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The changing nature of competition within the global pharmaceutical - Assignment Example

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Pharmaceutical industry is under a state of constant revolution ever since its official origin in the nineteenth century. This is due to the reason that it is an industry that is characterized by research and development processes that are highly risky, costly and time consuming; along with purchaser pressures, increasing government regulations and intense competition. …
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The changing nature of competition within the global pharmaceutical
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The changing nature of competition within the global pharmaceutical

Download file to see previous pages... The nature of the competition in this field has also been in a constant state of revolution along with its changing entities. While, in the 1960’s regulatory controls were held on a lighter end, due to rapid expansion of the industry along with the medical practitioners insensitive to the price entity; on the other hand, the industry demographics shifted in the 1970’s following a series of events, to constitute an environment that was ruled by strong regulatory bodies and increased patent protection. This is just the example of how industry shifted over a period of two decades alone. Over this period the competition started to get a boost through introduction of generic medicines competing on price. This entity of generics had a major impact on the level of competition in the pharmaceutical industry in terms of providing incentives and a race to market. In other words switching to generics is one of the most common and convenient ways to save cost. They are even being used as fist line treatment options with patent drugs used only once they fail. This also presents with it increased rivalry and competitiveness within the industry. Such challenges have been attempted by the organizations to counter using various strategic responses such as disease management initiatives or demonstrating added value offerings of the drugs in terms of various related entities. Porter’s Five Forces Analysis: Threat of Substitutes: When it comes to the pharmaceutical industry, the primary threat that the companies is faced with is of Generic Brand Medication. However, they may be countered through the factor of patents. Other than that, companies in the pharmaceutical industry can also be faced with threats from Complementary Alternative Medicine and alternative medicine which could serve as substitutes; with alternative medicine would serve as a substitute even more so based on the fact that it is not influenced by the pharmaceutical industry (What is CAM?). Threat of New Entrants: The pharmaceutical industry is an industry that has exponentially high barriers to entry making the threat of new entrants as being relatively low. A few of such barriers are the great costs required to enter the industry, extremely high Research and Development investments, costly and time consuming production process, which combined with strict government regulations and patents makes it really hard for anyone to initiate an entity in this field be it even the big bees. Also, the established firms in this industry are strong enough and well differentiated along with having a loyal customer base making it extremely hard for anyone to develop a brand name and get it recognized (Pharma: Through Porter's Eyes, 2004). Bargaining Power of Suppliers: In terms of the supplier side of the pharmaceutical industry, we see that it constitutes of various entities such as raw material producer and suppliers, local- co-marketing partners, internal labour and even the patients for clinical trials etc. When it comes to the threat presented by the supplier side in terms of their bargaining power we see that though all the suppliers present with themselves varying degrees of threat, but it is no more bigger than the threat presented by any such suppliers in other industries either. So, we can say that though there is some extent of threat present, but it is not that exponentially high. Bargaining Power of Buyers: The biggest buyer of the pharmaceutical industry is the government sector and it is one that can impose pressures on the pharmaceutical companies to achieve their own purpose. In addition to that, big hospitals and drug stores can pressurize the company to lower its prices provided ...Download file to see next pagesRead More
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