STUDY OF BUSINESS STRATEGY OF NOVARTIS

Prepared by:
PM-20-22 Akash Sandilya

 OVERVIEW
Novartis International AG is a Swiss multinational pharmaceutical
company based in Basel, Switzerland. It is one of the largest pharmaceutical
companies in the world.
In 2014, Novartis established a center in Hyderabad, India, in order to offshore
several of its R&D, clinical development, medical writing and administrative
functions.[14] The center supports the drug major's operations in the
pharmaceuticals (Novartis), eye care (Alcon) and generic drugs segments
(Sandoz).
Novartis mission and vision statements are an indication of the potential a
company can gain from uniquely crafted corporate statements. Novartis deliver
better outcomes for patients through science-based innovation in growing areas
of healthcare.
In this case, Novartis vision, mission clearly states the impact the company
desires to have on the care of its patients. The corporate mission statement
directly relates to this concept. It outlines the strategies a company would
exploit to achieve its vision together with its expectations.

 VISION
Vision: Our vision is to be a trusted leader in changing the practice of
medicine
Novartis uses science-based innovation to address some of society's most
challenging healthcare issues and to discover and develop breakthrough
treatments and find new ways to deliver them to as many people as possible.
They also aim to provide a shareholder return that rewards those who invest
their money, time and ideas in our company.
  MISSION
Mission: Our mission is to discover new ways to improve and extend
people's lives
So the mission of Novartis is simple yet powerful to depict the mission
statement as the company wants to excel in the R&D department to find new
discoveries and ways to improve and extend people’s lives.
 VALUES
Values: Strong values define our culture and help us execute the Novartis
strategy in line with our mission and vision.
These values are:
Innovation - by experimenting and delivering solutions
Quality - by taking pride in doing ordinary things extraordinarily well
Collaboration - by championing high performing teams with diversity and
inclusion
Performance - by prioritizing and making things happen with urgency
Courage - by speaking up, giving and receiving feedback
Integrity - by advocating and applying high ethical standards every day

 OBJECTIVES
Novartis objectives are aligned with its vision, mission and values which helped
them to make their goals clear and impactful.
Novartis must fundamentally reimagine the way they work and create a culture
that brings out the best in the people to fulfil their purpose of reimagining
medicine to improve and extend people’s lives. They believe they can drive
innovation, performance and reputation, and enhance our people's work
experience by transforming our culture to be
more Inspired, Curious and Unbossed.
 1. Inspired
Their purpose answers the desire many people have for meaning and fulfillment
in their work, so they want to make sure our people see the huge contribution
that their work makes, to empower them to be their best selves every day and
achieve their personal and professional goals.

2. Curious
They believe curiosity fuels discovery. To develop innovative medicines and
breakthrough healthcare solutions, they need curious minds with a constant
desire to learn and a passion to discover new and better ways of doing things.
 3. Unbossed
Their people are most creative and productive when they are empowered to
shape their work environment and pursue their ideas. Focusing on encouraging
leaders to remove obstacles and to empower their teams to reach their full
potential and are also equipping them with tools to be more self-aware and to
set clear goals.

 HISTORY
Novartis was created in 1996 through a merger of Ciba-Geigy and Sandoz.
Novartis and its predecessor companies trace roots back more than 250 years,
with a rich history of developing innovative products. From beginnings in the
production of synthetic fabric dyes, the companies that eventually became
Novartis branched out into producing chemicals and ultimately
pharmaceuticals.
a. 1993:  The Company entered into a joint venture agreement with Ciba-
Geigy Ltd., Switzerland and Chong Kun Dang Corporation, South
Korean to establish a joint venture company Ciba CKD Biochem Ltd to
manufacture anti-Tuberculosis Drug Rifampicin. The plant was to be set
up at Mahad, Maharashtra with an installed capacity of 125 tonnes per
annum
b. 1998: Novartis (India)'s pharmaceutical business is likely to get a bonus
addition in November this year with the return to its portfolio of cough
and cold preparation Triaminic.
The board of Novartis India has approved transfer of the company's 29.22
lakh (9.17 per cent) equity shares held by Ciba India Pvt Ltd in favour of
Novartis AG of Switzerland.
c. 1999: Novartis India Ltd is close to finalising its first acquisition in India.
The company, through its eyecare business, CibaVision, is buying an
eyedrop brand called Clearine from Optrex Ltd, a part of the United
Breweries group.

