Pest Analysis of Pharmaceutical Industry in Singapore - Case Study Example

PEST ANALYSIS OF PHARMACEUTICAL INDUSTRY IN SINGAPORE Affiliation This report aims to be an advisory resource for the company Amiviz Pharmaceuticals. The pharmaceutical industry is increasing with very high growth rate due to advancement of technology and diversification is very helpful for its growth. This report provides useful information about political, economic, social, and technological factors of an Asian country “Singapore”. Singapore is a suitable place to diversify pharmaceutical business due to its advanced healthcare system. Republic of Singapore, consisted on the population of 5.5 million, is a small island country in Southeast Asia. The country has recently become a potential region for pharmaceutical research and manufacturing companies due to its increasing purchasing power parity and per-capita GDP. It is one of the major commercial hubs around the world, with fourth-biggest financial centre. Its diversified and globalized economy depends majorly on trade especially trade of manufacturing goods, which accounted almost 30 percent of its 2013’s GDP. The healthcare system of Singapore is very advanced and ranked #6 by World Health Organization (WHO0 in 2013, therefore the country is very lucrative for pharmaceutical company. PEST ANALYSIS Political Analysis: The politics of Singapore is not unstable like other Asian countries. Its politics has taken the form of parliamentary representative democratic republic; in this form President of the country holds the position of head of the state, whereas prime minister holds the position as head of government. In the late 1980s it was a single-party state, the ruling party was People’s Action Party which dominated the county for many years. After 1961 other political parties were also emerged in Singapore (Tan, et. al, 2007). Domestic and foreign policies of Singaporean government has very significant impact on manufacturing, pharmaceutical, and trade industry. In order to capture attention of international companies for economic growth and development Singaporean government offers especial incentives, which are important reasons for its economic growth and diversity. Government has adopted low tax policy to encourage foreign investors to invest in Singapore’s economy. In 1966, the Pharmaceutical Trade Association (PTA) was formed in order to improve pharmaceutical industry of the country. The main reason for the establishment of PTA was to abolish import quota system which Singaporean government imposed on pharmaceutical products (George, 2005). PTA took some major steps and made representations to the Singaporean Government, which finally abolished the quota system. PTA supports international pharmaceutical companies who wanted to spend in Singapore. The association serves the role of advisor and facilitates international pharmaceutical companies in terms of legal and industrial policies. Furthermore, political factors like legal issues and government regulations define formal and informal rules under which all organizations operate. Country’s political activities have huge influence on business growth as well as on spending power of consumers. Over past few years pharmaceutical industry has got increased political attention due to increase recognition of healthcare system for economic prosperity and development (Tan, Pan, & Lim, 2005). Additionally, it takes almost 10-15 years to experiment any new drug and them make it available for patients. Singaporean government allows multinational pharmaceutical companies to invest in the country and improve healthcare system by providing effective and powerful drugs. There are many opportunities for multinational pharmaceutical companies in Singapore, due to its political situation. No matter which party rule the country, all support foreign investors and allow them to invest in country’s healthcare system. Economic Analysis: Economic condition of Singapore is very good and stable. In 2013 the purchasing power parity per capital of Singaporean GDP was more than $61,000, almost $10,000 more than USA (Phang, 2001). The country invest huge amount of its budget in healthcare industry, in 2013, its healthcare expenditure was more than $12 billion. This shows that Singaporean government pays serious attention towards healthcare and pharmaceutical industry. It is expected that by 2018 healthcare expenditure of the country would rise to more than $22.5 billion (Osman-Gani, 2004). Additionally, Singaporean government gives incentives to multinational firms in all areas to invest in the country, which is the main reason for its fast economic growth. Along with effective healthcare industry, Singapore also has well-developed infrastructure, logistics network, good regulatory environment, strong intellectual property (IP) laws, low taxes, and active government support. All these factors strengthen Singapore’s economic condition which attracts multinational companies. For all those pharmaceutical companies looking for an Asian country to expand business in terms of manufacturing, research and development, or