Pfizer Case Study

Situation Analysis

Pfizer Inc. is a large pharmaceutical company that engages in the discovery of new technologies, the manufacture of prescription and "over the counter" (OTC) medicines, as well as the marketing of such products. It operates in three distinct segments that include Human Health, Consumer Healthcare, and Animal Health. For fiscal year 2004, the company generated approximately $53 billion in revenue that contributed to over $11 billion in net income.(Pfizer, 2004)

The Cow and Calf division of the Animal Health segment markets its products direct to cattle ranchers. Such products include vaccines, medications, and antibiotics to support healthy and consistent herds of beef producing cattle. It segmented the market into three distinct categories. Hobbyists herd less than 100 cows; Traditionalists commonly carry between 100 to 499, and Businesses are working with 500 or more. (Mohr, 1999) Time spent in the field with the ranchers was allocated based on the volume of product purchased by each individual. Those that spent higher dollar amounts received the most attention (in the form of personal visits, seminar offerings, and trial product samples).

Although the ranchers appreciate the visits and the personal attention from the sales representatives they trust their veterinarians opinion over everyone else. Pfizer has traditionally used two distribution channels for its Animal Health products: Veterinarian Offices and Feed Stores. It has also tended to view the rancher as the end user of its product, but due to the size segmentation it may or may not understand each individual customers need, nor does it grasp its role in the larger supply chain (Ranchers-Feed Lots-Meat Packers-Retail-Consumers).

At the time of the case, the beef industry was in a state of decline. Increasing consumer sentiment towards the negative health effects of red meat timed with increasing inventories of product supplied from Canada and Mexico as a result of the North American Free Trade Agreement (NAFTA) had caused prices in the consumer market to plummet. (Mohr, 1999) As a result, ranchers were seeing that their finished product was commanding lesser dollar values while their inputs of feed and medication was remaining the same or rising.

Another factor contributing to the shrinking profit margins of beef producers was the overall consistency and quality of the meat. Products such as pork and chicken were beginning to be packaged by Tyson and Perdue as ready to eat meals (Mohr, 1999). These products were seasoned and partnered with a vegetable side to make complete meals in minutes. Society was moving in such a fast paced direction where families were composed of two working parents that did not have the time to plan and prepare meals from scratch anymore. Due to the convenience of the heat and eat meals, beef began losing market share because substitutes were found easier to manage while the beef segment required extra preparation time for cooking.

Beef producers needed to provide a consistent, high quality product in order to be able to compete with the substitutes. The packers were hesitant to label beef products with their branding unless they could be positive that one meal would result in the same taste, texture, and marbling (fat content) as the next. Government agencies and local agricultural cooperatives had begun informal, voluntary certification processes to test and grade the quality of beef. Feed lots and packers had stated that they would be willing to pay more for a certified product but as of the date of the case, this had not happened. Ranchers that were investing significant amounts of money to raise a healthy herd of cattle were seeing the same end prices as another rancher who did not invest in the same inputs. Therefore, the rancher who was dedicated to producing a quality product