Nucleon, a small biotechnology start-up company is in the process of human trials for their first potential product, i.e., CRP-1. Nucleon has to decide among several alternatives on producing CRP-1 for their long-term survival in the intensively competitive and high-stakes drug industry. Industry Analysis -Porter’s Five Forces
The Pharmaceutical industry has several high entry barriers as shown in figure 1. Economies of scale, product differentiation, government policy and capital requirements and financial services are few barriers for new entrant. Level of threat from rivalry is also high in this industry. Industry has presence of large number of small firms of a similar size. They are in direct competition with one another, which can often lead to severe price reduction strategies as a competitive means. Power of buyers is medium in this industry because of mixture between concentrated and scattered buyers, i.e., doctors, end users, government etc. Suppliers have low bargaining power company can switch from their suppliers without incurring cost. Threat of substitute is non existence. Nucleon General Environment
There are several external factors that affect the pharmaceutical company. Social: There is increasing demand for drugs because of high mortality rates of adults. Legal: The introduction of new drugs is closely regulated by FDA. Economic: Booming economy after 1980s is leading to increase in pharmaceutical companies. Political: Increase in minimum wage has leaded an increase in affordability of baby boomers. Technology: progress in biotechnology can be used to discover, develop and produce new drugs. VRIO Analysis
The table 1 shows the status of the resources and capabilities of Nucleon, Inc. Product Design: Product design is a valuable, rare and organized to exploit its full potential; however it is still imitable as issues with patenting always exists. This puts the company with temporary competitive advantage. Research and...