Businessmodel of Roche

Customer Segments

Roche does not sell directly to retail customers, and has as its two main customer segments healthcare organisations and laboratories.

• Healthcare Organisations – Roche sells both its pharmaceutical and its diagnostic products to healthcare organisations, such as hospitals, clinics, and pharmacies. These organisations have different purchasing profiles. For example, hospitals would usually purchase both medicines and complex diagnostic equipment, while pharmacies would purchase medicine and diagnostic equipment that is suitable for home use.
• Laboratories – Laboratories, particularly hospital and clinical laboratories, are key customers for Roche’s diagnostic division. Aside from the above two customer segments, Roche also licences its products and technology to other biomedical firms. The income from royalties makes up less than 5% of total revenue.

Value Proposition

Roche’s value proposition is that it researches and produces medicines and diagnostic equipment that is targeted at particular issues – these tools may not be available from other vendors.

Further, Roche is a trusted name in the industry, having been in business for over 100 years.

Channels

Roche sells directly to its institutional customers, employing teams of sales professionals to provide personalized service to healthcare institutions and professionals.

It also partners with local distributors to distribute products in regions where its sales presence is not significant.

Customer Relationships

Roche maintains its customer relationships using its dedicated sales teams, which are present in every region of operation.

Roche is the third largest biomedical company in the world, and enjoys the trust of healthcare institutions and regulators around the world (for example, the US FDA). It is thus able to maintain customer relationships by virtue of the trust that customers have with such an established brand.

Further, Roche manufactures unique, targeted products. In many instances, substitute products are not available. Customers are thus bound to purchase certain Roche products – this provides inertia that goes toward the purchase of other Roche products.

Key Activities

Roche’s key activity is the research, development, production, and sale of medicines and other biomedical compounds, and diagnostic equipment.

Key Partners

Key partners are involved in research, licensing, production, and sales. Of the four, research and development partners (e.g. AbbVie, Array Biopharma) form the most significant aspect of Roche’s business.

Roche manages over 200 partnerships worldwide and a third of their pharmaceutical sales are from partnered products.

Key Resources

Roche’s key resources are: its medicines and associated intellectual properties, its human capital in the form of researchers and industry experts, its property, plant, and equipment in the form of research laboratories, production sites, and infrastructure, and its goodwill.

Cost Structure

Roche’s key costs are: cost of sales, marketing and distribution, and research and development.

Revenue Streams

Roche’s revenue comes from its two business segments – pharmaceuticals and diagnostics.

Source of Revenue/Cost Revenue (FY 2015, million CHF) % of Total Revenue Revenues 48,145 100% Pharmaceuticals

37,331 78% Diagnostics

10,814 22% Costs and Expenses (36,582) -76% Cost of sales

(15,460) -32% Marketing and distribution

(8,814) -18% Research and development

(9,581) -20% General and administration

(2,727) -6% Operating Profit 13,821 29%