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Three men were asked to race in a competition across a desert for a grand prize. Of the three men, the two strongest and fastest start running franticly into the desert in hopes to beat the other. The third man stood calmly and watched the race for a moment and then began to walk in the other direction with a smile on his face. A judge of the race stopped the man walking in the other direction and asked him, “Where are you going? The race is that way, to the east.” The man turned and pointed at the two other men racing as they disappeared over the horizon, and then replied to the judge, “I’m running my race towards the west and by looks things I’m already winning.” Companies don’t have to be the biggest, strongest or wealthiest to compete in an economy, sometimes they just simply have to recreate the competition.
Companies that target small markets and strive to become leaders in those markets are known as Market-nichers. The central bases in which market niches can exist relies on a business or a company to fill a void that will satisfy consumer needs. Nichers three tasks are to create niches, expand niches and protect niches.
There are several main avenues to take when creating market niches. In the twelfth edition of Marketing Management, authors Philip Kotler and Kevin Keller list several common types of market niches, two of which, are the End-user specialist and the Product-feature specialist. According to authors Kotler and Keller, the End-user specialist is a firm that “specializes in serving one type of end-use customer.” An end-use customer, simply stated, is the customer who will eventually receive the product for its intended purpose. For example, the costumer who buys candy bars from a candy bar manufacturer is not usually the end-use customer. Usually a store buys the candy bars from a candy bar manufacturer. The store has no intentions for using the candy bar for its intended purpose. The consumer who buys the candy bar to eat is the End-use customer. End-use specialists sell products that are only intended for certain consumers. Product-feature Specialists focus on producing a product. Authors Philip Kotler and Kevin Keller state that Product-feature specialists are firms that specialize “in producing a certain type of product or feature.” Usually these types of firms or companies try to create something new where there is little to no competition.
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Once niches have been created and established companies then try to expand these niches. A company or firm might add new products to its line that complement the first product or service. A company might create new products or services that will open other niches. An example of these methods could be found at a vitamin store. The vitamin store in its self has a nich-market. The customers of a vitamin store are a special type of end-use customer. The products in the store are designed for people improving health and most of the product lines in the store are made of items that complement each other. The B vitamins for sale at a vitamin store are great to take with protein drinks, because B vitamins help you digest protein.
Finally, once market niches have been created it is important to protect them. Firms use branding, advertising and many other tactics to protect a market-nich, but one the most powerful ways to protect a market-nich is to obtain and acquire patents. Patents can keep other companies out of market niches for a given amount of time. Patents are supported by governments and patent agreements can differ from country to country.
Patents are extremely important for companies who have invested large amounts of money, time and research in a product or service. Patents give companies time to help pay off debt from research and development. This gives companies incentives to be innovative and create new market niches.
Pharmaceutical companies that use research to design drugs, medicines and treatments for diseases and illnesses rely on creating market niches to make a profit. Pharmaceutical companies usually have a large number of employees devoted to understanding and treating medical and genetic deficiencies. Pharmaceutical “Research and Development” departments usually focus on two types of market niches; the End-user specialist, the Product-feature specialist.
Pharmaceutical companies use End-use market niches by offer products that target very specific types of customers. For example the company Merck created the product Cosmegen. Cosmegen is a product designed to treat types of pediatric cancers. This product targets a very specific customer and thus creates a market-nich , because there is no other product that works like Cosmegen.
Merck expanded this market-nich by adding Diuril and mustargen to their product line. Nathan Hack the public relations manager for Ovation Pharmaceutical stated in a congressional hearing that, “Diuril Sodium is a product that can reduce fluid overload in infants, and Mustargen is a product used to treat infants with certain types of brain tumors.” All these products can be used in infants and in many cases they all have to be used together too effectively to treat an infant with cancer. Merck expanded the Cosmegen market-nich by adding two complementary products to the line.
Merck, like many other pharmaceutical companies, uses patents to protect market niches. Along with patents, branding and other advertising tactics, pharmaceutical companies use over complicated compounds and drug delivery systems are not only designed to deliver the product safely to the patient, but are also designed to confuse other companies that are trying to copy the product.
