Marketing Strategy - Analyse Competitive Dynamics in Pharma Industry

Topics: Strategic management, Michael Porter, Marketing plan Pages: 20 (5439 words) Published: August 26, 2009
Marketing Strategy Use of strategy frameworks to analyse competitive dynamics in the pharmaceutical industry Graham Leask
is a member of the Economics and Strategy Group at Aston University, where he currently teaches Value Based Strategy and Entrepreneurial Strategy to final year and postgraduate students. Graham joined ICI Agrochemicals Research, before entering the pharmaceutical industry, where he worked in marketing and general management roles for several top ten pharmaceutical companies. His most recent role was Strategic Planning Director for Astra Pharmaceuticals, where he was responsible for strategy development, which enabled him to gain first hand experience within the world’s key pharmaceutical markets. His primary research interests include competitive strategy, merger, acquisition and the alignment of strategy to shareholder value creation.

A knowledge of competitive dynamics is generally regarded as an essential starting point for successful strategy formulation.1–3 This paper explores the benefits of strategic group analysis and the technique of strategic mapping, compared with the merits of alternative strategy frameworks for classifying and making sense of competition. The pharmaceutical industry is used to provide an empirical example. This is an industry where a number of characteristics suggest that strategy should matter. First, the pharmaceutical industry is consistently cited as one of the world’s most profitable industries.4 Secondly, the industry spends on average US$700m on each new chemical entity that it produces and a further US$400m on marketing.5 Thirdly, analyst valuations of pharmaceutical companies differ widely, based on current performance and future expectations.6 Fourthly, the long lead time of the industry introduces considerable uncertainty into the outcome of research investment.7 Finally, the erosive effects of patent expiry and the increasing power of buying groups leads to a situation where

Graham Leask Economics & Strategy Group Aston Business School Aston University Birmingham B4 7ET, UK. e-mail:

establishing and sustaining a strong market presence over the longer term is becoming more difficult.8 In order to remain highly profitable therefore, pharmaceutical companies must be effective in executing their strategies or they will fail to cover the high costs incurred in research, development and global marketing. Different strategies may be expected to result in markedly different valuations which are not simply the result of serendipity.9 It also appears that the company which is fortunate enough to discover a potential blockbuster in the research process does not always win. Strategic groups are therefore important for two main reasons. First, because through providing a framework for the classification of strategy within a given industry, they facilitate the comparison of strategies and allow the separation of winning firm strategies from losers. Secondly, if we wish to optimise firm performance, then the identification of winning firm strategies and their characteristics would seem a good place to start. The contribution that strategic group

# Henry Stewart Publications 1745–7904 (2005)

Vol. 5, 3 209–218

Journal of Medical Marketing



theory makes to an understanding of strategy is discussed in the next section, before moving to a comparison of different methods of classifying and making sense of strategy in the chosen industry.

Classification of strategy and the origin of strategic group theory The name ‘strategic group’ was coined by Hunt, who in 1972 was researching strategy at Harvard into the US white goods industry.10 Hunt found that a number of groups of firms pursuing asymmetric strategies were present in this industry. Hunt’s findings ran contrary to expectation because extant theory at that time predicted that profit differentials between industries were the product of industry barriers to...
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