Strategic Analysis Report

Groupe 5 : Pfizer

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Sommaire

I. History of the company Pfizer

II. PESTEL analysis
III. Porter's Five Forces
IV. Key Strategic Factor for Pfizer and identification of the
strategic groups
V. Internal diagnostic
VI. The development of competitive strategies
VII. The impact of technology and innovation
VIII. The effects of the environment
IX. Conclusion
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I - The history of Pfizer

1. The start of Pfizer.
Pfizer was born in 1849 in Brooklyn, in the United-States. This American

multinational pharmaceutical corporation was created by Charles Pfizer, a

German-American businessman and chemist and his cousin Charles Erhart, a

candy maker !

As a matter of fact, their first invention and large-scale production was a

deworming candy : a remedy against intestinal worms, called santonin. This

remedy tasted too bitter, so the two founders of Pfizer came up with the idea of

adding a hazelnut-flavored coating.

Later, in the context of the Post-Revolutionary Era with the end of the Civil War, the

company began its expansion and moved its headquarters to Manhattan in 1868,

then opened some offices and a warehouse in Chicago in 1882.

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It was in 1900 that Pfizer obtained an official certificate of incorporation in the

state of New Jersey. Emile Pfizer, Charles Pfizer’s youngest son became president

of the company in 1905 (until 1941).

In 1919, Pfizer chemist James Currie and his assistant, Jasper Kane, successfully

pioneered the mass production of citric acid from sugar through mold

fermentation, an achievement that eventually frees Pfizer from dependency on

European citrus growers. The production was a success, making Pfizer widely

recognized as a leader in fermentation technology.

Another example of the success in Pfizer technology : in 1936, a fermentation-free

method for producing ascorbic acid, vitamin C was developed by Dr Pasternack.

The success of this method made Pfizer the world's leading producer of vitamin

C.

In 1941, Pfizer entered the international scene by responding to an appeal from the

United States Government to expedite the manufacture of penicillin to treat

Allied soldiers fighting in World War II. Of the companies pursuing mass

production of penicillin, Pfizer alone uses fermentation technology, and became

later the world's largest producer of the "miracle drug."

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Later, Pfizer discovered and created many drugs, opening facilities all over the

world and launching several programs. In 1950, Terramycin® (oxytetracycline), a

broad-spectrum antibiotic, became the first pharmaceutical sold in the United

States under the Pfizer label. In 1952, the company established an Agricultural

Division dedicated to offering cutting-edge solutions to animal health problems

in Indiana.

Pfizer also bought some pharmaceutical companies to expand its activities :

for example, the acquisition of J.B. Roerig and Company, specialists in nutritional

supplements in 1953. In the continuity of its expansion, some pharmaceutical

plants opened in Mexico, Italy, and Turkey in 1958. International personnel

increased from 4,300 in 1957 to over 7,000.

In fact, Pfizer has gradually become established throughout the world :

This map shows the countries in which Pfizer made its first international acquisitions (blue),
countries in which it operates today (green), and the current locations of its major research
facilities (red and purple).
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Pfizer soon celebrated other successes : In 1967, Vibramycin® (doxycycline hyclate),

the company's first once-a-day broad-spectrum antibiotic was introduced and

quickly became a top seller. As a result of its growing success, Pfizer crossed the

billion-dollar sales threshold in 1972 !

Later, in 1980, Feldene® (piroxicam) became one of the largest-selling prescription

anti-inflammatory medications in the world and, ultimately, Pfizer's first product

to reach a total of a billion United States dollars in sales. In 1997, the

Fortune® magazine named Pfizer the world's most admired pharmaceutical

company.

Later, the company expanded its worldwide reputation in 1998, with the launch of

Viagra® (sildenafil citrate), a breakthrough treatment for erectile dysfunction.

Finally, Pfizer goes public in 2004, when the company is selected to be included in

the Dow Jones Industrial Average, which is the best-known stock market barometer

in the world.

So, Pfizer has a great history, with many successes. But what about now ? With an

epidemic crisis that affects the whole world, what is the position adopted by

Pfizer to have a role in this crisis ?

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2. Pfizer today

Today, Pfizer Inc. is one of the largest research-based pharmaceutical firms in

the world. The current CEO, Albert Bourla has announced a turnover of 41,9

billions of dollars for 2020.

Pfizer’s aim is to change the life of their patients. The company is turning

scientific advances into healthcare solutions to save lives and help every patient live

a healthier life. It is preparing for the medical advances of tomorrow, the ones that

will make a lasting difference in patients' lives.

