Case Notes/Answers
Teva Pharmaceutical Industries, Ltd. Tarun Khanna
Krishna G. Palepu Claudi
Discussion Questions:
1. How did Teva succeed in Israel? Why did such a company emerge in Israel? How did Teva
set itself apart from its competitors in Israel?
2. As the CEO of Teva, which markets would you concentrate on developing going forward?
3. As an executive in ‘big pharma,’ what approach would you take to deal with Teva?
4. Where is Teva vulnerable going forward?
, 5-708-419
AUGUST 22, 2007
TEACHING NOTE
Teva Pharmaceutical Industries, Ltd
Introduction
The case examines the strategic challenges facing Teva Pharmaceutical Industries, which emerged
from a small domestic market, Israel, to become a global giant. Teva occupies an interesting—and
challenging—middle ground in both its home country origin and its competitive positioning. The
company’s early growth reflects many of the challenges and opportunities confronting emerging
market companies, but Teva is now in the same competitive realm as the world’s largest
pharmaceutical multinationals. Teva built its business on generic pharmaceutical production, but the
company is now a growing force in innovative drugs. One central question raised by the case is how
Teva can compete on price with low-cost, emerging market companies at the same time it develops
innovative drugs to compete with the research and development juggernauts of ‘Big Pharma.’
Teva’s development should be examined in the context of the changing competitive landscape of
the global pharmaceuticals industry but also in light of the strategies of other firms that have grown
out of developing and middle-income countries. The company’s growth and development parallels
the emergence of other “emerging giants”—companies that have grown beyond the confines of their
still-developing home markets to be genuinely competitive in global markets. We examine the
approaches of similar firms in “Emerging Giants: Building World-Class Companies in Developing
Countries” (Harvard Business Review, October 2006).
To understand and evaluate Teva’s emergence and outlook, the class should examine how the
company has overcome and exploited institutional voids—the missing pieces of market
infrastructure in emerging markets. Teva’s early growth was enabled by the institutional context in
Israel as restrictions on foreign direct investment there allowed for the development of a local
pharmaceutical industry. This provided the opportunity to produce licensed foreign drugs and
created a pool of Israeli pharmaceuticals expertise Teva could leverage as it grew. Without the access
to capital and technological capabilities of the major U.S. and European pharmaceutical firms, Teva
used innovative partnerships with Israeli scientific entities, such as the Weizmann Institute, to build
its research and development capabilities. The case might be supplemented with “Spotting
Institutional Voids in Emerging Markets” (HBS Note 9-106-014), which presents a conceptual
framework for understanding institutional voids. This framework is applied to several emerging
markets and considered in light of multinationals’ corporate strategies in “Strategies That Fit
Emerging Markets” (Harvard Business Review, June 2005).
Teva Pharmaceutical Industries, Ltd. Tarun Khanna
Krishna G. Palepu Claudi
Discussion Questions:
1. How did Teva succeed in Israel? Why did such a company emerge in Israel? How did Teva
set itself apart from its competitors in Israel?
2. As the CEO of Teva, which markets would you concentrate on developing going forward?
3. As an executive in ‘big pharma,’ what approach would you take to deal with Teva?
4. Where is Teva vulnerable going forward?
, 5-708-419
AUGUST 22, 2007
TEACHING NOTE
Teva Pharmaceutical Industries, Ltd
Introduction
The case examines the strategic challenges facing Teva Pharmaceutical Industries, which emerged
from a small domestic market, Israel, to become a global giant. Teva occupies an interesting—and
challenging—middle ground in both its home country origin and its competitive positioning. The
company’s early growth reflects many of the challenges and opportunities confronting emerging
market companies, but Teva is now in the same competitive realm as the world’s largest
pharmaceutical multinationals. Teva built its business on generic pharmaceutical production, but the
company is now a growing force in innovative drugs. One central question raised by the case is how
Teva can compete on price with low-cost, emerging market companies at the same time it develops
innovative drugs to compete with the research and development juggernauts of ‘Big Pharma.’
Teva’s development should be examined in the context of the changing competitive landscape of
the global pharmaceuticals industry but also in light of the strategies of other firms that have grown
out of developing and middle-income countries. The company’s growth and development parallels
the emergence of other “emerging giants”—companies that have grown beyond the confines of their
still-developing home markets to be genuinely competitive in global markets. We examine the
approaches of similar firms in “Emerging Giants: Building World-Class Companies in Developing
Countries” (Harvard Business Review, October 2006).
To understand and evaluate Teva’s emergence and outlook, the class should examine how the
company has overcome and exploited institutional voids—the missing pieces of market
infrastructure in emerging markets. Teva’s early growth was enabled by the institutional context in
Israel as restrictions on foreign direct investment there allowed for the development of a local
pharmaceutical industry. This provided the opportunity to produce licensed foreign drugs and
created a pool of Israeli pharmaceuticals expertise Teva could leverage as it grew. Without the access
to capital and technological capabilities of the major U.S. and European pharmaceutical firms, Teva
used innovative partnerships with Israeli scientific entities, such as the Weizmann Institute, to build
its research and development capabilities. The case might be supplemented with “Spotting
Institutional Voids in Emerging Markets” (HBS Note 9-106-014), which presents a conceptual
framework for understanding institutional voids. This framework is applied to several emerging
markets and considered in light of multinationals’ corporate strategies in “Strategies That Fit
Emerging Markets” (Harvard Business Review, June 2005).
