Discuss about the challenges and risks faced by multinational companies in the international market.
This report focuses on the challenges and risks faced by multinational companies in the international market. For the discussion, a pharmaceutical company is selected in the report. The pharmaceutical companies have to face various risks while operating in the international market. It is important for every company to expand the business in the international market. Generally, global marketing is basic function of the marketing by the company across the national borders. In other words, global or international marketing is the concept of expanding the marketing strategy of a company in more than one country. While entering in a global market, it is important for a company to understand different environment, culture, attitude and behavior of the customers (Cateora, 2008). Pharmaceutical companies are involved in discovering, creating and supplying the products, vaccines and other pharmaceutical products. Pharmaceutical companies generally operate under generic medicine sector, medical biotechnology sector and originator medicine sector. It is understood that a company has to deal with various risks in terms of marketing, culture of the country and behavior of the consumers in the international market. it is crucial to understand by the pharmaceutical companies that in each country, every customer has different perception towards products and services. In this report, a famous Australian pharmaceutical company Pfizer Australia is selected. The company is operating in the Australian market and now has expanded the business expansion in the China market and South Africa.
Pfizer Australia is the supplementary of Pfizer Inc. which is a foremost drug manufacturing company. The company provides broad variety of medicines and vaccines for the customers. Pfizer started its operation in Australia since 1956 and now, it is a popular company in pharmaceutical company in the country. The business objective of the company is to enhance the life of patients by providing quality services. For this manner, company is focused on identifying the needs of the customers and put the efforts to satisfy them. Company always seeks for the maintaining long term relationships with the customers in the market. Company provides its products and services in an effective and proper way. With the continuous research and development process, company is able to provide quality products to the customers. With the collaborations with other companies, company tries to identify the needs of the customers. Pfizer is now focusing on the core business of medicine (Pfizer, 2015).
On the business point of view, Pfizer is the largest research-based company in the pharmaceutical industry. The aim of the company is to use global and scientific resources in order to enhance the health of people at every stage of the life. Along with this, the objective of the company is to be a leading company in the industry in terms of enhancing the lives of patients. There are wide ranges of products including vaccines, biologic and small molecule medicines, and nutritional products along with well-known customer products. In order to stay competitive in the operating market, Pfizer has implemented open improvement approach by which the thought of new medicine can be created from various scientific sources. Further, company is creating values for the customer by doing partnership with other industries. While expanding in the international market, Pfizer has to deal with various risks due to different culture and attitudes of the customers (Benson, 2105).
It is well known that a company has to deal with various international business risks and challenges while expanding the business in the international market. So, Pfizer has to deal with numerous risks and issues in the international market. There are basically four types of business risks to which a company has to deal i.e. currency risk, commercial risk, country risk and country risk and cross-cultural risk. The analysis of various risks in the international market is as follows.
Lack of proper knowledge in the international market can be the cause of commercial risk in the business. There should be significant and proper knowledge about the global market otherwise company will face issues in the business operations. There are some reasons of failure of a company and those are poor procedures, poor business strategy including operational problem, timing of entry, poor competitive strength, and weak execution of strategy etc. Every country has different ecosystem i.e. mixed economy, market economy, and command economy etc. These are some real challenges while companies are entering in the global market. Governments of foreign countries have diverse philosophies, policies, priorities and rules. It is important for the companies those policies and regulations in order to get success in the global market. Along with this, there is the big difference in the policies like import policy, agriculture policy, and fiscal policy etc. These policies have significant on the business strategies of the companies. So, companies need to focus on the on various aspects of the foreign countries while entering the international market (BMS, 2013).
In case of Pfizer, company has expanded its business in China market. The company has maintained its strong position in the market by the implementation of innovative strategies. Since 1980, Pfizer established eight state-of-the-art plans in order to manufacture various products for consumer healthcare, nutrition, pharmaceutical, capsules and animal health in China. In order to deal with the commercial risks, Pfizer first understood the Chinese market and then implemented business strategy in the market. Further, in the South African market, Pfizer entered in the Biopharmaceutical division and it is now largest research based company in the country. In the vast product range, Pfizer has vaccines, biological medicines, oncology, urology, cardiovascular, neuroscience, anti-infective, pain medication, inflammatory and ophthalmology. Further, stakeholders of the company include pharmacy groups, hospital groups, healthcare professionals, government and media. Having proper communication with the stakeholders, company has enough knowledge of the market and there is less chances for the company to face commercial risk in the global market.