By contributing to the discoveries, they want to encourage innovation and

improvements.
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With the global epidemic crisis, Pfizer has experienced a resurgence of interest

and has been put in the spotlight : In March 2020, as the scale of the COVID-19

pandemic became apparent, Pfizer partnered with BioNTech to study and

develop COVID-19 mRNA vaccine candidates.

In fact, while the vaccine is adopted by more and more people in the fight against

COVID-19, the Pfizer-BioNTech COVID-19 vaccine has not been approved or

licensed by the U.S. Food and Drug Administration (FDA), but has been

authorized for emergency use by FDA under an Emergency Use Authorization (EUA)

to prevent Coronavirus Disease 2019 (COVID-19) for use in individuals 12 years of

age and older.

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Unlike many of its competitors, Pfizer took no initial research funds from the

United States' Operation Warp Speed vaccine development program, instead

choosing to invest roughly $2 billion of its own funds. Pfizer CEO Albert Bourla has

said that he declined money from Operation Warp Speed to avoid government

intervention, stating later that "when you get money from someone that always comes

with strings. They want to see how we are going to progress, what type of moves you are

going to do. They want reports. And also, I wanted to keep Pfizer out of politics, by

the way."

So developing the Pfizer-BioNTech COVID-19 vaccine was only possible through the

dedicated work of thousands of individuals and those who volunteer to take

part in research.

In May 2020, Pfizer began testing four different COVID-19 vaccine variations.

Vaccines were injected into the first human participants in the U.S. in early

May.

Even though Pfizer's vaccine is known around the world, Pfizer is fighting with its

competitors in the "vaccine race” : AstraZeneca is the first drug manufacturers in

term of number of ordered vaccine doses, followed by Novavax (the US vaccine :

NVX-CoV2373), BioNTech/Pfizer, Moderna and the Gam-COVID-Vac (also known as

Sputnik V, the russian vaccine elaborated in the National Center for Epidemiology

and Microbiology named after Nikolai Gamaleia, a pioneer of Russian

microbiological studies).
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Drug manufacturers with the highest number of ordered COVID-19 vaccine doses as of
March 2021 (in million doses) (source : statista.com)

As of 2020, Pfizer was among the top 5 most valuable pharma and biotech

companies with a market capitalization of around 200 billion U.S. dollars. And,

the COVID-19 vaccine could bring in $26 billion in 2021 for the company ! As for the

rest of the Pfizer story, the future has yet to be written…

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II - PESTEL analysis
We will do an analysis of the external environment of Pfizer through the Pestel

matrix in order to understand the opportunities that lie within the horizon of this

company.

I. Political

A company like Pfizer is present in multiple states and moreover is active in a

market facing both globalization and healthcare. So in addition to having to deal

with political environments on trade or tax-related laws, Pfizer must also comply

with the social protection requirements of the countries encountered. The political

risks vary from sudden changes in existing political regimes to civil unrest to major

decisions taken by the government. Pfizer has to analyse several criterias before

entering a market:

-Political stability and importance of Drug Manufacturers

-Whether or not a company’s intellectual property is protected
-The pricing regulations
-The integrity of the politicians on site
-The level of taxations
-Trading partners
-The minimum wage
-The country’s political reputation
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II. Economical

Developing countries are themselves an increasingly important target for any

market, and even more so for pharmaceutical companies which will have a medical

virtue in places which may have been in difficulty on this point. Many

macroeconomic and microeconomic factors influence the investment choices of

pharmaceutical companies and many tools are at their disposal to determine the

financial and economic situation of a target country.

-GDP growth
-Exchanges and Interest rates
-Inflation rate
-Labor costs
-Economic system of the country
-Level of unemployment
-Government intervention in the market

III. Sociological

The current society imposes that of the well-being, fast, confident in

scienceIn case of occasional or chronic problems, the drug has taken a very

significant place, even too much. It’s a great opportunity for the pharmaceutical

industry to offer drugs for each illness or small problem. Below are the sociological

factor that impact Pfizer.

-Demographics of the population

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-Culture (gender,religion)
-Class distribution (rich, poor, middle class)
-Attitudes about health or environmental consciousness
-Education

IV. Technological

In the pharmaceutical world, innovations punctuate the development of companies

and their competitiveness. It is the advances in material tools (lasers, microscopes,

3D printers, etc.) that enable health and pharmaceutical innovations. However,

rapid development can sometimes scare consumers as we have seen with the

vaccine.

