What are Strategic Development Tools?
This paper is being presented to explain different strategic development tools and their use within the business or industry. In order to discuss these different tools such as PESTLE Analysis, Porter 5 force framework, SWOT Analysis and Porter’s Generic strategies will be applied to the Pharmaceuticals Industry.
Pestle analysis is also denoted as PEST analysis, is a notion in marketing principles. Furthermore, this concept is utilized as the tool by different businesses to evaluate the environment in which they are working or are planning to establish a novel service, project, or product. PESTLE is a cue, which in its extended form signifies P for Political, E for Economic, S for Social, T for Technology, L for Legal, and E for Environment (Perera, 2017).
These factors define the level to which the government of the country may affect the industry or economy. The Pharmaceutical industry is working in the Health Care services and equipment in various countries and disclosures themselves to diverse kinds of political risks and environment (Fern Fort University, 2018).
These factors are elements of the performance of the economy that influence an industry and have long-term effects. The pharmaceutical industry could make use of economic factors of the country such as inflation, growth rate, and economic indicators of the industry like Health Care services and equipment industry customer spending, growth rate, etc., in order to estimate the growth.
Social factors inspect the market’s social environment and measure elements like population analytics, demographics, and cultural trends, etc. Socio-cultural factors offer opportunities to the sector of pharma. The aging population is the one that offers a broad variety of opportunities for the whole industry. Aging population will require devotion for numerous types of problems that arise with increasing age (Pratap, 2017).
The technological factors are related to the technological innovation that might influence the industry operations. Technology has provided various opportunities to the healthcare and Pharma sector. However, it also remains an expenditure source for the companies of the Pharma industry. Particularly, the growth of social networking has resulted in arisen of moneymaking opportunities for the sector (Pratap, 2017).
There are some laws that influence the environment of the business in some nations while there are some strategies that are maintained by the businesses for themselves. Presently, the financial penalties on the companies of Pharma have also become recurrent (Pratap, 2017).
These factors comprise all those elements that affect or are determined by the adjacent environment. Various types of pharmaceutical filtrates can contaminate the environment. However, maximum of these products do not have a key influence on the environment, yet their appropriate disposal and storage are important to evade any type of environmental influence (Pratap, 2017).
How are Strategic Development Tools Used in Business?
Porter Five force framework is one of the known tools used for analyzing the competition of the company. It makes use of five industry forces to define the competitive intensity in the industry and its level of profitability (Omsa, Abdullah and Jamali, 2017).
The threat of new entrants is low due to the presence of high barriers of entry. The industry involves high costs related to the research and development of new drugs and medicines, which is not affordable for the new entrant within the industry (Marin, 2008).
The competition among existing companies is high within the pharmaceuticals industry. For instance, the present competition in the erectile dysfunction space where Eli Lilly & ICOS says that Cialis works longer as compared to Pfizer’s Viagra or Bayer & GlaxoSmithKline says that Levitra works quicker (Marin, 2008).
Healthcare organizations and hospitals purchase in bulk quantities and increase the burden of companies in the pharmaceutical industry to keep prices in check. Moreover, the consistent patients have lost the power of bargaining because of increasing prices of generic drugs. This reflects that the buyer’s power of bargaining is medium (Marin, 2008).
Suppliers in the leading spot can cut the margins of the industries of Pharmaceutical. Influential suppliers in the sector of Health Services and Care Equipment use their power of negotiation to get higher prices from the companies in the field of Health Care Services and Equipment (Fern Fort University, 2018).
The threat of substitute products is high in the Pharmaceutical Industry because the demand for generic drugs versus brand-name drugs has increased due to the costs. Companies dealing with generic drugs do not spend high costs in the research and development of new drugs and that permits them to vend at lower prices (Marin, 2008).
SWOT Analysis is an analysis procedure of a business that confirms that purposes of a project are evidently defined and that every factor linked to the project are correctly recognized. The procedure of SWOT analysis is comprised of four areas i.e. Strength, Weaknesses, Opportunities, and Threat. Both external and internal aspect of the business is considered while performing SWOT analysis (Ommani, 2011).
- The Pharmaceutical Industry provides a wide range of pharmacy services, comprising retail services, business advisory services, and wholesale product services.
- The retail footprint of the industry permits good growth.
