33611168 pharmaceutical industry

8/13/2019 33611168 Pharmaceutical Industry

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PHARMACEUTICAL INDUSTRY

Introduction

Overview of the Industry

The pharmaceutical industry has en!yed "reat pr!sperity as nineteen#ninety#ei"ht mar$ed an!ther

stellar year %!r the industry& Pr!%its stayed in a sharp up#trend as '( !% the )* st!c$s in the industry+eat the Standard , P!!r-s .// Inde01 2hich r!se +y '3&*4& The pharmaceutical industry includesesta+lishments primarily en"a"ed in manu%acturin"1 %a+ricatin"1 and pr!cessin" medicinalsu+stances int! %inished pharmaceuticals %!r human and 5eterinary use& Ethical +rand name dru"s1"eneric pr!ducts1 and n!nprescripti!n !r !5er#the#c!unter medicati!n c!nstitute the pharmaceuticalindustry su+#sect!r&

Str!n" and c!nsistent "r!2th in the mid#sin"le di"its is e0pected in the "l!+al pharmaceuticalmar$et !5er the ne0t . years& 6!rld2ide sales are estimated t! reach 7)). +illi!n in 89991 up %r!m899( sales !% 7)8/ +illi!n& :ey %act!rs dri5in" this pr!ected "r!2th include l!n" li%e e0pectancies1str!n" dem!"raphic e0pansi!n in !lder se"ments !% the p!pulati!n1 a risin" standard !% li5in" in

de5el!pin" c!untries and lar"e untreated p!pulati!ns1 such as pers!ns 2ith ele5ated ch!lester!lle5els& Increases in li%e e0pectancies create m!re health pr!+lems& As the 2!rld-s p!pulati!n a"es1the demand %!r pharmaceuticals increases& The elderly are the sin"le lar"est "r!up !% users !%prescripti!n dru"s&

An!ther ma!r %act!r %uelin" the c!ntinued "r!2th !% the industry is the intr!ducti!n !%+rea$thr!u"h dru"s& The ne2 pr!ducts are especially in the areas !% heart disease1 cancer1 arthritis1dia+etes and HI;& An!ther trend is the de5el!pment !%


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A++!tt-s CEB1 Miles D& 6hite has +een in !%%ice %!r t2! years1 and he has helped thec!mpany reach rec!rd sales in 899( !% 78'&. +illi!n1 up .4 %r!m 899*& Net earnin"sincreased 88&4 t! 7'&) +illi!n1 and earnin"s per share r!se 8'&* percent t! 78&.8& Thismar$ed A++!tt-s '3th c!nsecuti5e year !% d!u+le#di"it "r!2th in earnin"s per share& InDecem+er 899(1 the +!ard als! declared the )//th c!nsecuti5e di5idend t! +e paid +y A++!ttsince 89'&

A++!tt-s strate"y is t! remain c!mpetiti5e1 +y e0pandin" and c!ntinuin" t! de5el!pinn!5ati5e pr!ducts that 2ill deli5er +etter health care& They als! 2ant t! %!cus !n internallyde5el!ped pr!ducts1 e0ternal c!lla+!rati!ns1 and 2ell#tar"eted ac


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+illi!n1 a 84 increase c!mpared t! 899*1 and net inc!me increased t! 7.&' +illi!n %r!m 7&3+illi!n in 899*&

Merc$-s strate"y %!r "r!2th is dri5en +y si0 ma!r c!mp!nents disc!5er imp!rtant ne2medicines thr!u"h +rea$thr!u"h research1 dem!nstrate the 5alue !% their medicines t!patients1 and t! +e the t!p#tier c!mpany in the health care industry& The !ther threec!mp!nents are their !peratin" pri!rities ma0imiFe re5enue "r!2th thr!u"h c!mmitment t!

research1 t! achie5e the %ull p!tential !% mana"ed pharmaceutical care1 and t! preser5e thepr!%ita+ility !% their c!re pharmaceutical +usiness&

Pfizer Inc.

P%iFer Inc& is a ma!r pr!ducer !% health care1 c!nsumer and a"ricultural pr!ducts they %!cus!n disc!5erin"1 de5el!pin"1 and +rin"in" t! mar$et inn!5ati5e medicines t! enhance theli5es !% humans and animals& P%iFer cl!sed !ut 899( !n an e0tra!rdinarily str!n" n!te&6!rld2ide re5enues increased ')4 t! 78)&. +illi!n1 and net inc!me r!se +y '34 t! 7)&)+illi!n& >!rtune ma"aFine named P%iFer !ne !% the m!st admired c!mpanies in the 2!rld andthe 2!rld-s m!st admired in the pharmaceutical industry& Als! in =anuary !% 89991 >!r+esnamed P%iFer ?C!mpany !% the Year?& S!me !% the c!mpany-s ma!r pr!ducts includeN!r5asc1 !l!%t1 ithr!ma01 Lipit!r1 ;ia"ra1 Cardura and en#Gay& P%iFer head!rtune .// c!mpanies& Am!n" the 8 pharmaceutical c!mpanies in the >!rtune .//


