CASE OVERVIEW

• Pfizer is one of the largest pharmaceutical companies in the world and they were present
in more than 150 countries

• Set up as the Charles Pfizer & Company in Brooklyn, New York in 1849 by Charles
Pfizer and Charles Erhart.

• Became popular during World War II, as it was the world’s largest producer of
Penicillin.

• In the early 1990s, Pfizer’s scientist developed a potential drug to treat male impotence.

• In 1994, Pfizer submitted patent application with China’s SIPO, US Patent and
Trademark Office and European Patent Office. The product was a huge success in many
European countries and contributed in increasing the revenue of the company.

• Pfizer launched Viagra in 1998.

• Successful internationally, but failure in China

1. However, there was a huge market in China but the men had developed
traditional medicines for curing the disorder and also to boost sexual
performance.

2. Viagra was approved but the Chinese government had classified it as controlled
substance and was banned from advertisements.

3. Series of IPR litigations and counterfeits: There was reports that the around 90
percent of Viagra pills were not original and there were consortium of Chinese
companies protesting against the patent given to Pfizer.

• In November 2006, Chinese government cracked down on Viagra counterfeits

• In December 2006, Beijing court upholds Pfizer’s Chinese patent for Viagra and
ordered companies to stop making generic versions and also pay compensation for
infringing on the registered trademark

• In February 2007, Pfizer lost the legal battle over rights to the brand name for Viagra
“Wei Ge”
 • Chinese government passed a rule that all the companies had to register their Chinese
language equivalent trademarks before entering the Chinese market for strong brand
recognition

CHALLENGES FACED

 IPR, Patent enforcement system in China was very weak.

 Pfizer patent failed to fulfil the “novelty” requirement under China’s patent law.
 Lack of documentation and standardization in patent claims
 Pricing strategy of Viagra was inappropriate. They priced it on a higher side.
 Counterfeit products to Viagra became prominent, this lead to competitions.
 Viagra could be purchased only with a prescription by a doctor only.
 Declining Sales.
 Difficulty in adapting to the new environment for Pfizer in China.
 Language related challenges. This also led to poor brand identification.

ANALYSIS OF ENTERPRISE RESPONSE IN HOST COUNTRY REGULATORY

ENVIRONMENT

Firm Related Variables

Firm resources, capabilities and competencies

Pfizer is the largest pharmaceutical company and the most admired pharma brand in the world.
The company is known for its research and development initiatives especially launching of
new to the world drugs. e.g.: Viagra. Pfizer operates in three business segments namely
healthcare, animal health and consumer healthcare with operations across and factories at
multiple locations. The firm major competencies are in the area of R&D, patentable and generic
drugs.

Nature of Product

Viagra is a drug which is used for the treatment of male impotence and was invented while the
scientists where researching on a potential drug to reduce hypertension. It is a high technology
product which involves lot of research, formulations, patents and testing for its development.
Country Screening Approach

Pfizer decided to enter the Chinese market as the market potential was very high with the
pharmaceutical industry in the country expected to grow at a very fast pace. China was lead
market for the company as it tried to capture the market share by introducing new drugs which
are not produced by Chinese pharma companies.

Mode of Entry

Pfizer started its wholly owned operations in China and received the approval for marketing
Viagra in China in 2000. The drug was marketed under the brand name “Wan Ai Ke” and was
produced at a factory in Dalian and was distributed by a local company named CNCN. China
was platform and growth market for Pfizer. The timing of entry of Pfizer in Chinese market
was at a time when the pharma market in China was booming, but the company failed in the
Chinese market due to IPR issues and excessive counterfeits as well as the cognitive mapping
of Pfizer in China was not proper which lead to its failure.

Host Country related Variables

Sophistication of legal system and implementation of law

The IPR law is China was very weak and there was lack of transparency. Pfizer faced many
challenges and litigations due to the IPR issue as the company first was rejected patent for
Viagra in China with the law stating there was no “novelty” in the drug i.e. there is no content
in the drug which is a new invention. As a result, Pfizer found it difficult to improve its sales
and hence the drug was not that much successful in Chinese market when compared with the
rest of the world market.

Role of government in host country

There was high intervention from the government in the Chinese market as the company had
to constantly involve in litigations regarding IPR and the IPR laws set by the government where
such that it made it difficult for a foreign company to do business in China

Cultural Dimension

The power distance in China was very high when compared with other countries. As per the
framework, China has a negative HNO with high power distance. The practices in China is
such that the drug can be bought only if the doctor prescribes by an authorised medical doctors.
Also China was known for having their own ways for dealing with sexual issues, hence the
citizens of Chin had a liking towards the traditional approach rather than usage of drugs. Chinse
are known for producing products at a lower cost and Pfizer failed to understand this market
characteristic by launching Viagra at a higher price, whereas counterfeits where available at a
lower price.

Intensity of local competition

Pfizer tried to follow the same strategies followed by them in the rest of the world market
without much market research. Thus it failed to understand the competitive environment
properly and had to face very stiff competition from local players who manufactured the
counterfeits of Viagra and manufactured it at a lower cost, thereby giving a very tough
competition.

According to the 3C’s of strategic planning Pfizer only focused on the customer and doesn’t
take into consideration competition and company.

CONCLUSION

China is the highest populated country in the world and it is developing very fast, so Pfizer
thought it as an opportunity to tap into the market so that they can get a pie market share from
China. As a result, they entered China. In this case it depicts the Pfizer’s battles over its Viagra
trademarks in China illustrate that even in today’s modern global economy and even when a
powerful and sophisticated MNC with vast resources is involved, mistakes and miscalculations
can occur that seriously undermine business opportunities in China. In particular, mistakes that
are rooted in areas that MNCs have not traditionally emphasized, such as issues of language
and culture, appear to be pitfalls for MNCs in China. But Pfizer first of failed to understand the
environment of China on the first phase.

The Viagra was very successful in rest of the world, Pfizer followed the same strategy in China
also. Chinese way of business was totally different they are good at the making counterfeit
products. It is because the IPR law was not powerful. As a result, the Viagra counterfeit came
into market after 3-4 months of launch of the product
So as a result the case here also explains the failure of product because of no proper application
of concepts, wrong cognitive mapping and underestimating the competition.

Recommendations

 China is very traditional country and it has their own medicines, so Pfizer should first
understand the market by through environmental analysis and proper cognitive
mapping. Should be there.
 They Should do the political and business environment analysis should be done before
entering into China.
 An alliance can be made with a strong branded company in China which will boost the
performance of the company.