Strategic management

1. Presentation on:
PORTER’S FIVE FORCES
Analysis of MERCK
Pvt. Ltd

2.  Pfizer
 Novartis
 Sanofi
 Merck
 Glaxo Smith Kline
 Astra Zeneca

3.  Leading science and technology in
healthcare.
 World's oldest pharmaceutical company.
 High profit margin.
 Profitability exceeding costs.

5.  Looks at the competitive arena in which
business operates.
 Describes five basic competitive forces which
directly impact on how successfully a
business unit operates.

6. 1-Supplier Power (Low)
 Depends on several organic chemicals.
 Chemicals are largely a commodity.
 Many suppliers and the switching cost is low.
 They do not have much power to drive up prices.
e.g: For patent drug, the cost of materials relative
to selling price of the product is very low since
cost of the drug is mostly coming from R&D.
For generic drug, raw material cost constitutes
more than 50% of the total expenses. Merck has
economies of scale that can lower the bargaining
power of suppliers.

7. 2-Buyer Power (Low to Moderate)
 End consumers are not very sensitive to price
movements.
 No bargaining power for end consumers.
 Health care insurance company has the
bargaining power to lower the price.
 Brand identity exists in the hand of medical
practitioners.
 Highly fragmented market thus buyer
concentration within the industry is relatively
low.

8. 3-Competitive Rivalry (High)
 Highly competitive industry with many players.
 Trend for merger and acquisitions in recent years.
 Weak and small companies hardly survive without
potential blockbuster drugs in pipeline.
 It is common for small companies with great
potential drugs to be bought by big Pharma.

9. 4-Threat of Substitution (Moderate/Low)
 ------Patent drugs, substitution generally is
minimal to non-existent.
 However, for expired patent, threat from
generic competition is high.
 Generic companies are increasingly focused on
global operations to minimize the cost, which is
posing more threat to non-generic
pharmaceutical companies.
 Biotechnology is also a threat to traditional
synthetic pharmaceutical products

10. 5-Threat of New Entry (Low)
 Barriers to new entry are high.
 Industry is highly regulated and the new drug
approval process takes a long time.
 Requires high working capital and need to invest
heavily on R&D and marketing to receive high
returns.
 Patent protection act as entry barriers for new
firms to enter.
 Creating brand awareness among
medical practitioners is the key for long-term
survival.

11.  One of the richest and attractive sector.
 Hard to access and compete in.
 Supplier Power > (Low)
 Buyer Power > (High / Low)
 Competitive Rivalry > (High)
 Threat of Substitution > (Medium/Low)
 Threat of New Entry > (Low)