An Attractive Industry - Pharmaceutical Industry

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MGT B399F Exercise (1) Guide

MGT B399F

Industry Analysis (5 Forces Model)：

An attractive Industry - Pharmaceutical

industry

Bargaining Power of Suppliers*

Bargaining Power of Consumers*

Threats of New Entrants*

Intensity of Rivalry*

Threats of Substitutes*

1. Expensive set-up cost for an effective sales force to persuade doctors or hospital authority to adopt new kind of drugs or medicine

2. Huge costs for developing new drugs

THREE different types of buyers: Doctors, Patients, Government. They are ALL generally price insensitive.

High Entry Barrier, Hard to Enter

Costs of ingredients are generally LOW

Usually NO, or HARD to find, substitute found,

1. Competition is gentle;

2. DON'T compete on price; bcoz i) buyers are price insensitive; ii) brand image is hard to be eroded.

Conclusion: ALL these forces are favorable!  The industry is attractive!eneral environment

Technological change

Demographic trends

Cultural trends

Economic climate

Legal and political conditions

Specific international events

d.