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%!r 899*1 Merc$ 2as ran$ed 8st1 P%iFer .th1 A++!t 3th1 and Eli Lilly *th in terms !%re5enues&

The prescripti!n dru" industry c!nsists !% hundreds !% c!mpanies ar!und the 2!rld& Durin"899*1 U&S& sales 2ere primarily d!minated +y 8/ lar"e c!rp!rati!ns 2hich acc!unted %!r.)4 !% d!mestic mar$et sales& Appr!0imately )34 !% research and de5el!pment isc!nducted +y U&S& pharmaceutical c!mpanies %!ll!2ed +y =apan 2ith 894 !% 2!rld2ide

research& B% 8.' ne2 dru"s intr!duced int! the 2!rld mar$et +et2een 89*. and 8991 .42ere intr!duced +y American c!mpanies1 84 +y ritish c!mpanies and 94 +y S2iss %irms2ith the +alance di5ided am!n" c!rp!rati!ns ar!und the 2!rld& U&S& %irms lead in theira+ility t! patent their inn!5ati!ns1 "l!+aliFe pr!ducts1 and de5el!p ne2 pr!ducts thr!u"h+i!techn!l!"ical research&

The United States acc!unts %!r /4 !% 2!rld2ide pharmaceutical sales1 Eur!pe )'4 and=apan '4& Bther areas !% the 2!rld acc!unt %!r 4 !% sales and this se"ment !% the mar$etis e0pected t! rise as pharmaceutical c!mpanies e0pand their sales in de5el!pin" c!untries&@3 Alth!u"h the United States is the +i""est c!nsumer !% pharmaceutical pr!ducts1 it spendsless !n pharmaceuticals as a share !% t!tal healthcare e0penditures than m!st industrialiFednati!ns& U&S& spendin" per capita ran$s %!urth in the 2!rld +ehind =apan1 >rance andel"ium& >!r pharmaceutical spendin" as a percenta"e !% "r!ss d!mestic pr!duct1 >ranceleads 2ith 8&*41 =apan 2ith 8&.41 and the U&S& 2ith 8&84& Daily U&S& per capita spendin"%!r pharmaceutical pr!ducts in 899* 2as 7/&3 as c!mpared 2ith daily per capita spendin"%!r alc!h!l !% 7/&981 78&/* %!r teleph!ne ser5ice1 7'&( %!r cl!thin"1 7*&9 %!r %!!d and7(&. %!r h!usin"&@8)

The !5er#the#c!unter cate"!ry !% pharmaceutical sales has nearly d!u+led since 89(*& This isdue t! an increasin" e%%!rt +y manu%acturers t! increase ad5ertisin" aimed at c!nsumers 2ithan emphasis !n pr!duct in%!rmati!n and sel%#medicatin" in%!rmati!n& Durin" 899*1 the !5er#the#c!unter mar$et had d!mestic sales !% 783&3 +illi!n&

Ri5alry am!n" c!mpetit!rs is intense as +rand rec!"niti!n has +ec!me increasin"lyimp!rtant as an appr!ach t! capturin" mar$et share& C!mpanies are increasin" ad5ertisin"+ud"ets t! pr!m!te the therapeutic +ene%its !% their dru"s in an e%%!rt t! di%%erentiate theirpr!ducts %r!m c!mpetit!rs& Many e0istin" pharmaceutical c!mp!unds are standardiFed%!rmulati!ns that 5ary little in e%%icacy am!n" manu%acturers& The search %!r a di%%erentiatedpr!duct that 2ill lead t! +l!c$+uster sales is !ne reas!n R , D1 ad5ertisin" and sales %!rce+ud"ets ha5e increased in recent years&

Research and de5el!pment e0penditures are currently 89&34 !% t!tal industry re5enues5ersus 4 !% sales %!r the a5era"e U&S& manu%acturin" industry& Appr!0imately a third !% R, D e0penditures are all!cated t! pr!misin" dru" c!mp!unds in clinical human trials& PhaseI1 II1 and III acc!unt %!r '34 !% R , D e0penses 2hile phase I; a%ter pr!duct intr!ducti!ntrials acc!unt %!r .&(4& Pr!cess de5el!pment c!nsumes 8/4 !% research e0penses1 84 isall!cated t! pre#clinical %uncti!ns1 88&(4 "!es t!2ards e0tracti!n !% chemical c!mp!unds%!r e5aluati!n1 and t!0ic!l!"y and sa%ety acc!unt %!r .&4& Ne2 pr!ducts are all!catedapr!0imately (/4 !% t!tal R , D e0penditures 2ith the +alance "!in" t!2ards impr!5ement!% e0istin" pr!ducts&@8)

