Introduction
In the today’s competitive business, many companies strive to grow with various kinds of strategies. The success and failure in merging and acquiring other companies have been one of the strongest indicators of the business in the competitive business world. The history shows that many companies have outperformed the industry after successful merger and acquisition. The companies have experienced the upsurge in the business volume and profits after the merger and acquisition of the companies within the industry. Beyond the benefits measured in dollars, the companies will get other benefits from the merger that is well planned and executed. Few of the benefits include the increased ability to build a partnership with other leaders in the industry, expand the scope of business, enter the international market, etc.
Mergers and acquisitions play a big role in shaping the global medical/pharmaceutical landscape. Most of the companies in the pharmaceutical industries that have been able to maintain the world largest positions in most cases have been involved in mergers and acquisitions. To examine the impact that the mergers and acquisitions have on the individuals companies involved, one looks at the excess total shareholders returns that remain above the industry average. This upsurge in returns is reflected within two to five years after the acquisition, or the merger was done. Also, post revenue growth, margins, new product developments and the products in the pipeline of the company after merger or acquisition resulting from the contribution of both acquiring/merging and acquired/acquiring company are some of the other factors that are considered.
The wave of merger and acquisition did not leave any of the industry untouched. The medical companies like Pfizer Inc. have been able to reap tasteful benefits of acquisition while the companies like Sonic Corporation have not got the opportunity to taste the tasty benefits of merger and acquisition. As stated earlier, the merger and acquisition must be strategically planned to reap its successful benefits. So, this paper will analyze various strategies that were adopted by Pfizer Inc. to acquire various other companies as well as the strategy adopted by Sonic Corporation, the impact upon the merged entity, the various business, and corporate level strategies adopted by the companies before the acquisition. This understanding will put one in the better position to understand the strategies that should be developed and implemented by Pfizer Inc. and Sonic Corporation to make the acquisition successful. This will also enable one to figure out the general framework of corporate and business level strategies for Pfizer Inc to be the industry leader and expand globally.
In this case study we will consider the following companies:
Pfizer Inc.
Pfizer Inc. is the American based pharmaceutical company founded on 1849 and incorporated on 1942. The company has the headquarter based in New York. The company is the manufacturer of medicines and vaccines that are required for various kinds of medical disciplines. Pfizer has remained as one of the top pharmaceutical company for its wide portfolio of medicine and vaccine. The company has the long history of merger and acquisition where it acquired several companies valued at multi-billion dollars. Recently the company is in the process of completing its merger with Allergan for $160 billion.
Pfizer has always strived to be one of the leading companies in the global health industry. The company has spent multimillion dollars in research and development for the development of a wide portfolio of life-saving drugs. In the meantime, the company strives to minimize its cost so that the unnecessary cost can be spent in R&D. The company aspires to be the leader in the Global Established Pharmaceutical (GEP) business. The motive behind the acquisition of companies like Hospira, Wyeth, Kings Pharma and more was to create the value for the shareholders by increasing the profits and EPS. The company strongly believed that by acquiring the companies like Hospira, Wyeth, Pharma, etc., the company’s GEP business was strengthened that could be used as a positioning strategy for the growth in the future (Pfizer, Inc., 2015).
With the acquisition of Hospira, Pfizer’s has now become a leader in GEP business with the growing portfolio of injectable drugs. The company now holds the portfolio of both branded and generic products. By 2020, it is estimated that the market for generic injectable drugs will be around $70 billion, and acquisition of Hospira will permit Pfizer to capture the large sales of this estimate. Moreover, GEP has shown considerable progression on its biosimilars business with the widened product portfolio that will make Pfizer the top firm with best capabilities in development and manufacture of monoclonal antibody (Pfizer, Inc., 2015).
The results have shown that it was a wise decision of Pfizer to acquire Hospira. The company has broadened its portfolio and stood as one of the top manufacturers of the injectable drug in GEP business. Pfizer has become able to beat the tough competition by acquiring Hospira. The acquisition deal of $16 billion has been reaping the benefits and will continue to do so. Taking the note of the business development that Pfizer had experienced after Hospira acquisition, one can say that Pfizer has taken a very good step to be the top in the business with the acquisition.
Sonic Corporation
Sonic Corporation, also known as Sonic drive-in, is a fast food restaurant based in America. Even though the company has started its business from the 1950s but it got incorporated on 1990. It is a chain restaurant based in Oklahoma. The company has its chain in more than 43 states of America that are busy in serving more than 3 million customers each day. The company operates more than 3,600 stores in America and serves the fast needs of people every day.
