Porter’s Five Forces Model Analysis
The Threat of New Entrants: Low-to-moderate threat of new entrants due to some barriers that are difficult to overcome. The high research and development costs for new drugs increase the barrier to entry and the government policies restrict and regulate the medicine market.
The Bargaining Power of Buyers: Low-to-moderate bargaining power of buyers because the main customers of pharmaceutical industry are hospitals, health care organisations and patients who are scattered. Hospitals and health care organisations buy in huge quantities and have pressure on pharmaceutical companies to price adjustment. The switching cost is low. However, the patients have low bargaining power only comply with doctor.
The Bargaining Power of Suppliers: Low bargaining power of suppliers as pharmaceutical industry relies on several suppliers such as chemicals. There is a low cost to switch their suppliers and the large number of players in industry decreases the bargaining power.
The Threat of Substitutes: Low-to-moderate threat of substitutes because it is hard to duplicate the raw materials of medicine and no substitutes for them. With the development of technologies, biotechnology is a threat to synthetic pharmaceutical products.
Rivalry amongst competitors: High competition amongst competitors. There are many competitive pharmaceutical industries with various players and the high growth and low fixed cost requirement and high working capital raise the competition.
Overall Assessment: The pharmaceutical industry is more competitive and attractive to compete in as the majority of five forces are low-to-moderate. In the future, the pharmaceutical industry is less attractive however the low threat of new entrants and substitutes would be changed to high.
The Threat of New Entrants: Low-to-moderate threat of new entrants because of the high barrier of huge capital and costs requirement to...
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