Market Presence

As the world has changed, so has the geographical distribution of our business,
employees, products and sales. In 2012, 56 percent of the revenues of Johnson &
Johnson come from outside the U.S., compared to about 40 percent a decade ago.
The BRIC markets (Brazil, Russia, India and China) comprise nearly 10 percent of
our total revenues for 2012. The broader emerging markets represent more than 20
percent of our sales, reflecting double-digit growth in 2012 on an operational basis,
inclusive of Synthesis.
The broad base of product offerings and global critical mass of Johnson &
Johnson positions us well with customers and governments, and gives us a unique
ability to meet the needs of the emerging markets. As we have established and
expanded our presence in global markets, we have leveraged our global portfolio
and selectively acquired products tailored to meet the needs of specific
populations. For example, in 2012 we acquired Spectrum Vision, LLC, a fullservice distributor of contact lenses serving Russia with facilities in the Ukraine
and Kazakhstan.
Our regional companies have optimized their infrastructure and are continuing to
invest to support dozens of institutes around the world designed to train health care
providers on the effective use of our products. For instance, our So Paulo Institute
in Brazil trains nearly 3,000 health care providers annually.
An example of our commitment to offer localized health care solutions is evident
in India, where we have opened a Deputy Institute. Approximately 1,000
physicians a year are trained there in the latest orthopedics techniques and
technologies to help ensure that patients can get the quality care they need.
Model of Emerging Market Strategy
The work we are doing in China illustrates how we are building our business in
important emerging markets. There are 1.4 billion people in China, the majority of
who are covered by some form of health insurance. Increases in health care
expenditures are estimated to run at a 20-plus percent annual growth rate through
2016. As Chinas national economy grows, and more people enter the middle class,
there is a rising demand for a broader array of health care solutions.
Johnson & Johnson has had businesses in China for 27 years, employing close to
9,000 people. Our China business generated nearly $2.5 billion in sales last year

driven by a diverse and expanding portfolio of brands that Johnson & Johnson is
known for globally, as well as those we have acquired to meet specific local needs
and demand.
We have eight major manufacturing facilities in China. Our Xian plant is equipped
with world-class capabilities and produces over 240 million packaging units of
high-quality pharmaceutical products that supply 26 countries with benchmark
cost- efficiency. Our sutures plant in Shanghai provides raw materials and semifinished silk to the U.S., Europe and South America, where we then complete
production.
We have a major new Innovation Center in Suzhou that supplies medical device
and diagnostics products specifically for the emerging consumer markets in China
and India. These products are targeted at specific disease states that are more
prevalent in the region, and they include simplified or smaller devices that are
better suited for use outside the major cities and top-tier hospitals, as well as multiuse or even disposable products that are more economical. We already have a
number of these products on the market, including staplers, sutures, a blood
glucose meter and an artificial knee. Yet there is much more to be done as we seek
to bring the promise of good health to as many people as possible.
Our portfolio of offerings in China is diverse and expanding, and it includes iconic
brands from our JOHNSONS Baby and NEUTROGENA franchises.
Important pharmaceutical products such as REMICADE (infliximab) and
INVEGA SUSTENNA (paliperidone palmitate) have strongly grown in the
market. RESOLOR (prucalopride) and EDURANT (rilpivirine) were approved
there in late December. Meanwhile, SIMPONI (golimumab) and STELARA
(ustekinumab) are under review by the Chinese Ministry of Health.
We are also conducting research and development into new medicines that will
address specific needs in China and across Asia. In May 2012, we acquired
Guangzhou Bioseal Biotech, which has the only approved porcine plasma-derived
fibrin sealant on the market in China. This acquisition will expand our biosurgery
business there.
We know the model in China works, and we are applying it in other countries as
well.

Local Wages
Johnson & Johnson companies maintain various employee databases and payroll
systems and compensate employees differently in different countries. As a result of
this complexity, we are not able to report a range of ratios of standard entry-level
wage compared to local minimum wage at significant locations of operation.
Our Caring
Health Care products by countries
Africa Africa,Egypt,south Africa
Asia/pacific Australia, China, Fiji, India, Japan, Malaysia, New Zealand,
Philippines, Taiwan, Singapore, South Korea, United Arab Emirates.
Europe - Austria, Belgium, Croatia, Czech Republic, Denmark, Estonia, Europe,
Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania,
Netherlands Norway, Poland, Portugal, Romania, Russia, Slovakia, Slovenia,
Spain, Sweden, Switzerland, Turkey, United Kingdom
Latin America - Argentina, Brazil, Chile, Colombia, El Salvador, Guatemala,
Panama, Puerto Rico, Uruguay, Venezuela
Middle East - Israel, Lebanon, Middle East, Saudi Arabia
North america - Canada, Mexico, United States

