AmerisourceBergen Corporation is a public wholesale firm operating in the pharmaceutical sector and offering and distributing its pharma drugs and services in North America and the United Kingdom. The firm also distributes health care products, including health care hospitals and health systems. Dealing in the pharmaceutical industry, the firm was established in 2001, having its headquarters in Pennsylvania, United States.
The firm generated significant revenue of 179.58 US billion dollars and has occupied a workforce figure of almost 22,000 as of 2019 (AmerisourceBergen, 2019). From the perception of pharmaceutical sector, the evaluation of Porter’s five forces would be of great help for developing policies to better understand the firm’s standing position.
Competitive Rivalry in The Market
The pharmaceutical industry is considered one of the most competitive sectors globally to cater to the growing population and diseases. As a result of this increase, several companies and institutions have captured the market to overcome the need for medicines and drugs and gaining high profits, resulting in fierce competition among established firms. In addition, technological advancements have further influenced the competition among firms to adopt new ways. AmerisourceBergen is one of the United States key distributors of pharma medications and supplies that different firms and individuals need.
The major competitors of the company are McKesson Cardinal Health, Henry Schein and Owens and Minor. As of 2020, the company is found to boost the revenue of $189.9 US billion while the other firms reflected the figure of 238.2, 152.9, 10.1 and 8.5 US billion dollars (Craft, 2020). Therefore, the presence of such big names in the industry makes the competition level more complex.
Threat of Substitutes
The threat of having substitutes is typically low to moderate in the Pharmaceutical Industry because medicines and treatments require a significant number of resources, investments, and exploration and typically take years to develop. Therefore, alternative treatments and remedies, such as meditations, herbal medicines, and other therapies, pose a minimal concern.
Furthermore, the drug’s use is protected by a patent, which means that no one may replace it while the patent is active. Due to the extended life of patents, large corporations frequently hold a monopoly. But once the protection on their drugs has expired, pharmaceutical corporations must deal with replacements. (Newham et al, 2018). Therefore, the risk of substitutes in the sector is less to medium.
The Threat of New Entrants
The threat of new entrants in the pharmaceutical industry is relatively low as there are loads of giant pharma firms already operating globally and has raised the barriers to entry high enough to restrict the new entrants from the market. There is indeed a massive investment associated with the initial procedures, distribution channels, and marketing activities.
In addition, established firms in the sector have built an economy of scale, making it more difficult for new firms to gain some market penetration. Moreover, the regulations imposed by the states are challenging to follow as fresher, and the expenses involved in the production and distribution with a long time of research are significant (Rafferty et al, 2016). Hence, minimizing the way of entry for new firms in the sector.
Bargaining Power of Buyers
The Bargaining power of consumers in the context of the pharmaceutical industry is low to moderate because buyers usually get those medications and drugs that are prescribed to them even though the firm charges a high cost for them. Furthermore, big customers like hospitals and health systems are somewhat capable of negotiating as they buy in bulk, but individual consumers have little influence.
Consumers’ influence increases as they have more awareness about market pricing and ranges (Moreno et al., 2017). But the large firms influence prices and control the sector with the advantage of patents. Keeping in view such a method, buyers’ bargaining power is considered low to moderate in the industry.
Bargaining Power of Suppliers
The Bargaining power of suppliers in the pharmaceutical industry is minimal. The sector only requires the raw materials for the medicines and the packaging materials necessary for the finished commodity. All of these goods are available from a range of cooperative manufacturers, putting them in a weak position to negotiate or restrict prices.
Raw material suppliers, labor force, chemical producers, warehouses, dealers, and distribution firms are examples of pharmaceutical industry suppliers. In addition, big corporations are able to impose an influence on the industry’s business cycle and can swing the supply methods (Saluja and Sekhon. 2016). Hence, the bargaining power of suppliers is minimal in context to the pharmaceutical sector.
References
AmerisourceBergen, 2019. AmerisourceBergen Corporation – Financials – Annual Reports. [online] Investor.amerisourcebergen.com. Available at: https://investor.amerisourcebergen.com/financials/annual-reports/default.aspx.
Craft, 2020. Competitors. [online] craft.co. Available at: https://craft.co/amerisourcebergen/competitors.
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.
Newham, M., Seldeslachts, J. and Banal-Estanol, A., 2018. Common Ownership and Market Entry: Evidence from Pharmaceutical Industry.
Rafferty, J., Nagaraj, H., P McCloskey, A., Huwaitat, R., Porter, S., Albadr, A. and Laverty, G., 2016. Peptide therapeutics and the pharmaceutical industry: barriers encountered translating from the laboratory to patients. Current medicinal chemistry, 23(37), pp.4231-4259.
Saluja, V. and Sekhon, B.S., 2016. The regulation of pharmaceutical excipients. Journal of Excipients and Food Chemicals, 4(3), p.1049.