7BSP0355-0206: International Business Strategy Coursework 2 Report

This report provides a comprehensive analysis of AstraZeneca's international business strategy, focusing on strategic contradictions within the company. The report identifies key issues, including the prioritization of short-term results over long-term goals, the impact of disengaged shareholders, and the lack of effective communication and understanding among management, shareholders, and industry analysts. The analysis highlights how these contradictions affect innovation, R&D, and overall financial stability. The report reflects on the findings, suggesting improvements such as fostering knowledge transfer, enhancing shareholder engagement, and implementing a robust corporate governance system. The conclusion emphasizes the need for a balanced approach to achieve both short-term and long-term objectives, ensuring the company's success and growth in the market. The report references several academic sources to support its findings and recommendations.

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Running head: Coursework 2
7BSP0355-0206 International
Business Strategy
Coursework 2 and Def/ Ref
Coursework 2019/2020

Coursework 2
Table of Contents
Answer 3...................................................................................................................................... 3
Introduction.................................................................................................................................. 3
Discussion................................................................................................................................... 3
Key strategic contradictions in the AstraZeneca......................................................................3
Reflection based on the analysis.............................................................................................5
Conclusion................................................................................................................................... 7
References.................................................................................................................................. 8
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Answer 3
Introduction
In this report, analysis of the key strategic contradictions based on the case study AstraZeneca
has been carried out in a detailed manner. Along with it, the identified contradictions have been
used as a background to develop in-depth knowledge and understanding that can act as a
mitigation technique in my future career.
Discussion
Key strategic contradictions in the AstraZeneca
Based on the case study of AstraZeneca, the 1st strategic contradiction is the focus of
shareholders and management prioritizing short term results over long-term results. As stated
by Goergen and Tonks (2019), greater board independence and institutional ownership can
affect long-term profitability influencing the performance of the company explicitly. In relation to
such context, it has been identified that the UK and US shareholders act as an outsider
dominated corporate governance system that critically impacts innovation and performance of
the company in the long-term as the market pressure to offer innovative products is increasing.
Based on Fig: 1, the three major contradiction within the company AstraZeneca has been
highlighted and it has been also comprehended form the case study that each issue is well-
linked with others.
74
76
78
80
82
84
86
88
90
92
Focus towards short term over long term and lack of R&D knowledge
Disengaged outsider and differences in shares
Performance driven environment and lacks communication flow
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Fig: 1 (Three major contradiction within the company AstraZeneca)
Other than that, it has been also suggested by Flammer et al. (2019) that visibility and novelty
act as significant factors for maximizing shareholder value as well as aligns with corporate
business functions. Based on such context, it has been certainly comprehended that the
visibility and understanding of shareholders are limited at AstraZeneca specifically for long term
R&D pipeline. Likewise, the understanding of the balance between putting money into the
market or in the research has to be done appropriately that certainly lacks within AstraZeneca
due to the significant gap between management and outside shareholders, Bianchini et al.
(2018).
On the other hand, the 2nd strategic contradiction identified at AstraZeneca in the UK capital
market act as disengaged outsiders in relation to the trader of shares. This critically impacts the
innovation cycle of the long term as the UK shareholders withdraw money from any firm that
invests heavily in the prior stages of R&D and offers the capital when the financial risks are
lower. This critically impacts the level of innovation within the pharmaceutical industry that can
lead to financial instability and competitive disadvantages in the long run, Veselovsky et al.
(2018). In addition, as the UK shareholders do not act as an engaged outsider, attaining market-
sensitive information that can benefit the company to develop innovative medicines is highly
limited.
Likewise, Astrazeneca.com (2020) stated companies that are into merger and acquisitions must
develop appropriate corporate governance system that can benefit financially, support R&D as
well as comprehends the needs of stakeholders while maximizing the value of shareholders. In
relation to such context, it can be argued that the Anglo-American company, AstraZeneca’s
principal share is composed of 50% from the UK, 33% from Sweden and rest from the USA.
However, it has been also comprehended that 11% of the company’s equity is from US
shareholders being the largest shareholder in the company. Such distinction in shares has
certainly led the company to struggle for supporting the R&D pipeline due to expensive
technology, (Refer to Fig: 2). This, in turn, impacts the innovation and sustainability of the
company, Jacoby (2018).
