The pharaceutical industry

Essay by carlorossi November 2004

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An important and sometimes overlooked factor that distinguishes one company from another in the pharmaceutical industry is strategic planning.

Porter's model looks at the competitive arena in which businesses operate and describes five basic competitive forces that directly impact on how successfully a business unit operates. By understanding and knowing what these competitive forces are and how they impact on the business, managers are better equipped to prepare their plans. They are also more able to focus on those aspects that have the greatest impact on their business and can, if necessary, realign their resources to ensure the best outcome. There are five basic competitive forces:


The bargaining power of suppliersTechnical expertise


The bargaining power of buyers


The threat of substitutes


The threat of new entrants


The intensity of rivalry among competitors.


First, we have to consider who the suppliers to the pharmaceutical industry are.

They could be the providers of the raw materials and intermediates, the manufacturing and production plants, the overseas head offices who supply finished product, the local co-marketing partners who supply product and/or third party suppliers anywhere along the supply chain. Each company will have different suppliers depending on whether they are OTC, ethical, or generic businesses. It is important to remember that labour should be viewed as a supplier to industry.

In analysing the business environment there is a need to consider how much bargaining power the suppliers actually have because the more power they have the more impact they can have. Suppliers can affect you in several ways: by threatening to raise prices or threatening to reduce the quality of goods and services. Both these prospects are unattractive to a business because of their affect on profitability.

In business planning sessions, it is therefore important to know how...