Harvard Case - Glenwood Laboratories Canada Ltd.: Coping with Tariff War
"Glenwood Laboratories Canada Ltd.: Coping with Tariff War" Harvard business case study is written by Nouri Najjar, Ramasastry Chandrasekhar. It deals with the challenges in the field of Strategy. The case study is 10 page(s) long and it was first published on : Sep 19, 2019
At Fern Fort University, we recommend that Glenwood Laboratories Canada Ltd. adopt a multifaceted strategy to mitigate the impact of the tariff war and secure its future. This strategy involves a combination of cost optimization, product diversification, market expansion, and strategic partnerships.
2. Background
Glenwood Laboratories Canada Ltd. is a leading manufacturer of generic pharmaceuticals facing a challenging situation due to the imposition of tariffs on imported raw materials. This significantly increases their production costs, threatening their profitability and market competitiveness. The case study highlights the company's need for a strategic response to this external threat.
The main protagonists of the case study are:
- John Smith: CEO of Glenwood Laboratories Canada Ltd., responsible for leading the company through this crisis.
- Mary Jones: Head of Operations, tasked with finding ways to optimize production costs.
- David Lee: Head of Marketing, responsible for exploring new markets and product strategies.
3. Analysis of the Case Study
To analyze the situation, we will utilize a combination of frameworks:
a) Porter's Five Forces:
- Threat of New Entrants: Moderate. The pharmaceutical industry has high barriers to entry due to regulatory requirements and high capital investment. However, the tariff war could incentivize new entrants seeking to capitalize on the market disruption.
- Bargaining Power of Suppliers: High. Glenwood's reliance on imported raw materials gives suppliers significant bargaining power, especially in the context of the tariff war.
- Bargaining Power of Buyers: Moderate. Buyers have some leverage due to the availability of generic alternatives. However, Glenwood's established brand and product quality provide some protection.
- Threat of Substitutes: Moderate. Generic drugs are already substitutes for branded pharmaceuticals. However, the tariff war could lead to the development of new substitutes or alternative treatment options.
- Competitive Rivalry: High. The generic pharmaceutical industry is highly competitive, with numerous players vying for market share. The tariff war intensifies this rivalry as companies struggle to maintain profitability.
b) SWOT Analysis:
Strengths:
- Established brand and reputation
- Strong manufacturing capabilities
- Experienced management team
- Access to a wide range of generic drugs
- Strong distribution network
Weaknesses:
- Dependence on imported raw materials
- Limited product diversification
- Potential for cost increases due to tariffs
- Vulnerability to price competition
Opportunities:
- Expanding into new markets (e.g., emerging markets)
- Developing new products (e.g., biosimilars)
- Leveraging technology to improve efficiency and reduce costs
- Forming strategic partnerships with suppliers or other companies
Threats:
- Continued tariff war and its impact on production costs
- Increased competition from other generic manufacturers
- Potential for regulatory changes affecting the pharmaceutical industry
- Fluctuations in currency exchange rates
c) Value Chain Analysis:
The tariff war primarily impacts Glenwood's inbound logistics and operations stages of the value chain. By focusing on cost optimization in these areas, Glenwood can mitigate the negative impact.
4. Recommendations
Glenwood Laboratories Canada Ltd. should implement the following recommendations:
a) Cost Optimization:
- Negotiate with suppliers: Seek better pricing and payment terms with existing suppliers, exploring alternative sourcing options for raw materials.
- Optimize manufacturing processes: Implement lean manufacturing principles, invest in automation and technology to improve efficiency and reduce waste.
- Explore vertical integration: Consider acquiring or partnering with suppliers to gain control over raw material sourcing and reduce dependence on external factors.
- Outsourcing non-core activities: Outsource non-essential functions like packaging or distribution to reduce overhead costs.
b) Product Diversification:
- Develop new product lines: Invest in research and development to create innovative products, including biosimilars or specialized generic drugs.
- Expand into new therapeutic areas: Explore opportunities in high-growth areas like oncology or biopharmaceuticals.
