Strategic Management

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STRATEGIC MANAGEMENT

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Introduction

The pharmaceutical industry has experienced several changes since its inception.

Nonetheless, this industry still plays a critical role in ensuring the wellbeing of humankind.

Various forces and factors influencing the pharmaceutical industry and its competitive

environment assist in giving insight into some of the barriers that hamper its growth. This text

looks at a critical analysis of the global pharmaceutical industry with regard to the

environmental forces influencing it, strategic groups operating within the ethical

requirements, the evolution of the strategic customer as well as the prevalent ethical stance

(James, 2000).

Q 1

Main environmental forces affecting the global pharmaceutical industry

The main forces that affect the global pharmaceutical industry include Political, Economic,

Social, Technology and Legal as follows:

Political

The pharmaceutical industry around the globe forms an important component of healthcare.

As such, most operations in this industry are influenced politically through government

regulations, tariff, trade restrictions and taxation policies. Moreover, political stabilities of

various regions around the globe also play a vital role in determining the business and

operational environment required by players in the pharmaceutical industry. Smith (2002)

observes that in the last couple of decades, the pharmaceutical industry has continued attract

political interest due to its growing economic significance. In this sense, the political interest

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has led to both positive and negative impacts to the social welfare of the society as well as

others sectors.

Economic

The purchasing power displayed by potential customers in the global pharmaceutical industry

is substantially affected by economic forces such as exchange rates, interest rates, the rate of

economic growth and capital among others. Further, some of the controls imposed by

governments on pharmaceutical products, such as prices control, represent economic forces

that affect this industry negatively. The findings made by Ahlstrom and Bruton (2010),

indicate that the involvement of a government in price control could result in the emergence

of various forms of parallel trades in the pharmaceutical industry. In the last couple of years,

parallel trade has made it possible for commodities such as pharmaceutical products to move

freely across various continents around the world with restrictions or barriers.

Social

Some of the social forces affecting the global pharmaceutical industry include the cultural

and demographic aspects associated. Others include social considerations such as the rate of

population growth, age distribution and society’s wellbeing. The changing trends that

continue to characterise the present social life gives rise to new considerations of the

guidelines and requirements in the pharmaceutical industry (Smith, 2002). Similarly, the age

of the population in a society determines the dimension taken by the demand for

pharmaceutical products in the sense that aged people have a tendency of consuming more

drugs compared younger individuals.

Technology

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Technological forces play a significant role in determining some of the changes that take

place in the entire pharmaceutical industry around the globe. According to the latest

technological developments, there is need for the adoption of the state of the art techniques in

manufacturing and development of drugs and other pharmaceutical products. It is also

through advancements in technology that this industry has managed to make considerable

progress with regard to research and innovation. As such, effective medications are

developed through enhanced scientific techniques thereby saving time and money as well as

other resources that would be required in producing and supplying reliable drugs around the

globe (James, 2000).

Legal

Certainly, the pharmaceutical industry is one that operates under strict legal framework and

regulations. Legal requirements and policies of product liability and pricing have continued

to affect global and regional operations within the pharmaceutical industry. To that extent,

any progress made in pharmaceutical innovation can only go as far as it is allowed by

regulations. The outcome of such regulatory requirements is unnecessary delays experienced

in efforts aimed at launching new pharmaceutical products (Ahlstrom and Bruton, 2010).

Scenario planning in global pharmaceutical industry

Undoubtedly, various drivers of change are likely to affect the future of the pharmaceutical

industry at the global level. As such, scenario-planning techniques are necessary for

consideration in the achievement of various goals and objectives. The process of scenario

planning is one that encourages the exchange of knowledge as well as mutual understanding

regarding issues that affect the future of a business in the pharmaceutical industry. The

following key drivers are expected to affect this industry (Smith, 2002):

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 Scanning and analysis of the environment

 Considering the available options for the scenario

 Carrying out financial projections

 Developing an action plan that lays down procedures concerning the implementation

of the scenario

Q 2

Analysis of Five Forces framework

In this regard, the model of Porter’s five force acts as a vital tool in performing an in-depth

analysis of the environmental forces influencing the global pharmaceutical industry. The

porter's model refers to an external strategic tool used in the determination of the value

associated with an industrial structure. Further, it assists in the identification of five key

competitive forces that are important in analysing the environment in which this industry

operates.

