Project 01: International Expansion

Objective: To understand and analyse the performance of a company in different

markets and the challenges it faces.

Date of Assignment: 2nd August'2022

Date of Submission: 25th August'2022

Course Outcome : ..................

International Expansion  

You will be allocated a unique company for the project.

AmerisourceBergen
Research about the international expansion journey of the company from its inception.

AmerisourceBergen has 26 pharmaceutical distribution centers in the US, nine distribution centers in
Canada, four specialty distribution centers in the US, and over 1 million square feet of packaging
production capacity in the US and the UK. With the addition of World Courier, the largest specialty
courier company in the world, over 150 company-owned offices around the globe were added to the
company.

AmerisourceBergen operates its pharmaceutical distribution business under four primary units:
AmerisourceBergen Drug Corporation (ABDC), AmerisourceBergen Specialty Group (ABSG),
AmerisourceBergen Consulting Services (ABCS) and World Courier. In March 2016 Walgreens Boots
Alliance Inc. announced it would exercise an option to purchase 22.7 million shares of
AmerisourceBergen stock and thereby control 15% of the company. [9]
Identify the countries in which the company has been operating.

Chengdu, China.

Manila, Philippines.

Vilnius, Lithuania.

Belgrade, Serbia.

Select any two countries preferably from different continents.

- “Our new offices, located in key markets in Asia and Europe, will enable us to build relationships with
local customs and regulatory authorities and better position us to serve our customers’ unique needs,
such as the growing demand for temperature control solutions.”

Prepare a report about the expansion in detail focusing on the:

Company’s Brief Profile-

AmerisourceBergen Corporation is an American drug wholesale company that was formed by the merger of
Bergen Brunswig and AmeriSource in 2001. They provide drug distribution and consulting related to medical
business operations and patient services.

They also distribute a line of brand name and generic pharmaceuticals, over-the-counter (OTC) health

care products and home health care supplies and equipment to health care providers throughout
the United States, including acute care hospitals and health systems, independent and chain
retail pharmacies, mail-order facilities, physicians, clinics and other alternate site facilities, as well as
nursing and assisted living centers. They also provide pharmaceuticals and pharmacy services to long-
term care, workers' compensation and specialty drug patients.

AmerisourceBergen handles about 20% of all of the pharmaceuticals sold and distributed throughout
the United States and ranked 10th on the Fortune 500 list for 2020 with over $179 billion in annual
revenue. In 2012, the firm was the largest by revenue based in Pennsylvania.

SWOT ANALYSIS

Initially we will go with SWOT analysis of AmerisourceBergen in US

Strengths
The strengths of AmerisourceBergen looks at the key aspects of its business which gives it competitive
advantage in the market. Some important factors in a brand's strengths include its financial position,
experienced workforce, product uniqueness & intangible assets like brand value. Below are the
Strengths in the SWOT Analysis of AmerisourceBergen :

1. Strong cash flow & financial position

2. They have acquired the world courier group

3. Presence of highly efficient distribution network

4. Efficient ERP system

5. Has a strong employee base of over 10,000 employees

Weakness

AmerisourceBergen Weaknesses

The weakness of a brand are sure parts of its business which are it can improve to build its position further.
Certain shortcomings can be characterized as qualities which the organization is missing or in which the
competitors are better. Here are the shortcomings in the AmerisourceBergen SWOT Analysis:

1. Presence in limited markets and not enough global presence

2.They operate in high volume low margin business, hence impact of cost pressures is very high.

OPPORTUNITIES-

AmerisourceBergen Opportunities
The opportunities for any brand can include areas of improvement to increase its business. A brand's
opportunities can lie in geographic expansion, product improvements, better communication etc. Following are
the opportunities in AmerisourceBergen SWOT Analysis:

1. Increasing access to healthcare due to healthcare reforms in U.S

2. Increasing cost pressures of other pharma companies makes them good clients for AmerisourceBergen
3. Tie-ups and acquisitions of global pharma brands and hospitals

THREATS
AmerisourceBergen Threats

The threats for any business can be factors which can negatively impact its business. Some factors like
increased competitor activity, changing government policies, alternate products or services etc. can be
threats. The threats in the SWOT Analysis of AmerisourceBergen are as mentioned:

1. Disruption of global supply chain due to natural disasters

2. Economic recession affects prescription pharmaceutical business, which in turn poses threat to
AmerisourceBergen
3. Strict govt policies relating to the pharma industry

PESTLE

Political Factors that Impact AmerisourceBergen Corporation

Political factors play a significant role in determining the factors that can impact AmerisourceBergen Corporation's long
term profitability in a certain country or market.

