1. What kind of multiproduct strategy is Novartis following? Explain.
Novartis acquisition in eye care company Alcon Inc. is an example of Related Diversification Multiproduct Strategy due to the fact that Novartis and Alcon both perform their business in health care industry. In addition, Novartis prescription drug make up 60% of the total sales indicate that company is operating in moderate to high level of diversification.
The acquisition of Alcon Inc. establishes a related link between Novartis prescription drug and Alcon’s eye care product. Even though, Novartis was already operating in eye contact lens through its Ciba contact lens brand, but only 60% of its total sales were coming from prescription drug business. That suggest only limited link exist between these two businesses. Being a fourth largest drug maker, Novartis also deals in with other drug such as Diovan for blood pressure, Gleevec for certain kind of cancers and Trileptal for epilepsy, but only its Ciba contact lens and Alcon’s glaucoma creates a related link, and thus only limit link exit between them.
2. Why did Novartis diversify into the eye care business?
Global prescription drug sales have flagged in recent years as insurers and state health-care system attempts to cut cost and increasingly demand that patients take cheaper generic drug instead of brand name. Drug companies have had a hard time discovering new drugs and bringing them to the market. Novartis dominant part of business comes from prescription drug is also affected by the increasing demand of generic drug. The primary reason for Novartis diversify into the eye care business by acquiring Alcon Inc. is to improve its performance.
Novartis has achieved new profitability growth with the acquisition of Alcon, CEO Deniel Vasella believes that “eye care is a less crowded market with less competition than other medical markets and has much more potential for growth in emerging markets in Asia and...
Cited: R. Langreth, 2008, Why Novartis bought Alcon stake, Forebes.com, April 7
J. Whalen, 2008, Novartis picks up eye-care unit, The Wall Street Journal, April 8
Kerry Capell and Dermot Doherty “What Novartis Sees in Eye Care." BusinessWeek January 7, 2010:
Alcon, Inc. “Alcon and Novartis agree to merger terms” Seeking Alpha, December 15, 2010:
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