Johnson & Johnsons operations

Nearly 55% of Johnson & Johnsons revenue comes from non-US markets. The
company focuses on the innovation of new products that bring value to people,
healthcare professionals, and health systems around the world.
The company operates 134 manufacturing facilities and eight innovation centers
across the globe. In the US, there are eight manufacturing facilities for the
Consumer Products segment, eight for the Pharmaceuticals segment, and 26 for the
Medical Devices and Diagnostics segment. There are 41 manufacturing facilities in

Europe, 15 in the Western Hemisphereexcept the US, and 36 in Africa and AsiaPacific.
Most of the manufacturing facilities outside the US serve more than one business
segment. Major research facilities are located not only in the US, but also in
Belgium, Brazil, Canada, China, France, Germany, India, Israel, Japan, the
Netherlands, Singapore, Switzerland, and the United Kingdom.
Consumer segment
The company introduced various products including moisturizers, body lotions,
body wash, anti-aging lotions, skin care products for sensitive skin, no-calorie
sweeteners, and pain relieving creams. The new products were mainly focused in
the US, the United Kingdom, Canada, and Australia. This determines the
companys efforts to maintain its market share in the Consumer Products segment
in the US and non-US markets.
Pharmaceuticals segment
The company is focused on developing and improving drugs in order to maintain
the revenue stream from this business segment. The patents for Remicadethe
companys largest selling productwill expire soon. In 2014, Remicade accounted
for 9.2% of the total revenue. Recently, the company launched Edurant, Olysio,
Xarelto, and Zytiga.
Medical Devices and Diagnostics segment
The company is mainly focused on orthopaedic products for joint reconstruction
and trauma. Apart from this, the company introduced various products for
oncology, cardiovascular care, surgical care, diabetes care, and vision care.
Johnson & Johnson already went for the divestiture of the Ortho-Clinical
Diagnostics business. Its exiting certain womens health products.
Other big pharma companies including Pfizer (PFE), Merck & Co. (MRK),
GlaxoSmithKline, and Novartis AG (NVS). Theyre constantly working to
increase their product range and market reach. Merck & Co. forms about 6% of the
total assets of the Health Care Select Sector SPDR ETF (XLV).

African Market
Its mostly about building up supply chains.
U.S. drug giant Johnson & Johnson is expanding its business and R&D presence in
Africa, a key emerging market that the company believes will buttress sales of its
medications over time.
On Wednesday, J&J cut the ribbon on a new Cape Town, South Africa office as
part of a new global public health unit. While part of the Africa initiative is meant
to boost development and distribution of drugs for diseases which
disproportionately afflict people in Africa, including HIV/AIDS treatments, CEO
Alex Gorsky told the Wall Street Journal that theres also a clear strategic angle to
the move.
Part of it is building those kinds of relationships, those kinds of capabilities that
over the long term are going to result in a very significant market opportunity for
us, he said.
That means working with both government and non-governmental organizations to
build out the drug supply chain. For instance, Johnson & Johnson will increase
drug distribution to local clinics and healthcare practitioners, and train them in
fundamentals such as proper medication storage and medical testing.The company
plans to create more offices like the new South Africa installation in countries like
Ghana and Kenya.
In 2015, J&Js infectious disease unit brought in more than $3.5 billion in
worldwide sales. The firm is developing several new medications in the space,
including a long-acting HIV injectable drug that its working on alongside rival
ViiV Healthcare, an AIDS therapy joint effort by GlaxoSmithKline and Pfizer

China Market
Johnson & Johnson (J&J) has been in China for over 30 years, predating the
countrys economic opening in 1979.The company entered China through a
technology-transfer agreement to build a chemical factory in 1979. In 1985, J&J
established its first joint venture in China, Xian-Janssen Pharmaceutical Ltd., and
it is now beginning to retire its first generation of Chinese employees and leaders.
J&J companies employ roughly 6,000 people in China today and produce a wide
range of consumer, pharmaceutical, and medical products. The companies use local
market research, natural ingredients, and competitive prices to meet the needs of
Chinas emerging market. J&J is seen in many ways within China as a Chinese
companyone that has grown with the nation.

