THE ANALYSIS AND ESTIMATION OF MARKET POSSIBILITIES OF THE PHARMACEUTICAL  ENTERPRISES

THE ANALYSIS AND ESTIMATION OF MARKET POSSIBILITIES OF THE

PHARMACEUTICAL ENTERPRISES

When discussing strategy, the first question a marketing strategist has to address is "where are we now?"

This is done by looking thoroughly at the internal and external situations, so that a realistic assessment of the company's current situation is reached.

The process of studying the internal and external environments is called situational analysis.

A SWOT ANALYSIS is an effective way of identifying your strengths and weaknesses, and of examining the opportunities and threats you face.

Carrying out an analysis using the SWOT framework will help you and your team focus your activities on where you are strongest, and where your greatest opportunities lie.

SWOT ANALYSIS

SWOT or TOWS is an acronym for Strengths, Weaknesses, Opportunities, Threats.

Strengths Positive tangible and intangible attributes, internal to

an organization. They are within the organization’s control. Weakness Factors that are within an organization’s control that

detract from its ability to attain the desired goal. Which areas might the organization improve?

Opportunities External attractive factors that represent the reason for an

organization to exist and develop. What opportunities exist in the environment, which will

propel the organization?Identify them by their “time frames”

Threats External factors, beyond an organization’s control, which

could place the organization mission or operation at risk. The organization may benefit by having contingency plans

to address them if they should occur. Classify them by their “seriousness” and “probability of

occurrence”.

SWOT stands for the strengths of, weaknesses of, opportunities for, and threats

to an organization. Strengths and weaknesses are internal, while

opportunities and threats are external

As previously mentioned, SWOT analysis uses both internal and external analysis tools.

In product SWOT analysis, a given product is compared to its direct competitors within the given market segment.

In company SWOT analysis, the whole organization is compared to its organizational competitors.

Both are useful tools, and are widely used by pharmaceutical marketers designing a company's strategy.

SWOT analysis steps

C0NSIDER THE USES OF SWOT

This technique can be used in various situations including business planning, team building and away days, as well as when you review the work of your team, during change management processes and even in your personal career planning.

The BOSTON CONSULTING GROUP BOX

• On the vertical axis, market growth rate provides a measure of market attractiveness.

• On the horizontal axis, relative market share serves as a measure of company strength in the market.

• A strategic business unit (SBU) is a profit center which focuses on product offering and market segment.

• SBUs typically have a discrete marketing plan, analysis of competition, and marketing campaign, even though they may be part of a larger business entity.

• By dividing the growth share matrix as indicated, four types of SBU can be distinguished:

1. Stars. Stars are high-growth, high-share businesses or products. They often need heavy investment to finance their rapid growth. Eventually their growth will slow down, and they will turn into cash cows,

2. Cash cows. Cash cows are low-growth, high-share businesses or products. These established and successful SBUs need less investment to hold their market share. Thus they produce cash that the company uses to pay its bills and to support other SBUs that need investment.

3. Question marks. Question marks are low-share business unite in high growth markets. They require cash to hold their share, let alone increase it.

Management has to think hard about question marks - which ones they should buikl into stars and which ones they should phase out.

4. Dogs. Dogs are low-growth, low-share businesses and products. They may generate enough cash to maintain themselves, but do not promise to be large sources of cash.

The Ansoff Matrix

The Ansoff Matrix was invented by H. Igor Ansoff.

Ansoff was primarily a mathematician with an expert insight into business management. It is believed that the concept of strategic management is widely attributed to the great man.

The four key factors:

Market Penetration

When companies enter markets with their existing products or services it is called market penetration.

This is done by taking part or all of a competitor's market share. Other ways to penetrate the market could be by finding new customers

for your product or by getting current customers to use more of your products.

What are the Objectives of Market Penetration?1. To maintain or grow the market share of the current product range2. Become the dominant player in the growth markets3. Drive out competitors4. Increase the usage of a company's products by its current customersMarket penetration is considered a low risk method to grow the business.

