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PORTER'S FIVE FORCES ANALYSIS: PHARMACEUTICAL

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Mary Jane Regidor

on 12 February 2015

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Transcript of PORTER'S FIVE FORCES ANALYSIS: PHARMACEUTICAL

PORTER'S FIVE FORCES ANALYSIS: PHARMACEUTICAL INDUSTRY
1. Threats of entry posed by new or potential competitor (LOW)
• High entry barriers due to costs associated with research & development of new drugs

• Government regulation (i.e. FDA)

• The threat of entry posed by new or potential competitor is a LOW competitive force due to the above entry barriers & regulatory constraints.

2. Degree of rivalry among existing firms (HIGH)
• High rivalry among main companies in the industry.
• The degree of rivalry among existing firms is a HIGH competitive force

Conclusion
Pharmaceutical Industry
The pharmaceutical industry develops, produces, and markets drugs or pharmaceuticals licensed for use as medications.[1] Pharmaceutical companies are allowed to deal in generic or brand medications and medical devices. They are subject to a variety of laws and regulations regarding the patenting, testing and ensuring safety and efficacy and marketing of drugs.
5. Closeness of substitute products (HIGH)
• Demand for generic versus brand name drugs has increased because of the costs
• Generic drug companies do not have the high costs associated with the research & development of new drugs and that allows them to sell at cheaper prices
• The closeness of substitute products is a HIGH competitive force

4. Bargaining power of suppliers
(LOW)

• Sales for the pharmaceutical industry concentrate in a handful of large players and that has decreased the bargaining power of suppliers.

• The bargaining power of suppliers is a LOW competitive force

Porter's Five Forces are
1) Threats of entry posed by new or potential competitors;

2) Degree of rivalry among existing firms;

3) Bargaining power of buyers;

4) Bargaining power of suppliers and

5) Closeness of substitute products.
3. Bargaining power of buyers (MEDIUM)
• Hospitals & other health care organizations buy in bulk quantities and exert pressure on pharmaceutical companies to keep prices in check
• Regular patients have lost bargaining power due to price increases in generic drugs
• The bargaining power of buyers is a MEDIUM competitive force.

Overall and based on the above analysis of Porter’s Five Forces, we can conclude that the pharmaceutical industry is not attractive for new entrants.
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