Ris$ is hi"h in the pharmaceutical industry as e0penditures %!r research and de5el!pment %!reach dru" typically last thr!u"h a peri!d !% 8/ t! 8. years +e%!re a c!mp!und ma$es it t! themar$et& >DA appr!5als "enerally ta$e 83 m!nths 2hich is d!2n %r!m )' m!nths in 89(*& It


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is 5ery unli$ely that a c!mp!und de5el!ped +y a pharmaceutical c!mpany 2ill e5er +e usedin the retail mar$et& Bnly 8 in ./// c!mp!unds 2ill e5entually +e s!ld and less than !nethird !% all mar$eted dru"s 2ill pr!5ide a return t! rec!up R , D e0penditures& The a5era"ec!sts ass!ciated 2ith +rin"in" a dru" t! mar$et is 7.// milli!n 2hile the pr!duct li%e !% aprescripti!n dru" a5era"es 8/ years&

The ma!rity !% pharmaceutical distri+uti!n is thr!u"h 2h!lesalers 2ith h!spitals1 mana"ed

care !r"aniFati!ns and retail pharmacies as the +i""est cust!mers& Direct sales t! physicians1retailers1 h!spitals and !thers acc!unts %!r appr!0imately )/4 !% distri+uti!n& ul$purchasin" practices ha5e "i5en lar"e +uyers c!nsidera+le +uyin" p!2er as h!spitals andmana"ed care !r"aniFati!ns c!ntinue t! see$s reducti!ns in e0penses&

There are se5eral underlyin" trends in the 2!rld that are c!ntri+utin" t! the demand %!rpharmaceutical dru"s& The a"in" !% the +a+y +!!m "enerati!n and increasin" li%e e0pectancyrates are e0pected t! increase the demand %!r prescripti!n dru"s !5er the ne0t '. years& Thenum+er !% pe!ple +et2een . and 3 years !ld 2ill increase 84 +y '/8.& Gi5en the rise ina"e p!pulati!n and li%e e0pectancy rates ar!und the 2!rld and the le5el !% pharmaceuticaluse +y a"in" indi5iduals1 "r!2th in the industry sh!uld remain in an up2ard trend&

Increases in ad5ertisin" +ud"ets ha5e increased !5erall demand %!r pharmaceutical pr!ducts&T!tal direct#t!#the#c!nsumer @DTC ad5ertisin" in 899( 2as 78&) +illi!n1 up %r!m 783)milli!n in 899)& T!tal ad5ertisin" e0penditures durin" the %irst hal% !% 899( 2as 7)&8 +illi!n2ith (/4 tar"eted t!2ards physicians and '/4 t!2ards DTC in the %!rm print media andtele5isi!n ad5ertisements& The increase in ad5ertisments is a resp!nse +y the industry t! the"reater de"ree !% in%luence c!nsumers ha5e in the ch!ice !% their pharmaceutical treatments&@3

General Economic Conditions Affecting the Industry

The pharmaceutical industry is relati5ely immune %r!m the e%%ects !% ec!n!mic cycles&Demand %!r the industry-s pr!duct remains c!nstant in up and d!2n ec!n!mic cycles asmar$et demand is a %uncti!n !% the !5erall health !% the p!pulati!n& H!2e5er the"l!+aliFati!n !% the pharmaceutical industry increases the ris$ ass!ciated 2ith %!rei"nin5estments and e0chan"e rates& The %irms in this industry see$ t! minimiFe ris$s +y usin"hed"in" practices such as %!rei"n currency %!r2ard#e0chan"e c!ntracts1 +!rr!2in" in %!rei"nmar$ets1 and usin" currency s2aps&

P!rter M!del

Ri5alry am!n" c!mpetiti5e sellers# This is a str!n" %!rce as c!mpetiti!n has increasedam!n" the ma!r players in this industry& StandardiFed %!rmulati!ns !% dru" c!mp!undsha5e increased price c!mpetiti!n in cate"!ries such as the hypertensi5e and c!r!nary caremar$et& Di%%erentiati!n strate"ies ha5e +een %!cused !n alternati5e use research %!r dru"%!rmulati!ns in an e%%!rt t! increase the pr!duct li%e !% indi5idual pharmaceutical pr!ductsand e0tend their use t! treatment !% !ther diseases& Niche mar$et c!ncentrati!ns ha5e +eenused t! pr!5ide hi"her returns +y s!me c!mpetit!rs +ut the ma!rity !% manu%acturers ha5ean e0tensi5e ass!rtment !% pr!ducts t! !%%er users& Recent price increases acr!ss the +!ard%!r all manu%acturers ha5e put pressures !n c!mpanies t! deri5e "reater pr!%its thr!u"h theimplementati!n !% !peratin" e%%iciencies in an e%%!rt t! increase pr!%it mar"ins&


