42 PART 3 Macro Perspectives DISCUSSION QUESTIONS t circumst

42 PART 3 Macro Perspectives DISCUSSION QUESTIONS t circumstances would you agree with someone who said that alliances are very risky? s would you use to classify the various types of strategic alliances? Why those dime 3. Which alliance tions do you think are the most compatible with each other? do you consider to be the likely stages of strategi illiance deelopenDoes ery lliance ha alliance have to g each stage? 5. What s the difference between an alliance problem and an alliance symptom, and what does this iflere of managerial intervention? 6. When can you tell if your partner is not likely to have a cooperative orientation? CASB: Strategic Alliances in the Pharmaceutical and Biotechnology Industry In the past two decades, strategic alliances have become an important tool for pharmaceutical and biotechnology 5tr they face increased competition, increased public scrutiny of their new products. There is business practices and p rofits, and dificulties i empirical evidence that products developed in strategic alliances have a higher probabi and th Phase II and Phase Ill clinical trials than products developed independently by either the pharmaceutical or biotechndions (Danzon, Nicholson, and Pereira, 2005). Co-development of new drugs via an alliance moral hazard problems arising from the sharing development adds value that outweihs ane two partners sharing development responsibilities (Nicholson. Danzon, and Wc cfe 2005). In 2001-2002 alone, there were 923 new (publicly announced) strategic alliances in this industry. This fiure indrt biotech-biotech, biotech-pharma, and pharma-pharma alliances, and each type offers different benefits to its partners For example, in the realm of biotech-pharma allances, a recent report focusing on licensing alliances between bicteth pharma firms suggests that \"the number of biopharmaceutical licensing alliances has remained fairly constant over the gud several years. but their value trebled from $30 billion USD to $90 billion USD between 2004 to 2007\" (Business Iisghe 12009, Evoluing Trends in Blopharmaceutical Licensing Deal Assessments, Drivers, and Resistors. March. Retrieved Aueast ely 2010, from http://www.globalbusinessinsights.com). REFER Of the 923 alliances mentioned above, a large number of new alliances (217) occurred between pharmaceutical biotechnology firms, probably reflecting pharmaceutical frms\' needs for access to new products that the smallet. ut no research-intensive. biotechnology firms have been generating. These are typically trading alliances that allow pharmacei firms to gain access to innovations, while enabling biotechnology firms to gain access to capital, clinical trial expertise,and te marketing capabilities that pharmaceutical firms possess (Danzon et al., 2005). Some support for the view that pharmacotica ican Colle firms are using alliances to gain access to technical innovations is found in the fact that almost one-third of the new a involved genomics, the path-breaking science that can be used to develop treatments tailored to individuals\' genetic making them highly effective. Of course, one can also observe individual biotech-pharma alliances evolving over longer periods of time, as is the a with Gen-Probe and Chiron (now a Novartis company). which began their alliance in 1998 to \"develop. manufactut. a T more than 125 million blood donations have been screened in the United States alone, and \"these tests have threatening diseases from being passed along to transfusion recipients\" (Novartis Web site, press release. January commercialize\" nucleic acid tests and instrumentation that have been used by blood banks for screening purposes To dat thousands of units of blood that were infected with HIV-I, hepatitis C and B, and West Nile virus, thereby preventrg A striking feature of the collaboration between Chiron (Novartis) and Gen-Probe is the long-term orientation that 27 both par

Solution

The synergy between the pharmaceutical industry and the bio technology industry impacts the degree of compliance and cooperation between the alliances of these 2 industries.

Introducing innovative means of drug delivery, production of drugs for the new diseases, discovery of inventive drugs are some of the goals of such alliances

Investing in Research & Development for the invention of a new drug would cost a fortune - more over the results f such endeavor would also be un predictable - rather by building a diversified portfolio and mergers, the risks would be distributed

The strategy of networking based on intellectual properties and patents ensures success as the risk is diluted

So the bio technology firms undertakes the development of new drugs for the pharmaceutical industry

Competition is one of the major tension factors between such alliances and such competition forces them to invent new drugs to stand out of the crowd.

According to Longest B 1995, the stringent government regulations pose a threat to the alliances. Government regulations insist many rules like environmentally friendly manufacturing practices, affordable costs of the drugs, increased efficacy and efficiency

The research was based on the human cell and its interactions with other cells. Research on neural networks, artificial neurons, and other biotechnology researches are aimed at inventing new drugs but containing the cost becomes the challenge.

2. The above issues can be addressed as follows:

Get the mission, vision, goals and objectives clarified

Make sure that the partners participating in the joint venture and alliances are compatible and they must have a common interest and motivation.

Counseling the employees to stay committed, helping them to subordinate individual goal for the common goal, educating on the importance of the objective will go a long way in making the alliance a success

Increased investments in Research and development will subside the competition - the result of such R&D must be communicated to the partners on a regular basis.

3. Challenges for maintaining or strengthening an ongoing alliance -

Before we start, let\'s see the numbers. Studies show that the number of alliances increase by 25% every year and the failure rate for the alliances hover anywhere between 60-70%. So, the challenge is to maintain the alliance.

A simple rule that has to be kept in the mind for a successful alliance is to - create a solid business plan backed by a detailed contract. There are five rules that helps to maintain a successful alliance. They are -

1) Concentrate more on developing right working relationship instead of defining the right business arrangement.

2) Concentrate more on embracing differences rather eliminating differences.

3) emphasising on creating the \'means\' metrics instead of creating \'ends\' metrics

4) emphasise more on managing the internal stake holders instead of emphasising on the external stake holders

5) Instead of establishing a formal alliance management systems, enabling a collaborative behavior with the alliance

All the above 5 thumb rules helps to maintain a successful alliance.

According to a survey on global alliances, almost 82% of the executives who surveyed, believe that alliances are the prime drivers for the future growth. Yet, despite that there are enormous risks associated with that, as almost 70% of the alliances fail. The reson for the failure is mainly due to lack of strategic alignment and cultural incompatibility. So, by mitigating the risk of failure in any partnership is a critical requirement for success in an global economy.

Beginning a new relationship :

When beginning a new relationship with a customer or a partner, certain things to be kept in mind are -

1) Develop an explicit joint strategy with the partner. By doing so, it would lead to a healthy relationship.

2) Strengthening the alliance, by addressing the gaps in the business strategy

3) Paying close attention to the fianacial aspects of the deal in a win-win situation or environment

4) The level of trust between the partners in the alliance should be on a higher end. This helps the organizations to succeed. Having a good hand on the extent of the relationship is very critical.

There are certain pitfalls involved in the alliances. The lack of realistic or meaningful metrics is a common pitfall. and the other most common pitfall is losing a track of multiple alliances that an organization has with different partners. Having a good track of all the relationships is very important.