What are the biggest challenges that foreign companies operating in the healthcare
and pharmaceutical sectors face in China? What strategies does J&J use to manage
these issues?
J&J face many of the same challenges as firms in other sectors, including stiff
competition for talent, a highly competitive market, and the need to produce and
distribute products in an efficient, cost-effective way. But our sector is unique
because healthcare is such a critical, personal, and sensitive area. In addition to
ensuring the quality and safety of our products, companies in our industry are

inevitably part of the debate over how best to provide healthcare for all citizens.
For this reason, our sector faces a significant level of regulatory oversight,
covering everything from exacting product safety standards to price controls and
extensive procedures for approval of new products in the market. All of these
issues require a combination of technical expertise and government-relations
capabilities to reach the right audiences and develop lasting solutions.
J&J strategy is to be broadly based in healthcare and to provide comprehensive
solutions in China that address the particular needs of patients throughout the
country. We are working with the government on its major healthcare reform
initiative.
J&J operates in an industry that involves complex quality and safety issues. How
does the company ensure that its products made in China meet global standards
and expectations?
J&J first obligation is to ensure that the doctors, healthcare professionals, patients,
customers, and families who use our products benefit from our high standards of
quality, safety, and effectiveness. Our companies have standards and processes in
place to ensure that products that come out of our facilities in China are equal in
quality and safety to products we produce anywhere in the world. Quality and
safety assessments and measures are followed throughout the manufacturing
process, from raw-materials sourcing to manufacturing of components and finished
products to delivery in the marketplace. Of course, working with regulatory
authorities and other agencies worldwide is critical to our improvement of
monitoring, testing, and processes.
In 2007, J&J opened the Emerging Markets Innovation Center in Shanghai. How
do this and other J&J facilities help the company adapt product development and
marketing to China?
Developments in information technology and transportation have facilitated the
flow of products around the world. However, in this environment it is important to
keep in mind that while it may be easy to take a product developed and marketed
in one country and sell it in another, that product may not be suitable or embraced

everywhere. This is especially so in a country like China, which has its own long
history, strong traditions, cultural identity, and personal preferences. So it is critical
that we be sensitive to the particular needs and preferences of our customers in
China. Our researchers and product developers at the Emerging Markets
Innovation Center focus on developing new and affordable products to address the
consumer needs and preferences of customers in China and other emerging
markets. One of the centers first successes was the launch of Johnsons Baby Long
Protecting Cream, which was specifically designed, priced, and packaged to meet
the needs of our Chinese customers.
J&J acquisition of Beijing Dabao Cosmetics Co., Ltd. in 2008 is also an example
of an approach we have taken to address local market preferences. This acquisition
not only provided us with a brand that is well-known and respected in households
across China but also expanded our presence in China and extended our
commitment to build the countrys consumer healthcare sector. We hope to bring
the Dabao brand to the rest of the world in the future.
J&J entered into a partnership with the Tianjin Medical University Cancer Institute
and Hospital in 2008 to develop biomarker models for personalized medicine.
What role does this partnership play in the companys market strategy and its
commitment to China?
Cancer is expected to be the worlds leading cause of death, and by 2025, 50
percent of new patients with chronic diseases such as cancer are expected to come
from developing countries such as China. Our goal is to transform cancer into a
preventable, chronic, or curable disease through a better understanding of cancer
biology that will lead us to innovative solutions such as predictive biomarkers.
Biomarkers, which are used in all J&J oncology research and development
programs, are essential to our ability to realize the promise of personalized
medicine.
The partnership with Tianjin Medical University Cancer Institute and Hospital is
part of our external innovation strategy to build a collaborative network with top
research institutes to access and accelerate cancer therapies. It is also a cornerstone
of our research and development strategy in China to build alliances with local

research organizations to collaborate in research areas that maximize the strengths

