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Pharmaceutical Innovation: Trends And Drivers

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Question:

Discuss about the Pharmaceutical Innovation for Trends and Drivers.
 
 

Answer:

Introduction

The report describes exploring different market opportunities in order to formulate a country-product opportunity brief. The chosen country is United States. Opportunities in the global market of the United States of America are determined in the report. The Australian pharmaceutical company chosen for the expansion of the business in the U.S market is Australian Pharmaceutical Industries (API). It is the recognized as the largest wholesale distributor of allied products and pharmaceutical products of Australia. The company is headquartered in New South Wales, Australia and is involved in pharmaceutical retailing, distribution and manufacturing. The company is exporting its pharmaceutical products in many countries of the world. However, API is now planning to export its product to U.S market. The pharmaceutical industry in Australia is very competitive in nature. The company has many subsidiaries such as Soul Pattinson Chemist, Priceline Pharmacy and Pharmacist Advise. The company deals with retail services, wholesale product delivery, business advisory services and marketing services. The company started its business from a small cooperative and now it is considered as leading beauty and health companies of Australia. API is focusing on six values of authenticity, respect, growth, initiative, unity and excellence. The brands of API is very famous and is responsible for generating substantial revenue for the company. Currently API has 100 Soul Pattinson stores, 420 Priceline pharmacy stores, 750 club premium pharmacies and 72 pharmacist advice pharmacies.

Situation Analysis

Business environment

Macro environment of Australian Pharmaceuticals Industry (API) includes PESTEL analysis of the pharmaceutical industry of United States.

Political: Most of the transaction of the pharmaceutical industry is done in the United States of America. The purchasing power of government is very high that affects the industry. It results in controlling prices along with export and import of goods. Eighty percent of the total sales in the global market are from the United States of America (Brown et al., 2015). API will have huge opportunities in the flourishing market of America.

Economic: The sales of the pharmaceutical industry contribute the GDP growth of the nation. It includes huge employment that decreases the rate of unemployment in the country. However, the economic downturn affects the sales of the industry. Approximately 46.6 million citizens in U.S do not buy any insurance. Hence, there is a chance of the pharmaceutical companies to earn less profit in low economic condition (Byrne et al., 2013).

Social: Social factors include population growth, cultural change, health problem, etc. The social factors are responsible for the growth of sales and creation of demand in the market. Ageing of population means an increase in the demand for medicines.

Technological: Technological innovation is very high in U.S. Hence, technological factors help in flourishing the pharmaceutical industry in U.S. companies are investing in their R&D department (Stephenson et al., 2013).

Environment: with the increase of pollution, people are affected more with many diseases. This is a negative sign of the growth of the industry. Manufacturing sites of the pharmaceutical products are responsible for the emission of different poisonous gases that affects humankind as a whole.

Legal: The regulatory department consumer law, safety and health law, employment law, etc. have a different effect on the industry. Regulations of government can inhibit the patent of a certain company. Companies have to abide by the regulations of U.S. government, otherwise, penalties are set for them (David et al., 2015).

The microenvironment of API includes customers, public, suppliers, competitors, marketing intermediaries, and employees. These factors are the internal factors of API. These factors are responsible for creating a different level of results for different companies. Customers of API include target customers of United States of America. Competitors of API in U.S market are Glaxo SmithKline, Pfizer, Johnson & Johnson, Abbot Laboratories, Novartis, etc. Supplier relation is a vital aspect that affects the profitability of a company. Public of API include the customers of the target market (Toole, 2012). It is the responsibility of the company to serve quality products to the customers for maintaining goodwill in the market. Employees are the asset of an organization that is responsible for earning substantial revenue in the U.S market. Marketing intermediaries of API include different companies and business houses that are responsible for the promotion of the company.

 

Market analysis

The pharmaceutical industry of United States is considered as the highest growing sectors of the nation. It is one most vital market of the world as it contributes a greater percentage of the economy of United States. The country alone holds approximately forty percent of the global market of the pharmaceutical industry. In the year of 2014, the market share of the sector is valued $ 365 million approx. the estimated value of the market in the year of 2020 is estimated to $548.4 billion. However, in the year of 2014, it was $395.2 billion (Guler & Nerkar, 2012). The government of United States supports the pharmaceutical industry. The government in the country for improved research and development supports companies. Not only the Federal government of United States has controlling power, but also by the Food and Drug Administration controlled the market. There are many drugs and the U.S department of FDA in the market approves medicines. There are many new initiatives are taken both by the government of the United States and FDA for the formulation of transparent regulation of the companies of the sector. The regulatory system is competent enough to identify different pharmaceutical products. Apart from that, there are other regulatory bodies that control the actions of the pharmaceuticals companies of United States of America (Freifeld et al., 2014). The Australian company will get favor in many areas while in some areas it can face some problems while trading in the United States. The global market for the pharmaceutical industry is very innovative in nature. The players of the sector are focused on gaining a major share of the market by its improved research and development of its different drugs, and other pharmaceutical generic products as per the needs of the consumers.

