Introduction: Pfizer Inc. is a research-based diversified health care company with operations around the globe. Pfizer Inc. has three main business groups.
They include the Consumer Health Care Group, U. S. Pharmaceuticals Group, and the Pfizer Animal Health Products Segment. For purposes of this case, we will discuss the Animal Health Products Group, where in 1998, accounted for twelve percent of the company's revenues. Industry Background: The process for making beef begins with the ranchers breeding and raising cattle, in order to sell them to feedlots. The ranchers' goals are to minimize death of the cattle, to breed low birth weight calves, to produce grade A choice beef, and lastly to produce calves that gain weight quickly.
By the time the feedlots purchase the cattle, the more the cattle weights, the better. The next step in the process after the feedlots purchase the cattle is for the feedlots to sell the beef to the meat packers. There are four main meat packer companies that account for eighty percent of the entire industry. The meat packers act as a middleman between the producer and the consumer. Since the majority of this industry is controlled by a few companies, this creates a problem because they act similar to a monopoly.
Due to this monopolistic view, there is no free-flow of information throughout the supply chain and beef prices tend to be higher than they should. After the meat packers have packed the beef, they sell it to retail stores, which in turn sell the meat to us, the consumer. Industry Trends: There are a variety of trends that directly influence the beef industry. To begin, changes in consumer lifestyles include less time for home-cooked meals and society's increased pressure for time; thereby, having a big impact on the decline of consumption of beef. In addition, consumers have increased dietary considerations for health and nutritional issues that lead them to consume alternative meat products like pork and poultry. Furthermore, the marketing strategies of the pork and poultry industry have done a better job advertising than the beef industry.
Also, the pork and poultry industry have recently produced more ready-to-eat and branded products. Even with all of this new increased pressure on the beef industry by the pork and poultry industries, retail prices for beef have still remained high, yet another factor deterring consumers from purchasing beef products. In 1989, the NAFTA agreement was passed allowing Mexican and Canadian ranchers to sell to the U. S. market. In turn, since the U.
S. dollar was stronger than the Mexican peso and the Canadian dollar, it became less expensive for the U. S. to import these products instead of purchasing the beef within the U.
S... Pfizer Animal Health Products, Inc. Pfizer Animal Health products are sold to veterinarians and animal health distributors in more than 140 countries around the globe. The products are used by livestock producers, horse and pet owners, and on more than 30 animal species. Furthermore, the Animal Health Group is dedicated to providing high-quality health-care animal products. To accomplish this, they invest over $4.
7 billion annually in their Research & Development department, higher than anyone else in the industry, allowing them to constantly introduce innovative animal health products. Moreover, the company provides technical support for ranchers for any kind of health related issue. The technical support department works with local veterinarians in order to assist ranchers. This technical support is very vital because the ranchers are not just sold products; they actually receive continuous customer service and support. The company's diversified and abundant product line includes vaccines, medications, antibiotics, de-workers, etc. Their Dectomax Pour-On de-worker has been recommended by eighty-four percent of veterinarians.
This is due to the fact that it is a time saver, it is simple to use and it does not need to be administrated. Moreover, Pfizer's marketing strategies include advertising in industry publication, trade promotions, price promotions, and so on. They are also prominent in national beef assurance efforts, educational materials and management programs. Problem: Pfizer's Animal Health Products Group's main predicament stems from the declining beef industry. There is a domino effect from less beef being consumed to less beef being sold to less beef being produced and finally to less animal health care products being used by the ranchers for their cattle. As we mentioned above consumers are becoming more health conscious and are switching to alternative meat products, particularly pork and poultry.
Moreover, the meat packers have a stronghold on the industry and are dictating the majority of the beef prices, which have remained high. Additionally, the NAFTA agreement has opened trade barriers resulting in the increase supply of cattle, consequently hurting U. S. ranchers. Additionally, the beef industry is lacking in the amount of advertising as compared to the pork and poultry industries.
Another difficulty for the beef industry is that they do not have enough ready-to-eat products and beefs' overall quality is poor, in terms of the tenderness and taste. Finally, the beef industry does not have a tracking system; therefore, producers and feedlots are not forced to improve beef quality. Alternatives: Pfizer's segment of beef health products ability to succeed is directly correlated to the beef industry's ability to succeed. There are numerous actions that the beef industry is capable of doing to increase sales; however, for this specific case, we will only focus on two courses of action that are controllable and available to Pfizer. Alternative 1: Our first alternative for Pfizer is to continue on their current track and basically do nothing.
Currently, they invest over $4. 7 billion annually in research and development as noted earlier. In addition, for the past nine years, Pfizer has sponsored the Cattleman's College, which is held twice a year. Pfizer also sponsors twenty-five to thirty additional cattleman's colleges offered by state and breed associations. Since, Pfizer is in a trusted and reliable position, if they were to introduce new products, more likely than not, these new products would be successful.
On the other hand, if they decide to do nothing, sales from their health products for beef will continue to decline because of consumers' health conscious attitudes and their on the go lifestyles. Alternative 2: Our second alternative is for Pfizer to enter into the poultry industry as well as continuing to be active in the beef and pork industries. Entering into this industry will be beneficial because sales of poultry are continuing to rise, while beef sales are continuing to decline. A major cost in implementing this strategy would be a significant increase in Research & Development costs.
As it stands now, the $4. 7 billion spent on research and development annually does not include poultry health products. Our Suggested Alternative & Implementation: We decided that the best course of action for Pfizer to implement is to enter into the poultry industry. This would assist Pfizer in increasing their sales in the near future and in the long run. If Pfizer were to enter into the poultry market, their history and reputation of dependable products and ongoing technical support will be advantages that otherwise would be hard to build.
Our basis for this conclusion is due to the fact that poultry sales are continuously increasing and, at the same time, beef sales are decreasing. Consequently, developing new products for a new industry does not come with a small price tag. Pfizer would have to devote a great deal of time, effort and additional capital in order for this new venture to be a success. Pfizer would need to modify their research and development department to include research on medications, vaccines, injections, antibiotics and so on, for poultry. However, our group believes that this new product line for poultry should not eliminate the existing beef and pork health care product line.
Although the ranchers in the beef industry demand Pfizer's animal health products less today than ever before, beef will always exist, therefore, Pfizer products will be needed. An added reason for them to continue with their cattle / calve health products is due to the fact that Pfizer has already invested heavily in this industry and makes over sixty health products for cattle. Additionally, we also recommend that Pfizer maintain their strong market share by continuing to sponsor seminars, publish educational material, offer technical support and organize management programs for the health care of cattle. Conclusion To conclude, the beef industry is currently experiencing a decline in demand, thereby directly affecting products sold to ranchers made by Pfizer's Animal Health Group. This decline can be attributed to a variety of factors outside of Pfizer's control, including social, economical and governmental issues regarding beef.
Since Pfizer is limited in what they can do to increase beef sales, our proposal is for Pfizer to enter into making health products for poultry, given that this industry seems to be on the rise. However, at the same time, Pfizer should continue to be active in the beef industry to keep them at the top.