Strategic Analysis of Bayer's Business Strategy: ACC7023

This report provides a detailed strategic analysis of Bayer AG, focusing on its performance from a corporate, business, and functional level. The analysis includes an examination of Bayer's pharmaceutical segment, environmental factors using the PESTLE model, stakeholder analysis, and an internal analysis of strengths, weaknesses, and strategic options. The report also utilizes tools such as the Mendelow matrix and the Boston Consulting Group (BCG) matrix to assess Bayer's strategic position. It evaluates strategic options, recommending continued focus on current strategies, innovation, and research and development. The conclusion emphasizes the importance of a well-designed business-level strategy and efficient leadership for long-term sustainability in the pharmaceutical industry. The report is based on an assignment for the ACC7023 Strategic Management module at Birmingham City University.

ACC7023: Strategic Management
Lecturer: Martin Beaver
Student: Amro Mousa
Word Count:
Arial font size 12
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Bayer Business Report
1.0 Introduction
Business strategy analysis is a significant aspect in the study of business as
the process of such analysis report involves several business-critical
considerations. In the instant report, the researcher will dive through Bayer
AG’s strategic analysis looking at the performance of the company from
corporate level with a focus on business and functional level strategy analysis.
Part A
2.0 Strategic Analysis
At the pharmaceutical segment, Bayer in terms of enhancing its sales margin
tends to focus on researching, establishing and marketing specialised
medicines that offer effective clinical benefits and values at the same time.
Moreover, the information shows that in its innovative product lines, the brand
enabled to attain its therapeutic facilities for patients and at the same time it
also manages to satisfy the emerging needs of its physician and health
insurers (AG, 2019). Inference can be drawn from the previous discussion
that the brand not only focuses on researching and developing innovative
product lines but also provides equal attention on the emerging demands of
its customers and shape their service lines accordingly to meet their needs to
the maximum.
3.0 Environmental analysis
In BAYERS environmental analysis, this report will focus on the PESTLE
model that is in the appendix (1). This model, there are a variety of factors
that BAYER should be aware of especially in the pharmaceutical and
agricultural group. When it comes to the legality BAYER should be aware of
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all the changes in regulations in the regions around the world. For instance,
19 European countries including Germany ban the import of any genetically
modified seeds or organisms (GMO). This ban is put in place because there
are fears that it can cause harm to humans and that it could lead to a
reduction in plant diversity. (2017) euronews
This links nicely with the food safety which is also an environmental factor.
Political and Legal
It has been identified that despite that impact of BREXIT, the UK
pharmaceutical brands have managed to follow the potential changes
introduced to the regulatory procedures and imposed strategies accordingly
(Kwon, 2018). Despite the legal hindrances, the pharma segment in its
manufacturing operations has made significant advancements including
Bayer.
Economic
The records of 2017 show that the pharmaceutical products' annual turnover
in the UK has been over 42 billion and the gross revenue of its retail medical
products has been 5 billion of British pounds (Stewar, 2019). Hence, it shows
a decent uprising trend.
Social
The employment standard of the market has been stable, where the stable
operation of the pharmaceutical sector has also created decent employment
opportunities in the market.
Technological
The chosen sector in the present time is focusing on 'Data Integrity' to adopt a
variety of integrated informatics platforms for the inclusion of Chromeleon
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Chromatography data software’s (CDS) to assist the brands to comply the
regulatory requirements to enhance productivity (Chopra, 2017).
Environmental
The UK government has passed strict instruction to the pharmaceutical
brands to keep the environment secured. The manufacturing, production and
retailing actions shall be initiated following regulatory guidance to prevent
pollution.
3.1 Stakeholder analysis
The stakeholder groups (appendix 6) is pulled from directly from BAYERS
sustainability report in 2019. BAYER has nicely presented their stakeholders
in a ‘Dialogue’ this helps them ‘recognise important trends and developments
in society and their markets at an early stage and take this information into
account when shaping their business” BAYER report (2019).
Furthermore, this report used the Mendelow matrix to help identify the key
stakeholders and their influence on BAYER. There is a relationship between
Mendelow matrix and BAYERS stakeholder dialogue in which most of the
stakeholders are in the same groups.
Stakeholders identified mainly to be influential to BAYER include suppliers
and their investors these stakeholders will need to be managed in various
ways for example for suppliers are essential to achieving good economies of
scale, to elaborate more on this point BAYER will need to maintain a good
relationship with their suppliers to get the raw materials to produce the
required products.
