Porter's Five-Force Analysis Case Study Example | Topics and Well Written Essays - 1250 words

Porter's Five-Force Analysis - Case Study Example The first key external environmental issue in the PHARMAC case study is the importance of regulatory agencies and authorities. From the case study, three advisory committees are identified as the key regulatory factors. The Consumer Advisory Committee (CAC), the Pharmacology and Therapeutics Advisory Committee (PTAC), and the Cancer Treatment Sub Committee (CatSop) are all identifies as the key factors (Koster, Erakovic and Smith). These committees are the advisory boards to the various elements of the external environment and the decision-making organs of PHARMAC. The other key environmental factor identified is the political factor in the operations of PHARMAC. The decision that PHARMAC made; approving the nine-week trial Herceptin drug reflects the influence of vested shareholder interests in the decision-making process. The political element is particularly important for this analysis because of the vested interests of the parties. Roche industries can be identified as having som e political influence on the analysis and the decision-making process. Porter’s Five-Force Analysis An analysis of the case study can also be done using Porter’s five-force analysis, which is used to determine every facet of the organization ranging from the profitability to the competitive threat and power of the industry (Porter, 1998). The first part of the five-force analysis is the threat of new entrants into the industry, a factor that is deemed to increase the intensity of competition. From the case study, it can be concluded that there is no threat of new entrants into PHARMAC’s industry because it is a government sanctioned advisory agency. An analysis of the second element in Porter’s five-force analysis is focused on the power of suppliers, who, in this case, are identified as the drug company Roche. The case study indicates that the supplier of Herceptin had exceptional power in the market; therefore, the bargaining power was relatively high. The third factor of Potter’s five-force analysis is the bargaining power of buyers, who, in this case, are identified as the New Zealand population and the regulatory and advisory agencies. An analysis of these buyers indicate that they have relatively low power compared to the suppliers, hence the decision to fund the nine-week trial of the drug Herceptin. The threat of substitutes is also considered in the same way as the threat of new entrants. In the funding process of new drugs, the case study indicates that PHARMAC and MedSafe are the primary considerations; therefore, there is no credible threat of substitutes. The competitive rivalry within the industry, the last factor of the industry analysis, indicates that the various factions in the funding and approval industry have different bargaining powers. The drug industry is very costly; therefore, the different competitors in the industry are identified to need massive amounts of funding to succeed. The case study also i ndicates that the critical success factor in the industry is consultation and good relations between the key players in the industry. The case study reveals that PHARMAC made its decision to fund the limited trial period for Herceptin based on a cost-benefit analysis. The success of the decision-making process could have been varied if the firm had decided to perform prior consultation with the stakeholders. This can also be supported by the success of the drug in other countries and regions. The main critical success