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>irms in !ther industries !%%erin" su+stitute pr!ducts# A str!n" %!rce a%%ectin" +randedpharmaceutical pr!ducts is the increasin" demand %!r "eneric pharmaceuticals as a 2ay t!c!ntain c!st& In 899*1 4 !% all prescripti!ns 2ritten 2ere %!r prescripti!n dru"s 2ith that%i"ure e0pected t! increase t! 334 +y '//)& Generic dru" c!mpanies d! n!t ha5e the c!stsass!ciated 2ith research and de5el!pment& As a result1 "eneric dru"s typically sell %!r retailprices 3/#9/4 +el!2 +randed prices&

Porter !Forces "odel

P!tential Ne2 Entrants# This is a 2ea$ c!mpetiti5e %!rce& The pharmaceutical mar$et in theUnited States is am!n" the hi"hest ran$in" in terms !% +arriers t! entry& The c!st ass!ciated2ith years !% research and de5el!pment1 "!5ernment re"ulat!ry c!mpliance and ris$ass!ciated 2ith the industry disc!ura"es ne2 entrants %r!m enterin" the mar$et&

uyers# This is a m!derate c!mpetiti5e %!rce& Recent pressure has +een put !npharmaceutical manu%acturers t! c!ntain price increase& The p!2er !% lar"e +ul$ +uyers suchas mana"ed care !r"aniFati!ns and h!spitals has had s!me pressure !n manu%actures t!c!ntain c!sts& H!2e5er1 recent price increases in alternati5es such as "eneric dru"s ha5ereduced +uyer-s +ar"ainin" le5era"e&randed pharmaceuticals c!ntinue t! +e a c!st#e%%ecti5etreatment&

Suppliers# The c!ncentrati!n !% the ma!rity !% industry sales am!n" 8/ lar"epharmaceutical c!mpanies has decreased the +ar"ainin" p!2er !% suppliers& Thepharmaceutical industry is a ma!r cust!mer !% the chemical industry& The chemical industryhas an incenti5e t! maintain c!mpetiti5e pricin" practices 2hich enhance thec!mpetiti5eness !% the ma!r player-s pr!ducts in the pharmaceutical industry&

IK& Industry Prospects and Overall Attractiveness

The industry 2ill +ene%it %r!m the a"in" p!pulati!n and increasin" li%e e0pectancy rates thr!u"h!utthe 2!rld 1 and an increase in the p!tential num+er !% candidates %!r pharmaceutical use& Increasin"emphasis !n health standards ar!und the 2!rld and !n the c!st#+ene%it relati!nship !%pharmaceutical use 2ill %urther increase the demand %!r the industry& The industry is attracti5e 2ith!peratin" pr!%it mar"ins e0ceedin" )/4 2hich is appr!0imately t2ice the S , P Industrial Inde01and net earnin"s as a percenta"e !% sales a5era"in" 8*&94 5ersus .&4 %!r "eneral industry !5er thelast . years& Pharmaceutical c!rp!rati!ns ha5e l!2er interest e0penses1 ra2 materials c!sts1 ta0 ratesand "eneral and administrati5e c!st as a percenta"e !% sales 2hen c!mpared 2ith m!st industries&B5erall the pharmaceutical industry is 5ery attracti5e 2ith a+!5e#a5era"e pr!%ita+ility&@3

Performance Analysis

T!tal industry sales ha5e +een increasin" steadily %!r the last . years& In 899(1 the pharmaceuticalindustry had sales !% 78'13/9& milli!n in the US& >r!m 899 thr!u"h 899* sales 2ere 7**1388&8milli!n1 7981/)9&/1 78/81.(/1 and 788/1((&8 milli!n1 respecti5ely&@8) Industry sales "r!2th ha5e"r!2n +y 3/4 !5er the last %i5e years and the trend is e0pected t! c!ntinue in 8999&

Industry sales "r!2th %!r each year has als! increased %!r the last %i5e years& The "reatest sales"r!2th realiFed 2as 899. 2ith 8*&)4 "r!2th %r!m the pre5i!us year& The sec!nd "reatest "r!2th2as in 899(1 2ith sales "r!2th !% 8'&841 8993 had a sales "r!2th !% 88&.*4 and 899* 2ith9&8'4& The least "r!2th realiFed 2as in 8991 2ith !nly a )&4 "r!2th %r!m the pre5i!us year&Industry net pr!%its ha5e als! +een steadily risin" al!n" 2ith sales& In 899*1 the industry had net


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pr!%its !% 7'819(. milli!n1 up 7'1(99 milli!n %r!m 8993& B5erall the pharmaceutical industry sales"r!2th is str!n" and is li$ely t! c!ntinue1 especially 2ith the inn!5ati!n !% ne2 dru"s in the %uture&

The pr!%ita+ility rati! %!r the pharmaceutical c!mpanies l!!$s "!!d c!mpared t! the industrya5era"e& The a5era"e "r!ss mar"in %!r the %!ur c!mpanies 2as P%iFer 2ith (8&((41 A++!tt 2ith3'&3.41 Lilly 2ith *(&8'4 and Merc$ 2ith 38&(4& The "r!ss mar"in %!r the c!mpanies 2ere


