Designing a Global Strategy for Pharmaceutical Industry
The pharmaceutical industry develops, produces, and markets drugs or pharmaceuticals compounds for medical purpose. Pharmaceutical companies produce generic, brand medications and medical devices. The industry is subject to a complex regulatory environment regarding the patenting, testing and ensuring safety and efficacy and marketing of drugs.
As per WHO "The 10 largest drugs companies control over one-third of this market, several with sales of more than US$10 billion a year and profit margins of about 30%. Six are based in the United States and four in Europe. Companies currently spend one-third of all sales revenue on marketing their products - roughly twice what they spend on research and development."
Product Life Cycle
Why Go Global?
• Utilize resource and skill pool elsewhere
• Cost advantages
• Patent and Testing Advantage
• Global Application
• Development of New technologies such as biotech, pharmacogenomics
• New players stealing market shares with generics as patents expire
National Competitive Advantage
The competitive advantages of pharmaceutical industry are
• R&D and innovative capabilities
• Marketing and distribution capabilities
Firms from US, Germany and Japan are the largest pharmaceutical players. 32 of the the top 50 companies belong to US, Japan and Germany. Understanding what national competitive advantage these three countries possess that makes the biggest players. Other factors such as financial system, government regulation and demand etc add to a company's success. Using Porter's Diamond Model to study this:
• Factor Conditions
In terms of chemical industry, biotech skills and skilled labor, Germany, US and Japan were the first few countries to start off. As it takes about 12 years to get a pharmaceutical product in the market, we are seeing high number of successful firms from these countries. However, this time advantage will quickly wear out as R& D capabilities move to new countries. However these three counties have an advantage of in terms of absorption capacity and learning curve. When a particular industry is highly profitable and barriers to entry are low, the forces of imitation and diffusion cause such an industry to spread across international borders.
• Home Country Demand
The demand for pharmaceutical is low in China comparing to Germany, UK, USA and Japan. USA, Japan, France, Germany, UK, Italy, Spain, Canada, Brazil and Mexico are the largest consumers; this also explains why Germany, USA and Japan have the largest players.
• Related and Supporting Industries
Chemical industries was one of the directly supporting industries and 26 of the chemical firms on the world's top 50 chemical firms are from Japan, Germany and US(Germany - 6, Japan-9,US-11). However as the nature of Pharmaceutical industry changes, the competition increase, need for outside finance is increasing. A well developed financial market is...