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However, the integrated reporting that BAYER has adopted uses the same
information every year but only tweak their financial figures, so their
stakeholder dialogue is the same year on year.
3.2 Threats and opportunities
The changing consumers' purchasing behaviour towards the online channel
could be a threat to Bayer. Moreover, the organisation is operating in several
regions, therefore, it sometimes gets exposed to currency fluctuations that
uphold its operations for certain tenure.
The inclusion and advancements of technology can also serve immense
opportunities to Bayer in terms of reaching its target audiences. Customers
are getting wider available options to buy their products as per own
conveniences. Hence, creating opportunities to Bayer in convincing its
customers to increase their purchase options with its product lines using most
appropriate technological support.
3.3 Culture
Bayer's culture centres around the concept of innovations by getting the right
support of its resources and stakeholders. The resources are encouraged to
propose right and effective ideas to management and also design their project
using individual creative insights. Hence, the culture of the brand centres
around positivity, optimistic approach and embracing innovation to its
optimum.
3.4 Summary
The discussion herein shows that the company has been able to perform in its
segment successfully for years. Though the competition and currency
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fluctuations may affect the operational excellence, the business may utilise
the latest available technology to stand out in the market.
4.0 Internal analysis
4.1 Strengths and weaknesses
The internal analysis includes BAYER strengths which consist of their robust
and strong focus on Research and Development (R&D), in the financial year
2019 BAYER accumulated a cost of EUR 5,342 million which is almost 12.3%
of BAYER revenues. This R&D focuses on developing new products for their
pharmaceutical and agriculture sector which in return could generate them
more cash. BAYER Integrated report (2019)
Another strength is BAYER strong revenue growth, in the financial year, 2019
BAYER reported revenue of EUR 43,545 million which is an increase of
18.5% from the previous year. This growth is linked to the acquisition of
MONSANTO in 2018 which reported revenues of EUR 6,649 million. BAYER
Integrated report (2019)
The resource attrition rate of the organisation is more as compared to the
other pharmaceutical brands in the UK market. Therefore, the brand has to
invest more in employee training and development activities (Pantano et al.
2020). Additionally, although its product lines had received success, kept
undefined in terms of USP and propositions, which creates clear space for
competitors to attack.
4.2 Ansoff
Market development
It has been identified that Bayer has not only managed to establish a
successful market of its pharmaceutical segment in the UK but also expanded
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its reach across various other regions (Pachamanova et al. 2020). The brand
has focused more on its research and developmental actions and produce the
most innovation outlines that serve apt medical benefits to the patients.
Diversification
Bayer has maintained a strong grip in its unique medical offerings, insurances
and also in the retail segments. Hence, it can be stated from the above
discussions that the organisation has enabled diversify its pharmaceutical
products into different segments and used apt marketing strategies to gain
acceptance.
Market penetration
The brand has complemented its research work by forming collaborations and
strategic alliances with the external partners within industry and academia.
Through a strong partnership, the brand intended to stimulate medical
benefits and innovation that can fetch the patients with the right health-related
treatments (Carmona-Lavado et al. 2020). Thus, it can be stated that external
collaboration has been used as one of the strategies for market penetration by
Bayer.
Product development
In the recent year, the brand has enables to establish a variety of successful
collaboration frameworks that includes license agreements, research and
development cooperation, acquisitions, regional collaborations and co-
marketing arrangements.
4.3 Boston Consultancy Grid
Question Mark Star
Bayer's' pharmaceutical product lines The agricultural products of the
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are identified to fit the category and
requirements of question mark
section under BCG matrix. The
segment is receiving high growth, but
due to political uncertainties, its
market share is struggling.
brand are fitting the criteria of the
star, where the market growth and
share are increasing at a constant
rate.
Cash Cow Dog
There have been no products found
under this category, but its strong
focus on R&D and external
collaborations with right partners
from products development have
served immense benefits that
enabled Bayer to position some of its
products that gained lower growth
rate but high shares in the market.
Majority of its product lines have
gained acceptance and stability in
the market, therefore, none of its
products is categorised under Dog
section.
4.4 Summary
The internal factors affecting the business is manifold. The robust R&D
strategy may help the business to achieve the competitive advantage in the
market. On the other hand, the management may need to consider the risk of
high employee attrition to retain the best talent within the business.
