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As prerequisite to final graduation of my master in international business management MBA at Business School, Hochschule Furtwangen University, I conducted this Thesis but also as a practical business case that match with the nature of my master’s focus of international business and could be used in real life.
I put myself as a member of project’s managing team for a pharmaceutical company, this team as a part of strategic decision-making process is responsible about assessing different potential international markets and segments as a part of the company plan to expand their operations, tape and penetrate new markets.
Narrowing down the options to two geographic markets (Germany & Saudi Arabia) and two pharmaceutical segments (Diabetes& OTC), starting this assessment with macro analysis (PESTEL) of Germany and Saudi Arabia followed by micro analysis (Porter’s five forces) of the pharmaceutical industry in the two markets of concern, having more in depth review of the two potential segments in each individual market then head to head attractiveness comparative analysis of the two potential segments in the two potential countries showing the pros and cons for each of the potential available opportunities and finally reach a conclusion to solve this business scenario.
In order to satisfy both scientific research basis and business need I utilized Data from both peer reviewed articles, reports from highly trusted international institutions and organizations for their data accuracy and few theoretical books.
Limitation of this paper: taking in consideration that some relevant data i.e., regarding specific market profitability are not accessible due to either company’s confidential policies or data consolidation for example the financial statements of Bayer, the pharmaceutical company shows consolidated data combining Europe and middle east allowing no possibility(for outsider) to directly compare profitability of each specific country, here in our research Germany and Saudi Arabia, also I tried my best to use the most recent accessible data , but some of the most updated relevant data is out of my reach either due to confidentiality or it is paid data that requires funding resources not available in my case as I am doing this Thesis independently not in partnership with a company, these limitations might to some degree affect the precision of the final conclusion.
This research aims to study transactional cost and organizational change management in a pharmaceutical company that had gone through the SSC implementation process through different regions, including Latin America. Eli Lilly SSC in Latin America is located in Mexico and was aimed to centralize standard routines and administrative transactions related to finance and accounting back office services for the entire region. In implementing changes of this magnitude, it is necessary to be prepared to encounter the transaction costs related to this strategic decision and for the internal resistance applied in organizational change process. In this sense, this research aims to study what are the main challenges and transaction costs involving a process of re-structuring the organization to the SSC business model, especially in Latin America. Taking as a base the change resistance elements mentioned by Burns and Scapens (2000) and transaction costs theory basis by Williamson (1981). The SSC, a relatively recent business model and a trend between multinational organizations, was implemented in Lilly across 4 different regions to support over 70 countries in all continents. Latin America the last region to be implemented had a proposed migration schedule within less than one year. The findings show that the main resistance to the existing process is related to lack of competence/information and attachment to control and existing routines. In addition, the transaction costs are closely related to the dimensions of asset specificity and uncertainty. We must consider that the lack of a formal change management strategy, within the LATAM region, was a risky move and had impacted the implementation process and stabilization period results. The chronogram had also to be changed due to unexpected details in the region. Latin America was more complex than expected due to the differences in regulations and culture between countries, also expressed a non-verbal resistance that was probably expressed through the lack of commitment of some personnel. The results of this research raise inputs to the next researchers and bring elements to be considered by organizations when implementing the SSC business model. It is useful to direct actions and strategies to control de change impact and possible transaction costs. Additionally, through the research we filled the purpose to build an overview on shared services model and discuss the main points that should be considered when taking into consideration to re-structure the business with this model, characterized as a centralization of services that are provided from one single point to multiple business units in order to avoid activities duplication, optimizing resources through the integration of technology, people and standardized processes (Deliotte, 2007).