UNIVERSITY OF ILLINOIS LIBRARY
AT URbANA-CHAMPAIGN
BOOKSTACKS
BOOKSTACKS CENTRAL CIRCULATION is re^ The person charging
octlon for dlfclpllnary
/\PR
this "^^terial
and may
result
m
6 1999
write new due date below renewing by phone, previous due date.
When
Digitized by the Internet Archive in
2011 with funding from
University of
Illinois
Urbana-Champaign
http://www.archive.org/details/corecompetenceco92174bogn
STX
330
Faculty Working Paper 92-0174
333 1??2:174 COPY
V
2
THE LIBRARY OF Thf
DEV 9 8
1Q00
UNiVi.1-,
URBA/MA-CHAiVI,'
Core Competence and Competitive Advantage: A Model and Illustrative Evidence from the Pharmaceutical Industry
William
C.
Bogner
Howard Thomas
Assistant Professor of Management Dean and fames F. Towey College of Business Administration Professor of Strategic Management Georgia State University College of Commerce and Business Administration University of Illinois
Bureau of Economic and Business Research College of
Commerce and Business
University of Illinois
at
Administration
Urbana-Champaign
BEBR FACGLTY WORKING PAPER NO. 92-0174 College of
Commerce and Business
University of Illinois at
Administration
Grbana-Champaign
November 1992
Core Competence and Connpetitive Advantage: A Model and Illustrative Evidence from the Pharmaceutical Industry
William C. Bogner Georgia State University
Howard Thomas University of
Illinois
CORE COMPETENCE AND COMPETITIVE ADVANTAGE: A MODEL AND ILLUSTRATIVE EVIDENCE FROM THE PHARMACEUTICAL INDUSTRY
William C. Bogner Assistant Professor of Management College of Business Administration Georgia State University P.O. Box 4014 Atlanta, Georgia
30302-4014,
USA
and
Howard Thomas Dean and James F. Towey Professor of Strategic Management College of Commerce and Business Administration University of 1
206 South
Champaign,
Illinois
Sixth Street
Illinois
61820,
USA
June, 1992 Revised November, 1992
Paper Submitted to the International Workshop on Competence Based Competition Brussels, Belgium, November, 1992. This is a draft developed for conference discussion purposes only. Please do not quote without written permission.
ABSTRACT
This paper presents a model of the relationship between Core Competence and Competitive Advantage. The model frames competence relative to both skill related and cognitive components. These components are presented in dynamic terms as they reflect the influence of changes both in the broad environment and in the learning processes within organizations in maintaining competitive advantage. The model also includes the concept of the core product as an intermediate phase between a skill and a competitive advantage in a market. The model's relationships and dynamics are examined through a 50 year study of competence and competitive advantage in the pharmaceutical industry.
INTRODUCTION The competitive advantages which seem economic times are the most prized assets
endure through both good and bad
to
of the firms
frustrating challenges for competitors
which do
keys to competitive success are often
difficult
Frustration occurs primarily
not.
to determine
product/market interface where firms typically compete.
advantage arises from the of
distinctive
economic recession and recovery
inimitable core
strategies
in
competitors, but they
core
skills
and
imitate.
In particular,
They
lie
highlight those firms
not.
whose
because the beneath the
sustainable competitive
core competencies developed within the
competencies and those which are
grounded
which possess them, and the most
Periods
firm.
strategies are built firmly
on
Businesses with competitive
not only survive troubled times with less pain than their
emerge stronger
Firms wishing to understand or emulate industry
still.
leaders and leaders wanting to maintain their competitive position need to clearly understand
what the concept
of a core
competence
is
and how
relates to competitive
it
advantages
in
the
market place. Unfortunately, core
core competence or description
is
often
in
competence
is
often perceived as a static concept.
describing a competitor's competence at any point
used which implies a stable condition or
relationship.
in
In
defining a
time,
a
Competition and
the competitive environment, however, are dynamic. Therefore, firms which maintain their
competitive advantages over
competencies.
In
many business
cycles must have dynamic, not
defining core competencies
in this
competition and the competitive environment are basic challenges of any general manager
is
paper
fluid.
We
we always assume infer
from
this that
If
a manager
is
to
that
one
of the
the relentless pursuit of alignment between the
ever changing core competencies within the firm and the ever changing external environment.
core
static,
accomplish
this,
demands
of the
then a clear understanding of the
changing relationship between those core competencies and competitive environment
is
needed. In this
paper
we
provide a framework to examine the relationship between core
competence and competitive advantage using both conceptual models and
real-world
examples. The conceptual models draw on both academic and practitioner
literature.
primary intent
them
to capture the
is
many elements which
to competitive advantages.
drive core
Our
competencies and which
Our real-world analysis then evaluates competition
in
link
the
pharmaceutical industry and assesses those factors which have historically led to success this industry.
It
examines and analyzes the
role
which core competencies have played
performance of both leader and follower firms and charts the effectiveness of nine firms
in
in
the
in
maintaining market alignment over a 40 year period of change.
THE CONCEPT OF CORE COMPETENCE We
propose a
definition of the
concept which encompasses each of the
critical
elements which create and sustain a core competence and which distinguishes core
competence from
other, related concepts.
Core competencies are
First
a formal
definition:
towards the attainment of the highest possible levels of customer satisfaction vis-a-vis competitors. Core competencies may be leveraged directly to satisfy existing customer needs or indirectly to develop a range of core products or core services. Firms with core competencies are more than just highly adept at executing core skill sets. In addition, they have built appropriate cognitive traits which include: a) recipes
b)
firm-specific skills directed
and organizational routines
for
approaching
shared value systems which direct action
c) tacit
in
ill-structured
problems,
unique situations, and
understandings of the interactions of technology, organizational
dynamics and product markets.
Both the activity oriented and the cognitive aspects of a core competence are built up cumulatively through learning and are constantly adapted towards applying a firm's skills so as to achieve competitive advantage.
The model shown sets
in
Figure
1
shows more
and the competitive environment are
discussed
in
how
clearly
cognitive
These
involved.
relationships are
more
skill
fully
One Here
Core Competence and Competitive Advantage The It
action-oriented
the succeeding paragraphs.
Figure
critical.
traits,
addresses the relationships
no matter how
refined,
at the very
first
component
top of Figure One.
can be a core competence
if
it
We
does not give a
of our definition
believe that
firm
no
is
skill,
an advantage
in
the marketplace by satisfying a customer need better than a competitor. Although the point
seems
rather elementary,
activities
which, although
it
is
important both for avoiding a mis-allocation of resources to
done
well,
do not
lead to competitive advantage,
and
for
avoiding
under-allocation of resources to those activities which, although not directly linked to the
market, could lead to competitive advantage.
It
is
also important here to underscore the distinction between core competencies
competitive advantage.
Core competencies are
internal traits of
a
firm.
They are
skills
and
and
understandings that are accumulated over time. Competitive advantage describes an edge that firm
has
in
external market competition.
competitive advantages, but they are not the
^
skill
Core competencies usually underscore
same
thing.
^
For example, customers
may
Competitive advantages resulting fronn pure luck are not based on core competencies, they have neither the
base nor
replicability.
not
traits of
a
be concerned
with, or
even aware
of,
Honda's core
skills in refining
the internal combustion
engine as described by Prahalad and Hamel (1990). They are motivated to purchase a competitor's vehicle because of the perceived value which
Honda over a
reputation for overall to
a
more
effectively
The core
reliability.
compete
for
skill in
comes from a
engine design underlies the
ability of
Honda
customers, but actually the outcomes of competition occur on
different plane.
It
is
unique to the
economic
competence must be
also important to note that our definition infers that a core firm.
profit
Core competencies must lead to unique,
can be earned
in
distinctive traits
otherwise open competition.
It
is
based on
such that this point that
core competencies are often called "distinctive competencies" (Andrews, 1980).
competence
be
to
distinctive will result in the equivalent of Porter's
(1
Failure of the
980) "profitless
prosperity".
Core Competencies and Core Products and Services The model indicates
competence may not lead product or service of the figure
and
is
will
directly to
in
advantage
will
There
competence applied
in
in
the market, and
be
is
located on the right side
is
be referred to only as "core product", although services
competence and a product
consumed
a competitive advantage. Here the idea of a core
introduced (Prahalad and Hamel, 1990). This
applications of competence.
A
that
clearly are
major
core product serves as an intermediary between the core
market competition. The core product
may
is
not even clearly identify the market
not the
in
final
product
which competitive
realized.
a sequence here, not unlike an
to competitive
activity chain,
which
ties
the core
advantage through the core product. Core competencies are
core products and services, then other
traits
are
wrapped around these core
first
products to create the
Hence,
market.
it
is
product or service which
final
and services are the basis they
distinctive
it
was
for
successful diversification.
compete successfully
mowers and
electric generators.
traits
in
the
Here
which led to successful
markets wherein the core product could lead to competitive
By contrast, we can in,
respect core products
Honda's core competencies would not lead to
infer that
say, ladies
retail
clothing; the core products
which the core
competencies produce can not be advantageously packaged with other
traits for
competition
that product market.
in
A
Core Competence as both Action and Cognition
two
levels.
of a
skill
On one
level there is the active
component
which focuses on performing some
skill
thus
exploitation.
far,
core
skills
product/market competition
than the competition.
efficient internal
are meaningful
itself.
