Business Strategy Analysis of The Global Pharmaceutical Industry

2018
BUSINESS STRATEGY ANALYSIS OF THE GLOBAL
PHARMACEUTICAL INDUSTRY

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Names Touseef Ahmed
Nauman Mirza
Aman Sharma
Abhishek Kuntal
Student Number
(in order of names)
10375436
10376134
10378862
10386207
Course MBA
Module Title Business Strategy
Module Code B9MG100
Lecturer Martin O’dea
Assessment Title Group Assignment for Business Strategy

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Table of Contents
Introduction..................................................................................................................................... 3
Conducting a macro environmental analysis for the global pharmaceutical industry.................... 3
Political factors............................................................................................................................ 3
Economic factors......................................................................................................................... 4
Social factors............................................................................................................................... 4
Technological factors .................................................................................................................. 5
Legal factors................................................................................................................................ 5
Environmental factors ................................................................................................................. 5
Analysis of the pharmaceutical industry using the five forces model ............................................ 6
The threats of entry posed by new or potential competitors ....................................................... 6
Degree of rivalry among the existing firms ................................................................................ 6
Bargaining power of the buyers .................................................................................................. 6
Bargaining power of suppliers .................................................................................................... 7
Closeness of the substitute products ........................................................................................... 7
Evolution of the “strategic customer” over time for the global pharmaceutical companies and its
impact on the critical success factors of the industry ..................................................................... 7
Overview of the future prospects for the pharmaceutical industry based on the above factors ..... 9
Conclusion .................................................................................................................................... 10
References used ............................................................................................................................ 11

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Introduction
The global pharmaceutical industry is considered as one of the essential industries present in every
country. The global pharmaceutical industry manufactures a variety of medicines. These industries
generally produce licensed drugs that are generally used for the purpose of medication. Their R&D
department is well equipped for the production of the licensed drugs used for medication. The
pharmaceutical industries generally deal with medications that are branded or generic and medical
devices and tools (DiMasi et al. 2016). They need to follow a number of laws and regulations of
the government that are concerned with the patenting, testing, pricing and they need to guarantee
safety and the efficiency and marketing of the drugs.
This study regarding the global pharmaceutical industry actually describes the changes that
occurred in the industry since the beginning and its environment, facilities, its success factors etc.
Lastly, this study will provide an overall view of the future prospects of the global pharmaceutical
industries based on the analysis that will be done in this study.
Conducting a macro environmental analysis for the global pharmaceutical
industry
The macro environmental analysis for the global pharmaceutical industry need to be done based
on the Political, Economic, Social, Technology, Environmental, and Legal factors (Gereffi, 2017).
All these factors affect the pharmaceutical industries in some or the other way.
Political factors
The political factors that are affecting the industry are the government regulations and legal issues
that describes the formal rules and the informal rules as well under which the industry operates
several functions like tax policy, trade restrictions and tariffs, political stability. There is a huge
influence of the political grounds on the business regulations and the ability and power of the
customers and other businesses for spending. There is an improvement in the pharmaceutical
industries for the increment of the political attentions because of the increment of recognitions of
the economic importance of the healthcare, which is considered as a part of the social welfare. It
takes a time of 10 to 15 years for the experiment of the drugs before the patients consume the
drugs; it takes this much time for the drugs to travel from the lab to the store (Roca et al. 2015).
By this time period, the drug reaches the expiring dates, as a result of which there generic drugs

