Case Write-up: Novartis AG
Problem:
The dilemma faced by Daniel Vasella, CEO at Novartis is how to allocate the company’s capital resources amongst internal company wide R&D projects and external collaboration projects. Since it is very difficult to measure the success rate of R&D projects, the managers at Novartis are finding it challenging to determine the amount of money to be spent on research of new drugs and at the same time ensure that they meet their shareholder’s expectations.
Goals to be achieved:
1. They planned to build new research centers and decentralize the R&D process and separate them from the corporate wing. The company planned to extend its centers to ensure proximity to leading research universities, hospitals and biotech companies in order to find talented scientists.
2. Another goal to be achieved was to make sure they have a right mix of long term and short term projects in their portfolio. This would ensure that they maintain a balance between choosing high and low risk projects.
3. Work towards continuous innovation and discover pathways between various diseases for development of new drugs which would help save and change lives of patients and work for the betterment of the society. As a part of this mission, the firm created a separate division which focused exclusively on developing new drugs for developing nations.
Alternatives:
Criteria
Increase profits in short term Long term growth
Novartis can focus their resources more on business and marketing of their existing products. This would require focus on internal projects which will give profits in the short term. Collaborate with organizations and institutions outside the firm and take up long term projects which may be risky and not be profitable initially. This will require them to spend more money on research projects.
Alternative
Recommendation:
I would recommend the manager at Novartis to...