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C A S E T E A C H I N G N O T E S
The global pharmaceutical industry in the land
of shrinking giants
Sarah Holland
1. Introduction
The case describes the evolution of the industry and its unusual strategic environment. Attention
is drawn to environmental pressures from regulators and payers. Key forces driving the industry
2. Position of the case
The case study is primarily concerned with business environment analysis on a global level. The
case is designed to facilitate teaching of analysis frameworks including PESTEL, Porters Five
3. Learning objectives
The case is designed to help students undertake structured analysis of an industrys business
environment, using analysis frameworks such as:
PESTEL analysis and scenario analysis (Section 2.2.1 and Section 2.2.2)
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The case can be used by students to understand drivers of strategic choices such as
diversification and outsourcing. Outsourcing has expanded beyond manufacturing to encompass
substantial components of R&D and even sales. Firms have also engaged more often in pre-
competitive collaboration, joining forces to tackle difficult challenges together. The tough
4. Teaching scheme
The case study may be used as the basis for plenary discussion, for small group work or
individual assignments. For example, the tutor could lead the class through a PESTEL analysis
5. Questions for discussion
1. Identify the main environmental forces which affect the global pharmaceutical industry.
2. Use scenario planning techniques to consider the key drivers of change that will affect the
global pharmaceutical industry in the future.
Supplementary questions
6. What is the prevalent ethical stance in the pharmaceutical industry? Create a stakeholder
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6. Case analysis
1. Identify the main environmental forces which affect the global pharmaceutical industry.
Students will be expected to address all aspects of a PESTEL analysis. Illustrative points are
given here, but this is by no means exhaustive.
Political governments focus on the industry as an easy target in the drive to reduce healthcare
expenditure; public outcry over safety alerts and international price comparisons; public
pressure to fund cancer medicines.
Environmental emphasis on sustainability by investors and employees.
Legal increased regulatory focus on drug safety and on industry sales and marketing practices;
growth in liability claims particularly in the US; threat of counterfeit medicines.
2. Use scenario planning techniques to consider the key drivers of change that will affect the
global pharmaceutical industry in the future.
Students should prioritise the forces identified in Question 1. The key forces should be
categorised according to expected impact (high, medium and low) and certainty of impact (high,
medium and low). Two forces that are both high impact and high uncertainty can be used to
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3. Analyse the Five Forces framework to identify environmental forces affecting the global
pharmaceutical industry? Do these forces differ by industry sector and where would you
place the different sectors in the industry life cycle?
Students will be expected to address all aspects of a Five Forces analysis and discuss how these
forces have changed over time. Illustrative points are given here, but this is by no means
exhaustive.
Threat of new entrants the industry has historically had high barriers to entry, but these are
dramatically lowered at patent expiry with generic entrants. Generic companies such as Teva
and Dr Reddys are emerging as major global players with ambitions in the innovative sector. A
4. Identify strategic groups within the global ethical pharmaceutical industry. Describe the
strategic choices made by Pfizer from 2008 onwards and comment on what may have been
the drivers behind these choices and how successful they were.
Based on the case, students should be able to identify five broad types of industry player:
ethical, generic, biotech, OTC and vaccine companies. Each requires very different strategic
capabilities. Producers of branded prescription drugs require strong R&D and global sales and
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5. How has the strategic customer evolved over time for global pharmaceutical companies?
What is the impact on industry critical success factors?
Students would be expected to identify that decision-making power has shifted from the medical
practitioner to the payer.
6. What is the prevalent ethical stance in the pharmaceutical industry? Create a stakeholder
map for the pharmaceutical industry and consider what actions the industry could take to
engage more effectively with its stakeholders.
Students are likely to characterise the pharmaceutical industry stance as enlightened self
interest. Some companies have pioneered initiatives to undertake at-cost research, donate
medicines or support charitable activities, but others have been caught out in unethical practices
and fined large sums.
7. Research, compare and contrast the activities of leading industry players in Brazil, Russia,
India or China?
This question could be an interesting individual or group assignment for students to undertake
using their own research.
