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Abstract:

Purpose – In 2007 global mergers and acquisitions (M&A) activity totaled a record $4.38 trillion, up 21 percent from 2006. Despite current turbulence in the world financial markets, 44 percent of privately held businesses globally are planning to grow through acquisition in the next three years. Following a merger or an acquisition, a combined firm may need to streamline an inefficient product portfolio so as to increase revenues and profitability. The consequences of retaining inefficient portfolios can be more than internal competition and inadequate financial returns. This paper seeks to illustrate key processes, methods and the value of strategic marketing research and science in helping make critical decisions that reshape an inefficient portfolio of 12 pharmaceutical products, created as the result of a merger of two large, global pharmaceutical firms.

Design/methodology/approach – Using a case study, the paper posits that taking a customer-centric, market-driven view of the value of products in a portfolio almost always results in significant insight that helps streamlining. Applying relevant tools and techniques from the disciplines of strategic marketing, market research and marketing science crystallizes insight into objective criteria that can then be used to make informed and valid decisions.

Findings – Results illustrate the importance of customer-centric, market-driven constructs in influencing critical market outcomes, which, in turn, provide rational insight into structuring existing product portfolios. Product, customer and market drivers that drive product and portfolio performance are explicated and recommended for analysis and ongoing tracking. Results are presented in terms of altered customer behaviors, product and portfolio revenue and profitability.

Originality/value – The paper highlights the critical role of relying on the core elements of strategic marketing and research in solving one of the most common and important business issues of our time. Key themes are stressed through focusing on insights reiterating the role of core marketing principles such as differentiation, positioning and strategy simulations. When combined with the insights provided by comparable other business functions such as financial modeling and valuation, this can only result in smart business strategy.

Keywords:

Acquisitions and mergers, Marketing strategy, Pharmaceuticals industry, Portfolio investment, Simulation

Article Type:

Research paper

Article URL:

http://www.emeraldinsight.com/10.1108/02756660911003121

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