Environmental Factors Affecting Pharmaceutical Industry and Implications of Changing Business Environments

3477 words 14 pages
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
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Elderly people consume 4 times more health care than younger people. This creates pressure on health care funding systems. Nowadays customers are vocal, well-informed, and demanding. More people are now computer literate and can use internet easily. They can obtain information about new products through internet. Drug industry knows this and investing more in direct to consumer marketing.

I.1.4 Technological Factors:

Technological factors can include following factors:
1. Government spending on research.
2. Government and industry focus on technological effort.
3. New discoveries/developments.
4. Speed of technology transfer.
5. Rates of obsolescence.
Johnson et.al.(2005). Since there is fierce competition within the industry, organisations continually focus on research and development. But R&D is very costly and time consuming. Due to improvements in technology new and better medicines are coming into market; and new diseases are appearing as well. This increases the rate of obsolescence of drugs which drives innovation. Some countries like China and India are pouring money in pharmaceutical industry. To become leader in industry, organisations need to be technology driven. Due to innovative new products small companies can become market leaders. Technology has affected consumers also. Widespread use of internet provides chance to consumers to gain information on medicines, their prices worldwide etc.

I.2 Porter’s five forces model:

This model is

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