d. 2000:  Novartis India, the Indian subsidiary of the Swiss pharma giant,
has become a signatory to the Global Working Alliance on Tuberculosis
drug development, paving way for its greater involvement in anti-TB
drug research. The Compay has launched Calcium Sandoz as an over-the-
counter product in India in two flavours, American Ice Cream and
Orange.
e. 2003: Novartis India Ltd has announced the appointment of Anil Matai as
the Chief Executive Officer, Pharmaceuticals.
-Novartis India Ltd has unveiled Myfortic - an enteric-coated advanced
formulation under the immunosuppresant category.
f. 2005: Novartis India members approve sell of Rifampicin bulk drug
business, by Postal Ballot.
g. 2010: Novartis announced that officials from the European Commission
(EC) have approved its meningitis vaccine - Menveo.
-Novartis bets on rural sales initiative ‘Arogya Parviar’ to double its
reach in India.
h. 2012: Novartis India has recommended dividend Rs 10/- per equity share
of Rs .5 each
i. 2016: Novartis is featured as one of the 2016 "Top 100 Global
Innovators". Novartis is proud to once again rank #2 in the FORTUNE
World's Most Admired Companies Pharmaceuticals Industry list.
Novartis ranks third in 2016 Access to Medicine Index Two Novartis
products receive 2016 Prix Galien Foundation Awards. ovartis received
an A- rating and is recognized among category leaders in healthcare in
the 2016 CDP Climate Score.
  AWARDS

a. 2016:
1. Novartis Pharmaceuticals Corporation recognized among the best
employers for diversity in the US in DiversityInc's Top 50 Companies
for Diversity.
2. At its Responsible Business Awards 2016, Ethical Corporation
recognized the Novartis 2015 CR Performance Report as “highly
commended” in the category Best Sustainability Report.
3. Novartis is featured as one of the 2016 “Top 100 Global Innovators,”
as compiled by Clarivate Analytics (formerly the “IP & Science”
division of Thomson Reuters).
b. 2017:
1. Novartis is listed for the third consecutive time. Novartis is again
honored to be included in the 2017 “Top 10 Pipelines” list published
by MedAdNews.
2. Novartis is proud to once again rank #2 in the FORTUNE World's
Most Admired Companies Pharmaceuticals Industry list. This is the
third consecutive year that Novartis ranked as the second-most-
 admired company in our sector, and the 13th consecutive year that
Novartis is in the top three.
c. 2018:
1. Novartis has been named #1 most innovative biotech company and
ranked #21 overall by Fast Company. The ranking identifies the most
notable innovations of the year.
2. IdeaPharma’s PII ranks companies on their ability to bring products
from early development to market and commercialize them
successfully. Novartis moved up 9 spots, from #12 in 2017.
3. In PatientView’s 2018 “Corporate Reputation of the Pharmaceutical
Industry – from the Patient Perspective” Novartis ranked #4 overall.
The company was also the number one partner for patient groups and
ranked first in corporate brand awareness.
d. 2020:
1. Novartis has again been ranked #4 by Fortune Magazine as one of the
most admired pharmaceutical companies in the world.
2. Novartis receives bronze award for best People Development Program
2020
3. Novartis enters the Top 50 Most Innovative Companies list by Boston
Consulting Group
e. 2021: Novartis is recognized as a Global Top Employer for 2021
Flow for strategic decisions for Vision and Mission:
Our strategy is to build a leading, focused medicines company powered by
advanced therapy platforms and data science.

