Qualification - Level 5 Higher National Diploma in Business
Unit Name - Global Business Environment
Unit Number - Unit 18
Unit level - Level 5
Assignment Title - Globalization: Drivers and Complexities
Learning Outcome 1: Analyze the key factors which drive globalization
Learning Outcome 2: Determine the strategic complexities associated with operating in a global environment
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Case Scenario:
Big Pharmaceuticals Caution Coronavirus Effect on Business
The growing economy means more income and employment. Growth is measured by reviewing the percentage change in gross domestic product, or the value of final goods and services produced annually. According to the Organisation for Economic Cooperation and Development (OECD), the world's economy could grow at its slowest rate since 2009 this year due to many reasons like global slow down, decline in manufacturing and agriculture and the recent impact that has caused concern is the coronavirus outbreak. Some of the globe's biggest drug makers have started warning that their businesses are affected by the spread of the coronavirus.
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Required:
Given this unexpected situation in pharmaceutical industry and the above scenario, you are assigned the responsibility of submitting a report that "Critically evaluate the global business environment, including the opportunities and challenges faced by drug producers across globe".
Solution:
Title: "Critically evaluate the global business environment, including the opportunities and challenges faced by drug producers across globe".
Introduction:
Pharmaceutical marketing differs both in the native and the international market in comparison to consumer marketing. The industrial specifications, regulations on the import-export of drugs is strict and is liable to penalties. The demand for the healthcare products and drugs dictate the production of these companies. (Mohammadzadeh and Aryanpour, 2013). Globalization is the establishment of any company on an international market however the emerging situations such as permission to proceed with production due to the current pandemic have placed the future of the companies especially pharma companies in the path of uncertainty.
In this essay we discuss the influence of changing markets on one of the leading pharma companies Roche in U.S. It has its many out of the country branches directly involved in clinical development
Global market/International business:
One of the key aspects of expanding the business on an international market is to take a closer look at export marketing and internationalization. Emerging markets is one of the concepts where the Pharmaceutical industry may explore the possible locations across the globe for the successful establishments. Brazil, India, China South Korea and a few others were regarded highly as the most probable choices on the international market.
The rise in the incidence of diseases and overall general health of the population due to changes in the lifestyle of the population influenced the emergence these companies. The pace of the countries in sync with the transformation of the market needs is one of the primary factors that promote the products. A clear change in the demands of the public to expand their life span and maintenance of their body gave rise to an entire beauty industry with a huge market. Majority of the challenges experienced by these companies in international business can be broadly placed under infrastructure in the overseas branches, cost-containment, competition from other companies or control, and evaluation of the drug quality (Tannoury and Attieh, 2017).
Pharmaceutical industry has large corporations that collectively hold the global markets and these include AstraZeneca, GlaxoSmithKline, Novartis, Roche and Pfizer. The companies that are research based and there are companies that are generic that form the basis of the industry.(Taylor, 2015)
key factors which drive globalization:
Companies that rely on the trade and exchange encounter a number of challenges as there are many variables that count counter the successful supply. Especially when the services are rendered across the national borders. Currently Pharmaceutical companies were banned from the production by the governments across the globe to limit the spread of the disease through the workplaces. The consequences of the pandemic in terms of morbidity and mortality is high and is considered one of the deadliest pandemics ever recorded after Spanish flu. Though pharma companies are at the forefront in this situation not all the companies contribute to the drugs that alleviate the symptoms neither they produce vaccines. Hence, a restriction was laid on these companies except for the ones that supply raw materials to the Covid-19 vaccine preparation or the other drugs such as Hydroxychloroquine.
The following are factors that influence the global business either directly or indirectly.
Political factors:
Political parties are the deciding bodies in addition to the security governing bodies in a given state that dictate the supply of the goods. Sometime additional taxes and hidden charges are laid on the goods. A sudden shift in the foreign trade regulations due to the political instability in the country also negatively influences the profit and consistency in the exchanges. Health reforms as a part of government initiative may interfere with direct supply of the medicine to the general public and are often supplied through the government funded organizations to check the cost and quality control (Shaw, 2018).
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Cost/Economic factors:
The pricing decisions are a result of complex strategies especially on an international market with the dynamic circumstances and factors. For the same product in different markets the pricing may differ. Pricing is dictated by the perceived value of the consumer. In addition to theexisting economic conditions i.e. GDP of the country as a whole or the distribution of the population below poverty line decides the inflation rate, levels of urbanization, price of each drug and its successful distribution across the country. The growth potential of the country is assessed through the age distribution and economic growth. A high pricing for any product may not sustain in the market for long. The current situation across decreased the number of jobs due to the shutdown of the companies and a relatively bigger recession is impending in the years to come. These factors influence the purchasing power of the government from these companies. The local needs and demands must be considered while quoting the price.