Later
we
not only leads to core products, but also
which improves competence
all
core competence exists on
For
combustion engines would be
Consistent with the internal orientation of core competence developed
we see such
The second
firm's
a core competence, the exploitation
of
activity better
example, actually designing increasingly more a
the
in
Prahalad and Hamel's example of
In
package the core product with other
diversification into multiple
competitive advantage
In this
that firm to
automobiles, motorcycles, lawn
for
clearly the ability to
advantage.
to multiple product markets.
show how engine competencies allowed
markets
advantageously compete
through the mechanism of core products that a single set of core
competencies can be dispersed
Honda
will
level or
actions/skills are driven
is
will
in
competition, but need not be the basis of
note
how
this activity of "doing" (or exploiting)
a key component of the
iterative learning
process
levels over time.
component
is
the cognitive portion of the competence.
by some mental model,
map
Assuming
or recipe, this level captures these
cognitive factors which act into a competence.
found
in
lie
behind core
skills
These may be cognitive
One
the mind of the single individual.
ongoing development
and which can transform the mere doing traits
shared by a group or they
implication
that
is
it
is
of these cognitive traits, that core skills rise to
level
an
may be
through the
a
of
effective,
which
is
distinct
from those of a competitor, leading to core products and competitive advantage. These traits of
each
core competence are subdivided into three parts,
other,
as indicated by the two-headed arrows
are predicated
on the basic assumption
where change often occurs for firms to
cope
and the concept
with
in
non-linear
of a core
The discussion is
future events.
of a constantly
1
.
Further, the roles of
all
three
changing competitive environment,
and unpredictable, ways. Indeed, without the need
competence would
revert only to the
a dynamic process. in
development and
skills.
model begins with the proposition
of cognitive traits in the
strategy "emerges" over time, inability to fully
Figure
which are interrelated with
such ongoing dynamics, the learning process, would not be necessary
maintenance of specific stable core
competition
in
of
all
"soft"
Mintzberg
(1
978)
makes
that
the point that competitive
contrast to being a rationally executable fixed plan.
plan competitive strategy
is
predicated on the
inability to fully
Firms must, therefore, respond to events which were not
fully
This
understand foreseeable as
they emerge and incorporate those events into their competitive strategy. As strategies
emerge, "recipes or routines" (Nelson and Winter, 1982) play an important
enhancement. They embody the ways the
firm
organizes stimuli as they
role in
competence
come from
the
environment. These stimuli carry important information about the future effectiveness of a
core competence
in
providing competitive advantage, but because of the unpredictable
nature of emergent events, organizational routines have to be adaptable so as to incorporate this information effectively.
Therefore,
in
the dynamic process of maintaining core
competence, operating routines must external events
The 1981
;
For example,
effort.
structured organization.
But
its
and
effectively)
into the set of
core
responding to
skills.
competence also include a shared value system (Ouchi,
& Waterman, 1982) among key
the core organizational
multi-person
changes
integrating relevant
cognitive traits of a core
Peters
who hone
and
exist for (efficiently
skills
Intel
decision makers.
It
is
the shared vision of those
which gives the appearance of singular action to a
has been described as a decentralized and
strong shared values system uses this as a strength, enabling
a large organization to respond smoothly, and quickly to the
fast
changing environment
microprocessors (Hof, 1992). The shared understanding of what the core they relate to competitive advantage drives team efforts like.
Such a shared
affecting the core
and core
vision allows for the
common
competence and the quick
in
skills
are and
for
how
sales forces, research labs and the
changes
recognition of the external
integration of
change
in
an organizational recipe
activities.
The different
ill-
third cognitive
aspect of core competence
is
a unique understanding of the
aspects of competitive dynamics. The competitive advantages to which core
competencies lead
is
a function of several forces from both the supply and the demand side.
Environmental events directly and indirectly impact several of these factors simultaneously.
Responses
to
changes
in
the external environment must be formulated based on the totality
of the competitive situation.
components
of supply
advantage
produces.
it
significantly effect
a
These actions require deep understandings
and demand
relate to the core
For example, a change
firm's ability to bring
in
It
is
the
combined impact
of the
the regulatory environment
new products
change
in
how
the various
competence and the competitive
But
to market.
the functions of the firm's research team and the application of others.
of
its
it
also interacts with
marketing
technology with
all
may
skills,
among
of these other factors
which
will
determine the actual impact of the environmental change on the firm's competitive
posture. Therefore, maintaining core competencies requires an understanding of the interaction of
organization.
a change
in
one aspect
Kotter (1982) identifies
of effective top
of the
such
managers. Here the roles
environment with other aspects of the
rich cognitive
of
understandings as one of the
traits
shared values and established recipes and
routines facilitate the process.
Continuous Learning
competence than
we
just
There
is
more
to the
dynamics
of maintaining
responding to the environment. Organizations must
refer to the acquisition of
new and unique understandings through
Competencies evolve through an
iteration of doing, learning
often as organizations digest a
change
in their
learn.
By learning
experimentation.
and doing some more. Each
sequence expands knowledge and enriches core competence.
more
a core
Clearly this process
will
environment, but organizations which
nurture their core competencies tend to continue their internal learning processes even
absence
of external motivation.
Indeed,
maintained long-term competencies (1
is
one
More
Steinberg
Inc. of
specifically,
the continuous refinement of their core
Similarly, the late
Canada
Sam
Mintzberg and Waters
(1
982) identified
shifted from a traditional grocery to
Walton describes
in
the
shared values of organizations which have
of the
992) states that this process of experimentation and improvement
success.
occur
his organization's
is
it
skills.
Senge
the key to competitive
as the process by which
a self-service operator.
two decades
of experimental
learning about discount retailing prior to the explosive growth of the Wal-Mart chain (Walton, 1992).
The dynamic environment, and the
as competitive opportunities of competitors, not just
for the
ability to
experiment and improve, are seen here
competence leaders
keep up. The flow
to
be entrepreneurial~to stay ahead
of learning from the experimental
8
doing phase to
the cognitive of our
model
The ties the
traits
in
which make a shared sense out of the competitive market
demands
Model and a Caveat
the diagram (Figure
1 )
and the
are
still
firm's goal of earning
of the activities
in
1
economic
competence
which take place
critical
part
profit
inexorably
of the firm.
We
the lower part of
in
the context of the larger product/market
pursuit of competitive advantage.
order to compete at
in
all
performed
an industry (Bullen & Rockart,
address
The
of the competitive environment to the core
should re-emphasize the point that
in
a
the context of a dynamic world.
Total
relationship
is
The concept
of critical
success factors
986) indicates that there are key areas which a firm must
all in
an industry. Indeed, a
firm
which wishes to earn
sustainable profits from competition must address at least one of these success factors better
than the competitors
if
there
is
to
be a basis
earning an economic
for
the market determines or limits what core competencies a competitor firms
which have developed competitive advantages
in
profit.
may
In this
have.
respect
Similarly,
the market have predetermined for
themselves which core competencies must be maintained. This
examples
is
not to say that purely entrepreneurial activity does not take place.
of Steinberg
and Wal-Mart mentioned above indicate
entrepreneurial behavior actually involves the development of a
became
critical to
success
in
no matter how
skilled,
new
what
is
often considered
set of core skills which
the next stage of industry competition.
Just as no one entrepreneur can create firm,
that
Indeed, the
demand
for
non
existent needs,
can respond to major competence destroying
environment (Tushman and Anderson, 1987). What
we
are saying here
so too, no
shifts in
is
the
that the very
processes set up to handle change and manage core competencies assume some underlying basic structure of demand, and of
how
9
that
demand
is
satisfied
by the supply side.
If
that relationship
is
fundamentally altered, then such a quantum change destroys any
competitive advantages that firms once enjoyed.
The underlying competencies are
often
rendered useless. The speed and scope of such environmental change presents a situation
which
is
more than
just evolutionary,
had developed high
it
levels in the
skill
is
revolutionary.
technology. As the technology evolved, what evolved, too, consistent with our model. their underlying
was developed none
market.
buggy whips and
Like
their competitive
skills
advantage.
and competencies
therefore have to
new knowledge
was needed
limit
built
the
1
950s many firms
in
vacuum tube
to maintain competitive
advantage
Experimenting and learning helped leading firms
competencies outward and kept them ahead
the transistor
in
manufacture and refinement of the vacuum tube.
Environmental monitoring kept labs on the edge of
push
For example,
of these evolutionary
of competitors.
Still,
when
systems could save the vacuum tube
butter churns before them, they maintained their skills but lost
No
competitive advantage can exist
up
will
if
no demand
produce neither sales nor economic
exists;
profits.
all
the
We
the scope of the model to exclude the case of a dynamic environment
which undergoes competence destroying change.
^
RESEARCH QUESTIONS DRAWN FROM THE MODEL The model
just
described presents
some assumptions about
the relationships between
core competencies and the market. They lead to three more formal research questions
discussed below.
However the learning portion markets and develop insights
into
of the
model may provide a basis
how new
skill
sets
may
for
understanding the evolution of newly emerging
lead to the development of firm-level core competencies.
10
Research Question #1
The model presented here distinguishes between a core
competence and a product/market
relationship.
We
have said that core competencies and
core products must address the most basic questions of any business competitive advantage: the who, what and
competence enables a product need
and
service which
fits
how and where by
how
it
competencies However,
products can emerge.
of
customer needs
will
build
if
yield
economic
they are to lead to a
(Abell, 1980).
some fundamental
of service to satisfy
better than the competition
profitable core
how
if
When
the
point of customer
The more desirable
profits for the firm.
up a broad base from which numerous businesses or
the competence or
with the competitive environment
it
skill
will
does not
yield a
be unprofitable.
core competence translates into a competitive advantage
product or
We
suggest that
will
be determined
the customers and other environmental factors define the product/market relationship.
This leads to the
first
research question:
Research Question #1 Is the determination of which competencies are "core" and lead to competitive advantage made by the competitive environment or the firm? If
be
built,
in fact
the competitive environment provides the basis on which competencies can
then an industry analysis should allow for a clear identification of the core
competencies on which industry members expect to find any firms
in
will
compete. Stated another way,
we should
an industry competing on a base competence which
is
not
not
predetermined by the competitive environment.