-The innovations of the competitors can seriously affect the sell of

Pfizer’s product
-The significance of an innovation (disruptive innovation would allow to
obsolete certain technologies
-Impact on value chain structure
-Impact on productivity and production chain
-product confidence

V. Environmental
There is one of the black spots: the company being with the ecological trend, the

synthetic drug has a bad image, in addition to coming from production lines mixing

non-renewable elements such as solvents, or organic waste. Before entering new

markets or starting a new business in an existing market the firm should carefully

evaluate the environmental standards that are required to operate in those

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markets. Some of the environmental factors that a firm should consider

beforehand are

-Weather
-Environmental laws regulations
-Recycling
-Consequence of climate change in the country
-Endangered species
-Opinion of local populations
-Waste management

VI. Legal

Many aspects of the pharmaceutical market are closely watched (patents,

components, then subsequently, marketing authorizations). In a number of

countries, the legal framework and institutions are not robust enough to protect

the intellectual property rights of an organization. A company must seriously study

the laws protecting their products or the technologies developed as well as all the

rules of marketing of a pharmaceutical product. In some countries the regulations

are strict and the marketing procedures can be very long.

-Copyright, patents / Intellectual property law

-Discrimination laws
-Health and safety laws
-Data protection
-Consumer protection laws
-Employment laws
-Data protection laws
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III - Porter’s Five Force

Porter's 5 forces model is a tool used for the analysis of the competitive

environment of a company. In our case, we will study the competitive

environment of Pfizer, so the pharmaceutical industry. The main objective of a

company is to find and keep a sustainable competitive advantage in its sector.

Through this advantage, they will be able to generate profit and resist pressure

of the different forces that will be detailed below. The 5 different forces that we will

be analysing are :

I - The bargaining power of suppliers

Similar to a consumer, a supplier has a bargaining power that can have significant

impacts on the final pricing and can durably affect the profits of the firm. In fact

suppliers can have a large amount of power and can impose their terms on the

market, especially when the transfer cost is high and when there are few firms in

the industry. In the case of Pfizer, we have found that the bargaining power of the

suppliers is quite moderate. In fact, there are many suppliers in the drug

industry so the firms can go from one to the other in order to find the lowest price.

Furthermore, in the medical machinery business, there are very technical aspects

that very few suppliers possess, giving them a high bargaining power. Balancing
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these two factors, we conclude that the bargaining power of suppliers is

moderate.

II - The competitive rivalry

It is determined by the number of competitors on the studied market and the

opportunities available to companies, suppliers and consumers. When the

competition is strong between all of these companies, players engage in price wars,

which can have negative impacts on their profits. In the case of Pfizer, we have

analysed that the competitive rivalry is very high. In fact, the demand for

different drugs has grown over the years. Despite Pfizer’s first place in the drug

market in 2018, the industry seems to have grown non stop with many different

players and new entries constantly. The rivalry is very intense between all of the

firms. Therefore, we conclude that the competitive rivalry is very high.

III - The threat of new entrance

If it is easy for a new firm to enter a specific field of business it will lead to a rapid

multiplication of competitors. Things that may affect the barriers of entrance can

be initial investments and payback period, existing patents in the market, standards

and reputation of the existing structures. In the case of pfizer and the

pharmaceutical industry, the lack of basic knowledge and high necessity of the

public gives a big power to the firms. This is an attractive aspect of the industry
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that brings in many new actors regularly. Also, the pharmaceutical industry is based

on innovation, giving way to many new firms that have embraced innovation

faster than longer lasting companies. For these reasons, we believe that the threat

of new entrance is high.

IV - The threat of substitution

This force is used to figure out the level of threat that is posed by products that

can be considered as substitutes on the market in question. In the case of Pfizer, as

drugs are a basic need (and right) they are in very high demand. As well as a

demande for innovation, there is a high demand for a large amount of product.

Furthermore, we may never enter into an age where drugs will not be needed.

Therefore, the pharmaceutical industry is very lucrative and has many different

actors. Due to this, there is a very high risk of substitution. Simply through generic

drugs using the same molecule as the brand name, but cheaper have taken over

the market. Therefore, we have deducted that the threat of substitution is very

high within the industry, but the industry in itself sees no risk of substitution in the

future.

V - The bargaining power of the buyer

Regarding the buyers, if the demand is much lower than the supply, consumers

have a strong bargaining power and competition is strong. In the case of Pfizer,
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or simply the pharmaceutical industry, we believe that the bargaining power of

the buyer is rather low. In fact, the client/patient has very little information on the

contents of the drugs and how they work. They have to surrender their trust to

the supplier, and the doctor that has prescribed it. This give the companies all the

power. Also, the pricing depends on the competition and on the difficulty of

isolating a particular molecule, and keeping it as stable as possible. Therefore, the

patient has no control over how much it will cost.

