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Causes and effects of the Global Great Recession


1.Discuss the Challenges faced by Pharmaceutical Company.

2.Which of these Challenges Provide the Best Opportunity for LVTLS and Why?

The challenges reported in literatures that face pharmaceuticals in Mid-Atlantic States of Pennsylvania and Lansdale were caused by the Global great recession of 2008 in United States. Reports showed that the recession did destroy a worth value of financial assets that was owned by US households. The recession was caused by drop in property prices in United States affecting other countries’ economies as well. Economists explained the sequence that led to recession. Theoretically explanations are that Low mortgage prices led households and investors to buy speculating increases in prices in the future. The buying of property led to more demand for real estate’s more households bought more properties from cheap credits. In the long run the prices did crumble down leading to a crisis (Lennernäs, H. Langguth, P. Yamashita, S. & Crommelin, D. 2014, 1). Several families were unable to pay for these credits.

Formal sources stated that the overall effect of the crisis was felt by several countries and individual businesses. There were large deficits in several countries economies, and collapse in major business. Majority of the banks did change their perception and could no longer offer credits due to high risks. Lack of credit facilitation led to liquidity crisis that affected global financial systems. Business and firms were unable to get financial support for the business (Lennernäs, H. Langguth, P. Yamashita, S. & Crommelin, D. 2014, 16). Other effects of the great global reported in written sources included: job loses, trade flows collapsing; unemployment increased, and led to sluggish in real wages payments. Households were affected with increase in food and energy crisis, and were unable to obtain any financial support. Several countries suffered lower economic growth, value less exports, and increase in poverty index. Pharmaceutical firms were affected too in Pennsylvania and Lansdale. The firms had to cut down productions and some relationship with business partners. The firms had to cut down relationships with the governments.

In economic market when prices decline consumption of medicine decline too. During this period the pharmaceutical firms were highly affected because the crisis led to lower consumption of medicines (Novac, N. 2013, 45). The financial crisis showed that if the country GDP drops it affects consumption levels of pharmaceutical products. The financial crisis reduced income levels among households and individuals as a result had to cut down part of their consumption of medicine, food, and energy. Lower consumption among households reduced the percentage of pharmaceutical products being sold in Pennsylvania and Lansdale. The aftermath of any recession is searching for better ways to make survival. Pharmaceutical firms then were faced with challenge of trying to look for strategic ways of increasing consumption of medicines and lowering their expenditure costs. Some of the pharmaceuticals cut down costs by shortening distribution channels and closing down some of the supply outlets.

The financial crisis led other governments to increase value added tax (TAX) to products like medicines in order to support the ailing economy. The direct increase of the tax led to increase in prices for pharmaceutical products. Price increase of medicines directly affected the number of it being bought. The consumption levels of medicines dropped that affected several pharmaceutical firms in Pennsylvania and Lansdale. Their business dropped down they were unable to make substantive sales to support their running costs (Gilmour, P., 2013, 34). They were then faced with the challenge of better ways of increasing sales without adding prices for the medicines. Other notable finding was in differential in brand consumption of medicine. Consumption of medicines for acute illness decreased compared to those of chronic illnesses. The pharmaceutical firms were faced with challenges of promoting consumption of certain brands of medicines.

Impact on pharmaceutical firms in Pennsylvania and Lansdale

The global great recession led many countries to tail down government budget spending on health services. The recession affected several of government policies. Reduction of the budget affected health care services in respective countries. Fewer medicines were made available to hospitals and supply of them reduced too. Firms supplying the medicine lacked business because they could not continue working with the government. Pharmaceutical firms in Pennsylvania and Lansdale had a challenge of looking for different business partners to replace the government. The challenge created more competition among the pharmaceutical because the customer outlets had reduced. The firms had a challenge of trying to remain competitive in the industry. Better competitive strategies for pharmaceutical firms could have been useful in increasing business (Yang, Y. & Sung, C. 2016, 34).  

