The global pharmaceutical industry - in the land of shrinking giants.
1. Introduction
The case describes the evolution of the industry and its unusual strategic environment. Attention is drawn to environmental pressures from regulators and payers. Key forces driving the industry are discussed, including addressing unmet medical need, the importance of innovation and time to market, and globalisation.
The case illustrates how an increasingly hostile environment, combined with a decline in R&D productivity, led to waves of job losses, and sparked industry consolidation, outsourcing and diversification. On the global level, the historical supremacy of the US was being challenged with the highest market growth rates recorded in emerging markets.
2. Position of the case
The case study is primarily concerned with business environment analysis on a global level. The case is designed to facilitate teaching of analysis frameworks including PESTEL, Porter's Five Forces, the concept of the 'strategic customer' and industry critical success factors.
3. Learning objectives
The case is designed to help students undertake structured analysis of an industry's business environment, using analysis frameworks such as:
v PESTEL analysis
v Scenario analysis and Change
v Porter's Five Forces and industry life cycle analysis
The case can help students to understand drivers of strategic choices such as diversification and outsourcing. Outsourcing has expanded beyond manufacturing to encompass substantial components of R&D and even sales. Firms have also engaged more often in precompetitive collaboration, joining forces to tackle difficult challenges together.
The tough industry environment drove global firms to pursue quite distinct strategies, ranging from a pure innovation focus to an emphasis on emerging markets, and even true diversification beyond drugs to animal health, medical devices and diagnostics.
The industry therefore became more interesting to analyse.
Students can map industry stakeholders and gain an understanding that public opinion, legislators, regulators, lawyers and powerful public and private sector payers may have significant influence on an industry. The case can also help students understand drivers towards the globalisation of an industry and the opportunities and threats involved.
4. Questions for Case Study Assignment
1. Identify the main environmental forces which affect the global pharmaceutical industry.
2. Use scenario planning techniques to consider the key drivers of change that will affect the global pharmaceutical industry in the future.
3. Analyse the Five Forces framework to identify environmental forces affecting the global pharmaceutical industry. Do these forces differ by industry sector and where would you place the different sectors in theindustry life cycle?
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