To conclude, the competitive environment that Pfizer has implemented itself into is

very difficult. A very high amount of competition is present but the firms make a lot

of profit through the low bargaining power of buyers. It is important for all actors of

the industry to stay up to date and to innovate constantly in order to stay large

actors.
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IV - Key strategic Factor for Pfizer and identification of the strategic

groups

VII. Key strategic factors

The aim of strategic group analysis is to determine whether groups of firms

that have a comparable strategic position exist within an industry or not.

Findings of strategic group analysis might further be used to explore the

performance implications of strategic group Membership. This analysis has a

significant effect on the industry’s profitability, contradicting the industrial

organization (IO) Economics’ speculation that industry members differ only in

market share.

Global pharmaceutical industry is monopolized with an intense level of

competition in R&D and property rights (Johnson, Scholes and Whittington,

2014). We have carefully identified the top 9 close competitors within the

global pharmaceutical industry and have strategically grouped them based

on the following factors:

- Number of employees

- Total Revenue,

- Marketing Spending,

- Percentage of Revenue spent on R&D

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Below is a Pharmaceutical Industry Life Cycle as described by (Johnson,

Scholes and Whittington, 2014) is a concept which proposes that industries

start small in their development stage, then go through a period of rapid

growth culminating in a period of shakeout, maturity and decline. The table

below shows where each sector lies based on the underlying factors they are

currently experiencing.

As the product line of Pfizer focuses mainly on biopharmaceuticals and

vaccines, this company stands clearly at a growing stage and has great

potential for growth in the future.

VIII. Strategic Groups

Strategic grouping by Percent of Revenue spent on R&D:

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R&D is a key area for the pharmaceutical industry. The company’s valuation

is done not only based on the product it has out in the market but also the

products it has in its pipeline. Statista report on R&D spending shows that

from 2006 to 2014, there has been continuous increase in R&D spending in

the global pharmaceuticals industry. In 2015 R&D in the global

pharmaceuticals industry dropped by 1%, statistical forecasted by the

pharmaceutical industry on R&D spending by 2020 is expected to reach

160bn in US$.

Our Strategic grouping analysis indicates that Novartis and Roche are close

competitors in the global pharmaceuticals while Merck and AstraZeneca are

also close competitors. Johnson & Johnson is high in revenue but in terms of

spending in R&D, they have spent less than other companies in the industry.
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From the chart, Roche and Novartis are close strategic groupings; they invest

heavily on research and development. There is a gap between Merck and

AstraZeneca.

Although the global pharmaceutical industry is an extremely competitive,

strict regulations, with continuous change of government policies, lengthier

time to market products, high attrition rate and a limited period of right to

intellectual property, huge capitals investment, large market spending and

constant involvement on research and development makes it a high stake

market, from the strategic group analysis firms can still identify gaps within

their environment to adopt.

Strategic grouping by Total Market Spending:

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In this category, Johnson & Johnson is a leader in the industry based on their

market spending of US$ 17.5 billion. The analysis indicates very close

clustering between ROCHE, GSK, MERCK and Sanofi, According Porter and

Heppelmann (Porter and Heppelmann, 2014), the closer the strategic groups

clustered in the chart, the stronger the cross-group competitive rivalry will

be. Roche, GSK, Merck and Sanofi are close rivals in the market based on

their market spending. Johnson & Johnson and Novartis hold a high

competitive advantage over the above listed. There is also a strategic gap in

the chart Pfizer could increase their market spending considering their

revenue at US$ 11.4 billion.

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V - Internal diagnostic

The internal diagnosis of Pfizer is quite complex. Like most large pharmaceutical

manufacturers, Pfizer pursues a “blockbuster” business model that is heavily

reliant on R&D to consistently develop and launch high volume drugs.

I. The value chain

First, let's see how Pfizer is organized. Pfizer’s value chain is composed of 2 main

activities :

- The primary activities, which are directly involved in producing and

selling the product to targeted customers such as inbound logistics

(storing inputs and distributing them), outbound logistics, manufacturing and

service operations,marketing and sales and services.

- The secondary activities are firm infrastructure, human resource

management and technology development.

Globally, Pfizer’s activity is organized in 3 main activities : Biopharma, UpJohn (a

division which produces generics of Pfizer's original medicines) and consumer

healthcare.
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Graphic : Pfizer's revenue from 2017 to 2019, by segment* (in million U.S. dollars)
(source : statista.com)

Now, let’s conduct a SWOT analysis to see what are the strengths, weaknesses,

opportunities and threats of the company.