In Pennsylvania and Lansdale an increase of fees on health care was documented. The increase was an extra burden for patients for they had to shoulder it. The extra fees covered prices for pharmaceutical medicines. Increase in health care fees directly has an impact it makes it unaffordable to many poor families. Financial recession did also affect health insurance policy patients in Pennsylvania and Lansdale because they were unable to pay for their premiums and that led to their covers to be discontinued (Stahl-Timmins, W. White, M. Depledge, M. Fleming, L. & Redshaw, C. 2013, 56). Both factors contributed to lower consumption of medicines which did affect supply by pharmaceutical firms. Business in the industry had to face the challenge in trying to manage decreasing consumption levels among patients.

In general pharmaceutical firms in Pennsylvania and Lansdale were faced with challenges during the global recession of reducing operational costs, increasing consumption levels, coming up with new partnerships business, and increasing sales of certain brands of medicines. They were also looking for better ways of using new technology and supply chains.

Economists and theorists explain that amongst challenges there are opportunities existing. Lehigh Valley transport and logistics service (LVTLS) was established in 1960 by Mason it is a local carriage company dealing with pickup and delivery services. The company has been able to strategize and capitalize on the increasing market in Pennsylvania and Lansdale. The company is currently utilizing Information systems and technology in its operations. In addition it has developed other logistics systems for distribution and storage (Singh, S. Bharati, S. & Kumar, M. 2013, 9). After the financial recession the company was focusing cost control and creating relationships to cover current and future economic volatility.

The financial recession in 2008 did affect several pharmaceutical firms in Pennsylvania and Lansdale and it resulted to several challenges to the industry. The management of LVTLS was focusing to use the challenges and convert them into opportunities. A collaborative strategy involves a close participation of parties involved. LVTLS employed collaborative relationship in its supply chain management with several pharmaceutical firms in Pennsylvania and Lansdale (Awan, N. & Khan, M. 2015, 7). The main aim was to provide a logistic system solution that provides fast transportation, decentralized warehousing system, sharing information and having a rapid order processing (Fanti, M. Iacobellis, G. Ukovich, W. Boschian, V. Georgoulas, G. & Stylios, C. 2015, 56).

Challenges faced by pharmaceutical firms in Pennsylvania and Lansdale

The agreement between LVTLS and pharmaceutical firms focused on improving future collaborations. The agreements were guided by three principles of category management, product replenishment, and enabling technologies. In category management the supplier and customer work on the product category to improve marketing strategies (Wang, G. Gunasekaran, A., Ngai, E. & Papadopoulos, T., 2016, 23). Product replenishment involved a process of minimizing total risks. Use of enabling technology involved practicing and employing suitable technologies in supply chain management. The use of technology is seen by the firm where it has employed LVTLS in managing information with pharmaceutical firms.

Collaborative relationship refers to a means where companies in a supply chain are working to unified common goal (Grabara, J. Kolcun, M. & Kot, S. 2014, 45). Collaboration in supply chain management explains an integrative supply chain where independent companies act as a single entity managed by customer demand. Employment of strategies in a collaborative relationship between firms is proved to improve share of profits, reduction of risks, knowledge and information’s. LVTLS was intending to join a strategic supply collaboration that will the following intensions of breaking down barriers between collaborative parties, having a higher level of trust, allowing efficient flow of real information among strong trading partners, and formulating an agreed framework of collaborations. The various pharmaceutical firms were focusing to remove the challenges they were facing especially of a lower demand of products.