of both organizations. Through these joint programs, we will play a key role in
encouraging scientific exchange from the best sciences around the world and will
be a partner to the momentum of innovation from China. These kinds of
collaborations will also serve to build platforms and foundations for innovation in
disease areas that have high unmet needs in China and other Asian countries.
J&J was a top sponsor of the 2008 Beijing Olympics and will be a top sponsor of
Chinas Expo 2010 in Shanghai. How does the companys participation in these
events fit into its overall China strategy?
As a company that has grown together with China for the past 30 years, we share
the excitement and pride that come with the Olympics and the 2010 Expo, and we
are happy to do what we can to make sure that others have a chance to enjoy these
historic events. Being the official healthcare sponsor of the Beijing 2008 Olympic
and Paralympic Games not only helped to enhance our reputation in China but also
helped us forge deeper relationships with the people of China. We conducted a
variety of activities during the Olympic Games focused on providing education and
information to improve the health and well-being of families and communities,
including opening a professional training and education center. These activities
have contributed to our growth in the market and, most important, have aided our
ability to attract and retain top talent.
The Expo is expected to bring 70 million visitors, of which 50 million or so will be
Chinese, and the companies of J&J are looking forward to opportunities to connect
with these customers in meaningful ways that will extend beyond the event itself.
How does J&J protect its intellectual property rights (IPR) in China?
IPR violations, as well as the related issue of counterfeiting, are serious concerns
for J&J as we expand into new markets. In particular, the global problem of
counterfeit healthcare products puts the health and safety of patients at risk while
undermining confidence in product safety and effectiveness. Over the past several
years, we have been encouraged by the increased emphasis that the PRC
government has put on IPR protection in China. Because there is no single step that

can ensure IPR is protected, our collaboration with governments, regulators, and
other stakeholders is critical to our ability to identify ways to strengthen and
enforce existing laws to ensure the integrity of our patents is maintained. We have
also worked with the PRC government and US business associations to support
their efforts to protect IPR.
We use a diverse mix of strategies to reduce the risks from counterfeiting. These
include monitoring markets and collaborating with regulatory and law-enforcement
authorities and others to identify, seize, and destroy counterfeit goods and take
legal action. Probably some of the most important work we do is to raise awareness
among stakeholders on the dangers of counterfeit products and the role these
stakeholders can play in eliminating a practice that puts our customers at risk.
How do you see the outlook for the pharmaceutical, medical device, and consumer
products markets in China over the next 5 to 10 years? In what areas will J&J grow
most in years to come?
Though we dont make public sales forecasts that far out, the unmet needs of
patients, consumers, and healthcare providers are more serious than ever, and the
growth opportunities associated with them are significant, globally and in China.
Our overall business is growing well in China despite the global economic
downturn, and we view growth in emerging markets like China as essential to the
overall health of our business.
Our strategy is to be well-positioned for growth in a variety of rapidly growing
healthcare segments across consumer [health products], phramaceuticals, and
medical devices and diagnostics. Some spaces where we have been making our
most recent investments for growth include beauty and cosmetics, Alzheimers
disease, vaccines, oncology, HIV, cardio-vascular disease, diabetes, and wellness
and prevention.
China is undertaking major healthcare reforms. What is J&Js role in these reforms,
and how will the company adjust to change?
Countries around the world continue to wrestle with the issue of how best to ensure
adequate healthcare for their citizens in a cost-effective way. Both the United

States and China are undergoing major reassessments of their healthcare systems.
As a leading global company in the healthcare area, J&J has much to offer China
and other governments by way of experience and ideas.
One of Chinas priorities has been to build a harmonious and innovative society.
J&J has supported this effort by working to ensure that innovation is rewarded and
that Chinese patients receive the best health treatment possible, including in rural
areas. We have worked with the PRC government, including through strategic
partnerships with the Ministry of Health and the State Food and Drug
Administration, as well as with organizations like the China Association of Mayors
and the All-China Womens Federation, to share our experiences and best practices.
Overall, Chinas healthcare reform policymaking process has been extraordinarily
open, with the government seeking public engagement from a variety of
stakeholders, including business. As a result, we have had the opportunity to
provide input on private insurance, hospital finance, pharmaceutical supply, and
other major elements of reform. We believe that this unprecedented level of
transparency and participation has been a critical factor in developing a sounder
healthcare policy and that this experience can serve as a model for policy
development in other areas in China.

SWOT Analysis of Johnson & Johnson with USP, Competition, STP

(Segmentation, Targeting, Positioning) - Marketing Analysis

Product Portfolio

Brands

1. Bedtime

2. Baby Oil

4. Baby Lotion

5. Baby Powder

3. Baby Shampoo
6. Destin

7. Bebe

8. Clean & Clear

9. Shower to Shower

10. Neutrogena

11. Band-Aid

12. Savlon

13. Caladryl

14. Purell

15. Listerine

16. Stayfree

17. Carefree

18. Visine

19. Acuvue Lenses

SWOT Analysis

1. Johnson & Johnson is one of the Worlds Most Admired

Companies
2. The United Nations awarded Johnson & Johnson the 2011
Humanitarian of the Year Award for our leading role in its Healthy
Mother, Healthy Child initiative.
3. One of the Top 100 Companies for Working Mothers every
year since the list was initiated 26 years ago.
4. Brand presence in form of advertising media and print media
for a number of products.
5.Excellent distribution network as the brand is supplied to remote
villages and faraway places
6.J&J is a brand trusted by mothers the world over

Strengths

7. Has an excellent product portfolio and high quality offerings

8. It includes some 250 subsidiary companies with operations in
over 57 countries and products sold in over 175 countries

1. Maintaining a global brand can pe problematic as retailers can

cause sale of expired products

Weaknesses

2. Being a global brand means operations are disturbed by market

fluctuations

1. Acquisitions of other smaller companies and increasing broad

brand presence.