II. SWOT analysis (Strengths, Weaknesses, Opportunities and Threats).

1. Pfizer’s strengths.

The different types of strengths of Pfizer are numerous :

- Pfizer has highly successful products that have become popularly known

internationally, thanks to a massive research and development (R&D :

Pfizer spends close to $8 billion annually on research and development,

a leading amount in the industry) arm, making it a profitable

pharmaceutical company.

- A popular brand and a real trust in the products.

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- Marketing advantage : Pfizer has commercially outperformed its

competitors with impressive and effective direct consumer marketing.

- Global presence all around the world.

- Human resource : A total of 78 000 employees form a part of the huge

workforce of Pfizer.
- Technology and infrastructure.
- Covid-19 response : fastest response to a pandemic and elaboration of a
vaccine.

Chart : Trial showing how Pfizer Covid-19 works ? (source : MIT Technology review)

This graphic shows the difference in Covid-19 infection rates between the people in

a trial who got a Pfizer vaccine (in red) and those who got a placebo (blue line). Each

time either line jumps up, that’s when a new covid-19 case occurs. So, the data

shows that, after some time, the lines start to separate : that’s the result of the

vaccine taking effect, which usually takes a few days and gets boosted by a second
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dose. After two weeks, hardly anyone with the vaccine is getting Covid-19. But the

disease kept striking those who got the placebo.

Analyzing Pfizer’s strengths also means studying its resources and capabilities,

that is to say conduct a core competencies analysis.

Pfizer has always had a strong capability in marketing and lobbying. And with few

acquisitions (M&A) of pharmaceutical companies, such as Wyeth in 2009, Pfizer

has improved its capabilities in R&D and manufacturing.

Many of Pfizer’s acquisitions have provided it new capabilities, such as

biologics with the acquisition of Warner-Lambert in 2000 and biosimilar drugs with

the acquisition of Hospira in 2015.

Finally, a VRIO analysis (Valuable, Rare, Inimitable and Organized) could tell us

what the sustained competitive advantage of Pfizer is, and could also show us

which resources could be improved to provide a greater competitive

advantage.

Which Pfizer’s resources are valuable and which are not ?

We have seen that Pfizer has a lot of strengths and resources, but they are more or

less valuable. First, the financial resources are highly valuable because it’s

allowing the company to invest into external opportunities and help fight

external threats.
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Then, Pfizer's employees are also a valuable resource to the firm, along with its

patents as these allow the firm to sell its products without competitive

interference. Finally, Pfizer’s distribution network is a valuable resource,

helping in reaching out to more and more customers.

Cost structure and R&D are not very valuable resources : the methods of

production lead to greater costs than that of competition, and lately research and

development are costing more than the benefits it provides in the form of

innovation.

Which of the valuable resources are rare ?

Again, strong financial resources are only possessed by a few companies in the

pharmaceutical industry so the financial resources are rare.

The patents are also a rare resource because they are not easily available and

are not possessed by many competitors, along with the employees of Pfizer,

because of their high-skilled training and competencies. Also, in a study of 2001,

we can see that Pfizer’s employees are proud and satisfied to work for the

company, so it won't lead to strikes or any kind of rebellions.

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Graphic : Pfizer employees Survey about the internal management in 2001.

Finally, the distribution network of Pfizer is a rare resource, because it’s well

developed and organized, meaning that competitors would require a lot of

investment and time to come up with a better distribution network than

Pfizer’s.

Which of these resources are costly or hard to imitate ?

It goes without saying : The financial resources of Pfizer are costly to imitate,

because it has been acquired through prolonged profits over the years. The

patents are very difficult to imitate because it is not legally allowed to imitate

a patented product. Then, the distribution network is also very costly to

imitate by competition, as it has been developed over the years gradually by

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Pfizer. Competitors would have to invest a significant amount if they are to imitate

a similar distribution system.

But, the employees are not very costly to imitate, as other firms can also train their

employees to improve their skills. These companies can also hire employees from

Pfizer by offering better compensation packages, work environment, benefits or

growth opportunities. This makes the employees of Pfizer a resource that

provides a temporary competitive advantage : competition can acquire these in

the future.

Which of these resources are entirely exploited by Pfizer ?

The financial resources of Pfizer are organised to capture as much value as

possible, meaning that these resources are used strategically to invest in the right

places. The distribution network of Pfizer is also well exploited : Pfizer uses this

network to reach out to its customers by ensuring that products are available

everywhere.

Finally, the patents are not fully exploited, that is to say not used to their full

potential. It’s an unused competitive advantage that can be changed into a

sustainable competitive advantage if Pfizer starts selling patented products before

the patents expire.

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From the VRIO Analysis of Pfizer, it was identified that Pfizer’s main sustained

competitive advantage was the financial resources and distribution network.

