Marketing

Apply Michael Porter’s five forces model to classify and analyze competitive pressures in the market place. (HL)

Michael Porter’s five forces model analyzes business competition within an industry. Porter identified five forces that determine the long term profitability of an industry. These are the threat of new entrants to an industry, the threat of substitutes, bargaining power of suppliers, bargaining power of buyers, and the extent of rivalry among existing competitors. These five forces can be applied to N-Pharma. New entrants to the industry are becoming a threat to N-Pharma since the expiry of their original patent, allowing competitors to produce similar products at a cheaper price. This poses a significant threat as products such as Pharmax provide the company with a share of around one third of the market of painkillers in Japan and the USA. N-Pharma drugs are trusted but expensive; therefore the threat of substitutes is a problem. Especially in times of economic difficulties, customers may prefer to buy cheaper generic drugs as a substitute. The market growth for anti-obesity drugs is increasing in recent years. In this way, changes in customer demand will influence the bargaining power of buyers in an industry. N-Pharma’s well established brand name gives the company a competitive edge between the extents of rivalry among existing competitors.

Discuss the role of branding in developing N-Pharma’s business.

Branding is a method of differentiating N-Pharma from other pharmaceutical businesses in the market. It is something that customers will be able to remember and associate the business with. Developing the image and reputation of N-Pharma, people would learn to trust this brand even further thus increasing the chances of potential investors to get involved with them.

Use the BCG matrix to suggest suitable strategies for N-Pharma’s product portfolio.

Evaluate different methods of market research that N-Pharma can use

What channels of distribution has N-Pharma been using?

What channels of distribution would you recommend the company uses in the future?

Use Ansoff Matrix or other suitable marketing tools to design a suitable marketing strategy for N-Pharma.What pricing strategies should N-Pharma adopt for their business and why?

Low risk growth strategy for businesses that chose to focus on selling existing products in existing markets, they do this to increase their market share of existing products, it is a low risk growth strategy as the business focuses on markets on products that they are familiar with.
 * || Existing || New ||
 * Exisiting || Market Penetration

Application to N-Pharma: Pharmax Drug: sell more in existing market they can achieve this by improving their current marketing mix: use better advertising to enhance the product, offer more competitive prices since market is now fully saturated. Pharmax at the moment has a share of 1/3 of the market for pain killers in Japan and USA.

Disadvantage is that they use competitor based pricing? Pharmax can’t afford to use competing products as a benchmark instead of considering own costs or the customer demand- because the market is now diffused and figures for sales are constant? || Product Development Medium risk growth strategy where businesses can sell new products in existing markets, sell more Pharmax, Pharmaflo in China since most of their drugs especially the weight reducing ones are performing quite poorly || Achieve higher sales/ market share of existing products in a new market- this would be N-pharmas product in Europe, market penetration of the existing products wont work as market is saturated N-Pharma needs to invest in a new market with an exisiting product in that case. || Diversification Sell new products in new market- sell animal drugs as they are considering Merging with Anigam- risky to sell products in new market as they haven’t tested the existing product, also this is Japanese company so there operations are more centralised and may diffuse the merger with Anigam. ||
 * New || Market Extension

Does the case-study suggest that demand for the products of N-Pharma is price elastic or inelastic?

Although, the "need" nature of the products plus the company's strong reputation make the demand for their products quite price inelastic, the fact that the products are "expensive" and there are "cheaper" substitutes make the product of N-Pharma relatively price elastic overall.

//Teacher's comment: I would think that the elasticity depends on the drug itself. New drugs which are breakthroughs for e.g. cancer treatment would be considered relatively inelastic (provided they are not too overpriced). More common drugs such as paracetamol, where there are many less aexpensive "home brand" products on the market will tend to be more price elastic.//

To what extent should N-Pharma alter their market strategy in different parts of the world?

What marketing strategies should N-Pharma use if they are to enter the animal drugs market?