Pharma UK and Volkswagen North America. This paper aims to compare and contrast these problems using the appropriate theories, examples and information given in the case studies.

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University of Strathclyde

MSc in International Marketing 2002/03

Managing the Multinational Subsidiary

March 24, 2002



                                                                               Hsin-Chun Wu

                                                                               Sing Kit Wang

                                                                              Daihong Wang

                                                                         Andrea Spaustat

                                                                  Shreeyukta Thapaliya

                                                                            Jens Stromnes                                                                              

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Both Pharma and Volkswagen exhibit signs of tension and/or relationship mismanagement between their headquarters and its subsidiaries; namely Pharma UK and Volkswagen North America.  This paper aims to compare and contrast these problems using the appropriate theories, examples and information given in the case studies. Further, the current state of the companies will be described and recommendations to improvements will be given.  

Pharma S.A.

Pharma S.A. was founded in Zurich in the late 1800s and has 110 subsidiaries worldwide. The biggest division within Pharma S.A. is pharmaceuticals but the company is diversifying its operations with acquisitions of various speciality chemicals businesses. Pharmaceuticals currently account for 57% of revenues. The major pharmaceutical product lines are oncology, dermatological, gastro-intestinal, and fertility control and hormone replacement. The drug approval process is complex and very costly (Approximately 8-20years and approximately $200million).  The Hormone Replacement Therapy (HRT) sector has been growing rapidly, especially in Britain.

Pharma’s subsidiaries are responsible for managing the registration process for new drugs and for local sales and marketing efforts. Before 1990, the core activities, namely R&D (although some R&D was also carried out on a subsidiary level), production and business management, were all centred at headquarters in Zurich. It was organized into divisions and then by functions within the division (figure 1).

Figure 1: Former structure of Pharma S.A.



In 1990 a new structure was announced in order to increase the level of coordination between countries and to focus product development efforts on the core products in Pharma’s portfolio. Four SBUs (Oncology, dermatology, gastro-intestinal drugs and HRT drugs) were created in Zurich to be responsible for providing “strategic direction”. A separate European Marketing Board was created to coordinate the registration and launch of products that would still be carried out in the national subsidiaries across Europe. 

The case study outlines a conflict between Pharma UK and the headquarters. The subsidiary developed a transdermal formulation of Vexa (a drug developed by the UK subsidiary in the 1980s) simultaneously with similar technology being developed for Zanta (a similar drug to Vexa marketed in the rest of Europe) at headquarters. In spite of negative signals from the SBU responsible, the subsidiary development went ahead and was later brought under deliberation to the European Marketing Board. 

Volkswagen in North America

Volkswagen, headquartered in Germany, is the fourth largest automobile manufacturer in the world.  In its early entrance into the American market, the company did well with the VW Beetle and VW Micro Bus. However, when these models went out of production and Japanese automobiles entered the American market, Volkswagen’s market share decreased.  

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VW’s operations are organised in three national divisions in Canada, USA and Mexico. Although the company has manufacturing sites (Canada and Mexico), marketing and sales division as well as a design centre (USA) in North America, the decision making is to a large extent controlled by the German headquarters.  The North American subsidiaries negotiate sales and profit targets with headquarters but exercise much discretion in achieving these targets. Further, the North American operations can choose what model type to sell, but have little influence on the product development process.  In 1991 a regional management for North America was announced ...

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