Strategic priorities

As we implement our strategy, we have five priorities to shape our future

and help us continue to create value for our company, our shareholders and
society.

Unleash the power of our people

We are transforming our culture to ensure people can fully apply their talent
and energy. We’re creating an organisation where people are inspired,
curious and unbossed.

Deliver transformative innovation

In our pursuit of transformative treatments, we challenge medical paradigms

and explore possibilities to cure disease, intervene earlier in chronic
illnesses, and find ways to dramatically improve quality of life.

Embrace operational excellence

We are rethinking how we work, embracing agile teams and building better
productivity into our company to free resources that we can invest in
innovation and help boost returns.

Go big on data and digital

We aim to spark a digital revolution at Novartis, embracing digital

technologies, advanced analytics and artificial intelligence to help drive
innovation and improve efficiency.

Build trust with society

We strive to build trust with society through our efforts to operate with high
values and integrity, and to find new ways to expand patients’ access to our
treatments.

 PORTER FIVE FORCES

Porter Five Forces Analysis is a strategic management tool to analyse

industry and understand underlying levers of profitability in a given industry.
Novartis AG managers can use Porter Five Forces to understand how the
five competitive forces influence profitability and develop a strategy for
enhancing Novartis AG competitive advantage and long term profitability in
Drug Manufacturers - Major industry.
 1. Threats of New Entrants
New entrants in Drug Manufacturers - Major brings innovation, new ways of doing
things and put pressure on Novartis AG through lower pricing strategy,
reducing costs, and providing new value propositions to the customers. Novartis
AG has to manage all these challenges and build effective barriers to safeguard its
competitive edge. Barriers to new entrants is high.

How Novartis AG can tackle the Threats of New Entrants

a. By innovating new products and services. New products not only bring new
customers to the fold but also give old customer a reason to buy Novartis AG
‘s products.

b. By building economies of scale so that it can lower the fixed cost per unit.

c. Building capacities and spending money on research and development. New

entrants are less likely to enter a dynamic industry where the established
players such as Novartis AG keep defining the standards regularly. It
significantly reduces the window of extraordinary profits for the new firms
thus discourage new players in the industry.

2. Bargaining Power of Suppliers

The powers of suppliers are high when the products provided by

suppliers are scarce or do not have multiples providers. This is
not the case with drug suppliers for the pharmaceutical
companies which is the reason for the low bargaining power of
suppliers. But in case of equipment supplier of pharmaceutical
machinery, the suppliers are less as compared to drug suppliers.
So, the bargaining power of suppliers is low. The machinery is
technical equipment that is not possible to be provided by
 anyone. In the case of machinery, the power of suppliers is high.
Therefore, balancing the impact of both types of suppliers for
the pharmaceutical industry, the overall bargaining power of
suppliers is moderate.
All most all the companies in the Drug Manufacturers - Major
industry buy their raw material from numerous suppliers.
Suppliers in dominant position can decrease the margins Pfizer
Inc. can earn in the market. Powerful suppliers in Healthcare
sector use their negotiating power to extract higher prices from
the firms in Drug Manufacturers - Major field. The overall
impact of higher supplier bargaining power is that it lowers the
overall profitability of Drug Manufacturers - Major.
How Novartis AG can tackle the Bargaining Power of Suppliers

a. By building efficient supply chain with multiple suppliers.

b. By experimenting with product designs using different
materials so that if the prices go up of one raw material,
then company can shift to another.

3. Bargaining Power of Buyers

Buyers are often a demanding lot. They want to buy the best offerings
available by paying the minimum price as possible. This put pressure on
Novartis AG profitability in the long run. The smaller and more powerful
the customer base is of Novartis AG the higher the bargaining power of
the customers and higher their ability to seek increasing discounts and
offers.
 How Novartis AG can tackle the Bargaining Power of Buyers

a. By building a large base of customers. This will be helpful in two ways. It

will reduce the bargaining power of the buyers plus it will provide an
opportunity to the firm to streamline its sales and production process.

b. By rapidly innovating new products. Customers often seek discounts and

offerings on established products so if Novartis AG keep on coming up
with new products then it can limit the bargaining power of buyers.

c. New products will also reduce the defection of existing customers of

Novartis AG to its competitors.

