Porters Five Force Analysis

Porters five force analysis

1. Threat of new entrants (LOW)

a. Product differentiation : Genzyme focused only on orphan drugs which were very rare and related to the lack of key enzymes in the body which can be artificially induced/replaced

b. Capital Investment : very huge capital investment is required in order to set up an infrastructure of research and development.

c. Switching costs : the drugs usually take 10-14 years and $ 800 million to be brought into the market. If the company doesn’t do well then its not possible to move to another product or industry

d. Economies of scale : no high volumes for rare diseases. Only a few thousand of patients to be served to.

e. Entry barriers: the orphan drug act provides 7 years of exclusivity higher than the patents to the first company bringing out a specific product.

2. Threat of substitutes (LOW)

f. No of substitutes available in market: There are no substitutes available other than the direct surgeries for the diseases

g. Price/performance ratio : the success rates of such rare surgeries are very low and the costs are very high. So the price performance ratio of the genzyme product will be better.

h. Perceived level of product differentiation: there are very less target customers and doctors treating these diseases. Marketing campaigns can directly access this group and create a better perception.

3. Bargaining power of customers (LOW)

i. Buyer concentration: there are a very few number of buyers across the world.

j. Degree of dependency: these drugs are life saver drugs against the rare diseases and hence the buyers are fully dependant on the company which gives them less power to bargain.

k. Backward integration: the customers here are the end users or the doctors treating these kind of patients. The possibility of backward integration in this case is 0.

4. Bargaining power of suppliers (HIGH)

l. Supplier...