The Globalization of Wyeth free essay sample

Over the next 8 years, with the help of the Information Technology department, Wyeth became a globalized pharmaceutical company with centralized information that created new efficiency in an increasingly competitive market. The end result was a positive one but it was not an easy road to get there. Wyeth had great pre-planning for the Information Technology shift, but the original strategic design needed to be revamped when the implementation started. Employee resistance was a result of the fear of the unknown as well as confusion with the processes.Also, budgetary concerns played a role in the rate at which the Information Technology division could grow. With headaches like this, you can believe that the leaders at Wyeth were reaching for an Advil. Background In 1860, John and Frank Wyeth started a drugstore in Philadelphia. In the small research lab they had attached to the pharmacy, they started to manufacture large quantities of commonly needed medications. We will write a custom essay sample on The Globalization of Wyeth or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page They found success in â€Å"mass† production of pharmaceuticals. This â€Å"mass production† was defined by 1929 standards and happened in the storage area next to the pharmacy.John’s son, Stuart, incorporated Wyeth as a holding company in 1929. Until the 1990’s, Wyeth was a holding company for a diverse offering of products. Some of their most popular were a toothpaste called Kolynos and a headache medicine called Anacin. Wyeth’s reputation was that of a laissez-faire holding company that was primarily focused on bottom-line profits and not in meddling in the individual companies’ business. In the early 1990’s this style was not allowing Wyeth to be as successful as they knew they could be and they looked for a change.Wyeth had many locations throughout the world and they would be considered a multinational company. Though they had many locations, these locations did not interact with each other or report much information back to Wyeth other than bottom line financials. Management decided they needed to become a global corporation that had set business practices and continuity throughout their companies. They needed centralized information and strong interaction between locations. They believed that information technology was the key to their future growth. Stages of changeWyeth’s first step toward change was to divest as all the non-health care divisions that they owned. This was an important step for Wyeth to reorganize themselves as a more focused pharmaceutical company as opposed to a holding company. While redefining themselves as a pharmaceutical company, they also made significant investments into research and development so that Wyeth would start producing original scientific discoveries. Creating and owning the rights to the products would obviously help the margins of the future product offerings for Wyeth.Adding this important division was also another reason that they needed to upgrade their internal efficiencies. Because of the disjointed nature of the current Wyeth company design, there was a lot of redundancy. The next step to change was consolidating those redundancies. Many of the individual locations had excess manufacturing space and duplicated staff functions. In a few cases they even had managers that would hoard products because they suspected a future shortage. If Wyeth was going to keep the investors happy, they would have to become leaner. Communication beyond the bottom line numbers was not something that often occurred between the local firms and corporate Wyeth. Communication between the different local firms happened even less. This was another step, which would not come easy for the new â€Å"global† company. Corporate Wyeth had very little knowledge about storage space or production levels at the various locations. The local firms never shared ideas for success with each other because there was little incentive or benefit to the individual locations.The laissez-faire, only concerned about the bottom dollar, holding company was going to need to establish formal control mechanisms to become better with global inventory. The next stage was to have Research and Development up and running. Wyeth being able to manage the product from origination is a valuable step to protecting margins, licensing agreements and global growth. This was a problem at the local level however for the individual managers. The local managers were mainly used to local activities.They would order and produce at local levels and there was an uneasy adjustment to get local managers to think on a global level. Last, but certainly not least, is the growth and expansion of information technology. To aid in the communication between locations and to gain understanding of processes on a global level, the Information Technology division was going to need to be a larger part of the company. Part of this growth was going to be the purchase of new technology and part was a reconfiguration of how products were offered and packaging was designed. Wyeth was already a multinational company so they understood there would be problems going global. Issues like getting products approved in different countries often varied greatly from country to country. This became both marketing and an information technology problem. Managers from different countries accounted for products differently and kept books differently according to local needs. This was an accounting problem as well as an Information Technology problem for the new global Wyeth. Trying to standardize and grow was not going to be easy. SWOT StrengthsFinancial strength- One of Wyeth’s biggest strengths was their financial stability. The shareholders were pleased. Even with their inefficiencies, they were bringing in large profits year after year. For example, in 1997 Wyeth had earnings of $2 Billion. This strength allowed them leeway in making decisions to further their new corporate plan. It is obvious that they still needed to remain profitable and grow their profits, but having the financial means as well as the latitude to make these moves is a benefit that not all companies have when they are reinventing themselves.Vision- The leadership team for Wyeth believed that in order to remain competitive, they would need to make serious changes in how the company was run. The vision that these leaders had cannot be understated. Without this vision it is likely that Wyeth would have continued at the same pace, and most likely their margins would have shrunk as competitors became more efficient. Wyeth would have problems with inventory over and under stock and would remain somewhat clueless regarding the movements and the outputs of their company throughout the world.The need for change does not seem to have come from competitive threat, though we are sure it was there. The change primarily seems to have come out of vision of what was to come. This is also important because it was not always easy to show on balance sheets that there was a need for change. Showing shrinking margins and competitors growth probably would have made this transition easier for investors and employees to understand. The leaders understood the theoretical loses they were taking from not sharing information, reducing redundancies and not streamlining the brands. Those losses are not showing up on the balance sheet†¦ yet. That is why the vision of the leadership is so important. Information Technology Management- Though it is a work in progress, the Information Technology management plan is a great strength to Wyeth. When they streamline the communication via the Information Technology department, they are able to gather a wealth of knowledge. We know that a single product could have between 