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gain importance and are mostly sold in the market. The generic drugs are comprised of the same
ingredients as the branded drugs but differ in prices; this is because the generic drugs do not go
through clinical trials. Therefore, the emergence of the generic drugs will have a huge impact in
the market. Monophony is considered as a major factor that is affecting the industry in most of the
counties. Monophony means that there is only one consumer in their industry, who is powerful,
that is the Government. There is a set of strict laws and regulations created for the pharmaceutical
industries so that the Government can take control and good care of the medicines that are
manufactured and produced by the pharmaceutical industries.
Economic factors
The purchasing power of the customers is affected by the economic factors and the industries need
to pay the costs for the capitals, such a economic growth, interest rates and exchange rates. The
power of controlling price of the Government is the most important challenge for the industry and
in a different type of parallel trade. Parallel trade is mainly described as the movement of the
products in free across the Europe without any barriers of trade that affects the manufacturer that
are local, his is because, the manufacturers purchase the products in a low price from the market
and export them with a high price tag. In the major issues in this industry, exchange rates and
currency problems are also included. Few problems that people face due to economical problem
are that they cannot buy medicines because of the high price. This factor can also create problems
in the pharmaceutical industries (May, 2015). The pharmaceutical industries need to decrease the
prices of the medicines, so that all kind of people are able to buy medicines, because it is seen that
people avoid taking medicines in illness because of their financial crisis.
Social factors
The cultural aspects of the pharmaceutical industries are also included in the social factors that are
a part of the external macro environment. These factors affect the requirements of the customers
and the size of the market also depends on these factors. There are few social factors that are
concerned with the health issues, growth rate of the population, distribution of age and they mainly
put their focus on safety (David et al. 2015). The efficiency of the pharmaceutical industries
depends on the importance of the medicines to the customer, for them leading a better life. The
operations that are performed in the pharmaceutical industries are a bit complicated by nature. The
development of the pharmaceutical industries depends on whether the industry is fulfilling the

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needs of the consumers or not. They need to develop an environment, which has efficiency in their
work in order to lead a better life for the consumers.
Technological factors
Technology has a great impact on the pharmaceutical industries. Technology helped the
pharmaceutical industries to develop their industry by manufacturing of medicines in a proper and
in an organized manner. Technology helps to record the data of the medicines that are
manufactured or produced in the industry along with their expiry dates and efficiency, so that the
customers are able to know that. They are also provided with the information that is required to
buy a medicine. The details of the medicines are provided to the customers so that they can be sure
that whether to buy the medicine or not (Dutfield, 2017).
Legal factors
The legal factors of the pharmaceutical industries include the laws and legislations provided by
the government to the industry. The production of the medicines is depending on the legal factors
of the pharmaceutical industries. Legal factors are responsible for the development of the industry.
Changes in the legislation can cause problems to the industry and thus, they need to be aware of
the changes created by the government (Roschangar et al. 2015). Otherwise, there will be a chaos
in the industry. In case of drugs, there is a high possibility of banning particular drugs, that might
cause addiction or any problem for the human body or their might be few side effects, in order to
avoid such factors, the government might ban few drugs, which the industry need to be aware of.
Environmental factors
The pharmaceutical industries are associated with few risks regarding the environment. There is a
possibility of few pharmaceutical components that might create pollution in the environment.
However, this fact needs to be noted that, most of the products of the pharmaceutical industry does
not create any major impact on the environment, but a proper storage of the products are required
in order to avoid any kind of impact on the environment. The products need to be disposed properly
so that the environment does not get affected, for the safety purpose. The government pressurizes
the pharmaceutical industries to pay much attention towards the risk factors associated with the
environment (Cook, 2016).

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Analysis of the pharmaceutical industry using the five forces model
There is a method of analysis, known as the Porter’s Five Forces. The Poster’s Five Forces
includes,
• The threats of entry posed by new or potential competitors
• Degree of rivalry among the existing firms
• Bargaining power of buyers
• Bargaining power of suppliers and
• Closeness of substitute products
The threats of entry posed by new or potential competitors
There are barriers created for the costs of the research associated and the development of the new
drugs that are manufactured in the industry. This is done for the safety purpose, so that the
medicine does not harm anybody (Abrol et al. 2017). This model requires to follow the
government regulations that are provided to the pharmaceutical industries. The threats that the new
or potential competitors posed are low competitive forces because of the barrier that are mentioned
above. Due to the restriction, the threats that are imposed for the entry by the potential competitors
are LOW competitive force.
Degree of rivalry among the existing firms
There is a high chance of rivalry among the existing firms, that is the firms which already exists,
for the products of the different companies must differ and they are always in a competitive state
of mind and wants to rank good than all the other companies. This degree of rivalry that takes
place among the existing firms is considered as a HIGH competitive force (Parikh, 2016).
Bargaining power of the buyers
The buyers have a tendency to bargain before buying any product. Especially, when they are
purchasing something in a bulk. The health organizations and the hospitals always purchase
medicines in a bulk, because it is very much essential to keep medicines in their stock, in case of
urgent requirement. Hence, the hospitals and the health organizations buy medicines in a bulk,
they ask the pharmaceutical companies to make the price reasonable, and affordable for them so
that they can buy the products, mainly they want discounts. However, in case of regular patients,
they do not bargain anymore, because the price rates are getting high rapidly for the generic drugs