Opportunities

2. Bringing out a range of more portable products for economy

class and increasing rural penetration

1. Excessive promotion of any product making it almost generic.

2. Spurious brands with the name similar to existing brand name
Threats

3. Availability of cheap substitutes and low priced competitors.

Competition

Competitors

1. Reckitt Benckiser
2.Paras
3.Himayala

Mergers & Acquisitions

Johnson & Johnson targets acquisitions with $18bn of cash pile

Johnson & Johnson, the worlds largest healthcare company, said it was hunting for
acquisition targets on which to spend its more than $18bn of cash but insisted it
would be patient when assessing potential deals.
The company said it had roughly $18.5bn of net cash, making it one of a handful
of groups that will have the capacity to pursue big-ticket acquisitions even as debt
markets tighten and interest rates rise.
This is a higher level of cash than we typically hold and...we are actively
looking for the right opportunities to deploy that capital to create greater value
for our shareholders, said Dominic Caruso, the companys chief financial
officer.
He added: But were patient...and well only act when we see the right valuecreating deal at the right price with the right partners.
The company has sat on the sidelines of a healthcare deals frenzy that started in
2014, during which many of its rivals have completed large acquisitions, such as
Pfizer, which has agreed to buy rival Allergan for roughly $160bn.
J&J tried to buy Pharmacyclics, the maker of a blockbuster blood cancer drug, in
March last year, butlost out to AbbVie, which bought the company for about
$21bn.
Just because we didnt close on a larger deal, I would not assume we are not
engaged or involved, said Alex Gorsky, chief executive.

J&J outlined its approach to deals as it published annual earnings for 2015, during
which its revenues fell roughly 6 per cent to $70.1bn. The company attributed the
sales slide to the impact of a strong dollar and the launch of a cure for hepatitis C
that virtually wiped out sales of its own drug.
The companys earnings per share fell to $5.48 compared with $5.70 in 2014.
J&J is the worlds largest healthcare company, with three separate divisions
focused on pharmaceuticals, medical devices including hip and knee replacements,
and consumer products such as Band-Aid plasters and nappies.

Excluding the impact of currency fluctuations, sales at its pharmaceuticals division

rose 4.2 per cent year on year to $31.4bn in 2015, while revenues at its medical
devices unit fell 1.4 per cent to $25.1bn. Revenues at its consumer arm, the
smallest of its three divisions, were up 2.7 per cent at $13.5bn.
Last week, the company said it would cut 3,000 jobs at its medical devices unit as
part of a restructuring effort designed to save up to $1bn a year in costs.
Vamil Divan, a pharmaceuticals analyst at Credit Suisse, said the performance at
the companys drugmaking unit had set a relatively positive tone for earnings
season for US pharma companies.

J&J said it expected full-year sales to be in the region of $70.8bn to $71.5bn this
year, below the $71.8bn level Wall Street analysts were typically expecting.
However, it said adjusted earnings per share would be roughly $6.50 per share in
2016, a touch higher than analyst forecasts, largely due to lower costs and a higher
market share for some of its bestselling products.
Shares in J&J gained 4.9 per cent by close of markets in New York, which analysts
attributed to the companys apparent willingness to improve its profitability by
reducing costs.

Acquisitions Till Date

Date

Acquired

Amount

Jun 2, 2016

Vogue International

$3.3B in Cash

Nov 8, 2015

Novira Therapeutics

Unknown

Sep 26, 2015

NeoStrata Company, Inc.

