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Porter’s Five Forces of Abbott Laboratories

Abbott Laboratories is an American public corporation dealing in the pharmaceutical industry, providing and selling generic medicines, devices and nutritional all over the world. Similac, Ensure, and Pedialyte is among the most famous products of the firm. It has been dealing in the pharmaceutical industry, the company was formed in 1888, with its head operations located in Illinois, United States.

The firm generated a handsome sales figure of 34.68 US billion dollars and has attached a workforce body of over 100,000 as of 2020 (Abbott, 2020). From the perspective of the international pharmaceutical sector, the consideration of Porter’s five forces would be of great use for developing procedures to become more aware about the firms’ current position in the industry.

Abbott Laboratories – Competitive Rivalry in The Market

The pharmaceutical industry is considered to be one of the most complex sectors globally in order to fulfil the demand of the growing population and ailments. New technologies have raised the pressure on businesses to adopt new methods. As an outcome of this increase, several firms and institutions have stepped into the market to provide the supply for medicines and drugs and gaining high returns and brand image, resulting in tough rivalry between existing firms.

The foremost competitors of the company are Johnson & Johnson, Pfizer, Merck &co. and Novartis. Abbott Laboratories is one of the world’s largest pharma firms based on the number of employment worldwide, with over 107,000 figures, while at the same time, Johnson & Johnson is leading at the moment with 132,000 employees all over the world (Statista, 2021). Therefore, the presence of such big corporations in the industry makes the competition level more complex.

Abbott Laboratories – Threat of Substitutes

The threat of having substitutes is typically low to moderate in the Pharmaceutical Industry because treatments and prescriptions require a significant amount of money, resources, and analysis and usually take years to develop. Alternative drugs and treatments, such as exercises, herbal medicines, and other therapies, provide a slight risk.

Furthermore, the drug’s use is protected by a patent, which means that no one may replace it while the patent is operational. When the patent on their drugs has lapsed, pharmaceutical corporations must deal with replacements (Song and Han, 2016). Due to the extended life of patents, large corporations frequently corner the market. Therefore, the element of substitutes in the sector is more minor to medium.

Abbott Laboratories – Threat of New Entrants

The threat of new entrants in the pharmaceutical industry is considered low because there are so many substantial pharma companies currently functioning globally. The barriers to entry have remained strong enough to hold the majority of new competitors out. The core product development, sales channels, and marketing activities all come with a hefty price tag.

Existing firms in the industry have developed economies of scale, making it much harder for newcomers to gain a foothold in the market. Moreover, governments’ restrictions are difficult to follow because they are fresher, and the costs of production with a long period of study are high (Bailey and Thomas, 2017). Hence, minimizing the way of entry for new firms in the industry.

Abbott Laboratories – Bargaining Power of Buyers

In the drug industry, consumers have minimal to moderate negotiating power because they typically order the medicinal products that are recommended to them, even if the firm charges a heavy price for them. Secondly, because institutions purchase in quantity, large clients like hospitals have considerable negotiation power, whereas individual consumers have very little of it.

The power of customers strengthens as they gain information about market retail prices and variations (Moreno et al., 2017). However, through the use of patent applications, large corporations can influence prices and monopolize the industry. Keeping in view such a method, consumers’ bargaining power is considered low to moderate in the industry.

Abbott Laboratories – Bargaining Power of Suppliers

The Bargaining power of suppliers in the pharmaceutical industry is low. Only the raw components for the medications and the packing material for the end product are required by the industry. All of these items are available from a range of cooperating vendors, putting them in a poor negotiating or price-control position.

Pharmaceutical sector suppliers include raw material providers, labour sources, chemical makers, storage, dealerships, and distribution companies. Large firms can shift the distribution network by exerting influence on the industry’s dynamic systems (Saluja and Sekhon. 2016). Therefore, the bargaining power of suppliers is low in the context of the pharmaceutical sector.

References

Abbott, 2020. Annual Report. [online] Abbottinvestor.com. Available at: https://www.abbottinvestor.com/static-files/52cadf21-4090-40fd-9857-fa58e1e25949.
Bailey, J.B. and Thomas, D.W., 2017. Regulating away the competition: The effect of regulation on entrepreneurship and employment. Journal of Regulatory Economics, 52(3), pp.237-254.
Moreno, F.M., Lafuente, J.G., Carreón, F.Á. and Moreno, S.M., 2017. The characterization of the millennials and their buying behavior. International Journal of Marketing Studies, 9(5), pp.135-144.
Saluja, V. and Sekhon, B.S., 2016. The regulation of pharmaceutical excipients. Journal of Excipients and Food Chemicals, 4(3), p.1049.
Song, CH, and Han, J.W., 2016. Patent cliff and strategic switch: exploring strategic design possibilities in the pharmaceutical industry. SpringerPlus, 5(1), pp.1-14.
Statista, 2021. Largest pharmaceutical companies by employees 2019 | Statista. [online] Statista. Available at: https://www.statista.com/statistics/448573/top-global-biotech-and-pharmaceutical-companies-employee-number/.

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