February 11, 2012
Teva Case Study
In an industry full of intense rivalries battling for low-cost opportunities, many major players in the pharmaceutical industry, such as Teva Pharmaceutical, are struggling to meet their profit margins due to a number of reasons. With increasing competition, new low-cost companies have learned from the past successes of Teva and their impact on this growing market. So how did Teva become the world’s leading producer of generic pharmaceuticals? Using a “highly focused approach”, which will be talked about in detail later, Teva saw revenue streams grow from $91 million in 1985 to $8.5 billion in 2006. Starting in Israel, the firm saw significant opportunities for growth in an economy that was also growing at a fast pace. However, Eli Hurvitz, former CEO and Chairmen, recognized that the company had grown as far as it could within its home market. He hired Dr. Joseph Aleksandrowicz to head the strategic planning process for the company.
Still, Teva focused on generic or “bioequivalent” versions of the Big Pharma or what they call the their innovative counterparts. These innovative companies, who had more capital and controlled a lot of the industry, were going to pose a big threat to Teva. Not only were they fighting patent challenges against the small generics, but they were acquiring many of the generics too. In addition, Teva continued to battle other low-cost firms operating in abroad while Teva fought against rising market prices in The United States. This rise cut into Teva’s pricing by 15-30% over three years causing them to take significant blows to their revenue stream. However, many generics lasted due to the fact that most of the population was aging making consumers find a more cost effective option. Analysts began wondering how Teva could continue to see annual growth of 33%.
History shows that the generics typically had lower profitability compared to the innovative firms, yet Teva showed six...