AstraZeneca is the second-biggest drug company in the UK with its headquarters based in London. Pfizer’ , in proposing a merger with AstraZeneca seems to launch a multi-dimension strategy to differentiate its business. To begin with, Pfizer is interested in developing its pipeline of cancer treatment by acquiring shares in the company. The rationale of the company is to expand its company profits by associating with a UK based company. The choice of AstraZeneca as a potential business partner is a well-thought decision. The company understands the value of partnering with the right company to stimulate its own growth.
Pfizer intends to enter into this market through a merger, which is one of the ways that companies reduce business risk while venturing into new markets. By associating with one of the biggest medical company like AstraZeneca, it is likely that the company will survive in the new market. The expectation is that the company would invest not only in a new market but also launch a new product altogether. Therefore, the company is bound to generate more income for its company without much risk of business failure.
On this ground, the idea of Pfizer is positive strategy that would provide a chance for the US Company to grow. Another important rationale for Pfizer’ s move is the concept of tax inversion, a strategy that multinational companies employ to ensure that they optimize their profits by reducing their tax remittance. The intention of the CEO of the company is to find a new market where they would invest the profits that they accrue outside the US. The idea is to ensure that the company avoids the high tax rates that the US imposes for foreign investment.
The US charges 40% of income from non-US organizations as one way of encouraging business investment in the US. Contrary, the UK charges about 21% tax and this bound to drop to 20% in the near future. On this note, Pfizer will pay less tax and hence its income is bound to rise after the partnership with the UK based company. In addition, the company intends to relocate its headquarters in the UK to ensure that its tax remittance further goes down.
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