Novartis Agricultural Institute Incorporated

Problem Identification

Novartis is dealing with a number of issues in an effort to remain competitive. As a late mover in the life science industry, Novartis has yet to create and define a corporate strategy that enables it to be competitive in the life sciences industry, and this is their main problem. Various symptoms and questions are raised in this case, including some long-term issues and one urgent challenge. The immediate question is whether NADII should bid to buy DeKalb, an independent corn-seed company with expertise in the field. This short-term question is a result of industrial long-term strategic factors: the high monetary cost associated with entering the life science research industry, the time and delay it takes to be established, the presence of two strong dominant competitors, the uncertainty of whether “blue-skies” research can generate a return on investment, and the complex puzzle of obtaining competitive advantage from research- an information good. As a result, Vasella, Chairman and CEO proposed $600 million to be dedicated to creating a new research institute NADII- a subsidiary wholly owned by Novartis.

Situation Analysis

The tumultuous change and perpetual research in the life sciences industry validates Vasella’s concern that Novartis not be left behind. One business analysis framework that can be considered in defining corporate strategy is a SWOT analysis.

From an internal perspective, Novartis’ strengths are that: it is the world’s largest agribusiness company, it has a budget of $120 dedicated to Novartis- which gives it the potential of being a major player, its new compensation system encourages employee action, the company has reoriented itself to reflect the change to a broader life sciences perspective (has synergy and good corporate culture) and it currently has NABRI- a pipeline for ideas in the Agribusiness division. Novartis’ weakness is its difficulty in melding the two corporate cultures of Ciba-Geigy and Sandoz, and inexperience in innovating within biotech field.

From an external perspective, Novartis’ opportunities are that with transgenic technologies becoming increasingly important, there are lucrative investment opportunities. In addition, as of 1997, it had sales of $5.8 billion reflecting a large market share. Furthermore, the market for crop protection, seeds and agricultural chemicals is expected to grow as population and world food demand continued to increase. Novartis’ presence in many countries allows it to pursue health needs in different countries and expand its market share for its pharmaceuticals business units. Novartis’ threats include constant change in the life sciences industry and lack of first mover advantage in genomics research. Moreover, competitors like Monsanto and DuPont are locking up intellectual property and market access in the lucrative field.