Biotech Industry Analysis: A Strategic Review Using Five Forces

This assignment provides a comprehensive analysis of the Biotech industry using Porter's Five Forces framework. It assesses the threat of new entrants, highlighting the company's experience, manufacturing heritage, reliable supply chain, and financial strength as key advantages. The analysis also addresses the threat of substitution, considering factors like reduced reliance on natural products, the rise of allopathic treatments, and the time-consuming nature of the company's treatment methods. The bargaining power of customers is examined, focusing on high prices, limited customer loyalty, and the attraction of innovative substitutes. The bargaining power of suppliers is deemed low due to numerous suppliers and the industry's reliance on intellectual property. Finally, industry rivalry is explored, noting high competition, lower prices from competitors, and the need for better promotion and technical advancements. The analysis uses the case scenario of Biotech developing products geared to the baby boomer market, specifically a hibiscus tea product. The assignment concludes that while Biotech has strengths, it faces significant competitive pressures and needs to adapt to changing market dynamics.

Running head: FIVE FORCES ANALYSIS BIOTECH
FIVE FORCES ANALYSIS BIOTECH
name of the student:
name of University:
Author's note:

1FIVE FORCES ANALYSIS BIOTECH
Threat of New Entrants
1. Experience: this company has a huge experience of more or less a century in this field
which obviously gives it an advantage over the new entrants (Mathooko and Ogutu
2015).
2. Strong biologics manufacturing heritage: as the company has been operating in some
of the important international market (Wheelen et al., 2015).
3. High-quality and reliable supply: Biotech has been serving the customers with reliable
and highly effective products for years hence it has a chain of loyal customers
(Gereffi 2017).
4. Huge amounts of funding to finance: for entering a market in biotechnology industry,
the companies need to have huge capital. Most of the companies do not possess that
amount of capital initially to match the financial strength (Porter and Heppelmann
2014).
5. Specialization: the company has products which cater the needs of different customers
for different difficulties. This may not be similar in the case of other companies trying
to enter the market recently (Eskandari et al. 2015).
6. Few experts: as Biotech Health and Life Products has been operating in this industry
for a long time it has better expertise to cater the needs of the customers (Dälken
2014).
Threat of Substitution:
1. Reduced reliability on natural products: with the change of time, the patients have
started to rely on the other products rather than natural one (Mathooko and Ogutu
2015).

2FIVE FORCES ANALYSIS BIOTECH
2. Discovery of different types of allopathic treatment: allopathic and other substitute
products have been affecting the company’s operation and profit (Wheelen et al.
2015).
3. Limited specialization: the company only has few offerings than the other
competitors. Therefore, it has to depend on the popularity of those products only
(Gereffi 2017).
4. Time consuming treatment method: the products of Biotech Health and Life Products
are quite time consuming to trade the patients hence seem to be less efficient to the
new improved allopathic products (Eskandari et al. 2015).
5. Low switching cost: the customers do not pay much to switch one product to another
as the price comparison is much less among these products (Dälken 2014).
6. Product oriented process: Biotech is much more product oriented than service
oriented hence the substitutes can gain advantage by balancing product and service
process (Porter and Heppelmann 2014).
Bargaining Power of Customers:
1. High price: the product price of Biotech Health and Life Products is much expensive
than the products offered by its competitors like Nestle and Glaxo (Mathooko and
Ogutu 2015).
2. Limited number of loyal customers: despite the fact that the company has a high
reputation among the natural treatment preferring customers but the number of such
loyal customers is much less (Wheelen et al. 2015).
3. Rapid innovation attracting buyers to substitutes: new types of products with more
efficiency are more attractive (Eskandari et al. 2015).
4. Defection of existing buyers: the company can lose support of the royal customers as
not having much upgraded and hybrid products (Gereffi 2017).

3FIVE FORCES ANALYSIS BIOTECH
5. Seeking discounts: customers ask for discounts and tend to flood to the companies
giving discounts and offers (Porter and Heppelmann 2014).
6. Demanding more variety: customers now a day prefer to shop online for which they
check variety of products from different companies then choose one to buy (Dälken
2014).
Bargaining Power of Suppliers
1. Low bargaining power of suppliers: the industry is not very dependent on the power
of the suppliers as their uniqueness depend on the intellectual property (Wheelen et al.
2015).
2. Numerous supplier: there are numerous number of suppliers present in the market for
the supply of raw materials hence the company do not depend on the demand of the
suppliers (Mathooko and Ogutu 2015).
3. Efficient supply chain: despite the fact that the companies do not depend on the
suppliers but they do need an efficient and loyal supply chain (Gereffi 2017).
4. Experimenting create scope for shifting: as the experiments are the continuous
process for the company hence they can easily shift from one supplier to another
(Porter and Heppelmann 2014).
5. Developing dependent suppliers: new and dependent suppliers become more loyal to
the company (Eskandari et al. 2015).
6. Low shifting cost: biotechnology company does not face problem to gain resources if
they want to shift (Dälken 2014).
Industry rivalry
1. High competition: biotechnology sector is highly competitive with domestic and
international brands (Mathooko and Ogutu 2015).

4FIVE FORCES ANALYSIS BIOTECH
2. Low price: many competitors offer low price for similar products (Porter and
Heppelmann 2014).
3. Higher variety: in low price the competitors offer more and better materials (Wheelen
et al. 2015).
4. Better promotion: this brand does not follow methods of high promotion through
online media which competitors do (Gereffi 2017).
5. International reputation: despite this company possesses a strong market recognition,
new entrants can easily replace this company (Dälken 2014).
6. High technicality: Scientific tools and materials, testing equipment are used by the
other international brands whereas this brand depends largely on the traditionalism
(Eskandari et al. 2015).

5FIVE FORCES ANALYSIS BIOTECH
References:
Dälken, F., 2014. Are porter’s five competitive forces still applicable? a critical examination
concerning the relevance for today’s business (Bachelor's thesis, University of Twente).
Eskandari, M.J., Miri, M., Gholami, S., Reza, H. and Nia, S., 2015. Factors Affecting The
Competitiveness of The Food Industry by Using Porter's Five Forces Model Case Study in
Hamadan Province, Iran. Journal of Asian Scientific Research, 5(4), pp.185-197.
Gereffi, G., 2017. The pharmaceutical industry and dependency in the third world. Princeton
University Press.
Mathooko, F.M. and Ogutu, M., 2015. Porter’s five competitive forces framework and other
factors that influence the choice of response strategies adopted by public universities in
Kenya. International Journal of Educational Management, 29(3), pp.334-354.
Porter, M.E. and Heppelmann, J.E., 2014. How smart, connected products are transforming
competition. Harvard Business Review, 92(11), pp.64-88.
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic
management and business policy. pearson.