PORTER’S FIVE FORCES ANALYSIS

COINED BY MICHAEL PORTER’S PROFWSSOR OF STRATEGY AT

HARVAERD BUSINESS SCHOOL;HE STATED THAT A
COMPANY’S PROFITABILITY IN AN INDUSTRY IS DETERMINED
BY FIVE-INDUSTRY LEVEL FORCES.
THEY ARE:

BARGAINING POWER OF SUPPLIERS: The bargaining power

of suppliers in the market is low. Pharma industry depends
upon the several organic chemicals .Pharma industry being a
well established industry has led to a number of suppliers
limiting their power to influence price through
bargaining .Pharma industry takes in accounts chemicals as a
commodity which led to high high switching rate between
suppliers without incurring a high cost .companies such as
sahsun chemicals and orchid chemicals are an example of
such forward integrations.

SUBSTITUTE PRODUCTS: Availability of substitute product in

the pharma industry is one of its greatest advantages.
Demand for pharma products continue and the industry
thrives.Pharma industry faces a huge competition in terms of
substitute product as the creation of generic product is very
cheap. Customers can find a substitute medicine in terms of
generic drugs if the original product has an expired patent.
RIVALRY: Pharma industry is highly competitive when the
potential for very high return when new drugs is created.The
rivalry between various companies in the industry is caused
as all the various companies want to improve their position in
the market.The rivalry between the companies is in the form
of price competition, advertising battles, and product
introduction.

NEW ENTRANTS: Pharma industry is based on their

RESEARCH AND DEVELOPMENT unit. The cost associated with
Research and Development unit setup and its functioning is
very high. Pharma industry are moving toward a new
business approach. This business approach takes off the
costly burden of research and development.

BARGAINING POWER OF BUYERS: In the modern economy,

bargaining power of buyer is generally very high in industries
where companies use pricing as the foremost tool to lure
cutomers. An example of this is the Indian E-commerce
industry, where the top two players, flipkart and amzone,
often use deep discounting to attract cutomers.