The patents are a source of unused competitive advantage, and there exists a

temporary competitive advantage for employees. Lastly, the cost structure of Pfizer

is a competitive disadvantage, as research and Development.

So, all Pfizer’s strengths help increase its overall success and viability, but what are

its weaknesses ?

2. Structural weaknesses.

Pfizer has some weaknesses, particularly in the legal and supply chain areas.

First, Pfizer has faced thousands of drug lawsuits, mainly filed for medical

injuries allegedly caused by some of its more popular products. It holds one of the

records for the largest fines paid for a healthcare fraud lawsuit : the court

ordered Pfizer to pay $2.3 billion in fines, penalties, and settlements for illegal

marketing claims.

Then, recently, Pfizer failed to meet delivery quotas for the initial doses of the

coronavirus vaccine at the end of 2020.

We can also see that Pfizer has nevertheless a quite low spending in R&D as

compared to competitors, and a heavy reliance on blockbuster drugs.

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As we can see in the graphic below, while Pfizer is one of the world’s biggest players

in Pharma, it’s not the one with the largest spending on R&D !

Graphic : The top ten biopharma companies ranked by their spending on R&D in 2018 (Source :
Statista).

3. Business opportunities.

As of today, we can say that the coronavirus vaccine development was a

challenge and an opportunity for the company, making it very famous all

around the world.

Other opportunities rely on merger and acquisitions of companies : we have

seen that the part of total revenue for Pfizer's division, UpJohn, was significant.
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In the future, we can also think of technology advancement for science, the

robotisation of the world and the industry and many opportunities in

emerging markets.

4. Possible threats.

First, we can say that the impending expiration of the patents of many of its

unique products is a huge threat for the company, as it could weaken its

revenues. In fact, after the expiration of one of its more lucrative patents for its

blockbuster product Lyrica, a drug for fibromyalgia, some of Pfizer’s revenues

dropped as the FDA approved generic versions of the drug to nine different

companies. This led to the company dropping a few spots in Fortune 500 global

rankings.

As we can see in the graphic below, 2 Pfizer’s patents will expire this year, and 4

other ones in 2024 !

Graphic : Patent expiration dates for Pfizer (2021-2025).

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Pfizer is also dependent on regulatory approval of drugs by the FDA, and tax

rate on medicines. And, finally, nothing prevents the development of patent drugs

by competitors, new product development or even new competitors.

But, considering its strengths, Pfizer has all the competencies to counteract

the risks with a more aggressive R&D, strategic alliances and competitive

strategies.

VI - The development of competitive strategies

In this business, companies have to be quicker than their competitors. Drugs

or vaccines must be developed, produced and marketed quickly while being safe
for patients.

I. A rapid and secure capacity for innovation

During Covid-19 crisis, Pfizer developed a new type of messenger RNA

vaccine, which allowed it to be the first approved by health authorities in countries

around the world. This innovation is important because pharmaceutical companies

are now able to create vaccines in less than a year. Even though other competitors
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entered the market soon after, Pfizer managed to establish itself as the number 1

in covid-19 vaccination like it’s shown on the diagram right below.

II. Significant production capacity

When a product is allowed in a country, it’s really important to commercialize

and distribute it quickly after authorization to prevent competitors from entering

the market before. For the Covid 19 vaccines, it is vital to be able to deliver to

countries which have placed orders on time, but above all in large quantities so that

the market is restricted for competitors. Pfizer succeeded in increasing its

production capacity of Covid 19 vaccines in juste a year.

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III. Technological and geographical adaptability

Pfizer is able to adapt in different countries. The company must know how to

deal with the vagaries and regulations of each country where it is established. First

of all, from a legislative point of view, the product must comply with the standards

of manufacture, conservation of the

country and these rules are very often

different from one country to another. Also

from a marketing point of view, marketing

and packaging must be done in a different

way depending on the target populations

and cultures.

From a technological point of view

now the company must be able to adapt to

new forms of disease and to adapt each of these drugs to them. The example of

covid is currently number 1, with its new messenger RNA vaccine Pfizer is now able

to make it effective against all existing variants in less than 6 months thanks to this

very easy to adapt technology. It really is a step forward for science.

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VII - The impact of technology and innovation

Within the pharmaceutical sector, innovation and technology are key factors.

Pfizer being one of the major players in this field, it is subject to innovation

constantly, and must even be at the forefront of it. This is one of the reasons why

the pharmaceutical industry is so competitive and holding onto its competitive edge

is necessary for the survival of the firm. Regarding Pfizer, it is interesting to analyze

how the firm has innovated in the past, how its profitability depends on its constant

renewal/innovation and finally the projects in progress to stay one step ahead.