Product Development

Companies develop new products in existing markets. This is called product development.

An organization that already has a market for its products might try and follow a strategy of developing additional products, aimed at it's current market.

Even if the new products are need not be new to the market, they remain new to the business.

Market Development

When companies develop existing products into new markets, it is known as market development.

An organization's current product can be changed improved and marketed to the existing market.

The product can also be targeted to anther customer segment. Either way, both strategies can lead to additional earnings for the business.

Product Diversification

An organization that introduces new products into new markets has chosen a strategy of diversification.

When companies have no previous industry nor market experience this strategy is called Unrelated diversification.

Related diversification describes how companies stay in a market with which they have some familiarity.

Brand new products may also be created in an attempt to leverage the company's brand name.

The different types of diversification strategies

The strategies of diversification can include internal development of new products or markets, acquisition of a firm, alliance with a complementary company, licensing of new technologies, and distributing or importing a products line manufactured by another firm.

Generally, the final strategy involves a combination of these options. This combination is determined in function of available opportunities and consistency with the objectives and the resources of the company.

There are three types of diversification: concentric, horizontal, and conglomerate.

Concentric diversification

This means that there is a technological similarity between the industries, which means that the firm is able to leverage its technical know-how to gain some advantage.

For example, a company that manufactures industrial adhesives might decide to diversify into adhesives to be sold via retailers. The technology would be the same but the marketing effort would need to change.

Horizontal diversification

• The company adds new products or services that are often technologically or commercially unrelated to current products but that may appeal to current customers.

• In a competitive environment, this form of diversification is desirable if the present customers are loyal to the current products and if the new products have a good quality and are well promoted and priced.

• Moreover, the new products are marketed to the same economic environment as the existing products, which may lead to rigidity and instability. In other words, this strategy tends to increase the firm's dependence on certain market segments. For example, a company that was making notebooks earlier may also enter the pen market with its new product.

Conglomerate diversification

The company markets new products or services that have no technological or commercial synergies with current products but that may appeal to new groups of customers.

The conglomerate diversification has very little relationship with the firm's current business. Therefore, the main reasons of adopting such a strategy are first to improve the profitability and the flexibility of the company, and second to get a better reception in capital markets as the company gets bigger.

Even if this strategy is very risky, it could also, if successful, provide increased growth and profitability.

Porter's Five Forces Model

An industry is a group of firms that market products which are close substitutes for each other (e.g. the car industry, the travel industry).

Some industries are more profitable than others. Why? The answer lies in understanding the dynamics of competitive structure in an industry.

Porter's Five Forces Model

The most influential analytical model for assessing the nature of competition in an industry is Michael Porter's Five Forces Model:

INDUSTRY COMPETITORS

Rivalries naturally develop between companies competing in the same market.

Competitors use means such as advertising, introducing new products, more attractive customer service and warranties, and price competition to enhance their standing and market share in a specific industry.

To Porter, the intensity of this rivalry is the result of factors like equally balanced companies, slow growth within an industry, high fixed costs, lack of product differentiation, overcapacity and price-cutting, diverse competitors, high-stakes investment, and the high risk of industry exit. There are also market entry barriers.

PRESSURE FROM SUBSTITUTE PRODUCTS

Substitute products are the natural result of industry competition, but they place a limit on profitability within the industry. A substitute product involves the search for a product that can do the same function as the product the industry already produces. Porter uses the example of security brokers, who increasingly face substitutes in the form of real estate, money-market funds, and insurance. Substitute products take on added importance as their availability increases.

BARGAINING POWER OF SUPPLIERS

Suppliers have a great deal of influence over an industry as they affect price increases and product quality.

A supplier group exerts even more power over an industry if it is dominated by a few companies, there are no substitute products, the industry is not an important consumer for the suppliers, their product is essential to the industry, the supplier differs costs, and forward integration potential of the supplier group exists.

Labor supply can also influence the position of the suppliers. These factors are generally out of the control of the industry or company but strategy can alter the power of suppliers.

