Porter’s Five Factor Model
Porters concept of competitive strategy is described as the search by a firm for a
favorable competitive position in an [Link] create a profitable competitive
strategy, a firm must first examine the basic competitive structure of its industry
because the potential profitability of a firm is heavily influenced by the
profitability of its [Link] Pharmaceuticals Limited managers use Porter
Five Forces to understand how the five competitive forces influence profitability
and develop a strategy for enhancing Beximco Pharmaceuticals Limited
competitive advantage and long term profitability in Healthcare industry.
Rivalry among the Existing Competitors:
For each industry analyzed, we must judge if the rivalry among firms is currently
intense and growing or polite and stable. Rivalry increase when many firms of
relatively equal size complete in an industry. Beximco Pharmaceuticals Limited
operates in a very competitive Healthcare industry Beximco Pharmaceuticals
Limited can handle Rivalry by building a sustainable
differentiation,scale,Collaborating with competitors to increase the market size.
Rivalry among the top players in the industry is very high. About 68% of the
market is controlled by top 10 companies. For a generic medicine class all the
companies have a brand which competes against each other in the market.
Beximco Pharmaceuticals Limited increase brand loyalty by rewarding the
customers' repeat purchase behaviour.
Threats of New Entrants:
Threat of new entrant in this industry is lower because a new comer in the industry
will need huge capital investment and many regulatory permissions in order to start
producing drugs. The brand loyalty of the customers is another factor contributing
to the barrier of [Link] Beximco achieve customers trust. Beximco
Pharmaceuticals
building economies of scale so that it can lower the fixed cost per unit. It also
building capacities and spending money on research and development. New
entrants are less likely to enter a dynamic industry where the established players
such as Beximco Pharmaceuticals Limited keep defining the standards regularly.
Threats of Substitute Products or Services:
When a new product or service meets a similar customer needs in different ways,
industry profitability suffers. The availability of substitute products or services
makes the competitive environment challenging for Beximco Pharmaceuticals
Limited and other existing [Link] Threat of Substitute Products or services
increases when a cheaper substitute product/service is available from another
[Link] psychological switching costs of moving from industry to substitute
products are [Link] threat is substantially low for Beximco Pharmaceuticals
Limited when the switching cost of using the substitute product is high (due to
high psychological costs or higher economic costs)
Customers cannot derive the same utility (in terms of quality and performance)
from substitute product as they derive from the Beximco Pharmaceuticals
Limited’s product.
Beximco Pharmaceuticals Limited can reduce the Threat of Substitute Products or
services by clearly emphasising how its offered product/service is better than the
available substitutes.
It should provide convincing reasons to the customers by offering a better
experience and high value for money.
Bargaining Power of Buyers:
Bargaining power of buyers indicates the pressure that customers exert on the
business organisations to get high quality products at affordable prices with
excellent customer service. Buyers are often a demanding lot. They want to buy the
best offerings available by paying the minimum price as possible. This put pressure
on Beximco Pharmaceuticals Limited profitability in the long run. The smaller and
more powerful the customer base is of Beximco Pharmaceuticals Limited the
higher the bargaining power of the customers and higher their ability to seek
increasing discounts and [Link] Pharmaceuticals Limited can handle the
Bargaining Power of Buyers by building a large base of customers. This will be
helpful in two ways. It will reduce the bargaining power of the buyers plus it will
provide an opportunity to the firm to streamline its sales and production process,by
rapidly innovating new products and new products will also reduce the defection of
existing customers of Beximco Pharmaceuticals Limited to its competitors.
Bargaining Power of Suppliers:
All most all the companies in the Healthcare industry buy their raw material from
numerous suppliers. Suppliers in dominant position can decrease the margins
Beximco Pharmaceuticals Limited can earn in the market. When suppliers have
strong bargaining power, it costs the buyers- (business organisations). Moreover,
high supplier bargaining power can increase the competition in the industry and
lower the profit and growth potential for Beximco Pharmaceuticals Limited
Similarly, weak supplier power can make the industry more attractive due to high
profitability and growth potential.
Beximco Pharmaceuticals Limited can handle the Bargaining Power of Suppliers
by strengthen its position against suppliers by decreasing the dependency on one or
a few suppliers. It will increase its price sensitivity. Developing the long-term
contractual relationships with suppliers from different regions not only lowers their
bargaining power but also allows Beximco Pharmaceuticals Limited to improve its
supply chain efficiency. Finally, Beximco Pharmaceuticals Limited can find the
alternate ways of producing the product if product demand is high enough and the
firm has required competencies and expertise. However, it requires detailed cost-
benefit analysis to determine its feasibility. Product redesign and diversification of
the product lines can also help the organisation reduce the suppliers’ power in the
market.
