PESTLE Analysis of the Pharmaceutical Industry Political - Recent US health reforms has led to increased pressure on price. - Increased push for continued overseas aid, particularly through the United Nations and the European Union, with price of the drugs being a major factor in the supplier choice. Economical - Due to the current economic climate, price has become a major factor in pharmaceuticals especially on drugs where generic brands are also available. Social - Skilled employees can be difficult to source in other third world countries where segments of the batch production line may be based. - Increasing pressure on pharmaceutical industry to support developing countries through the supply of reduced cost drugs, tightening margins. Technological - Technology evolution in the industry is fast and needs to be updated frequently to avoid being left behind with the first to implement radical new technology into the production process gaining 'first mover' advantages Legal - Many legal restraints to releasing drugs suitable for human consumption - High legal costs associated with passing drugs for human consumption and dealing with unforeseen side effects of a drug Environmental - Batch production processes of pharmaceutical products can have manufacturing plants based in multiple countries. The carbon footprint of many drugs can be very large due to the amount of transport involved in the batch production processes.
Industry Competitiveness Overall the pharmaceutical industry is highly competitive, due to reasons already discussed but also due to the potential for very high returns if new drugs can be created. The market is densely populated with many of the firms being established for significant amounts of time and well known globally. Bargaining Power of Suppliers Established industry has led to a multitude of suppliers limiting influence. However suppliers tend only to supply technology as drugs are produced in house. The Specialist knowledge of suppliers slightly increases bargaining power, however not to enough to negate the effects of supplier choice. Bargaining Power of Customers Patents lasting 20 years after drug invention mean that the company can dictate price and supply during that period, however once the patent finishes, generic drug producing firms can move in consequently placing more power in the consumers hand Threat of Substitutes There is a medium to high threat of substitutes in the pharmaceutical industry coming from the threat of generic branded drugs once patents run out and also from alternative medicines and treatments (particularly prevalent in eastern cultures) Porters 5 Forces Analysis Threat of New Entrants Low threat of new entrants due to the already competitive nature of the industry, high investment levels required for start up, high risk of no return on investment if a new drug cannot be created and the specialised knowledge required to be able to produce these new drugs.
Industry Competitiveness Introduction of the MIT/Novartis innovation could affect the market by either making the market more competitive if most of the competitors follow suit and switch to continuous flow manufacturing methods or there is also the potential for the market to become less competitive if they are not able to react fast enough. Bargaining Power of Suppliers Finally bargaining power of suppliers will remain low, with the possibility of their bargaining power reducing further as with the introduction of continuous flow processes throughout the industry, there will also likely be an increase in the reliance on lean manufacturing techniques and JIT - meaning that if suppliers are not able to keep to deadlines they will quickly be replaced. Bargaining Power of Customers Depending on if the marketplace becomes more competitive or less competitive will largely affect the bargaining power of the consumer. However if it becomes more competitive the cost savings this...
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