Essay About Oli Paradigm And Pharma Company

Strategic Alliance: Case Study in Competitive Positioning
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CASE 1: Strategic AllianceCOVERED LECTURES:Chapter 01 Multinational Financial Management                                                                   Chapter 04 Financial Goals and Corporate Governance                                      Chapter 17 Foreign Direct Investment (pp. 512-518)                                              KEY NOTESContentKey Information from ArticlesKey Points to discussIn-class discussionLink to Concepts/TheoriesLocal family-owned Pharma company (LAFAPE) in Lima, Peru. CEO & co-founder is Mr. Fausto. President is his sister, Macarena.Ms. Marina, MBA intern in 6 mths. Her assignments in 1-month include: One-month rotational training on company activities & operations.brief meeting with CEO on parameters of her assignment.written report on recommendations + strategy to utilize biz resources.oral presentation on key issues.Sources of info – 3 references: (1) literature on international expansion for MNEs.(2) Peru pharma industry review (market structure + growth trends).(3) company profile (background, ops, financial perf. & prospects).Ref 1: Internationalization process in literatureGlobalization process – 3 phases:(1) Domestic phase: focus to develop competitive advantage. Local sources, local customers. Transactions in local currency. Credit quality based on domestic guidelines.(2) International phase: Foreign sources, foreign buyers. Expanded scope of ops. Risk exposure. (3) Multinational phase: Physical presence abroad. OLI paradigm.- OLI paradigm: explain reasons MNEs choose FDI over other modes of entry (eg. Licensing, joint ventures, mgt contracts). FDI decision succeed by 3 factors: (i) O- owner specific: competitive advantage in home market that can be transferred abroad.(ii) L- location specific: specific market with attractive characteristics for competitive advantage.(iii) I- internalization: effective control of information within org. Low cost financing, minimize transaction costs. Political risk. => Strategic alliance (SA): to mitigate FDI risk. SA = A cooperative arrangement among firms in diff. countries. Diff. forms of arrangements: (1) cross-border SA (2 firms share ownership, exchange stock)(2) outsourcing of a biz function (save cost, more effective).(3) joint marketing & servicing: each partner represent the other in certain markets. Pros: increase profits & market share. Ease of entry to new market. Sharing of knowledge & risks. Gains from synergy & comp advantage.Cons: autonomy loss.Fail reasons: partner incompatibility -> divergence, national cultures/values, individual partner’s goals, lack of coordination or mistrust.Ref 2: Pharma industry in PeruGlobally: est. $1.6 trillion (2016)slow growth in developed marketsLatin American: est. $45 bil (2016)industry growth: 10% per annumeconomic growth in LA countriesincreased population of aged abv 65yrsnational govt provide citizens more access to healthcarePeru: population: 30 milGDP growth: 6.9% (2011)Lowest inflation rate in LAMarket-oriented economic reforms, privatisationsUrban demand on improved healthcare &pharmaPharma industry in Peru:Expanding, $750 mil (2010)Market growth: 17%-20% /year (2011-2016)Rural market is potential.Lima market:Sizeable urban populationCover 60% of pharma total marketNational total market made up by 3 channels:Horizontal sales: include. private clinics + pharmacies, served by distributors. Spot sales= 14,000 (stores or POS)Chains: served thru major chainsInstitutional (30%): served by Peruvian state agencies (social security, health ministry). Procurement by pharma comps.Ref 3: Company profileFamily owned, founded in 2002. Company Name: LABO. Objective: sell pharma products by own brands & genericProduct brand: DIGEMID. Target Products: pills, syrups, ointments, creams2006: FTA signed, Peru becomes regional operational hub. US exporters entering market => company change strategy:Invest in a new pharma start-up -> focus on manufacturing LABO products & for other domestic & regional firms => LAFAPE is created. Manufacture LABO’s 85 brands & 40 generic products & for other chains & labs.LABO then focus on marketing products to chains.LAFAPE Operations:Org Structure – 3 units: technical, operations & finance. Each headed by a VP.Need to hire foreign candidates to benefit from their knowledge of foreign markets.Lines of credit with 4 institutions $860,000Market sizePlant Capacity: current 250 products. Max 500.Procurement: buy raw materials from foreign sources, mainly China, India, Germany, USA.