Michael Porter’s five forces are useful in determining the competitiveness of markets. In this paper, I am studying one of the five forces, namely the threats of new entrants into the industry. A “new entrant” can be defined as a new or existing company that has not previously competed in the industry in its geographic market. A number of common barriers to entry include government policy, economies of scale, switching costs, cost advantages, large capital expenditures, cost advantages independent of scale, contrived deterrence, strong competitor retaliation, limited access to distribution, proprietary product differences and established brand preferences.
Understanding the barriers to entry that are specific to the biotechnology industry requires that we first define the industry. Our group decided to define the biotechnology industry as “firms in this industry primarily use living organisms or molecular and cellular techniques to provide chemicals, food and services that meet human needs” (IBIS World Report, 2013). For the purposes of this project, we chose to exclude companies manufacturing general biologic equipment, developing small-molecule pharmaceuticals and performing research by contract. Additionally, we chose to focus on the US market.
The biotechnology industry is dominated by relatively few well-established companies, such as Amigen and Biogen Idec. These dominant firms generally have large capital reserves, large Research & Development (R&D) departments, access to specialized equipment and materials, experts in the field and generally hold multiple patents. These firms also generally have well-established manufacturing plants and distribution networks. All of these characteristics can pose significant barriers to...
... middle of paper ...
...is industry also experiences major “exit barriers” due to the fact that the technologies produced are highly specialized and have low utility in other areas. Thus, even when certain innovations have limited marketability and are returning low profits, they oftentimes stay in the market. Because companies oftentimes become highly specialized, they can create a niche for themselves that is difficult for other competitors to enter but may also be difficult for them to exit.
The barriers to entry in the biotechnology industry protect large industries while making it difficult for small companies to enter. Whether these barriers inhibit or promote innovation is debatable. While a smaller firm may find cost of researching and developing innovative technologies insurmountable, these companies may license out their technology or partner with a larger, well-established firm.
Faboil Ltd has evolved into a relatively successful organisation in the biotechnology field. The success of the company and its paternal approach was adopted by Dr Alfred Brownlow. Dr Brownlow has led from the front in terms of developing the product range for Faboil Ltd. Richard Cranberry (Director of Biotechnology) has driven very hard to maintain the success of the company, although the organisation lag behind in terms of modus operandi technology. At present, the monopoly position of Faboil Ltd has slowly eroded away and faces two competitors. The major causes are that the new products have failed to live up to market expectations and it is at a backward stage only holding a 20% market share. This report will find the causes of issues in the company and give ideas and resolutions on how to fix the problem.
In the late twentieth century, the field of biotechnology and genetic engineering has positioned itself to become one of the great technological revolutions of human history. Yet, things changed when Herber Boyer, a biochemist at the University of California, founded the company Genentech in 1976 to exploit the commercial potential of his research. Since then the field has exploded into a global amalgam of private research firms developing frivolous, profit-hungry products, such as square trees tailor-made for lumber, without any sort of government regulation.
Moore, Patrick. “Battle for Biotech Progress.” The American Enterprise (March 2004). 3 April 2006 .
Nucleon is a small biotechnology start-up with a very promising potential product (CRP-1), which is also the first product that Nucleon is planning to go into the clinic market. Nucleon has reached to human clinical trials phase with its product and it has no manufacturing facilities that satisfy the guidelines for these clinical trials and testing. Nucleon is on the verge of making a critical choice of manufacturing strategy, which will affect Nucleon’s survival in the intense competition in the long haul. Nucleon management is aware of the facts that they have a limited budget to start with, the financial environment in biotechnology is rapidly changing and establishing the safety and efficacy of products like CRP-1 is complex, time-consuming and expensive; that’s why they want to evaluate risks and rewards of each manufacturing strategy before making their final decision.
The Bio-technology market is a very rich and powerful market in the world. This market is mostly controlled only by very few giants such as Monsanto, Du Pont, Syngenta, Bayer etc. Leaving agricultural system, a system vital for a country’s survival in private hands, that to in the hands of few corporations is very dangerous to any country.
