The Five Competitive Forces That Shape Strategy.
Submit a 2000 words paper on the topic The Five Competitive Forces That Shape Strategy. The framework of analysis looks at six external forces ” Political, Economic, Social, Technological, Environmental and Legal ” that affect the company at its present state or that have the potential to affect industry competitiveness in the future. For the pharmaceutical industry, we have identified that Political, Economic, Social and Technological factors have a potentially greater impact on the industry than the remaining two, therefore, we shall focus on these four in our following discussion. It takes 10-15 years on average for an experimental drug to travel from lab to patients (Holland, 2011) and this is largely due to stringent government regulations. This long lead time is just a tip of the political iceberg that plays a very big role in the pharmaceutical industry.
Beginning in 2009, the U.S. Federal Drug Administration tightened regulations so that pharmaceutical companies will now have to adjust to stricter standards and stronger enforcement (Anon, 2011). In addition to this, most governments continue to pressure GSK and the other big pharma to increase access to medication either by lowering the cost of drugs or by removing their patent protection to allow for the manufacture of generics. The latter ask is highly unlikely to be accepted by GSK and its peers whereas the former could be achieved if the pharmaceutical companies are guaranteed of bigger sales volumes. One important political move that should have a big impact in this industry is the passing of President Obama’s US healthcare reform into law on March 23, 2010.
This bill is good news for the big pharmaceutical companies because it is expected to expand health insurance coverage to more than 30 million uninsured Americans (Trager, 2010), especially considering that America is still the largest pharmaceutical market in the world. Other than this significant increase in market size, the new healthcare law also protects original drug manufacturers, such as GSK, from competition from generic alternatives on biologics through a 12 year exclusivity period. Biologics are currently viewed as one of the potential huge products for pharmaceuticals, especially given that they contributed the US $80 billion in 2008 with favorable projected goals of up to three times that of small molecules (Holland, 2011). Closely following political factors in significance for the pharmaceutical industry is the economic factor. There are positives as well as negatives for GSK and its peers to ponder over with regards to economics.
The first negative that quickly comes to mind is the global economic squeeze of 2008 that has somewhat persisted to the present day, especially in the EU. According to Holland (2011), the pharmaceutical market growth is strongly aligned with GDP growth, therefore, the low GDP growth in the current key markets of the US, Japan, and Europe is a cause for concern. The immediate consumer behavior will be to opt for the more affordable generic drugs at the expense of the original drugs that have cost GSK and its peers billions of dollars in investment from research, to production to marketing. Talking about generics, most of the blockbuster drug patents that enriched big pharma has/is coming to an end in 2011 and 2012.
This growth of generics and loss of patent protection for best-selling drugs at the same window period has the potential of turning cash-cows for GSK and its .peers into dogs if we were to use the Boston Consulting Group Matrix to evaluate this phenomenon. Get homework help.
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