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Eli Lilly & Company is a leading U.S. pharmaceutical company. In year 2002-2003, the company suffered loss in net profit. The cause was the heavy investment in research and development. In terms of market share and sales, the performance of the company was quite nice in this time span. Two of the very promising drugs of the company delayed in market launch in this time span.
After this period, the company's performance is steady even when it lost few patents because of good performance by its other generic products.
B. Strategic Posture:
In terms of company's policy, the company manufactures both generic and animal drugs with animal drugs comprise just around 5% of the total manufacturing. The key strategy being patent of all drugs manufactured. In developing countries, the company's key strategy is heavy investment in research and development because of heavy competition in this field.
EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREATS
A, Societal Environment
The company is a big name in drug manufacturer. This big name is the base for sales of most of its product. A continuous problem in company's execution is its dependency on patent rules and regulations. In last few years, the company lost a number of cases asking for patent for few of its products. This results in significant loss in company's profit.
In developing parts of the world, the main problem is different and is basically the competition in the market.
B, Task Environment
â€¢ Threat of new entrants: The Drug industry is highly profitable and thus a number of new entrepreneurs enter in the industry increasing the competition significantly.
â€¢ Bargaining power of buyers: As given, 33% of the company's product is purchased by those of above 65 in age. Thus company has few distinct segments to entertain.
â€¢ Threat of substitute products or services: This is one of the biggest threats in the drug company. Any new product if not patented soon is been copied with new name and the entire sum of research and development of that product is disappeared. So, new products are serious threat to company's performance.
â€¢ Relative power of unions, governments, special interest groups: The Company lost patents on two of its major launches in drug market due to the intervention of government and FDA.
Current key factors: Currently as mentioned, the major influencers on company's performance are government policies, new products and heavy competition,
In external context, the key threats to the company are the competitors and excess of same types of product in the market.
INTERNAL ENVIRONMENT: STRENGTHS AND WEAKNESSES
The company has a mixed marketing strategy. In this, the company sends its Medical Representatives to promote few of its ethical drugs. Most of the products have the same marketing methodology. The other one is the TV promotion which was not quite successful.
ANALYSIS OF STRATEGIC FACTORS
A. Situation Analysis
The situation analysis is framed by five C's as mentioned below:
Company: The Company has strong brand image in the market. It has a position in top 10 pharmacy companies of the world.
Customers: The Company serves all kinds of segments. The key segments are old care (people above the age of 65) and child care products.
Collaborators: No information provided in case.
Competitors: The pharmacy industry has a number of competitors. The industry is highly prone to new entrant.
Climate: Business climate vary from country to country. In developing countries, the market depends on Investment in Research and Development. In Unites states, the company focuses on launching new products for market share.
B. Review of Mission and Objectives
Strategic factors play a crucial role in reviewing mission and objectives of a Drug company so as to tackle extremely rising competition and high demand of maintaining quality according to changing scenario. Also for drug industry it is highly relevant to bring out changes in its objectives on the basis of continuous scanning of environmental factors.
Strategic Alternative and Recommended Strategy
Strategic alternative available with the industry is to operate by adopting expansion strategy. This can be considered as the best possible option in present situation as most of the companies are trying to follow this strategy and start their business in a collaborative format with other organization by using their resources like networking in order to enhance its sales.
Another alternative available with the company is to start franchising. This will increase the market reach of the company in a drastic format making it possible for the company to augment its sales by a considerable factor.
Best possible strategy that this pharmaceutical company can adopt is expansion strategy as in present situation, i.e. post crisis condition, most of the companies are trying to occupy markets voids that had been generated because of previously shrunken market and company's domain.
Implementation of this strategy will play a significant role for future planning and functioning of this organization as most of its futuristic aspects will be entirely dependent over this particular factor itself. Before implementing this strategy, there should be an in-depth study over concerning market so as to take all the factors into account and deviates all the aftereffects of the implementation in its favor. This pre-analysis have always been a primary essence for organizational functioning in drug industry because of constantly changing conditions and increasing intensity of competition in the market. These factors are compelled to be taken into account so as to rectify any mistake beforehand that may hinder its performance.
Evaluation is a necessary step to be taken as in this step analysis of final outcome is done over both qualitative and quantitative basis. This is the last step of the discussion that is considered as highly necessary for future reference as it depict mistakes along with scope of mistakes that would have been committed. Also for the purpose of evaluating success nature of the strategy, this step is considered as mandatory. Also evaluation is considered as necessary in order to measure financial progress made by the organization that is one of the most important aspect associated with the company and signify importance of evaluation.