Q1: Drawing on the five forces model, clarify why the pharmaceutical sector has in the past been a very profitable industry. Entry of potential competition: It is not easy for the new organization to enter in to the pharmaceutical sector because:? They should invest a lot of money in R, D, marketing and sales promotion.? You will find high costs , risks connected with developing a new drug , bringing this to market as out of every 5000 compounds analyzed in the laboratory by a drug company, just one of these in the end make it to the market.
They have to spend huge amount of capital which will only huge companies may bear.? We have a low effectiveness in pharmaceutic industry just as the last two decades only two companies effectively enter the marketplace. Rivalry between existing firms:? In Pharmaceutical industry you will discover only few companies which could pose solid competition. It’s not hard to compete against few rather than more firms.? Patent shielded medicine enables practicing monopoly. Bargaining power of buyer: Customers bargaining power is low, because:? Market leader appreciate monopoly prices.? Medicines are emergency medicines so they should use.
Negotiating power of distributor: As the numbers of companies in the pharmaceutic industry happen to be negligible the suppliers possess less negotiating power. They must satisfy the producers and take on other suppliers to remain in the market. Threat of substitutes:? Since many medicines are protected by patent rules, competitors can produce drugs since effective while original 1 lowering the risk of better replacement.? It is very expensive to introduce a brand new drug. Q-2: After 2002, the profitability from the industry, measured by ROIC, started to decline. Why do you consider this occurred?
Ans: The pharmaceutical market has been in the past a lucrative sector. Its rate of return on invested capital (ROIC) was comparatively high than other folks like computer hardware industry, corner shop, electronic sector , such like. Although it was a lucrative sector, its profitability has been decreasing of late. Reasons behind this receive bellow:? Consumers have become even more conscious about the side effect of medicine, consequently they use herbal drugs: Since there are some unwanted effects in certain medicines, people these days use natural drugs which might be said to be totally free of side effects. Anti-American, Europe advertising campaign: In 2003 during Iraq war there were a demonstration in employing American product.? Failure to innovate fresh drugs: We understand it takes almost 10 to 15 years to introduce a new medicine, during these very long period parasitic organisms create a defense mechanism against older drugs making them ineffective so that they gradually drop their marketplace.? Unable to match customers’ demands: Now a day’s customers need medicines that do something quickly.? Patent expiration: Marketplace leaders drop their business as their patent expired. Individuals have become immune to those prescription drugs that they have commonly used. Q-3: Exactly what are the prospects for the industry down the road? What are the opportunities? Exactly what are the threats? What must pharmaceutical organizations do to use the options , table the hazards? Ans: Leads: With the passage of time pharmaceutic industry is expected to boost its success. The reasons behind this happen to be as follows:? Innovating new medicines as people’s average life, demand for better life is increasing. Increasing exploration in medical science quicker the chances of introducing new medicine.? Increasing expense on biomedical research. Options:? New technology opens the door to introduce new medications. using new technologies the firms can easily minimize the price and thus maximize profits.? Drugs for many diseases like Alzheimer, Cancers, heart illnesses, , SUPPORTS are not developed yet. The pharmaceutical firms can purchase medical researches to create new medications to remedy these disorders.? Increasing demand for increasing human population. ith the increasing inhabitants the demand to get drug is additionally increasing. therefore the profitibility will increase in case the firms are able to increase their business.? From previous history, it could be said that new diseases may be break out in future like Swine-flue, Anthrax, and so on offering pharmaceutical company to introduce medicines to check these. Threats:? Obvious risk. After the patents will be expired the businesses face competition as rivals are now liberated to produce the patented drugs.? Pressure from political figures to lower price. Polititians are looking for ways to limit health care costs.
They are inducing the pharmaceutical industry to diminish the price.? Value control on prescribed medications.? Aggressive competition from general drug companies faced by simply proprietary medication companies in their patent , pricing methods, as a result losing market share to them.? Medications that damage one body organ in perspective of curing another need to pull off.? Folks are considering natural products more effective than medication. As people are becoming more conscious about their overall health they now like natural ways to cure disorders rather than powerful medicines. Take advantage of opportunities: Has to invest more in advertising and marketing, sales campaign etc . Overall health campaigns could be created to boost awareness.? Generating new suggestions, killing soreness in minutes.? Using new technology.? Introducing prescription drugs for intractable for medical condition.? More purchase in Ur , G will increase the invention of new drugs. Countertop threats:? Having new medicines in pipelines. When the us patents are expired the company encounters intensive competition. Hence they must be ready to face this competition with fresh drugs which can be patented following the old types are expired. Try to improve the period of patent. Long term us patents can eliminate the threats for a long period, allowing the firms huge time to produce a new drug.? Creating a situation on buyers mind in a way that they can by no means thought of moving over. The firms should strive for making loyal customers because of its products.? Producing new competitive advantage. Based on a competitive strategies the company can hold its market share for the longer period.? Create recognition through wellness campaign.