Sep 25, 2017 term paper 2

WHEN THE TWO PHARMACEUTICAL COMPANIES UPJOHN AND PHARMACIA DECIDED TO MERGE IN 2000, A CENTRAL…

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When the two pharmaceutical companies Upjohn and Pharmacia decided to merge in 2000, a central question was where to locate their new corporate headquarters.22 Upjohn had long been headquartered in Kalamazoo, Michigan, and suggested that the new venture be run from there. Nor surprisingly, Pharmacia, headquartered in Stockholm, had a different idea and suggested Sweden as its preferred location. After considerable negotiation, neither side would yield, so it was decided to move the new headquarters and its hundred-member executive staff to London, England, instead. The new venture would be known as Pharmacia Corporation. Principal manufacturing centers for the new 30,000-employee company would remain in Kalamazoo, Stockholm, and Milan, Italy, and division managers from these operations would fly back and forth to London as needed. It was an inauspicious beginning. Clashes between the parties began almost immediately. The hard-driving, mission oriented Americans from Upjohn routinely clashed with the more consensus-oriented Swedes from Pharmacia. The Americans wanted more cost cutting and accountability, while the Swedes wanted to keep their employees informed and sought feedback on how to move the company forward. American managers scheduled meetings throughout the month of August, a common holiday time for the Swedes. At the same time, the more internationally experienced Swedes were surprised by the parochial manner and lack of sophistication of their American counterparts. Swedish managers had long worked with people from across Europe and tended to be more adaptable and flexible than their American counterparts. Upjohn’s culture had banned smoking and required drug and alcohol testing of its employees, while Pharmacia’s culture served liquor in the company cafeteria and provided ashtrays in each conference room. Finally, the Upjohn-based CEO kept his managers on a tight leash and required frequent reports, budgets, and staffing updates. Swedish members of the executive team considered this detail of reporting to be a waste of time and soon simply stopped complying until the CEO finally resigned. Meanwhile, the Italians concluded that the Americans were trying to take over the “partnership” and began resisting calls for cooperation. No one was happy. To put the conflict into perspective, a Swedish executive observed, “I see in America a more can-do approach to things. They try to overcome problems as they arise. A Swede may be slower on the start-up. He sits down thinks over all the problems, and once he is reasonably convinced he can tackle them, only then will he start running.”23 Another Swedish executive added, “The Swedish approach is more the engineering approach: ‘Tell me why and how this thing works.’ The American approach is much more direct. Their attitude is: ‘Don’t teach me to be an expert, just tell me what I need to know to do my job.’”24 The original impetus behind the merger was the compatibility of product lines of the two companies. The new company was well placed in the global marketplace, with a broad range of highly competitive pharmaceutical products. However, the ongoing cultural conflicts between members of the executive team led to lost opportunities and less than anticipated sales and profits. In 2002, New York–based Pfizer acquired Pharmacia for $60 billion, closed its London headquarters, and fired most of its former executives. As a result of the acquisition, Pfizer was able to significantly expand its product line of successful drugs and is now the largest pharmaceutical company in the industry, with 122,000 employees and annual sales of $45 billion. As Pfizer CEO Hank McKinnell observed, “We are an evolving company in a changing world. We’ve grown, in our 155 years, from a small family-owned business to a specialty chemical company to a diversified manufacturing firm to a research-based pharmaceutical company that is now the world’s largest and most valuable company devoted to healthcare.”25

QUESTIONS FOR DISCUSSION

1. How would you characterize the nature of the conflict between the Americans and Swedes at Pharmacia? What caused this conflict?

2. Did locating the new corporate headquarters in London help or hurt attempts to bridge the cultural divide between the two parties? Why?

3. If you were brought in as an outside consultant, what would you suggest to help resolve the conflicts on the executive team?

4. What can other companies learn from the Pharmacia example to avoid making similar mistakes in the future?


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