Let us begin with basics of “Globalization” –
Globalization in its literal meaning explains the inter-dependent & inter-connected markets for a company. When an enterprise extends the business beyond its local boundaries and generates revenue out of those markets. The geographical divisions become connection & nations become business nodes for these companies.
Do you know that a single pharmaceutical pill we consume can depend upon as many as 10 different countries?
Why does a Pharmaceutical Company pursue “Globalization” of its enterprise?
Globalization results in a rapid reduction in barriers to the movement of ideas, capital and people, and naturally the opening of new markets. It reduces national borders. In general, there are five essentials that drive any pharmaceutical company to become a global company:
1- To pursue growth –
Globalization allows you to become bigger being anywhere around the world. It offers a competitive advantage over competitors by achieving “Operations of scale”, giving it larger revenues and a larger asset base.
2- To pursue efficiency-
A larger scale can help the company to undertake the steps needed to convert scale into economies of scale by spreading fixed costs, reducing capital and operating costs, pooling purchasing power, and/or creating critical mass in a significant portion of the value chain.
3- To pursue knowledge-
Global operations are an endless source of knowledge. In many cases, locally created knowledge is relevant across multiple countries, and, if leveraged effectively, can yield significant strategic benefits to a global enterprise. For example, Biocon has developed many biologics by collaborative efforts of its overseas knowledge centres. Similarly, Sanofi -Pasteur has developed indigenous vaccine with its domestic business arm – Bharat Biotech (now part of Sanofi)
4- To better meet customer needs
When customers start to join the global world and have access to global goods, companies have to accommodate them. Multinationals such as Pfizer, Novartis and GSK increasingly insist that their suppliers from raw material suppliers to advertising agencies to human resources and personnel recruitment companies become more global. In a sense, they have to address the need of the local customer and at the same time keep products available to other markets of the globe.
5- To prepare for competition-
A competitor who globalizes early may have the first-mover advantage, greater opportunity to create economies of scale and scope. For example – The patent expiry of any molecule The United States being the largest market for pharmaceuticals is the preferred market to launch all new product development for all the “Global Pharmaceutical Company” irrespective of its origin country.