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Distribution of principle share (%)
0
10
20
30
40
50
60
UK Sweden US
Fig: 2 (Distribution of principle share of AstraZeneca)
It has been analysed based on the annual report Astrazeneca.com (2020) that the company
engages with each stakeholder and extensively focuses on innovations offering a new
dimension and visibility within the pharmaceutical industry. However, it can be argued that the
company AstraZeneca is performance-driven that fixes strict targets for the R&D department
which affects the visibility of innovation as the shareholders and investment analysts are highly
focused towards meeting the targets. This is the 3rd strategic contradiction. Lack of
communication flow and understanding of industry-specific expertise within management,
shareholders and industry analysts act as a critical issue for the company resulting in financial
instability and lack of innovation.
As put forwarded by Chen and Vann (2017), a strong corporate governance system in firms can
assist to make appropriate investment decisions as well as the adoption of the new technique,
enhancing financial stability and growth in the market. As the R&D facilities of AstraZeneca are
situated in different parts of the world, the issue of visibility based on innovation is highly
contradicted in the company due to lack of alignment and knowledge among the top managers
and owners for innovation. Likewise, the difference among the industry analysts and technical
expertise of the company is a significant problem that impacts innovation, Asensio-Lóp et al.
(2019). In addition, institutional shareholders also do not have knowledge and understanding of
the R&D pipeline affecting the interest of R&D scientists, investment decisions as well as growth
in innovative products.
Reflection based on the analysis
Based on the case study of AstraZeneca, I have comprehended significant strategic issues
within the functioning of the company’s management, shareholders and stakeholders.
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Specifically, it has been identified that a lack of understanding and knowledge about the core
competencies, R&D facilities, and innovative ideas is critical for the growth and success of the
company. Other than that, the company’s short-term achievements are critically hampering the
long-term goals affecting innovation and the development of new products. As stated by García‐
Sánchez and García‐Meca (2018), a strong corporate governance system must include
knowledge transfer among managers and shareholders of the company for investment
efficiently.
Specifically, firms like AstraZeneca are geographically dispersed, in the future if I become a part
of such firms then I would try to develop a system that would reinforce the engagement of each
stakeholder and shareholders of the company based on which investment decisions and long-
term projects would uphold. In addition, I would ensure that visibility and novelty of information
would be well communicated to the shareholders for their active participation in R&D
infrastructure and the necessary investment required for attaining both short-term and long-term
goals. It has been well suggested by Bobillo et al. (2018), coordination and knowledge transfer
act as pillars towards the appropriate corporate governance system.
On the other hand, Fernando et al. (2019) highlighted that strategic issues and weak corporate
governance are the implications of concentrated ownership, higher shareholder rights and lower
board effectiveness resulting in financial crisis and stability in the competitive market. In relation
to such context, it has been identified that the dominance of the UK and US as disengaged
shareholders at AstraZeneca has affected innovations and development of new products for the
company in long term affecting financial stability. In my future career under such circumstances,
I would develop a plan where the shareholders can communicate with the management of the
firm in order to develop appropriate business operations and investment decisions. It can be in
the form of meeting that can be done monthly or face to face conversation can also justify the
situation, Glass et al. (2016)
In addition, the expertise of R&D would also take part in the meeting so that the need for
innovation in products can be well communicated to the shareholders. This can assist to
increase shareholder’s knowledge and also act as a tool for mutual understanding leading to
financial stability and success in the competitive market, Scherer and Voegtlin (2018). Likewise,
I would also suggest making strategic decisions that can maximize the long-term value of
earnings even at the expense of lowering the short term. Following this strategy can assist not
only to fulfill long term goals but also short-term goals significantly. In addition, I would
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encourage the workforce and other stakeholders by offering rewards and incentives while
controlling and aligning with the performance-driven work environment. This will certainly act as
motivation resulting in innovative ideas, Napoli (2018).