Competitive analysis

It is already mentioned earlier that the growth of the market is very high. Most of the world famous companies are headquartered in the United States. It is due to the improved version of research and development procedure, the market players are adopting due to the effort of the government. Competitors of Australian Pharmaceutical Industries in America include Glaxo SmithKline, Pfizer, Abbot, Glenmark, Novartis, Merck & Co, Johnson & Johnson (Gibson, 2016). The largest companies of the industries generated approximately $75 billion of annual revenue in the year of 2014. The companies are very active in selling products of consumer segments and diagnostics and medical devices. As per the volume of the sales, Pfizer is considered as the largest pharmaceutical company in the United States of America. However, when these companies operate in other countries then they usually merge with other companies to enter the market (Comanor & Scherer, 2013). In terms of medical development and research, United States is always achieved in the topmost position in the world in this sector. The industry acts as a booster for its growth not only in the country but also outside the nation. For the purpose of research and development, the pharmaceutical companies of United States spend approximately 50 billion dollars annually. Day by day the cost of manufacturing drug is increasing which is the reason of increased investment in the production of drugs. Apart from that, if the individual investment is considered, then it also counts a lot for a single company. Top companies are focusing on differentiation in the quality of the drugs they are serving to the market (Sams-Dodd, 2013). The patent is very important in this industry that consists of different steps of approval and a huge investment for the manufacture of a single drug.

 

Organization analysis

As it is mentioned earlier that Australian Pharmaceutical Industries (API) is a well-reputed company in Australia. It is one of the fastest growing retailers in the sector of health and beauty sector in the country. It has gained much reputation from the Aussies in terms of its products from various segments. It has its business operations all over Australia through franchise stores. It is an advantage for the company. The company has its good control over its franchise stores across the nation (DiMasi et al., 2016). It can be used as a popular entry mode while entering the U.S pharmaceutical market. However, the company is into selling services on retail, business advisory and marketing programs. Apart from the franchise operations, Australian Pharmaceutical Industries (API) also owns its company-owned stores. There are many subsidiaries of the company such as Pharmacists Advise, Priceline Pharmacy, Soul Pattinson and Priceline. These are the strong aspects of the company against its competitors in Australia. However, the company is successful in maintaining its strong brand image in the market. The company is famous for its formulation of the strategy of globalization in the market (Çelik, 2016).

It is very critical to know about the consumer trends about the customers of the United States. The nature, taste, preference, and decision-making process of the customers of United States of America are different from that of residents of Australia. Extensive market research should be conducted in the American market for collecting various information related to market analysis (Moses et al., 2015). The organizational analysis is incomplete without competitor analysis.

 

SWOT Analysis

SWOT analysis of the company is based on the different aspects of the situational analysis described above. It will help the company to mitigate different external risks of internalization of the business operations in U.S. market.

Strengths: Australian Pharmaceutical Industries has a strong brand reputation in Australia. It is the largest wholesale pharmaceutical company in Australia. Apart from strong brand image, the company is focused on its marketing activities that help in maintaining a global image in its international countries. The core aspect of the company is to provide value to its customers. The company has its strong distribution channel across different regions of Australia (Csermely et al., 2013).

Weakness: Australian Pharmaceutical Industries (API) has its strong presence only in different parts of Australia only. The strong distribution is not so much dominant outside Australia. The health and beauty products are popular in the Australian region compared to other regions outside Australia.

Opportunity: Opportunity for API in U.S pharmaceutical market is very high. U.S pharmaceutical market is a booming market. On exporting the manufactured goods of API into U.S market, the company will be able to earn to huge amount of profit from the target market. The research and development of the pharmaceutical company should be strong enough so that they can compete with the existing pharmaceutical giants of United States of America. There are many products of the company that the company is famous for will be well flourished in the U.S market (Gassmann et al., 2013).

