Eli Lilly and Company: the Global Pharmaceutical Company Essay Example

are not powerful.

There exists a little possibility of forward integration. All of the above makes the bargaining power of supplier low. In Eli Lilly’s case it is true that the power of suppliers is reversal of the buyer’s power. Threat of Substitute Product The threat of substitutes is not very high. Traditional medicine using drugs as a curing remedy is a main mean for treatment used by almost all healthcare institutions. Substitutes such as sport, yoga, alternative medicine are not very popular and unlikely to become such.

However for the main product Prozac, which is an antidepressant drug, alternatives are possible because treating depression using alternative medicine, psychologist’s help and other means is more probable than treating of physical disease by similar means. The threat of substitutes is low, which is a significant advantageRivalry Among Competitors The rivalry is tense in this business. However the competitiveness is rather unique in pharmaceutics. High costs of research and development hold the appearance of new rivals. It is also true that rivals are usually focused on a rather small market of specific medication.

The main rivals Novo Nordisk A/S, Pfizer and Smithkline are narrowly oriented companies which however give Eli Lillys hard time producing such products as Zoloft – Prozac alternative. The competitive rivalry in the business is medium.

Swot Matrix Strengths-Opportunities

Eli Lilly & Company should join strategic alliance to develop and market a blood substitute product on its ethical products.Use cooperation joint ventures & alliance3s to lower down costs of R expenditures, increase research capabilities and seize economies of scale, thereby protecting future profits.

Offer wide spectrums of products. Make research in other therapeutic benefits from a previously marketed drug. Identify

and develop treatments for future wide spread maladies.

Strengths-Threats:

Find innovative ways to extend patent on Prozac through marketing it in other forms.

Weakness-Opportunities:

1. Consider joint ventures and alliances with generic-producing pharmaceutical to protect earnings from patent losses.
2. Make research on the pricing policy in other markets around the globe to make wise market entry decisions.

Weakness-Threats:

1. Find creative ways to extend patent protection and differentiate it from those of competitors by creating a brand name and customer loyalty.

SWOT Anaysis

Strengths:

1. Success of their anti-depressant Prozac
2. Many Strategic Alliances
3. Patent protection of company’s products
4. Heavily involved in Alliances to perform research
5. Top 10 contender in the Pharmaceutical Industry
6. 1st pharmaceutical firm to market a genetically engineered drug the Humulin
7. Pharmaceutical products are widely distributed in 200 dependent wholesale outlets in U. S.
8. It had R & D facilities in 9 countries including North America, Europe, and Japan
9. It had manufacturing facilities in 20 countries including locations in Australia, South America, China, Middle East, Europe & in U.S.

Weaknesses:

1. Unfavorable exchange rates in overseas sales
2. Decline of sales of anti-infective due to strong competition from generics in the U. S. and overseas

Opportunities:

1. U. S. market offering great growth potential
2. Trends of globalization
3. Aging of worldwide population
4. Longer life expectancy
5. Opening of new markets
6. Increased demand from Third World nation experiencing rising standards of living
7. Merge agreement with Sepracor

Threats:

1. Expiration of Prozac patent
2. Emergence of Generic Drugs
3. Under investigation by the Federal Trade Commission (FTC) for alleged antitrust activity due to its agreement with Sepracor
4. Unresolved case with Barr Laboratories, Inc. from manufacturing generic versions of Prozac
5. Lawsuit with Zeneca Inc. regarding its product Evista claiming that it is a breast cancer treatment

Industry Analysis

The industry consists of the product organizations such as drug companies and product and supplies organizations. The size of the global industry was $250 billion in 1999 and 6 to 7 percent annual worldwide sales growth for 1999 to 2003. The pharmaceutical industry ranks as the number one industry in the world in terms of return on assets, return on revenue and number three in terms of return on equity for year 1997 among Fortune 500 companies. Among the 14 pharmaceutical companies in the Fortune 500 for 1997, Merck was ranked 1st, Pfizer 5th, Abbot 6th, and Eli Lilly 7th in terms of revenues. Rivalry among competitors is intense as brand recognition has become increasingly important as an approach to capturing market share.

Companies are increasing advertising budgets to promote the therapeutic benefits of their drugs in an effort to differentiate their products from competitors. Many existing pharmaceutical compounds are standardized formulations that vary little in efficacy among manufacturers. The search for a differentiated product that will lead to blockbuster sales is one reason R & D, advertising and sales force budgets have increased in recent years. Risk is high in the pharmaceutical industry as expenditures for research and development for each drug typically last through a period of 10 to 15 years before a compound makes it to the market.FDA approvals generally take 16 months which is down from 32 months in 1987. It is very unlikely that a compound developed by a pharmaceutical company will ever be used in the retail market.

Only 1 in 5000 compounds will eventually be sold and less

than one third of all marketed drugs will provide a return to recoup R & D expenditures. The average costs associated with bringing a drug to market is $500 million while the product life of a prescription drug averages 10 years.There are several underlying trends in the world that are contributing to the demand for pharmaceutical drugs. The aging of the baby boom generation and increasing life expectancy rates are expected to increase the demand for prescription drugs over the next 25 years. The number of people between 45 and 64 years old will increase 41% by 2015.

Given the rise in age population and life expectancy rates around the world and the level of pharmaceutical use by aging individuals, growth in the industry should remain in an upward trend. The pharmaceutical industry is relatively immune from the effects of economic cycles. Demand for the industry's product remains constant in up and down economic cycles as market demand is a function of the overall health of the population. However the globalization of the pharmaceutical industry increases the risk associated with foreign investments and exchange rates.

The firms in this industry seek to minimize risks by using hedging practices such as foreign currency forward-exchange contracts, borrowing in foreign markets, and using currency swaps.