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ma!r pharmaceutical c!mpanies tend t! ha5e +etas l!2er than the mar$et p!rt%!li! due t! l!2era5era"e mar$et ris$s& The st!c$s !% A++!tt1 P%iFer1 Lilly1 and Merc$ all ha5e +etas !% less than !ne&

Merc$ has se5eral patents e0pirin" in the near %uture1 2hich c!uld si"ni%icantly a%%ect %utureearnin"s& Alth!u"h Merc$ has a c!nsistent up2ard trend in earnin"s and di5idend payments1 thelac$ !% patent pr!tecti!n %!r s!me !% its ma!r pr!ducts may lea5e the c!mpany in a p!siti!n una+let! c!ntinue mar$et d!minance& 6ith an !utstandin" pr!duct line and patent pr!tecti!n1 2e ha5e

ch!sen P%iFer as the +est in5estment am!n" !ur %!ur c!mpanies& P%iFer has a PE !% ) timesearnin"s 5ersus an industry a5era"e !% )/ re%lectin" in5est!r-s 2illin"ness t! pay a premium %!rP%iFer-s earnin"s&

P%iFer has the lar"est sales %!rce in the industry c!nsistin" !% 81.// sales representati5es 2!rld2idee0ceedin" industry leader Merc$-s 8'13//& 6ith dru"s such as ;ia"ra and Lipit!r1 P%iFer is "ainin"!n the mar$et share currently held +y Merc$& Durin" 899(1 P%iFer-s mar$et capitaliFati!n r!se */4placin" P%iFer am!n" the 2!rld-s 8/ m!st 5alua+le c!mpanies& P%iFer has c!nsistently raiseddi5idends %!r )' c!nsecuti5e years& Durin" the last %i5e years P%iFer has re2arded its shareh!lders2ith a t!tal return !% 39/4 re%lectin" rein5ested di5idends and capital "ains& An in5estment !%78/1/// in 899) 2!uld +e 2!rth 7*918/ as !% Decem+er )81 899(1 assumin" di5idendrein5estment&@*

$i%liography

8& http222&st!c$master&c!m'& P%iFer 899( Annual Rep!rt1 http222&p%iFer&c!m)& Merc$ 899( Annual Rep!rt1 http222&merc$&c!m& Lilly 899( Annual Rep!rt1 http222&lilly&c!m.& A++!tt 899( Annual Rep!rt1 http222&a++!tt&c!m3& Standard , P!!r Industry Sur5eys1 Healthcare Pharmaceuticals1 Decem+er 8*1 899(&*& 6hy P%iFer is S! H!t1 Da5id Stipp1 >BRTUNE Ma"aFine1 May 881 899(&

(& Inside the >!rtune .//1 >BRTUNE Ma"aFine1 April '*1 899(&9& ;alueline8/& C!mpustat88& httpyah!!&c!m8'& 6all Street =!urnal8)& Pharmaceutical Research Manu%acturin" Ass!ciati!n1 http222&phrma&!r"

Barriers to Entry in the Global Industry

Like many industries, any new entrant into the pharmaceutical sector will be faced with various "hurdles" that

have been previously erected by already established businesses and by national and international standards and

regulations. These include, but are not limited to:

:: economies of scale - manufacturing, R!, marketing, sales

:: distribution product differentiation - established products, brands and relationships

:: capital reuirements and financial resources

:: access to distribution channels: preferred arrangements

:: regulatory policy: patents, regulatory standards

:: switching costs - employee retraining, new euipment, technical assistance

The barriers to entry are e#tremely high in the pharmaceutical industry. $any of the top firms have "significant

manufacturing capabilities that are hard to replicate". %lso, they have e#tensive patents that guarantee the


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protection of their products while they defend their brands with large marketing budgets. &ince any emerging

pharmaceutical company can e#pect a sharp retaliation from the established competitors in the pharmaceutical

industry, the overall threat of entry into the global marketplace is relatively low in comparison to other

international industries.

The largest factors that influence the success of many pharmaceutical companies are capital reuirements and

financial resources, regulatory policies, and research and development. %ll three of these factors can influence

one another and a lapse in one area can be disastrous for the future of the company.

Introduction

Abbott Laboratories Ltd. Are has the market value of being among the 50

companies in the United States and has been recognized around the world with

epansions covering almost the ! continents and distributes to "#0 countries worldwide.

In retrospection$ Abbott was founded b% &r. $ considered one of the founders of modern

pharmac%$ because of his invention of the dosimetric granules through the use of an

alkaloid. 'ollowing the first few %ears of success in the business$ &r. shifted and etends

his research focus to s%nthetic medicines courtes% of &r. as the one who gets to convince

&r. to venture into the promising new field of growth. In "("5$ from )ompan% the

emergence of what is now known as the Abbott Laboratories.

