Porters Five

Forces Analysis
of - INDIAN
PHARMACEUTICA
L INDUSTRY

Submitted By
Group-2
Members:
Pankaj Bhatt
Anurag Sarkar
Ashish Gandotra
Chopalli Sai
Jyothi

Industry
The IndianOverview
pharmaceuticals market is third largest in terms of volume
and thirteen largest in terms of value
India is the largest provider of generic drugs globally with the Indian
generics accounting for 20 per cent of global exports in terms of volume
The countrys pharmaceuticals industry is expected to account for
about 3.1-3.6% of the global pharma industry by value
Largest Exporter in Generic Drugs
Contributed 2.67% to the India's GDP

Attractiveness of
Industry
Indian
Pharmaceutical industry is expected to expand at
a CAGR of 15.92 per cent to US$ 55 billion by 2020

India is expected to rank amongst the top three

pharmaceutical markets in terms of incremental growth
by 2020

Indias cost of production is significantly lower than

that of the USA and almost half of that of Europe

A skilled workforce as well as high managerial and

technical competence

Continuous support from Government

Porters Five
Forces

Barriers to
Entry
Less investment in fixed assets
Economies of Scale
Brand Equity
High Working Capital
High chances of failure in case of rejection of drug by
regulatory body
Creating Brand Awareness and franchisee amongst
doctors for long term survival
Access to Distribution
Learning Curve Advantages

Moderate
Government Policies

Barriers

Buyers
Power

End user of the product

is different from the
influencer
Consumer has no
choice but to buy what
doctor says
In some cases, can
switch to substitutes

According to ICICI
Lombard and India Today
reports

Govt. policies
contribute for some
drugs (Price Ceiling)

Suppliers
Power

Moderate power in influencing the price

They can reduce the quality of the chemicals

They can even withhold supply
May not have high switching costs in most situations
Suppliers may go for forward integration (Orchid Chemicals &
Strides Shashun Chemicals)
Difficult to switch suppliers (For life saving drugs)

Moderate bargaining power

Rivalry among
Competitors

Dominance established by the large cap companies

Cut throat competition
Product differentiation and patents
Highly fragmented

Consistently reduce profitability due to reverse engineering of

drugs by competitors
Rapid Acquisitions and Mergers by existing firms to expand market
share
(Strides Arcolab acquiring Shashun Pharmaceuticals)
(Lupin Pharmaceuticals acquiring Gavis Pharmaceuticals, a US
firm)

Threat of
Substitutes
Substitutes that are available in
India:

Ayurveda

Homeopathy

Quarks and Talismans

Biotechnology- Stem Cell Research

Yoga

Threat of Substitutes
contd.
Availability of Substitutes
Ayurveda, homeopathy, yoga
have a good stronghold.
Price value of substitutes

Cheaper than allopathy.

Price elasticity of industry

demand

Relatively inelastic.
For instance, in drugs used for
chronic conditions, patients often
form loyalties to one particular
generic because of tablet shape
or color.
Also, in drugs used for some life
threatening condition may have
no other perfect substitute for the
patients to choose.

Availability of complements

Other pharma drugs,

biotechnology (may become
substitutes in the future)

Price values
Threat
of complements
from

substitutes
Very expensive
moderate.

Conclusio
n
Pharmaceutical industry in India has enormous
potential of growth.
In order to enter and survive in this industry
the company entering should offer a
differentiated product or a therapy
A new firm should think twice as the industry is
labour intensive and capital intensive
There is a possibility of high initial investment
associated with it which tends to discourage
new companies to enter into the market
There is also high risk and high chances of
failure if drug is not approved by regulatory
bodies