Research Question competitive advantage that competencies,
we
#2
In
required that the
no matter how
competitive advantage
if
the discussion of
skillfully
how
core competencies related to
competence be
firm-specific.
developed and executed,
will
We
are assuming
not provide
they are held by more than one competitor. Those, core
11
competencies which purchased
in
will
lead to a competitive advantage can not be quickly acquired or
an open market by a competitor. Although they could possibly be acquired
through purchase from the sole owner, perhaps through acquisition, the unique status of competitive advantage to
whom
ever holds
it.
this
does not eliminate
Thus, firms should not be
able to lose competitive advantage due to quick copying by a competitor of their underlying
competence. Instead, competence should have the potential to provide a term source of economic
development of
profit.
a long-
firm with
Only significant environmental change, a competitor's
alternative skills or failure to maintain one's
own competence should
maintain a core competence the
a loss of competitive advantage. For studying the
ability to
second research question looks
for insights
at the
exceptions
underlie
about
sustainability.
Research Question #2 How do firms with established core competencies lose competitive advantage over time? In
the analysis of an industry over a sufficient period of time changes
leadership should be observable.
examining the long-term changes
In
positions of firms an industry analysis can research overall trends
and
in
the competitive positions of individual firms. in
success factors
the environment led to shifts
in
analysis at the firm-level can
be made
responsible for the performance the relationship between core firm's loss of competitive
it
shift.
to
It
see is
if
in
industry
the competitive
the industry environment
By comparing the environmental
can be determined whether changes
the competencies
individual firms
in
in
in
in
organizational performance.
failure to
the
If
shifts to
critical
not,
maintain core competence
an
was
anticipated that these alternative explanations of
competence and the environment may throw
advantage.
12
light
upon a given
Research Question learning.
In
The
skills.
#
A key concept
3
in
our model
is
the role of organizational
the model competencies are based on developing firm-specific knowledge and
firm-specific nature of the
knowledge enables the
firm to stake out
a unique
competitive position. The development of firm-specific knowledge, therefore, requires
than just collecting information and commonly known specific learning
must take place.
changing nature
of the external
our key points
that learning
First,
a
firm
is
it
to a level
competitive
(1
beyond
992) sees as
firm
of the industry
must
because
of the
such
that the firm retains
change.
and from the
refine this information internally~it
If
is
this
its
second type
must develop
edge even as the of learning
which Senge
advantage and we agree.
to maintaining competitive
critical
is critical
collecting information from experimentation
that of competitors
demands
and grow
a two pronged process when related to core competencies.
Second, the
external environment.
from the environment. Firm-
environment and the demands of the customer. Thus, one of
is
must constantly be
Failure to learn
skills
more
Research Question #3 What role do learning processes play in a dynamic environment.
in
maintaining core competence Here the focus competitive edge.
In
in
the analysis
identifying
question
2,
again be on those firms which have lost their
they lost their edge questions can be raised as to the
Here the interaction between the scope of the change, discussed
role of learning in this loss.
in
how
will
and the speed with which the
firm
can learn new
skills
can be examined.
CORE COMPETENCIES AND THE PHARMACEUTICAL INDUSTRY Selection of Industn/ excellent industry to use
in
and Firms
for Analysis
The pharmaceutical
studying the applicability of our model.
industry provides an
First of
all,
this industry
has been extensively studied by both academics and regulators. These discussions have
13
lead to a strong consensus about the core competencies
base for
for differentiation
competence
falling
among
the industry.
therapeutic classes of drugs provides
and hence
building
in
over the industry's history.
situations
Finally,
Second, a broad
numerous opportunities
which to observe dominant firms
in
the industry
is
made up
rising
and
which are
of corporations
generally dominated by their pharmaceutical units. This allows the researcher to get a clear
view of business-level competition largely unencumbered by other corporate business
The modern pharmaceutical
industry
is
end
generally dated from the
World War. There were, however, many firms conducting drug research
some
significant products
in
the pre-War era.
Peoria,
Illinois.
Europe.
soil
prior to the
war and
the
US
almost no
new
shift of penicillin
There, a consortium of for the
larger chemical
US
firms
and dyestuff operations
ethical
of
many
drug research was undertaken
research from Oxford, England to
developed the deep-tank fermentation
mass production
Armed
of penicillin.
with
competencies
in
screening for antibiotic action (and the fact that several European competitors were
reduced to the
In
The war saw the
techniques which allowed
Second
had been developed (Sneader, 1985). These operations, however,
were often greatly over shadowed by the firms, particularly in
of the
units.
US
ruins)
these firms went into pharmaceutical research. The granting of patents by
patent office for
artificial
antibiotics in
1
948 guaranteed
profitable returns from
pharmaceutical research. Together these events created firms whose dominant business was the pursuit of ethical drugs, independent of overriding chemical or dyestuff operations.
An
overall
sample
were the largest firms
in
of 41 firms
the
was examined used
US and Western
Europe.
In
the relative competitive postures of these firms changed
in this
study (see Table
a prior study in
the
we have
These
1).
looked
US market between
1
at
how
969-1 988
(Bogner and Thomas, 1991). The nine firms which make up the primary focus of our discussion are presented
in
Table 3 together with a
14
brief description of their
competitive
skills.
We
have focused
on these
primarily
firms,
although the competencies of other firms are also
discussed.
Core Competencies traditionally
research
in
been based on the
shows however
skills
that these
have to be interpreted
skills
the Pharmaceutical Industry Core competencies have
drugs are
relative to the various therapeutic
R&D
therapeutic classes have shifted
wave
of
In
the
different
skills.
pockets of
classes of drugs which
demand
For example, the
R&D
skills
for
exist.
drugs they also
needed
develop
to
antibiotic
from those which produce psychotropic drugs. More over these
different
the years.
R&D, marketing and promotion. Our
in
broad descriptions are much too general. Core
These classes not only recognize the recognize different bases of
involved
1
940s and
1
in their relative
950s
importance
And
in
the
1
the overall drug market over
were the primary new drugs.
antibiotics
psychotropic drugs provided significant advances
emotional problems.
in
980s a new generation
in
In
the
1
960s a
dealing with mental and
of cardiovascular
drugs replaced
older therapies.
A second
observation with respect to
R&D
the research methodology required to identify
World War
skills in
skills
new drug compounds.
The
soil
screening and fermentation
provided an alternative research base for shift
life
change from
Prior to the
Second
molecular manipulation and mass-assay testing drawn from the organic
chemistry of the dye trades dominated R&D. These recently.
addresses the changing character of
skills
skills of
some
retained their
dominance
the antibiotic firms
firms, primarily
in
until
quite
the 1950s
from the US. Later a major
large-scale trial-and-error techniques occurred
when developments
in
the
sciences of biology and chemistry advanced to the point where researchers could
develop drugs based on knowledge of
how
the body's systems operated. This "rational drug
15
design" allowed for more concentrated research. The increased knowledge of biology,
however, eventually led to a more radical change
in
the
1
980s with the emergence
biotechnology as an alternative to organic chemistry as the base
summary
of the
changes
Similar patterns of
and promotion.
in
R&D and
1
950s
fact
purchases the drug
that time, firms
have
in
Four.
in
for the patient with
built detailing
that
prior to the
dominant
little
in
which they
1
1
life,
develop
skills for
who
in
1
this
was
at least
fit
two major
5 years as indicated
for the
into the
development
shifts
Table
in
of selling
ineffective.
of
competence: the
ability to
not always a source of competitive
similar administrative
procedures
for
new drug
The next two decades saw these procedures become more and more onerous.
Particularly in the US, large
patent
to
with the
962 did the US establish pre-market approval requirements. During the
960s most Western countries established
approval.
need
However,
new and growing source
cope with regulatory agencies. Again in
However, the
position as a gatekeeper
sell.
selling pattern over the last
our review indicated a
advantage. Only
the area of marketing
sales forces directed at the physicians which
competencies. Similarly they rendered older ways of selling
effectively
in
Table Four.
in
regard to price. Through the decades since
These new competitive postures created new bases
Finally,
provided
Second World War, along
The physician occupies a unique
medical cultures of the various countries
have occurred
US
the
synthetic antibiotics, brought about the
influencing the physician.
is
A
drug research.
direct selling to physicians did not exist.
creation of "prescription-only" drugs
new
competence
competence changes occurred over time
Prior to the
increased flow of
other areas of
for
of
are
now
sums
of
money
sacrificed in order to
however, that significant variation exists approval process.
and, more importantly, over half of the product's
comply with drug approval processes. in
the
amount
of time different firms
It
spend
is
clear,
in
the
Firms aim to be "first-to-market" so as to establish drug-of-choice status
16
and
build
up switching costs with respect
(and speed)
in
to
subsequent entrants. Therefore, effectiveness
dealing with regulatory agencies
may
lead to significant long-term competitive
advantages within therapeutic classes.
FIRM ANALYSIS Nine firms which
reflect
the range of competitive positions
selected for intensive case study treatment.
In particular,
in
the industry were
the case studies sought evidence
on relationships between core competence and competitive advantage. Based on the casestudy observations
made
here, conclusions about the research questions
Sales figures for the nine firms are presented
pharmaceutical drugs. the universal chemical
given
in
names
position which
Merck
is
is
be drawn.
Table Five. These data include only
Please note that the descriptions given
parentheses and
Merck
in
will
of specific drugs.
in
the following section use
The brand name used
in
the
US
is
often
capitalized.
the largest seller of pharmaceutical drugs
Merck has held
for the better part of
in
the world. This a
a decade now, but they did not occupy
that position during the middle years of this industry's brief history.
