Business level strategy to implement on
Torrey Nano, Inc.
by
Jathin Hari
Strategic Management and Competitive Advantage. (p. PC2 48–51)
November28, 2021
Professor: Jana Comeau, MBA
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Strategic Management and Competitive Advantage, Thesis of Strategic Management
Business level strategy to implement on Torrey Nano, Inc.
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Business level strategy to implement on Torrey Nano, Inc. by Jathin Hari
Strategic Management and Competitive Advantage. (p. PC2 48–51) November28, 2021
Professor: Jana Comeau, MBA
Torrey Nano, a biotechnology firm focused on R&D since its founding, developed a pharmaceutical product, Nano-4, was almost ready for human testing (Barney & Hesterly, 2019). Torrey Nano vision is to be a full-fledged pharmaceutical company but it had done no manufacturing or marketing (Barney & Hesterly, 2019). This study examines whether a small-scale pilot facility for manufacturing Nano-4 for human trials should be built. A well- developed strategy should lead to a competitive advantage because it is based on assumptions and hypotheses about the competitive environment. Human testing was divided into three phases, and the company developed five scenarios for it, each with its own set of financial benefits and drawbacks, as well as the opportunity to develop manufacturing experience, which the company aspires to attain.
Nanotechnology-based drug production is thought to be extremely difficult and risky (Barney & Hesterly, 2019). Torrey Nano identified five manufacturing scenarios for Nano-4, which would eventually be marketed by a well-known pharmaceutical company that would operate as Torrey Nano's marketing partner (Barney & Hesterly, 2019). A $5 million investment in 2018 and a $3 million investment in 2019 and 2020 were made to build a pilot plant with enough capacity to create output for Phases I and II (Barney & Hesterly, 2019). Torrey Nano had adequate capital to invest in Phase I/II. In 2020, a larger-scale factory for Phase III and commercialization would cost $30 million. Building a pilot plant, on the other hand, was not without its difficulties and risks (Barney & Hesterly, 2019). The process constraints involved in creating Nano-4 at even pilot scale were unknown, which could constitute a problem for a firm with early capabilities in manufacturing. The pharmacy industry is highly competitive field. Development of a successful pharmaceutical product depends on unmet needs for disease, clinical efficacy, comparators, safety, and price. Due to the use of nano-technology, Nano-4 could be the cheapest diabetic medicine on the market if it passes all three phases of testing. Even though Nano-4 had multiple potential therapeutic applications, Torrey Nano focused on diabetes treatment as its first application (Barney & Hesterly, 2019). Torrey Nano could face a threat from new competitors on the basis of its product differentiation.
According to a SWOT analysis, Torrey Nanos' current strength consists of 35 technically advanced research scientists and three other products in the early stages of development. Torrey Nano had adequate capital to invest in Phase I/II. Torrey Nano, on the
invest $30 million in phase III production without any production know-how, which could be generated if involved in Phase I and II production as per scenario 1. Torrey Nano's much desired production experience is provided at an additional cost of $2.5 million under Scenario 2 in Phases I and II in comparison to Scenario 4 (Scenario 2: $11 million & Scenario 4: $8.5 million). Scenario 5 involves entering into a licence deal immediately, and the licensing partner would bear all the costs and risks (Barney & Hesterly, 2019). Torrey Nano would receive a $5 million payment as well as a 5% royalty on future Nano4 sales (Barney & Hesterly, 2019). However, Torrey Nano would forego the opportunity to capture the much higher royalties associated with the other scenarios and much desired production experience to achieve its vision.
In conclusion, it is very clear that to achieve Torrey Nano's vision, you need to have production capacity. So, it is very important to put a step into the vision of the company and ensure its survival by not investing heavily in production by ignoring that its strength is still in R&D. Scenario 2 is the idle production method for the company, basically because scenarios 1 and 2 only provide Torrey Nano with much-needed experience in production. Why is scenario 1 selected over scenario 2? It is because of the huge investment requirements in phase III. Even though scenario 1 gives a better return than scenario 2, with an investment of $30 million through venture capital at a cost of 30%, it makes it less feasible by considering the complex production method and uncertainty of success of Nano-
- In the opening remarks, we discussed that nanotechnology is very complex and only a few firms are successfully doing the same. One side of the coin is the complexity of the production, and the other side is that any small error in the strategy leads to the loss of technically advanced research scientists to competitors. If Torrey Nano is able to successfully develop other three products in the human trial stage, the company can go into full fledged production and achieve its vision as a standalone pharmaceutical firm.
Scenario 2 is recommended strategy to follow by Torrey Nano, it give the financial stability to survive the company even in the adverse case of Nano-4 product failure and it give much wanted experience in nontechnology production.
References
Barney, J. B., & Hesterly, W. S. (2019). Strategic Management and Competitive Advantage: Concepts and Cases 6th edition. Harlow : Pearson.