In this type of risk, company has to face current risks while entering in the global market. Fluctuations and changes in the exchange rates of the country is the cause of financial or currency risk. There are differences in the currency unit in various countries. This is the cause of problem for the companies to convert the currency according to the foreign countries due to the variations in the exchange rates. Along with this, there are also differences in the regulations and policies. It may create big issue for the companies in the global market (Leger, 2017).
Currency risk arises because if foreign taxation, asset valuation, inflation and transfer pricing etc. Fluctuations in the currency of foreign country can impact on the profits of the local companies. In the countries China and South Africa, Pfizer has achieved high growth in the sales and revenue. But the company was very conscious about its profit due to fluctuations in the exchange rates as most of the revenue of the company is generated by the global operations. So, sometimes Pfizer has to face currency risk in the international market due to changes in the exchange rates.
There are some risks in terms of economic, political and legal environment in each country. If a company is operating globally, company has to deal with these risks. The common risks are property rights, trade barriers, improper management and lack of legal safety etc. There are certain rules and regulations implemented by the government of the country on exporting or importing of goods and products including various duties custom duties and antidumping duties etc. Sometimes they restrict activities in the international market. So, it is becoming challenge for the companies to enter in the global market (Taylor, 2015). Pfizer is operating in the international market i.e. South Africa and China; company has deal with various political and legal issues in terms of prohibition and patent rights. Along with this, there are some rules and regulations in the foreign countries related to export, import and trading by which the company has to deal. Further, Pfizer has also faced legal issues in terms patent rights for some important drugs i.e. Sutent, Celebrex and Lyrica etc.
This is another risk in the global market which can be faced by company due to different culture. It is understood that each country has different tradition and culture including various religion, behavior, thinking, language mindset, and traditions etc. Each country has different patterns and infrastructure, so it is important for the companies to understand the market infrastructure of the foreign countries. Each and every country has different cultures and norms. It is not easy for the local company to expand the business in the international market. company may find diversities in the behavior, needs, languages, habits, preferences of the customers and buying and consumption patterns etc (Fatti & Toit, 2013). So, social and cultural differences are the real challenge for the companies. Various strategies like marketing mix, product distribution and pricing need more practice and information in order to understand the customer patterns. That is the reason; company needs to understand the social and cultural environment of the foreign countries in order to get success. In case of Pfizer, company has faced various issues related to communication and language in South Africa and China market. In order to deal with these issues, Pfizer has provided cross cultural training to the employees who relocating in the foreign countries. The training related to different language and communication is provided (Kotler & Kotler, 2014).
Pfizer is known as popular and leading company in the pharmaceutical industry of China. The company was started working in China market since 1980. The company is famous for its innovative research and development process and it has launched 50 innovative drugs in the country. By doing so, Pfizer has sustained its effective place in the China market. Although, the company has faced lots of issues but Pfizer has got success in maintaining effective place in the China market. In order to stay competitive in the market, company has implemented unique strategies in the business operations. In the Chinese Pharmaceutical industry, Pfizer has two brands i.e. Centrum and Caltrate. Along with this, company is also seeking to bring new brand in the industry. There are around 200 million customers who are taking services from Pfizer and many consumers are from rustic and urban areas. Pfizer is popular as the biggest drug maker and pharmaceutical company in the industry (Chitour, 2013). For Pfizer, China is the most profitable company in terms of business growth. Pfizer has four business units in the pharmaceutical industry i.e. specialty drugs, primary care, cancer care and established products. The company is doing corporation with various China companies for the business enlargement. Along with this, to enhance the Chinese healthcare system, company is also trying to collaborate with the administration of the country. Company is facing strong competition in the Chinese market but company is still able to maintain its strong brand image in the market (Loftus, 2016).
For Pfizer, China market is very attractive place for the growth and development of the pharmaceutical business. China is suitable market for the research and development of new medicines and new drugs. Along with this, China market is appropriate for developing generic and premium drugs in order to enhance the lives of people. Further, China market also provides the opportunity to the company to discover drugs and healthcare solutions. There are various aspects such as demographic, socio economic, legal and political aspects by which China marketing is becoming appropriate and suitable market for Pfizer. Now, China is becoming most suitable destination for pharmaceutical company in order to stay competitive and cost-effective in the market. For the global operations in China, political and legal aspects are considered.