In the beginning, Pfizer immediately started out as a leader innovator, being the

first to mass produce penicillin following its discovery by Alexander Flemming. Then

again, in 1998, Pfizer developed an anti-erectile dysfunction drug : viagra. The

success of the blue diamond-shaped tablet was immediate: 150,000 prescriptions

were written in the United States in the first two weeks of marketing. Viagra

became a worldwide craze before it was even approved outside of the United

States. It was called the “miracle drug” and is still today a source of income for the

firm.
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Worldwide revenue of Pfizer’s Viagra from 2003 to 2019

in millions of dollars (USA)

Viagra has since 2013 experienced an inevitable crisis. Its generic forms have been

available in pharmacies since 2013 in Europe and since late 2017 in the United

States. Another big innovation, led by Pfizer once again, was the COVID vaccine. As

one of the first companies to come out with a vaccine, Pfizer answered a huge

demand worldwide and, through its fast work and innovation, became a leader of

the field overnight. Pfizer estimates that sales of its vaccine, developed in

partnership with BioNTech, will reach about $15 billion by 2021. This would make

the vaccine one of the biggest blockbusters in pharmaceutical history. Therefore,

within its history, Pfizer has proven that it is not afraid to innovate and bring new

things to the table. Always a few steps ahead of its competitors, Pfizer is able to

accumulate patents constantly and make a profit.

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The use of patents in the pharmaceutical industry gives both an advantage and

disadvantage to the players. In fact, a patent gives the creators of the product the

chance to have a lapse of time as “solo players on their field” and with no direct

competition for their product. Nevertheless, as soon as the patent comes to an end,

many generic propositions will flood the market, and will in most cases be cheaper

or simply better, creating a huge crash in sales, called the “cliff” in the industry. The

period of the patent creates a pocket of growth the bursts as soon as the patent

comes to an end.

Global sales for three blockbuster chemical drugs: Effexor, Lipitor and Plavix. The solid coloured lines
represent the annual sales of the product until 2011; the dotted lines represent a projection of the sales
for the following years based on Effexor’s drop in revenue drop

Therefore, it is interesting to note that the innovation that these companies have to

keep up with must be cyclical and frequent. No pharmaceutical company can rely
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on one star product, the only way to stay afloat and competitive is by innovating

constantly.

In order to do so, Pfizer has developed Healthcare Hub to support Health Tech

startups in their development. Pfizer Healthcare Hub was created in 2018 and it

aims to support digital innovations in the healthcare field. It is based on a

partnership between the Pfizer Innovation France endowment fund and the Institut

de Cerveau et de la Moelle épinière. Through this, Pfizer has access to new minds of

the 21st century, developing new ideas from inside the company, all the while

supporting these small start-ups.

To conclude, the pharmaceutical industry does not only feel the impact of

technology and innovation : it is its lifeline. The only way any type of firm can

survive within it is by being a pioneer and developing a product that has high

demand and that has never been seen previously. Pfizer has been able to do so

multiple times and to sustain a head start throughout the years.

VIII - The effects of the environment

I. Government regulations
Government focuses on reducing spending on health from patients. They

believe that savings are to be made by facilitating and increasing the uptake

of unbranded drugs (generics) by individual patients and healthcare

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professionals. Branded drugs are more expensive than generic but both do

the same function. Government hopes to achieve the increased uptake and

substantial cost savings by introducing generic and also opening up price

competition among pharmaceutical suppliers.

The generic companies are happy with government policy on the production

of generic drugs. The blockbuster drugs are coming off from patent

protection, such as Lipitor from Pfizer’s company that is used for lowering

cholesterol.The introduction of generic versions of Lipitor has made greater

market competition generally affecting demand and pricing at a global scale.

The generic manufacturing companies are witnessing strong sector growth in

emerging markets.

II. Innovation, Research and Development (R&D)

Innovative medicines developed by America’s Biopharmaceutical research

company have helped many children to survive cancer. In 1970s, 58 percent

of childhood cancer survived but today, the rate has increased to 83 percent

and have contributed to reducing death rates for patients battling with

diseases; for example, HIV/AIDS, heart problems and cancer has reduced 22

percent since 1991 (Phrma.org, 2016) Patients and community as a whole

benefit from new drug development innovations.

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Pharmaceutical companies remain competitive by expending significant

resources to maintain a diverse number of drugs in their research pipeline in

order to bring new drugs to the market.

