Q The report is for QAB020C410H Business Organisations and Environments in a Global Context Home, - QAB020C410H Business Organisations and Environments in a Global Context QAB020C410H Business Organisations and Environments in a Global Context Executive summary Pfizer’s background was given by mentioning some major milestones in this organisation. Their revenue and legal structure, shareholders were given. Sweden’s economy was discussed and their political situation was analysed. Culture amongst Swedish people was identified. Amount of FDI in Sweden in recent years was found and evidence has been given. Scenario of pharmaceutical business was evaluated through situational analysis. This analysis focused on some facts, which are related to external factors. It weighed both positive as well as negative impact of Pfizer’s business. Ultimately, “Porter’s Five Forces” analysis helped in understanding competitive environment of pharmaceutical business in Sweden, which will affect Pfizer. Introduction Business environment is collection of every factor, which may influence business of a company. This will include a study on Pfizer. Pfizer will be expanding their pharmaceutical business in Sweden through foreign direct investment. They will operate from their country of origin in Sweden. This study focuses on this topic. For this, background information of Pfizer will contain in first section. Then economic condition, political situation, culture, and financial system of Sweden will be evaluated. Then this business scenario will be analysed. For this situational analysis will be conducted on Sweden. Competitors, buyers, suppliers, and power of new entrants will be assessed for Pfizer. Discussion Background Information on (Pfizer) Pfizer is a pharmaceutical company and it presently employs over 92400 people. They have revenue of 53.64 billion USD in 2018. Pfizer is a publicsector organisation based in New York. Pfizer has reached more than 90 international markets, including Japan, Canada, New Zealand, and Western Europe. They sell their products to 125 countries across international borders. Albert Bouria is their CEO. Charles Pfizer founded the company in 1849 and the organisation grew by merging with Pharmacia, Warner-Lambert (pfizer.com, 2019). The organisation’s income tripped in 2017, which amounted to 21.3 billion USD. This is the second largest pharmaceutical company. They have their research centre in Groton. In 2018, they have been ranked 57th in fortune 500 company list. They announced in December 2018 to merge with GlaxoSmithKline. The British company was meant to give 68 percent share. They produce medical supplies for immunology, cardiology, neurology and many more. Pfizer wanted to merge with Allergan PLC by cracking a deal worth millions of pounds. Pfizer has some main products, which brings them maximum amount of revenue. These are Lyrica, PRevanar 13 suite, Lipitor, Xeljanz, Ibrance, Sutent and Viagra. These products has brought them huge amount of revenues. About 10 percent of their sales come from Japan. They have manufacturing units in China, Ireland, Belgium, India, Italy, Singapore, and US. They operate about 60 plants. About 40 percent revenue annually comes from sales though their retail chains, stores, pharmacies and distributors. In 1849, Charles Pfizer borrowed money and set up their first fine chemical business. Their first production was tartaric acid, which dates back to 1862. They sold it to chemical and food industries. The company’s expansion was propelled during civil war. Their revenues were doubled at this time in 1868. In 1880, Pfizer started to produce citric acid using lemon. First international expansion came in 1882, when they found many clients in West Mississippi. They opened office in Chicago, which was outside of New York. Charles Erhart leaves partnership to William. In 1899, they were declared as the leader in chemical business in US (pfizer.co.uk, 2019). There are some organisations, who owns maximum share of Pfizer. These organisations are JPMorgan Chase, Capital World investors, BlackRock, State Street, and Vanguard. JPMorgan Chase owns 1.27percent;Capital World Investors own 2.67 percent, BlackRock5.03 percent, State Street 5.11 percent, and Vanguard 7.96 percent (money.cnn.com, 2019). Other organisations such as SSgA Funds Management, T. Rowe Price Associates, Geode Capital Management, Northern Trust Investments, and Wellington Management own shares of this company. Background Information on the Business Environment in (Sweden) Economy Sweden’s GDP is 466,925 million Euros in 2018. There has been a 2.4 percent growth in it. GDP per capita of Sweden grew to 45900 Euros. This indicates a great financial health of this country. This kind of major growth in economy is a positive factor. This may make other countries more interested to invest in Sweden. Recent rise in GDP per capita is evidence to greater financial strength of people. This increases their purchase power for any kind of products. Final consumption percentage of households in Sweden had a growth of 2.2 percent in 2017. By taking into account of total expenditure of Swedish community, people have spent about 3 percent of their money on Health. Culture Swedish people are egalitarian in nature. They are humble and do not believe in boasting. Population of Sweden contains Swedish people, Sami, and Finnish citizens. Business culture of Sweden is egalitarian too. There are no formal hierarchy and consensus is a major business principle. Therefore, business can become easier due to flexible organisational structures. Swedish people prefer to be punctual in work. Price is Swedish people’s primary concern. They look at prices of products first before buying. Quality comes as their second factor of concern. These people indulge in research before buying a product. Due to large number of population being connected by internet, they try to obtain information about a product first. According to research, 53 percent Swedish customers are use internet to research. About 13 percent people do research about products in stores (En.portal.santandertrade.com, 2019). Other major factor, which changes their