Agrochemical Generics Entry
A major European agrochemical company was trying to determine whether it should enter the market for generic pesticides. Most of the company's executive team were in favor of this strategy – and the momentum was strongly in that direction – but there was a case to be made for not entering the market.
With analyses not clearly supporting one choice or the other, management turned to SDG to evaluate the company's alternatives.
The core of SDG's evaluation was to compare the business model and key enablers of a successful pharmaceutical generics company with the market for agricultural chemicals.
Several critical factors were not in place in agriculture – making the generics opportunity less valuable than it initially appears.
For example, the company relied heavily on informal and formal alliances with its rivals for in-market products. Its reputation as a high-quality, reliable partner was critical for the formation and functioning of these alliances. There was some risk that an aggressive entry into generics would endanger those relationships. In addition, we identified mismatches that severely diminished the potential for generics to create significant value. Managing and manufacturing generics would almost certainly require a separate organization; however, setting up a separate organization would erase the significant synergies in marketing and sales that provided the original motivation for the initiative.
In the end, minor and highly credible impacts on our client's ability to form alliances were enough to offset most of the value a generics business might create. Management eventually concluded that its attention was better spent elsewhere, and decided not to enter the generics business.
