1. Business description
& history
Eli Lilly & Co. is among renowned pharmaceutical
industrial leaders. The company employs more than
41000 people worldwide and has business spanning
158 markets worldwide. The company believes in
exceeding customer's expectations by working creatively
to understand the customer's needs and taking
actions necessary to meet those needs (Official
Website 2003).
The company started in May 1876 in Indianapolis
by a 38 year old pharmacist and veteran of the
US Civil War. Colonel Lilly had been dissatisfied
with the ineffective and poorly prepared medicines
at his disposal. He decided to form a company
that would manufacture medicines of the highest
possible quality, dispose the products to physicians
and the company would be highly streamlined to
incorporate the latest technology for pharmaceutical
production purposes. Together with a young full-time
scientist, he established the newest techniques
in quality evaluation and laid the foundation
for quality pharmaceutical products. This tradition
continued with his son Josiah K. Lilly, Sr. and
two grandsons Eli Lilly and Josiah Lilly Jr. Their
management style, corporate culture and corporate
philosophy continue to progress and lead the company
to the 21st century.
Today Eli Lilly & Co. generate net income
$2.56 billion (2003 estimate) with sales growth
of 14 percent. Pursuing a continuous growth strategy
and progress in the field of pharmaceutical, the
management continues to invest its income in various
projects to discover new products to meet customer's
needs (Annual Report 2003). The company's mission
is to provide for medical needs through internal
research and production specializing in six core
areas: "neuroscience; endocrine disorders;
cancer; infectious diseases; cardiovascular diseases;
and gene regulation, bone and inflammation"
(Official Website 2003). Not only this but the
new medicines discovered in the past decade include
"treatment of cancer, schizophrenia, osteoporosis,
diabetes and cardiovascular complications."
Products include registered trademarks like actos®
Alimta™, Cialis®, Evista®, Forteo™,
Gemzar®, Humatrope®, The Humalog®
Family of Insulins, The Humulin® Family of
Insulins, Iletin® II pork, ReoPro®, Xigris®
and Zyprexa®.
In the past two years the company has streamlined
its infrastructure to increase its pre-tax earnings.
To achieve higher earnings Eli Lilly & Co.
has been involved in many innovative production
process including experiments with biotechnology
and collaboration with other pharmaceutical companies.
2. Environmental Analysis
Eli Lilly & Co.'s management is responsible
for the development of its policies and governance
controls. The company pride itself in designing,
monitoring and revising its internal control system
to provide the decision makers with efficient
information. At the employee level, the company
has set a code of conduct called The Red Book
which applies to all levels of employees. From
time to time the employees are appraised and any
kind of violation of The Red Book results in punishment
through legal actions.
Not only this but the company prides itself as
a leading innovative pharmaceutical company that
continue with the tradition of excellence by keeping
at par with new tools and technology in the industry.
The organization is to extensively capitalize
on business opportunities and venture funds. Initiatives
like Lilly BioVentures, e.Lilly Venture Fund,
and InnoCentive LLFC are evidence of these efforts.
Not only this but the company and its management
especially the CIO believe in the company's flexibility
to be able to meet the challenges within the business
environment. Integrating information systems and
developing an IT based infrastructure of Sun Microsystems
eased outsiders access of the company information
and to communicate with internal business partners
(Glasser 2002). Streamlining the internal structure
not only enables the company effective address
outside challenges but also to effective compete
against other giants like Pfizer, Zenith Goldmine
Pharmaceuticals, Inc., Dr. Reddy's Lab, Ltd. and
Teva Pharmaceuticals.
Since the company is heavily reliant on the legal
and political external environment a mere change
in laws could greatly affect its performance.
For example the pharmaceutical industry depends
on intellectual property rights protection which
allows the companies to innovate and invent new
products. Violation could result in expensive
litigation as well as recouping lost business,
investments and sales.
Similarly, Eli Lilly & Co. realizes the importance
of technology driving the industry which is why
its success is greatly dependent on the IT infrastructure
it maintains. Not only this but it also recognizes
the contribution of the community and the academic
institutions in helping it achieve new therapeutic
approaches (Official Website 2003).
3. Situational Analysis
Strengths
The company has one of the most organized business
infrastructures in the world. With branches spread
out in 158 countries, there is great diversity
and creativity pooled in the company for its management.
The company does not believe in numbers of employees
but in the number of quality employees who could
greatly provide input for effective planning and
decision making.
Together with its infrastructure, the employees
at Eli Lilly are equipped with the latest technology
to innovate and produce new products as and when
the customers desire.
