Political
- Stringent government regulation and powerful purchaser pressures.
- Governments around the world focused on pharmaceuticals as a politically easy target in efforts to control rising healthcare expenditure.
- Inter-country pricing disparities.
Economic
- European free trade agreements.
Social
- Ageing populations create pressure on healthcare systems.
- Epidemic or chronic diseases (e. g. obesity).
- More expectations from the consumer.
- Payers choosing generic drugs for first-line treatment of common ailments.
Technological
- Impact of internet on traditional business models.
- Impact of genetic research on industry.
Environmental
- Increasing standards and requirements for environmental protection are becoming more stringent because of industry operations.
Legal
- Legislation was enacted to set a fixed period on patent protection.
- Rigorous regulatory scrutiny governed by legislation.
Use scenario planning techniques to consider the various environmental influences which may affect the global pharmaceutical industry in the future. The external environment of the pharmaceutical industry is extremely dynamic. Customers are better informed about the product and its contents, so the customer has more requirements. The requirements cause competition between the drug brands, so the customer has the benefit of it because prizes are lower.
How relevant is the Five-Forces Framework map to identify environmental forces affecting the global pharmaceutical industry? The Five-Forces Framework is relevant for the pharmaceutical industry. The Framework is relevant to most of the organizations and the five forces are equal to each other. It can provide a useful starting point for strategic analysis even where profit criteria may not apply (Johnson, Whittington and Scholes 2008). The department Research & Development (R&D) is the key to success. The pharmaceutical industry is well known because there’re a lot of risks in the industry and there’s stringent government regulation and powerful purchaser pressures.
The government has the legislation to be a powerful purchaser. Governments around the world are focused on pharmaceuticals as a politically easy target in efforts to control rising healthcare expenditure. The biggest threat from the substitute force is the competition. Rivals could launch generic medicines with exactly the same active ingredients as the original brand, but at a lower price (Johnson, Whittington and Scholes 2008). There’re two buyers of the products of the pharmaceutical industry: governments around the world and insurance companies. The pharmaceutical industry has no affects from the supplier force, because they are not dependent of raw materials and/or equipment’s.
Identify the strategic groups within the global pharmaceutical industry. There’re four organizations in the pharmaceutical industry that have a similar strategic characteristics: over-the-count, ethical, generic and biotech.
How has the ‘strategic customer’ evolved over time for global pharmaceutical companies? Because of the competition in the pharmaceutical branch are the prices low and are there medicines on the market with have exactly the same active ingredients as the original brand. That means that the customer has the benefit.
What is the impact on the industry’s critical success factors? The rivals cause a reduction of the value of the product. The customer will notice that he only pays for the brand when there’re also generic medicines on the market. During the competition the original brand has to deliver the customer extra service to keep the customer bounded on the organization. E. g. after-sales service, delivery reliabilities and technical quality. The customer has a lot of requirements, so the company has to respond on that demand to survive the competition.
Bibliography
- Johnson, G. , Whittington, R. and Scholes, K. 2008. Exploring strategy. 8th edition, London: Financial Times Prentice Hall.