It
was, however, the
technological base which Merck brought into the industry at the outset which would be the
key to
their latter
success.
Merck was a sell
"fine
chemical" producer prior to World
proprietary remedies, rather they sold chemicals
"professionals": doctors, researchers
War Two. As such Merck
and chemical compounds
and pharmacists. Merck participated
to
in antibiotic
research during the war and emerged with streptomycin, an important early drug.
however, gave the patent to Rutgers University and allowed
17
it
to
be
did not
Merck,
freely licensed (Temin,
1980).
As a
result
Merck seems
dominated the industry chemistry.
In
much
the
When
trial
and
opportunity.
Building
firm
management
The questions which are center on
in
to introduce
a
string
how management handles
in
is
in
the
1
the largest
the
difficult.
leadership
its
in
As Merck has
environment has become more
now
the lab (Meyer, 1990).
in
980s in
its
these and other areas
their strength (Byrne, 1987).
the dynamics
sales force
Merck's sales force
targeted selling.
a drugs
raised about the ability of the firm to maintain
its
broad chemical
for firms with
cardiovascular drugs and rebuilding
of a creative laboratory
Merck has realigned
prior to the war,
more advantageously Merck's management seized the
on established bases
Merck was able
organic
through the antibiotic era.
Merck's labs have always been seen as larger,
its skills in
(which
on organic compounds and produced a series
error tests
drug design created the opportunities
to exploit their skills
grown
stick to
in antibiotics
same way as Hoechst formulated new compounds
backgrounds
1980s.
Merck did however
drugs which sustained the
rational
antibiotic skills,
have missed being a major player
twenty years).
for
Merck employed tedious of non-antibiotic
to
to reflect the
numbers
in
the
move toward more
US and
carries a
reputation as being the best trained as well. Training includes extensive continuing education for established sales personnel.
executives spending
Merck
is
some
of their early
Merck's products
in
months
is
championed
at
Merck, with
all
some
move through
Glaxo
is in
world market-share.
well publicized difficulties in gaining
quickly, retaining
many ways
Glaxo
is
more
of their patent
new drug
one drug company, namely
18
new approvals,
life.
the antithesis of Merck, although Glaxo
essentially a
potential
with the firm promoting drugs to doctors.
also extremely adapt at dealing with government regulators. While
biotechnology firms have had
Glaxo
The sales function
is
number two
ranitidine (Zantac).
company has
While the
other products and a promising pipeline
in
some
areas, their global
rank has been achieved primarily through ranitidine and their great competence
it.
In
over.
the 1970s Glaxo
was perceived as a weak
firm;
They had no unique products and no presence
Japan.
In
in
marketing
Boots even attempted to take them in
the two largest markets, the
US and
the late 1970s, however, they had formulated a slightly different version of the
emerging super-drug cimetidine (Tagamet) produced by Smith Kline & French, now SmithKline Beecham.
Glaxo's version
was not considered superior on any important
the vast majority of users and other second movers were entering the market too.
SK&F had
trait for
Further,
established cimetidine as the most successful drug ever, with sales approaching
$1 billion annually
in
the early 1980s.
However, Glaxo developed a strategy
Using what they
for selling ranitidine in Italy.
learned there about focussed selling they set their sights on the US. Without a large
US
sales force, Glaxo "rented" the under-utilized sales force of Hoffmann-LaRoche and put
its
of
all
resources into promoting a single drug. The results were stunning. Ranitidine, not
cimetidine,
became
the
first billion
dollar
drug and Glaxo has maintained
growth ever since. Since the success of Glaxo's launch of redesigned
their sales functions to
its
sales
and
ranitidine other large firms
profit
have
mimic Glaxo's techniques. Primarily they have sought to
reduce the number of products which each salesperson handles and to target
their
salespeople more narrowly, based on physician characteristics. This results from the belief that the promotion of a
product
line.
few "blockbusters" produces more
be seen. Glaxo has not yet
new
than a large more diverse
Consequently much larger sales forces are now being used
Whether Glaxo has retained
readying
profit
tried to
its
core competence
launch
its
in
in
the industry.
blockbuster marketing remains to
second super-drug. Although they
clearly are
attempts, Glaxo has only focused on developing a few blockbuster drugs.
19
In
1986 Glaxo had only 13 products
in
development compared to Merck's 89 (Economist, 1986).
Glaxo has no non-ethical drug businesses and they have sold
do not produce high margin products,
in
Bristol
was an
antibiotic firm
However, by the
the largest firms.
billion.
A
In
1
late
988
1
efforts
980s
Bristol
is
merged found
960s.
1
were
In
in
989 with the
firms
through the
1
960s.
In
the
diversify their
in
new products
did not
1
4th
in
that of
Squibb also was a major of antibiotics
and
However, they too were unable to keep
primarily successful in the cardiology market.
up with leaders such as Merck and were
match
the world with Rx sales of just over $2
970s they sought to branch out
1
matching the
intent of
such as Merck and Ciba-Geigy.
969 they sought to
breadth of
ranked twelfth
1
cancer drugs and central nervous system
in
their total
1
in
similar story characterizes the recent evolution of Squibb.
antibiotic firm
were
through the
more successful
research. Their
drugs.
firms
both products and research which
scope
operations which
bulk antibiotic manufacturing plants.
ie.
These two
Bristol-Mvers Squibb
their ethical
the world
in
1
988 with Rx sales
of
about $1
.7
billion.
In
the strategic group study of the competitive positions of Squibb and Bristol Myers
through the
1
970s and
permanent future strong
R&D
the changes
skills,
in
in
1
980s (Bogner and Thomas,
a second-tier position
but not
in all
the
these weaknesses. The
US market
of the major drug classes.
R&D
The merger strengths
of these
(see Exhibit Two). They had
They were also being pressed by
two firms allowed them to address both
complemented themselves
have competencies within classes, they had
advantage
992) both of these firms were facing a
marketing to build the extensive focused sales forces needed to target drugs
to specific physician groups.
firm
in
1
of technological opportunities
skills
Not only did the new
across classes which could take
whenever they occurred
20
well.
in
of
the market.
The
combination of sales forces allowed
Competencies, however, are
built
competencies and managerial
competence
distinctive
another's strength.
In
is
have the
develop
becoming
come
specialization.
in parallel.
We
have noted that what makes a
the inability of firms to quickly build or buy what third in the
world
in
is
needed
to
for the
close to Merck
promoting wholly new drugs and
in fully
in
1
990s
match
sales Bristol-Myers Squibb has merely
among
of the research pipeline with established reputations
The competitive question
ability to
more product and physician
over time and the merger requires that organizational
skills
combined products already out physicians.
for
Squibb
for Bristol-Myers
is
whether they
and
the underlying competencies of developing
integrating the core skill-sets across
two diverse
organizations.
Hoechst
Hoechst
is
a broad based chemical firm with about
pharmaceuticals. The firm has a very strong base
back
to the
1
9th century.
Until recently
required licensing there of
all
8%
of
sales
its
this
century and continues to
a lack of an extensive marketing operation
but a few products.
Hoechst has attempted to
Hoechst provides a strong example
of the
Following the destruction of the
return to drug research
endurance
of
in
the bricks and mortar. Allied
in
(Lasix)
to
and
bombers destroyed
capital could rebuild factories.
21
its
the minds and the
assets which were not the basis of Hoechst's competence. Thus, the firm
rebound as a leading innovator as soon as
up
980s.
Second World War Hoechst was able
and develop some key products, including furosemide
Hoechst researchers, not
1
the
of firmly established
tolbutamide (Orinase, licensed to Upjohn). The competence resided
methods
in
build
pharmaceutical business through sales force additions around the world during the
competencies.
in
organic chemistry research which dates
Hoechst has survived the two wars of
provide important products.
US
in
1
was
able to
Clearly the capital
and other
limitations
prevented the firm from taking
full
advantage
of
research
its
competencies, as the license of tolbutamide to Upjohn indicates. However, as long as the research competence their
new
is
retained, the firm
products. Therein
lies
will
continue to have a competitive advantage with
the challenge for a firm such as Hoechst. As research shifts
more toward a biology base and away from organic chemistry, the core competencies) or Hoechst must change
described above.
in
early 1970s.
began its
Lilly
was even more
prospered
in
the
has a very
1
Like the other two,
1
970s, but
Lilly
seems
the 1980s and
expanding
Lilly
was engaged
to
in
1
980, but by
more
larger
retail
number
its
Lilly
be nurtured
number
a
level
990
the
of product areas
it
in
its
which
difficulties in
it
1
the late 60s and
firm
notes that
top ten products covered 7
980s
Lilly
its
sales force to avoid
added a
third
wing to
its
drugs through
to lead hospital sales while
competence maintenance
living,
six of
grows elsewhere.
and the desire
where the competence remains
of therapeutic classes
in
led the world in hospital setting
position even as
presence may lead to
at
In
Indeed,
a research diversification program. That
has long had some bifurcation of
finely target hospitals.
wants to maintain
it
1
firms.
Squibb. They also
have been more successful. The
have presented competencies as dynamic, almost to
in
the heavily covered antibiotic areas.
sales force to
Bristol or
960s, only to have a performance shortfall
different therapeutic classes.
The
well.
those other two anti-biotic
similar history to
top-ten products were antibiotics
in
dramatic manner as
relatively
focused on antibiotics than
centrally
950s and
1
the late
duplication
a
(and
This firm provides a strong contrast to the Bristol-Myers Squibb strategy
Eli Lilly
Lilly
in
skills
for
Lilly.
We
parts of the organization which have
distinctive.
As
seeks competitive advantage
Lilly
it
expands the
takes an ever
increasing flow of resources to keep up with, and exceed, the performance of firms such as
22
Merck, Bristol-Myers and Hoechst sustain a competitive position
in
each
becomes
the industry leaders by between $1
.5
class.
