Abstract
Although it is generally agreed that the pharmaceutical industry is in a state of rapid internationalization, there is no clear comprehensive explanation of the current state and effectiveness of an international strategy. There are many studies about internationalization but they neither focus on the pharmaceutical industry nor evaluate the effectiveness of an international strategy with a control. Therefore, we investigate the current state of internationalization with a sample of the 30 multinational pharmaceutical companies, as well as the effectiveness of an international strategy by comparing two international strategies. In this study, we define an international strategy as a strategy that controls the geographic distribution of sales across regions to maximize total sales. The results show that 33% of the companies are still home-region-oriented, and we did not find any evidence of the effectiveness of an international strategy that pursues a balanced geographic distribution across regions in terms of total sales and adjusted total sales. The results provide the practical implication that pharmaceutical companies should weigh up the specific markets to secure higher sales through the advantage of adapting to customers’ needs. This paper contributes to the research on sustainable growth by empirically providing results of comparisons of different international strategies in the pharmaceutical industry.
Highlights
The business model of the pharmaceutical industry involves making investments into research and development (R&D), delivering the resulting products to the market, and collecting the return on these investments as profits [1]
Our results show that an international strategy to make sales around the world is not always effective in terms of total sales (TS) and sales and marketing (S&M) productivity, as shown in Figure 1, even though there is no difference in the number of blockbusters (10,000 million USD or more sales in 2017) between global companies and home-region-oriented companies
We confirmed that the pharmaceutical industry seems to be more aggressive in its pursuit of an international strategy to shift to a global approach, yet some of the largest companies remain anchored in their home regions
Summary
The business model of the pharmaceutical industry involves making investments into research and development (R&D), delivering the resulting products to the market, and collecting the return on these investments as profits [1]. The pharmaceutical industry has traditionally been highly profitable due to the high value added from innovation and low manufacturing costs [3], and the global pharmaceuticals market is growing, reaching about 935 billion USD in 2017. This business model requires a pharmaceutical company to secure profits enabling reinvestments into R&D as well as sales and marketing (S&M) by sustaining sales growth and controlling R&D expenditures. Oh and Rugman [29] analyzed longitudinal sales data from 1998 to 2008 using a sample of companies listed on the Fortune Global 500 They found that most international companies were anchored in their home region (84.8%, of which 26.7% are domestic) over the 10 year study period. They do not focus on the pharmaceutical industry, as there are few pharmaceutical companies in the Fortune Global 500 (less than 5%), and the data is somewhat outdated
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