Political stability and importance of Drugs Wholesale sector in the country's economy.

Mandatory employee benefits

Industrial safety regulations in the Services sector.

Product labeling and other requirements in Drugs Wholesale

Economic Factors that Impact AmerisourceBergen Corporation

The Macro environment factors such as – inflation rate, savings rate, interest rate, foreign exchange rate and economic
cycle determine the aggregate demand and aggregate investment in an economy.

Infrastructure quality in Drugs Wholesale industry

Comparative advantages of host country and Services sector in the particular country.

Labor costs and productivity in the economy

Economic growth rate

Social Factors that Impact AmerisourceBergen Corporation
Society’s culture and way of doing things impact the culture of an organization in an environment. Shared beliefs and
attitudes of the population play a great role in how marketers at AmerisourceBergen Corporation will understand the
customers of a given market and how they design the marketing message for Drugs Wholesale industry consumers.

Demographics and skill level of the population

Class structure, hierarchy and power structure in the society.

Education level as well as education standard in the AmerisourceBergen Corporation ’s industry

Culture (gender roles, social conventions etc.)

Technological Factors that Impact AmerisourceBergen

Corporation
Technology is fast disrupting various industries across the board. Transportation industry is a good case to illustrate this
point. Over the last 5 years the industry has been transforming really fast, not even giving chance to the established
players to cope with the changes.

Recent technological developments by AmerisourceBergen Corporation competitors

Technology's impact on product offering

Impact on cost structure in Drugs Wholesale industry

Impact on value chain structure in Services sector

Environmental Factors that Impact AmerisourceBergen

Corporation
Different markets have different norms or environmental standards which can impact the profitability of an organization
in those markets. Even within a country often states can have different environmental laws and liability laws.

Climate change

Laws regulating environment pollution

Air and water pollution regulations in Drugs Wholesale industry

Attitudes toward “green” or ecological products

Legal Factors that Impact AmerisourceBergen Corporation
In number of countries, the legal framework and institutions are not robust enough to protect the intellectual
property rights of an organization. A firm should carefully evaluate before entering such markets as it can lead to
theft of organization’s secret sauce thus the overall competitive edge.

 Anti-trust law in Drugs Wholesale industry and overall in the country.

 Consumer protection and e-commerce

 Employment law

 Health and safety law

Political Factors:

For any business to flourish, it is essential to have a stable political condition. Here are some political conditions which
can impact the pharmaceutical industry :

 Most countries maintain frameworks that include guidelines about safety standards, certifications, etcetera. They also
mark the banned drugs, which may cause health hazards. If a pharmaceutical company fails to follow those regulations, its
business may suffer severely.
 Administrations of most countries try to gain control over the price of the drug to make it affordable for people. It may toll
on the growth of pharmaceutical companies.
 Governments of some countries subsidize the pharmaceutical companies to keep the essential drugs within the
commoners' reach. It helps the companies to survive in the competitive market.

Economic Factors:

The economy of any direct impacts the businesses. The pharmaceutical industry is also affected when the economic
conditions of a country get affected. The PESTEL analysis pharmaceutical industry can identify the economic
conditions which can affect the pharmaceutical companies :

 As the economic conditions of the countries are developing with time, the household income of people is also increasing.
It may allow them some essential drugs. They may have the urge to buy costlier drugs, which were previously out of reach
for many people.
 The researchers are constantly working on drug modification, resulting in more beneficial and potential drug production.
As people are buying those drugs, the pharmaceutical industry is also flourishing.
 The average healthcare spending of the families is increasing. If there are aged people in a family, there are more chances
of high healthcare expenses. It also includes the cost of medicines. It is also giving the pharmaceutical companies to earn
better profit even after following Government guidelines about pricing.
Social Factors:

Socio-cultural factors of any country can impact the industries within the periphery of the country. The pharmaceutical
industry is not an exception, and the sociological conditions dominate it gravely. Here are some sociological conditions
which can impact the growth of the pharmaceutical industry:

 The lifestyle of people has people incredibly fast yet stagnant. As a result, more people are moving towards obesity. Thus,
facing health conditions like diabetes, thyroid, hypertension. The patients need continuous medication to deal with this.
Hence the sales of the pharmaceutical companies are also increasing.
 As the healthcare system has improved all over the country, the number of the aging population is also growing. Hence,
there is a need for more medicines for them than for the younger ones. It creates a greater demand in pharmaceutical
companies resulting in their expansion.
 Many people are concentrating on having a healthy lifestyle while doing exercises, eating healthy. It may result in a
decrease in the demand for drugs in the future.

