Summary of Porter's Five Forces

The strategic issues: Analyzing the pharmaceutical industry by Porter’s five forces we find the strategic issues in the pharmaceutical industry mainly focus on 1.) Buyer’s bargaining power strong from government or other health authorities. 2.) New entrants such as biotechnology companies might lead to new rivalry. 3.) Competition from generic drugs after patent expiration and parallel re-importation of the same drugs. 4.) There is a trend of industry consolidation among rivals. Other issues such as political pressure, free rider concerns, marketing trends of e-detailing and e-prescribing, new R&D approaches from new science and technology, high R&D cost but declined productivity and devotion to the blockbuster drugs are other factors that could cast a shadow on the development of the pharmaceutical industry.

Alternative courses of action: In view from 1.) Political pressure and strong bargaining power from government or health authorities leads to price reductions, it is suggested to improve the public relations or lobby, and be involved in the major discount-card programs to increase the sales. 2.) Build up close partnership, strategic alliance with new biotechnology companies. Acquisition can be taken into consideration out of the concern of potential competitors or limited R&D expertise e.g. protein production techniques from Genentech. 3.) Appeal for long term protection and legitimacy of patents. Sign contracts with distributors to prevent re-importations. 4.) Industry consolidation might create new market leader. 5.) With regard to the free rider concerns, it is suggested to expand new drug market to Europe to restore the R&D cost by increasing sales volume even under the circumstances of cost containment in Europe. 6.) Urge new innovation among R&D through new technology in devotion of developing blockbusters. Strongly promote blockbusters through e-detailing and the commercials to raise images and increase sales volume. Market leaders e.g. Merck or Pfizer...