Another recommendation for Boston Scientific is to pursue a differentiation strategy instead of a cost-based leadership strategy. The oligopolistic nature of the industry and opportunities for innovation create an ideal situation for differentiation. This strategy is also dependent upon Boston Scientific acquiring and maintaining a plethora of patents. By using these patents, Boston Scientific would be able to create a distinct, innovative product that consumers would be willing to pay a higher amount for. Consumers would be less price-sensitive if Boston Scientific’s products were unrivaled and unique. Additionally, creating a technologically superior device could lead to a sustainable competitive advantage for Boston Scientific. Due to the
To perform the Industry Analysis it is better to follow Michael Porter's five forces model. This analysis framework was created so that it helps managers in their task to analyze competitive forces to the company. (Hill & Jones 80) This model is only one of the models that can be used for this task but it is one of the more popular models. The five forces that we will have to look at for this model are (1) the risk of new and potential competitors; (2) the bargaining power of suppliers; (3) the threat of substitute products; (4) the bargaining power of buyers; and (5) the degree of rivalry among established companies within an industry. (Hill & Jones 80)
Existing firms have cost and performance advantage in this industry. This is because existing firms have already purchased large capital expenditures and have economies of scale. They also have direct supply and distribution channels setup
Genzyme also participated in some vertical integration for specific areas of research. For example, it acquired Cell Genesys' manufacturing operation in California to support the grow...
Located in South San Francisco, CA, Genentech was started in 1976 by a biochemist Dr. Herbert Boyer and Robert A. Swanson. From 1995-2009 Arthur Levinson had become the CEO of Genentech; presently it is Ian T. Clark. Genentech is a leading biotechnology company, using human genetic information to discover, develop, manufacture and commercialize medicines to treat people with serious or life-threatening medical conditions (2014). Biotechnology is the technology based on the science of cellular and biomolecular processes to develop technologies and products that help improve peoples’ lives and the health of our environment. How biotechnology uses cellular and biomolecular processes are by using molecular mechanisms by which genetic and metabolic processes occur in plant, animal, and microbial organisms. By using this technology it provides breakthrough products and technologies to combat debilitating and rare diseases, reduce our environment footprint, feed the hungry, use less and cleaner energy, and have safer and cleaner and more efficient industrial manufacturing processes. The many factors they are trying to prevent in our environment overall affects our human health. Genentech provides products in the areas of immunology, oncology, and disorders of tissue growth and repair. For example, scientists are finding ways to prevent the spreading of cancerous cell tissue growth of metastatic breast cancer.
Biotechnology is a growth field that consists of the use of biological systems or living organisms in which technology is developed and applied1. Take a look at IBB in figure 1 below it shows an increasing upward trend in the past 5 years showing the fast expansion and growth of the bio sector. One of the significance and importance of biotechnology is that it covers almost every field. The application of biotechnology can be used for industrial, agricultural and medical purposes. The study of microorganisms and particles can be beneficial to mankind. With a clear understanding of internal body composition and molecular behaviour, vaccines and medications can be produced to treat diseases and conditions. Fruits and vegetables can be modified to grow faster, taste better, resist different temperatures, repels insects, etc2. Although biotechnology has the potential to affect modern society and have a positive impact on the environment, the misuse of such technology can lead to devastating consequences and side effects. The creation of bioweapons, food toxicity, errors in products and many ethical issues are also to be considered with the development of such technology. However, the upside and potential breakthrough in this technology could feed the hungry, reduce environmental or human footprint, develop cleaner and more efficient energy sources, etc. On top of this, the emerging applications in the biotech sector is creating plenty of opportunities for businesses that offer biotech related services for other organisations to make use of3. Examples of these applications and subjects include combinatorial chemistry, bioinformatics, biochips, proteomics and high-throughput screening. However on of the most looked at, compelling and c...
Case of UK Genetic Knowledge Parks." Technology Analysis & Strategic Management 19.2 (2007): 189-204. Academic Search Premier. EBSCO. Web. 21 Apr. 2011.
For the biotechnology industry, the future is now. Biotech companies are producing new and improved drugs, mapping the genome, and creating artificial organs and body parts. The advent of these new products will increase the quality of life for those who have access to them. Advancements in the biotechnology field have received a lot attention by the press and publications. They have given the impression that it is almost imperative to learn about this fairly new field of study.
...incipal risk is related with level and number of competitors, the most important are in order: Starbucks, McDonalds and The coffee bean and Tea leaf. To face competition Illy should keep in mind “differentiation through innovation”.
Life as a student of Biotechnology held untold wonders and I enjoyed learning via the practical sessions in the lab, simply because I could actually implement everything I studied. At the same time, I also learned about the latest innovations in products and services using Biotechnology via courses such as ‘Commercial Aspects of Biotechnology’ and ‘Frontiers in Biotechnology’. My decision to pursue a MS in Drug regulatory Affairs is driven by my ambition to contribute to the industry, combined with my innate desire to discover and explore the subject. I would love to work under the areas of food science, microbiology, drug regulatory affairs, food and drug administration, and cell immunology.