Technological Factors:

The pharmaceutical industry is greatly dependent on technological innovations. The PESTEL analysis pharmaceutical
industry can show how the technical conditions can affect the business :

 The pharmaceutical industry is greatly dependent on technology. The research and biotechnological innovations have
resulted in the production of drugs that are good in quality and have low production costs. It will allow more people to get
access to medicines that they previously could not afford.
 The drugs require proper storage conditions. Technology has made it easier to preserve medicines and transport them
without getting harmed due to unpleasant conditions.
 Technology has provided pharmaceutical companies with the chance to reach more companies through campaigns. They
can also deliver the medicine at the door, which has increased the reach of the companies. It can also increase the revenue
of pharmaceutical companies.

Environmental Factors:

Environment is a significant concern, and the impact of waste materials on the environment has worried the
environmentalists. Here are some ecological issues which may affect the pharmaceutical industry:

 As the production of drugs is related to a large carbon footprint, many countries are coming up with regulations to
decrease the effect on the environment. As abiding by these regulations may be costly for the new companies, they may
fail to establish their business.
 The production of drugs results in the creation of different biotechnological pollutants. They may be hazardous for
people's health. The company needs to take care of this waste to maintain the safety of the people.
 Like other companies, pharmaceutical companies may take up some corporate responsibilities towards the environment.
They can donate money or campaign for some environmental causes, which can help them create a better image.

Legal Factors:

A nation's legal conditions do not have much direct impact on the pharmaceutical industry. However, there can be some
indirect issues that may affect the growth of the pharmaceutical business. The PESTEL analysis pharmaceutical
industry can help to point out the legal aspects which can work on the growth of the pharmaceutical industry :
 As pharmaceutical products are one of the essential ones, the government always uses laws to control the fraud regarding
the expiration dates and manufacturing of the batch of drugs. If a company fails to adhere to the set guidelines, it may
have to face legal proceedings.
 Pharmaceutical companies are mainly dependent on their database. If they get affected by cyber threats, the customer may
lose their confidence in them. It can affect their business as well.
 Pharmaceutical companies should maintain strict legal guidelines while formulating the framework for their business and
researches. They ensure the safety of the products. It helps them to avoid legal issues. Thus, allowing them to stay away
from the high expenses of proceedings.
VRIO Analysis (value, rarity, imitability, and organization analysis)

VRIO Analysis VRIO stands for Value, Rarity, Imitability, Organization. This analysis helps to
evaluate all company’s resources and capabilities and bring them together into one aggregate table that
includes:

Value
The result of the analysis gives a clear picture of company’s competitive and economic implications,
answering the questions if the resources mentioned above are:

Valuable

 According to the VRIO Analysis of AmerisourceBergen Corporation Holding Co, its patents are a
valuable resource as these allow the firm to sell its products without competitive interference. This results
in greater revenue for AmerisourceBergen Corporation Holding Co. These patents also provide
AmerisourceBergen Corporation Holding Co with licensing revenue when it licenses these patents out to
other manufacturers.

 The AmerisourceBergen Corporation Holding Co VRIO Analysis shows that AmerisourceBergen

Corporation Holding Co’s distribution network is a valuable resource. This helps it in reaching out to
more and more customers. This ensures greater revenues for AmerisourceBergen Corporation Holding
Co. It also ensures that promotion activities translate into sales as the products are easily available.

 According to the VRIO Analysis of AmerisourceBergen Corporation Holding Co, its cost structure is not
a valuable resource. This is because the methods of production lead to greater costs than that of
competition, which affects the overall profits of the firm. Therefore, its cost structure is a competitive
disadvantage that needs to be worked on.

Rare
Having an exceptional or uncommon capability in a firm can lead to competitive advantage. Rarity is
when a firm has a valuable resource or capability that is unique.

The employees of AmerisourceBergen Corporation Holding Co are a rare resource as identified by the VRIO
Analysis of AmerisourceBergen Corporation Holding Co. These employees are highly trained and skilled, which
is not the case with employees in other firms. The better compensation and work environment ensure that these
employees do not leave for other firms.
The patents of AmerisourceBergen Corporation Holding Co are a rare resource as identified by the
AmerisourceBergen Corporation Holding Co VRIO Analysis. These patents are not easily available and are not
possessed by competitors. This allows AmerisourceBergen Corporation Holding Co to use them without
interference from the competition.