4. Threats of Substitute Products or Services

When a new product or service meets a similar customer needs in
different ways, industry profitability suffers. For example, services like
Dropbox and Google Drive are substitute to storage hardware drives. The
threat of a substitute product or service is high if it offers a value
proposition that is uniquely different from present offerings of the
industry.

How Novartis AG can tackle the Treat of Substitute Products / Services

a. By being service oriented rather than just product oriented.

b. By understanding the core need of the customer rather than what the
customer is buying.

c. By increasing the switching cost for the customers.

5. Rivalry among the Existing Competitors

If the rivalry among the existing players in an industry is intense then it
will drive down prices and decrease the overall profitability of the
 industry. Novartis AG operates in a very competitive Drug Manufacturers
- Major industry, i.e. High rivalry among the existing competitors.

This competition does take toll on the overall long term profitability of
the organization.

How Novartis AG can tackle Intense Rivalry among the Existing

Competitors in Drug Manufacturers - Major industry

a. By building a sustainable differentiation

b. By building scale so that it can compete better
c. Collaborating with competitors to increase the market size rather
than just competing for small market.
d. Implications of Porter Five Forces on Novartis AG
By analyzing all the five competitive forces Novartis AG strategists can
gain a complete picture of what impacts the profitability of the
organization in Drug Manufacturers - Major industry. They can identify
game changing trends early on and can swiftly respond to exploit the
emerging opportunity. By understanding the Porter Five Forces in great
detail Novartis AG 's managers can shape those forces in their favour.
  STRATEGIC DECISION BY NOVARTIS INDIA
At Novartis, we strive to be a trusted healthcare leader and cultivate a
corporate culture of high ethical standards. We promote innovation,
quality, collaboration, performance, courage and integrity, which we
regard as essential values and behaviors in our interactions with patients,
healthcare partners and society at large.
Our key focus areas of Business Responsibility include expanding access to
healthcare and doing business responsibly. This combination of
responsible business and making medicines accessible is an important
element supporting our company mission, vision and strategy. In this
endeavor we adopt an array of approaches such as innovative business
models, equitable commercial models, zero-profit initiatives, patient
assistance programs and strategic philanthropy.
We at Novartis strongly believe that high performance with integrity is
fundamental to the way we operate and is critical to maintaining the support
of society and governments. Our Code of Ethics sets high ethical
standards, and comprehensive training ensures our employees know how
to apply these standards in their work.

A MULTI-PRONGED STRATEGY
In grappling with the crisis, Novartis teams initiated multiple actions, which
continue to be fundamental to the Company’s operations, with the pandemic in
its second year. These include:
Consistent follow-up with manufacturing plants and the global Logistics
Team for Novartis products imported as finished goods – medicines packed in
boxes and cartons – there was the very real issue of raw material availability
across the globe. Packing material and other ancillary goods were also
impacted.
In India, the External Supply Operations (ESO) teams worked with contract
manufacturers to understand the issues involved. Since ESO plants were
closing down at short notice thanks to the lockdown, Novartis’ Supply Chain
Management (SCM) team worked closely with the ESO team and transporters
to ensure expeditious transportation from Contract Manufacturing Organisations
(CMOs). They also worked closely with the ESO team to prioritize production
for Novartis’ products at the CMOs.

