The Mayne Nickless Cast
The Mayne Nickless case study presents many of the issues and difficulties many companies face and the approaches they take to deal with them. Mayne went through a period of expansion into new markets when the environment in which it operated began to transform, requiring it to use different strategies and approaches to managing the firm. These modifications resulted in some improvements as well as deterioration to the firm.
Mayne employed a number of strategies during its expansion into the health care and pharmaceuticals industry. Two main strategies that Mayne used, stemming from Michael Porter’s generic business strategies, were: a focus strategy, “a strategy by which an organisation concentrates on a specific regional market, product line, or group of buyers” (Davidson 2006, p249), and an overall cost leadership strategy, “a strategy by which an organisation attempts to gain a competitive advantage by reducing its costs below the costs of competing companies” (Davidson 2006, p248). The company implemented its focus strategy through a number of sales and purchases of new businesses, beginning in 2000 when it “sold out its British parcel delivery service and its Australian ports business”. By doing so, it allowed the company to place more emphasis on its health care businesses, with takeovers of Australian Hospital Care and F.H. Faulding in 2001 and the sale of the generic oral drug operations of Faulding. It also allowed Mayne to develop specific parts of the business, such as its injectable pharmaceuticals business which was a “major asset in its health care products supply chain”.
Mayne’s overall cost leadership strategy formed largely around its proposal to be debt free by June 2002. Mayne raised revenue by selling part of the company to Alpharm Inc and further developed its injectable pharmaceutical business after its sale to Teva did not eventuate. Also, the drugs that Mayne primarily produced were generic, and “sold in high volumes”. This alleviated Mayne from having to differentiate its products and reduced advertising costs. Some cost reductions, however, caused problems as different groups within the organisation had conflicting interests. Mayne’s management teams appeared to behave more as profit centres; emphasising cost, revenue and investment goals, rather than as responsibility centres; rewarding research productivity and publications (Besanko 2000, p552). Doctors, in particular, found that new cost cutting strategies jeopardised levels of clinical care.
Additionally, Mayne coordinated its expansion by centralising parts of the company, namely its information technology and finance management departments, as well as $250 million of its health care consumables. Centralisation involves retaining power and authority in the hands of higher level managers (Davidson 2006, p357). By centralising certain functional departments of the company, Mayne endeavoured to improve efficiency and reduce