Case For Analysis: Schering Plough Implements A New Strategy

C A S E F O R A N A L Y S I Sschering Plough Implements A New Global

C A S E F O R A N A L Y S I Sschering Plough Implements A New Global Strategy and Structure

Schering-Plough faced significant challenges in its global strategy and organizational structure during the early 2000s. The company’s primary issues stemmed from its decentralized approach to managing its global operations, which led to a lack of coordination and information flow across regions. Each regional division operated independently, handling manufacturing, marketing, and sales in ways unique to their local markets, resulting in inconsistencies and inefficiencies. This fragmented structure hindered the company's ability to respond swiftly to global market changes and quality concerns, especially in the context of increasing regulatory scrutiny from bodies such as the FDA.

Furthermore, the decentralized regional management created a bureaucratic hierarchy that slowed down decision-making processes. Managers at the headquarters did not receive timely or accurate information about operational challenges at the country level, leading to delays in addressing bugs or quality issues. This situation was particularly problematic in the pharmaceutical industry, where drug quality and compliance are critical. As a result, Schering-Plough experienced drug quality problems which went unnoticed for extended periods, adversely affecting its reputation and compliance standing. The company also struggled with innovation and maintaining a competitive edge because its structure impeded effective coordination of R&D efforts and product development pipelines.

Compounded by a reliance on a single best-selling product, Claritin, and limited new drug prospects, the company's strategic outlook appeared increasingly vulnerable. The company’s structure created silos that prevented a unified global strategy and limited the scope for economies of scale. Overall, Schering-Plough’s global organization was hampered by excessive layers of hierarchy, regional autonomy without sufficient oversight, and inefficient communication channels. These structural problems rendered the company less agile, undermined product quality, inhibited innovation, and jeopardized its long-term competitiveness in the pharmaceutical industry (Hassan, 2010).

Paper For Above instruction

To address the critical issues embedded within its global strategy and organizational structure, Schering-Plough undertook a comprehensive reorganization under the leadership of Fred Hassan. Recognizing that its decentralized regional model was a significant impediment, Hassan implemented structural reforms designed to increase oversight, improve communication, and streamline decision-making processes. The company reduced its hierarchical layers by eliminating duplicative functions between country managers and the corporate center. This flatter structure allowed direct reporting lines from division heads to Hassan or his top management team, thereby enhancing transparency and enabling quicker identification of operational issues such as drug quality problems.

Specifically, Hassan abolished the traditional regional divisions that caused operational divergence, opting instead for a unified global organizational framework focusing on product line management. Since Schering-Plough manufactured primarily pharmaceuticals, Hassan argued that separate regional and product divisions were unnecessary, as this duplication hampered efficiency. By consolidating functions and emphasizing global standardization, the new structure fostered consistency in quality control, sales practices, and regulatory compliance across all markets. Standardized procedures facilitated better monitoring and evaluation, essential for maintaining high product quality and responding swiftly to regulatory changes, especially from bodies like the FDA.

Another significant change was expanding the scope of each international division's product portfolio to generate economies of scale. Hassan’s strategy involved diversification through acquisitions, such as the purchase of a Dutch pharmaceutical company specializing in vaccines for animals and pets. This acquisition not only increased the company's product portfolio but also provided a pipeline of promising drugs, including treatments for schizophrenia and bipolar disorder. These strategic moves aligned with the company's goal of creating a more integrated and scalable organization capable of competing more effectively on a global scale (Hassan, 2010). Over time, these structural adjustments led to increased sales and profits, culminating in the company's acquisition by Merck in 2010, demonstrating the success of Hassan’s revised global organizational model.

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