Potential entrance

There are low threats to new entrants in this industry since a company has to have large sums

of capital for it release a product. This implies that there is a substantially huge capital

investment required other than the policies and regulations often formulated by governments

thus new companies face tough barriers in entering this market. Moreover, there is the risk of

a business likely to take up to fifteen years to gain stability in the market (James, 2000).

Potential supplier

The potential suppliers experience a low power of bargaining power since most of them

happen to be chemical industries. Furthermore, it is not easy for suppliers to sustain

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themselves in the market due to the ease with which pharmaceutical industries may change

their preferred suppliers.

Potential buyers

Buyers in this industry have a relatively high power of bargaining since the government

represents most of them. Additionally, other buyers have various substitutes from which to

choose thus brand loyalty reduces among them.

Potential substitutes

Players in this industry face high threats of substitutes due to the existence of various

substitute products such as biopharmaceuticals and branded generics among others.

Consequently, imported drugs from places like India and China tend to substitute the locally

produced ones (Johnson, Whittington and Scholes, 2014).

Competitive rivalry

Instances of competitive rivalry are common in in this industry due the benefits obtained by

the patient. The pharmaceutical market is becoming saturated with companies that are

operating globally with the aim of gaining competitive advantages.

These forces differ from one industry sector to the other and the different sectors would be

placed in the industry’s lifecycle as illustrated below:

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Global pharmaceutical sectors industry lifecycle

Source: (Johnson, Scholes and Whittington, 2014)

Q 3

Strategic groups within the global ethical pharmaceutical industry

According to the case in question, there exist five strategic groups within the ethical

pharmaceutical industry at the global level. These groups include vaccine, OTC, generic,

ethical and biotech industry stakeholders. Petryna, Lakoff and Kleinman (2006) indicate that

every one of such groups requires the incorporation of unique strategies for it to function

effectively within the ethical pharmaceutical industry around the world. Players in this

industry who are concerned with production of various drugs and prescriptions need to

develop reliable strategies that are aimed at enhancing the infrastructure for marketing and

global sales. Generics institutions and firms place a lot of emphasis the ease of manufacturing

drugs as well as the ability to access a broad global market. Strategically, biotech firms would

be expected to focus on developing and enhancing the intellectual rights to which they are

entitled in the pharmaceutical industry.

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Choices made by Pfizer and the drivers behind them

Beginning from the year 2008, Pfizer managed to come up with various strategic choices,

which involved scenarios that illustrated shifting of focus and emphasis from conventional

pharmaceutical products a broad outlook. As such, there has been the gradual emergence of

other functions such as vaccines, consumer care and biologics among others. Most companies

taking part in the manufacture of drugs and other pharmaceutical products often have the

operations occurring under several strategic groups in the global ethical industry (Ahlstrom

and Bruton, 2010). Nonetheless, such groups may also come into existence based on the

focus and the objectives of a particular pharmaceutical industry. Firms operating in the

pharmaceutical industry across the international scene have other departments working under

them like those concerned with marketing and branding as well as customer care. Some of the

actual drivers behind the choices made by Pfizer include the establishment of more reliable

and stable businesses as well as the need to reduce overreliance individual blockbusters as far

as the pharmaceutical industry is concerned (John, 2016).

Q 4

Evolution of the strategic customer over time

The evolution of strategic customers over time for the pharmaceutical companies operating

around the globe implies that various measures need to be put in place to cope with the

dynamic relationship between customers and the firms in question. The arguments made by

Abbott and Dukes (2009) indicate that strategic customers continue to exist within the

pharmaceutical industries due to the introduction of new players and stakeholders in the

health sector. To that extent, the evolution of customer in the last couple of years has

encountered expansions and included wholesalers, government agencies, pharmacies and

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various healthcare facilities. Pharmaceutical firms are more concerned with embracing

services offered by healthcare professionals such as pharmacists and doctors as a way of

addressing the issue of evolution of the strategic customer in this industry.

