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18 May 2016

Novartis strategic rejig – Created 2 SBU for effective control

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Novartis is splitting its pharmaceuticals division into two business units.
SBU 1 will take care of cancer drugs and
SBU 2 will deal with other drugs.
Novartis Annual Total Sales Revenue – 49 Billion.
And major chunk of business involve cancer segment. Recently, Novartis has acquired GSK’s oncology cancer drugs for 16 billion. This deal came after the patent expiration of blood cancer drug Glivec and slower-than-expected revenue from its new heart failure medicine, Entresto.
So, separate cancer drugs SBU will help them to effectively focus and manage on cancer segment.
It is common practice in pharmaceutical strategic management to create SBU.
Strategic business units work on the principle of micro management.
SBU helps company to be organized.
Once organized, you can micro manage things. Just take an example of large companies. They have at least 30 different products at all times. Each of them requiring separate manpower, strategies, expenses and returns. But, similar set of products bring together in a same sbu for effective utilization of the manpower, strategies, expenses and returns. It’s helps in effective segmentation, targeting and positioning.
This is the exact reason behind converting a products / brands into a SBU or to make them part of a separate SBU.

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