Novartis Goes Global

Ⅰ. Market Strategy Analysis (Diamond Model)

Demand conditions:

The global healthcare industry is one of the world's fastest growing industries, absorbing over 8% of GDP of most developed nations. (See Exhibit 1) Globally, pharmaceutical sales account for US$ 602 billion, with an annual growth rate of 7%. ① The sales volume is expected to reach US$ 880 billion in 2011 counted by IMS.

As an obvious fact is that the proportion of the population in older age groups will grow and older people have a higher incidence of injury or illness. In addition, with the development of the medical technology, people will live longer. New technologies will increase the ability to treat the illness that was previously not treatable. As a result, demand for healthcare will increase.

Novartis’ strategy analysis: Novartis was created through the merger of Sandoz and Ciba-Geigy in 1996-when only 45% of net sales came from healthcare. In order to focus on this fast growing industry, the company spins off of Ciba specialty chemicals business in 1997 and of agriculture business to form Syngenta in 1999. Later, through continuous and aggressive M&A in this industry, Novartis’s sales reached $44.3 billion in 2009, 100% of the net sales completely from healthcare.   (See Exhibit 3) New acquisition also contributes largely to the increase of the sales.

Cluster conditions:

The global medical industry is highly fragmented, it constitutes of wide range of services offered by various hospitals, laboratories, pharmacies and pharmaceuticals, chemicals, medical equipment, manufacturers and suppliers. (See Exhibit 2 Industry cluster)
Hospitals and pharmacies are two main selling channels for drugs. Employment mainly includes doctors and nurses.
Chemical industry is likely to be the one of the most related industry, which supply raw material for pharmaceutical manufacture.
Equipment and Facilities are necessary not only for chemicals and pharmaceutical manufacture but also for... [continues]

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