The collaborative logistics policy is empirical proven to be a suitable solution to these challenges (Guarnieri, P. Sobreiro, V. Nagano, M. & Serrano, A. 2015, 45). The relation involved pharmaceutical firms outsource its logistic activity to a third party. The third party chosen was LVTLS.  Any good logistic system ensures that products meet the purchasing rights (right quality, right time, right place, right quantity, and right price) (Grabara, J. Kolcun, M. & Kot, S. 2014, 45). Business firms need to employ a supply strategy that covers good collaborations, integrations, communications, sharing of resources and mitigation of risks. LVTLS employed a collaborative logistics strategy with pharmaceutical firms which covered significant solutions for costs reductions, improved supply chain efficiency, and creation of flexibility among trading partners in order to meet consumer demands (Kabir, M. 2013, 6). The focus of the collaborative relation was to provide necessary support and value addition for pharmaceutical firms in order to meet customer needs (Selviaridis, K. & Norrman, A. 2015, 34).

LVTLS use of technology and information systems was critical in improving efficiency and transformation of supply chain systems. The product quality in supply chain between the LVTLS and pharmaceutical firms was achieved by employing a good process for quality (Wang, B. Hu, L. & Siahaan, T. 2016, 45). Quality was achieved by having a shared flat form supported by use of technology which allowed shared flow of materials and information from vendors and customers (Hsu, C. Tan, K. & Mohamad Z. 2016, 45). The use of new technologies is useful in managing supply chain between each party capability by improving performance. LVTLS and pharmaceutical firms have employed information sharing policy which allows sharing of customer information. The IS links the communication system of both parties (Potter, A. Lalwani, C. Disney, S. & Velho, H. 2016, 34). Example of IS system was the data processing information system (DIS) and distribution processing information system (DIS).  The IS and technology was useful in collecting information regarding inventory levels, sales data, tracking/tracking orders, sales forecast, performance metrics, and delivery schedule (Kaufmann, L. Carter, C. & Rauer, J. 2016, 34). The use of technology became a useful tool in sharing information between the LVTLS and pharmaceutical firms. It facilitated easy decision making among the parties in the relationship.

Opportunities amidst the challenges

The agreement between LVTLS and pharmaceutical firms agreed to have a collaboration supply chain system which contains a risk mitigation mechanism. The plan was to ensure that risks are reduced in entire process of delivery to final consumer. Part of the agreement was to have a scheduled and planned logistic management. The system specified time schedules and quantity to be delivered. Any bad supply chain logistic system allows risks which disrupts operations thus leading unnecessary costs. The agreement between the parties was on sharing of delivery risks. The performance of fewer loses originating from products is measured upon the good logistic and supply chain (Gorton, F., 2013, 67). Fewer risks can be reported on how well warehousing, distribution and retailing are managed well (Schönsleben, P. 2016, 3).

LVTLS and pharmaceutical firms employed a horizontal type of collaborations which is suitable for non- competing companies. The relationship was characterized by sharing of warehouse space, sharing of deliveries to retailers, sharing of costs together and buying infrastructure together (Harms, D. Hansen, E. & Schaltegger, S. 2013, 23). The relationship was critical in facilitating mutual gain cost relationship (McKinnon, A. 2013, 24). It tries to build long lasting relationships between the parties involved. The collaboration of the firms in supply chain management explains an integrative supply chain where independent companies act as a single entity managed by customer demands (Verhetsel, A. Kessels, R. Goos, P. Zijlstra, T. Blomme, N. & Cant, J. 2015, 45).

The financial crisis that occurred in 2008 in United States affected several industries, economies and countries. To be able to capitalize on rising opportunities and promote good business understanding logistic collaboration relation approach was necessary. The collaborative relationship supply chain between LVTLS and pharmaceutical involved offering the firms warehouse services and delivery services. Strategic collaborations have been known to bore fruits for parties involved. Both parties were able to share information using information technology through a well-defined information sharing points. Every party becomes responsible and accountable to the relationship. The strategic relationship resulted to several benefits which include: increased efficiency, reduction in costs, lower investment risks and costs, improved customer responsiveness, flexibility to changing market conditions, and improved customer service. LVTLS was looking for suitable strategies and approaches for its logistics and transport system. The supply chain collaborative relationship was able to solve some of the challenges facing the pharmaceutical industry and made them to remain a float during and after the great recession crisis of 2008.


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