• Stringent government regulation and powerful purchaser pressures.
• Governments focused on pharmaceuticals in efforts to control rising healthcare expenditure.
• Inter-country pricing disparities.
• European free trade agreements.
• Ageing populations create pressure on healthcare systems. • Epidemic or chronic diseases (e.g. obesity).
• Impact of genetic research on industry.
• Utilizing a web of alliances to address multiple customer needs Environmental
• Increasing standards and requirements for environmental protection are becoming more stringent because of industry operations. Legal
• A fixed period on patent protection.
• Regulatory scrutiny governed by legislation.
2. Step 1 :High potential impact and high uncertainty: A. Intellectual property B. Government regulations C. Purchaser pressure Step 2: A(i) Longer period on patent protection
(ii) Shorter period on patent protection
B(i) Stringent government regulation
(ii) Relatively flexible government regulation C(i) Powerful purchaser pressures
(ii) Relatively weak purchaser pressures
Step 3: Scenario 1 : Consolidation Wave
A longer period on patent protection(A(i)) guarantees the high profit of patent owner even with powerful purchaser pressures(C(i)), but it makes harder for companies without patent to survive. If there is stringent government regulation(B(i)), big companies will consolidate with small ones at the global level to cut cost. Scenario 2: Spring-up
A shorter period on patent protection(A(ii)) creates more
opportunity for small companies to survive because they can launch generic medicines at a lower price even under powerful purchaser pressures(C(i)). If there is relatively flexible government regulation, more companies will spring up around the globe.
3. There are a lot of factors in the environment which influence competitiveness.The Five-Force Framework map can help in identifying the sources of competition by describing the competitive rivalry with four parts. Threats of entry posed by new or potential competitor (LOW) • High entry barriers due to costs associated with research & development of new drugs (investment in R&D for a drug that may/may not work) • Government regulation (FDA)
• Demand for generic versus brand name drugs has increased because of the costs • non-drug treatment will gradually take the place of drug treatment Suppliers(LOW)
• A few large buyers contribute to most sales which has decreased the bargaining power of suppliers
• Regular patients don’t have bargaining power due to price increases in generic drugs or branded ones • Hospitals and other health care organizations exert pressure on pharmaceutical companies to stabilize prices Competitive rivalry(HIGH)
• High fixed cost builds high exit barriers which increases rivalry
4. Manufacturers, regulators, marketeers, research institutions, drug wholesalers, bio-pharmaceutical agents, biotechnology start-ups, universities, hospitals, marketing and advertising agencies.
5. The pharmaceutical industry is unusual since in many countries it is subject to a monopsony–there is effectively only one powerful purchaser, the government. From the 1980s on, government around the world focused on pharmaceuticals as a politically easy target in efforts to control rising healthcare expenditure. Then the distributors, drugstores, hospitals and health care organizations become the strategic customers.
6. CSF: Direct-to-consumer advertising, suitable cost-control measures, innovation, good sales and marketing capability, keeping pace with technology(utilizing a web of alliances to address multiple customer needs), bearing corporate social responsibility, consolidation(for example, combining a company with a strong pipeline but a weak sales and marketing with its converse), leverage investment in technology platforms and great strategic vision(exploring new business model). These critical success factors enhance competencies and make companies achieve their competitive advantages.