Genentech Internal Analysis

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Genentech is one of the world’s leading biotechnology companies focusing on therapies for cancer, heart attacks and others. Its industry is marked by rapid and accelerating (technological) change, thus internal resources and capabilities form the main basis for competitive advantage and strategic orientation. In line with this resource-based view this essay will analyze the company’s resources and capabilities following Porter’s “Value Chain“ approach. Building on this they will be evaluated in terms of relative importance and strengths in order to conclude the main strengths and weaknesses of Genentech and derive strategic implications. 1. Value Chain Analysis

Typically, a value chain in the biotechnology industry refers to a series of transformations from the discovery of drugs to the distribution involving several support functions. 2.1. Support Activities

Procurement: The company has a strong focus on cultivating a diverse supplier pool in order to maximize quality and talent available to Genentech, which gives the company access to unique outside resources. Technology Development: Genentech is well-known for its research and invests heavily in the development of manufacturing and research facilities. Human Resources Management: Genentech has a reputation for scientific excellence and giving its researchers wide autonomy. Therefore, its post-doctoral program attracts the most talented scientists and researchers from all over the world. For the last 13 years, Genentech has been ranked among the top companies to work for and in 2006 it was even voted as the best company to work for in the world by Fortune Magazine. Thus the company’s Human Resources Management and its science-driven culture enable it to attract talents, which are vital for the success of its business. The Firm’s Infrastructure: The firm is well-equipped with infrastructure in the fields of research and manufacturing, as will be discussed under the relevant point in the primary activities. Financing: The company’s net income is increasing yearly which means that its financing possibilities are quite good. This is also shown in the relatively low level of debt. However, ratings and ratios would have to be evaluated considering that Genentech is now part of the Roche group. 2.2. Primary Activities

Inbound logistics: As part of a comprehensive supply chain management initiative, Genentech introduced a standardized system to optimize the supply process with specific requirements ensuring efficiency.

Operations: This part of the value chain can be divided into three sections:Discovery and Research: Genentech is known for “cutting-edge research and as a place where scientists can flourish.” The key to most of Genentech’s success is its strength in research and development. It has the largest single-site biotechnology research facility in the world and invests more than the industry average in research and development - $2.8 billion in 2008. However, its emphasis is not on outspending its rivals in this field but on gaining competitive advantage through an alternative approach to research. Instead of being lead by commercial interests, it rather follows science and lets the “biology deliver the product” thus a lot of research is groundwork. It currently has approximately 7,400 non-expired patents worldwide and about 6,250 patent applications pending. It is important to note that the main patents still have significant time until expiration, guaranteeing the company substantial profits in the near future and a strong product portfolio. Clinical Tests and Introduction to the Market: Drugs undergo extensive clinical testing before entering the market. Fairly recently Genentech has developed its own infrastructure or development capability outside the US which can undertake clinical trials. This has...
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