Cambridge Laboratories: Proteomics

Auzinger-Hotzel

Prepared for

Dr. Daniel E. GilbertUniversity of Maryland University College Strategic Investment and PartneringIMAN615 Section 9040

Porter’s 5 Forces Analysis: Athletic Footwear

Entry Barriers – high:•Economies of scale exist•High capital requirements (marketing, advertising)•Government policies/trade barriers•Proprietary knowledge•Brand identity/loyalty•Patents, proprietary knowledge, and technology

Threat of Substitution – high:•Substitutes are available•Goods exist that perform the same or similar function•Buyers do not face uncertainty and/or inconvenience when switching•Existing substitute products/services satisfy price, value, and quality expectations •Brand loyalty exists

Bargaining Power of Suppliers – low:•Suppliers are diverse and geographically dispersed•Suppliers provide basic inputs (manufacturing, raw materials)•Switching may not be costly

Bargaining Power of Customers – low:•Low switching costs•Substitutes are available•Good is not a critical input and can easily be replaced•Buyers are fragmented with few large ones (i.e. universities, athletic teams)

Rivalry within the industry – medium:•Industry growth is medium but expected to increase•Number of competitors/rivals is medium•Similar products, performance, and quality•Buyer cost for switching low•Rivals are diverse, yet similar

SWOT Analysis: Nike

•78 facilities in 16 countries; 5000 employees (250 with advanced degrees)•Financially stable•Industrial knowledge•Good client relationships•Leadership position in laboratory outsourcing services•Business discipline

•Depend on technology platform acquisitions, JVs, technology licensing, and strategic partnerships to acquire essential skills•Large customers account for less than three percent of business•Strict focus on financial goals•Recent acquisition of PMC

•Technology changes•New scientific discoveries – new direction of R&D, testing, etc.•Pharmaceutical industry consolidation•Increase in outsourcing activities by industry

•Competitive structure of the industry is evolving•Changing focus and scope of industry•New competitors•Failing of many firms•Unstable operating environment (i.e. trying to raise venture capital is difficult)

CPA - Cambridge

Corporate Operations:•Resources: 78 facilities in 16 countries; 5000 employees (250 with advanced degrees); financially stable; industrial knowledge; good client relationships•Production: provide laboratory services for use in drug discovery research, development, and testing of new pharmaceuticals; most of company’s technology is licensed, purchased, or developed through collaboration•Marketing: provide quality reliable testing services; large customer base/exclusive client list

Corporate Organization:•Admin: management ensures strategies and plans are implemented; publicly traded company•Polity: decisions are made centrally, board of directors and management; well-trained, professional managers•Commonweal: maximize shareholder wealth, meet quarterly financial goals

Corporate Culture:•Learning: most of company’s technology is licensed, purchased, or developed through collaboration; company pursued technology platform acquisitions, JVs, technology licensing, and strategic partnerships to enhance its position and acquire essential skills•Style: board meetings, press releases; management creates value, maintains quality and high standards to increase company reputation•Identity: innovation, growth, meeting targets and goals

CPA - Canterbury

Corporate Operations:•Resources: highly educated staff of scientists, proprietary knowledge (Proteomics Analyser); expertise •Production: provide protein targets to pharmaceutical companies; Proteomics Analyser is used to identify and analyze proteins as they are expressed from DNA•Marketing: provide drug targets to companies so they can design drugs and treatments more specifically; alliances with IBM, Japan Biotech and other important companies

Corporate Organization:•Admin: private company, decisions are made by owners•Polity: decisions are made centrally, critical decisions are made after careful consideration by the owners and select staff•Commonweal: science takes priority; developing an innovative product; advancing their field

Corporate Culture:•Learning: company develops technology through collaboration with industry leaders in other fields (i.e. JVs and strategic partnerships); it enhances its position through hiring highly qualified scientists; acquire essential skills through collaboration and cooperation•Style: meetings, personal interaction•Identity: innovation, research, discovery, science

Strategy AlternativesStrategy A: Enter into a JV with CPL by making the

necessary concessions to secure their cooperation (i.e. agree to the royalty model, refrain from providing options to PMC scientists, etc.)