Unknown

Mar 20, 2015

X01

Unknown

Sep 30, 2014

Alios BioPharma

$1.75B in Cash

Jun 14, 2014

Synthes

Unknown

Jun 17, 2013

Aragon Pharmaceuticals

$1B (terms undisclosed)

Jul 19, 2012

Calibra Medical

Unknown

Feb 22, 2011

Crucell

$2.3B in Cash

Sep 27, 2010

Micrus Endovascular Corporation

Unknown

Dec 17, 2009

Acclarent

$785M in Cash

Pharmaceutical companies must consider different elements in different nations, in

their pricing strategy. Certain factors, which have a high influence in one country,
have alesser influence in another, making it difficult to standardise the price across
markets.
Pharmaceutical firms can transfer or license encoded experiences to other firms
pricing,this is where pricing strategies are difficult (Levitt and March 1990, 24
cited in American Economist, 2006). The Agreement on Trade-Related Aspects of
Intellectual
PropertyRights (TRIPS), under the WTO seeks minimum 20 years patent protectio

n for pharmaceutical products. The different price concepts have led to a wide gap
between drug prices in Canada and the US.
Best-selling cholesterol lowering drug Lipitor was $3.20 per pill in the US
in2003, compared with just $1.89 in Canada(Johnson et al, 2002,p636)
In previous decades the government was the sole or major bearer of
pharmaceutical products, recent trends indicate a shift in this trend through health
insurance companieslike VHI (Voluntary health Insurance) and Quinn Health
Insurance in Ireland as well asthe consumer. This is causing pharmaceutical
companies to reduce the costs of the products. It is important that these companies
segment the market. Different consumers inthe market have different needs and
we can serve them better by segmenting the marketinto groups with homogeneous
needs.The following five factors are necessary for successful segmentation;
the segment must be measurable, substantial, accessible, differentiable and
actionable.
There are four basesof segmentation for consumer markets:(1). Demographic
Variables: such as age, occupation, family size, religion, educationand social class.
(2). Geographic Variables: such as region, city size, market density
andclimate. (3). Psychographic Variables: such as personality attributes, motives an
dlifestyles. (4). Behavioural Variables: such as volume usage, end user, benefitexpe
ctations, brand loyalty and price sensitivity.
Developing countries like India andChina have different healthcare needs than
people in the developed world because of theneed to improve health, sanitation and
nutrition. This offered pharmaceutical companiesto operate in a Corporate Social
responsibility manner.

Substitutes
In the pharmaceutical Industry there is increased pressure on companies like Pfizer
asthere core product Viagara is a high cost which encourages customers to use
cheaper alternatives, not only is Viagara a high cost there is also number of safety
issuessurrounding the Viagara drug.
This is a cause of concern for Pharmaceutical companieslike Pfizer as imitation of
a product can devalue the product as well as leaving itvulnerable to the market.
Viagara is what is referred to as a blockbuster drug, these aredrugs that achieve
rapid and deep penetration, and because of their superlative they candetermine the
future of the fortunes of individual companies.

Blockbusters launched between 1998-2003 sales are said to be in the region of

$2bn in a three and half year period. (Johnson et al, 2008)Globalisation is
affecting companies everywhere as nearly every country wants a share inthe profits
and the pharmaceutical industry as the potential for high return on profits.China
and India are examples as these countries are seeking to develop in
regionalmarkets. Pfizer lack of geographical balance on a global front may present
the company problems in the future as they rely heavily on the U.S market which
account accounts for 6 0% o f t h e c o m p a n y s s a l e s . P f i z e r s
i m b a l a n c e d g e o g r a p h i c a l pr e s e n c e ( t h e U S accounts for over 60% of
Pfizers market.The expiry of patents as well as the risk associated with patents
allows competing firmsto gain the rights of other pharmaceutical products, in order
to combat this problem, it isimportant those companies are highly efficient
and cut unnecessary costs internally aswell as externally to enable to
operate more efficiently in the global environment. It is important that
big pharmaceutical companies develop a strategy that enables them
tor e d u c e t h r e a t s a n d t a k e a d v a n t a g e o f t h e o p p o r t u n i t i e s t h a t a r i s e
w i t h i n t h e g l o b a l markets.
For a long time authorities like the FDA presented obstacles for competing firms
wishing to introduce similar products that other pharmaceutical companies
already produced. H o w e v e r g e n e r i c dr u g s i n t h e 1 9 8 0 s b e g a n t o
enter the market and by 1996 generic drugs accounted for
m o r e t h a n 4 0% o f p h a r m a c e u t i c a l p r e s c r i p t i o n s a s w e l l a s t h e biot
echnology industry entering the market. Biotechs have a number of
capabilities in11

that in which they can diversity as well as be innovative, there success is

evident as in2005 there were nearly 700 publicly traded biotechs worldwide with
a revenue of
$63bnT h e s u c c e s s o f b i o t e c h n o l o gy c o mp a n i e s i n t h e dr u g d i s c o v e r
y a r e a s u g g e s t e d t h e creativity in research and Development worked
better in small groups. Branded drugs require strong R&D combined with
sales and marketing infrastructure. Generic drug companies focus on supply
chain management and manufacturing cost leadership in both ethical and OTC
sectors (Johnson et al, 2008) then there are the natural, herbal remedies as well as
exercise that are all substitutes for prescription drugs; however there these do not
prevent life threatening illness like cancer which prescription drugs are still a
requirement

