Salix pharmaceuticals-case analysis
Introduction
Salix pharmaceutical is a leading developer, marketer, and licensure of pharmaceutical products used in gastroenterology treatments (Chey et al., 2015). Randy Hamilton and Lorin Johnson, who were friends and former employees of California Biotechnology Inc., founded Salix pharmaceuticals specializing in the treatment of gastrointestinal diseases. The firm has its headquarters in Bridgewater, New Jersey, within the New York Metropolitan ar. Salix pharmaceutical dedicates most of its resources to activities that increase its sales volumes, such as marketing. As of 2019, the firm recorded a total of $ 840.9 million, with a workforce of 893 employees. Salix pharmaceutical’s main competitors are Impax and Taro.
Statement of the problem
Historically, Salix pharmaceutical has employed the technique of market adaptation in which they acquire their drugs at the last stages of development. The company does external sourcing of its products. According to Chey et al. (2015), the current long-term problem that the firm faces are deciding on adapting diversification as a future strategy. Alternatively, the company can choose to remain focused on its existing policy of niche marketing of pharmaceuticals used in the gastroenterology treatment. Creating sustainability in profitability by reducing operating expenses is another long-term problem faced by the firm’s management. The company incurs a lot of costs during the pre-approval stages. These costs are due to the Federal Drug Administration, which requires that all drugs go through the three pre-trial phases. Founded over thirty years ago, Salix pharmaceutical is still struggling to market itself as the world’s leading pharmaceutical company specializing in bowel illnesses. The inability of the firm to package and market the efficacy of its drugs locally and internationally is a short-term problem.
SWOT analysis
A SWOT analysis is a strategic planning technique that identifies the company’s main strengths, weaknesses, opportunities, and threats that provide fresh perspectives on the firm (Morgovan et al., 2015). Salix pharmaceutical company has several strengths. Firstly the company has succeeded in acquisitions and in-licensing deals that have boosted its overall performance. The firm has a strong performance of its top products in the market. Salix pharmaceutical has established a robust collaboration with strategic suppliers of pharmaceutical products. Recently, the company has faced lawsuits emanating from ethical issues.
On the other hand, the company has opportunities in the specialty pharmaceutical sector. The growth in demand for pharmaceuticals in the United States provides a business opportunity for Salix pharmaceuticals. The development of conceptually new products is another opportunity for the firm. Salix has the opportunity to expand globally through franchising. However, Salix pharmaceutical has threats in the forms of healthcare reforms in the United States on drug pricing policies, and liability products are the main threats to the company.
Causes of the problems
The pharmaceutical industry today is highly competitive. Thus Salix pharmaceutical management must consider the need to change the firm’s strategy, mission, and business model (Morgovan et al., 2015). In the case of Salix pharmaceuticals, the main problems emanate from the weaknesses and threats, as captured in the SWOT analysis. Salix pharmaceutical has several weaknesses which include; lack of manufacturing capacity, which increases the dependency risk. A high dependence risk lowers the company’s competitive advantages. According to the theory of competitive advantage, competitive advantage is achieved when a firm implements specific actions that outperform its rivals. Therefore, for Salix pharmaceutical to beat its competitors, the company must implement strategies to reduce the risk of overdependence on pharmaceutical products.
Salix pharmaceutical company incurs a lot of expenses during the pre-approval stages as per the requirement of the FDA, which increases the company’s operating costs. According to the cost minimization theory, reducing expenses leads to improved cash flows and increased profits (Morgovan et al., 2015). The strategy to cut costs must focus on the cost- reduction actions that do not severely impact the company’s income and customer service.
Salix pharmaceutical has been unable to market its products both locally and n the international market effectively. According to Morgovan et al. (2015), the inability of the firm to market its products by employing the PESTEL model has hindered its ability to enter new global markets, especially in emerging markets, which offer enormous business opportunities growth.
Decision criteria and alternative solutions
Salix pharmaceutical can diversify its range of products to reduce the overdependence risks. Diversification into other products is an essential strategy that the firm can adopt to remain competitive because it would enhance cost reduction. Manufacturing pharmaceutical products that do not require the mandatory FDA four-year pre-trial phases would significantly help the company reduce the operating costs (Chey et al., 2015). However, this strategy may be costly due to the high costs involved in drug testing and trials.
Recommended solutions, implementation and justification
The most suitable solution recommended for Salix pharmaceuticals is implementing the product diversification strategy. According to the diversification theory, the company reduces the risks associated with the production of a single line of product through diversification (Morgovan et al., 2015). Through diversification, Salix pharmaceutical will expand its product portfolio hence increase in revenues. To implement the diversification strategy, the company will have to analyze the product range offered by the competitors in the pharmaceutical sector. The company should also review its ethical code of conduct to minimize lawsuits resulting from unethical business conduct. Resolving ethical issues will help the company rebuild trust with its strategic partners. The company should also search for other drugs that treat other inflammatory illnesses due to their high occurrence incidences.
Conclusion
Salix pharmaceutical is the leading manufacturer of specialty pharmaceutical products used in the treatment of intestinal illnesses. The firm outsources its products at the final levels of drug development. The company lacks adequate manufacturing capability, thus relies on strategic suppliers. The firm can improve its performance through product diversification and cost reduction. Diversification will broaden the company’s product portfolio, which will increase the sales hence higher profitability as well as reduced risks of overdependence.
References
Chey, W. D., Lembo, A. J., Phillips, J. A., & Rosenbaum, D. P. (2015). Efficacy and safety of tenapanor in patients with constipation-predominant irritable bowel syndrome: a 12-week, double-blind, placebo-controlled, randomized phase 2b trial. Gastroenterology, 148(4), S191-S192.
Morgovan, C., Olah, N. K., Popescu, C., Ardelean, M., Toma, C. C., Juncan, A., … & Ardelean, S. (2015). A Study Regarding The Marketing Strategies In The Class Of Gemmotherapic Products. Jurnal Medical Aradean (Arad Medical Journal), 18(1), 67-71.