Strategy B: Reject CPL and evaluate other companies and/or proposals that would enhance the company’s portfolio of services

Strategy C (recommended): Renegotiate with CPL – highlighting non-negotiable points (i.e. royalties) while compromising on others (i.e. stock options)

Strategic Competency: Cambridge

Management and global strategic perspective:•Opportunity Scanning: company and mangers are open to and proactively address changes in the environment; vision, values, and mission are aimed at designing effective strategies•Value Societal Differences: company recognizes societal differences and responds to them (differentiation); shape and adapt value chain and asset distribution of company (licensing to JV)•Building Value Networks: build competencies around astute technical and managerial capabilities; adaptability and flexibility of management to “varying regulatory environments, business cultures, managerial styles, and work ethics” (Mann, 2006, p. 58) through thorough selection of partners and managers

Risk aptitude:•Time-Pacing: pace introduction of services (and technology) upon perceived demand and company capabilities•Location Leveraging: manage risk by distributing operations globally; take advantage of decentralization to better serve customers •Risk-Sharing: utilize JVs to share risk, distribute the burden (50-50), and gain access to proprietary knowledge and technology; find competent, innovative partners, nurture good relationships, and monitor JVs closely to ensure success

Open systems thinking:•Continuous Learning: foster a structure and habits to create/establish continuous learning and improvements (learning organization); continuously reevaluate environment, opportunities, and threats to adjust, redesign, and/or create new strategies•Holistic Analysis: embrace the views of several generations and cultures (Australian/American, scientists/managerial team, etc); see the whole picture with all its components and be open to the evolution of systems and the effects of changing external and internal environments; continuously evaluate market, economic, societal, and political situations to discover opportunities the company can take advantage of (i.e. changes in R&D, new technology etc.)•Collaborative Leadership: internal as well as external stakeholders and members need to function in a mutually beneficial way, tailor architecture and leadership to enhance cooperative efforts and ensure success of JV; embrace cultural differences – embrace different perceptions

Recommended Strategy: Evaluation

•Technological Dimension: •Proposal allows Cambridge to access CPL’s revolutionary technology,

•JV between the companies would enhance Cambridge’s market position and support its growth strategies by creating synergies.

•JV would enable Cambridge to become a first-mover offering proteomic laboratory

•Company offering unique type of service without imposing royalty payments (would be appealing to pharmaceutical companies)

•Organizational Dimension:•JV could be quite difficult to realize, as the companies’ structures cultures are different

•Companies’ respective business models may be difficult to align (royalty payments versus fee-for-service)

•Cultures may clash, undermining the effectiveness and success of the venture by counteracting the benefits both parties could derive from cooperation.

•Transactional Dimension:•CPL appears committed to the JV BUT will it deliver a quality product in the Proteomic Analyzer

•CPL’s long-term potential is debatable, as the firm’s financial situation is unknown.

•Differences in perceptions of the JVs direction and goals as well as ownership and management disagreements could interfere and impede operations.

Recommendations: Actions to be taken

First Step: Perform a thorough market analysis to:

Acquire additional knowledge (e.g. CPL’s terms with other firms, a list of CPL’s liabilities, etc.)

Gather information about similar ventures, so they can utilize knowledge of previous successes and failures to design a promising strategy

Gather information that will assist with the formation of its negotiating position (e.g. common practices in the sub-industry, industry labor pool, and similar factors)

Second Step: Determination of a negotiation position based on:

Unproven technology of the Proteomic Analyzer

Divergent business models of the firms

Differences in corporate culture

CPL’s financial stability

Design a set of terms, provisions, and conditions as a basis for negotiations

Prepare contingency terms and proposals

Recommendations: Actions to be taken

Third Step: Negotiations:

Utilize the information acquired in the first step and the negotiation position determined in the second step to achieve favorable terms

If the firm cannot arrive at terms representing a manageable risk, it should walk away from the deal

Enter into JV if terms are favorable and will not negatively impact existing operations

Fourth Step: If a deal is struck and the firms go forward with forming an alliance:

Form management team to foster cultural cohesion and success of venture.

Cambridge should consider the possibility of including experienced academic administrators on the management team, as they have experience in dealing with both academically and business minded individuals, while being proficient in financial matters.

Conclusion: It is possible with this approach to form a joint venture and address all of the factors outlined as a part of the central question. This approach also allows for the company to address the strategic objectives behind the situation. Thus, if done properly, the venture will utilize the core competencies of both companies to achieve a sustainable competitive advantage. It will essentially offer Cambridge the potential earnings growth and access to proteomics technology it is seeking.

Case Update•Changes since 2004:

•With the global recession in recent years companies and shareholders alike are looking to reduce risk.

•Over the last six years there have been many mergers and acquisition in the industry

•Outsourcing has become more common while alliances have become the standard

•Increasing amounts of regulations, government interventions, and a continuing trend to outsource services to emerging economies

•On a final note, neither one of the companies exists anymore. However, the Proteomic Analyzer has become a part of equipment frequently used in the pharmaceutical industry. Today there are many different versions of the equipment and technology available. For the rest, we can only speculate on the actions taken by either company and assume that the technology offered was successful.

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