- Niche competitors are present in over-the-counter toiletries and pharmaceuticals (MBA Skool, 2018)
- The industry can lose its concentration if it will also enter into diverse segments (well-being and personal care products)
- Three key players i.e., Symbion Health, Sigma, and API (MBA Skool, 2018) control 90% of the industry
- Awareness regarding healthcare is constantly increasing, the Pharmaceuticals Industry has vast space to bring well-being and healthcare products.
- There is a wide scope for growth in the segments of personal care and well-being. (MBA Skool, 2018)
- Restructurings in the pricing scheme in the pharmaceutical industry namely PBS reforms can increase problems for the companies in the industry.
- Severe guidelines in contradiction of clinical trials and drugs quality will need strict measures for the business leading to increased costs
- The company margin can be influenced due to the PBS as it can generate a barrier of trade between the U.S and Australian drug companies (MBA Skool, 2018)
Porter’s generic strategies explain how a business attains a competitive advantage in the selected market. This framework talks about three generic strategies, i.e., focus, differentiation, and low cost. Michael Porter established this concept in 1980 (Zoephel and Zapf, 2011). The companies in the Pharmaceuticals Industry also make use of this strategy to survive in the market and attain competitive advantage.
This happens when the business offers a variety of clearly differentiated products, which attract different market segments. This would be the most appropriate strategy to follow because of the reputation of the company in terms of quality, service, and value (BC Campus, 2018). For example, Johnson & Johnson is one of the player in the industry who has adopted this focused differentiation strategy to compete in the market and increase the market share.
However, Johnson & Johnson does not compete based on cost in the industry but it should cut some costs because different players in the market are targeting the company in terms of cost and quality of the product. Hence, it should be considered by the company that product quality is not enough to survive in the market but the cost is also essential.
From the above analysis, it can be concluded that all the strategic development tools i.e. PESTLE analysis, SWOT analysis, Porter five-force framework, and Porter’s Generic Strategy is supporting different industries in identifying the threats, opportunities, and competition present in the industry as elaborated above with the example of Pharmaceuticals Industry.
References
BC Campus (2018) Focused Cost Leadership and Focused Differentiation [online]. Available from https://opentextbc.ca/strategicmanagement/chapter/focused-cost-leadership-and-focused-differentiation/ [accessed 23 August 2018]
Fern Fort University (2018) Australian Pharmaceutical Industries Limited PESTEL & Environment Analysis [online]. Available from https://fernfortuniversity.com/term-papers/pestel/nyse4/4883-australian-pharmaceutical-industrie.php [accessed 23 August 2018]
Fern Fort University (2018) Australian Pharmaceutical Industries Limited Porter Five Forces Analysis [online]. Available from https://fernfortuniversity.com/term-papers/porter5/asx/694-australian-pharmaceutical-industries.php [accessed 23 August 2018]
Marin, M.G. (2008) Porter’s Five Forces Analysis for the Pharmaceutical Industry [online]. Available from https://studentsviewonstrategicmgmt.blogspot.com/2008/03/porters-five-forces-analysis-for.html [accessed 23 August 2018]
MBA Skool (2018) Australian Pharmaceutical Industries SWOT Analysis, USP & Competitors [online]. Available from https://www.mbaskool.com/brandguide/pharmaceuticals-and-healthcare/9985-australian-pharmaceutical-industries.html [accessed 23 August 2018]
Ommani, A.R. (2011) Strengths, weaknesses, opportunities and threats (SWOT) analysis for farming system businesses management: Case of wheat farmers of Shadervan District, Shoushtar Township, Iran. African Journal of Business Management, 5(22), 9448-9454.
Omsa, S., Abdullah, I.H., and Jamali, H. (2017) Five Competitive Forces Model and the Implementation of Porter’s Generic Strategies to Gain Firm Performances. Science Journal of Business and Management, 5(1), 9-16.
Perera, R. (2017) The PESTLE Analysis 1st ed. Sri Lanka: Nerdynaut.
Pratap, A. (2017) Pharmaceutical Industry PESTEL/PESTLE Analysis [online]. Available from https://www.cheshnotes.com/pharmaceutical-industry-pestelpestle-analysis/ [accessed 23 August 2018]
Zoephel, M., and Zapf, M. (2011) Michael Porter’s Competitive Advantage Theory: Focus Strategy for Smes 1st ed. Germany: GRIN Verlag.
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