BARGAINING POWER OF BUYERS

The buyer's power is significant in that buyers can force prices down, demand higher quality products or services, and, in essence, play competitors against one another, all resulting in potential loss of industry profits.

Buyers exercise more power when they are large-volume buyers, the product is a significant aspect of the buyer's costs or purchases, the products are standard within an industry, there are few changing or switching costs, the buyers earn low profits, potential for backward integration of the buyer group exists, the product is not essential to the buyer's product, and the buyer has full disclosure about supply, demand, prices, and costs.

The bargaining position of buyers changes with time and a company's (and industry's) competitive strategy.

POTENTIAL ENTRANTSThreats of new entrants into an industry depends largely on barriers to

entry. Porter identifies six major barriers to entry:• Economies of scale, or decline in unit costs of the product, which

force the entrant to enter on a large scale and risk a strong reaction from firms already in the industry, or accepting a disadvantage of costs if entering on a small scale.

• Product differentiation, or brand identification and customer loyalty.• Capital requirements for entry; the investment of large capital, after

all, presents a significant risk.• Switching costs, or the cost the buyer has to absorb to switch from

one supplier to another.• Access to distribution channels. New entrants have to establish their

distribution in a market with established distribution channels to secure a space for their product.

• Cost disadvantages independent of scale, whereby established companies already have product technology, access to raw materials, favorable sites, advantages in the form of government subsidies, and experience.

Benchmarking

Benchmarking is the process of identifying "best practice" in relation to both products (including) and the processes by which those products are created and delivered. The search for "best practice" can taker place both inside a particular industry, and also in other industries

The objective of benchmarking is to understand and evaluate the current position

of a business or organisation in relation to "best practice" and to identify areas and

means of performance improvement.

Benchmarking involves looking outward (outside a particular business, organization, industry, region or country) to examine how others achieve their performance levels and to understand the processes they use.

In this way benchmarking helps explain the processes behind excellent performance.

Application of benchmarking involves four key steps:

(1) Understand in detail existing business processes

(2) Analyse the business processes of others

(3) Compare own business performance with that of others analysed

(4) Implement the steps necessary to close the performance gap

Types of Benchmarking

Strategic Benchmarking• Where businesses need to improve overall

performance by examining the long-term strategies and general approaches that have enabled high-performers to succeed.

• It involves considering high level aspects such as core competencies, developing new products and services and improving capabilities for dealing with changes in the external environment.

Performance or Competitive Benchmarking

Businesses consider their position in relation to performance characteristics of key products and services.

Benchmarking partners are drawn from the same sector. This type of analysis is often undertaken through trade associations or third parties to protect confidentiality.

Process Benchmarking

Focuses on improving specific critical processes and operations. Benchmarking partners are sought from best practice organisations that perform similar work or deliver similar services.

Process benchmarking invariably involves producing process maps to facilitate comparison and analysis. This type of benchmarking often results in short term benefits.

Functional Benchmarking

Businesses look to benchmark with partners drawn from different business sectors or areas of activity to find ways of improving similar functions or work processes.

This sort of benchmarking can lead to innovation and dramatic improvements.

Internal Benchmarking

Involves benchmarking businesses or operations from within the same organisation (e.g. business units in different countries). The main advantages of internal benchmarking are that access to sensitive data and information is easier; standardised data is often readily available; and, usually less time and resources are needed.

External Benchmarking

Involves analysing outside organisations that are known to be best in class. External benchmarking provides opportunities of learning from those who are at the "leading edge".

This type of benchmarking can take up significant time and resource to ensure the comparability of data and information, the credibility of the findings and the development of sound recommendations.

International Benchmarking

Best practitioners are identified and analysed elsewhere in the world, perhaps because there are too few benchmarking partners within the same country to produce valid results.

Globalisation and advances in information technology are increasing opportunities for international projects. However, these can take more time and resources to set up and implement and the results may need careful analysis due to national differences