Businessmodel of Abbott

Customer Segments

Abbott sells directly or through third party wholesalers, retailers, and distributors to retail consumers and institutions, including government agencies, health care facilities, pharmacies, blood banks, hospitals, commercial laboratories, clinics, and others – depending on the business segment. Its sales are evenly split between developed, mostly in the US and Western Europe, and developing markets.

That said, sales in developing markets are growing at a rapid rate – 17.1 percent in 2015 and 12.5 percent in 2014.

• Established Pharmaceutical Products – These are sold generally outside the US directly to wholesalers, distributors, government agencies, health care facilities, pharmacies, and independent retailers.
• Diagnostic Products – These are sold worldwide directly to blood banks, hospitals, commercial laboratories, clinics, physicians’ offices, government agencies, alternate care testing sites, and plasma protein therapeutic companies.
• Nutritional Products – These are sold worldwide directly to consumers and to institutions, wholesalers, retailers, health care facilities, government agencies, and third-party distributors.
• Vascular Products – These are sold worldwide, directly to hospitals in the US and directly to customers and third-party distributors outside the US. ### Value Proposition

Abbott has three main value propositions – its commercial presence, leading-edge innovation, and its brand.

• Commercial presence – Abbott sells its products all over the world, in over 150 countries and is a leading company in many key markets including India and Latin America.
• Leading-edge Innovation – Abbott invests heavily in research and development, and many of its products are not available from other companies – this ties customers who require its products to Abbott.
• Brand – Abbott is an established brand with over 125 years of history. It was recently awarded the Most Admired Company in the pharmaceutical industry in *Fortune *magazine’s annual rankings. ### Channels

Abbott uses a multi-channel approach, with channels depending on the region or country of operation and the type of product being sold. Abbott has almost half of its sales directly to consumers, through its Abbott-owned distribution centers, public warehouses, or third-party affiliates and distributors.

Customer Relationships

Abbott maintains customer relationships though it’s in-house sales teams, through its country offices, and through 24/7 live online customer support – the latter provides customers with immediate self-help access to important information such as orders, product information, guide literature, and product support.

Key Activities

Abbott’s key activity is the discovery, development, manufacture, and sale of a broad and diversified line of health care products.

Key Partners

Abbott’s key partners are its suppliers and its licensees.

Its suppliers are other corporates that produce and supply various products used in the manufacturing of Abbott products, in research and development, and for general operations. Products purchased range from physical goods, such as biological products and food, to services, such as transport and logistics.

Abbott’s licensees are also key partners as they allow Abbott to enter new markets and to reach regions that would have otherwise been difficult to service through proprietary means.

Key Resources

Abbott’s key resources would be its property, plant and equipment, its goodwill, and other intangible assets including patents and other intellectual property, product rights, and technology.

Cost Structure

Abbott’s key cost drivers are price rebates, research and development costs and selling, general and administrative expenses.

Revenue Streams

Abbott’s key revenue streams come from its main segments - Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Vascular Products. Of these, the nutritional products segment is the largest, covering over half of Abbott’s annual revenue.

Source of Revenue/Cost Revenue (FY 2015, million euros) % of Total Revenue Revenue 20,405 100% Established Pharmaceuticals

3,720 18% Nutritionals

6,975 34% Diagnostics

3,529 17% Vascular Products

2,696 13% Other (Including items from all business segments)

3,485 17% Expenses 17,538 86% Cost of products sold, excluding amortization

8,747 43% Research and development

1,405 7% Selling, general and administrative

6,785 33% Other

601 3% Operating Earnings 2,867 14% *Note that “Other” revenues include products from all the four main business segments. These products are individually insignificant and were thus not itemized in Abbott’s reported financials.