BUSB 481 - Professor Coulson
Case 27 - Genentech: After the Acquisition by Roche
June 3, 2015
1. Perform a VRIO analysis. What is Genentech’s competitive advantage, if any? The significant resource that led to Genentech's competitive advantage was culture. This culture was instilled by it's founding partners Robert Swanson and Herbert Boyer. In this culture R&D focused on applying leading edge scientific knowledge to discover and develop best-in-class medicines. The culture of "individual creativity and initiative," helped to establish a reputation that attracted some of the best scientists in the world who were encouraged not only to work on projects associated with the companies goals, but also to work on projects that piqued their own interests. The overall culture led to a highly productive environment labeled by insiders as "casual intensity."
2. Apply a PESTEL analysis. What impact will changes in health care and biogenerics regulation have on Genentech? Why? PESTAL analysis shows that the Political, Legal, Economic, and Social-Cultural environments were changing significantly in the biotechnology sector by the late 2000's. The economic stimulus package and the Healthcare Reform Act were both bringing about increased government oversight to the industry, which could mean that time to market for new products could be increased and the potential that some products would not receive accreditation from regulating bodies meaning that sales and revenue could be impacted. Specific aspects of the Healthcare Reform Act also posed serious threat to Genentech's business model. The passage of the Biologics Price Competition and Innovation Act allowed for a shortened approval pathway for biogeneric drugs, which would have a significant impact on Genentech, because of the significant costs associated with product development and testing in the industry. 3. Apply a five forces analysis. How would you describe Genentech’s competitive position? Threat of Entry: The threat of entry is relatively low as it takes a substantial investment in R&D, facilities and equipment to move into the biotechnology market. Most competitors have backing from large pharmaceutical companies to gain entry. Ranking: Low. Power of Suppliers: Most biotechnology firms produce their own protein structures and have in-house production capabilities. This results in a low rating for power of suppliers. While continued demand growth for these drugs is expected, Genentech should have sufficient production capacity and financial backing through Roche to meet increased production concerns. Ranking: Low. Power of Buyers: Buyer power has traditionally been low in the biotech industry, however as government healthcare reforms have been implemented, HMO's and PPO's have been able to exert more influence over buying power through by mandating patients to use biogeneric drugs. Even with this shifting trend buyer power is still seen to be low - medium. Ranking Low - Medium. Threat of Substitutes: There is an increasing threat of substitutes as other established pharmaceutical companies partner with biotech firms to produce similar products. There is also threat of substitution from biogeneric drugs as patents expire. Ranking: Medium. Rivalry: Each of Genentech's primary product offerings have competition and while patent protection prevents drugs with similar structures it does not prevent drugs that have similar effects or treat similar diseases. Ranking: Low - Medium. Overall, I would say that Genentech's profit potential is strong based on a low - medium ranking in the 5 Forces analysis. 4. Perform a SWOT analysis.
- Advanced technological capacity with the biotechnology fields leading scientists on staff. - Significant patents and technology breakthroughs and commercial successes accredited to staff. - Industry leading research reputation and product portfolio. - Strong focus on individual initiative and research...
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