Political
Pharmaceutical companies must be proactive in scanning and responding
to the
policye n v i r o n me n t a n d i t m u s t a d h e r e t o a t r e n d t o w a r d S o c i a l a c
c o u n t a b i l i t y, c o r p o r a t e p h i l a n t hr o p y, c o r p o r a t e c o mp l i a n c e a n d e t
h i c s pr o g r a m s , i n or d e r t o t r a d e i n t h e s e markets (Bennett 1998, Dabson
1991 and Manley 1992 cited in Leclair 2000, p 196).Increased political
attention in the pharmaceutical Industry due to healthcare
becomingi n c r e a s i n g l y i mp o r t a n t i s s u e o n a g l o b a l f r o n t . H e a l h t c a r
e h a s b e c o me i n c r e a s i n g l y expensive and has been viewed by people as
a financial burden foe example the
U.KS N a t i o n a l H e a l t h S e r v i c e d e b a t e a n d t h e U . S M e d i
c a r e d e b a t e . R e g u l a t i o n s o n pharmaceutical companies and
general corporate compliance standards are becoming more stringent around
the World. It follows therefore that the corporate compliance andcosts of doing
business in third world countries would be much lower than Europe
andt h e U n i t e d S t a t e s . T h e g r o w t h o f t h e p h a r ma c e u t i c a l i n d u s t r y e
s p e c i a l l y t h e U . S i s potential sources of major profits, major markets
of Pharmaceutical competitors, lower political risk and the richest markets.
Economic
Mergers and acquisitions have become common practice in
m a n y i n d u s t r i e s , t h e pharmaceutical industry underwent a number of
mergers and acquisitions in the late 20the a r l y 2 1 st
century, Pfizer\Pharmacia, Glaxo- Wellcome \Smith Kleine
Beecham and Novartis as well as the merger of Sandoz and Ciba Geigy.
Majority of pharmaceuticalsales are in Europe, U.S and Japan. The U.S is
the fastest growing market. Datamonitor forecasts suggest that the top 16
pharmaceutical companies for 2001-2007 that sales willgrow a minimum of 5.2%
based on their product potential pipeline. (Datamonitor
2001).T h r o u g h t h e s e a c q u i s i t i o n s a n d n e w p r o d u c t s a d d e d t hr o u g h i
n-house research andd e v e l o p m e n t , p h a r m a c e u t i c a l c o m p a n i e s
n o w h a v e a c o m p r e h e n s i v e p o r t f o l i o o f pr o d u c t s . M a n y
p h a r ma c e u t i c a l o p e r a t i o n s a r e f u n d e d t h r o u g h o u t t h e s a l e o f i t s se
curities and shares. Convertible into shares, cash flows from operations
and bank 2

borrowings, lease financing, current working capital and sales revenue

that funds itsexisting operations payment obligations.

responding to the policy environment and it must adhere to a

trend toward
S o c i a l accountability, corporate philanthropy, corporate compliance and e
thics programs, inorder to trade in these markets Bennett 1998, Dabson
1991 and Manley 1992 (cited inLeclair 2000, p 196).Aids which is terminal
disease is example of a turning point within the
pharmaceuticalI n d u s t r y a s a c c e s s t o m o d e r n t h er a p i e s w a s
n o t a ffo r d a b l e b y p e o p l e i n d e v e l o p i n g countries, this caused a
number of questions to be raised around the topic of
ethics,w h i c h w a s n e l s o n h e l p e d b y N e l s o n M a n d e l a ,
a s i t f o r c e d c o m p a n i e s l i k e GlaxosMithKline to negotiate clear
principles as well as supplying countries on a no-lossno-profit basis.
Technological
The pharmaceutical industry has seen many modern advance
s o n t h e s c i e n t i f i c technology, which requires the key players within the
pharmaceutical industry to adapt tothe markets that they participate in. This has
required increased investment and spendingon research and development in
order to encourage innovation. This requires
investors,w h i c h a r e r e f e r r e d t o a s s t a k e h o l d e r s t o f i n a n c e t h e
i n n o v a t i o n i n t h e c o m p a n y . Stakeholders are individuals or
organisations that have an interest in, or some kind of stake in, the firms
ongoing activities (McGee et al, 2005). Stakeholders have a number of
attributes the most important of which are interest and power. Interest is how
focusedthe group is on the current strategic activity of the organisation; interest can
be positive or negative. Power is the ability of individuals or groups to
persuade, induce or coerceo t h er s i n t o f o l l o w i n g i n c e r t a i n c o u r s e s o f
action (Johnson et al, 2008 p.160).
The p h a r m a c e u t i c a l i n d u s t r y i s d e f i n e d n o t b y t h e p r o d u c t s
b u t b y t h e t e c h n o l o g y i t employs. Modern technology has increased the
pace of the industry in which companiesmust implement as well as keep up with
these changes to avoid becoming venerable.
Environment
The power of the pharmaceutical compliance enforcing industry has been
increased

