The pharmaceutical industry consists of firms that develop, patent, and distribute drugs: Strategic Management Assignment, UK

  1. Perform a five forces analysis on the following two industries: Assume missing data.

 The Pharmaceutical Industry

The pharmaceutical industry consists of firms that develop, patent, and distribute drugs.  Although there are not significant production economies in this industry, there are important economies in research and development.  Product differentiation exists as well, because firms often sell branded products.  Firms compete in research and development.  However, once a product is developed and patented, competition is significantly reduced.  Recently, the increased availability of generic, non-branded drugs has threatened the profitability of some drug lines.  Once an effective drug is developed, there are usually few, if any, alternatives to that drug.  Drugs are manufactured from commodity chemicals usually available from numerous suppliers.  Major customers include doctors and patients.  Recently, increased costs have led the federal government and insurance companies to pressure drug companies to reduce their prices.

The Textile Industry

The textile industry consists of firms that manufacture and distribute fabrics for use in clothing, furniture, carpeting, and so forth.  Several firms have invested heavily in sophisticated manufacturing technology, and many lower-cost firms located in Asia have begun fabric production.   Textiles are not branded products.  Recently, tariffs on some imported textiles have been implemented.  There are numerous firms in this industry; the largest have less than 10 percent market share.  Traditional fabric materials (such as cotton and wool) have recently been threatened by the development of alternative chemical-based materials (such as nylon and rayon) although many textile companies have begun manufacturing with these new materials as well.  Most raw materials are widely available, although some synthetic products may be periodically in short supply.  There are numerous textile customers, but textile costs are usually a large percentage of their final product’s total costs.  Many users shop around the world for the low prices on textiles.

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