The Five-Forces Framework Map - Case Study Example

?Section A a). This paper seeks to establish the extent to which the Five-Forces Framework map is relevant in identifying environmental forces affecting the global pharmaceutical industry. Thus, in order to fully understand the above concept, it is imperative to begin by defining it. McCarthy & Perreault (1996) define the Porter’s Five Forces Model as a business strategy tool that is used to scan the environment in order to establish its attractiveness in terms of establishing a business. This model is comprised of five elements which determine the attractiveness of the environment and these include the following: entry of competitors, threat of substitute, bargaining powers of buyers, bargaining powers of suppliers and rivalry among existing players. This framework is used to analyse the global pharmaceutical industry. In the given case, it can be noted that the pharmaceutical industry is characterised by a highly risky and lengthy research which is very costly. This industry is capital intensive given that the cost of developing a new drug is estimated at over $ 1 billion which deters other small players from entering it. The industry is also under stringent government regulation which makes it challenging for other competitors to enter it. It is not very easy to find a substitution for a drug given the complexity of the process involved in carrying out the research as well as the costs For instance, Lipitor could not be easily replaced or substituted in the given case study. The buyers are affected by various factors which affect their buying power. As a result of the global economic crisis, consumer spending power with regards to health care has been affected. However, those with medical insurance can afford to meet their healthcare requirements. Unfortunately, about 46 % of the people in the US do not have medical insurance and this has a bearing on their buying power of the drugs. It also has to be noted that the government controls the industry since it is the largest purchaser of the drugs in a bid to control the health sector. Since this a sensitive sector, it can be noted that the suppliers have no bargaining powers since the industry is strictly controlled. The pricing regime is controlled by the government so there is no single supplier who can charge very high prices. There is intense competition for intellectual property among existing players as they compete to preserve their inventions. This industry is highly specialised and this is the reason why there is rivalry among existing players as they seek to dominate it. Over and above, it can be noted that the Five Forces Framework map is relevant in identifying the environmental forces affecting the global pharmaceutical industry. It can be noted that there are different factors that characterise this industry hence there is need to take these into consideration so as to be in a better position to establish the attractiveness of this particular industry. Failure to do so can result in wrong perceptions about the industry since it is a bit different from other industries. b). In order to establish whether these forces differ by industry sector as well as the place they can be placed in different sectors in the industry life-cycle, it is important to begin by explaining the meaning of industry or product life cycle. Basically, every product has a certain life cycle in the market. Therefore, product life cycle refers to the different phases passed by the product in the market from the time it is introduced until its withdrawal period (Strydom, 2003). The product usually passes through four distinct stages namely: introduction, growth, maturity and decline. From this definition, it can be seen that the five forces discussed above differ by industry sector. For instance, the forces that operate within a clothing and textile industry are different from those operating in the pharmaceutical industries as a result of various reasons. First and foremost, it must be noted that the industry life cycle of the pharmaceutical sector is longer than the textile sector. The life cycle of different sectors make forces also different for each sector. On the other hand, the textile sector is not capital intensive and there many players who can enter the industry. Unlike the pharmaceutical industry, the clothing industry is characterised by various players and competition is intense. This industry is not capital intensive and it can be noted that there are many substitutes owing to the relatively low cost of manufacturing the products. The suppliers can determine the price of the raw materials since they are many while the buyers can shift their preference to products with affordable prices. Rivalry among the players in the textile industry is high given that there is fierce competition as a result of the fact that there are many actors in this industry. Because of the very long product development cycle, most biotechs take years to reach profitability if at all. Therefore, the pharmaceutical sector especially in the given case study can be placed on the growth phase of the industry life cycle given that the industry is still witnessing growth. Other actors such as Japan, EU, China and Brazil are also beginning to emerge in the market hence it can be noted that the sector is still growing. The level of development of the market shows that there is still room for growth and development in the sector. On the other hand, it can be noted that the given example of the textile industry falls under maturity stage whereby it can be observed that the industry is now saturated and the