Harvard Case - Novartis: Building a Sustainable Business at the Bottom of the Pyramid
"Novartis: Building a Sustainable Business at the Bottom of the Pyramid" Harvard business case study is written by Amitava Chattopadhyay, Reinhard Angelmar. It deals with the challenges in the field of Entrepreneurship. The case study is 16 page(s) long and it was first published on : Mar 26, 2018
At Fern Fort University, we recommend that Novartis adopt a hybrid approach to addressing the unmet needs of the bottom of the pyramid (BoP) market. This approach combines direct engagement with strategic partnerships to leverage Novartis?s core competencies while fostering sustainable business models.
2. Background
This case study explores Novartis?s efforts to reach the BoP market, specifically focusing on the development and distribution of affordable, essential medicines in emerging markets. The company faces challenges in balancing its commitment to social responsibility with the need to generate profits.
The main protagonists are:
- Novartis: A global pharmaceutical company aiming to expand its reach and impact.
- The BoP market: A large and underserved population with significant unmet healthcare needs.
- Local partners: Organizations and individuals working within the BoP market who can provide valuable insights and support.
3. Analysis of the Case Study
Novartis?s BoP strategy can be analyzed through the lens of Porter?s Five Forces framework:
- Threat of New Entrants: High. The BoP market is attractive to new entrants due to its large size and unmet needs.
- Bargaining Power of Buyers: High. Consumers in the BoP market have limited purchasing power and are price-sensitive.
- Threat of Substitute Products: High. Traditional medicine and alternative therapies are readily available and often cheaper than pharmaceuticals.
- Bargaining Power of Suppliers: Low. Novartis has a strong bargaining power with its suppliers due to its scale and global reach.
- Competitive Rivalry: Moderate. The BoP market is increasingly attracting attention from other pharmaceutical companies and NGOs.
Key Challenges:
- Profitability: Balancing social impact with financial sustainability in the BoP market is crucial.
- Distribution: Reaching remote and underserved populations requires innovative and cost-effective distribution channels.
- Product Development: Adapting existing products or developing new ones specifically for the BoP market requires significant investment and expertise.
- Cultural Sensitivity: Understanding the unique needs and preferences of the BoP market is essential for successful product adoption.
4. Recommendations
1. Direct Engagement:
- Develop and launch affordable, essential medicines: Novartis should invest in product development to create innovative and affordable solutions tailored to the specific needs of the BoP market. This could involve disruptive innovation to create low-cost, high-impact solutions.
- Establish a dedicated BoP division: This division should be responsible for market research, product development, manufacturing processes, and distribution strategies specifically for the BoP market.
- Invest in technology and analytics to optimize distribution channels, track product usage, and gather data on patient outcomes.
- Develop mobile applications to provide access to healthcare information and facilitate patient engagement.
2. Strategic Partnerships:
- Collaborate with local NGOs and healthcare providers: Partnering with organizations already working in the BoP market allows Novartis to leverage their expertise and reach.
- Form joint ventures with local companies: This can provide access to local knowledge, distribution networks, and manufacturing capabilities.
- Support entrepreneurship and startup ecosystems within the BoP market by providing funding, mentorship, and access to technology.
- Implement social entrepreneurship programs to empower local communities and promote sustainable solutions.
3. Leverage Novartis?s Core Competencies:
- Apply innovation and technology to develop cost-effective solutions for the BoP market.
- Utilize global supply chain management to ensure efficient and reliable distribution.
- Leverage marketing expertise to create targeted campaigns that resonate with the BoP market.
- Foster a corporate social responsibility culture that prioritizes ethical and sustainable practices.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Novartis?s core competencies in pharmaceuticals, research & development, and global reach can be leveraged to address the BoP market effectively.
- External customers and internal clients: The recommendations prioritize the needs of BoP consumers while ensuring the financial sustainability of Novartis.
- Competitors: The recommendations aim to differentiate Novartis from competitors by focusing on innovation, partnerships, and social impact.
- Attractiveness: The recommendations are expected to generate positive social and financial returns, contributing to Novartis?s long-term growth.
Assumptions:
- The BoP market will continue to grow and offer significant opportunities for pharmaceutical companies.
- Novartis can successfully develop and distribute affordable, essential medicines that meet the needs of the BoP market.
- Partnerships with local organizations will be mutually beneficial and contribute to sustainable business models.
6. Conclusion
By adopting a hybrid approach that combines direct engagement with strategic partnerships, Novartis can effectively address the unmet needs of the BoP market while generating sustainable business growth. This approach will require a commitment to innovation, collaboration, and social responsibility.
7. Discussion
Alternative Options:
- Focusing solely on direct engagement: This could lead to high costs and limited reach, making it difficult to achieve financial sustainability.
- Reliance on partnerships alone: This could result in a lack of control over product development and distribution, potentially compromising Novartis?s brand and reputation.
Risks:
- Lack of market understanding: Failing to understand the unique needs and preferences of the BoP market could lead to product failures and wasted resources.
- Partner selection: Choosing the wrong partners could lead to conflicts of interest, ethical dilemmas, and reputational damage.
- Financial sustainability: The BoP market is challenging to navigate, and achieving profitability requires careful planning and execution.
Key Assumptions:
- The BoP market will continue to grow and offer significant opportunities for pharmaceutical companies.
- Novartis can successfully develop and distribute affordable, essential medicines that meet the needs of the BoP market.
- Partnerships with local organizations will be mutually beneficial and contribute to sustainable business models.
8. Next Steps
- Develop a detailed business plan: This plan should outline the specific products, partnerships, and strategies for reaching the BoP market.
- Pilot projects: Implement pilot projects in select markets to test and refine the proposed approach.
- Build a dedicated BoP team: Recruit and train a team with expertise in the BoP market, product development, and partnerships.
- Monitor and evaluate progress: Regularly assess the impact of the BoP strategy on both social and financial outcomes.
By taking these steps, Novartis can position itself as a leader in addressing the healthcare needs of the BoP market while creating a sustainable and impactful business model.
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Case Description
Inspired by C.K. Prahalad's "The Fortune at the Bottom of the Pyramid", Novartis was exploring ways to build a sustainable business for the BOP in India that would improve access to healthcare for the poor while being financially profitable, unlike Novartis's traditional philanthropic and corporate social responsibility approaches. To succeed, it had to answer a series of strategic questions: Which BOP patients should be targeted to best achieve the social and financial goals of the programme? Which diseases should it cover, and with what types of products (patent-protected, generics, OTC)? Which stages of the patient journey should the programme address? Which stakeholders should be targeted? What communication channels should be used? What should be the programme scale? Where to 'house' the social business group in the Novartis organization?
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