The decision of the New Zealand government to establish a single agency named ‘‘Pharmac’’ for purchasing pharmaceuticals has changed the landscape of the pharmaceutical industry. The objective of this agency is cost containment through reference pricing system. As a result, the pharmaceutical industry has been on a decline in terms of market revenue over the past few years. This has also affected Lily, a pharmaceutical affiliate operating in New Zealand. The threat of new entrants have been high in the market, with niche generic traders entering the market in association with preferred generic suppliers for generic products. This meant that these new and small entrants have posed a big competitive threat to an established pharmaceutical affiliate like Lily, at a lower cost. It has led lily to lower its prices for both new and existing products, and has changed the nature of customer relationships. They have also lost their patent that has had a huge impact on their sales. This requires Lily to come up with a strategy to gain its competitive and innovative advantage in the market back.
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