International market entry modes allow firms to enter foreign markets and can choose the most appropriate entry mode for their industry. After analysing market drivers, demand and consumer behaviour, Pharmaceutical firms may choose the most strategic mode of entry to enter a market. The market entry mode is strategic and is regarded as a major factor in the Internationalisation process (Morschett et al.,2015, p.323). As illustrated below, the International market entry model outlines that Pharmaceutical firms may enter foreign markets through Exports/Imports, Subsidiaries, Mergers/Acquisitions, Joint ventures, or Licensing.
Figure 2.4 An international market entry model for pharmaceutical companies. (Adapted from Javalgi&Wright,2003, p.277).
• Joint Venture
A joint venture is characterised by the need to achieve a business transaction while remaining separate from each other. Each firm maintains its resources and independence while engaging in an activity, with the objective of achieving certain objectives. The need for joint ventures in the Pharmaceutical industry may be characterised by the need to reduce high R&D costs and by so doing, share costs through common equity (Roijakkers&Hagedoon,2005, p.8). Joint venture as a mode of market entry may
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In process licensing, a firm gives the licensee the right to use production processes. This type of licensing may be common in the Pharmaceutical industry, regarding patented drugs/products. Product licensing allows a firm to grant specific rights in the manufacture of products, while distribution licensing gives the licensee the ability to market and distribute products in an area. Brand licensing allows a firm to use a firm’s brand. Licensing enables the licensor to benefit from the skills, comparative advantage, and other capacities of the licensee (Morschett et al., 2015,
The company then decides on a market-entry strategy. This typically entails four avenues of entry into the international market. A). Market entry may be handled through exports, directly or indirectly. Internet sales and direct selling
Global pharmaceuticals had presence in India since early 80’s and it was not until 1993 that Eli Lilly International decided to establish a Joint Venture with India’s second largest laboratory and exporter, Ranbaxy. This move happened in a very challenging context as both companies have very different profiles and backgrounds. The main differential characteristic was the nature of their products. While Ranbaxy was focused on generics and in other intermediate products, Eli Lilly International core business was the commercialization and development of new drugs through an aggressive R&D strategy. The trigger for Eli
In continuation to the previous designing of global strategy for a pharmaceutical firm, we analyze some of the challenges posed by the value chain disaggregation of the pharmaceutical industry.
* Barriers to Entry. A number of factors allow a pharmaceutical manufacturer to act as a
Firstly, it is important to remember the current situation of Trader Joe’s in USA, the company has over 400 stores in 30 states and is the leader in customer service in USA. However, the company is not on the top ten supermarkets in sales category. Additionally, Trader Joe’s just operates in USA and does not have experience in other international markets. (Peterson, 2013)
Research and development teams will have to identify what is important to the stakeholders and develop products that have value for the stakeholders. If the company does not have the resources or capabilities to develop the products that stakeholders value, acquisitions must be made. Companies will need strong marketing and sales departments that will be able to develop messages that are targeted at all of the stakeholders, not just patients and physicians. The marketing and sales department must develop strategic messages that contain strong economic and clinical value messages instead of feature and benefits messages that are currently used. Since biopharmaceutical companies tend to use product differentiation as strategy to offer unique value, instead of cost, it might be necessary for them to develop partnerships with companies that provide patient support and resources to add value to their
“A joint venture is a legal organization that takes the form of a short term partnership in which the persons jointly undertake a transaction for mutual profit. Generally each person contributes assets and share risks. Joint ventures are also widely used by companies to gain entrance into foreign markets.” (Cornell University Law School) In way to engage ones customers with new stuff, joint venture has become paramount in satisfying customers with variety and also infuse modernization and advance technology. An example is the introduction of the popular video streaming website “HULU” created by a joint venture in the year 2008 by NBC Universal Television Group, Fox Broadcasting Company and the Disney –ABC Television Group. This venture
Economic: Globalization of the pharmaceutical industry is an exciting opportunity to have research and development done at cheaper prices in other countries. However, this could be a double edged sword for companies because it is easy for other countries, such as India, to produce generic versions of the drug in bulk.
The biopharmaceutical industry has historically been dominated by large companies. The threat of new entrants is low, but not impossible. The main path for entry into this market is through development of novel new drugs. New entrants are limited to this method of entry due to patent thickets surrounding incumbent drugs. The largest barrier to entry for companies attempting to enter the biopharmaceutical industry is high research and development costs. Not only must new firms develop and test new therapies, but they must also obtain approval from regulators in order to bring their products to market. Approval of a new drug requires highly capital intensive clinical test in addition to navigating a heavily bureaucratic approval process. The process is time consuming and
This report provides an analytical strategic review of the global pharmaceutical industry; its origin, evolution,
In pharma industry the raw materials mainly consist of organic chemicals. The need of different organic chemicals depends on the chemical formulae of drug. Pharmaceutical industry depends on various different organic chemicals for the production of end drugs. The chemical industry itself is very competitive and also very fragmented because their products (organic chemicals) are standardized and steps to produce them are also standardized. The chemicals used in pharma industry are commodity as pharmaceutical companies do production on economies of scale to lower the cost. The suppliers have low bargaining power because companies can switch to a new supplier without incurring a high cost. But there is a threat from supplier if it decides to go for forward integration and become a pharma industry
The need for a solid market entry decision is an integral part of a global market entry strategy. Entry decisions heavily influence the firm’s other marketing-mix decisions. Company can enter International Market with many ways, some of them are as follows:
Anna’s Car is one of the top automakers in the United States that is currently planning on selling its new revolutionized Smart Cars to two foreign countries, Japan and Germany. The company believes that the increasing trend of going green and concerns about the environment in Japan and Germany will merge significant profits shortly after entering those two markets. Anna’s Car has evaluated various market entry strategy alternatives and is now hesitating between direct exporting or foreign direct investment for Germany and franchising or joint venture for Japan.
Most joint ventures take place between related companies that share a similar target market, but do not compete directly in the goods and services they offer.
Pharmaceutical industry, the discovery, development, and manufacture of drugs and medications (pharmaceuticals) by public organizations and private organizations .Pharmaceutical companies may deal in generic or brand medications and medical devices . The pharmaceutical industry is responsible for the development, production and marketing of medications. Thus, its immense importance as a global sector is inarguable. In 2014, total pharmaceutical revenues worldwide had exceeded one trillion U.S. dollars for the first time. North America is responsible for the largest portion of these revenues, due to the leading role of the U.S. pharmaceutical industry . Sun Pharmaceuticals Industries Limited plans to acquire 85.1 per cent stake in Russian company Biosintez for US$ 24 million for increasing its presence in Russia through local manufacturing capability.