*ith the reach heritage being in the business for more than a centur%$ the men and

women behind Abbott have been constantl% driven to a common goal$ the advancement of

medical science to be able to help people in enriching healthier lives. Abbott Laboratories

Ltd. is a health care compan% with bases across the globe which aims to discover new

medicines$ develop new technologies and alternatives to managed health. Abbott products

etend from being that of care to nutritional products and innovative laborator% diagnostics.

'urther$ Abbott+s sweeping products goes from catering health needs of infants up until to

the golden %ears. Indeed$ the products of Abbott foster holistic approach towards giving

people a health% living. 'or the fiscal %ear ,005$ Abbott+s sales amounted to -,,.# billion


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in which -". billion has been allocated to the research and development which pla%s a

pivotal role in the continuing success of Abbott.

/ain art

Overview of Theories

1 )ore )ompetence2 3"((04

he 6ournal of 3"((04 is descriptive of the development and maintaining core

competence in a compan%. It eplores the different leading companies core competences

and describes how these big time companies gets to engulf core competence in the

business world. It is said that in the short1run$ the competitiveness of a compan% stems

from the attributes on price7performance of current products while in the long1run$ the core

competence is spawned from coming up with innovative unlikel% products stemming from

the building abilit% power at lower costs that is more hasten than that of the competitors.

here are four var%ing definition of core competence. 'irst$ denotes to the collective

learning in the organization. Second$ competence spells involvement and deep

communication to working across the borders of the organization. hird$ competence is

not diminishing in use wherein it is sort of like glue that binds the eisting businesses.

'inall%$ there are three named test to gauge core competence in a compan%. he% are the

provision of potential accessibilit% to a wide arra% of markets$ the impeccable contribution


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to the perceived customers+ benefits of end products and the distinction which is barel%

susceptible to imitation.

1 8esourced1based 9iew2 3"((4

wo themes about marketing strateg% in the "((0+s dominates$ among the two is

the resource1based view 38:94 of the firm. he 8:9 seeks to epound on the firms

sustainabilit% of competitive advantage which are drawn from 8:9+s two main approaches.

'irst$ is the resource1based approach that emphasized on the rent earning capabilit% of

internal scarce resources 3 "((#4. Second$ is the d%namic capabilities approach that looks

into how resources and capabilities are being developed in the contet of the firm which in

turn$ stresses the need for eternal market orientation to achieve competitive success. he

contention of resource1based theorists suggests that for strateg% to be sustainable it has

the apparent need to be etched in the resources and capabilities of the firm.

In this 6ournal$ it discusses two fundamental approaches in the creation of

advantage over competitor 3 "(0$ "(54 through cost leadership and differentiation. )ost

leadership evokes firms to seek similar attractive offerings to the market without

necessaril% lowering internal cost while in differentiation$ it tries to make the offerings

distinctive and diverse in the market1place such that the distinctiveness would provide add1

on value to customers and 3 "((#4 persuades customers to bu% brought about b% the

modifications in the offering.

In lieu to the ;uest in gaining competitive advantage$ the positioning of the firm in

the marketplace is vital. here are seven named positioning in which firms must consider

and constantl% work on to find themselves having the best positioning as possible. 'irst$


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the competitive positioning pertains to the firms+ choice of occupanc% that in line with the

combination of a chosen target and the differential advantage it seeks to create.

Additionall%$ 3"((


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has two starting points= one is the formulation of marketing strategies wherein it advocates

an eternal orientation to the development of strateg% b% providing emphasis on the market

environment and second$ is the firm and organizational resources.

1 )apabilities Approach to /arket1driven >rganizations2 3"((?4

he 6ournal of 3"((?4 tackles the capabilities approach to strateg% that

characterizes market driven organizations. As defined b% 3"((?4$ capabilities are comple

bundles of skills and collective learning$ eercised through organizational processes that

ensure superior coordination of functional activities. It is noted that companies that are

better e;uipped to initiate responsiveness to pertinent market re;uirements and sense of

anticipating abilit% to the altering conditions are likel% to indulge long1run competitive

advantage and superior profitabilit%. /arket orientation represents superior skills in

understanding and satisf%ing customers 3"((04. he principal features are a set of beliefs

that puts the customer+s interest first 3. "((#4$ the abilit% of the organization to generate$

disseminate$ and use superior information about customers and competitors 3 "((,4 and

the coordinated applications of inter1functional resources to the creations of superior

customer value 3 "((0= "(b4. /oreover$ the supporting propositions that a market

orientations is positivel% associated with superior performance 33. "((#= "((,= "((0= "((,4

he emerging capabilities approach otherwise called as the resourced1based

theories$ in terms of strateg%$ offers a new perspective in market orientation where in seeks

to identif% the sources of defensible competitive positions distinctivel% such that it would be


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resistant to imitation. 'urther$ the approach cites two related advantages2 assets and the

capabilities. o contrast both advantages$ according to 3"((4$ capabilities differ from

assets such that it cannot be ;uantif% b% monetar% value and are so deepl% embedded in

the organization routines and practices that is not susceptible to imitation or

interchangeable.

he competitive forces approach 3"(04 and the related entr% deterrence approach

3"((04$ which have been the dominant paradigms in the strateg% field 3 3"(("4$ have a

different answer as to how superior performance can be achieved. hese approaches put

the emphasis on the intensit% of competition in the industr% and market segment that

determines the profit potential. he firm seeks a position in an attractive market that it can

defend against competitors.