product offerings are performing at their best and would begin to decline soon as the fashion changes. Over and above, it can be noted that the Five Forces Model differ by industry sector depending on the nature of business being done by a company. It can also be noted that different industry sectors have different life cycles depending on the products manufactured. For instance, the life cycle of the pharmaceutical industry is long as a result of the fact that a great deal of time is spent on conducting research about the new product. Section B 2. George Davies the Founder of the fashion retailer Next says “culture is the thing that makes us do things and stops us doing things.” In order to critically analyse this assertion, it is imperative to begin by defining the meaning of culture in order to gain a full understanding of the whole concept. Basically, organisational culture is defined as a system of shared meaning held by the members that distinguishes the organisation from the other organisations (Robbins, 1993). Upon a closer examination, this set of shared meaning is comprised of key characteristics that an organisation values. As such, a culture web has been designed to show how an alignment of the following factors; rituals and routines, stories, symbols, control systems, organisational and power structures can help shape the behaviour of people in an organisation. This is metaphorical in that various themes are interconnected and they entrap people in an organisation like a web to behave in a certain way. For instance, it can be noted that Xerox is ranked among the top performing companies in the US owing to its approach to organisational culture. The success of this company can be attributed to the aspect of inclusivity with regards to managing people from diverse backgrounds which constitute the control system of the cultural web. According to research, the company’s ability to manage diversity is a source of competitive advantage given that it employs different people from different cultural backgrounds. Through different stories, the organisation is better positioned to retain its skilled workers since it is able to provide a platform upon which people from diverse backgrounds can harmoniously contribute towards the attainment of organisational goals set. Xerox’s operations are shaped by its culture as it tries to empower the employees to put optimum performance in their operations. The rituals and routines allow the employees to meaningfully contribute towards the decision making process in the company and this plays a pivotal role in creating a sense of belongingness among them to the company. The leaders in the company are accommodative to views from diverse people and these significantly contribute in shaping the operations of the company. The employees in the organisation are stopped from doing things which do not reflect the values of the company as they are part of it. This sense of oneness in the company has significantly contributed to the effectiveness of the organisation in its operations. These are symbols that characterise the culture of the behaviour of the employees. Another approach by the company is its open door policy whereby the employees can freely give their ideas which can be incorporated in the value system of the organisation. This is mainly shaped by the power structure which is accommodative to other people’s views. The organisation is structured in a horizontal way which enables people to freely communicate. This depicts a cultural web whereby different views from different people are captured and used to build a culture that is shared by all members of the organisation. Just like a web, the culture of this organisation is comprised of different components which all contribute to a shared meaning of the value system of the company. This value system shapes the behaviour of the employees in the company. The adoption of the culture web framework has significantly contributed towards a positive culture drift by Xerox which is ranked among the best organisations with best cultures. From the discussion above, it can be noted that the culture of the organisation distinguishes it from the other organisations. It shapes the behaviour of the people by virtue of sharing the same values. The culture of the organisation is also responsible for creating a sense of belongingness among the employees to the company which compels them to act in a desired manner. 3. There are different types of actions that can be taken by a large company that is trying to increase its innovativeness in a high-technology and very competitive industry. However, it is important to begin by defining the meaning of innovativeness in order to fully understand the whole concept. According to Robbins (1993), innovation is a new idea applied to initiating or improving a product, process or service. This definition implies that innovation involves change. There are various actions that can be taken by a large company that is involved in the scenario mentioned above. The McKinsey 7S model can be implemented to improve the performance of the organisation. This model is comprised of the following aspects: strategy, structure, systems, shared values, style of leadership, staff and skills. These elements need to be realigned for positive performance. First and for most, it must attempt to identify a good strategy such as recruiting talented employees who can positively contribute to its performance. Skilled workers are often in short supply in a competitive environment hence the company should make an effort to recruit the right people in the first instance for different