PESTEL: Pharmaceutic Industry - Case Study Example

Pharmaceutical Industry Table of Contents Answer a) 3 Answer b) 5 Answer 2 (a) 6 Answer 2 (b) 7 Answer (3) 8 Answer 4 (a) 9 Answer 4 (b) 10 Answer 5 11 References 12 Answer 1 (a) The PESTEL analysis for the industry can be as follows: Political factors Pharmaceutical products have become a very important part of daily life. The pharmaceutical industries have gained significant leverage from this scenario. The importance of the industry has attracted tremendous political attention. The political reasons have often dictated the decision making of the industry. Political attention has mainly increased in due course because of the recognition of economic importance related to the healthcare products as a valuable part of social well being. Economic factors With respect to the economic scenario related to the pharmaceutical industry, the mergers and the acquisitions were recorded to be high in the year 2003. It increased the value of the stocks with a better growth rate. In the year 2004, it was estimated that the industry on a global basis recorded 500 billion dollars. USA, Japan, Germany, France, United Kingdom, Italy, Spain, Brazil, and Canada are the countries which have contributed to around 80% of the global sales of this industry (Verbigena, n.d.). Social Dimension The health related issues are quite important for everyone. The industry provides the facilities with their respective products for cure of the diseases, meeting the needs of the consumers and providing a healthy society and protected environment. The social benefits related to the products of the industry have made it a significant part of every society around the world (Verbigena, n.d.). Technological Involvement The technology is being upgraded very fast and in this industry, it is vital to adopt the modern technology in practice to get better results in all aspects. This has forced the industry to spend upon the research and development and get innovative products (Verbigena, n.d.). Environmental Factors The industry requires a good and hygienic environment for its research & development programs and also for its production as it deals with health care products. The climatic condition needs to suit the production of the products and provide a long lasting capability to the products (Verbigena, n.d.). Legal Environment The pharmaceutical industry comes under high regulations of the law and the enforcement acts. Due to this reason there are certain legal bodies and regulations that the industry has to abide by in their operations (Verbigena, n.d.). Answer 1 (b) Following environmental factors are affecting big pharmaceutical companies: Barriers to entry The reason for it is the huge investment in manufacturing, R&D, marketing and sales with comparison to existing ones. It is tough for a new entrant to compete with the existing products and brands and also the relationship they maintain (Duke University, 2007). Liability Issues Lack of regulatory policies lead to lawsuits and require lots of amount which needs re-evaluation of their R&D method to compete globally. The industry has suffered liability issues that make an impact on their image (Duke University, 2007). Social Responsibility With the increase in global competition, the companies are trying to maintain relationship and develop suitable business standards to ensure the product safety. The standards are mostly created by the company in order to secure a niche in the global market where the liability of the product is the determining factor for the success (Duke University, 2007). Answer 2 (a) Porter’s Five Forces Factors can be analysed as follows: (Verbigena, n.d.). Barrier to entry The cost is high in terms of research and development, financing and patent limitation. The existing brands and their established trust with the society make it difficult for a new entrant (Verbigena. n.d.). Industry Competition There is significant amount of competition between the existing companies in the industry which makes mandatory for all the companies to constantly improve their services (Verbigena, n.d.). Suppliers and Buyers Suppliers as well buyers, both in this industry, have a low bargaining power (Verbigena, n.d.). Substitutes The effect of substitute is low in case of the patents being reserved but turns out to be the medium when the patent terms are expired (Verbigena, n.d.). Answer 2 (b) The key success factors can be as follows: Industry Consolidation The merger of companies has provided a harmonizing portfolio as it provides short term as well as long term revenue boost (Verbigena, n.d.). Innovation Innovation provides an opportunity for new products and processes providing an advantage in the market. This industry has evolved significantly and continues to do so with a better rate of development (Verbigena, n.d.). Increased Competition