3,500-5,000 SKU’s. Once they normalized the products, the Information Technology department was able to feed very valuable information to the marketing department regarding product movement.Normalizing and centralizing the information also helped with production efficiencies. Some managers would over order to avoid a shortage of product while other managers were forced to deal with shortages because of said managers. Because of the global product sourcing, the individual locations were able to become more efficient and save Wyeth money. The Information Technology upgrade also helps to save time and money on accounting practices. Because the individual locations chose to, or were required to, they often kept books in a way that was different from other locations.When Wyeth would try to reconcile books it would take them weeks to get answers on product variations or confusing differences. Centralizing information limits the confusion by standardizing the information. Weaknesses Culture- The transition period from autonomy to unity was not an easy one. Wyeth struggled with many aspects of this change. Some of the people simply did not see the value in the changes. Business was good and they did not want to bother with change. Others felt they did not have time to change because they needed to remain focused on the bottom dollar.Wyeth investing time and money and had great thought and planning. They met with many of the mangers to explain the plan and describe the vision. With all of this, the culture still took time to shift. Some of the employees understood that the redesign was going to make Wyeth more lean, which was a threat to their job. All of this is a culture issue. It is never easy to change the culture of any organization, let alone an organization that is a vast as Wyeth. Not only was Wyeth dealing with business culture, they are also dealing with world culture.Globalizing an autonomous factory in Brazil will be different than Globalizing a factory in the US. They will also deal with the changes differently. Original design- for basically 60 years the ownership style of Wyeth was hands off. They allowed for entrepreneurship and individual thought for most of the businesses when Wyeth was a holding company. A weakness for the new global Wyeth is that they have been running the show so differently up until this change. Undoubtedly there were many employees who enjoyed the relative independence they were offered through â€Å"old† Wyeth and would not want a new system that changes this.The problem here is a case of original design. If Wyeth had, from the beginning, had a global mindset and required centralized information, all of the individual locations would be running smoothly. Because this is a shift in vision from the leadership, the employees will need time to adjust. Opportunities Financial- The most obvious opportunity for Wyeth was the financial opportunity that this change brought them. Many at Wyeth estimated globalization to be worth â€Å"hundreds of millions† and that was specifically talking about inventory management.The upgrades in Information Technology and streamlining of support staff only adds to those figures. Wyeth was financially successful prior to this transition but they were not lean. The focus on efficiency is a financial windfall for the company. Proximity to market- Wyeth knew that 40% of their business was outside of the United States. With figures like that, it makes sense that Wyeth wanted global efficiency The more they globalize, the closer they are to their customer, and the more efficient they while getting to their customer.With almost half their customer base outside the United States, Wyeth has an opportunity to expand in many countries. Threats Financial shifts- We have expressed that this transition has tremendous opportunities for Wyeth, but these moves were very costly. Financial shifts, even toward becoming a leaner company, can threaten the financial solvency of the company. We believe the leadership was very cautious, likely too cautious, with the transition and specifically the Information Technology transition. This is a justified threat for Wyeth. In the 1990’s like today, technology is ever evolving and reducing in price as a result.Expanding Information Technology is an investment that Wyeth needs, but they risk purchasing equipment that becomes obsolete well before it’s time. There is also a threat of foreign shift. Being global requires that Wyeth be invested in countries other than the ones that the leaders live in. Dealing with foreign countries has countless unknowns. Whether it is technology or foreign diplomacy, it all adds up to a threat of financial shifts for Wyeth. Cultural shifts- Internally, during a time of change, Wyeth has to be concerned about the shifting culture within their global business.Wyeth put a lot of time and effort into making a smooth transition to streamlined globalization. It is not possible for Wyeth to manage the day-to-day rumor mill and when you are dealing with big transitions it is tough to define what will be rumored. This could simply be lowering of employee satisfaction or good employees leaving. These are unfortunate but minimal threats. A larger threat would be if an employee damages Wyeth’s global image through lawsuits, negative media expose or bad products being released to market. These do not seem to have happened, but they are very real threats none the less.Recommendations We feel that Wyeth should have made this transition sooner, and they should have done it faster. There was plenty of opportunity lost as they crawled through parts of this transition. The leadership understood the need for a much more dynamic Information Technology department but they did not back up that idea with enough money for several years. They should have made more of a financial commitment with their verbal commitment. Now that the streamlining process is in place and the RD is developing new products, Wyeth should focus on acquisitions.When Wyeth was a holding company, they were good at acquisitions. They would allow those independent locations to be financially successful-independently. Now that Wyeth is a global force, they can add new independent locations for the purpose of market share, proximity to market and/or bottom line net profits. Global Wyeth has the pieces to streamline, dismantle and utilize resources of newly acquired locations. We believe that Wyeth has made the transition from a multinational company that has many locations that do not share information to a global company that has effective centralized information.As a global company, the majority of their locations are the United States and Europe. We recommend that Wyeth take a close look at the real estate they are not occupying and look to expand in other parts of the world. Specifically, parts of South America, Most of Africa and all of Russia. As an efficient global company, Wyeth should have the ability to take advantage of the new markets with much less risk of redundancy and failure. Lastly, Wyeth needs to continue to keep IT a priority. Wyeth had a lot of catching up to do regarding IT in the last several years.We know that the majority of the budget growth for IT was merely combining the local IT department budgets to one centralized budget. The IT budget will continue to have many intangibles. They will not always be able to show direct cost savings in the budget. We believe the IT department needs an expanded budget to allow for technology growth that will result in additional efficiencies. Most importantly Wyeth leadership needs to continue to shift their mindset towards IT centralization and growth that will lead to global growth for Wyeth’s pharmaceutical company.

Audit Sample - Essay Writing Tools

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