Introduction
The Bayer AG is a German multinational chemical company that deals in pharmaceutical and was founded in 1863 by Barmen. As a chemical and pharmaceutical company, Bayer AG was the first company to produce aspirin in large quantities at a time when it was considered the best cure in the world. From this point, Bayer AG has strategically placed itself from this time to control the cosmetics and pharmaceutical market in the UK and other reading partners that interact with the UK. In terms of business, Bayer AG has invested in doing research and coming up with new products as a way of ensuring that its brand dominates the market to make it a key player and monopolist in the German market.
The company has organized itself into a holding company and has opened branches all over the world as well as operates as a franchise in other many business destinations all over the world. Due to the specialization aspect, Bayer AG operates as a parent company as we as a subsidiary company known as Bayer Crop Science Limited operating in the UK while the parent company, Bayer AG is stationed in Germany. This paper provides a detailed analysis of the Bayer AG, which is the parent company situated in Germany and its subsidiary, Bayer Crop Science Limited located in the UK answers various questions on its strategy, organizational structure, business model, its role as well as the source of funding particularly to the subsidiary
#1
As a parent company in Germany, Bayer AG has established itself through different models and frameworks to make sure that it holds a strategic position in the chemical and pharmaceutical market in order to propel it to a zone of maximum profits. Bayer AG as a parent firm has institutionalized itself in the home country, strategically positioning itself as a monopolist in the German market in terms of producing drugs used both by animals and human beings. In using the integration/responsiveness IR theoretical framework, Bayer AG, which is the parent company, belongs to the transnational strategy cell of the framework. Under the transnational strategy, Bayer AG operates on a structure that has clear and definite short, medium and long-term strategic objectives. The objectives result from the conducting market studies that indicate the potential of the domestic market as well as the influence of the organization in the local market.
The strategies put in place by the parent company are a reflection of the models that it will use in other subsidiary and franchising companies outside the home market. transnational strategy is the most imposed strategy by the company in the local market is constant restructuring according to the current market trends to allow for relevance and conformity with the market trends. Since the pharmaceutical industry has a lot of competition especially in developed economies, it is important for a business to conduct constant restructuring that should be in tandem with the long-term, short-term and medium goals and objectives of the organization. Through identification of the various patterns and market trends, as a parent company, Bayer AG applies the transnational strategy in the domestic market and takes a period of up to 1 year studying the market and responses of the strategy. Afterwards, the strategy is applied to other subsidiary companies that operate in an almost similar environment or economic situation with Germany.
#2
The transnational strategy employed by Bayer AG in the German domestic market works best with the divisional structure. As a structure that works best in large corporations, the divisional organizational structure employed by Bayer AG ensures that all the units in the domestic market as well as the international markets are harmonized and managed in a fashion that ensures the company reaps maximum profits from the production of chemicals, drugs and other pharmaceutical products. A typical characteristic of divisional organization structure is that it is used in charger companies that operate in a wide geographical area. The scope of operation of such companies like Bayer incudes other separate smaller organizations that fall under the umbrella group so that it can cover the different types of products that the company has diversified into as well as the market areas that the company targets.
The benefit of using the divisional organization structure by the Bayer Company is that the needs of other companies operating in the same market or business environment as the parent company are met rapidly. This results from the idea that the Bayer AG as the parent company understands the market trends in a perfect, which results to efficient prompt decisions that do not need consultation or market studies. Bayer AG operates on a larger scale and although the divisional organizational structure is costly, the company manages to apply it because of the other smaller branches that it has through Germany that help in the reduction of other costs of production like logistical and market study expenses. Bayer AG operates different offices and centers in Germany and through these stations, the company finds it easier to conduct market studies and understand the business environment better in order to apply strategies that are more informed and can help the organization enjoy best sales in the region.
#3
A major partner to Bayer AG is the EcoVadis, which has helped the organization in market research, which has improved the data collection and assessment of Bayer’s supplies in Germany and other international markets. Organizations that outsource assessment functions to other partners about their suppliers are likely to collect unbiased information about supply trends and consumer behavior towards the organization’s product or products. Bayer has used partners to create sustainability in the production and supply of its products through the domestic market as well as subsidiary markets in the US and the UK. The Rugman & D’Cruz’s flagship framework of partnerships is also applied by Bayer AG as a parent company and has helped in the creation of international competitiveness that occurs between the country level and firm level. The Rugman & D’Cruz’s flagship framework has country-specific business advantage because it involves creation of partnerships with parties that are best known to the business. Through this strategy, Bayer AG has used the framework to strengthen its supply and distribution networks.
#4
Bayer Crop Science Limited operates as a subsidiary company in the UK and uses the I/R strategy of the parent company in the implementation and management of its functions. As a business subsidiary, Bayer Crop Science Limited engages in the production of chemicals and pharmaceuticals related to crops and animals. It was opened as a special division to take care of the growing demand of food production in the UK. One activity engaged by a subsidiary company is market research, where the sales and marketing department as a division in the subsidiary company uses the available resources to study the market. This is done with the intention of understanding the trends of production so that there is reduction of wastage during production. It is also done with the aim of market segmentation so that different types of chemicals are produced and supplied to regions where the crops do well and have high yields in terms of production. This has played a huge role in making the subsidiary successful in terms of research and market analysis.
Bayer Crop Science Limited plays the role of management representative of the parent company, Bayer AG situated in Germany. As an international organization, Bayer Ag uses Bayer Crop Science Limited as a center of management in checking the progress of the production and distribution of its products across the England market. Most subsidiary and franchise business are strategically placed so that the parent company can understand the region in order to implement other decisions and business strategies. Subsidiaries have often been used as a source of information by other partnering companies and business operating in the same industry. Bayer Crop Science Limited provides information about the potentiality of the UK market in the production of other products by the parent company.
#5
The major financing sources of Bayer Crop Science Limited as a subsidiary company in the UK comes from the sale and production of pharmaceuticals and drugs, after which the proceeds are rationed to pay the employees and management functions while the rest is transferred to the parent company in Germany. According to statistics, Bayer AG, the parent company uses approximately €2 billion in running Bayer Crop Science Limited in the UK annually. From this amount, the company collects an approximate €3.1 billion from the subsidiary as net profit. Additional investment conducted by subsidiary company is conducted by the parent company and it has to ascent to the investment after extensive research and reports indicating on the viability of the investment. The funding is controlled majorly from the parent company through its representatives in the UK business region. The harmonization strategy implemented by most multinational corporations ensures that funding is done by the parent company. The Bayer AG company controls the funding process of all its subsidiaries and franchises in Japan, Brazil, UK, Turkey as well as Africa.
Bayer AG, the parent company uses market analysis and financial reporting as a mechanism to fund the subsidiary. Financial reporting allows accountability and indicates the right channels of cash flow, which helps in the determination financial direction both by the subsidiary and its parent company. Financial analysis also helps in assessment of the needed funds for budgeting especially in developing a strategic plan. Financial strategic plans run for a period of five years to ten years and allow the business to study the market and implement the plan in steps so that the business carries out financial activities for effective profit making.
In conclusion, a critical analysis of the Bayer AG, which is the parent company situated in Germany and its subsidiary, Bayer Crop Science Limited located in the UK answers various questions on its strategy, organizational structure, business model, its role as well as the source of funding particularly to the subsidiary. Bayer AG has other subsidiary companies all over the world and their management reflects the success of the company.
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