Business Organization and Policy - Case Study Example

Business Organization and Policy Introduction The case is about the drug development process; the pharmaceutical industry has a long lead time and can go up to 12 years. The process starts from the discovery of the disease to marketing authorization by the governing authorities. For a new development process the company has to undergo a detailed research process; no risks can be taken with respect to the research that is conducted. Once the research is completed the product has to be developed. There is high risk in the industry of newly formulated drugs because the research might not work the same way as expected. There is high risk in the research as well as formulation process. The high risk also comes with high amount of funds, and keeping in mind the high cost and high risk of the company there is a need to ensure that intellectual property rights are protected. The same drugs are applied on affected humans and animals and that is why it is a heavily regulated body; there are many agencies including food and drug administration which deal with examining and post evaluation of the product. The time duration for examining a product takes as much as 12 months to complete. The evaluation process takes 15 years and is divided into three critical stages. These include the discovery / preclinical testing which can take up to 7 years, and includes testing on animals to assess the safety and biological activity. The second stage is clinical trials, which includes testing on first 100 applicants to test the safety and dosage if successful. It is then tried on next 300 to 400 volunteers to test the effectiveness and the last is to test on the final on the next 100 to 3000 patients to confirm the effectiveness and monitor any adverse affects. The final phase is the review of FDA which takes another year for approval and finally the post marketing test. Position of Case The case is meant to have a view of global level analysis of business environment. It includes information about the critical success factor for a company and the strategic target audience. The case is meant to be a learning process for the students to understand how the company indulges in a conceptual process of defining a problem and making concrete solutions to bring out the best and generate more output. The case is considered as a ground for formulating successful strategic process. Learning Objectives The case study is assigned for the better learning and understanding of the students with respect to an industry business environment using the famous and most effective PESTEL, scenario and Porter’s Five Forces. The main aim behind the study is to help the students understand the choices and consequences of strategic choices. What is the main research undertaken behind each decision made and main components of the research and development department along with all other requirements? These firms also engage in pre-competitive collaborations and solve different challenges that are occurring in the way. The industry analysis helps the company to understand the positioning of the brand and how they need to progress in the market. This is a wholesome learning process for the students, where they can gain the understanding of public opinion and how private sector invests in these companies, and how funds are generated. These is also a drive towards the knowledge of globalization, these include the future opportunities for the company and the threats they might face. Questions for Case Study There are four main questions that have to be answered according to the case study. These include identification of the environmental forces which can or may affect the global pharmaceutical industry, and based on our knowledge and information we will use the scenario planning to consider the key drivers of change that can affect the global pharmaceutical industry in the future and what are the critical factors that have to be kept in mind before progressing with any further research and development in the similar field. Once we have studied the scenario planning we will further critically analyze the five forces of Porter to further identify the environmental forces and would further bifurcate according to the different sectors that exist in the industry and where would we place them in industry life cycle. Environmental Forces The global pharmaceutical industry is one of the multinational industries which have a high cycle of growth along with high risk, regulations and long cycle of research and development process. The industry can further be bifurcated with respect to medical-clinical chemical, biological, ethical, propriety product and private formula. Pharmaceutical is one of the high profit generating industry, the core reason behind the high profits is the high investment and years of research that is placed in developing one product. The highest risk of the product is the changing environment; these changing environment includes the change in structure and at the same time can also include the change in the intensity of the disease over the years. We shall study the factors of environmental analysis by going in depth of the PESTEL analysis. This helps us to understand the current status of the organization and the potential factors that might affect them. PESTEL comprises of political, economical, social, technological, environment and legal factors. We shall study each one of them in detail to have a better knowledge of the pharmaceutical industry and how they might be affected by the external environment. The Political factor includes foreign and domestic policies. The Government has a great effect on this industry innovation. The industry involves high risk because the direct application of the medicine is being done on live animals and volunteers; for this mere reason along with strict policies the company also provide heavy incentives for these firms to find effective solutions to the uprising germs. The policies also have a thorough check and balance on the price controls, monopoly and trade of the medicines. The environment factors are the most critical factors of the industry. These are the factors that focus on the green movement, and are in process of reducing the emission of chemicals and carbon gases which are the main waste of the pharmaceutical industry. There is an entire government body dedicated for the charter of clean and better environment. These effect the air, water and land area by emission of chemical waste. These pharmaceutical industry are also an active member of the same society, they are also willing to protect the earth from harmful gases. There are people who are aggressively working for the same cause and might cause hindrance in the operations of the pharmaceutical companies. The social is the third of PESTLE link and it affects the pharmaceutical industry with respect to social life, physical activities and the level of health required for a community. These change in the trends of social lives affect the research and development