It has been well stated by Ahlstrom et al. (2018) that firms are facing strategic issues including
ownership and control as well as aligning and controlling shareholders. Based on such context,
it can be stated that AstraZeneca has a significant issue in aligning the views of shareholders,
R&D scientists, industry analysts, and management of the firm, affecting innovation and
success in the long haul. In such a situation, I would communicate with each of the parties and
explain to them the risks of shareholders are similar to the risks of management and
stakeholders as lack of each party can create conflicts and poor investment and management
decisions. Hence, in my future career, I would advise them to increase communication flow with
the use of digital technology as the R&D facilities are geographically dispersed. This can assist
to gain conscience among the parties leading to understanding and good corporate governance
system enhancing long term results, He and Tian (2018).
Conclusion
Therefore, it can be stated that there are three major strategic issues within AstraZeneca
including excessive focus towards short term over the long term and lack of R&D knowledge,
disengaged outsider and differences in shares as well as the strict performance-driven
environment and lack of communication flow. Based on such note, I have suggested significant
requirement of knowledge transfer, development of the system that engages each party as well
as the need of good corporate governance system that can serve the entire firm offering short-
and long-term achievements, resulting in success, growth and financial stability in the market.
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References
Ahlstrom, D., Cumming, D.J. and Vismara, S., 2018. New methods of entrepreneurial firm
financing: Fintech, crowdfunding and corporate governance implications. Corporate
Governance: An International Review, 26(5), pp.310-313.
Asensio-López, D., Cabeza-García, L. and González-Álvarez, N., 2019. Corporate governance
and innovation: A theoretical review. European Journal of Management and Business
Economics.
Bobillo, A.M., Rodríguez‐Sanz, J.A. and Tejerina‐Gaite, F., 2018. Corporate governance drivers
of firm innovation capacity. Review of International Economics, 26(3), pp.721-741.
Astrazeneca.com. 2020. Annual Report 2019. [online] Available at:
<https://www.astrazeneca.com/investor-relations/annual-reports/annual-report-2019.html>
[Accessed 13 April 2020].
Bianchini, S., Krafft, J., Quatraro, F. and Ravix, J.L., 2018. Corporate governance and
innovation: does firm age matter?. Industrial and Corporate Change, 27(2), pp.349-370.
Chen, Y. and Vann, C.E., 2017. Clawback provision adoption, corporate governance, and
investment decisions. Journal of Business Finance & Accounting, 44(9-10), pp.1370-1397.
Fernando, J.M.R., Li, L. and Hou, Y., 2019. Corporate governance and correlation in corporate
defaults. Corporate Governance: An International Review.
Flammer, C., Hong, B. and Minor, D., 2019. Corporate governance and the rise of integrating
corporate social responsibility criteria in executive compensation: Effectiveness and implications
for firm outcomes. Strategic Management Journal, 40(7), pp.1097-1122.
García‐Sánchez, I.M. and García‐Meca, E., 2018. Do talented managers invest more
efficiently? The moderating role of corporate governance mechanisms. Corporate Governance:
An International Review, 26(4), pp.238-254.
Glass, C., Cook, A. and Ingersoll, A.R., 2016. Do women leaders promote sustainability?
Analyzing the effect of corporate governance composition on environmental
performance. Business Strategy and the Environment, 25(7), pp.495-511.
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Goergen, M. and Tonks, I., 2019. Introduction to Special Issue on Sustainable Corporate
Governance. British Journal of Management, 30(1), pp.3-9.
He, J. and Tian, X., 2018. Finance and corporate innovation: A survey. Asia
‐Pacific Journal of
Financial Studies, 47(2), pp.165-212.
Jacoby, S.M., 2018. The embedded corporation: Corporate governance and employment
relations in Japan and the United States. Princeton University Press.
Napoli, F., 2018. Corporate governance and firm network: An empirical research based on
Italy. Corporate Ownership & Control, 15 (2-1), pp.231-247.
Scherer, A.G. and Voegtlin, C., 2018. Corporate governance for responsible innovation:
Approaches to corporate governance and their implications for sustainable
development. Academy of Management Perspectives, (ja).
Veselovsky, M.Y., Izmailaova, M.A., Bogoviz, A.V., Lobova, S.V. and Ragulina, Y.V., 2018.
System Approach to achieving New Quality of Corporate Governance in the Context of
Innovation Development. Quality-Access to Success, 19(163).
Case study-
Ramirez, P. and Tylecote, A., 2004. Hybrid corporate governance and its effects on innovation:
a case study of AstraZeneca. Technology Analysis & Strategic Management, 16(1), pp.97-119.
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