The
size of the
With pharmaceutical sales
significant here.
and $2.5
billion
cash flow available to
annually,
Lilly
has
trailing
significantly less
resources to dedicate to achieving a competitive edge across multiple research classes.
Hoffmann-LaRoche
good basic competencies
Our analysis in
of
Hoffmann-LaRoche (Roche) indicates a
organic chemistry, but with a limited product focus.
aspects of Roche are quite secretive. The firm
is still
drug introductions, however, cannot be hidden. firm
whose competence focus could
Roche's success industry.
in
the
Even without
1
(Librium),
and Swiss law requires
family controlled
in part,
that respect
In
not maintain
960s and early
1
970s led
financial disclosure
it
is
its
Roche
reflects the
new
slippage of
competitive advantage over time.
to the
presumed
position of
#1
clear that their psychotropic drugs
The development
that therapeutic class of drugs.
however, was,
Many
Observation of the firm's sales performance and the scope of their
minimal disclosure.
a
firm with
of the
benzodiazepine class
for
in
the
dominated Roche,
serendipitous (Sneader, 1985). The resulting drugs, chlordiazepoxide
diazepam (Valium) and flurazepam (Dalmane)
all
became
large selling drugs.
In
the
1970s these drugs came under severe price pressure from government purchasers, particularly in the UK.
In
the
1
980s rapid patent expiration brought
in
a range of generic
manufacturers and aggressive price competition, driven by the very product successes that
had made Roche so
profitable.
drug development, then a new
If
line of
products as the drugs-of-choice. replace their ageing
lines.
Roche had nurtured a core competence
But,
(The under
in
psychotropic
patent protected drugs would have replaced the older
Roche had only a utilization of their
23
limited
US
product range with which to
sales force
was a key element
in
Glaxo's launch of ranitidine
in
The
the US.)
has slipped greatly
firm
the global market
in
share tables.
case competition was dramatic as patents expired around the globe on Roche's
In this
key drugs. Competence
based on the idea
is
advantage
firms continue to maintain competitive
was not
hugh cash flows and
that there
Upjohn were successful
all
large leads
was an insurmountable
in this
drug class (known its
a base competence
prior
in
in
in
US, Genentech,
in
more a challenge than
that of
US
the firm
internal
the
1
and
Lilly
980s which were very
development, Roche has sought to acquire
acquiring
Cetus,
Lilly.
in
Roche's
1991.
Lilly is
60%
of the leading biotechnology
nurture
ability to
competence
is
even
seeking increased levels cash flow generation to
those of the top
Schering-Plough
is
one
firms.
Roche
new core
attempting the more
is
skills for their
of three smaller firms
This firm should not be confused with the
US based
was
Foreseeing
in
Bristol-Myers,
It
R&D
thrusts, at
a
than the existing competition.
Schering-Plough
assets the
in
as Buspar, Prozac and Zanax respectively).
task of re-framing and re-developing a set of
highlight.
Schumpeterian creative
1990, and then acquiring a key diagnostics technology from
their skill levels competitive with
level better
of
research insights which the firm possessed.
new biotechnology by
the
firm,
difficult
wake
technological barrier.
the
success through
another biotechnology
keep
the
able to bring out new, patent-protected drugs
Unable to match
firm in the
in
By maintaining competencies
Roche, however, was unable to replicate the success of the benzodiazepines,
destruction. spite of the
of replication.
firm
was formed
after the
Germany
firm,
Second World War.
which
this
inability to
compete against
In
the
1
960s and
larger antibiotic firms Schering-Plough
24
will
Schering AG, from whose
very dependent on one product, gentamicin sulfate (Garamycin), for
its
study
its
1
970s
profits.
appears
to
have sought out a niche position, focussing
its
limited research dollars
substance, interferon. The firm acquired a large stake ($8 million consistent with this focus on a leading
edge biotechnology. The
on the once promising
1979)
in
in
Biogen,
interferon technology,
however, did not pan out with the result that Schering-Plough produced the worst return to investors of any Fortune
500
from 1975-1984 (Steyer, 1985).
firm
interferon
market was estimated
continued
this focus,
expanding
at
about $50
its
million.
In
the late 1980s the
In
the 1990s Schering-Plough
and production
interferon research
in
Ireland
and
elsewhere.
Burrouqhs-Wellcome (Wellcome Foundation) of
making
Burroughs Wellcome (BW) has a history
drug research which dates back to the
significant contributions to
century.
However, that research legacy has not translated
recently.
Similar to Schering-Plough,
global pharmaceutical market Unlike Schering-Plough's
in
the
movement
BW was
1
a
in to
firm of limited
research
was considered
to
to the cutting
response earlier
scope and presence
edge
of research,
firms,
symptoms
BW
in
until
the
returned to a
namely,
be a research "black-hole" by many
introduced acyclovir (Zovirax) to help control the sexually transmitted diseases.
competitive advantage
970s. They too had decided on a focus strategy.
researched area which had been largely abandoned by other viral
late 19th
firms.
In
1
of herpes, then the
azidothymidine (AZT)
in
1
Anti-
anti-virals.
Herpes was quickly overshadowed by AIDS and
for that virus too, bringing out
much
982
BW
scourge of
BW
had the
986, a modification of an
disappointing cancer drug.
While
BW
has had other new products as well (most notably they fought with
Genentech over tPA, the dominate
force.
anti-clotting agent), anti-virals
The sales
of anti-virals
and
their
research has
come
have greatly aided the development of the
25
to
be a
firm's over-
all
size,
but they
remain mid-sized.
still
successful competence: too
much success
engaging
in
more
now
they
research
anti-viral
in
aggressive
new
competition from larger,
own
Most important,
doing
all
this
research
firm-specific skills in the anti-viral area in general.
With or
the AIDS area, these firms
in
in
significant levels of research.
these firms are building their without success
brings
maintaining a
in
Indeed, the potential market for AIDS drugs has almost
established firms (Porter 1980). large firms
Here a new problem emerges
Where
the future.
will
BW
face a range of large firms pursuing the
in
have a stronger base from which to do
used
to
dominate the niche others avoided,
same competence-based advantage
in
a
mainstream area.
Marion no longer exists as an independent company.
Marion
regarded as one of the top firms
in
Marion achieved
reality is that
drug acquisition. They had no larger competitors.
limited
product
In
the late
Two
line.
its
its
known
from Japanese firms, which had no
980s they were
In
1
989 Marion
accolades by being an innovative first-mover
at best.
in
outside
competencies which could not be easily copied by
970s Marion began licensing products to
drugs,
1
performance since has been disappointing
distinctive
1
the
America by Forbes and Business Week.
was acquired by Dow Chemical and The
In
in
the
US
fill
out
its
very
as Cardizem and Carafate, were licensed
skills in testing
new drugs
for
approval
in
the US.
Marion
took these products through testing and regulatory approval. They were introduced by
Marion
in
the
accounting
for
development"
them
to the
US
in
over
firm
US
1
982 and
70%
981 respectively.
of the firm's sales
based on
market.
1
its
Both were tremendous successes,
by 1987. The firm boasted of being a "search and
searching for foreign firms' promising drugs and bringing
Needless to say
this
does not
developed drugs.
26
reflect
a pipeline of
internally
was not
Marion's competence
Moreover,
other firms. larger, with
many
of the firms with
more experience
approval promotion. This very successful
1
988
is
fiscal
line.
In
the
aggressively competing
need
of a very
1
all.
whom
could be, and was, easily copied by
It
Marion competed
for
licenses were
not to say the firm had other competitive options.
year
its
1
total
Even
pharmaceutical sales were less than $750
960s a smaller
firm
in its
million.
such as Marion could sun/ive on
In
its
990s, with high drug research budgets and the largest firms
in all
important classes through
R&D and
promotion, a small firm
unique niche to service long-term competitive advantage.
the resources required to build and sustain a core firm of Marion's size
new
gaining drug approval and with bigger sales forces for post-
in
a competitive environment of the small product
distinctive at
and considerably lessened
Put another way,
competence were beyond the reach
its ability
is in
of a
to remain within the industry's
mainstream.
ANALYSIS OF RESEARCH QUESTIONS Research Question
#
1
With every one of the nine firms discussed above
competencies they possess or they pursue are defined by
that the
competitive advantage which a competence gives skill
as by the market's
demand
comparing the two niche virals
and
firms,
for that
skill.
determined not so
products of these
much by
the level of
not,
two
firms.
Yet
based on the scale
BW
skills in anti-
has had
of the
market
skills.
Breakthrough products should be viewed antibiotic firms
environment. Any
Burroughs-Wellcome and Schering-Plough. The
interferon respectively are both first-rate at these
for the
clear
This can be seen most dramatically by
tremendous success while Schering-Plough has
demand
is
their
is
it
in
much
the
same way. The
skills
which the
developed during World War Two proved to be profitable because of the
27
preexisting
demand
for
a cure
European based organic chemistry of
market place demands
for
those
firms
built
too, the products
were based on the
skills in
epidemic and the subsequent surge
competencies are
So
for infection.
first
research
in
skills
place.
which were pursued because
The sudden
demands
(ie.
able to achieve
firm is rejected
will
combination of seeking out foreign licenses and bringing drugs to the
its
competition.
As a
for
result,
these licenses did not define Marion's
the firm
was unable
lead to competitive
by the Marion case. Here a
some unquestioned successes. However, Marion was
competence. The market
the AIDS
demand-pull).