increase sell, Singapore is a best choice because of its economic growth and liberal government policies. Singapore’s most significant resource is deep water harbours; its ports serve the operations of import and export. The country does not have mineral resources but it tranships and process goods by nearby countries. Singaporean government, in 1960 embarked on an ambitious successful program to bring improvement in its industrial sector by attracting foreign marketers. The reason behind this program was to develop industrial infrastructure and to get technical and financial services from large multinational companies (Wong, Ho, & Singh, 2007). Moreover, Singapore has best business environment in the world due to its strong economic condition and it is widely acknowledged for that. The presence of many multinational companies in Singapore is a testimony to its excellence in manufacturing and service industry. The country started to diversify its economy after 1980s, and diversification serves major role towards its success and economic growth. The country has opened its gates to many manufacturing, communication, and financial service firms and stabilizing its economy by diversification (Osman-Gani, 2004). There are many multinational firms working in Singapore and many others are intended to start operations there due to low tax, fair legal policies, and fast economic growth and development. Social Analysis: The social life, traditions, activities, and level of health of people affect the growth of pharmaceutical industry. Any change is social life create significant changes in business economy and create new directions for local and multinational organizations. Singapore is an eastern country and follows traditional norms and values, but the youngsters are more attracted western culture and values. The shift of youngsters’ interest from eastern culture to western culture has created many opportunities for multinational firms (Teo, & Liu, 2007). Due to cultural shift many multinational firms has started their operations in Singapore. Many multinational pharmaceutical companies have also started their manufacturing and sell in Singapore and earning good profit. Moreover, Singaporean people have materialistic desire, and in order to satisfy their desire they work hard, which has positively increased growth and productivity of the country. On the other hand their increasing materialistic desire is hurting their social and cultural values. Singapore is a diversified nation consists of Chinese, Malays, Indians, and Singaporean. Most of the people dislike blue collar works so there is a window for foreign workers to work blue collar jobs in Singapore. Furthermore, labour cost is low in Singapore than other neighbouring countries so, multinational pharmaceutical companies can safe their cost and can earn good profits. In 1970s Singaporean government undertook sustained urbanization program and increased opportunities for international organizations to invest in country’s economy (Yuen, 2014). As a result of urbanization people adopted new ways and skills. Today, people of Singapore expect high standards of public education, transport, and health. They prefer to use products of multinational firms and it is the main reason behind success of international firms in Singapore. Furthermore, social factors like health consciousness, age distribution, population growth rate, and emphasis on safety and career attitudes affect customer needs and demand. The population growth rate of Singapore is very low, now population of the country is 5.47 million, which is slowest growth in past 10 years (Yuen, 2014). It is one of the fastest aging population countries of Asia and facing challenges due to low rate of youngsters. Currently, almost 7% of its population is over the age of 65, and it is expected that this rate will increase to 19% by 2030 (Chan, n.d). Foreign pharmaceutical companies can earn good profits by providing medicines to old age population of Singapore. Technological Analysis: Diversity and urbanization has changed the technological sector of the country. If Singaporean government would not allow foreign firms to invent in the country then economic and technological growth would be severely limited. Government’s decision to industrialise caused tremendous increase in technological sector and due to industrialisation the country has improved its technological sector. Furthermore, Singapore has improved its medical technology in tremendous manner and has become a global medical technology hub. It is a leading location for medical technology among all Asian countries. Additionally, Singapore is a home to more than 30 global medical technology companies which have started their operations in Singapore to produce medical equipment for global and regional markets. Multinational pharmaceutical firms like GlaxoSmithKline, Novartis, and Eli Lilly, have established their research and development departments in Singapore. Among top ten world’s leading pharmaceutical companies, seven manufacture some of their drugs in Singapore, whereas eight established regional headquarters in Singapore (Finegold, Wong, & Cheah, 2004). Due to the presence of international medical technology firms Singapore’s technological sector has improved very well. In recent years, government of Singapore has been trying to improve local technology sector and trying to fund local technological innovation start-ups. The government has invested $100 Singapore dollars for early stage start-ups of scientific research and development (Purnell, 2014). Singaporean people want to use latest technology gadgets and do not reluctant to invest their money in technological gadgets. Furthermore, the use of internet and online shopping has also increased among people of Singapore and they prefer to shop online. A pharmaceutical or biomedical company can earn good amount of profit in Singapore by selling medicines online. Singapore has got attention to many international firms due to its advanced biomedical facilities and innovative medical technology products. The country has proved itself as a best technological hub among Asian countries and provides a suitable base for companies to produce new innovative technologies and products for international and regional markets. Singapore’s pharmaceutical market is valued nearly $1 billion, and over the past few years Singapore government invites high technology companies to invest and now it has established Genome institute, Bioinformatics institute, Bioprocessing Technology institute, Institute of Bioengineering and Nanotechnology, and Singapore Institute of Clinical Sciences (Finegold, Wong, & Cheah, 2004). Furthermore, the country has identified a strategic economic growth are that is “clean-tech industry” and has placed great importance on its development and improvement. Clean-tech industry includes, the environment and water, fields of clean energy, and inter-related efforts to protect ecosystem. According to Singapore government the clean-tech sector will contribute almost $3 to $4 billion to its gross domestic product by 2015 (Bogaerts, Yuling, 2014). The government invites international biotechnology companies for producing environmental friendly biomedical solutions. From all the factors analysed above, it is conclude that Singapore is a good place to invest among all Asian countries due to its government policies and enterprise friendly approach. The economic growth shows that the country has potential to grow further and investment in Singapore could be a good decision for pharmaceutical company. Together with effective strategic planning and hardworking discipline of its citizens, there are great chances of success for an international firm. Reference List Bogaerts, M., Yuling, M., (2014), Clean Technology Sector SINGAPORE, Belgian Foreign Trade Agency. [Online]. Available at: http://www.abh-ace.be/nl/binaries/Clean%20Technology%20Sector%20in%20Singapore%20-%20BFTA_tcm448-248161.pdf. Accessed on 8th March 2015. Chan, A., (n.d) Singapore’s Changing Structure and the Policy Implications for Financial Security, Employment, Living Arrangements and Health Care, Asian Metacentre Research Paper Series. [Online]. Available at: http://www.cpahq.org/cpahq/cpadocs/Singapores%20Changing%20Structure.pdf Accessed on 8th March 2015. Finegold, D., Wong, P. K., & Cheah, T. C. (2004). Adapting a foreign direct investment strategy to the knowledge economy: the case of Singapores emerging biotechnology cluster. European Planning Studies, 12(7), 921-941. George, C. (2005). The internets political impact and the penetration/participation paradox in Malaysia and Singapore. Media, Culture & Society, 27(6), 903-920. Osman-Gani, A. M. (2004). Human capital development in Singapore: An analysis of national policy perspectives. Advances in Developing Human Resources, 6(3), 276-287. Purnell, N., (2014), Singapore Aims to Become Southeast Asias Silicon Valley, Venture-Capital Investments in Tech Outstrip Many Asian Neighbors, The Wall Street Journal/Tech. Available at:http://www.wsj.com/articles/SB10001424052702304071004579406393779804868. Accessed on 8th March 2015. Phang, S. Y. (2001). Housing policy, wealth formation and the Singapore economy. Housing Studies, 16(4), 443-459. Teo, T. S., & Liu, J. (2007). Consumer trust in e-commerce in the United States, Singapore and China. Omega, 35(1), 22-38. Tan, K. P., Rui, C. N., Devan, J., Goh, C., Kadir, S., Lee, T., ... & Yen, J. W. Y. (2007). Renaissance Singapore? Economy, culture, and politics. Singapore. Tan, C. W., Pan, S. L., & Lim, E. T. (2005). Managing stakeholder interests in e-government implementation: Lessons learned from a Singapore e-government project. Journal of Global Information Management (JGIM), 13(1), 31-53. Wong, P. K., Ho, Y. P., & Singh, A. (2007). Towards an “entrepreneurial university” model to support knowledge-based economic development: The case of the National University of Singapore. World Development, 35(6), 941-958. Yuen, T., (2014), Singapore population now at 5.47 million, slowest growth in 10 years, The Straits Times/Singapore http://www.straitstimes.com/news/singapore/more-singapore-stories/story/singapore-population-now-547-million-slowest-growth-10-y#sthash.ZzdJ6RLi.dpuf Read More