The exchange rates of each product influences the sales. In a country with a relatively higher fluctuations in its currency it may lead to sever losses with the exchange rate.
Market factors:
For any new product of a service the potential of the new market needs to be analysed. Calculating market potential is one of the essential steps which can be defined as a demand present or possible in the environment. The market size of any product that includes all the current product sales should be considered. This gives a gross update of total market revenue size. From a top view the market size might be higher and is unequally distributed among the companies. The rate at which demand for the product is increasing defines the potential market growth and it changes often. For example, the demand for the manual glucose monitors changes with the introduction of automated monitors. Hence the trend in the market also decides the demand.
Legal factors:
In the United states,all the fifty states differ in their drug administration and distribution through private pharma or government monitored outpatient distribution. Hence in the states where there is an opportunity to increase the prices due to the lack of government monitoring there is higher possibility of profits. The production rate and duration sometime interfere with the local legal concerns and the laws enforced affect the working policies.
Social factors:The culture and values of the people in the workforce heavily dictates the rate of production and maintenance of consumer demand-supply
Environmental factors:
One of the most important factors that needs to be considered and has the potential to negatively affect the business especially the drug industry is the weather, external atmospheric temperature, availability of water resources and the locations to safely deposit the industrial wastes. A product that is not stable in the extremely hot weather of the country it is manufactured in the cost of the maintenance may skyrocket with low net profits. Areas highly prone to natural disasters are a poor choice to establish a permanent manufacturing unit with a high risk for losses as the preference for the product may be lowered in the event of such as disaster and has a severe impact on the business.
Technical factors:
The shift in the production from the manual labour to clean rooms has enormously affect the jobs and production rate of companies. The turnover of the number of products has exceeded the expectations and the current global market heavily depends on the fully automatized production lines. Any changes or damage to the equipment the repair expenses are often in millions and severely affects the companies.
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Competition:
Competition in the international markets is high and is extremely challenging. As of today Customers are highly informed about the products, to attract these potential stakeholders the price is usually monitored and is mostly in line with the competitors. The highly uncertain market needs a dynamic pricing plan to withstand the competition. In some cases the concept of marginal costing is applied in Competitive markets to the concept of marginal costing however this scheme involves risk.
Strategic complexities associated with operating in a global environment:
Large pharma invests in billions of dollars both the improvising the existing drugs, innovative drug solution, and to firmly establish themselves in the international markets.
Research based companies are the drug innovators that consistently strive to provide new drugs however the risk on investment at pre-clinical stage is high. Patent system and quality assurance of the drug are the key components as any side effects of the drug found at any stage of its trial need to be withdrawn and the entire production cost is completely borne by the company.The associated allergies and specific of each human and their reactions towards drugs are an important aspect while researching and distributing. Hence stringent approaches towards rigorous testing is employed to move the candidate drugs from research towards production. (Mohammadzadeh and Aryanpour, 2013)
Some of the generic companies supply on an international level with least resistance as they are backed by the validated products and commercially successful products.
A strategy employed to analyse the complexities and the possible alternative solution is through SWOT analysis. Considering the company Roche, a SWOT analysis can be performed.
Strengths:
The biggest strength of Roache is it market share and global distribution network with numerous partnerships to conduct the research at various locations. UCSF's Quantitative Biosciences Institute (QBI) Coronavirus Research Group is attempting develop therapeutic drugs and especially vaccines. This firm has delivered with higher patient satisfaction.
Weaknesses:
The segmentation in term of products is very little beyond the health grade products. Highly skilled labour contribute to the success however a relatively higher attrition rate counters this (Holmes et al., 2019)
Opportunities:
The company has its major products in the innovative research and the current situation has been in favour of its drug trials and it is highly possible for it to explore the unexplored markets through the distribution of the vaccines and latest drugs against Covid-19. The fully automatized infrastructure in the company for the development of drugs is another added advantage for the unhindered production.
Threats:
Currently vaccine is in high demand however the post the pandemic there may be sharp decline in the demand for the product and the regulatory bodies may interfere with the distribution(Phadermrod et al., 2019)
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Conclusion:
The international business provides both challenges and opportunities due to its distribution of resources. The current emerging situation of COvid-19 pandemic has severely restricted the production of many industries except for the pharma companies. Many factors such as legal system and working environment in the foreign country influence the business. The conditions are ever changing and unreachable for most of the time due to the distance. Establishing positive relationship with the governments is the first and foremost step to build the strength of the company.