SG7001 Managing Strategy Operations
3 a. An evaluation of opportunities and threats posed by megatrends.
Sothema belongs to pharmaceutical industry who considered as most diversified industry where changes are often occur (G et. al. 2019). Covid-19 pandemic brings revolutionary changes across the industry. Moreover, there are several megatrends which the industry focusses and who brings many opportunities and threats.
| Megatrends | Key issue affects the industry | Impact and implications |
| Artificial intelligence (AI) | AI accelerates new medicine discovery and develop advanced processes. Pharma company exploring the use of such automated manufacturing process in order to increase their production capacity along with design effective marketing approach. | AI brings both opportunities and threats.
Opportunities: Pharma company increase their production, marketing, and sale capacity. Moreover, patient identification is important in the discovery and development of drug (Mitchell et. al. 2021). AI simplifies identification process and makes it faster and cheaper. Threat: All pharma companies are now using advanced technologies which increase competition and companies reach any extent to discover new drugs which ruin human trial programs. |
| Financial growth | Pharmaceutical industry rises to 20.8 billion Dollar in 2013 from just 4.7 billion Dollar a decade ago. The growth is continued which makes the industry worth 65 billion Dollar by 2020 (Belkhir and Elmeligi, 2019). Government support pharma company which is also the reason behind constant growth and thus, the industry gets able to develop new and advanced medications. | Opportunity:
All companies across the industry get benefited from financial growth and government aids. Hence, they can do extensive market research and develop new medicines which ensure their high future growth.
Threat: Government supports the invention of new medicines and thus, companies ask financial support to strengthen their corpus and not focus on the quality of medicines which may cause poor human health. |
| International market | Globalisation close international market which also includes customers. Pharma industry show promising growth in global market. | Opportunities:
Globalisation reduce the deficiency of appropriate resources and low profit margin problem and thus it opens the gate of global market for all pharma companies to flourish their business. Threat: It increases the competition and as well as prices of medicines because countries impose various taxes and duties which makes the medicine costly. Hence, it may defeat the purpose of pharma companies. |
| Patent | Pharma industry often develop effective to more effective medicines. If a company discover new drugs, they can patent their invention and can earn good amount of profit. | Opportunities:
Patent rule provide protection to new discovery of medicines and the opportunity to earn maximum profit which motivates pharma companies to involves in advanced research (Lee et. al. 2019). It ultimately profitable for patients who suffer from non-curable disease. Threats: Effective patent medicines are generally costly and low to medium income group people cannot afford. Moreover, generic drugs of patent medicines are also difficult to found. |
| Sustainability | It is fact that medical waste cause serious damage on environment. However, there are advanced techniques to discard these wastes but plastic debris cannot be discarded. Moreover, legal compliances about sustainability also affect the industry standard process. | Opportunities:
Pharma company who follows sustainability standard can gain highly competitive advantages and escape from legal compliances. Threats: It increases their operational cost because sustainability is not the core business of pharma company. Along with it consume their significant amount of time and efforts which may affect their regular work practices. |
3b Critical analysis of industry environment
| Environmental factor | Issues Pertinent to the industry | Implication for industry |
| Political | Pharma industry mostly operates in global market and most of the countries maintain some standard guidelines including safety standards, certification, and so on. They also highlight the banned medicine and if pharm company not follow these guidelines, then their business gets affected (Díaz and Sanchez-Robles, 2020).