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(Drucker, 2017). They need those medicines on a regular basis. The competitive force of the buyers
in the process of bargaining is considered as a MEDIUM competitive force.
Bargaining power of suppliers
There are a huge number of suppliers associated with the pharmaceutical industries and that is the
reason for the decreasing in the bargaining powers of the suppliers. Therefore, the bargaining
powers of the suppliers are considered as a LOW competitive force model in the Porter’s five
forces model.
Closeness of the substitute products
There is an increase in the demand of the generic drugs versus the brand name drugs, which is
noticed, this is because of the variation of costs between them, though both the generic and the
brand name drugs have the same ingredient but vary in their prices. The companies that produces
the generic drugs does not need to invest much in the research and the development of the new
drugs, hence it is possible for them to sell the medicines at a much cheaper price than the brand
name drugs. Therefore, from this fact, it can be concluded that the closeness of substitute products
can be considered as a HIGH competitive force in the Porter’s five forces model.
According to the above-mentioned analysis, it can be said that the industry, shrinking giants
Johnson, Whittington and Scholes, at the present time can be considered as structurally attractive
because of all the processes that the industry possesses. The customers will find it more attractive
and reliable. They will be able to trust it more for the purpose of buying their medicines for leading
a better life (Park et al. 2016).
Evolution of the “strategic customer” over time for the global pharmaceutical
companies and its impact on the critical success factors of the industry
The “strategic customers” are said to be the customers who have made a place of their own in the
organization and they are always provided with the best quality products, they do not need to
complain about their products. Even, the organizations are also aware of the fact that they cannot
sell any bad quality products to the strategic customers. The organizations even create new
strategies to meet the requirements of the strategic customers, because the organizations value the
strategic customers. They also provide the medicines to the customers at an affordable price so
that they do not face any problem in buying medicines for their health issues.

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On the other hand, in order to bring customer loyalty in the organizations, the pharmaceutical
industries are planning to implement Customer Relationship Management (CRM) to their
organization to achieve loyalty of the customers in order to keep their economy rate high
throughout their business. The Customer relationship management attracts the new customers in
the company and also tries to fulfill their requirements and value their needs so that they feel
satisfied after buying the medicines from the company. Customer relationship management is
termed as a business strategy, which is implemented in the company in order to build a good
relationship between the customers and the company. They shifted their principles from product-
oriented business to customer-oriented business. They focus on the process of interaction with the
customers in different ways. The company needs to be capable of supplying the customers as per
their requirements in order to provide customer satisfaction and this will help in the increment of
the profit level.
There is another thing that the companies need to pay attention is they need to keep a record of the
problems and the issues that takes place in the organization regarding the products or any issues
regarding the products. Sometimes, the customers complain about the products if they find any
fault in the products or if they find that, they are getting side effects after consuming the medicine,
then they will need some other medicine according to their requirements. It is the responsibility of
the pharmaceutical industries to provide the customers with proper medicines that will be able to
cure their problems health wise.
The organizations also applies a business strategy, termed as strategic management, this strategic
management helps the organization with its growth and by increasing its rate of profit. This
strategic management needs help from both internal and external factors in order to function. This
strategic management allows the organization to research on the issues that the customers have
against the products and need to provide a solution to the customers and they need to keep a track
of the issues they are getting to know from the customers for their own good, as they will not
manufacture the same kind of product from the next time. The companies need to get the customers
the solution of their issues, so that the customers can rely on the services that are provided by the
companies. The customers need to know the details of the products so that they can decide whether
they require that product or not, therefore, the companies cannot fool the customers as the strategic
customers, are all educated and they will want to know the details of the product, which they are

