Resources and Suppliers

Characteristics	Current situation	Future trend
What are the most important resource markets used by this industry?	Chemical industry, R&D, labor market	Chemical industry, R&D, labor market
Are these markets concentrated? Who has more market power at these markets: buyers or sellers?	Markets are not concentrated, there is a large amount of small companies, producing the needed raw materials; the R&D market is more concentrated, there are less suppliers, so suppliers may have more power over buyers (in a case when a pharmaceutical company needs some sophisticated research to be done on a regular basis, it usually would try to create its own R&D department), in the labor market a buyer (a pharmaceutical company) still have more market power, than a supplier.	The situation is likely to stay the same
Do firms in the industry purchase relatively small volumes relative to other customers of supplier? To sales of typical supplier?	Suppliers usually works with a particular buyer, so the buyer may purchase up to 100% (not necessarily, though) of the supplier product, which means the supplier does not have any other customers. In any case, the buyer usually purchases large volumes of the supplier’s final product.	The situation is likely to stay the same
Are there substitutes for these resources?	For chemical ingredients it depends on technology: if it is flexible, there is no problem to find a substitute (because there is a large number of chemical suppliers), if it is quite strict (an ingredient cannot be replaced by any other not influencing the quality of final product), there is no substitute. Situation with R&D is more complex, however, usually unique research is conducted by large companies which have their own R&D department, for smaller companies it may be quite difficult to find a substitute for R&D.	The situation is likely to stay the same.
Credible threat of forward integration	No threat	No threat
Are suppliers able to price discriminate?	There is a possibility of second and third type price discrimination in the market (based on segmentation).	There is a possibility of second and third type price discrimination in the market (based on segmentation).

Conclusion

Market is new and underdeveloped, therefore the nature of competition is specific. The products are heterogeneous and protected by patents and the amount of firms-producers is fairly low. The market has noticeable geographical differentiation, because free movement of the products around the globe does not exist due to different local pharmacological and healthcare legislation and different ethical perception.

Major part of products is protected with patents, which last for a long time, usually for 10 years. This fact is very crucial for competitors and potential entrants – these companies cannot easily and instantly entice competitors’ customers.

Therefore severe price competition and price wars barely exist if exist at all. Companies do not have high enough production capacity to maintain the price war long enough to achieve any result.

In the long term the firm producing a particular product loses its unique right to produce it as the patent expires. Due to this fact every competitor acquires the right to produce it – the product changes its nature from heterogeneous to homogeneous. Thus the firm should implement the following strategy:

1. Keep producing the first product because it still has high market share but the market growth rate for this product decreases.

2. Conduct R&D in order to form a new product.

3. Launch the new product.

This BCG matrix shows better the idea of long-term profitability when we lose the unique right to produce the first product (orange circle) and implement another one (red circle).

The alternative strategy is to improve our primary product and take out a patent on a modified product.

Another strategy is to improve the production cycle, e.g. implement new material saving technology.

Sources

1. The world pharmaceutical industry, James H. Taggart

2. Cognition Enhancers, Roy Jones, Kelly Morris http://www.bis.gov.uk/assets/bispartners/foresight/docs/brain-science/cognition-enhancers.pdf

3. Economics of Addiction and Drugs, Jonathan Cave, Christine Godfrey

http://www.bis.gov.uk/assets/bispartners/foresight/docs/brain-science/economics.pdf

4. Smart drugs 2: next generation, Ward Dean, John Morgenthaler and Steven Fowkes

http://bltc.com/library/library.htm

5. Cognitive Commodities in the Neuro Marketplace, James Kent

http://hplusmagazine.com/2009/12/23/cognitive-commodities-neuro-marketplace/

6. Cognition Enhancers: Current Strategies and Future Perspectives, Shubhada R. Ingole, Satyendra K. Rajput and S.S. Sharma

http://www.niper.ac.in/cognition.pdf

7. Анализ аптечных продаж ноотропных препаратов, Светлана Горелова

http://www.economist.com/node/11402761

8. Обзор рынка ноотропных препаратов, Леонид Коковин, http://www.rosapteki.ru/arhiv/detail.php?ID=1432

9. Smart policy: cognitive enhancement and the public interest, Nick Bostrom, Rebecca Roache

http://www.fhi.ox.ac.uk/__data/assets/pdf_file/0008/10241/smart-policy.pdf

10. Cognition Enhancers: Current Strategies and Future Perspectives, http://www.niper.ac.in/cognition.pdf

11. Cardiovascular segment, http://www.ipapharma.org/pp/IPA%20April%2010[1].pdf

12. TARGETING THE CREB PATHWAY FOR MEMORY ENHANCERS, http://pharmacology.ucsd.edu/graduate/courseinfo/Tully-Tullyetal(2003).pdf

13. Mechanisms of Action of Cognitive Enhancers on Neuroreceptors, http://www.jstage.jst.go.jp/article/bpb/27/11/1701/_pdf

14. Pharmexpert. Market Research Center, http://www.pharmexpert.ru/en/

Дата добавления: 2015-11-14