Allen Chao grew up in Taiwan and his parents owned and operated a large pharmaceutical manufacturing business. After earning a doctorate degree in industrial and physical pharmacy, Allen chose to work as a researcher for G. D. Searle & Company. In 1983, Chao followed in his parents' footsteps and started his own company, naming it Watson Pharmaceuticals. His company would specialize in the manufacturing of generic drugs. Like many entrepreneurs, Allen Chao found that starting a company is difficult. But, like a true entrepreneur, Chao was not deterred by setbacks. He knew he could be successful, so he turned to his family and friends in Taiwan--giving up almost 90 percent of the equity in the business in exchange for start-up capital. Chao's strategy was unlike most others specializing in producing genetic equivalents of hard-to-copy medicines. Chao chose to go after market segments where sales rarely exceeded $10 million and where little drug name recognition existed.
His strategy paid off. Watson Pharmaceuticals now has 47 different products available in nearly 100 different dosage strengths on the market. And many of them have no direct competition. Questions:
1. What type of grand strategy(ies) have Chao pursued? Cite specific examples. Answer – None of the strategies fit directly, the closest being growth--growth through more sales revenues, more employees, or more market share, through direct expansion, new product development, quality improvement. 2. Michael Porter identified three generic strategies that companies can follow to develop a competitive advantage. Which one of the three do you believe Chao is primarily using? Discuss and support your choice. Answer – Focus or niche with cost leadership. He went after smaller drug markets, copied brand names and offered them at lower prices. 3. What characteristics does Allen Chao possess that indicates he is an entrepreneur. Give specific examples. Answer – A number of common...
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