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Abbott Laboratories Pharmaceutical Co.   Term Paper ID:27980 Click to get this paper

Essay Subject: (1990) Abbot Laboratories case analysis including: company description; innovative strategies in the pharmaceutical industry; management; innovative capabilities; & recommendations.... More...

6 Pages / 1350 Words 5 sources, 6 Citations, TURABIAN Format $24.00 Return to List of Papers

Paper Abstract: (1990) Abbot Laboratories case analysis including: company description; innovative strategies in the pharmaceutical industry; management; innovative capabilities; & recommendations. Paper Introduction: Abbott Laboratories Abbott Laboratories of Chicago is one of America's major pharmaceutical companies, but it also has other products, including nutritionals and diagnostic equipment. In fact, more than half of the company's revenues come from these other products in markets where Abbott has the dominant share. Abbott also supplies such goods as intravenous fluids to hospitals and blood banks, along with pumps, screening tests, anesthetics, and critical care equipment. The company has shown innovative capabilities in terms of the development of new drugs for various purposes and has spent a good deal on research and development to create the next generation of such products. The key competition for this company includes other pharmaceutical giants such as Johnson & Johnson, Do Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. hospitals now uses the TDX system that monitors the levels oftherapeutic drugs in a patient's bloodstream (Deveny & Hamilton, 1987, p.9 ).Management The Abbott Alkaloidal Company was founded in 1888 to sell an improvedform of the dosimetric granule, a pill to supply uniform quantities ofdrugs. The company went public in 1929. The diagnostics market is about a$6.2 billion business per year. This ability to spend has allowed the company to move quicklyinto the fast-growing markets as they are identified. Hamilton, "In Medical Testing, Abbott Is the Name of the Game," Business Week (June 1, 1987), pp. In 1991 the company made $7 billion in sales and spent just21 percent of this amount on selling, general, and administrative costs,while Johnson & Johnson spends twice that amount. Nutritional formula (Similac) was added and became animportant product, also involving Abbott laboratories later in the concernsexpressed by critics over the way baby formula was being marketed. The company believed it was in a good position to accomplish this.Abbott Laboratories has an annual research and development budget of morethan $15 million, which is also more than the total sales of many of itscompetitors. At the time of this battle betweenthe two men, the board sided with Schoellhorn, but within a short time theboard had changed position and fired Schoellhorn. New productswere introduced after the war, including different forms of penicillin.Consumer products were added in the 196 s, including Murine for the eyesand Selsun Shampoo. These are the immunodiagnostics that include tests for screeningfor hepatitis and to monitor cancer therapy. The granule and the company were created by Walter Abbott. The cost is about $7, compared with a minimum of$25 in most medical facilities, and the machines can also offer glucosetesting and testing of triglyceride levels, among other tests. Most people have developed an immunity, but if a pregnant womanis exposed to the parasite for the first time, her baby may be infected inthe womb and so be retarded or stillborn or develop epilepsy or blindnesslater in life. The advantages for Abbott result fromdiversity so that for marketing and distribution, Abbott is able to realizeenormous efficiencies. The companyset goals for itself in the 198 s: it wanted to lead in every segment andalso to achieve at least 2 percent of the total market within a decade. When the diagnostics sales force was sent out to sellTestPack, an easy-to-use testing product allowing doctors to test for strepthroat and pregnancy in their offices, the diagnostics division did nothave enough manpower for the job. The key competition for this company includesother pharmaceutical giants such as Johnson & Johnson, Dow Chemical, DuPont, Procter & Gamble, American Cyanimid, Bausch & Lomb, and Unilever,among others.Innovative Strategies in the Pharmaceutical Industry The pharmaceutical business unit of Abbott Laboratories achieved theleadership position in the diagnostics field in the 198 s, but this wasaccomplished with only a 14 percent share of the market because that marketis so fragmented. 159).Innovative Capabilities Abbott has shown itself to be innovative in terms of productdevelopment, particularly in the Diagnostics Division, and in businesspractices, with the flexibility to shift its work force around for maximumefficiency and with marketing methods that make the most of low-pricedpharmaceutical products and diagnostic equipment. The companyincreased production of penicillin for use in World War II. 64.Schwartz, John and John McCormick, "The CEO Who Won't Go," Newsweek (May 7, 199 ), pp. Another market niche discovered and filled by Abbott Laboratoriesoffers in-store cholesterol screening in pharmacies using a portablechemical blood analyzer. Abbott is ahead overall, but it is notahead in certain key markets such as blood tests for glucose. The company has also been innovative with its use ofits sales force. The company as a whole is seen as doing well against