This is the most important aspect for Pfizer for operating in the China market. China has stable political environment that favored the rapid growth of the pharmaceutical industry and this will continue to drive this growth in the upcoming years. Further, the country has strong geopolitical influence in Africa. Chinese government is very conscious and focused on the healthcare sector. Government is deeply involved with the pharmaceutical companies in order to provide health care services to the people in the country. The government is heavily involved with the drug and pharmaceutical industry that is the part of 7 main industries along with the 5-year plan. The government of the country is trying to shift towards providing basic healthcare services and schemes for the Chinese people by 2020 and shifting towards an innovation driven economy from low innovation products driven economy (Zhang et al, 2010). Economic growth will bring political stability to China. It will enhance the global reliability of the country and create a visionary for the global operations. It is the objective of Chinese government to make the medicines affordable to the entire Chinese citizens. The objective of the government is to distribute the low-priced medicines to middle class people and high-priced modern medicines to rich people. The economic development of the country is the reason of growth in the pharmaceutical sector. In the political sense, the development in the pharmaceutical industry will be win-win situation for the country (World Health Organization, 2017).
The changing disease patterns are understood by the government and policies are prioritized for the treatment of disease. The Chinese government focuses on improving the livelihood of people. The strong development in the healthcare industry will be key driver of the enhanced quality of life. Within the industry, pharmaceuticals, health management services and aged care, health supplements are included which have largest share. China has speedy industry development by dynamic improvement in the medical and pharmaceutical device technologies and more sharp growth approach. China encourages the ‘Healthy China’ tactical plan for the medical services and healthcare industry. Pfizer has vast chances in China as the government enhances the healthcare services and R&D focused industry (Perri & Gatti, 2016)
Further, one of the main concerns related to legal system is the impact of senior officials which results in prudential rulings. Chinese legal system is effective and fair for the foreign companies operating in the market. With the aim of improving healthcare coverage to the entire population by 2020, there are some new sets of laws and regulations are formed by the Chinese government.
For various overseas organizations, China is useful as the major possible market of the world for pharmaceutical products. The products focus on the security of intellectual property rights and it is important for the overseas organizations to accept the IP protection methods in order to create the tactic for the pharmaceutical products in China. China is associated its laws and legislations with WTO requirements which includes basic principles for the enforcements of property rights. China has established comprehensive legal system for the IPR protection to protect trademarks, patents, trade secrets and copyrights of the pharmaceutical products. Pfizer has great advantage of this legal system of China (Pacific Bridge Medical, 2014).
Drug administration Law and Drug administration regulation of China has established a six-year period of protection against the unfair commercial use of products including new chemical ingredients. Some foreign companies have complained that generic versions of their drugs are approved before expiration of exclusivity period.
China is still very efficient country for business because of contemptible employment costs as compared to other countries. The least wages differs with the geological locations. Every company must set a least wages along with the ranges of benefits and subsidies. Foreign pharmaceutical companies are trying to attract various employees as there is sufficient talent pool in China.
The regulatory system of China for pharmaceutical industry has contributed to the drug innovation in China. China is rich in terms of traditional knowledge and genetic resources and Chinese government is supporting and encouraging research in order to develop intellectual property for the assets. Pharmaceutical companies need to pay attention to the requirements of the patent laws (Wang et al, 2016).
By consider the political and legal aspect of China; Pfizer has adopted proper business strategy in the market in order to identify the needs and requirements of the customers. The strategic moves of Pfizer are entering in the international market, managing competitiveness by collaborations with other companies, and capturing emerging markets (Geschek, 2013). To enter in the global market, Pfizer has adopted some strategies. Company has adopted various approaches for market segmentation. For this, Pfizer has done an agreement with Jointown pharmacy group of China in 2011. Company has implemented corporate pilot team model in order to cover various cities of the country and to operate at the international level (M-brain, 2014).
Conclusion
Based on overall analysis, it is observed that pharmaceutical organizations have to deal with various risks and challenges while entering in the international market. For the discussion, famous pharmaceutical company Pfizer Inc. is selected. It is analyzed that Pfizer is highly involved in identifying the needs of the customers. The company is seeking for the long term relationship with the consumers in the global market. In China market, Pfizer has faced various risks in terms of currency risk, country risk, cross-cultural risk and commercial risk. But, company is able to maintain its strong image in the market. For Pfizer, China is the most important market in order to expand the business. While entering in the China market, company adopted various models i.e. merger and acquisition and joint venture with various Chinese pharmaceutical companies. By these strategies, objective of the company is to achieve growth, identify opportunities for innovations and enhance partnership in the market. Overall, it can be said that Pfizer has to deal with various risks and issues when trying to enter in the international market which impact on the business operations of the company. But, company achieved success in its business objectives.
References
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