Pfizer and the Challenges of the Global Pharmaceutical Industry

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Chapter 4.2 : Bargaining power of the suppliers:
A powerful supplier is trying to gain a higher profit by charging higher prices, limiting quality or services, or shifting costs to industry participants. Raw materials for drugs are extracted from natural or synthetic sources. Recently, many of the raw materials previously derived from natural sources are being produced synthetically with bio-technologically which is more economical, safer, and quicker. As raw materials we need to consider the following four major groups: animal extracts, intermediate drugs, herbal raw materials and pharmaceutical additives. As the pharmaceutical market is growing, the raw material market is going to grow as well. "The total size of animal extract industry is approximately US $ 19.6 billion, growing at a rate of 4.7% annually. The global market for herbal raw material is US $ 584.3 billion, which is estimated to reach US $ 225 trillion in the coming few years." As the industry is growing we can expect an increase in raw material prices.
Pfizer is dependent from there raw material suppliers. Nevertheless there would be several substitute suppliers on the market who deliver high quality. Even so, these suppliers have high switching costs due to highly differentiated technological manufacturing processes, specialised machines and core competences.
Due to this interdependence, the power of the raw material and machinery suppliers can be stated as moderate or even low, stabile and developed.
4.3 Threats of substitutes products:
A substitute supplies same or a similar function as a product by different means. Regarding substitute products for Pfizer drugs, we need to observe the market of the protected branded drugs, generics were the patent protection is exhausted and, as seemingly unrelated businesses can have major impacts on industry profitability; we have to view alternative medicines as well.
Branded drugs are recognised as patent-protected and therefore not

Axel Jörn, B. Eng., was born in 1982 in Güstrow. After his apprenticeship to a "System Mechanic" in a small handcraft firm he became further qualified to a "State Certified Technical Engineer - Machine Construction". From 2006 to 2015 he made practical engineering and project management experience in the aviation industry at Airbus in Hamburg. From 2009 to 2013 he studied beside his full time job to become a "Bachelor of Engineering -Mechatronic-" and he made his "Project Management Professional (PMP)" certification at the Project Management Institute (PMI) in 2014. From 2014 to 2016 the author got through a "Master of Business Administration (MBA) Program" at the FOM Hochschule für Ökonomie & Management in Hamburg. In the year 2015 he changed from Airbus to Siemens and became project manager for the building automatisation in the wind energy sector.