duet o t h e i n d e p e n d e n c e a n d c r e d i b i l i t y ; c u s t o m e r s d e m a n d h i g h q u
ality products at anattractive price. The customers have a low lev
e l o f i n v o l v e me n t o f t h e r e g u l a t o r y 4

o r ga n i s a t i o n s a n d t h e p o w e r t h e y h o l d i s b a s e d o n t h e
m a i n t e n a n c e o f t r u s t w i t h t h e regulatory organisation. These compliance
and regulatory overheads are costs, which theindustry has to absorb. This to
certain extent may have reduced innovation; however governments have
requested regulatory proposals so as not to deter innovation within
the pharmaceutical industry.
The aging population is a cause for concern since
the elder generation consumes four timesas much healthcare per heads as those
below 65, companies put an emphasis on researchfor drugs of patients over the
age of 65.
(
Johnson et al, 2008, p610). The society has ahigh interest in the in
healthcare due to the greater demand for the service in the area. Society
has indirect power to influence the government.
Legal
D e v e l o p i n g c o u n t r i e s d i ffe r s u b s t a n t i a l l y b o t h i n g e o g r a p h i c r e gi o
n a n d l e v e l s o f economic development (Gillespie
et al
2 0 0 7 ) . I n t h e U . S a n d E u r o p e t h er e i s h i g h e r growth potential
because markets are more competitive. Global trade liberalization
hascaused many closed countries to open their borders to imports.
Cultural distance ishigher for triad organisations (Japan, US and Europe) but
lower for regional competitors.However, political and economic threat is still
higher than in the triad (Gillespie
et al
2007). Investment from stakeholders is a source of increased innovation.
They have
ah i g h i n t er e s t i n m a k i n g t h e C o mp a ny m o r e i n n o v a t i v e , e ffi c i e n t a
n d e ffe c t i v e . T h i s i n t e r e s t i s s e e n t h r o u g h c r e a t i v e i d e a s i n r e
s e a r c h a n d d e v e l o p m e n t s u c h a s t h e introduction of trials on particular
drugs whether it is for alzeimhirs, cancer, diabetes
anda i d s . T h e s o c i a l p o l i t i c a l e n v i r o n me n t h a s a n i n f l u e n c e o n d e c i
s i o n s p h a r ma c e u t i c a l companies make as in developing countries increasing
pressure has been put on to ethicalmanner in providing healthcare and drugs to the

less well of. Department heads have high power due to their ability to influence
other stakeholders to adapt to these innovations asseen with the use of trials.
The main regulatory bodies that require extensive clinical testing are the
food and drug administration (FDA). This organisation governs producttesting,
labelling storage, advertising premarket clearance, advertising and
promotionand sales distribution. (Johnson et al, 2008 p.609). For example Irish
Medicines Board asauthority over Trinity Biotech in Europe and Canada in
which regulates the market of 5

introducing their products onto the American market known as premarket

notification( 5 1 0 ( k ) ) a n d r e ma r k e t a p p l i c a t i o n ( P M A ) . T h e s e a r e j
u s t t w o o f t h e m a ny m a i n regulatory bodies. (Clearance pathway is
notifying what exactly the product does andalso how safe it is also to find out
if changes can be made to the product to make it moreeffective and efficient.)PMA
Approval Pathway this is the device has not received adequate permission
so thecompany will have to prove the safety and effectiveness of the
product). The FDA hasimplemented substantial fees for the submission and
review of PMA applications (TrinityBiotech 2008)

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