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How does Genzyme’s focus on orphan drugs affect the degree of competition it faces?
Genzyme’s focus on orphan drugs had a positive (for Genzyme) impact on the amount of rivalry that the firm was faced with. More specifically, no other companies were interested in developing orphan drugs, believing that it was needed to create a “blockbuster,” a medication that would result in at least $1 billion, to be successful (Chapter six n.d.). Therefore, Genzyme faced practically no competition in the market.
This also had a profound effect on customers’ bargaining power (Hill & Jones 2010, p. 43), lowering it practically to zero. Clients did not have any choice but to buy the medication from Genzyme, so they were forced to purchase the drug at a price proposed by Genzyme; they would get no treatment at all.
How does focusing on orphan drugs affect the types of resources and capabilities a biotech firm needs to succeed?
Concentrating on the production of orphan drugs has a significant effect on both the resources and capabilities needed for success. For instance, it is required to dedicate a considerable amount of resources to research and development to produce new drugs. Also, rare resources might be needed for production – for example, human placentas were necessary for Ceredase (Chapter six n.d.). As for capabilities, the production facilities probably should not be oriented on mass manufacturing, being focused on the production of several drugs in relatively small amounts instead. That also might often mean that high costs are needed to produce the medications.
Does Genzyme’s focus on orphan drugs make sense?
If “making sense” means achieving success in the market, then retrospectively, it is possible to state that Genzyme’s focus on orphan medications made sense, for they achieved considerable success. On the whole, Genzyme decided to concentrate on the development and production of orphan drugs since they would have virtually no competitors in the market; the niche was free (Chapter six n.d.). Also, as was noted above, Genzyme’s potential customers would have no choice but to purchase that company’s drugs, which would permit setting high prices on the drugs. Therefore, if the developed orphan drugs were effective, at least moderately, the company would supply unique medications for those who would have no choice at all. On the other hand, if the company developed medicines against common diseases, they would need to outperform many other drugs on several criteria. Probably that was a long-term strategic intent of Genzyme – to occupy an empty niche in the market, where the threat of entry would also be very low (Hill & Jones 2010).
What are the advantages and disadvantages of Genzyme’s diversification into other areas of medicine?
It might be possible to assume that Genzyme diversified into other areas of medicine because in market terms, developing drugs for orphan diseases which were not related to enzymes did not differ considerably from doing that for orphan enzyme-related diseases; e.g., Genzyme would still occupy a convenient and safe niche in the market which was described in the answers to the previous questions. An advantage of this is, actually, the diversification of products. It may mean more customers, larger total sales, and also additional products in case other companies started developing competing drugs for the already covered areas (after the passing of the seven years of market exclusivity) (Chapter six n.d.). Possible disadvantages include the need to create new facilities for drug production (the new medications might require different equipment to be produced), the need to start research in a new, yet unknown area, and so on.
What recommendations can be offered Genzyme for the future?
A possible recommendation for Genzyme in the future might be that it should keep focusing on the production of orphan drugs. This is due to the fact that if the firm switches to producing drugs for non-orphan diseases, it will only have the benefits of the usual patent, not the legal protection that orphan drug manufacturers enjoy.
Reference List
Chapter six: defining the organization’s strategic direction n.d., Web.
Hill, CWL, & Jones, GR 2010, Strategic management theory: an integrated approach, 9th edn, South-Western Cengage Learning, Mason, OH.
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