Notably, the changes that have contributed to the evolution of customers overtime within the

operations of pharmaceutical players have considerable influenced certain success factors that

remain critical to this industry. In that regard, factors such as marketing of drugs have taken a

different dimension. Consequently, pharmaceutical firms have started playing a direct role in

marketing drugs and other products to the end consumer. In such a case, most healthcare

institutions are eliminated in the entire chain of distribution as the firms focus on getting

direct access to target consumers with their prescriptions. The United States is among the

nations around the globe that have the largest market and demand for drug prescriptions from

pharmaceutical companies (James, 2000).

Q 5

Prevalent ethical stance

The prevalent ethical stance in the pharmaceutical industry involves certain fundamental

issues affecting the major stakeholders and members of the society. These issues include the

perception created in the minds and eyes of the members of public by the pharmaceutical

companies, the property rights associated with the products and operation as well as the

constraints encountered by such companies in their pursuit for emerging markets. Ethical

practice demands that all prescriptions being carried out in this industry should involve the

input of a qualified and recognised medical practitioner. Mennen and Zhou (2010) explain

that the prevalent ethical position notwithstanding, the fundamental ethical issues affecting

this industry should be accorded the necessary importance and emphasis in line with global

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standards and requirements. Most pharmaceutical firms may be seen as having the tendency

to benefits from the sufferings experienced by human. However, this may not be the case

when the prevalent ethical stance is taken into keen consideration since majority of drug

firms have been able to demonstrate their commitment towards patenting and protecting their

products. As such, the prevalent ethical stance in this industry plays a substantive role in

ensuring that drug manufacturing companies do not engage in practices may be perceived as

unprofessional or unethical.

Stakeholder map for the pharmaceutical industry

Key stakeholders in the pharmaceutical industry include patients who are the end consumers

of drugs and other products. The other category of stakeholders include professional

practitioners in the health sector who are charged with the responsibility of giving

prescription to patients before go to purchase drugs and various mediations. Investors and

business people are stakeholders who play a critical role in financing manufacturing

companies in this industry. Moreover, governments around the world are among stakeholders

in the pharmaceutical industry and they major role is to come up with the necessary pieces of

legislations and regulations to guide and control operations in this industry (Smith, 2002).

In order to ensure the existence of more effective engagements amongst its stakeholders, the

pharmaceutical industry needs to understand that every stakeholder has an important role to

play as indicated by Mennen and Zhou (2010). Stakeholder engagements stand to benefit

considerable in situations where there is shifting of emphasis with regard to stakeholder

values in the context of attitudes accorded to patients. This is because drastic changes have

been witnessed in relation to customer expectations over the last couple of decades. Abbott

and Dukes (2009) clarify that presently, healthcare and effective medication is regarded as a

human right and an entitlement in most parts of the world. As such, key players and

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regulators in this industry need to have clearly defined roles and responsibilities for all

stakeholders involved to enhance engagements amongst themselves.

Conclusion

In conclusion, it is worth indicating that the global pharmaceutical industry is bound to

experience various transformations and development as it progresses into the future. This is

owing to the dynamic nature of the environmental forces affecting this industry. As such, it is

imperative to enhance engagements amongst stakeholders in this industry up to the global

level.

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References

Abbott, F. M., & Dukes, M. N. G. (2009). Global pharmaceutical policy: ensuring medicines

for tomorrow's world. Cheltenham, UK, Edward Elgar Pub.

Ahlstrom, D., & Bruton, G. D. (2010). International management: strategy and culture in the

emerging world. Australia, South-Western Cengage Learning.

James, B. (2000). The global pharmaceutical industry in the 1990s: The challange of the

change. London, Economist Intelligence Unit.

Johnson, G., Whittington, R. & Scholes, K. (2014). Exploring Strategy Text Only. 10th ed.

Edinburgh: Pearson Education.

John, A. (2016). Pfizer and the Challenges of the Global Pharmaceutical Industry.

Mennen, M., & Zhou, H. (2010). Mergers and Acquisitions in the Global Pharmaceutical

Industry. Mu

nchen, GRIN Verlag GmbH.

Petryna, A., Lakoff, A., & Kleinman, A. (2006). Global pharmaceuticals: ethics, markets,

practices. Durham, Duke University Press.

Smith, M. C. (2002). Pharmaceutical marketing: principles, environment, and practice. New

York, Pharmaceutical Products Press.

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