Case: The Global Pharmaceutical Industry assignment two - Essay Example

547). The risky nature and lengthy R & D process was evaluated to be due to the average length in years (taking 10 to 15) that an experimental drug needs from its discovery up to clinical trials, FDA approval and finally post marketing tests before it could be safely marketed and distributed to the patients. High levels of risk could only be appropriately compensated by high costs which are decided on by the medical practitioners; with little knowledge or influence from final consumers and payers (Holland, 2010, p. 547). In this regard, the current analysis would utilize Porter;s Five Forces to analyze the strategies applied by the global pharmaceutical industry in detail.

The five forces are shown in figure 1 below: Figure 1: Porter’s Five Forces Source: Investopedia, 2011 For simplicity and clarity in presentation, these forces would initially be presented as Table 1, below: Five Forces Strategies Applied: Global Pharmaceutical Industry Bargaining Power of Suppliers Strong bargaining power manifested by the ability and practice of price insentiveness of buyers where costs of patented drugs are determined solely by the manufacturers in the pharmaceutical industry. . Strategies include the use of personal detail through sales representatives; increasing sales and marketing capabilities.

Threat of New Entrants Strong threat due to expiration of patents and the emergence of newly developed product variants such as biologics, biosimilars, biotechnology start ups and the threat imposed by emerging Asian markets. Strategies include intensification of R & D; use of personal strategies using sales representatives and focus on core competencies. Threat of Substitutes Increased threat due to the presence of easily available and more affordable generic medicines; ethical and OTC meds, branded generics, decreased popularity of blockbusters.

Case facts noted that patented drugs are expensive to produce but inexpensive to reproduce (Holland, 2010, p. 554). Strategies include intensification of R & D; use of personal strategies using sales representatives and focus on core competencies. Rivalry Intense presence of competitive pressures especially from Asian markets. Strategies include acquisition and merger to increase geographical scope, gain economies of scale, and access new technologies; and the use of network based approach to innovation (Holland, 2010, p. 553). It could be deduced that the global pharmaceutical industry responds and reacts depending on the forces that impinge on their performance and success.

The strong bargaining power of suppliers, for instance, deemed the sources of raw materials for the manufacturers. All costs inputted including the materials, labor, man-hours from the pre-clinical testing, and clinical trials are included making the costs of patented drugs considerably high. Strategies included pricing strategies (negotiated, average and reference