III. Merger and Acquisition (M & A)

M&A are very crucial for pharmaceutical industries to achieve growth and

realign their portfolios in a competitive market. The pharmaceutical industry

enjoys R&D collaboration, often considered to be attractive as they abolish

duplication, control development costs, attain increased market share,

greater exchange of expertise with merged companies and they have wider

geographical coverage/market, by introducing new products easily. M&A has

resulted in cost reduction and revenue maximization.

IV. Business to Business (B2B)

The meaning of customer has developed or evolved from "somebody who

buys goods or services to someone with whom one must deal, which

suggests emphasis on the relationship. The strategic customers in the

Pharmaceutical industry are the government agencies, wholesalers,

healthcare/ hospital and pharmacies. Pharmaceutical companies through

their sales representatives invite doctors, healthcare professionals and

pharmacists for discussion on how to use their products, the advantages of

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the drugs along with free samples. They provide necessary information, new

studies, clinical data and new dosing information. Promotion was subject to

industry self-regulation (Johnson, G. 2014, P. 555). Below is the

communication channel from the pharmaceutical industry to their strategic

customers and the end users.

In developing countries like India and Nigeria, the government is a strategic

customer of the pharmaceutical industry because they hold some substantial

power to dictate policies and regulations. Government controls the

pharmaceutical market through drug prices (Rxchange CO., 2015).

Government has played an important role in shaping the pharmaceutical

industry by taking some measures to make medicines available to those who

cannot afford it. They have subsidized the prices of some drugs such as

Anti-Retroviral drugs (drugs for HIV/AIDS).

The US pharmaceutical market is different from the rest of the world since

the US government has no price control. So people have to pay more for

same drugs compared to other countries (RxChange Co., 2015)

V. Business to Consumer (B2C)

Pharmaceutical industry is now marketing their product directly to the final

consumer which is B2C. B2C is a Pharmaceutical marketing strategy used to

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promote products and services directly to consumers (the end users). The

United states of America are the largest market for prescription drug sales

(Mackey T, Liang B., 2015). The emergence of Direct to Consumer advertising

(DTCA) is a form of pharmaceutical marketing that directly advertised

prescription drugs and targets the consumer/patient rather than healthcare

professionals (Wang B, Kesselheim, 2013).

In March 2014, 235 companies in China gained Qualification Certificate for

Online Drug Trading Services, including 162 online pharmacies (A Berkshire

Hathaway Company, 2014). Online drug-stores are getting more attention

from pharmaceutical companies as they continue to shape the future of drug

purchasing and have created new relationships between patients,

retail/wholesale pharmacies. The pharmaceutical industry is predicted to

grow 20 percent of total sales coming from online sources by 2020, the

highest penetration of all industries (Kaplan, 2015).

VI. Strategic Customer Evolvement

In the past, most of the pharmaceutical industry decisions were heavily

influenced by healthcare providers like doctors and medical representatives.

This is mainly because insurance companies or government involvement was

very limited. Similarly, medical practitioners were insensitive to price but

susceptible to the efforts of sales representatives.

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At present, this picture has changed to a great extent since technology and

globalization have profound effects and the government is taking the lead

role in maintaining control on the industry. Worldwide growth of the

healthcare sector has also contributed to the present scenario where

wholesalers are playing the role of strategic customer.

In the future, the government and wholesalers will continue their role as

strategic pillars in the industry but consumers will also bring their influence

through the steady rise in B2C concept which is still limited in few markets

only.

IX - Conclusion

As one of the largest research-based pharmaceutical firms in the world, Pfizer is,

now more than never, well implemented on the international economic and

diplomatic scene. Through the analysis of the competitive environment we found

that the pharmaceutical industry is extremely competitive due to its very high profit

potential. The low bargaining power of the buyer is the largest factor contributing

to their success but staying on top of innovation is an obligation.

As for the internal diagnostic of Pfizer, the firm has as many strengths as

opportunities, with a sustained competitive advantage in its financial resources and

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distribution network. And, in order to remain a powerful and profitable company,

Pfizer has to adapt its competitive strategies to the various changes of the

economic world.

However, Pfizer does have a unique product line that focuses mainly on

biopharmaceuticals and vaccines, these product sectors are known as having low

rivalry and high growth, making this company stand clearly at a growing stage and

has great potential in the future.

Pfizer also stands at the middle place in terms of spending on marketing activities

in comparison to its competitors. On the other hand, according to the data that we

have, Pfizer spends relatively less money on Research and Development compared

to its peers, which might be a potential risk of losing competitiveness. So, Pfizer has

a lot of strengths to remain well-positioned in the pharmaceutical industry but

what will happen in a few years within this industry which has experienced a real

boost with the Covid-19 crisis and with the advance of new technologies, the future

will tell us...