Competitive Rivalry in the Pharmaceutical Industry
The pharmaceutical industry is one of the fields that are known to contribute greatly to the economy. A lot of revenue and income is obtained from this industry. More so, it is an industry that offers patients an opportunity to prevent, stabilize and have solutions to many diseases. Unfortunately, like any other economical field in the world, pharmaceutical industry has been a target of numerous antitrust actions and regulations by government enforcement agencies and private plaintiffs.
Competition is also a major issue that has made the pharmaceutical industry ineffective in many countries. Competitive rivalry is all about the intensity of competition between many companies in an industry. Not all industries are equally competitive, but for the pharmaceutical industry, competition is quite transparent and characterized by a complex structure that involves profound decision making and payment. Competition in the pharmaceutical industry can be said to be high if;
- There is a little differentiation between the medicines sold between patients and other consumers.
- Competitors have all similar marketing and operation strategies.
- It is quite costly to leave the industry
- High storage and fixed costs which spur fast turnover of inventory.
- When capacity can only be increased by bulk amount whereby a company has to protect its market share.
Competition has become intense in the pharmaceutical industry as more competitors either see an opportunity to grow and capture more potential clients or attract more customers with low profitability. In many cases, there is increased rivalry between highly reputed pharmaceutical companies. The number of direct competitors has always been high since the introduction of new medications or prescription drugs and better medical technologies.
These companies have always tried to increase their medical products and this has helped many clients remain loyal and not easily lured by lower prices from other existing companies. And this has kept the market more attractive as these companies do not try to compete aggressively; they recognize each other’s position in the market.
Competition in the pharmaceutical industry has been heightened by threat of new entrants in the market. It is not that easy for an inspired entrepreneur to enter into the pharmaceutical world if it is a challenge to meet the economies of scale, cannot access the finest technologies or it is hard to meet the capital requirements to join the marketplace. You need enough capital to invest in the pharmaceutical industry or to match other players in the market.
With the large number of chemical industries, it has been hard for suppliers to hold any power on the products that they offer. Hence, on the prescription drug companies, suppliers’ power is virtually absent. Since 1980s, the pharmaceutical industry has reveled in a powerless group of buyers. Many times, doctors and physicians have been caught unaware of the new medicines in the market. Hence, the industry made a lot of profits as doctors prescribed drugs without minding about their cost and effects. On top of this, the industry has also been unthreatened by substitute products as consumers trusted what their doctors prescribed.
The pharmaceutical industry has fared well with the recent developments in the medical industry. Competitive rivalry has remained modest as majority of the players in the marketplace have common interests. The industry has remained attractive thanks to introduction of effective policies by the government and organizations that foresee the growth of the industry. Pharmaceutical companies need to work together and offer best products and services and make profits in the process.
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