Porter’s Five Forces Analysis:
Sector -1: Pharmaceuticals Industry
HEALTH IS WEALTH is one of the most believed saying by all the people in the
world. To ensure safety health pharmaceutical industry is the man and most important
player. Therefore, here’s an attempt to assess the profitability in an industry by
understanding porters five-industry level forces.
1. Bargaining power of buyers : LOW OR MEDUM
Pharmacy is one of the most unique industry because pharmacy or
medicine is an urgency or necessity rather than a luxury.
So, the bargaining power for a buyer is ether low or medium but never
high
The only entities with any negotiating power are the pharmacies and
medical institutions that fulfil the medical patients’ prescriptions.
And also even ethically also there are some restrictions by government
in order to make sure that no high prices or profits are being charged on
the public.
And most of the organisations prefer to buy the medicines in bulk
quantities which will result in pressure on the industry and leads to
frequent price check.
One more man reason for low bargaining power s that, no matter what
customer/ patent needs to buy whatever is prescribed by the doctor.
Therefore, as a conclusion we can say that bargaining power of buyers is
medium in case of large organisations like health centres, but whereas in
case of small buyers like individuals it is very low.
2. Bargaining Power of Suppliers: LOW
Suppliers refers to those who supply raw materials to the companies’ in
an industry.
In the present competitive industry, raw materials are available from
various sources.
And therefore any company can easily switch to other sources.
Suppliers usually offer multiple products to the manufacturer, which
moderates pricing on rarer materials and unique equipment.
Here, in case of high cost, suppliers can also go for forward negotiation
and become a pharmacy company.
3. Rivalry among Existing Competitors: HIGH
Pharmaceutical industry will always be on the top lists of the industries
that earn high reruns.
This will boost all the innovators to be more creative and competitive in
the industry.
Though it requires high capital investment, there’s a scope for high
growth prospectus.
The rivalry in the market can be in the form of price competition,
advertisements and product innovation etc.
Almost all the market player’s involved in the market have existed for a
long time and are globally recognised.
As technology is also growing rapidly which is giving a high scope for
the competitors.
4. Threat of Substitutes Products: HIGH
Healthiness of an individual is necessary until his life expires. It means
unless and until human world exists, there’s a need for pharmacy.
Therefore demand for pharmacy continues and industry thrives.
Production of these generic products is not that tough, so, threat of
substitutes is almost high.
Sometimes the effect of substitution also varies based on the drug or
medicine.
There’s also patents and license system where the protection of the
inventor or the original owner is ensured.
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
5. Threat of New Entrants: LOW
High entry barriers due to costs associated with research & development
of new drugs.
In addition to that the restrictions and rules taken by government are also
high.
As trust is also plays man role, consumers will prefer the same player
rather than a new one.
N addition to above reasons, high capital requirements, strategies, risk of
high failure are more reasons for low threat of new entrants.