Threats: Stiff competition in the generic and other types of drugs are there in the Australian as well as U.S market. Many companies are capturing the leading position in the market. They have a strong brand in the U.S market. Consumers trust old and reputed brands of health and beauty brands. Exposure to fluctuations in foreign currency, as well as impose of government regulations, can affect the profitability of the company in the foreign market (Khanna, 2012).

 

Conclusion

The report contains various types of situation analysis as well as competitor analysis of Australian Pharmaceutical Industries (API) in the United States of America. The company has too many risks and difficulties while expanding its reach in the U.S pharmaceutical market. API has to overcome the risks of internalization by adopting the strategies of internalization in the U.S market. The company has to abide by the rules and regulations of the government of United States to maintain a smooth flow of the export of its products in the United States. However, API can focus on its R&D department to match the needs and demands of the U.S market. Apart from that, to increase the flow of export of trade, extensive market research is required to be conducted by the pharmaceutical company. Strategies are to be formulated for different branches of operations to cope up with the issues and problems that may arise in future business operations in the target country. Australian Pharmaceutical Industries by formulating strategies based on the above situational and SWOT analysis will successfully control its international expansion in U.S market.  However, it can also focus on the trends of the consumer of United States in order to export its products.

 

References

Brown, S. R., Evans, D. V., & Fugh-Berman, A. (2015). Pharmaceutical industry interactions in family medicine residencies decreased between 2008 and 2013: a CERA study. Family medicine, 47(4), 279-282.

Byrne, E. M., Gehrman, P. R., Medland, S. E., Nyholt, D. R., Heath, A. C., Madden, P. A., & Martin, N. G. (2013). A genome‐wide association study of sleep habits and insomnia. American Journal of Medical Genetics Part B: Neuropsychiatric Genetics, 162(5), 439-451.

Çelik, M. (Ed.). (2016). Pharmaceutical powder compaction technology. CRC Press.

Comanor, W. S., & Scherer, F. M. (2013). Mergers and innovation in the pharmaceutical industry. Journal of health economics, 32(1), 106-113.

Csermely, P., Korcsmáros, T., Kiss, H. J., London, G., & Nussinov, R. (2013). Structure and dynamics of molecular networks: a novel paradigm of drug discovery: a comprehensive review. Pharmacology & therapeutics,138(3), 333-408.

David, B., Wolfender, J. L., & Dias, D. A. (2015). The pharmaceutical industry and natural products: historical status and new trends.Phytochemistry Reviews, 14(2), 299-315.

DiMasi, J. A., Grabowski, H. G., & Hansen, R. W. (2016). Innovation in the pharmaceutical industry: new estimates of R&D costs. Journal of health economics, 47, 20-33.

Freifeld, C. C., Brownstein, J. S., Menone, C. M., Bao, W., Filice, R., Kass-Hout, T., & Dasgupta, N. (2014). Digital drug safety surveillance: monitoring pharmaceutical products in twitter. Drug safety, 37(5), 343-350.

Gassmann, O., Reepmeyer, G., & von Zedtwitz, M. (2013). Leading pharmaceutical innovation: Trends and drivers for growth in the pharmaceutical industry. Springer Science & Business Media.

Gibson, M. (Ed.). (2016). Pharmaceutical preformulation and formulation: a practical guide from candidate drug selection to commercial dosage form. CRC Press.

Guler, I., & Nerkar, A. (2012). The impact of global and local cohesion on innovation in the pharmaceutical industry. Strategic Management Journal,33(5), 535-549.

Khanna, I. (2012). Drug discovery in pharmaceutical industry: productivity challenges and trends. Drug discovery today, 17(19), 1088-1102.

Moses, H., Matheson, D. H., Cairns-Smith, S., George, B. P., Palisch, C., & Dorsey, E. R. (2015). The anatomy of medical research: US and international comparisons. Jama, 313(2), 174-189.

Sams-Dodd, F. (2013). Is poor research the cause of the declining productivity of the pharmaceutical industry? An industry in need of a paradigm shift. Drug discovery today, 18(5), 211-217.

Stephenson, C. P., Karanges, E., & McGregor, I. S. (2013). Trends in the utilisation of psychotropic medications in Australia from 2000 to 2011.Australian and New Zealand Journal of Psychiatry, 47(1), 74-87.

Toole, A. A. (2012). The impact of public basic research on industrial innovation: Evidence from the pharmaceutical industry. Research Policy,41(1), 1-12.

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