Conversely, the proposition that the core competencies which
advantage can be determined by the
rise of
evidence of the extent to which
is
as a reflection of market
which came form the
firm
make
not able to
US market
skill
was
into
their
a
as distinctive vis-a-vis
success they had
to continually replicate the
had with Cardizem and Carafate. This may or may not be the case with Glaxo. When Glaxo developed the blockbuster approach to promotion they gained a short term advantage over their rivals.
Whether
that
advantage
Note that Glaxo seeks to outperform
is
distinctive or not in the long run
rivals
its
by
limiting itself to
remains to be seen.
a few big drugs and heavily
marketing them with a distinctive marketing and promotion mix. Whether skills
can lead to competitive advantage
The concept
of
competitive advantage.
economic
will
profit ties
this
combination of
only be determined over the next decade.
together the ideas of core competence and
Competitive advantage
is
the sustainable base on which those profits
can be earned over long periods of time, and core
skills
must be
built,
accumulated and
maintained towards that end. The more successful firms studied here did exactly
case of Bristol-Myers Squibb the merger was driven by a desire the therapeutic classes
same
deemed
market-dictated goal
critical
by the market.
was sought through
internal
28
In
for
a mix of
the cases of
Lilly
R&D
that.
skills
and Merck
development of core
skills.
In
the
across this
And
in all
three cases the future success of their will
be determined by the success
of
skill
bases
new drugs
particular research oriented skills give
maintaining their competitive positions
in
in
the market-the extent to which their
them products which command a competitive
advantage.
Research Question
its
relationship to competitive
performance positions
The
emerged with
first
with
group
in
We
now moves
is
Some
examine those firms which
firms,
of firms
in
we
looked
at is the antibiotic firms.
their
lost top-
In
the 1950s these firms
a new technology which allowed them to produce products
firms, particularly Lilly
new generations
of competitive
and Glaxo, were able
of products from the
however, were not so successful
including Bristol-Myers,
competence
advantage make to explaining why some firms
developing cephalosporins, antibiotics which were used largely
continually develop
distinctive
lost
the industry over the 50 years of the study.
competencies
mixed.
to
want to see what contribution
hugh demand. Were those products a source
score in
2 The analysis
over time.
their competitive status
and
#
had ended up
in
advantage? Here the to
in
develop competencies hospitals,
to
1950s through the 1980s. Other
distinguishing their products.
in similar
and
Several firms,
competitive positions with their research and
products became close substitutes for each other. The resulting 'letracycline
conspiracy" represented the clearest evidence of the
products
in
the market (Costello, 1980).
each other's patents
for tetracycline in
In
that
inability of
these firms to distinguish
their
case the firms simply agreed not to challenge
exchange
for
promises not to license the drug beyond
a small group of manufacturers nor to compete on price. The tetracycline conspiracy
produced
litigation
which spanned two decades. These firms were unable to use
29
their
initial
R&D
skills to
develop differentlatable new products and hence another base
for competitive
advantage was needed. With price competition eliminated, and with no technological advantages with which to
develop new products, the It
was
at this time,
and with these products,
promotion competencies. physicians.
was one
effectively
Pfizer
is
began
that the firms
largely credited with the
first
to build their advertising
for chlortetracycline
(Aureomycin)
million dollars for their tetracycline
moved
in
1
948.
What caused these
firms to lose their
which resulted from the end of the price
very competitive and
in
into
In
to
and
eased It
in
less significant.
the
US
in
cost
be greater
What
hurt the firms
was
A few
price competition
the
firms
inability to
such as
Lilly
and
second-generation cephalosporins, but the hospital market
were played
differentiating ability
When
off
is
against each other by
moved more and more
brought about by marketing
the use of generic substitutes
in
our cases
more aggressive therapeutic class about
their direct mail
in retail
skills
prescriptions
became
was
the mid-1 970s, the resulting price competition hurt these firms even more.
should be recalled that
antibiotics at
million dollars to
built.
purchasing agents and the use of formularies. Further, as products
less
two
edge was not the increased
fixing.
that market the firms
toward commodity status, the
of
952
1
seemed
continue to develop new, distinctive, patent-protected drugs.
Glaxo were able to move
sum
(Achromycin) (Measday, 1972). The firms
the competition to marketing where there
opportunities for competitive advantages to be
and
advertisements directed to
Others followed. Lederle spent the then unheard of
conduct promotions alone
antibiotic pioneers shifted their competitive energies to promotion.
this time.
we saw
diversifications,
Fortunately, this
techniques began to take over
in
that Bristol-Myers,
was
moving
their
Lilly
all
began
research programs away from
also the time that rational drug design
the laboratory, facilitating the move.
30
and Squibb
Still,
these programs
alone did not allow the antibiotic firms to recapture the lost prestige of the
1
950s and
Only through merger do Bristol-Myers Squibb hope to keep up with the pace set by
960s.
new research
in
Merck and Glaxo. In
which
1
the case of the antibiotic firms the
distinctive
competence could be
close substitutes the
skill level
overwhelmed by the lack clearly illustrates
one
of our points
sufficient to
command
at
a
products
skills
level
which gives the
in their
distinctive
firm
competencies: They
a degree of differentiation
profits.
a period of time, then
illustrates
how a
to maintain a
fail
can gain
single firm
competence.
technological environment for psychotropic drugs clearly indicates that there for further
financial
advances beyond the drugs Roche introduced.
resources or
effort in trying to
They simply lacked the core research replace the benzodiazepines.
and Upjohn, were able
These two examples
of
advantages
how in
similar drugs.
to
maintain
skills to
its
Further,
in
in this
study,
review of the
was
still
in
competitive advantage can be
lost.
Many
the drug class.
firms
Lilly,
to
Bristol
that therapeutic class.
antibiotic firms
more and more
room
did not lack
most notably
and the benzodiazepines, provide
the therapeutic class shrink as
A
produce subsequent products needed
produce new and very successful drugs
firm
Roche
competitive position
Meanwhile, other firms
situations, antibiotics
No one
was
research
brought to the product-market. This
about the dynamics of
super-normal
for
base became overcrowded with
that
had obtained
which those
By contrast the Hoffmann-LaRoche case distinctive
technology only created a single base on
When
built.
of the participants
of distinction
must be continually improved
initial
interesting
had
their
matched the leader with
could either significantly distinguish themselves from the
competition or push out the technological boundary through internal research.
case competitors bypassed the leader with new drugs. History showed that
31
in
In
Roche's
both situations
there
was
An advantage
research. firms,
an opportunity to push out the technological horizon through new product
still
each
of
largely held
by one
was now aggressively sought by
firm
which was able to make firm-specific advances
produced drugs
of significant
demand. Indeed,
it
was noted
as a holder of major patent protected products
antibiotics
the traditional antibiotic firms were diversifying
a competitive product
advantage by
economic
rivals.
at
one
point
in
Failure to learn
away from
in
the technology which
in
that
Merck was able
the late
1
to re-enter
980s, just as
that class of drugs.
many
Thus, firms with
and increase core
skills
ahead
of rivals leads to
a loss of
profits.
difficult
over time, but that
is
precisely
why
advantage became
competitive advantages can be unique and
sustainable for the few firms which can effectively maintain them with internally protected
and knowledge. When the
made
similar
advances
through conspiracy. barriers
In
barriers
in skills
were low
new
skills in
first
(In this
skills
the early days of the antibiotics several firms
recent times the increased
products. the
in
and competencies. As a
has allowed only the most highly
successful
Roche's
of
time were constantly challenged to maintain that
Clearly the technological barriers for maintaining a competitive
more
several
skilled,
result
no advantage ensued, save
difficulty of vaulting
the technological
those with true competencies, to launch
vein, the question
can be asked about the extent
place-did luck play a larger than expected role
of
in their initial
breakthrough? Regardless, the market shows that the true competencies which lead to competitive advantage
in this
class of drugs resided elsewhere.)
In
both antibiotics and
psychotropics the analysis supports our proposition that competitive advantage which
based on
replicable
and growing
distinctive skills will not
32
be sustainable
in
is
the long run.
not
Research Question learning
in
#
The two
3
Two
sustaining competence.
prior discussions lead directly into
things are clear about the
marketing and regulation discussed here.
Second, not
constantly changing.
all
First,
firms pick
the environment
often drive the ability to better
learning,
is
therefore
technology area
on
we saw how
we
existing
is
three areas
in all
firms
in
are using learning here
demands. Learning,
its
was
information to maintain an overall level of knowledge which
of staying
ahead
in
learning can also be
examined. Burroughs-Wellcome was able to stay ahead on
one can ask how much to lack of interest
was
new
public
and unique. Others
inclusive
will tell
if
BW
be unfavorable
quickly learned by others
in
In
in
the smaller firms
some
anti-virals for
which considered the
can continue to push out it
to maintain
its
lead
in
the case of Marion. Their
and there was no
maintain their distinctiveness.
seen
attributed to distinctive tacit skills
rest of the industry
a pace which allows
internal learning at
to
of that lead
by the
Only time
Time did prove
based
not.
The importance
unprofitable?
fail
the lead (eg. Merck and Hoechst) were able to effectively pursue
type of learning. They mixed the results of their experimentation with
due
the
the sense of truly experimenting and discovering.
this
Roche) did
In
underlying biology and chemistry.
firms
(eg.
skills
particularly firm-specific
The
in
third point with
major drug classes were able to succeed or
in
is
also important: Internally developed
about that class of drugs and
which stayed
technology,
in
long term maintenance of competitive advantage.
critical for
their ability to learn
Recall that
meet
changes
up on these changes. A
respect to the technological and marketing areas
an analysis of
additional
skill
may endure
33
and how much was be
knowledge through
new product
introductions.
mover advantages were
which Marion could add to
smaller markets where competition
competitive advantage and economic profits
But,
anti-virus area to
antiviral
first
time.
for
some
is
less vigorous,
time.