Weaknesses
Despite this fact, Eli Lilly greatly depend on
the government and the pharmaceutical regulators
for its effective strategy. Legal suites as well
as the struggle for retaining rights of protection
have till now protected Eli Lilly from losing
its top position. Yet, the management is fast
losing its strategic edge as customers tend to
take negative view of the financial losses as
a result of these legal suites.
Opportunities
One of the most important aspects that Eli Lilly
has maintained throughout its history is the integrated
approach to health care. Unlike other pharmaceutical
companies that tend to specialize in particular
areas, the company has committed itself in providing
customers with integrated health care services
and products. As a result it tends to infiltrate
the health care system of the country. This approach
greatly influences the kind of opportunities available
for exploiting in the future.
Threats
Yet, the very factor that provides opportunities
to the company remains to be one of disputable
factors. This is because without specialization,
Eli Lilly tend to avail only fragmented shares
of the market which decreases its chances of attaining
top position within the industry.
4. Strategy formulation: review strategic decisions
the company has formulated during its development
and growth.
In the past, the company has been engaged in access
and cost-containment measures. This strategy basically
provides the customers with the choice to access
particular medicinal needs within the cost range.
With the help of Medicaid and Medicare, the US
population has greatly benefited from this structure
and Eli Lilly wants to capitalize on this fact
by prescribing only effective medicines without
redundant costs associated with medical treatment.
On the other hand, from the production point of
view, Eli Lilly has been involved in various ventures
to produce new treatment and medicines based on
its research and development department. This
has been critical to the growth of the company
due to the fact that the industry is heavily reliant
on new and innovative technology for producing
new products and medicines. However, the past
the government has levied restrictions on and
off which has altered most of the strategic efforts
by the company. For this reason, earnings have
decreased significantly.
To resolve the government has again altered its
policies pertaining to the pharmaceutical companies
for the next few years by inducing R&D processes
and rewarding innovative efforts. The FDA has
approved new methods for treatment of diseases
like leukemia and such research development efforts
so as to promote US pharmaceutical companies.
5. Strategy implementation
The restrictions and the new regulations have
to be accommodated by pharmaceutical companies
and Eli Lilly is not indifferent to this approach.
Eli Lilly realized the importance of the information
system and how it would allow the company to remain
connected, communicate, generate funds, create
awareness as well as announce its new strategies.
By implementing its IT infrastructure, it has
in one achieved communication needs for both stakeholders
and shareholders.
Half the competition is won as its internal customers
has become greatly satisfied with the ease and
usefulness of the database of information for
R&D and innovation purposes.
To further the strategy, the company equipped
its offices with computing power, data and storage
capacity via private networks so as to institute
research and development at all levels (Glasser
2002).
Not only has this but Eli Lilly also been involved
in change process management. Through process
re-engineering approach, it has been able to mediate
its business models to various segment of the
business. Entrepreneurial groups as well as e-enterprise
groups could also join in with the company with
least cost structure. The problem of innovation
is thereby resolved through this strategy.
6. Strategy evaluation:
From the above analysis, it is clear that Eli
Lilly's operating environment is highly complex.
Not only does the company compete at the local
level but it is also competing at the global level
as well. Issues like intellectual property rights,
trade marks, brands and research rights all require
great participation of the local governments and
industrial leaders to formulate legal frameworks
for the protection of companies. However, not
all governments are the same. In some countries
there are few regulations while in other regions
of the world, medicinal rights are very strict.
Not only this but it is also clear that the local
companies may pose as threats to Eli Lilly as
they have a better legal standing with the local
government as compared to Eli Lilly which is a
multinational companies. Nevertheless, the current
model of grouping entrepreneurs from the local
level works efficiently as it addresses the local
needs as well as the company's needs to have an
edge over competitors. Ventures like e.Lilly Venture
Funds and e.Lilly all contribute to this direction.
Another aspect of the company is that it relies
greatly on the FDA for formulating internal regulations
and policies. Much of the research and development
strategy reflect the FDA's incentives. The lack
of internal original infrastructure that is immune
to the external environment pose a great threat
to Eli Lilly in the future.
The company's resources which are directed towards
governmental endeavors and FDA directives would
render useless and result in losses should the
FDA alter its regulations.
Consequently, these decisions taken by the company
may in the long run result in unbalancing the
company's position. Instead what Eli Lilly should
be doing is formulate objective base strategies
that would allow the company pursues organizational
goals or project goals. These projects should
utilize pooled resources instead of allocating
resources to infrastructure utilization which
would save on investment cost in the long run
and increase market capitalization.
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