With the experience gained by operating the outlets in more than 43 states with more than 3600 stores serving more than 3 million customers every day, the company can reap the maximum benefit if it merge or acquire the business that has a close match of the goals and objective of providing the best and quick drive-in tasty food with the unique feel of the 1950s to the loyal customers. For Sonic Corporation, it would be a wise decision if they created a merger or acquire Ruby Tuesday, a US multinational foodservice company. Ruby Tuesday is also a fast food restaurant that provides the food in the home style. The company provides the same type of service with same quality so that the Sonic Corporation do not have to face problem once it acquired Ruby Tuesday. The strategies and policies of both the entities seem to be highly matching in the same industry, which makes it easier for the merger/acquirer entity to implement its strategies and policies with minor modifications. Currently, Ruby Tuesday operates with about 900 stores in the USA alone and many other stores around the world generating $1.3 billion revenue annually. This will be a ripe fruit for Sonic and easiest way to expand globally as they have not expanded their operations globally. This merger with Ruby Tuesday will bring together both the entities to create the meaningful partnership that will facilitate the growth of the business as well as boost the profits.
Pfizer Inc. has always focused on growing its business as a top firm in the industry. The company has been catering the high-quality medicines to the wide range of people. To remain in the top of the industry is not the matter of luck and it needs a well crafted and implemented strategy. Pfizer has been able to maintain success in the international markets utilizing both business-level and corporate-level strategies that focus on catering their products to the wide disciplines of health science. The company adopts several strategies at a business level while it focuses primarily on increasing it product width. By increasing a product width, the company is seeking to capture the wide market. The company focuses on developing varieties of pharmaceutical products that helps to treat the patients of varying nature.
The company’s motive behind this is also to develop the new market. The wide portfolio of products will help the company to enter into the new markets easily. Pfizer Inc. executives are focusing on building high-growth sales capacity in emerging markets while filling in gaps in their existing product lines. There are still the countries in Asia and Africa where there is no availability of sophisticated medicines. Pfizer is looking forward to capturing those markets by developing the medicine that is suitable for the markets of Asia and Africa. To accomplish this, the company is spending millions of dollars in R&D.
Apart from this, at the corporate level, the company is driven by the strategy of merger and acquisition. To complement the business strategy of expanding to a new market and new product development, the company is continuously striving to acquire new companies in the related business but with different product portfolio. The series of merger and acquisition was the result of the same strategy. Apart from investing in R&D for new product development, the company is consistently looking for the companies in the same industry with some different kind of product portfolio so that the company can acquire that company and include the product in the portfolio of the company.
Some of the recommendations I would make for improvement include:
Clearly identifying the new markets/countries that they would like to venture into making considerations of all the requirements in those countries
Identify the other companies that they may be interested in working with either as mergers, acquisition or just temporary contracts that may include their market share from the current rate.
Noting the success that various fast food companies like McDonalds and Subway have maintained over the years with the international business, there are business-level and corporate-level strategies that Sonic Corporation could utilize in order to guarantee their success upon expanding their business. Sonic Corporation’s waiter serve the customers with roller skating. The waiters and waitress with roller skating serve the tasty and healthy food that creates the unique environment. This uniqueness will allow them to succeed internationally.
On the business level, Sonic Corporation can implement the cost leadership strategy. This strategy will allow the company to provide with the foods at a lower price and to make it affordable to a wide category of people. This strategy entails the creation of price or delivering the service at a price that is low enough for people of various levels to enjoy. Sonic Corporation is already onto this strategy by providing Happy Hour meals, where a customer can buy the foods and drinks at half the regular price. This strategy will attract more customers who were previously buying similar drinks and food at a higher price from the competitors. By offering low priced yet tasty and, quality food will not only help the company to expand rigorously but also allow people to enjoy the meals with the best value.
However, the corporate level strategy must be in line with its business level strategy (Wheelen & Hunger, 2004). By the analysis of the company’s business, the most suitable corporate strategy is to maintain the low turnaround rates while expanding globally. The fast food service industry is so crucial that the service delivered by the individual waiter or waitress affect the image of the whole organization. The Too high turnaround of the employees will not create a good image of the company. In addition to that, there is always a risk that an employee might disclose the trade secrets unethically thereby leading to the loss of business. Hence, turnaround must be maintained at low level. In addition to this, when a customer sees a waiter serving him/her on every visit, then the customer feels privileged and have the sense of ownership over the business. This creates a loyal customer for the company. Flexibility in the working hour and work culture will ensure that the productivity will be higher and low turnarounds.
In conclusion, acquisitions and mergers typically help corporations increase their profits and business opportunities in other locations around the world. Though the experience that Pfizer was unique, there are many lessons that can be learned when it comes to successfully acquiring and merging two corporations together. When the correct business-level and corporate-level strategies are utilized, corporations can successfully increase their success and opportunities for growth. Through the evaluation of the strategies used to acquire Hospira as well as the impact that Pfizer’s acquisition of Hospira had in their profits and success, one can better understand how other companies could learn from this experience to success acquire and merge and expand their services internationally.
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