Environmental Factors Affecting Pharmaceutical Industry and Implications of Changing Business Environments
INTRODUCTION 1
I. ENVIRONMENTAL FACTORS AFFECTING INDUSTRY 1
I.1. PESTEL ANALYSIS 1
I.2. FIVE FORCES MODEL 3
II. IMPLICATIONS OF CHANGING BUSINESS ENVIRONMENT 4
III. USE AND LIMITATIONS OF TOOLS APPLIED 5
III.1. USE AND LIMITATIONS OF PESTEL 5
III.2. USE AND LIMITATIONS OF FIVE FORCES MODEL 6
SUMMARY 6
APPENDIX 1 8
APPENDIX 2 9
REFERENCES 10
INTRODUCTION
The origin of the modern pharmaceutical industry can be traced to the late 19th century. There are five broad types of industry players: Ethical, Generic, Biotech, OTC, and Vaccine companies. Ethical drug is key sector with 80% of market share by value and 50% by volume. Key markets are USA, Japan, The EU, China, and Mexico. Companies with consistently high levels of R&D spending and productivity have become industry leaders. Pfizer (USA), GlaxoSmithKline (UK), Sanofi-Aventis (France), Novartis (Switzerland), Johnson & Johnson (USA) are leading global pharmaceutical companies.
Purpose of this report is to identify main environmental forces that are currently affecting the pharmaceutical industry and to provide reader the understanding of possible effects of this changing business environment on pharmaceutical firms. It also evaluates advantages and limitations of tools used to analyse pharma industry.
In this process, author first applies PESTEL framework to the pharmaceutical industry to derive environmental factors from macro layer. Then he evaluates industry’s attractiveness by applying Porter’s Five Forces model. In the next part of the report author evaluates use and limitations of PESTEL analysis and Porter’s Five Forces Model.
I. ENVIRONMENTAL FACTORS AFFECTING PHARMACEUTICAL INDUSTERY
To identify the factors which affect the industry, we have to apply PESTEL framework to macro-environment and Porter’s Five Forces Model for industry layer.
There are three layers of the business
I. ENVIRONMENTAL FACTORS AFFECTING INDUSTRY 1
I.1. PESTEL ANALYSIS 1
I.2. FIVE FORCES MODEL 3
II. IMPLICATIONS OF CHANGING BUSINESS ENVIRONMENT 4
III. USE AND LIMITATIONS OF TOOLS APPLIED 5
III.1. USE AND LIMITATIONS OF PESTEL 5
III.2. USE AND LIMITATIONS OF FIVE FORCES MODEL 6
SUMMARY 6
APPENDIX 1 8
APPENDIX 2 9
REFERENCES 10
INTRODUCTION
The origin of the modern pharmaceutical industry can be traced to the late 19th century. There are five broad types of industry players: Ethical, Generic, Biotech, OTC, and Vaccine companies. Ethical drug is key sector with 80% of market share by value and 50% by volume. Key markets are USA, Japan, The EU, China, and Mexico. Companies with consistently high levels of R&D spending and productivity have become industry leaders. Pfizer (USA), GlaxoSmithKline (UK), Sanofi-Aventis (France), Novartis (Switzerland), Johnson & Johnson (USA) are leading global pharmaceutical companies.
Purpose of this report is to identify main environmental forces that are currently affecting the pharmaceutical industry and to provide reader the understanding of possible effects of this changing business environment on pharmaceutical firms. It also evaluates advantages and limitations of tools used to analyse pharma industry.
In this process, author first applies PESTEL framework to the pharmaceutical industry to derive environmental factors from macro layer. Then he evaluates industry’s attractiveness by applying Porter’s Five Forces model. In the next part of the report author evaluates use and limitations of PESTEL analysis and Porter’s Five Forces Model.
I. ENVIRONMENTAL FACTORS AFFECTING PHARMACEUTICAL INDUSTERY
To identify the factors which affect the industry, we have to apply PESTEL framework to macro-environment and Porter’s Five Forces Model for industry layer.
There are three layers of the business
References: Accessed: 4th November, 2008 Cooper, L Evans, C. & Richardson, M. (2007) “Assessing the environment”, British Journal of Administrative Management Oct/Nov issue 60 pi-iii Johnson, G Kotler, P. (1998) Marketing Management Analysis, Planning, Implementation, and Control .9th Edition, Englewood Cliffs: Prentice-Hall. [Accessed: 3rd November, 2008] Porter, M Porter, M. (1980) Competitive Strategy Techniques for Analysing Industries and Competitors. The Free Press Porter, M (1979) “How competitive forces shape strategy” Harvard Business Review March/ April, Vol Walsh, P. (2005)” Dealing with uncertainties of environmental changes by adding scenario planning to strategy reformulation equation” Management Decision, vol. 43 issue 1, pp 113-122. Adopted from:: Porter (1980) Competitive Strategy Free Press