THE UPJOHN COMPANY: A STRATEGIC ANALYSIS

This research analyzes the strategic situation at the Upjohn Company in mid-1995. The Upjohn Company is headquartered in Kalamazoo, Michigan. The company (1) manufactures pharmaceutical and agricultural products, and (2) provides health care services in both the United States and in foreign markets (Rho 1278). In mid-1995, the firm employs approximately 16,900 persons (down approximately 20 percent from five years earlier), and has approximately 46,620 stockholders. About 16 percent of the firm's outstanding common stock is closely held (down from approximately 30 percent five years earlier). The individuals primarily involved in the closely held shares are members of the Upjohn family.

In mid-1995, Upjohn, along with Merck and Lilly, is a leader in pharmaceutical research in the United States (Rho 1278). Research and development expenditures consume 18.2 percent of Upjohn's revenues (up approximately 30 percent from five years earlier).

Management Problem Identification

The pharmaceutical industry in the United States in mid-1995 generally is financially healthy (Rho 1250). Profitability projections for the companies competing within the industry, however, are mixed. The Upjohn Company, while profitable, is not experiencing profitability growth over the preceding year, and the company is beset with on-going legal liability actions lodged by consumers (Rho 1278).

Upjohn has traditionally sought and gener

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elopment spending, and (2) increased competition in the United States from generic drug manufacturers. The significant decline in the value of the United States dollar in international currency exchange, however, provides the United States pharmaceutical manufacturers with an opportunity to further expand both sales and profits. As Upjohn already derives 40 percent of its sales and profits from foreign marketing, the company is particularly well placed to exploit this situation. The federal government's drug patent policy in effect prior to the mid-1980s provided, in effect, permanent patent protection to ethical drug manufacturers to protect the industry, as well as to promote research and development in pharmaceuticals. Changing the law concerning the patenting of ethical drugs in the mid-1980s provided an opportunity for the expanded manufacture of generic drugs. The revised policy was designed to provide some cost relief in the delivery of health care services in the United States. In practice, the policy of permitting and promoting the use of generic drug substitutes resulted in (1) a decrease in the return on investment for pioneer drug manufacturers, and (2) an increase in the return on investment for generic drug man
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Approximate Word count = 1973
Approximate Pages = 8 (250 words per page)

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