Winners / Selection Rationale

Takeda Chemical Industries, Ltd.

2002 2nd Porter Prize Winner Pharmaceutical Manufacturer
Outstanding strategy implementation and pipeline management to win with a strategy of focus, while other mega-pharmaceutical companies pursue scale

Unique Value Proposition

Providing pharmaceuticals and information in four core therapeutic areas consisting primarily of lifestyle diseases is Takeda's value proposition. Takeda focuses its development and marketing activities on these areas. Through both in-house development and aggressive licensing, it has pulled together a robust product line targeting core therapeutic areas. Furthermore, by accumulating knowledge and applying it to attain qualitative improvements, and by efficiently using IT resources, its MRs have achieved the highest customer satisfaction in the industry, despite greater numbers of MRs at competing companies. This is the result of a clear trade-off of those characteristics sought after by the world's mega-pharmaceutical companies, which use M&A to increase their scale and, thereby, broaden their research and development activities and expand their pipelines.

Unique Value chain

The strategy of concentrating on strategically selected areas, while also looking for market opportunities and paying close attention to knowledge accumulation is one that includes as an integral element a focus on four core therapeutic areas - 1) diabetes; 2) cancer, urological disease and digestive tract diseases; 3) circulatory and central nervous system diseases; and 4) allergies and diseases of the bones and joints. Another integral element is the transfer of bulk vitamin and other non-medical operations to other companies or joint ventures. However, implementing a strategy of focus in the pharmaceutical industry, where the risk associated with research and development is high, is no simple matter. Weekly general product strategy meetings in which strategies are determined in a top-down system led by the CEO enable rapid judgments and decision-making under conditions of extreme uncertainty and allow the organization to take strategic action. In turn, rapid decision-making makes efficient research and development possible. Takeda is able to make judgments regarding risks associated with development process overlapping and make decisions (for example on whether to license or develop in house) with appropriate timing. It has also built an organization suited to its strategy. By introducing transparency to its personnel evaluation system and basing its compensation system on performance, Takeda has created an organization that appreciates actions consistent with its clearly delineated strategy.

Focusing on particular areas makes it necessary to pursue sales widely throughout the world and Takeda was one of the very first Japanese pharmaceutical companies to establish a marketing operation in the US, the world's largest market. In recent years, Takeda has made sales companies in Europe and other place wholly owned subsidiaries in a move to increase its marketing power.

Takeda's return on invested capital and profit margin exceed industry averages and are doing so by margins that widen with each year.

Return on invested capital (ROIC)   (Unit = percentage point)
Difference from industry averag
over 5 year period
Difference from industry average, by year
1997 1998 1999 2000 2001
5.63%P 1.03%P 2.22%P 2.47%P 5.49%P 15.97%P
Return on invested capital = Operating income / Average invested capital

Return on sales (ROS)   (Unit = percentage point)
Difference from industry average
over 5 year period
Difference from industry average, by year
1997 1998 1999 2000 2001
4.96%P -0.56%P 1.11%P 1.00%P 5.92%P 18.49%P
Return on sales =Operating income / Net sales

Activity System Map

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