Competitive Dynamics

1
BADM 590, MT2Law, Technology and Intellectual
Property
Paul M. Vaaler Associate Professor of
International Business Department of Business
Administration College of Business University of
Illinois at Urbana-Champaign
Session 13 CSR and IPM
2
Presentation Plan
Administrative Matters and Review
1
Start Pharma-AIDS Case
2
Looking Forward to Pharma-AIDS Case Debate
3
3
Administrative Matters
1

• Take Home Final Exam Details

4
Reviewing Course Topics
1

• Understanding IPM Basics
• What Are Various IP Regimes and What Are Key
  Developments in such Regimes
• How They Relate to Strategy Fundamentals of
  Commitment, RBV and TCE
• Understanding IPM and Learning
• Concept and Technical Measurement of Learning
• Use of IPM as a Learning Shield and Sword
• Limits of IP-Based Defenses in Learning
• Understanding IPM and Competition Policy
• Concepts of Competition Oversight, and Key
  Developments in Dynamically Competitive TI
  Industries
• Use of IPM to Maintain Market Dominance in
  Related Markets (Bundling)
• Policy Arguments for Supplanting Traditional
  Competitive Oversight with IP-Based Regime
• Limits of IP-Based Strategies to Thwart
  Competitive Entry
• Understanding IPM and Corporate Social
  Responsibility
• CSR Concept and Ethical Decision-Making in
  Multinational Enterprise
• Stakeholder Management and International IPM
  Regimes
• Limits of IP-Based Strategies in Overlapping
  International Markets with Inconsistent IP Regimes

• 9 Cases Over 30 Years
• State Street (1998)
• Pfaff (1998)
• Motor City Bagel (1999)
• Hughes (1987)
• Monsanto (1980s)
• Rambus (2004)
• DuPont (1970s)
• US Microsoft (2001)
• Pharma (2000s)

5
Pharma Case
2
2001 25 Million Africans Are HIV Positive.
Only 25,000 Are Getting Antiretroviral Drugs

• Shaving at least 1-2 off of economic growth
  rates on average
• A generation of parentless, sick, dying children
• A great social unraveling

HIV Rates in 2001
And what does Big Pharma think?
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Pharma Case
2

• Were Sorry, Now Buy Our Drugs Like Other (Rich)
  Nations Do

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Pharma Case
2

• Were Sorry, Now Buy Our Drugs Like Other (Rich)
  Nations Do
• If You Produce Them Generically, Well Stop
  Importing

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Pharma Case
2

• Were Sorry, Now Buy Our Drugs Like Other (Rich)
  Nations Do
• If You Produce Them Generically, Well Stop
  Importing
• And Well Sue You

9
Pharma Case
2

• Were Sorry, Now Buy Our Drugs Like Other (Rich)
  Nations Do
• If You Produce Them Generically, Well Stop
  Importing
• And Well Sue You
• And Well Start a Special 301 Case Against You
  with the USTR

10
Pharma Case
2

• Were Sorry, Now Buy Our Drugs Like Other (Rich)
  Nations Do
• If You Produce Them Generically, Well Stop
  Importing
• And Well Sue You
• And Well Start a Special 301 Case Against You
  with the USTR
• And Well Seek Sanctions Against You from the WTO
  for Violating TRIPS (Trade-Related Intellectual
  Property Rights) Agreement

What Should Big Pharma Do?
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Pharma Case
2

• Just Givem Africa The Drugs!

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Pharma Case
2

• Just Givem Africa The Drugs!
• Small (and Very Poor) Segment of World Market
• Huge Need
• Tremendous Good Will Generator. Advertisement.
• An Obligation of Global Corporate Citizenship

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Pharma Case
2

• No Chance! Never! Even If They Wanted To, They
  Shouldnt

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Pharma Case
2

• No Chance! Never! Even If They Wanted To, They
  Shouldnt
• Small Market Segment, But Markets Are Only Mildly
  Segmented
• Giving Up Intellectual Property Rights ThereAnd
  Thus Elsewhere in International Regime?
• Its Not Our (Industrys) Job. Its Governments
  Job. Let (Cheap) Governments Deal With It
• We Have Obligations to Shareholders

Whats A Corporate Moral Obligation
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Pharma Case
2

• Morals, Ethics, CSR
• Morals Values (Propositions About the World
  That Involve a Right-Wrong Judgment)
• Ethics Systems of Morals. The Logical Links
  Between Judgments
• Business Ethical Modes
• Business Self-Interest (Friedman). The Moral
  Obligation of the Corporation Is to Maximize
  Shareholder Profits. Do Whatever Helps
  Shareholders
• Utilitarian (Mill). Maximize Utility, the
  Preferences of Dominant Coalition (Profits,
  Employment). Do Whatever Helps Them
• Deontological (Kant). Do Your Duty as a
  Citizen No Matter the Outcome.
• Corporate Social Responsibility Obligations to
  Firms Stakeholders, Including (But Not Limited
  to) Shareholders (Substantive)
• Stakeholder Anyone significantly affecting or
  affected by the firm (who isnt one?)
• Stakeholder Theory of the Firm
• Corporate Social Responsiveness How (Fast) You
  Respond (Procedural)

Teleological (Ends-Based) Systems
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Pharma Case
2
How to Respond (and Be Responsible) in MNE?
Each Approach Assumes Different Extent of
Spillovers Across Markets and
Stakeholder Groups Served By MNE
-Apply Local Values -Apply Home Country
Values -Apply Universal Values
When In Rome (or Johannesburg) Should Big Pharma
Do As the Romans Do?
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Looking Forward to Pharma Case Debate in Next
Course Meeting
3

• What Should Be Pharmas Response to The Threat of
  Mandatory Licensing and Generic Mfgr in Africa
  and by India for Export to Africa?
• Its a Shareholder Meeting At Merck Taking Place
  At the Same Time As the Big Pharma Lawsuit Is
  Being Litigated in South Africa in 2001-2
• Lets Divide Into One of the Six Groups Below.
  Meet and Form Your Position and Strategy for
  Meeting. Tomorrow, Lets Debate What Next for
  Big Pharma
• Representing Merck Top Management That Led the
  Pharma Industry Group Suit
• Representing Institutional Shareholders That
  Agree with Merck Top Management
• Representing Institutional Shareholders That
  Wanted the WHO Alternative (WHO Distributes Drugs
  and Oversees Therapies)
• Representing Minor Shareholdings by OECD and
  African Country Governments
• Representing Minor Shareholdings by Generic Drug
  Mfgrs from India and Brazil
• Work Out Your Strategy for Mondays Debate!