Merck & Co. is ab American multinational company deals in the pharmaceutical industry. It is one of the largest companies of this industry in the world. It was founded by George Merck in 1891. Its Headquarter is in New Jersey, United States. The main products of the company are Gardasil, Singulair, Propecia/Proscar, Zocor Vioxx Fosamax, Keytruda Januvia Primaxin etc. It is public listed company and registered in New York Stock Exchange. There are total 69,000 employees working in this organization. [1]
Bargaining Power of Supplier
In this industry, there are different chemicals that are used by the company to manufacture its products. Each chemical is used on large scale, so each chemical is supplied by single supplier. It means there are number of suppliers in the market to provide the raw material. As there are several suppliers in the market, it means the switching cost of Merck & Co is low and it can easily change its suppliers because of its large scale (some supplier may not be able to fulfill the demand) and because of other options available for the market. Suppliers are more so they do not have the power to influence the price of raw material they are providing due to available substitutes.
In this industry, the cost of material is low, most of the costs incurred due to R&D for any product. Therefore, Merck & Co. is a large company and needs a large size of supplies from various suppliers. Similarly, other different factors discussed above shows that in this industry the bargaining power of suppliers is low.
Bargaining Power of Buyer
As this industry is manufacturing products for different patients. Different patients to overcome the disease of different nature, purchase the medicines to consume. End-user is not much sensitive about price movements if it satisfying their need. Similarly, brand identification in the market also plays a vital role. Industry is highly fragmented, consumers are more sensitive about the brand and need satisfaction as compare to other factors. There are a large number of buyers and individually they cannot influence the market. Therefore, all of these factors show that the bargaining power of the buyer is low in this market.
Competitive Rivalry
As the market is highly fragmented, there are several companies in the market offering different products to the same segments. Different large players are influencing the market to increase the market share through mergers and acquisitions from the last few years. It is hard for small companies to survive in the market without any competitive edge in the portfolio. Small companies with good potential are bought by different big companies. There are different formulas to cure the same disease and every company uses R&D to be influential in the market. Therefore, all of these factors show that in this market competitive rivalry is high.
Threats of Substitute
As this industry is serving different patients. Each company manufacturing different products by different formulas for the same disease. Like DELSTRIGO is a product of Merck & Co. which is used for HIV infection. In the market, there are different other medicines available to cure similar diseases. Such medicines include Abacavir, Emtricitabine, and Lamivudine, etc. Same is the case for other diseases. Therefore, all of these factors show that substitutes of Merck & Co. are available in the market and threats of substitutes are high in this market. [2]
Threats of New Entrants
This industry is regulated by different legal bodies and laws are strict for every company doing business in this industry. Similarly, there are different laws and regulations and time taking process for registering new products in this industry because of the sensitivity of the nature of products. Large capital is needed to start the company. Most of the expenses are related to R&D of products by different companies, it is another barrier because a large amount of investment is needed to do it. For new entrant it is hard to attract the customers because of brand identification, consumers are not much sensitive about price as compare to brand identification. So, new entrants cannot influence consumers through less price. Therefore, all of these factors show that threats of new entrants are low in this market.
References
1 Merck & Co., 2019, about, [online], Available at: https://www.merck.com/about/home.html
2 Anonymous, 2019, Antiretrovirals: HIV and AIDS Drugs, [online], Available at: https://www.webmd.com/hiv-aids/aids-hiv-medication#1