Introduction
Strategic Choices prevails in many companies’ setting to progress towards betterment. Somehow it comes with benefits and opportunity costs as well. Based on the case study, Biocon India, a pharmaceutical company in India, is a great example of a strategic choice. Biocon India was established in 1978 by Kiran Mazumdar-Shaw, the Managing Director, as a joint venture with Biocon Ireland to bulk manufacture enzymes. In 1989, Biocon Ireland was acquired by Unilever. As part of Unilever, Biocon began producing enzymes for Unilever’s food business. In 1998, Biocon India bought out Unilever’s share in the company and became an independent, privately-owned entity. And, the Biocon India Group started expanding into the pharmaceutical industry. The firm started to mass-produce generic drugs and established a subsidiary, Syngene. The group followed a successful pattern to develop its capabilities to catch up with new opportunities.
However, it started to face a common issue that all companies must resolve. Break out the present limit. If Biocon India Group were to grow, then it needed to expand. To Mazumdar-Shaw, this seemed certain. To become more competitive in the highly soaked generic pharmaceutical market, Mazumdar-Shaw believes the company needs to expand and have the capability to perform and run clinical trials. Syngene was organized as a contract research organization (CRO), a service organization that provides support to the pharmaceutical and biotechnology industries in the form of outsourced pharmaceutical research services. Ultimately, another new subsidiary, Clinigene was established, which will be responsible for the company’s clinical trials. The problem is that although the resources are limited and the whole new business is also not yet been proved profitable, the firm still has to make the decision on innovation or keep trapped in the competitive generic pharmaceutical market.
When global pharmaceutical firms choose to outsource, they tend to focus on three areas of the drug discovery and development value chain which are Research, Clinical trials, and Manufacturing. Research and development are drug discovery usually required considerable quantities of particular molecules with which to experiment. A drug typically went through four phases of clinical trials to determine whether it worked consistently without toxicity or major side effects. It requires finding the patients, working with hospitals and doctors, and managing the data. And finally, Manufacturing. Once the drug was tested and approved, it could be into mass production. However, this stage tended to be the least value-added compared to the previous three stages and also the most price-competitive.
So, what are the strategic choices available? Apparently, there is a lot to consider before putting the precious resources into a new venture. Let's recap what we learned previously on strategic management. There are three schools of strategy, the planning school, the positioning school, and the resource-based school. The planning school achieves a fit between the organizational strategy and the environment and uses a bureaucratic process which does not adopt by Biocon India. The positional school follows a rational, analytical approach, and attempts to place the organization and its products in favorable markets which is suitable for the case of the Biocon India Group. The resources-based school is an inside-out approach and it is very dangerous if the Biocon India Group adopts it since it ignores the outside environment. Moreover, it does not consider the culture which is one of the significant strengths of Biocon India. In addition, the best strategy needs structural alterations such as the Division form for innovation or the functional form for cost-leadership. Before the organization can consider the best structure, it must first determine the structural alterations. In this case, Biocon India did face several strategic choices. The company needs to determine whether it would allow its subsidiary Clinigene to perform its complete potential at the feasible expense, whether its “Earn as you learn” approach should prevail, and if it means selling the subsidiary.
Making decisions is a common daily routine in the business world. In this case, who are the key groups involved in this decision? Not only the leader, the board of directors, the shareholders, and its employees were involved and influenced this decision, but also external and internal stakeholders are all somewhat affected by the strategy. The relationship between these groups is strongly connected, the leadership and the mutual trust between the colleagues as they were collaborating and sharing knowledge.
Of course, there are tremendous rewards available to expanding or growing Biocon India’s business, to encourage such a big decision. From learning new skills, ideas, and financial rewards, to the overall value chain, the group grows not only in profitability but also in its culture. However, it did not come with zero cost. The risks of expansion will include the diversion of resources away from Biocon and Syngene to grow Clinigene.
Now, let's look at the internal structure of Biocon India. What is the primary structure that makes Biocon India distinctive? As we know that the structure is the allocation and control of work tasks. Culturally, Biocon India successfully maintained openness, trust, and collaboration. This kind of non-hierarchical structure makes its decision-making easier and faster. Moreover, it enables various professionals to exchange research information among themselves which is critical. However, the dark side, or the threat, may arise when Clinigene became more and more independent from its parent group, Biocon India, the more loyalty concern rises. Such aggressive growth was also a big challenge to its great culture if new employees have not inculcated the culture and adopted it.
To summarize, although the decision seems to be painful at first, it is still a necessary step for Biocon India. It is similar to the vaccine which helps you to the possible infection. I am not a biotech professional. Therefore, my recommendations will be majorly in the business administration field. I think an employee stock ownership plan (ESOP) may support such a divisional structure. It is an employee benefit plan that gives workers ownership interest in the company, and this interest takes the form of shares of stock. ESOPs also give the sponsoring company various tax benefits, it benefits the group financially and culturally.
References
Biocon India Group, a case study by Kalegaonkar, A., Locke, R., & Lehrich, J.
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