positions. Innovative organisations tend to have similar cultures (Robbins, 1993). This constitute shared values which enable the employees to share the same goals and objectives of the company. Basically, innovation serves a strategic purpose; it is a means of achieving competitive advantage through differentiation and is about value creation. They encourage experimentation and they reward both successes and failures. Such organisations should be in a position to celebrate mistakes as these are part of the innovation process. The other action that can be taken by such an organisation mentioned above is to promote risk taking initiatives as these can bring new ideas to the company. An innovative organisation in this case ought to actively promote the training and development of their members so that they keep pace with changes that may be taking place in the environment. This mainly depends of leadership style. Training and development of the employees promotes the creation of new ideas which can be shared among the employees which is a basic tenet of innovation since it improves the skills of the employees. Job security should also be promoted so that the employees so that the employees do not fear getting fired from making mistakes. In fact, individuals should be encouraged to be champions of change in their operations. Once the idea has been developed, champions of change actively promote the idea, build support as well as overcome resistance from other members to ensure that innovation is implemented. The other action that can be taken is related to empowerment of the staff to make decisions that can affect their operations. If the employees are given the autonomy to make decisions in their operations, they are in a position to think for new ideas that can positively contribute to the performance of the organisation as a whole. Employees who are in a position to make decisions are motivated and they are likely to identify with the organisation which make them productive. Given the status of 3M as a premier product innovator, it is anticipated that it has all of the properties identified above (Robbins, 1993). Basically, innovation is mainly concerned with change that is related to introduction of new ideas in the organisation that are meant to improve the product or service offered. In order to promote innovation in large companies operating in a high technology and competitive environment, the above mentioned actions can be implemented as they are designed to create a sense of belongingness among the employees to the organisation. This can lead them to put optimum effort in their performance which can significantly improve the overall performance of the organisation as a whole. 5. “Good corporate parents constantly search for ways in which they can improve the performance of their businesses.” In order to critically discuss this assertion whether it is wise or not for corporate parents to interfere with strategies of diversified groups of companies, it is imperative to begin by highlighting the meaning of corporation. Basically, a corporation is a group of people with legal right to act as a single entity (Gibson, 1988). A good example can be British Broadcasting Corporation. Indeed, this company acts as a single entity but a closer look at its structure shows that it is comprised of other holding companies all operating under one umbrella. To a larger extent, it can be noted that it is wise for parent corporations to help shape the strategies of their businesses in order to promote uniformity of the mission as well as vision of these companies. Since these companies are regarded as a single entity, it is important for them to share the same goals and objectives which are often enshrined in the mission and vision of the company. This enables these companies to pull their efforts towards the same direction which is reflective of the broad vision of the parent company. If each company is given the autonomy to pursue its own goal, focus for the parent company is lost as it may be difficult for it to streamline its broad objectives into a single entity. The other reason why it is wise for parent corporations to have the same strategy with companies under them is that it becomes easier to manage the operations of these companies. All efforts are directed towards the same direction and confusion among the leaders of these companies about the strategy to follow is eliminated. Under normal circumstances, organisations are in existence in order to achieve a certain goal. This broad objective should be attained from the broad stand point of the parent corporation. Without a single strategy in place, it may be difficult for the company to obtain its goals. Usually, such a corporation is under the leadership of one Chief Executive Officer hence the need to promote uniformity in its operations. Over and above, it can be noted that it is wise to streamline the activities of the corporations in order to protect the interests of the stakeholders. Such a corporation will be assured of directing its operations towards the attainment of the same goals and objectives if it shares the same strategy. It also becomes easier to control the operations of the companies under the parent name as they are regarded as a single entity. References Gibson, GTR 1988, South African mercantile and company law, JUTA: CT. McCarthy, JE & Perreault, WD 1996, Basic Marketing: A Global Managerial Approach, 12th Edition, Irwin McGraw-Hill: NJ. Robbins, SP 1993, Organisational behaviour: Concepts, controversies and Applications,6th Edition, Prentice Hall: NJ. Strydom, J 2004, Marketing, 3rd Edition, JUTA: CT. Read More