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Porters 5 Forces - Pharmaceutical Industry

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Rory Sands

on 4 January 2013

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Transcript of Porters 5 Forces - Pharmaceutical Industry

Industry Competitiveness

Overall the pharmaceutical industry is highly competitive, due to reasons already discussed but also due to the potential for very high returns if new drugs can be created. The market is densely populated with many of the firms being established for significant amounts of time and well known globally. Bargaining Power of Suppliers

Established industry has led to a multitude of suppliers limiting influence. However suppliers tend only to supply technology as drugs are produced in house. The Specialist knowledge of suppliers slightly increases bargaining power, however not to enough to negate the effects of supplier choice. Bargaining Power of Customers

Patents lasting 20 years after drug invention mean that the company can dictate price and supply during that period, however once the patent finishes, generic drug producing firms can move in consequently placing more power in the consumers hand Threat of Substitutes

There is a medium to high threat of substitutes in the pharmaceutical industry coming from the threat of generic branded drugs once patents run out and also from alternative medicines and treatments (particularly prevalent in eastern cultures) Porters 5 Forces Analysis Threat of New Entrants

Low threat of new entrants due to the already competitive nature of the industry, high investment levels required for start up, high risk of no return on investment if a new drug cannot be created and the specialised knowledge required to be able to produce these new drugs.
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