Pharma

Pharmaceutical Industry

Medicines have played a key role in improving the life expectancy of humans. In the last century there have been incredible improvements in the field of medicine making the pharmaceutical industry one of the most profitable industries. Government plays an important role in regulation of this industry. The pharmaceutical industry is characterized by a high level of concentration with fifteen multinational companies dominating the industry. Major players in this industry are Pfizer, Glaxosmithkline, Merck & Co, etc.

Industry Analysis Based On Porters Five Forces

Supplier Power: Supplier power in this industry is minuscule. Raw materials for the medicine ( chemicals) are readily available. The cost of raw materials is a relatively small fraction of the cost of the end product. One area where supply might be a constraint is the scarcity of donor organs for the purpose of R&D

Buyer Power: Buyer's include customers, doctors, and hospitals. All of them rely heavily on the producers of the medicine. Also the buyers of medicine are not price sensitive. Hence the buyer power in this sector is very poor.

Threats of new entry: Potential Barriers to entry like Patents, R&D Costs, Government Regulations, etc are prevalent in this industry. However huge profits continuously attract new companies in to this highly profitable and lucrative sector

Substitute Competition: There is hardly and competition to pharmaceutical companies from substitute. Potential Substitute includes alternative therapies, auyrveda, etc.

Industry Rivalry: The Pharmaceutical Industry is highly fragmented with large number of firms. This is evidenced by the fact that the world largest pharmaceutical company contributes to a very small percentage of the annual sales. Therefore because of large