In contrast$ the capabilities approach serves as a locator of the sources of

defensible competitive position in the distinctive$ hard1to1duplicate resources that

encompasses the integrations of assets and capabilities the firm has graduall% developed

3 "(!= . "(("4. hus$ management+s task is to determine how best to improve and eploit

these firm1specific resources 3"((,4$ although in times of turbulence the challenge of

developing new capabilities comes to the fore 3 "(("= "(?4

An emphasis on building distinctive capabilities or competencies can be found in

3"(5!4 and 3"(5(4 and is featured in the strengths and weaknesses component of the

earl% business polic% frameworks 3 "(


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bringing in eternal realities to the attention of an organization. he market sensing

capabilit% evaluates the capabilit% of organization in determining continuousl% sense

changes in the marketplace and the pre1emptive anticipation of appropriate responses to

marketing actions wherein the process of market sensing follows the usual se;uence of

information processing activities that organizations use to learn 3"((?= "(5= "(("= "(=

"((?4. )ustomer1liking capabilit%$ on the other hand$ comprises the skills$ abilities and

processes evident in the achievement of collaborative customer relationship wherein$ for

successful collaboration to occur it necessitates a high level of purposeful cooperation

aimed at maintaining a trading relationship over time 3 "(= "(4.

1 8esource Advantage heor%2 3"((


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processes which ma% in turn led to economic change$ 3#4 81A theor% reveals that despite of

the absence of entrepreneurial firms that engages in proactive innovation$ competition

d%namism would still ensure the market1based economic s%stems$ 3?4 81A theor% not onl%

incorporates the higher1order learning 3 "((verall$ 81A is

perceived to five views$ competition as an evolutionar% process$ the technolog% as a non1

rival and in part an eclusive resource in the process of production$ innovation as an

outcome of competition processes$ firms engulfing a rational epectation that superiorit% in

financial performance is due to innovations and that societal institutions either facilitates or

inhibits induced competition growth.

The Abbott Laboratories Ltd.

As Abbott Laboratories emerges$ it had entered the period of growth that is

characterized b% war 3the *orld *ar II4$ strategic ac;uisitions and the ;uest for scientific

pursuits since companies at that time was also establishing themselves in the business 6ust

like Abbott.

'rom the 3"((04 identification of core competence$ Abbott Laboratories is indicative

of the three measures that falls into the contet of core competence. 'irst is the offering of

wide arra% of markets. In Abbott$ the% etremel% have the competence in pharmaceuticals

and the advancement of medical science as having have had etended their products from


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the continuum of care being that of medicines$ from producing nutritional products$ like

@nsure$ and technolog% driven laborator% diagnostics that offers state1of1the1art medical

devices and pharmaceutical therapies. /oreover$ Abbott is considered to be the global

leader in vitro diagnostics from which it evolved from immunodiagnostics as their

cornerstone. Second$ the contribution to the perceived customer benefits of the end

products that is reflective of Abbott strong commitment to the advancement of science that

focuses in the areas of unmet medical needs such as the fields of laborator% and molecular

diagnostics that seeks for earl% detection for related medical conditions so that cure can be

given and prevention can incur. And lastl%$ it is the competence of Abbot+s 8&

organization that is works collaborativel% together at high efficienc% that is difficult to

imitate. Buided b% the Abbott+s mission$ the Blobal harmaceutical 8esearch and

&evelopment 3B8&4 organization$ works together collaborativel% in constantl%

discovering$ developing innovative medicines to be marketed and aimed to improve the

unmet scientific needs and cure the ill1health of patients$ as Abbott centers caring as the

foci of their work.

Abbott Laboratories would not be competitive if it has not placed itself in the right

position in the market. he competitive positioning$ including the variet%$ needs1based

positioning and access1based positioning$ all together greatl% fits in to the diverse

characteristics of the people with different medical needs such that these people would be

inclined to spend mone% for the promotion of good health and the urge of sta%ing health%

as much as possible. he market of Abbott is etremel% ver% rich since it is essentiall% all

the people from ever% walks of life and from all borders across the globe needs to have a

dose of pharmaceutical products to combat illnesses$ diseases$ or 6ust plainl% foster good

health% living. 'urther$ the innovative positioning of Abbott is where the% sta% almost

unbeatable. Across time$ the% have been the leaders in pharmaceutical business and