Yet
in
the
light of
strong competitors, a firm must lead
in
Our analysis strongly underscores the
learning
is
if it
to maintain
advantage
its
role of every firm's ability to learn
as a
in
the market.
critical
factor in
maintaining long-term competitive advantage.
We
can now return to an important
aggressive competition: Acquisition
The
is
distinction
about keeping advantage
mean
new
this
each
of these therapeutic classes
that the firm
edge
that the
must
learn
if
firm, at
it
their
past successes.
double the size of either old
firm,
can continue to learn
now covers?
the acquisition
profits
which
is
edge out
further
dynamic learning requires the
New
or
was
firm
interest in
Genentech
state of
ability to learn
beyond the
leading-edge core position that
skills in
knowledge
skills
skills,
further out over time.
Similarly, acquisition
into
in
at
Thus, the
unless they can push
merger or acquisition,
In
position, not just possession.
continue
its
is
clearly
acquisition
in
areas or ways
would will
like to
push out
include Genentech's
another issue. Roche possessed
one time
too, but they
Through learning other
were unable
firms
to
passed them
in
the therapeutic class.
must not be seen as a replacement
new markets from
skill.
Roche's recent acquisition of a controlling
Roche
but whether
psychotropic drugs
change
for learning to
already possessed
the race for competitive advantage
growth
to
the interesting case here.
Genentech's leading-edge core
for
knowledge
not positioned to learn before. is
present value of the
their acquisition
through additional learning.
combined product areas create the need
where the
reflects the
accrue from that leading-edge core
still
in
Buying one's way to the leading-
to retain value.
purchase price that
will
But
Financial theory supports the proposition
purchasers should not receive any economic gain from the technological
light of
combine
of technology should require a
expected economic
the
not necessarily a form of or a substitute for learning.
Bristol-Myers Squibb merger allowed these firms to
does
in
the existing core competence.
34
for
core products as the base
Core products lead to new
marketplace products because learning takes place
and team-based organizational
of core products
in
the organization through the building
Over time the number of
skills.
product/market interfaces where competitive advantage exists
number
competencies which have
of core
Hoffmann-LaRoche was able
to develop
which were major products, from Finally,
we
note that
becomes
some and
public
is
different tranquilizers
base discovery
well others
been copied? Speed and
it
two
the effective
limit
in
can copy a
efficiency in
this skill
and a sleeping
pill, all
of
the benzodiazepines. firm's
core
the
skills clearly limits
skill In
launching ranitidine,
copying what others have learned once
on the returns which
internal learning
bio-technology start-ups have been unable to develop
their
increases, even while the
be nurtured by learning remain the same.
competence. Glaxo was able to use a
firm's ability to maintain
but has
how
its
to
may
skills in
can
it
Recently
bring.
dealing with regulators
products are slow to reach the market. But have enough firms effectively mastered
so that
weakness
it
no longer represents a competitive advantage
to those firms
competitive edges and
learned by others
Strategic
skills,
the
is
is
way
it?
If
then the external dispersion of these in
it
is
a Merck or a Rizer, only a
internal learning is the
skills
key to maintaining
so they can be
which the resulting competitive advantage can be
Groups and Competitive Advantage
pharmaceutical industry
competence
which do not have
to
Throughout the discussion
clear that the nature of the opportunity to
targeted changes from time to time.
lost.
Dynamic
strategic
which
of the
distinctive
group studies
reflect
these variations across an industry and over time (Cool and Schendel, 1987; Fiegenbaum
and Thomas, 1990). The that there are alternative
industry's history.
In
larger study of competition
in
the pharmaceutical industry
bases on which competence were
general, the ability of firms within the
35
built at different
same
industry to
points
shows
in
choose
an
alternative competitive postures
dynamic
strategic
will
appear and
competing firms
similarly
would seem to be most
member
this
of the
new
industries evolve, differing competitive
anticipated to be
(Porter, 1980).
In
developed based on the patterns of
of firms are
most keen
each group
within
of
Thus, core competence and competitive advantage
significant in intra-group competition.
rivalry builds
up so intensely
within
each strong group
is
an
on-going pursuit of competitive advantage through similar competence which
paper describes. Because groups represent the
allocations across an industry,
competencies. These time.
1973, Miles and Snow, 1978).
(Galbraitli,
As
firms.
rivalry is
The reason competitive outcome
not
group studies clusterings
resource allocations of the alternatives
is
alternative patterns of resource
each group contains firms which are attempting
rivals invest in
the development of core
skills
They develop resource bases or bundles which can not be
and
tacit
to build similar
knowledge over
changed and which
easily
are dedicated to the pursuit of the strategic posture which the group represents.
A
firm
which
has gained competitive advantage along the dimensions which define a certain viable competitive position
abandoning the decisions.
will
out perform
trajectory
To do so
its rivals.
The
which they have developed through
requires the building of alternative core
and competing against entrenched competitors will try
harder to win
and the incentive
in
for
Only wholly
Lilly.
When
in
prior
skill
have
difficulty
resource allocation
bases from the ground up
other viable positions.
Instead, followers
the group which they currently are members, thereby increasing
rivalry
usurping leaders over time.
new
opportunities, with
opportunity for change. The
case of
others, however,
no entrenched competitors, represent an easy
difficulty in shifting
the antibiotic market
competitive groups can be illustrated
opened
in
the
1
aggressively entered, looking for competitive advantage.
36
940s Lilly
Lilly
and several other
was one
of the
in
the
firms
few developing
skills
Lilly
which sustained them
wanted
at the
top of this therapeutic class for decades.
narrow base
to diversify out of their
with established competitors. incentive to win
in
in
more than a decade
This transition took
the strategic group a firm
is
had
antibiotics they
However, when
to enter drug classes
for Lilly to
currently in increases the pressure
leader to learn and to stay ahead-the trailing rivals aren't going to just
make. The
on the
go away.
CONCLUSIONS We
conclude that competitive advantage must be based on
competence
if
it
is
to
be sustained over
time or uniform at any one point competitive advantage as the
time.
A
time.
in
demands
distinctive
But such relationships are neither stable over
core competence must continue to give
of the environment,
and hence what constitutes a
which underlay the core products and
competitive advantage, changes. Therefore, the
skills
services of the firm must be constantly changing
and improving over
This process of change and improvement
need
to
employ
interactive
their cognitive abilities to
process of learning, firms
advantage
to maintain competitive
competitive advantage
in
maintain the lead position
core
this
skills
time.
involves decision
makers who
on going change. Through an
core competencies continuously
in
this is the
it
key to successful tying of core competence to is difficult.
Few
process over the long term.
if
In
any firms can continuously our study
we saw
firms dominating the pharmaceutical industry with different skills at different times.
firms
which consistently
advantages which
their
built
on
their
environment
an attempt
a changing environment. Our analysis of the
the long-term, but in this
in
manage
alter their
in
pharmaceutical industry shows that
core
core
made
skills
different
Still,
those
and aggressively pursued the competitive
available tended to
the long term.
37
be the most successful over
References 1980.
Abell, D.
Andrews,
Defining the Business:
The
Starting Point of Strategic Planning.
Englewood
NJ: Prentice Hall.
Cliffs,
Homewood,
1980. The Concept of Corporate Strategy (2ed Ed.).
K.
III:
Richard D.
Irwin.
1 986. "A Primer on Critical Success Factors". In J. Rockart and The Rise of Managerial Computing: The Best of the Center for Dow Jones-lnrt/in. Information Systems Research. Homewood
Bullen, C.
and
Rockart.
J.
C.
Bullen (Eds.),
III.:
& Thomas,
Bogner, W.
1991
H.
.
"A Longitudinal Study of the Competitive Positions
Entry Paths of European Firms
Academy
in
and
the U.S. Pharmaceutical Industry", presented at the
of International Business,
Annual Meeting, Miami,
Florida.
& Schendel, D. 1987. "Strategic Group Formation and Performance", Management Science 33: 1102-1124.
Cool, K.
1968. 'The Tetracycline Conspiracy: Structure, Conduct and Performance
Costello, P.
Drug
Economist
Industry", Antitrust
1
Fiegenbaum,
& Thomas,
Insurance Industry, Galbraith, J.
1973.
1982.
Kotter, J.
H. 1
Intel",
Business Week. June
The General Managers. New
& Snow,
the
1990. "Strategic Groups and Performance: The U.S. Management Journal. 11:1 97-21 5.
1,
Reading, Mass: Addison-Wesley.
pp. 86-94.
York: Free Press.
Measday, W. 1971. 'The Pharmaceutical Industry". In W. Adams American Industry. 156-188. New York: Macmillan. Miles, R.
in
(Summer), 40.
970-84", Strategic
Designing Complex Organizations.
1992. "Inside
Hof, R.
1
"More than a One Drug Wonder", Dec 20: 87-88.
986. A.
Law and Economic Review.
C.
1
(Ed.),
The
Structure of
New
978 Organizational Strategy. Structure and Process.
York:
McGraw-Hill. Mintzberg, H.
1978.
"Patterns
Mintzberg, H. and Waters,
Management Nelson, R.
&
in
Strategy Formation",
'Tracking Strategy
J.
in
Management Science.
an Entrepreneurial
Academy
of
Journal. 25(3): 465-499.
Winter, S.
1982.
An
Evolutionary Theory of
Economic Change. Cambridge,
Mass.: Harvard University Press. Ouchi, W.
Firm",
24(9): 934-959.
1981. Theory Z.
Reading, Mass.: Addison-Wesley.
38
.
and R. Waterman. 1982 In Search of Excellence: Lessons from America's Best Run Companies. New York: Harper & Row
Peters, T.
Porter, M.
Prahalad,
1
Competitive Strategy.
980.