Part B
5.0 Options and evaluations
5.1 Option 1
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The strategy the brand has been following to expand its operation and
develop new products seems to be quite suitable to fit the existing market
criteria. Thus, the brand needs to keep going within its current strategies.
5.2 Option 2
Its strong focus on innovation and introducing the right medical facilities by
understating the acute needs of the patients has gained the brand with high
acceptability in the UK market (Friend et al. 2020).
5.3 Option 3
The research and developmental activities have been its major strength that
helped the brand to introduce the right and feasible product offerings with the
right choices of service assistance to help patients with their right medical
benefits.
6.0 Evaluating options
6.1 Option 1
The existing strategy of Bayer seems to be suitable in terms of catering its
pharmaceutical products segments am amongst the UK population. The
existing strategies are helping the brand to make a slow but steady rise in the
market, which is expected to enhance its growth rate shortly.
6.2 Option 2
Innovation has become the major agenda in the present time that has kept
every organisation going (Magalhães et al. 2020). Therefore, Bayer's strong
focus on innovation has fetched the brand positive outcome and helped it to
differentiate a beneficial offering from the competitors that helped in gaining
high acceptance.
6.3 Option 3
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Bayer’s high concentration on research and developmental actions has been
mostly feasible considering the high fluctuations in the market (Gornostaeva,
2020). The market dynamics are changing at a rapid pace where brands are
struggling with different experimental approaches to bring the right products in
the market. Therefore, Bayer's strategy of research assists in identifying the
products as per market convenience.
7.0 Conclusion and recommendations
Based on the aforesaid assessment and evaluation of the company’s strategic
position, it may be stated that the company has been performing reasonably well in
the segment for last several years. The management has identified opportunities of
utilising R&D initiatives of the company to the fullest extent possible for innovative
and market-disruptive product offering. However, the issue of declining profitability
and extreme price war may need to be strategized by the business through cost
restructuring and focus on product differentiation through innovation. Finally, it may
be concluded that a well-designed business-level strategy supported by the efficient
leadership will considerably help the management of the business to achieve the
long-term goal of sustainability in the industry segment in most optimum manner.
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References:
AG, B., (2019). Profile Of Pharmaceuticals At Bayer. [online] Bayer.com. Available
at: <https://www.bayer.com/en/pharmaceuticals-division.aspx> [Accessed 15 April
2020].
Carmona-Lavado, A., Gopalakrishnan, S. and Zhang, H., (2020). Product
radicalness and firm performance in B2B marketing: A moderated mediation model.
Industrial Marketing Management, 85, pp.58-68.
Chopra, A., (2017). Technology Innovation In Pharma Industry - ET Healthworld.
[online] ETHealthworld.com. Available at:
<https://health.economictimes.indiatimes.com/news/medical-devices/technology-
innovation-in-pharma-industry/58395395> [Accessed 15 April 2020].
Friend, S.B., Johnson, J.S. and Ranjan, K.R., (2020). An antecedent and contingent
outcome model of fail fast strategy in salesforce management. Industrial Marketing
Management.
Gornostaeva, Z.V., (2020). Marketing Management of Technological and Social
Entrepreneurship in Growth Poles of the Modern Global Economy. In Growth Poles
of the Global Economy: Emergence, Changes and Future Perspectives (pp. 287-
295). Springer, Cham.
Kwon, D., (2018). The UK Pharmaceutical Industry Braces For Brexit. [online] The
Scientist Magazine®. Available at: <https://www.the-scientist.com/news-opinion/the-
uk-pharmaceutical-industry-braces-for-brexit--64926> [Accessed 15 April 2020].
Magalhães, M., Pereira, M., Cardoso, A., Cairrão, Á. and Figueiredo, J., (2020).
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(pp. 158-168). IGI Global.
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Pachamanova, D., Lo, V.S. and Gülpınar, N., (2020). Uncertainty representation and
risk management for direct segmented marketing. Journal of Marketing
Management, pp.1-27.
Pantano, E., Giglio, S. and Dennis, C., (2020). Integrating Big Data Analytics Into
Retail Services Marketing Management: The Case of a Large Shopping Center in
London, UK. In Handbook of Research on Innovations in Technology and Marketing
for the Connected Consumer (pp. 205-222). IGI Global.
Stewar, C., (2019). Topic: Pharmaceutical Industry In The UK. [online]
www.statista.com. Available at:
<https://www.statista.com/topics/5056/pharmaceutical-industry-in-the-uk/>
[Accessed 15 April 2020].
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