Schilling-06

Schilling-06 - StrategicManagementof...

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Chapter 6 DEFINING THE ORGANIZATION’S  STRATEGIC DIRECTION Strategic Management of  Technological Innovation   Melissa Schilling
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Organization’s Strategic Direction Genzyme’s Focus on “Orphan Drugs” Genzyme was founded in 1981 by scientists studying  genetically inherited enzyme diseases Adopted a very unusual strategy of developing drugs for  rare diseases rather than “blockbuster” drugs. Developing a drug takes 10-14 years at an average cost of $800  million to perform the research, run the clinical trials, get FDA  approval and bring the drug to market Blockbuster drugs earn revenues of $1 billion or more and are  sold to millions of people with chronic illnesses Genzyme concentrated on the “orphan drug” market that had a  market of only a few thousand people  • Requires smaller clinical trials, less advertising, smaller sales force,  less competition Insurance companies would be willing to cover the drugs due to the  severity of the diseases and a limited number of patients for the drug  6-2
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Organization’s Strategic Direction Genzyme’s Focus on “Orphan Drugs” In 1983, the FDA established the “Orphan Drug Act,” giving seven  years market exclusivity to developers of drugs for rare (<200,000  patients) diseases. Also chose unusual strategy of doing its own manufacturing and sales  rather than licensing to a large pharmaceutical company. Chemical supplies Genetic counseling  Diagnostic testing The company went public in 1986, raising $27 million Their first drug, Cerezyme, was sold to 4,500 patients at a yearly  cost of $170,000 (annual revenue of $800 million). The drug is  required to be taken for the lifetime of the patient.  By 2006, Genzyme was the world’s third largest biotech company  proving that a profitable business could be built around small disease  populations 6-3
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Organization’s Strategic Direction Overview A coherent technological innovation strategy leverages the  firm’s existing competitive position and provides direction for  future development of the firm. Formulating this strategy requires: Appraising the firm’s environment, Appraising the firm’s strengths, weaknesses, competitive  advantages, and core competencies Articulating an ambitious strategic intent. Determining the key resources and capabilities the firm needs  to develop or acquire to meet its long-term objectives 6-4
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Organization’s Strategic Direction Assessing the Firm’s Current Position External Analysis Two common methods are Porter’s Five-Force Model and  Stakeholder Analysis. Porter’s Five-Force Model 
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This document was uploaded on 10/09/2010.

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Schilling-06 - StrategicManagementof...

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