. Paragraph 2.4.2. focuses upon Naisbitt (1982). The next paragraph has as her startingpoint Naisbitt et al.
(1990). The trends described by Popcorn are presented in paragraph 2.4.4. The next paragraph gives trends and developments elaborated on in other literature. Paragraph 2.4.6 ends the description of trends and developments by giving some concluding remarks. The described trends and developments are also included as insight for the principal in what is happening in the environment.
Paragraph 2.4.2: Megatrends, Ten New Directions Transforming Our Lives
Naisbitt (1982) has identified ten megatrends. These trends are the outcome of integrating the numerous specific individual trends that occur(ed) in the US (Fahey et al., 1986: 182). It tells about the restructuring of the US. According to Naisbitt the ten megatrends ‘will affect your life and business. Trends tell you the direction the country is moving in’ (Naisbitt, 1982: 9). The purpose is to offer ‘a new context within which to sort out and assess today’s events’ (Naisbitt, 1982: 9). Below these ten trends are described.
Paragraph 2.4.2.1: From an Industrial Society to an Information Society
According to Naisbitt (1982) the information society has its beginnings in 1956 and 1957, when prosperity, productivity and industrial growth rose. 1957 was the
