The paper “ Competition and Marketing Strategies in the Pharmaceutical Industry - Johnson & Johnson Marketing Strategies against GlaxoSmithKline's Ones” is a spectacular version of a case study on marketing. The pharmaceutical industry in the new millennium has become a highly complex sector. Advances in drug discovery and development technologies are now at the limits of human comprehension. The great number of pharmaceutical manufacturers combine with new technologies and processes undertaken presents enormous challenges in organizational management. While overhead costs in the management of supply chain and marketing have skyrocketed (Rasmussen 2002). The most profound challenge is winning the competition as a necessary benchmark for a company’ s survival in the global pharmaceutical environment.
Uncertainty surrounds drug discovery processes, but the huge potential returns following a single discovery are comparable to oil drilling or a random selection of black beans from a jar full of white ones. Success in this industry is highly dependant on risks and luck. Therefore, excelling in the pharmaceutical industry requires the adoption of business strategies and models capable to cope with uncertainties. For example, Colonel Ely Lilly achieved success by manufacturing ‘ true to label’ products to face competition with ‘ snake oils’ plus other vague concoctions of his era (Rasmussen 2002). Analysis framework and ModelsThe industry is characterized by highly skewed returns, such that the prevailing volatile conditions contradict with normal principles like diversification of portfolios to gain predictable returns.
Success in the pharmaceutical industry by established firms all depends on building scales through acquisitions and mergers with the hope that in later stages, their product lines will at least have sizeable prospects of blockbuster drugs. Building scales provide modes of funding in house research and drawing external discoveries through alliances and licensing agreements as well as the much-needed resources for marketing.
Estimates show that the marketing of pharmaceutical products alone consumes about 35% of revenues products. The expiry of patent rights is the biggest threat to returns from blockbuster drugs resulting in another M& A round. Some of the strategies adopted to cope with these pressures involve questionable expansions by diversifying business activities, for example, Johnson & Johnson diversity into household and health products (Rasmussen 2002). However, focusing on a comparatively broad market niche for drugs rather than concentrating on blockbusters is among the best diversification strategy.
This strategy is adopted by the majority of European companies where total sales returns place them on a higher ranking in the pharma companies despite having only one or two blockbuster drugs. Sales of wider drug ranges reduce dependence on discovery to new blockbusters. However, development and marketing costs need to be closely monitored due to the smaller markets to remain economically viable. Breakthrough in this complex industry has been achieved by engaging in a marketing alliance with a global pharma rather than agglomeration tendencies.
For example, biotech firms initiated funding of independent drug discoveries by accessing direct funds from capital markets (Rasmussen 2002). Therefore, three models have shaped the industry, 1. The blockbuster model involving searches for distribution of small numbers of the drug in order to gain substantial global sales. 2. The diversification model emphasizes marketing a larger number of drugs in smaller market niches. 3. and the intermediary model that incorporates both. This paper is more concerned with current successes or failures in the distribution strategies undertaken by Johnson & Johnson in comparison to GlaxoSmithKline (Tech Connect 2003).