Merck remains a strong company because it is fully independent. Merck is famous for the advancements that it has made in cancer treatment research. Merck recently expanded its cancer treatment market-nich. Merck posted on its web page that September 12, 2008 that “FDA approved Merck's new product Gardsil to protect against two additional cancers.”
According to Merck news, Merck had to overcome the discontinuation of the development of obesity treatment, and expiration on the patent for three cancer treatment drugs. Opportunities that Merck can exploit are gains in the profit revenues for the 2008 year. Merck is also beating it rivals AstraZeneca and Schering-Plough in profit margins. Threats that Merck needs to overcome is gaining the full approval for Gardasil by the end of the 2009 year. Merck
Strengths to build upon Weakness to overcome
-Made advancements that it has made in cancer treatment research
-Discontinuation of the development of obesity treatment
-Expiration on the patent for three cancer treatment drugs
Opportunities to Exploit Threats to overcome
-FDA approved Merck's new product Gardsil to protect against two additional cancers
-Gaining the full approval for Gardasil
Schering-Plough is a long standing Pharmaceutical company that has been in business for eighty years. Schering-Plough boasted during the National Black MBA that it was leading the world in late stage human pharmaceuticals. Schering-Plough has a market –nich by carrying a variety of patented products. According to the Schering-Plough publication web page, Schering-Plough has recently purchased Organon Biosciences “increasing their capabilities in women’s health and fertility treatment” and “expanding human pharmaceutical strengths in cardiovascular care, immunology and respiratory care. They also have several drugs coming out next year. With the planned release of those drugs an obstacle to overcome would be getting the drugs approved by the FDA.
Schering-Plough has strong alliances with other biotechnology companies and pharmaceutical companies. Those alliances could be dependences and this could be a weakness. Schering-Plough has generated high revenues and has purchased companies in the past they could possibly acquire or purchase some of the smaller companies that they rely on for research in the future.
Strengths to build upon Weakness to overcome
-Increased capabilities in women’s health and fertility treatment
-Expanding human pharmaceutical strengths in cardiovascular care, immunology and respiratory care -Relying on a lot of outside companies to provide research
Opportunities to Exploit Threats to overcome
-Recently purchased Organon Biosciences
-Several drugs coming out next year -Getting drugs approved by the FDA
Astellas is another pharmaceutical company that uses research on the treatment medical conditions to develop products. According to Astellas financial statements they generated eight billion in sales during the 2006 year. Astellas has a strong hold in Japan and they have been generating a steady increase in sales in Asia for the last few years. According to Astellas web page cardiology, dermatology, immunology, infections disease, urology, are their areas of research but they leaders in therapeutic treatments for cardio logical illnesses. They have a large worldwide presents and many counties often have strict pricing caps on pharmaceuticals which could be a threat to overcome.
Strengths to build upon Weakness to overcome
-High sales revenue
-Steady Growth into Asian Market -Reliance on outside sources for some research and development
Opportunities to Exploit Threats to overcome
-Large variety of research and development -Strict pricing caps imposed buy foreign governments
The United States Pharmaceutical Industry as a whole has always had the strength of innovation to create new products and treatments. Many talented scientists and doctors’ work for United States based companies. A weakness for the industry to overcome is the slowdown of innovation associated with companies relying too heavily on treatments and medicines that are already established.
Opportunities to exploit that lie in the United States Pharmaceutical industry come from overseas markets, government incentive programs and charities that sponsor pharmaceutical research and development projects.
The main threat the pharmaceutical industry in the United States faces comes from the United States congress. Congress can cause drug companies to put price caps on products, instead of following a supply and demand system. Tight government regulations can make the production of drugs less profitable when compared with other less significant drugs. This causes companies in some cases to cut production of life saving or ground breaking drugs with less significant drugs that have less price capping restrictions and a higher profit yield. Other counties with socialist style economies then step up and make low quality knock- offs of medicines that are then used to treat patients with little effect. The end result is business is taken from the United States pharmaceutical industry and American consumers are forced to use lower quality products and end up spending more money on larger quantities of generic brand product.
Pharmaceutical companies with research and development branches rely heavily on end-user specialization niches and the product-feature specialization niches. They focus on creating niches through research, expanding niches by developing complimentary products, and protecting niches through patents and advanced scientific techniques. The whole base of the pharmaceutical industry exists in the principal of creating and protecting market niches.