process of the pharmaceutical industry. The usage of advance technologies and the increasing bacteria’s which causes a higher version of the same diseases affect the current research of the company and the drugs under progression. Technology also plays a vital role in the development and effecting factors of the pharmaceutical industry. These include the art and method of developing the and manufacturing of drugs is much related to the technology in the market. The usage of upgraded technology affects the all of the factors that are included in PESTLE. It gives a better control over the research and development process, it reduces the time of developing and manufacturing, it has also developed many techniques to apply the same drugs on non-human element before they could apply on living beings. It decreases time and money at the same time. It also links the world through the concept of globalization and the clinical trial can involve many individuals. As compared to other factors states the economy of the country is the least effecting factor in the pharmaceutical industry. This industry does not run out of funds, because these funds can be generated through internal and external sources. There are many major sources which are dedicated for the similar cause and are willing to invest funds for the betterment of the society at large. The structure of the industry is such that the merge and diversification allows for development of new and expanded markets. The last of the factors is legal, and pharmaceutical industry is one of the most regulated industries, and has various patent laws. These also include the pricing laws and the product quality and liability laws. The new product cannot be developed until the companies undergo an entire process under law. The launch of new product also requires a detail approval and is the main factor for many of the drugs entering late into the market. Even new copyrights protections laws are being introduced into the market to overcome the problem of fake or less expansive medicines. Many countries follow have formulated internal and are also following the external law and standards. Scenario Planning The industry has to undergo many environmental factors before it can undergo the scenario planning. We shall study the scenario planning about the upcoming threats and what the industry can do to tackle them along with threats we also identify the scope of the pharmaceutical industry that would identify the opportunities that can be availed by different companies and would further discover the strengths that can overcome the threats and weakness that can be a hindrance in the way of the opportunities. The infrastructure and ways in which the industry operates is very much different from the other major industries. It is directly influencing the open market environment; the research can turn out to be not successful and is highly regulated by the different governing bodies. These include the pricing and supplying of the product. In the past few years many of the new drugs have been declined by the governing bodies to be sold to the general public keeping in mind the high standards of the industry. These decline of product have caused various companies loss of millions of investments. In the coming years the companies and different developing and manufacturing bodies will face patent expiry issues. The industry is exposed to many different weaknesses, and one of the biggest is the funding and result issues. These are linked with the published results favoring the interest of these companies, and are one of the most important issues which need to be resolved at the earliest. Another weakness that the industry faces is the shortage of supply and demand of men power in the industry and in this regard collaborations have to make between the pharmaceutical industry and educational industry and the government to deal with shortfall. It is though one of the most profitable and productive industry, the intellectual property protection plays a vital role in the development of the industry. It is the basic strength of the industry, and is also depends upon the patent protection. This helps to sustain the quality of the product. The industry is heavily and highly committed to the research and development sector and that is why it produces sustainable and competitive products in the market. Three are major opportunities in the market, these can include different alliances and can expand into variety of product and can have many more researches that can be helpful in the medical science and would provide better living for the people. There many new markets that can be explore and at the same the existing markets can be improved with respect to time and technology. Five Forces The industry has the richest companies in the world and has high margins of profits. There are many players in the market who are dedicated to making and developing new products. The porter helps us to looks at the competitive analysis of the market, what are the major competitors and how a company can sustain in this industry. The threats of new entrants is low because of high investment and lengthy process, access to different distribution channels, the high regulatory policies and switching cost with respect to human resource and technology. The power of supplier is low in the industry, because of the raw materials and production plants. These are not available at all times; most of the efforts are being utilized in research and development of the product. The bargaining power of the industry is divided into ethical and generic companies. In case of ethical companies there are large volume of customer and are highly leveraged where as the individual buyers have little bargaining power. The power of barging is with respect to the sales of the product and the generic companies depend upon the brand names. If the brand name is reliable the bargaining power is high and if the brand name is not much reliable the bargaining power is low. The bargaining power of the customer is low because they have to choose between the products of the market and they don’t have much option. The prices are already regulated and there is not much variety between the drugs. They have to keep with the prescription of the doctor. As stated there is little choice for the customer that is why the substitute threat is low in the market. There are not much alternative medicines and they are most prescribed by the doctor thus the individual have to take the similar. The substitute is low to medium for few of the product but most of them cannot be substituted. There is high competitive rivalry in the industry; few players are doing most of the research and development work. Because of few players each player wants to gain a substantial market share. Thus, to summarize the five force we can conclude for the pharmaceutical industry that the threats of new entrant is low, bargain power of supplier is low, bargaining power of customer is medium, threats of substitute is medium and competitive rivalry is high. Read More