buying behaviour, is after sales service. They believe in getting excellent quality of post purchase service from any company. Political Constitutional monarchy is the basis of parliament democracy in Sweden. King is head of state but yields no power over this country. Stefan Lofven is prime minister, who is from modern party. There has been four months of political instability in Sweden before arrival of Sweden Democrats. There has been recent turmoil, as many parties are not agreeing to include a fat left party in government (ft.com, 2019). Stefan Lofven has promised to bring stability. Executive power in Sweden is hereditary. There is legislative power, which is controlled by parliament, which is known as Riksdag. Legal Sweden’s law is controlled by parliament, which has legislative power. Sweden does not have any restriction on foreign investment. They follow rules set at EU and UN regarding trade policies. Therefore, doing business in Sweden is not difficult, as they allow foreign direct investment. There is company act, which organisations need to follow to do business in Sweden. Registration can be done by filling for “Foretagsregistreing” and can be sent to Swedish tax agency. There are many regulations according to employment. These laws protect employees inside organisations. It is a point to consider for organisations, who are trying to expand in Swedish market through FDI. Until 2010, there was a monopoly in Sweden in case of pharmacy business. Medicines were sold through National Corporation of Swedish Pharmacies. After some reformation, the scenario changed. Other companies were allowed to sell medicines on their own (Bergmanet al., 2016). Financial system Financial system in Sweden is quite stable now. There has been major improvement in fixed-income as well as foreign exchange market. Liquidity requirements are quite high in Sweden. Main Swedish banks are seeing profits due to great economic condition. There has been crisis in stock market of Sweden in past. It has recovered now due to help from government. Sweden is a top country when it comes to global privatisation. They have privatised deregulated services much faster than any country. This has increased efficiency of various industries, which has become a major cause for financial benefits. Sweden’s financial system has changed over years. Credit agencies gave Sweden AAA rating in 2017. Therefore, changes inside this organisation. From 1990s, Swedish government has been able to control public spending. They were able to avert maximum damage in global crisis in 2008 by this method. FDI in Sweden has reached an amount of 63.7 SEK billions at 1st quarter of 2019. In average, 21.25 billion SEK has been the rate of FDI. Therefore, this data implies that FDI in Sweden is quite possible as this market is having large amount of foreign investments. Therefore, it brings numerous opportunities for any foreign company. Threats generating from new entrants (Low) There are absolute costs barriers present in entering pharmacy market of Sweden. It is quite difficult for new companies to make an entry in this market. Small companies may not have good investors, who can back their entry in this market. Therefore, it will be difficult for them to strive. Therefore, it will be easier for Pfizer to use FDI to expand in this market, as they have strong financial background. Therefore, new entrants have very less threat for Pfizer (Håkonsenand Sundell, 2015). Supplier power (Low) Suppliers in Sweden’s pharmacy industry have low bargaining power. This is because raw materials are commodity products. These are easily available from chemical industries. There are numerous suppliers in Sweden’s booming pharmacy industry. If a supplier is increasing cost of raw material, then Pfizer can shift to another supplier. Therefore, Pfizer will not face huge pressure from them. They can easily negotiate with suppliers to keep their prices reasonable. Buyer power (Moderate) There are many pharmacy companies in Sweden. It gives people more choices in terms of choosing products. This can pressurize Pfizer to lower their prices of medicines. In many cases, patients do not have any alternatives for choosing drugs, as doctors prescribe it. Therefore, the situation is quite balanced, as buyers cannot directly negotiate with Pfizer to lower their prices. There are issues of quality in case of bad medicines. Therefore, buyer’s power is moderate in case of Pfizer. Threat generating from substitutes (Low) Only substitute product of Pfizer’s products is herbal medicine, homoeopathy, chiropractic. These are not well accepted amongst majority of people, as they have tendency to purchase allopathic medicines. Herbal medicines are much costlier and economically weaker section in Sweden will not be able to afford it. There are still doubts on people’s mind regarding effects of these alternative medicines. Therefore, these alternative medicines are not much feasible in this industry. Pfizer will not face any challenge from it and it makes threat low from these products. Threat of rivalry (High) There are many companies in Sweden, which can give cutthroat competition to Pfizer. AstraZeneca AB, Recipharm AB are companies, who are considered giants in pharmaceutical business in Sweden. It makes competitive environment for Pfizer, as they may find it difficult to capture market. After EU enlargement, competition in pharmaceutical business has increased (Granlund and Köksal-Ayhan, 2016). Conclusion Background information regarding Pfizer gave idea about financial condition of this company. Relevant data regarding revenue of this company was provided. These data showed that Pfizer is one of the top pharmaceutical companies. Sweden’s economy has good amount of growth in present. Culture in Sweden is egalitarian. Political change brought in Democratic Party, which gives Sweden political stability. Situational analysis pointed out factors, which may become either positive or negative influence on business of Pfizer. “Porter’s five forces” was performed and it gave an idea about competitive nature of pharmaceutical market in Sweden. It is in favour of Pfizer’s expansion in Sweden.