thecompetition. Abbott began an aggressive push into diagnostics in the late 197 s,at which time the company hired a group of young scientists and gave themfree rein to build a business in the growing nutritional-supplement anddiagnostic-equipment markets. Schoellhorn fought backand sued to keep his job (Schwartz & McCormick, 199 , pp. In fact, more than half of thecompany's revenues come from these other products in markets where Abbotthas the dominant share. In 1989 chief operating officer Jack Schuler left thecompany, apparently feeling pressure from CEO Robert Schoellhorn, who wasreported to be too intent on ensuring earnings growth and who wantedcutbacks in research and development. The research and development budgetis high to keep the company competitive in a highly competitive field.These innovative capabilities have made Abbott the first in its field.Recommendations The board needs to decide the issue of company strategy in terms oflong-term company strength and not in terms of short-term profits. The change in the attitude of the board came with the realizationthat many company managers were unhappy with Schoellhorn and his way oftreating them and their divisions. 159."Pinpointing a Parasite That Threatens Moms-to-Be," Business Week (May 14, 199 ), p. BibliographyDeveny, Kathleen and Joan O'C. Abbott Laboratories Abbott Laboratories of Chicago is one of America's majorpharmaceutical companies, but it also has other products, includingnutritionals and diagnostic equipment. Abbott Laboratories is now offering an antibody test fortoxoplasmosis that is inexpensive and easy to use in comparison with thecostly and difficult tests previously used ("Pinpointing a Parasite thatThreatens Moms-to-Be," 199 , p. The division has continued to try to find answers to medicalquestions in a way that corners a market or market segment. For instance, AbbottLaboratories started work on a diagnostic test for antibodies to the AIDSvirus later than the competition but got to the market first, bringing in6 percent of what is now a $5 million business. There is ahuge potential in this market ("While-You-Wait Blood Tests at Your CornerDrugstore," 1989, p. 48-49."While-You-Wait Blood Tests at Your Corner Drugstore," Business Week (April 1 , 1989), p. 9 ). The Abbott Diagnostics Division is the fastest-growingportion of Abbott's business, achieving a size twice as large as itsnearest competitor and contributing an estimated $85 million to thecompany's $3.8 billion annual sales. Abbott's pretax marginhas been estimated at 22 percent, twice that of Baxter International, C.R.Bard, and Becton Dickinson. A little-knownbut widespread disease called toxoplasmosis is caused by a parasite oftenfound in cat litter boxes and that has infected half the population of thecountry. 9 -91.Grover, Mary Beth, "Diversity and synergy," Forbes (January 6, 1992), p. In addition, the Research and Development budget must be protectedfrom cuts if the company is to maintain its position and be viable into thefuture. This is the fastest-growingsector in the industry. The company has alsobeen innovative in identifying where there is a need which can be fulfilledin a way that appeals to the consumer, as with the testing products for useby doctors and for those to be used in pharmacies, all at lower cost andgreater convenience to the consumer. 64). This does not necessarily mean that theboard decided Schoellhorn was wrong for curtailing research anddevelopment, however, and therefore this raises questions about the fit ofcompany leadership with the innovative capabilities of the company in thefuture. By 199 management was involved in a major battle over the issuesfacing other businesses as well, notably short-term profit versus long-termcompany growth. 89. The sales force for theDiagnostics Division is noted for its aggressiveness, and it has managed togain more than 5 percent of the doctor's office market for quick pregnancytests (Deveny & Hamilton, 1987, p. 46-47). 89). The drug sales force was enlisted tosell the new product, and Abbott is now the world market leader in the $1billion doctors' office diagnostics market (Grover, 1992, p. Abbott also supplies such goods as intravenousfluids to hospitals and blood banks, along with pumps, screening tests,anesthetics, and critical care equipment. The company has shown innovativecapabilities in terms of the development of new drugs for various purposesand has spent a good deal on research and development to create the nextgeneration of such products. In 1986 the Diagnostics Division brought out 7 new diagnostics, and such a pace is necessary because the average lifespanof a test is three to five years. DuringWorld War I, Abbott Laboratories developed techniques for synthesizinganesthetics and sedatives that had been available before only from the moreadvanced German companies. It has a number of advantages and innovative capabilities thathave placed it in first place and that can keep it there, but this willonly be possible if new products are developed and new testing methodsrefined within the prescribed three-to-five year period presentlyprevailing. Only inthis way will Abbott be able to achieve its goal of 2 percent of themarket. One inthree U.S. This unit began focusing on developing newdiagnostics based on the use of antibodies to detect diseases in bodyfluids. The division has also shown skill atdeveloping highly automated instruments for reading test results. 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