The distribution network of AmerisourceBergen Corporation Holding Co is a rare resource as identified by the
VRIO Analysis of AmerisourceBergen Corporation Holding Co. This is because competitors would require a lot
of investment and time to come up with a better distribution network than that of AmerisourceBergen
Corporation Holding Co. These are also possessed by very few firms in the industry.

Imitate
It helps a firm to be leader in the market and helps to gain the first-mover advantage in the market, and
can hence gain competitive advantage.

 The financial resources of AmerisourceBergen Corporation Holding Co are costly to imitate as identified
by the AmerisourceBergen Corporation Holding Co VRIO Analysis. These resources have been acquired
by the company through prolonged profits over the years. New entrants and competitors would require
similar profits for a long period of time to accumulate these amounts of financial resources.

 The distribution network of AmerisourceBergen Corporation Holding Co is also very costly to imitate by
competition as identified by the AmerisourceBergen Corporation Holding Co VRIO Analysis. This has
been developed over the years gradually by AmerisourceBergen Corporation Holding Co. Competitors
would have to invest a significant amount if they are to imitate a similar distribution system.

Organized properly
Resource management is called efficient when resources are available in time and are economical.
These may include financial resources, inventory, skills, production resources, or IT and natural
resources

 The Patents of AmerisourceBergen Corporation Holding Co are not well organised as identified by the
AmerisourceBergen Corporation Holding Co VRIO Analysis. This means that the organisation is not
using these patents to their full potential. An unused competitive advantage exists that can be changed
into a sustainable competitive advantage if AmerisourceBergen Corporation Holding Co starts selling
patented products before the patents expire.

 The distribution network of AmerisourceBergen Corporation Holding Co is organised as identified by

the VRIO Analysis of AmerisourceBergen Corporation Holding Co. AmerisourceBergen Corporation
Holding Co uses this network to reach out to its customers by ensuring that products are available on all
of its outlets. Therefore, these resources prove to be a source of sustained competitive advantage for
AmerisourceBergen Corporation Holding Co.
5.      Mode of entry opted by company in different markets


In 2011, the company acquired IntrinsiQ for $35 million and Premier Souor an undisclosed
amount. In July, Steven Collis replaced Yost as CEO of the company.

 In March 2012, AmerisourceBergen agreed to acquire World Courier Group Inc, a

transportation and logistics provider for the biopharmaceutical industry, for $520 million.

 In January 2015, the company bought MWI Veterinary for $2.5 billion. In October, they agreed
to buy PharMEDium, a compounding drug company, for $2.58 billion.

 On January 3, 2018, AmerisourceBergen acquired H. D. Smith, the largest privately-held

national pharmaceutical wholesaler in the U.S.

 On June 2, 2021, AmerisourceBergen acquired Alliance Healthcare from Walgreens Boots

Alliance for approximately $6.5 billion, made up of $6.275 billion in cash and 2 million shares of
AmerisourceBergen common stock.

6.      Challenges and risks faced by the company

RISKS

The production risk has been identified by the company that company has an informed investors
at about 27% of its employees belong to unions. It may lead to labor’s strikes and different
unproductive activity. The finance and corporate risk factor’s sector average is 29% compared
to AmerisourceBergen’s 28%.

CHALLENGES

 The company will have to face regular inspection and if something found wrong a warning letter
is used. These are the things to be taken care of by the company.

 Regulation means combining administrative and legal measures. ABC has to be aware of
regulations that Government to put ensure drug quality, efficiency, and patient safety.

7.      Corporate Restructuring (if any)

8.      Comparative analysis of the company’s performance on various indicators for all three markets.
Various Indicators

Basis UNITED STATE CHINA

Year of establishment 1992 1997
No. of warehouses 5,461 4,950

Modes of entry AmerisourceBergen agreed to

acquire World Courier Group
Revenue 1,39,537 1,32,509
in mil. USD
Price per Share 68.03 60.08
in USD

No. of employees 179,000 195,000

Bibliography/References:

       
This section will be a listing of all your research
–your sources of information for the project. This must include all the
sources

diverse sources, including relevant research using some of the business

newspapers, magazines.

Organization
and Mechanics of paper:
        
Paper should be well-‐organized, clear and easy to read, laid out effectively, using headings, sub- ‐heads
and bullets.