THE GLOBAL PHARMACEUTICAL INDUSTRY

The Global Pharmaceutical Industry

The Global Pharmaceutical Industry

Introduction

This report provides an analytical strategic review of the pharmaceutical industry; it's origins, evolution, development and competitive environment within which it operates and the strategic issues facing the industry. The report also offers an overview of the industry, it's key players, their strategic outlook, the impact of technological developments and other strategic issues facing the industry. (Johnson & Scholes 2002:14-15)

Structural Industry Analysis (Porter's Five Forces)

This section provides a summary positional analysis of the pharmaceutical industry using Porter's Five Forces model (see diagram below) (Agrawal 1999:01)

Barrier to entry: High (Pharmaceuticals). Cost of R&D and patent limitations

Industry Competition: High. Advantages gained by first mover advantage (patents)

Suppliers: supplier power is low

Buyers: buyer power is low (Batiz & Holland 2001:1-8)

Substitutes: low (with patents) medium (after patent expiry)

Overall, the pharmaceutical industry shows an upward trend in its core markets. The industry remains highly valued, has a favourable market position with strong financial make-up and strong earnings growth. (Robinson, 2001:2) Its future potential demand trend is positive and despite increased competition the industry still shows a continuing upward growth momentum. Datamonitor's9 forecast of the leading 16 pharmaceutical companies for 2001 to 2007 suggests that combined sales will grow at a minimum rate of 5.2 percent based on the potential of their product pipeline.

Science and Innovation:

Over the last decade the knowledgebase of the pharmaceutical sciences has changed dramatically and continues to change at a fairly high rate. As new technologies and bodies of scientific knowledge emerge, whole new sets of opportunities and threats are being introduced. (Angell 2000) Breakthroughs in science, innovation and technology continue to create novel opportunities for new products and processes. (Johnson & Scholes 2002:14-15) This has increased the pace of the industry and major players must keep up with changes else become vulnerable. Over the last decade, we have seen this happen as companies that were not very effective in research and new product development were acquired.

Increased Competition:

A major issue facing the industry is the intense competition and the changing face the pharmaceutical market. The industry has seen a legion of new market entrants, increased competition among key players and industry consolidation. A host of large-scale mergers and acquisitions have taken place over the last two decades. (Angell 2000) Competitive advantage within the industry is being constantly redefined and to maintain their presence, key industry players are being forced to revamp their organisational ...