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buying. Therefore, the most important thing that the companies need to focus on is the quality of
the products they are selling. They need to maintain the legal issues as well along with this. The
best way to maintain a company through strategic management is, the companies can create a
forum where the details of the products will be provided, and it need to be visible to the customers
as well, so that, if they cannot find the details provided to them earlier, they will be able to check
it in the forum and they will also be able to give feedback in the forum regarding the products they
have bought. By doing this, they will be able to bring customer loyalty and the process is also
effective for the company in pointing out of the faults in the company and in the products as well.
The company needs to fulfill the requirements of the strategic customers and value them in order
to gain their trust on the company (Dunlap et al. 2014).
Overview of the future prospects for the pharmaceutical industry based on the
above factors
The pharmaceutical industries have developed hugely in past few decades. Previously it did not
have much provision for the customers and hence the customers were unable to rely on the
pharmaceutical industries. Gradually, the pharmaceutical industries developed on a large scale in
many of the countries. The government helped the companies in many other ways. Previously,
there were people who never wanted to do treatment for their illness, because of financial crisis
and many other issues, which they had in their mind. However, those things are not present in
recent times because people nowadays are educated and very liberal. Only the people who suffer
from financial crisis are unable to proceed with a proper treatment. This is the only problem people
face nowadays with treatment and medicines. Otherwise, the developments in the pharmaceutical
industries are huge. However, still there are people who are not aware of their hygiene and suffer
a lot from illness. The government needs to take some steps regarding educating the people who
are still unaware of their own hygiene and the association of the pharmaceutical industries in such
programs are necessary. The first and the foremost thing is to create prevention before any problem
takes place.
Another important thing that needs focus is the high level of prices of the medicines. The prices
of the medicines need to be decreased so that normal people who have average income are able to
buy medicines in order to cure their illness and lead a better life ahead.

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It is predicted that in future, the pharmaceutical industries are going to make many more changes
to their industry for the well-being of the people residing in the society. According to the above-
mentioned factors in this study, the pharmaceutical industries are going to flourish in the future if
they maintain the requirements that need to be implemented in their industry.
Conclusion
From the above illustration, it can be concluded that the pharmaceutical industries have developed
from many ways; it is not like how it was few decades back. The pharmaceutical industry is very
essential in the lives of every human being, not only now, it was before also, but there was no
scope for people to benefit from it. However, gradually the industry developed on a large scale.
There are few methods that are mentioned above in the study, which needs to be implemented in
the pharmaceutical industries to make the companies work effectively. The companies need to
give priority to the customers visiting them in order to achieve success and increase the level of
profit in the company.

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References used
1. Abrol, D., Prajapati, P. and Singh, N., 2017. Globalization of the Indian pharmaceutical
industry: implications for innovation. Institutions and Economies, pp.327-365.
2. Cook, A.G., 2016. Forecasting for the pharmaceutical industry: models for new product
and in-market forecasting and how to use them. Gower.
3. David, B., Wolfender, J.L. and Dias, D.A., 2015. The pharmaceutical industry and natural
products: historical status and new trends. Phytochemistry reviews, 14(2), pp.299-315.
4. DiMasi, J.A., Grabowski, H.G. and Hansen, R.W., 2016. Innovation in the pharmaceutical
industry: new estimates of R&D costs. Journal of health economics, 47, pp.20-33.
5. Drucker, P., 2017. The age of discontinuity: Guidelines to our changing society. Routledge.
6. Dunlap, D., Marion, T. and Friar, J., 2014. The role of cross-national knowledge on
organizational ambidexterity: A case of the global pharmaceutical industry. Management
Learning, 45(4), pp.458-476.
7. Dutfield, G., 2017. Intellectual property rights and the life science industries: a twentieth
century history. Routledge.
8. Gereffi, G., 2017. The pharmaceutical industry and dependency in the third world.
Princeton University Press.
9. May, C., 2015. The global political economy of intellectual property rights: The new
enclosures. Routledge.
10. Parikh, D.M. ed., 2016. Handbook of pharmaceutical granulation technology. CRC Press.
11. Park, Y., Goto, D., Yang, K.F., Downton, K., Lecomte, P., Olson, M. and Mullins, C.D.,
2016. A Literature Review of Factors Affecting Price and Competition in the Global
Pharmaceutical Market. Value in Health, 19(3), p.A265.
12. Roca, I., Akova, M., Baquero, F., Carlet, J., Cavaleri, M., Coenen, S., Cohen, J., Findlay,
D., Gyssens, I., Heure, O.E. and Kahlmeter, G., 2015. The global threat of antimicrobial
resistance: science for intervention. New microbes and new infections, 6, pp.22-29.

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13. Roschangar, F., Sheldon, R.A. and Senanayake, C.H., 2015. Overcoming barriers to green
chemistry in the pharmaceutical industry–the Green Aspiration Level™ concept. Green
Chemistry, 17(2), pp.752-768.

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