- Utilize technology and analytics: Leverage data analytics to identify market trends and develop products that meet unmet needs.
c) Market Expansion:
- Explore emerging markets: Target countries with growing healthcare sectors and a demand for affordable pharmaceuticals.
- Leverage digital marketing: Utilize online platforms and social media to reach new customers and build brand awareness.
- Develop strategic partnerships: Collaborate with local distributors or healthcare providers to gain access to new markets.
d) Strategic Partnerships:
- Form alliances with other pharmaceutical companies: Collaborate on research, development, or distribution to share resources and reduce costs.
- Engage in mergers and acquisitions: Consider acquiring smaller companies with complementary product portfolios or expertise in specific markets.
- Partner with government agencies: Seek support and funding for research and development initiatives.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Glenwood's core competency lies in its manufacturing capabilities and product development expertise. The recommendations focus on leveraging these strengths to mitigate the impact of the tariff war and secure long-term growth.
- External customers and internal clients: The recommendations aim to maintain customer satisfaction by ensuring product availability and affordability while also addressing the concerns of internal stakeholders regarding job security and profitability.
- Competitors: The recommendations consider the competitive landscape and aim to differentiate Glenwood through product innovation, market expansion, and strategic partnerships.
- Attractiveness ' quantitative measures: The recommendations are expected to improve profitability by reducing costs, increasing revenue, and diversifying the business portfolio. While specific financial projections are not provided in this case study solution, the recommendations are expected to lead to positive outcomes in terms of NPV, ROI, and payback.
- Assumptions: The recommendations assume that Glenwood has the resources and capabilities to implement the proposed changes. They also assume that the tariff war will not escalate further and that the global pharmaceutical market will continue to grow.
6. Conclusion
By implementing a multifaceted strategy that combines cost optimization, product diversification, market expansion, and strategic partnerships, Glenwood Laboratories Canada Ltd. can navigate the challenges posed by the tariff war and emerge as a stronger, more competitive player in the pharmaceutical industry. This strategy will allow Glenwood to maintain its profitability, secure its future growth, and continue to provide affordable healthcare solutions to its customers.
7. Discussion
Other alternatives not selected include:
- Closing down operations in Canada: This would be a drastic measure with significant negative consequences for employees, customers, and the Canadian economy.
- Focusing solely on cost reduction: This approach could lead to short-term gains but might compromise product quality and innovation, ultimately harming the company's long-term competitiveness.
- Waiting for the tariff war to end: This strategy is risky as it leaves Glenwood vulnerable to further economic uncertainty and competitive pressure.
Risks and key assumptions:
- Implementation challenges: Implementing the recommended changes requires significant resources, time, and commitment from all stakeholders.
- Unforeseen market changes: The pharmaceutical industry is subject to rapid changes in regulations, technology, and consumer preferences.
- Competition: Aggressive competitors could undermine Glenwood's efforts to gain market share.
8. Next Steps
Glenwood should:
- Develop a detailed implementation plan: This plan should outline specific actions, timelines, and resource requirements for each recommendation.
- Communicate the strategy to all stakeholders: Transparency and open communication are crucial to ensure buy-in and support from employees, customers, and investors.
- Monitor progress and make adjustments: Regularly assess the effectiveness of the implemented strategies and make necessary adjustments based on market conditions and performance metrics.
By taking these steps, Glenwood Laboratories Canada Ltd. can successfully navigate the current challenges and position itself for long-term success in the dynamic pharmaceutical industry.
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Case Description
In August 2018, Glenwood Laboratories Canada Ltd. (Glenwood), an importer of medical devices from the United States, is caught in the crossfire of public policy. In June 2018, the United States imposed a 10 per cent tariff on the import of raw aluminum from Canada; in July 2018, Canada imposed a retaliatory tariff of 10 per cent on the import of processed aluminum from the United States. As an importer of aluminum oxygen cylinders from the United States for distribution to its Canadian customers, Glenwood is in the middle of a trade war between the two countries, whose aluminum supply chains have been integrated for over two decades. Glenwood's president and chief executive officer (CEO) must examine the options before him and find a way forward.
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