Most of the countries established their control on the price of medicine to make it affordable for their citizens which adversely affect their profit. Government in some nations subsidize their domestic pharma company which decrease international companies’ competitiveness. Some of the government do because of poor political relation of that country. |
Poor politic equation causes to ban and high taxes on pharma company. Moreover, government try to protect their domestic pharma company. It adversely impacts their profitability, competitiveness, and sustainability. It not only impacts a pharma company, but also, the entire industry gets affected because in the reaction of high price medicines, other companies has to increase their prices. |
| Economic | Developing countries economic conditions lead to increase their income which allow them to buy even branded medicines. Further, companies improve their medical policies where they reimburse even medicine cost. Hence, people become more reachable to international pharma companies’ offerings. However, Covid-19 pandemic entirely change the economic condition of people as well pharma industry’s profitability and work approach. | Good economic condition of people as well as nation, becomes a great opportunity for pharma industry. However, pandemic cause to recession and world economy experiences steep decline which directly affect pharma industry (Fabbri et. al. 2019). Cash rich pharma company can able to survive but start-up companies face significant loss due to economic condition which affect entire pharma industry. |
| Porter’s five forces | Strength | Justification |
| New entrants | Sustainment of pharma industry depends on research and development and the cost of robust research is very high. Moreover, strict government rules to entre in pharma company and approve new medicines lead to make barrier for new entrants in manner of huge capital investment (Ramu and Chittela, 2018). Hence, it becomes the strength of existing pharma companies that they do not have to face threats for new entrants. | Requirement of high capital investment is the strength of pharma industry and such barriers are profitable for their competitiveness. The reason behind such strength is, products of pharma companies determine the health of people and even it is the sake of someone’s life and death. Hence, it is very sensitive and effective research and development is necessary along with company who have apatite of high investment, can also able to discover rare medicines (Mahlich et. al. 2021). Further, it filters out inefficient companies to entire in the industry. |
| Bargaining power of suppliers | Mostly pharma industry relies on organic chemical which make the supplier bargaining power low. However, there are many suppliers in pharma industry which limit their power to influence price. It may consider the strength of pharma industry. | High bargaining power of suppliers lead to high cost of resources which ultimately increase the product price. Moreover, if suppliers have powerful position, then they can dominate pharma company which may affect their production and business process (Justin, 2022). Thus, it considered as a strength to have low bargaining power of suppliers. |
| Bargaining power of buyers | Buyers bargaining power is low in pharma industry because the buyer are patient or relatives of patient which have to buy the medicines in order to save their life. If medicines are costly. However, there are multiple pharma company in the industry and buyers have lots of choices which put them into powerful position. Only those company who offer rare and very effective medicine, can leverage from buyer’s low power which can consider as a strength. | In order to stand strong among various companies and in the industry, pharma company has to discover very effective rare, and most demanded medicines. The best example, of this strength is Covid-19 vaccine. The first company who made the vaccine, have leavy from the poor bargaining power of buyer. Thus, it motivates the company to make effective products. |
| Substitute products | High availability of substitute products is the best advantage in pharma industry as it ensures the constant demand of medicines and industry thrives (Bhattacharji, 2019). There are many genetic medicines which give tough competition to branded pharma company. Hence, generic pharma companies on the other hand, focus to establish global presence to achieve low cost of suppliers. | Demand of generic medicine is the great opportunity to generic manufacturing company which also motivates non-generic manufacturers to find scope in generic medicines as well. Hence, it makes the high prices medicines affordable for people. |
| Competitive rivalry | Pharma industry is very competitive as they have potential for high return in case of new medicine created. There are many companies in pharma industry including generic and non-generic manufacturers. | In order to get competitive advantages, companies adopt innovative approach to stand strong which is beneficiary for entire pharma industry and patients also get advantages. |
References
Belkhir, L. and Elmeligi, A., (2019). Carbon footprint of the global pharmaceutical industry and relative impact of its major players. Journal of Cleaner Production, 214, pp.185-194.
Díaz, R.F. and Sanchez-Robles, B., (2020). Non-Parametric Analysis of Efficiency: An Application to the Pharmaceutical Industry. Mathematics, 8(9), p.1522.
Fabbri, A., Swandari, S., Lau, E., Vitry, A. and Mintzes, B., (2019). Pharmaceutical industry funding of health consumer groups in Australia: a cross-sectional analysis. International Journal of Health Services, 49(2), pp.273-293.
- de la Torre, B. and Albericio, F., (2019). The pharmaceutical industry in 2018. An analysis of FDA drug approvals from the perspective of molecules. Molecules, 24(4), p.809.
Lee, Y., Fong, E., Barney, J.B. and Hawk, A., (2019). Why do experts solve complex problems using open innovation? Evidence from the US pharmaceutical industry. California Management Review, 62(1), pp.144-166.
Mahlich, J., Bartol, A. and Dheban, S., (2021). Can adaptive clinical trials help to solve the productivity crisis of the pharmaceutical industry?-a scenario analysis. Health Economics Review, 11(1), pp.1-10.
Mitchell, A.P., Trivedi, N.U., Gennarelli, R.L., Chimonas, S., Tabatabai, S.M., Goldberg, J., Diaz Jr, L.A. and Korenstein, D., (2021). Are financial payments from the pharmaceutical industry associated with physician prescribing? A systematic review. Annals of internal medicine, 174(3), pp.353-361.
Ramu, B. and Chittela, K.B., (2018). High Performance Thin Layer Chromatography and Its Role Pharmaceutical Industry. Open Sci. J. Biosci. Bioeng, 5(3), pp.29-34.
Justin, W., 2022. Porter’s five force analysis of pharmaceutical industry. [Online] [Access Through]: <https://eduzaurus.com/free-essay-samples/porters-five-forces-analysis-of-pharmaceutical-industry/>
Bhattacharji, A., 2019. The Three Top Political Issues for Big Pharma. [Online] [Access Through]: <https://pharmaboardroom.com/articles/the-three-top-political-issues-for-big-pharma/>
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