Pfizer is an American pharmaceutical company with headquarters in New York. The company has the ambition to come up with innovative and differentiated products that would help to overcome the health challenges worldwide. Pfizer is one of the largest pharmaceutical companies all across the world with its operations from more than 150 years (Pfizer, 2019). Innovation and differentiation is now a major contributing factor to the success of pharmaceutical companies. Successful innovation can be applied if the company understands the industry. The analysis of the global pharmaceutical industry is done by using Porter’s five forces analysis for helping Pfizer for future planning
Competitive Rivalry
The demand for medicine and pharmaceutical products around the globe is exceptional and the industry has gained enormous growth in the last few decades. The Chinese pharmaceutical sector has the highest rate of growth in 2014. The major competitor in the pharmaceutical industry comes from America and Europe that leads the industry in terms of revenues. Pfizer is the largest in 2018 with annual revenue of 53.7 billion US dollar. Roche, Johnson & Johnson, Sanofi, Merch, Novartis, Abbvie, Amgen, & GSK collected revues of 45.6, 40.7, 39.3, 39.7, 34.9, 32.8, 23.7, and 23 billion US dollar in 2018 (Ellis, 2019). The collection of such a large amount of revenue by these company shows the growth of industry and the tough competition among firms as there are multiple players dominating the industry rather than two or three. The presence of these players with exceptional financial and revenue strengths intensifies the competitive rivalry in the pharmaceutical industry at a global level.
Threat of Substitutes
Medicine and other health-related products are the basic needs of human life. If there are no medicines or health-related products, the death rate will be high. It is not possible that a human being can survive without health products. Now looking at the pharmaceutical industry, there does not seem to be any close substitute for the pharmaceutical industry. There are no products currently that have the benefits of curing the person’s health other than products from the pharmaceutical industry. The threat of substitute for specific products within the industry is always high as the innovation keeps on replacing the older products but the pharmaceutical industry itself is safe from the threat of being replaced (Holland, 2014).The lack of significance and availability of substitutes for health-related products have decreased the threat of substitutes for the pharmaceutical industry.
The Threat of New Entrants
Due to growth and the size of industry and contribution of innovation in the products, the new entrants are always keen to start businesses in the pharmaceutical industry. The researchers that are expert in research and finding out innovative products and ideas in the industry attach venture capitalists with them to enter into the market. The industry that has room for innovation is always inviting the new entrants. The lack of knowledge of customers for pharmaceutical products is another benefit that attracts the new entrants towards the pharmaceutical industry (Holland, 2014). This lack of knowledge leads to high price setting by the industry players. Therefore, the threat of new entrants is high.
Bargaining Power of Suppliers
The power of suppliers is high when the products provided by suppliers are scarce or do not have multiples providers. This is not the case with drug suppliers for the pharmaceutical companies which is the reason for the low bargaining power of suppliers. But in case of equipment supplier of pharmaceutical machinery, the suppliers are less as compared to drug suppliers. The machinery is technical equipment that is not possible to be provided by anyone. In the case of machinery, the bargaining power of suppliers is high (Kirytopoulos, 2008). Therefore, balancing the impact of both types of suppliers for the pharmaceutical industry, the overall bargaining power of suppliers is moderate.
Bargaining Power of Buyers
Pharmaceutical products are those products that are completely unknown to customers in terms of differentiation and costing. Despite the number of companies available, the buyers do not have any control over the pricing of the products. They have to buy at the price what is set by the companies. Governments do have control over prices but the lack of knowledge about the products lead to no control or bargaining of buyers over the products (Holland, 2014). Therefore, the bargaining power of buyers for the pharmaceutical industry is low.
References
Ellis, M (2019). Who are the top 10 pharmaceutical companies in the world? (2019).Available at: https://www.proclinical.com/blogs/2019-3/the-top-10-pharmaceutical-companies-in-the-world-2019
Holland, S. (2014). The Global Pharmaceutical Industry. Manchester Business School. Available at: https://www.researchgate.net/publication/265114484
Kirytopoulos, K., Leopoulos, V., & Voulgaridou, D. (2008). Supplier selection in the pharmaceutical industry: an analytic network process approach. Benchmarking: An International Journal, 15(4), 494-516.
Pfizer. (2019). Our Purpose. Available at: https://www.pfizer.com/purpose