The intense competition and key players’ domination have made the industry more competitive internally (Verbigena, n.d.). Socio-political Environment Due to the significance of healthcare products, the industry is facing increased political pressure related to cost (Verbigena, n.d.). Influence The medical practitioners usually act as an agent of the final consumer and are responsible for consumer purchase (Verbigena, n.d.). Answer (3) The following are identified as the main drivers for change: Innovation The requirement of innovation to stay ahead of competition will increase the development of new products and processes, providing the opportunity in creating a superior market (Burger & Et. Al., n.d.). Flexibility The flexibility in development of market innovation strategy will meet the current requirement as well as future need giving opportunities for growth in the market on a global basis (Burger & Et. Al., n.d.). Communication The relationship and the communication with the government regulating bodies and towards the society will build a positive relationship and image for enhancement of the industry (Burger & Et. Al., n.d.). Integrated Technology and Implementation The integrated approach in technological involvement will provide better cost effectiveness with market efficiency. The implementation of all the factors will lead to better opportunity of the industry (Burger & Et. Al., n.d.). Answer 4 (a) The industry was efficient enough to increase the life expectancy; still it was under the government intervention. Being a life saving industry, certain companies have hampered the image of the industry through many lawsuits and paying huge compensation. The costs of producing medicines are low but it involves the R&D cost that is high and increases the overall cost. The social responsibility of the industry was felt during the phase of AIDS epidemic. The industry created a good relationship by providing critical drugs to poor countries at a break even cost. These are few of the issues raised that pertain to the periphery of corporate social responsibilities. Answer 4 (b) The primary stakeholders are the lower and middle income groups that are interested in reproductive, cheaper contraceptives and enhanced health. The external stakeholders are the private income holders in particular projects. The secondary stakeholders are the Ministry of Welfare Activities, pharmaceutical companies, distributors and other agencies (Social Development Department, 1995). Answer 5 The transforms in the global environment have changed the industrial management practice from that of the traditional perspective. The industry needs to redefine and re-think the business and adjust to the changing environment for its competitive maintenance in the global environment (Wind, 2000.). Technology plays a vital role in this industry as the technical advancement is rapid in this sector. The business needs to adapt to the new technology which will reduce the cost of R&D and so therefore also that of the products (Wind, 2000.). The government policies play an important role in providing opportunity or threat to the industry. The government attitude and policies define business strategy of this industry as it is highly influenced by political issues and rules and regulations imposed to the industry (Wind, 2000). The external and the internal process need to be reengineered for formation of a new vision towards the changing environment. The external process involves the expectation of the firm’s stakeholders. The internal process consists of value, culture, objectives and core competencies of the firm. The proper analysis will provide an enhanced objective and vision towards the business and the society for future development (Wind, 2000). References Burger, T. H. & Eli Lilly and Company & Et. Al., No Date. Critical Success Factors in Pharmaceutical Innovation. Understand the Business. [Online] Available at: http://www.lexjansen.com/pharmasug/2004/fdacompliance/fc11.pdf [Accessed September 03, 2010]. Duke University, 2007. The Global Pharmaceutical Industry. International Trade and Contemporary Trends. [Online] Available at: http://www.duke.edu/web/soc142/team2/social.html [Accessed September 03, 2010]. Social Development Department, 1995. Guidance Note on How to Do Stakeholder Analysis of Aid Projects and Programmes. [Online] Available at: http://www.euforic.org/gb/stake1.htm [Accessed September 03, 2010]. Verbigena, No Date. The History and Analysis of the Pharmaceutical Industry. The Pharmaceutical Industry. [Online] Available at: http://www.verbigena.com/case_studies/history_analysis.pdf [Accessed September 03, 2010]. Wind, J. 2000. The Technology Management Handbook. Creating an ideal vision. [Online] Available at: http://marketing.wharton.upenn.edu/documents/research/0013_Creating_a_Vision.pdf [Accessed September 03, 2010]. Read More