The primary focus of this essay is the analysis of the global pharmaceutical industry and the substantially significant factors that shape this industry; the industry is primarily defined by very few yet critically influential factors; these consist of: governing bodies, the role of corporate social responsibility, and the emphasis put on the industry and firms by the Research and Development process.

The most consequential factor placing emphasis on the industry is the governing body, with it being the legislative body and largest purchaser of the industry exclusive of the USA creates a strategic dilemma for the corporations in terms of profit maximization. Patent limitation, regulatory controls, price or reimbursement controls and extensive safety legislations are methods adopted by the government to legislate control and limitations over the industry. These legislations construct a paradigm that the main objective behind the intervention is to keep medicinal costs low as the majority of the population i.e. under 18’s, over 65’s and people primarily on benefits, medical costs are paid for by the government and with the ageing population the expenditure is ever increasing hence the various limitations. Being the legislative body and the largest purchaser gives the government various types of buyer control; the case study implies that the industry is a “monopsony”, giving the corporations very little bargaining power in terms of profit maximization and can often alter the strategic outlook of a firm, a strategy synthesis states that in some opinions government should set basic rules of conduct and stay out the way, whereas it also suggests they should interfere and stay there (a strategy synthesis, page 360), in this industry they tend to do a mix of these opinions due to the nature of the industry and circumstances created. In the USA, although the government is not the primary buyer, the insurance companies are, they still play a role in the pricing through the legislations they pass; an example of this can be the employee healthcare benefits which are a necessity in the USA as laws state hence changing the competitive strategy in the USA in terms of competitive price advantage.

Secondly, Corporate Social Responsibility is the biggest factor in terms of impressions, the industry runs on this as a method of strategic competitiveness between firms and also as a strategy to get the industry into better views; the industry has acquired an image of unethical methods of practice and also acquired a relatively tarnished image due to the high margins, with media and public unfamiliar with the costs of researching and developing costs towards the products. CSR tends to be used to get the industry in a better light. The industry has misinterpreted the legal system in terms of CSR by negating the introduction of generics on many occasions. Corporate Social Responsibility and developing countries states that even though legislations are impeded to incorporate better social conducts the legal system can be misused and hence should be seen as CSR misconduct (Corporate social responsibility and developing countries). Practices such as the not-for-profit research into diseases and supply of critical drugs in poorer countries at a no-loss, no-profit basis are used to get the industry into better light; although this is the case on the outside on the inside it can be outlined as a “win-win” situation as the environmental investments bring about an economic return (Exploring corporate strategy, page 150), even though it’s a “win-win” situation, the high R&D costs tend to negate the ethical practices due to the high mark-ups.

Another vital factor in the industry that tends to link those above is research and development; it is the most significant factor internally and externally in the consequent industry. Internally, it is the factor that affects the costing system of the business and also the speed at which the firms market their products, externally the factor is influenced by various controls such as product trials and safety procedures and also due to which the industry gained the tarnished reputation in terms of CSR; through this it also affects the firms internally. The long processes of development, trials and safety tend to be where the costs lay in the pipeline hence the high markup on the drugs which can be manufactured for a fraction of the price.

These three factors tend to interlink and are often the ones placing the most emphasis on the industry, while there may be other significant factors such as competitive rivalry between firms, high levels of mergers and acquisitions to keep afloat, parallel trade and etc, all of these are influenced by the ones mentioned previously through sub-classification. Governing bodies, CSR and R&D however, tend to interlink significantly; Governing bodies affect the R&D processes of the firms, through the long delays in marketing due to increased safety measures of drugs, lengthy trials and regulatory controls in terms of sales experience. In turn this affects the CSR of the firms, as the costs add up the mark-up tends to be significant to cover these costs therefore exploiting consumers, and in terms of primary buyers affecting the government due to the government being the primary buyer.