Creating awareness and visibility of inventory with stakeholders at a

country level, Novartis created an Inventory and Supply Dashboard which
provided a quick overview of inventory coverage (warehouse stocks, in-transit
and open orders), thus creating visibility and providing comfort to business on
inventory availability.
Typically, at an aggregated Company level, Novartis has an inventory of about
one-and-a-half months to two months across the country, which can be
sustained even if supplies were to dry up for any reason. However, with
countrywide distribution, there could be pockets that face shortages.
Down the chain, distributors and stockists typically hold 15 days to a
month’s worth of inventory. At the pharmacy level, the inventory is leaner, a
week or 15 days at the most. Because shelf space is at a premium, pharmacies
expect frequent replenishments to be available.
In all, from the start to the end point, there are three to three-and-a-half months’
worth of inventory. Keeping track down to the last mile in a huge country like
India is certainly a complex task!
Sensitizing support systems and prioritizing India supply through various
forums Novartis worked proactively with the Regional SCM team to ease
supply challenges and develop an escalations process to create priority for
supplies to maintain continuity.
 CORPORATE COMPETENCIES

a. Novartis Core Competencies

1. Customer/Quality Focus
 Assigns highest priority to customer satisfaction
 Listens to customer and creates solutions for unmet customer needs
 Establishes effective relationships with customers and gain their trust
and respect
 Monitors quality standards to enhance customer satisfaction

2. Innovation and Creative

 Comes up with a lot of new and unique ideas
 Challenges “status quo”; does not settle for the first right idea
 Makes new connection work by seeing relationships between
seemingly disconnected elements synthesizes odd combinations
3. Leadership
 Establishes clear directions and sets stretch objectives
 Aligns and energizes associates behind common objectives
 Champions the Novartis Core Competencies
 Rewards/encourages the right behaviors and correct others
 Fast/Action-oriented/Initiative/Simplicity
 Is action-oriented and full of energy to face challenging situations
 Is decisive, seizes opportunities and ensures fast implementation
 Strives for simplicity and clarity. Avoids “bureaucracy”

4. Empowerment/Accountability
 Sets clear performance targets and a well-defined “playing field” with
corresponding personal accountability
 Defines clear-cut, flexible involvement process (involves the right
associates in the right situation at the right time)
 Fully utilizes diversity of team-members to achieve superior business
success
 Shares consequences of results with all involved

5. Commitment/Self-discipline
 Fully supports and implements decisions
 Is 100% committed to achieve agreed-upon targets (strives to achieve
the “slightly impossible”)
 Pursue targets with a need to finish. Does not give up, especially in the
face of adversity

6. Mutual Respect/Candor/Trust/Integrity/Loyalty
 Establishes mutual respect and trust in dealing with others
 Acts and behaves in accordance with his/her words
  Commits to honesty/truth in every facet of behavior and demonstrates
ethical conduct
 Keeps confidences, admits mistakes and does not misrepresent self-
personal gain

b. Novartis Distinct Competency

Novartis International AG has a well-defined framework in all the different
aspects which is consent to a pharmaceutical company. With clear and distinct
mission and core competencies, the management has empowered the associate’s
take on investing ideas and work for the company. It is also commendable that
as of now, Novartis being a MNC has complement with all the different
countries’ legislations in manufacturing drugs and carrying out researches.

Nevertheless, there are some recommendations that Novartis could implement

in order to shape an even better pharmaceutical company with excellent
progress in business and development. At the outset, Novartis should review
and restructure (if necessary) the proportion of focus that has to be given to the
different sectors in this company. As of now, Research and Development sector
has been prioritised too much. In latter stages, there may be a possibility for
Novartis to encounter high rate of discontinuation in pre-approval products.

Apart of that, I also recommend Novartis to focus on resources management.

One of the implementation that they can uphold is to analyse their resources
well and identify the rate of resource wastage. As soon as they have recognised
this factor, they would be able to systematically distribute the resources for
future researches.

In conclusive, I would like to quote that Novartis International AG has the

potential to develop to be the world’s largest pharmaceutical company if they
have employed a better marketing strategy and a comprehensive review system
in all the aspect that would affect their business and development.