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Abbott continuall% ecels in coming up with innovative inventions. Abbott+s innovations in

medical products are seen from the diversified products$ businesses and therapeutic areas

the% have been offering such that respected Abbott scientists shares Abbott+s dedication

towards the common goal of the advancement of science to be able to provide healthier

lives to the people. @ver% Abbott scientist un;uestionabl% and ferventl% seeks out new

innovative wa%s to come up with clinical solutions to come to terms with patients need. 'or

eample$ in the case of finding the cure for the CI9$ Abbott ma% have not come up %et with

the proven cure for CI9 but Abbott+s focus to this area is constantl% graduall% improving as

currentl% the% are able to produce new and improved CI9 medicines that minimize the

tendenc% for the immune s%stem to be severe. Dot onl% the% are able to produce it$ the

product availabilit% of the CI9 medicines are being distributed to government$ health care

institutions and organizations worldwide via Abbott Access program$ especiall% to the

developing countries that are less able to afford these medicines. Caving have had

established that competitive edge for decades$ it is assumed that Abbott Laboratories is

able to protect its advantage. >f the man% protecting mechanisms emplo%ed b% Abbott to

secure its competitive positioning$ path dependenc%$ where process would pass through

critical time dependent stages$ is salient in the firm. 'or instance$ in Abbott+s

pharmaceutical drug development group$ their work is subdivided into four dependent

phases to ensure that the product is monitored. In phase " E #$ the group conducts clinical

research to the drug candidates to be able to assess their ;ualifications and act on the

plausible confounding variables$ if an%$ thus$ avoiding them. he last phase$ after have had

go through to the drug candidates$ to closel% look on their safet% and gather possible

valuable data if there coeists additional therapeutic indications.

he interesting challenging feature of capabilities approach b% 3"((?4 is the building

of distinctive capabilities of the firm. /arriot for instance$ for man% %ears now the% have


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been constantl% chosen and preferred b% customers as being the number one hotel in the

world in giving customer satisfaction. *hat accounts for /arriot+s reputation is that the%

constantl% seek to satisf% their costumers with the superb services and other intangibles

the% incorporate to their service offerings. Abbott did 6ust that$ like that of a /arriott$ but of

course$ certainl% in a different wa%. In this instance$ we would illustrate the workforce

ecellence of Abbott that is presumabl% to be one of intangible asset Abbott has. *ith

about


20/21

the% divested other products to be able to concentrate on their strong point of ecelling in

the ;ualit% of health care products in ever% stages of life. o name several Abbott+s areas

of epertise the% are in anesthesia$ animal health$ anti1infectives$ cardiovascular$ diabetes

care$ hematolog%$ clinical chemistr%$ immunolog%$ metabolics$ neuroscience$ molecular$

nutrition$ oncolog%$ pain care$ renal care$ spine and virolog%. >verall$ the% contribute to the

financial superiorit% of Abbott because the areas of epertise covers a wide1ranging

capabilities$ from top to bottom of the human anatom% and the identification of the valuable

areas that needs medical attention. Abbott is able to utilize and eplored$ especiall% the

unmet medical areas which cues Abbott to produce products innovativel% to the market

according to these needs. Donetheless$ aside from the established strategic positioning of

Abbott in the marketplace$ it is from these unmet areas Abbott can gain an advantage and

such that the% can generate financial assets in pursuance of being superior in the financial

performance.

)onclusion and Improvement 8ecommendation

his essa% had eplored on the four different views of how to be able to gain and

benefit from the ac;uisition of competitive advantage. 'rom the different views of the

authors namel%$ 3"((04$ 3"((4$ 3"((?4 and 3"((


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It is seemingl% hard to recommend improvements for Abbott as it has proven itself

to the world. As far as competitiveness is concerned$ undoubtedl% Abbott is able to come

to terms with that and possess promising capabilities for the sustenance and maintenance

in the future. erhaps if re;uired to give recommendation$ it would be to a bit minimize in

the ependiture for the 8& organization even though it is understandable that the Abbott

relied on efficienc% and effectiveness of Abbott+s 8& so that the% would be able to invest

some of the mone% to some organizations in Abbott that needs improvement or support$

which in turn$ the% can benefit from$ provided that it leads to the maimization of the other

resources. he overl% focus on one aspect ma% limit the effective functioning of the other

aspect and brings in to the imbalance of the e;uilibrium of the firm or corporation.

Company Perspectives&

A++!tt-s 5isi!n is t! +e the 2!rld-s premier health care c!mpany& Simply put1 2e 2ant t! +e the+est##the +est empl!yer1 the +est health care supplier1 the +est +usiness partner1 the +est in5estmentand the +est nei"h+!r&6hile A++!tt is +r!adly di5ersi%ied1 all !% its th!usands !% pr!ducts and pe!ple are dedicated t! ac!mm!n missi!n t! impr!5e li5es +y pr!5idin" c!st#e%%ecti5e health care pr!ducts and ser5ices&

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