Business Life Cycle Strategy Case Study

Table of Contents

Title        4

Introduction        4

Companies Background        4

I.        Johnson and Johnson        5

II.        Porton Biopharma        5

Characteristics of Growth and Mature Company        5

I.        Mature Company        5

II.        Growth Company        6

Business/Corporate Strategies        6

Johnson and Johnson and Porton Biopharma        6

Capital Structure        7

Johnson and Johnson and Porton Biopharma        7

Sources of Finance        7

Johnson and Johnson and Porton Biopharma        7

Dividend Policies        9

Johnson and Johnson and Porton Biopharma        9

Conclusion        9

Appendices        10

References        11

Title

“Choose a growth company and a mature company from the FTSE 100 companies or any other company of your choice. What are the similarities and differences the two in terms of their business/corporate strategies, their capital structure, sources of finance and dividend policies? Comment on the differences and similarities.”

Introduction

Companies are created everyday just as how companies die every day as well. It’s a never-ending life cycle with businesses, just as there are for humans and other living and non-living things. The arrangement of the business life cycle stages reflects the difference of business growth and the flexibility of businesses to the competitive environment, according to Bulan and Yan (2009). A business life cycle is the development of a business and its stage over time and is usually divided into five (5) stages: launch, growth, shake-time, maturity, and decline (CFI Education, 2015).

Figure 1: Business Life Cycle

[pic 1]In the business life cycle of companies there are two main stages that this essay will compare and contrast. The two stages are the Growth and the Mature stages of the life cycle. In order to compare and contrast these two elements of the life cycle, two companies will be used. For the growth aspect the company that will be used as an example will be Porton Biopharma and for the mature aspect the company that will be used is Johnson and Johnson. Both companies’ business/corporate strategies, their capital structure, sources of finance and dividend policies will be discussed and compared.

Companies Background

In order to progress, it is important that two firms of the same industry are chosen. The industry that has been chosen is the Pharmaceutical industry. According to ‘The Pharma Industry’ (2019) the global pharmaceutical sales in 2010 topped 911 billion dollars, and that the research-based pharmaceutical industry is one of the few remaining leading high technology industries in Europe, amounting to 17% of European Union (EU) business in Research and Development investments, and about 3.5% of the total EU manufacturing value added. So, the pharmaceutical industry is thriving, that’s why this industry was chosen for this assignment. However, are the growth and mature companies in this industry thriving as well, or is that the mature companies have already saturated the sub-markets within the industry?

1. Johnson and Johnson

Johnson and Johnson is one of the largest American multinational manufacturing company. They ranked No. 37 on the 2018 ‘Fortune 500’ list of the largest United States corporations by total revenue. Johnson and Johnson have such a large diversification within their products. Their products range from medical devices, pharmaceutical and consumer packaged goods. This allows the company to serve assorted needs and preferences to customers and increase its overall revenue. In 2018, the company surpassed the pharmaceutical industry on the basis of its ‘return on equity’ producing a higher 21.57% relative to the peer average of 11.69% over the past year, according to the Simply Wall Street (2018).

1. Porton Biopharma

Porton Biopharma (PBL) is a limited liability company that is based in the United Kingdom. The Company has around 300 staff and is based at Porton Down in Wiltshire, UK, co-located with Public Health England on the same campus (Porton Biopharma, 2018). The company is experienced in developing, manufacturing, and bringing life-saving biopharmaceutical therapeutics and vaccines to market. On the United Kingdom’s Government’s website, it stated that Porton Biopharma develops new vaccines, therapeutic proteins and enzyme products. It also manufactures its own licensed biopharmaceutical products to treat acute lymphoblastic leukaemia and the UK’s anthrax vaccine.

Characteristics of Growth and Mature Company

Firstly, what makes a firm a mature or a growth company isn’t necessarily the number of employers the business has or the actual size of the business. It is more or less by the turnover rate, which strategy the firm is mainly focus on whether it is financial or strategic, sources of funds (Capital Structure), dividend policy and more.

1. Mature Company

A mature company is at the stage of the life cycle where it grows at the rate of an economy at large. They tend to have numerous likewise well-established competitors, making price competition a significant factor in their ability to increase profits. According to Miller and Friesen (1984), in the business life cycle, when a business reaches the maturity stage, they are characterized by steadied sales levels and decreasing innovation levels because of the high level of competition. In the mature stage, simple things like starting administrative objectives and developing the structure of the company becomes more complex, stated by Adizes (2004). Additionally, not all mature companies are large co-operations. There are many small companies that have reached their growth quickly but just stayed as a small, mature firm, maybe for convenience.