Generic Feedback – Tutorial 6
From small town pharmacy to a multinational corporation: Pierre Fabre, culture as a competitive advantage

The case deals with the development of a pharmaceutical and dermo-cosmetics company owned and controlled by its founder, Pierre Fabre. The company (Pierre Fabre Laboratories) has made extensive use of its culture to build competitive advantage. The company history pervades its strategic choices (selective distribution through pharmacists, manufacturing and R&D localisation), its choice of product development path (natural substances), organisational capabilities building (innovation) and management style (‘humanistic’). The company’s name is not well known to the general public except in the south
It has enjoyed in major European markets, a first mover advantage, by using pharmacies as specialised distribution channels. As such Pierre Fabre has been able to command higher prices and margins. It has retained a very strong competitive position, despite facing a very powerful challenger in L’Oréal ‘active cosmetics’ SBU (Vichy, La Roche Posay, Innéov).

Q2. When might a strong corporate culture become a weakness for an organisation?

The independence of the company has long been established as a non-negotiable element of the company ethos. It has its drawbacks in terms of growth. It means relying on self-finance and debt, and creates limitation for strategic options. In recent years, the growing cost of drug development has caused problems for Pierre Fabre who needed to redefine its position towards pharmaceutical giants looking for niches rather than trying to develop blockbusters.

A strong corporate culture, for instance based on an established technology, could create inertia and problems to manage change or develop new strategies. (Examples include Olivetti with electrical typewriters or EMI in the musical industry. The former was almost destroyed by the word processor and the second by the mp3).

Q3. Is it possible to change the strategy of a company with a strong culture? How?

It is possible but it requires a good understanding of the current characteristics of the company culture. A strong