C and
G. Hamel.
1990.
New
York: Free Press.
'The Core Competency of the Corporation", Harvard
Business Review. May-June, pp. 79-91
Senge,
P.
1
992.
"Building Learning Organizations", Journal for Quality
and
Participation.
March.
Sneader, W.
1
985.
Drug Discovery: The Evolution of Modern Medicines. Chichester: John
Wiley.
Steyer, R.
Temin,
1
985.
'The Great Wait for Interferon", Fortune. August
P. 1980. Taking your Medicine: Drug Regulation Mass.: Harvard University.
Tushman, M. and
in
1
9,
1
985, pp. 50-53.
the United States.
Cambridge,
Anderson. 1987. 'Technological Discontinuities and Organizational Environments. In A. Pettigrew (Ed.), The Management of Strategic Change, pp. 89122.
Walton, S.
P.
Oxford: Basil Blackwell.
1992.
"Sam Walton
in his
own Words",
39
Fortune, June, 29: 98-1 06.
Figure
One
Competitive Advantage Product Market 2
Competitive Advantage Product Market 1
Competitive Advantage Product Market 3
Core Product/Service
/ Core
Action Traits
In
Skill
doing something
4
1
Learning
C
O M P E
Recipies and Routines
Cognitive Traits
Tacit
Understandings of Interaction
T E N
C
Shared Value
Systems
E
' '
Table
Firms
in
One
Data Base
Abbott Labs
Beecham*
American Home Products ^ American Hosp. Supply ' C.Rc Bard ^ Becton-Dickson
Boots* Glaxo*
Bristol-Myers
Ciba-Geigy*
ICN
Hoffmann-LaRoche* Sandoz* Hoechst* American Cyanamid Squibb
ICI*
Burroughs-Wellcome*
Eli Lilly
Johnson & Johnson Marion Labs
Merck Norwich-Eaton (P&G)
Barr Bolar
Pfizer
Mylan Par'
Richardson-Vicks (P&G) Merrell Dow A.H. Robins
Rorer Schering-Plough G.D. Searle SmithKline Beckman
Zenith
^
'
*
European firms studied here.
'
Generic firms added to original
^
Hospital supply firms
list.
Sterling ^
Sybron Syntex Upjohn Warner-Lambert
the original
list.
dropped from
Table Strateaic
GrouDS
in
Two
the U.S. Pharmaceutical Market
•1969
GrouD Two
GrouD One Beecham
Abbott Labs
Bolar
Bristol-Myers
ICN Marion Labs
Burroughs-Wellcome
Men-ell
Johnson & Johnson
Mylan Norwich-Eaton
Parke-Davis
Rorer Zenith
Eli Lilly
Robins (A.H.) Schering-Plough Sterling
Group Three American Home Products American Cyanamid Hoffmann-LaRoche Imperial Chemical Merck
Group Four Pfizer
Searle (G.D.) Smith Kline & French
Syntex
Upjohn
Squibb 1970-1977
GrouD One Beecham Boots Bristol-Myers
Burroughs-Wellcome ICN
Johnson & Johnson Robins
Group Two Abbott
American Cyanamid American Home Products Eli Lilly
Squibb Warner-Lambert
(A.H.)
Rorer Schering-Plough
GrouD Three Ciba-Geigy Hoechst Hoffmann-LaRoche Imperial Chemical Merck Pfizer
GrouD Four Barr Bolar
Marion Labs Merrell
Mylan Norwich-Eaton
Sandoz
Par
Searle (G.D.) Smith Kline & French
Zenith
Sterling
Syntex 1978-1980
GrouD One Burroug hs- Wellcome Glaxo
GrouD Two American Home Products
Beecham
Johnson & Johnson
Bristol-Myers
Robins (A.H.)
Eli Lilly
Rorer Schering-Plough Searle (G.D.)
Syntex
Pfizer
Smith Kline & French Squibb Warner-Lambert
GrouD Three Ciba-Geigy Hoechst
GrouD Four Barr
Bolar
Hoffmann-LaRoche Imperial Chemical Merck Sandoz
Boots ICN Marion Labs
Sterling
Mylan Norwich-Eaton Par
Upjohn
Men-ell
Zenith
GrouD Five Abbott Labs
American Cyanamid
Strateaic
Table Two, continued in the U.S. Pharmaceutical Market
Grouos
1981-1984
GrouD One Boots ICN Marion Labs Merrell
Mylan Norwich-Eaton Rorer
Group Two American Home Products
GrouD Three American Cyanamid
Bristol-Myers
Beecham
Burroughs-Wellcome Glaxo
Ciba-Geigy
Johnson & Johnson
Hoechst Hoffmann-LaRoche Imperial Chemical Merck
Robins (A.H.) Schering-Plough Searle (G.O.) Smith Kline & French
Syntex Warner-Lambert
Group Four Barr
Bolar Par Zenith
Eli Lilly
Pfizer
Sandoz Squibb Sterling
Upjohn
Group Five Abbott Labs 1985-
GrouD One Boots ICN Marion Labs
GrouD Two
GrouD Three American Cyanamid American Home Product
Johnson & Johnson
Beecham
Mylan
Bristol-Myers
Par
Ciba-Geigy
Zenith
Merrell
Dow
Norwich-Eaton Robins (A.H.) Rorer Sterling
Eli Lilly
Hoechst Hoffmann-LaRoche Imperial Chemical Merck Pfizer
Sandoz Schering-Plough Searle (G.D.)
SmithKline
Beckman
Squibb Syntex
Upjohn Warner-Lambert
Group Five Abbott Labs
GrouD Four
Burroughs-Wellcome Glaxo
Barr
Bolar
Table Three Sample Analysis
Firm's/
Merck
Fine chemical firm, a few, key non-antibiotic products; jumped into rational drug design to take R&D lead; responded to Glaxo with broader, deeper, detailing; "knows" the FDA; #1 firm in the world.
Glaxo
History of focused research (cephalosporins, Zanax, new migraine drug); developed "blockbuster marketing" concept, first in Italy, then in the U.S.;
#2 Bristol
Myers-Squibb
firm in the world.
Two
firms with narrower product backgrounds merge to try to match Merck product scope and R&D focus-have they matched the competence? or do they continue to lag? #3 firm in the world. in
Hoechst
Eli Lilly
Largest corporation among top drug producers/ deep skill in organic chemistry/ source of many pre-WWII breakthrough drugs/ marketing still deficient outside of Western Europe/ #4 Rx firm in the world.
an antibiotic house/ major shift diversifies sales and products over broader range of therapeutic classes/ marketing also Traditionally considered
reorganized to
Hoffmann-LaRoche
skills
Once the and
fit
different physician profiles/
leading firm
in
#9
firm in the world.
the world/ narrow focus on psychotropic drugs
related discovery/ acquisition of
Genentech (60%)
in
1989/ fallen to
11th in the world.
Schering-Plough
Burroughs- Wellcome
Medium sized firm, but much smaller than the largest ones here/ focused on a major potential product line-interferon related cancer products/ failed to pan out/ company struggles/ 15th in the world in 1988. Medium
sized firm as well/ focused on major potential product lineproducts/ success with herpes and HIV treatments in the 1980s/ can this single competence support the firm?/ 23rd in the world in 1988.
antiviral
Marion
"Search and develop" strategy not distinctive/ no long-term "distinctive" competence/ acquired by Dow in 1989/ 33rd in the world in 1988.
Table Four
Core Competencies in the Rx Industry Competencies in R&D Technology
Impact and Nature
Organic Chemistry 1870s-Present
Established by Central-European dye firms through molecular manipulation,
trial
Firms/Role
&
error
Fermentation and Soil Screening 1940s- Present
Established antibiotic firms in the United States. Narrow competence not transferable to other drug classes.
Rational Drug
High cost drug development driven by advances in bio-
Design I970s-Present Biotechnology 1980s-Present
Hoechst, Ciba-Geigy: Sustained
competence in product development for over a century. Lilly, Squibb: Dominant products brought industry leadership for twenty years, then began to lag.
SmithKline, Merck: Able to develop drugs, required cutting edge research across classes.
chemistry.
Non organic approach
to drug
therapy.
Competencies
in
Genentech, Amgen: Specialized, cutting-edge research, knowledge and insight.
Marketing and Promotion
Skill
Impact and Nature
Direct Selling
to Physicians
Allowed for the effective marketing to gatekeepers
1950s
economic transactions.
gatekeepers.
"Blockbuster"
Single product focus of entire
Marketing Early-mid 1980s
detail force
Glaxo: Created a new way to sell; through selling, gave blockbuster potential to a chemically
Effective
Firms/Roles Pfizer, Lederle:
and promotion. with narrow product
Created effective
differentiation of products
in
line.
among
indifferent drug.
Specialized Selling
Specialized Sales forces for different therapeutic
classes/medical specialties. More focus with broad product line.
Merck: Specially trained and focused units in cardio, hospital etc.
Table Four, continued
Core Competencies in the Rx Industry Competencies in R&D
Competencies
Handling regulatory requirements
Speeds drugs
in
to market expanding time available under patent for
economic
profits.
Marketing and Promotion
Merck, Marion: Of limited value without competence in acquiring new drugs
e lA
n
^
•«
^
^
p>
< Z
(O
^F"
CJ
y-
i'li OJ
CM
T
^y
^ y-
n en
m
(A
CO CM
CO CO
CO
5
o.
CO
(0 "T-
»
c o
2
CO
o
o
CM 1= o> '"
»-
o« :5 w
o o
o
S
cm"
y-
o at o
o
(O
CM
CM
T-
^
o ^T CO T-
o CO
U
Q.
CO
(0
CO
CB
GC
^
CM
A
CO
-
< z
!>.:
0> 00
