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Teva Pharmaceutical Industries, Ltd
CASE SYNOPSIS
pharmaceuticals, Teva had recently entered the innovative pharmaceuticals market by teaming up with
Israeli academic institutions to launch two successful new drugs. Teva, however, faced intense
CASE OBJECTIVES
Teva Pharmaceutical is a good example of a company that utilized its resources to build a competitive
advantage in the intensely competitive generic pharmaceuticals market. The case aims at helping
1. The generic strategy of cost leadership
2. Challenges companies face in international markets in highly regulated industries
3. Managing the balance between different segments of a business
POSITION IN THE COURSE
Since the case deals with concepts in business strategy and the deployment of resources for competitive
TEACHING PLAN
The instructor should focus on discussing three distinct pastures in a 75-minute class: the nature of
Teva’s competitive advantage, the challenges it faces in both the domestic and international markets,
SUGGESTED ASSIGNMENT QUESTIONS
advantage?
2. Evaluate Teva’s resources. Which are its most valuable ones?
3. Analyze the opportunities for Teva in innovative pharmaceuticals and biosimilars.
4. How should Teva move forward?
ANALYSIS OF ASSIGNMENT QUESTIONS
1. How does Teva compete in the generic pharmaceuticals industry? What is its competitive
advantage?
strategy of cost leadership or low-cost. Such a strategy requires the business to be able to provide its
product at a cost below what competitors can achieve and such an advantage must be sustainable. This
Teva’s competitive advantage is that it has established itself as the cost leader in an industry where price
is the key issue for customers.
2. Evaluate Teva’s resources. Which are its most valuable ones?
As described in Chapter 8 in the book, a cost leader, in order to succeed, must be able to accomplish one
integrated into producing its own APIs and was one of the world’s largest third-party API suppliers,
giving it considerable economies of scale advantage over competitors. In addition, Teva has scale
firm can file and the faster that these applications are filed, the greater the advantage. Teva excels in
this area. It aggressively files ANDAs and also acquires companies with a large ANDA pool. While Teva
Teva’s low-cost advantage reduces the likelihood of buying pressure from its buyers, who are the
national pharmaceutical chains. As indicated above, it gives these chains a one-stop shopping
3. Analyze the opportunities for Teva in innovative pharmaceuticals and biosimilars.
Unlike the other innovative pharmaceutical companies, Teva does not spend a lot of money on R&D. It
expenses for these drugs by partnering with firms such as Sanofi-Aventis. Teva has tremendous
opportunities in the innovative drugs market because it has a cost effective model for drug discover and
was growing and also the profit margins were higher here than in generics. These drugs were priced only
at 10-20% less than branded ones, giving firms such as Teva tremendous potential for increased sales
and profits.
4. How should Teva move forward?
The instructor should clearly lay out the choices for Teva moving forward. It could:
Emphasize generics in foreign markets
Pushing innovative drugs calls for Teva, in effect, to become a differentiator as defined in Chapter 8.
Differentiators share qualities (and resources) that are starkly different from those of cost leaders. Can
Teva be both a differentiator and a cost leader under the same roof? Consider what has happened to
Novartis. It has a generic arm, Sandoz, whose operating margin was only 7.3% in 2005 compared to
The acquisition of Ivax gives Teva a foothold in many foreign markets and so there is a strong argument
for Teva to emphasize its international business. Many foreign markets are opening up to generics and
Teva can leverage its economies of scale and market knowledge to make inroads abroad.
Biosimilars are also promising. Teva’s acquisition of Sicor allows it entry into this market. As stated
benefit from going there.
The instructor should wrap up the discussion by reiterating the key points of the case:
Resources and activities of a firm should support the firm’s strategic positioning
“Tensions” exist that may be inconsistent with a company’s strategic positioning and these
tensions must be proactively addressed (such as the tension between generics and innovative
drugs for Teva)
competitive advantage can be sustained.
