There was continuous pressure from sectors of the government and nonprofit organizations to reduce the price of the Retrovir product. This was followed by the negative reaction from the management team to reduce the price of the drug. There are three possible alternatives to fix the problem:
1. Maintain status quo
This alternative implies that Burroughs will maintain current prices unaltered. The company would have to invest more in marketing programs in order to communicate this to its customers. The government and nonprofit organizations already cut the price by 20% in 1987 and 1989. Also the marketing campaign has to communicate that by maintaining the current prices it will not only allow the company to generate profits, but also will provide capital to invest in more research in order to develop new possible treatments and the cure for HIV.
2. Reduce the Retrovir price by 10%
This alternative will reduce the price by 10% of the Retrovir after the two price cuts made in 1987 and 1989. This new price cut will start in 1990 and the wholesale price will be $1.08 per 100-miligram capsule.
3. Reduce the Retrovir price by 20%
This alternative implies the reduction of 20% of the current wholesale price of Retrovir. This reduction will start in 1990 and the wholesale price will be $0.96 per 100-milligram capsule.
The SOWT analysis shows that Burroughs has an excellent opportunity to be the first company in the market to provide a drug to control HIV. However, there is image damage for the company: possible intervention of the government, the high price of its drug, and the introduction of new and probably better drugs from other companies in the near future. It is going to have serious effects on the company revenue and sales. Strengths * Experience in viral research drugs. * First company to develop and sell drug against HIV. * Brand recognition. * Drug FDA approved and in the market. * Control of raw material supply chain. * Company worldwide presence. * Patent for Retrovir. * Pediatric treatment program for children with HIV. | Weaknesses * High price of Retrovir. * Bad public image. * Negative reaction of some patients to the drug.| Opportunities * Increase in the number of people infected with HIV and the number of countries with infected people. * Children infected with HIV. * Develop new drugs to improve the treatments and better control HIV.| Threats * New drugs from different companies are in the testing process. The prediction that a new drug will be in the market by 1991. * Threats from some government sectors to nationalize the drug. * Campaign from some groups against company stocks. |
The experience in viral research made it possible for the company to produce a patent drug, which is FDA approved to control HIV in a short period of time with a lower research cost. This experience positioned the company to be the first in the market, develop relations with suppliers for raw material, and distribution channels. Burroughs has presence worldwide. This presence helped the company to develop the distribution channels and improve research in an effective way. After being the first in the market they developed brand recognition. Another advantage for the company is the pediatric treatment: the company is treating children with Retrovir. Weaknesses
A major weakness of the company is the bad reputation that it is getting due to the high price of Retrovir. This bad reputation is damaging the image of the company to the point that people are perceiving the company as not humanitarian and only a profit focus company. Another weakness is the bad reaction of some patients to the treatment. Opportunities
The major opportunity for Burroughs is the exponential increase of people with HIV in the near future. This increase on infected people is not only in the U.S. This is a disease that is affecting the entire...