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Summary
Nowadays, the pharmaceutical industry is one of the fastest-growing industries. Drug sales in 2018 reached $900.7 billion, an increase of 3% compared to 2017 (Lakdawalla, 2018). This industry remains one of the most profitable, with a return on sales of 17%. The pharmaceutical market is oligopolistic, the main share of which is concentrated in the hands of about the 20 largest manufacturers from the USA, Switzerland, Germany, France, and Japan. The largest pharmaceutical company in terms of global drug sales is Pfizer, with $45 billion in annual sales (Lakdawalla, 2018). Therefore, it seems worthwhile to understand the difference between Pfizer’s strategy and its competitors to understand what allows this company to outperform them.
Differences between the Strategies of Pfizer and its Competitors
Unlike many competitors, Pfizer has a broad differentiation business-level strategy. It produces high-quality, innovative drugs that require extensive research and development and patent protection. Kinch and Weiman (2021) note that although differentiation forces Pfizer to increase costs, which drives up the value of the product, it increases the customer’s perceived value. Thus, Pfizer’s differentiation strategy allows the company to serve a large market and, at the same time, create value for its product.
Moreover, Pfizer actively participates in integration processes. According to Hoffman and Bowditch (2020), in 2014, Pfizer acquired the pharmaceutical company Innopharma Inc as well as the Baxter product portfolio. Two years later, in 2016, Pfizer also acquired Anacor for $49 billion (Hoffman & Bowditch, 2020). Thus, absorbing its industry competitors, the company reaches a new level of development. Moreover, since 2018, Pfizer has actively collaborated with BioNTech on vaccine development. The companies received the world’s first regulatory approval for a COVID-19 vaccine through this collaboration. Therefore, integration with competitors is also a hallmark of Pfizer’s strategy.
Another key feature of Pfizer’s strategy that sets it apart from its competitors is its commitment to innovation. Pfizer continually improves R&D productivity by identifying the compounds most likely to succeed and focusing its resources on areas of high value. Kinch and Weiman (2021) assert that such areas include oncology, diabetes, obesity, schizophrenia, and Alzheimer’s disease. These areas are characterized by significant unmet medical needs as well as a high potential for market growth. Pfizer continues to complement its internal R&D with the best external scientific data to help create a series of valuable new drugs. Thus, the desire for innovation distinguishes Pfizer from its competitors.
Recommendations for Deterring Competitors
The company’s success over the years shows that its strategy is the right one. Thus, based on the identified features of Pfizer’s strategy, some recommendations can be made that will help deter the company’s competitors. It is important to note that Pfizer Inc. pursued an aggressive approach to research and development. R&D capabilities are an important competency that a company can leverage to support business growth. Aggressive research and development is a necessary approach to mitigate the effects of competitive forces in an industry. Another recommendation is to expand strategic alliances that complement Pfizer’s current business. For example, a company may enter into agreements with many large distributors and sellers in emerging markets to strengthen its presence around the world. On the other hand, diversification is a recommendation to reduce Pfizer’s exposure to the risks associated with the restrictions resulting from the business’s focus, primarily on the pharmaceutical industry. Thus, while maintaining the current strategy, the company will be able to contain competitors.
References
Hoffman, D., & Bowditch, A. (2020). The global pharmaceutical industry: The demise and the path to recovery. Routledge.
Kinch, M., & Weiman, L. (2021). The price of health: The modern pharmaceutical enterprise and the betrayal of a history of care. Simon and Schuster.
Lakdawalla, D. N. (2018). Economics of the pharmaceutical industry. Journal of Economic Literature, 56(2), 397-449.
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