The Pharmaceutical Industry with Reference to Key Strategy Theory, Analyse and Evaluate the Changing Nature of Competition Within the Global Pharmaceutical Industry

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This essay will analyse the factors that shaped the competition within pharmaceutical industry. It will look at the key players in the market and try to answer how they obtained the competitive advantage over their rivals. Moreover his paper will also examine the main business models in pharmaceutical industry and look how the companies react to the changing nature of competition, by re-assessing their strategies.
According to the case, written by Holland & Batiz (2004), the pharmaceutical industry has its roots in 19th century but the R&D was firmly established during 1940s and 1950s. This means that throughout that time pharmaceutical companies acquired practise and experience which helped them to obtain a competitive advantage (Porter
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Michael Porter identified three generic strategies (cost leadership, differentiation, and focus) that can be implemented at the business unit level to create a competitive advantage and defend against the adverse effects of the five forces (Akan et.al. 2006).Generic strategies provide direction for companies in designing incentive systems, control procedures, operations, and interactions with suppliers and buyers. Within the pharmaceutical industry there are four main groups of competitors that have developed over the last decades. These are: generic, ethical, biotech (all require prescription) and OTC (prescription free). Each one of them uses different generic strategy to achieve and maintain competitive advantage.
R&D companies use differentiation strategy that requires them to create something about their product that is perceived as unique and innovative within the market. Differentiation often forces firms to accept higher costs in order to make a product or service appear unique (Herbert et.al. 1987). In regard to strategy ethical pharmaceutical companies need to focus mainly on their R&D process as wells as advertising that makes their customers to perceive their products as being unique. As a result, the companies that invested their capital vastly in R&D became industry leaders. Therefore companies compete on who will enter the market first with the new product, since only the pioneer drug would benefit the company. A differentiation
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