Nucleon CaseEssay Preview: Nucleon Case1 rating(s)Report this essayIntroductionNucleon, a small biotechnology start-up company is in the process of human trials for their first potential product, i.e., CRP-1. Nucleon has to decide among several alternatives on producing CRP-1 for their long-term survival in the intensively competitive and high-stakes drug industry.
Industry Analysis -Porters Five ForcesThe Pharmaceutical industry has several high entry barriers as shown in figure 1. Economies of scale, product differentiation, government policy and capital requirements and financial services are few barriers for new entrant. Level of threat from rivalry is also high in this industry. Industry has presence of large number of small firms of a similar size. They are in direct competition with one another, which can often lead to severe price reduction strategies as a competitive means. Power of buyers is medium in this industry because of mixture between concentrated and scattered buyers, i.e., doctors, end users, government etc. Suppliers have low bargaining power company can switch from their suppliers without incurring cost. Threat of substitute is non existence.
[quote=Growth_Dynamic]”Industry Analysis -Porters Five ForcesThe Pharmaceutical industry has several high entry barriers as shown in figure 1. Economies of scale, product differentiation, government policy and capital requirements and financial services are few barriers for new entrant. Industrial forces and industrial force in combination are the main barrier. They are not only the biggest producer of pharmaceuticals and pharmaceutical supplements and even main producer of drugs and medicines. So there are a lot of competing industries, particularly pharma which is one of the biggest competitors. These barriers could also prevent a pharmaceutical from becoming an attractive option. The high cost of manufacturing pharmaceutical products on a non commercial basis makes it difficult to build and manage it at a steady pace.”
Industry Analysis -Prabhu Dutta: “A major concern for stakeholders is the loss in growth of competition in the new entrant industry. We believe these are significant changes for the better. Industry must be considered for the economic transformation of society.”
Industry analyses from the point of view of investors & management are in the process of refining information about the competitive nature of our business model, our prospects, expectations and expectations. This could lead to opportunities for a number of reasons, from the creation of industry-wide business plans to new business formation.
The new entrant industry, though, is already at the beginning stages. The main challenge is to build competitive market share within these industries. The only possible target for the new entrants are to get into new market share of pharmaceuticals/drugs to address the demand in this particular industry. Also the potential growth and growth from new entrant means that the growth potential are not in the long term as we have seen from the emergence of these competitors. In a recent market research presentation the industry showed a growth rate of 14.5%. The growth rate is consistent with growth rates for pharmaceutical industries in the US. The growth rate in the US is much larger than the country is experiencing. And the growth rate of pharmaceuticals in the US is high. In the past year or two, we expect to see an increase in pharmaceuticals in many parts of the world. These growth levels are also associated with a relatively lower costs of business in the emerging segment. The growing industry has already been growing to create jobs for over a fifth of the employees. However, it needs a lot more time for the pharmaceutical industry to achieve this growth rate in the short term. Growth is only going to happen with the emergence of new entrants. In this segment, the cost per employee will be decreasing even more quickly than in the current market. The development process for the current entrant segment would not include the growth in the manufacturing and manufacturing for this segment. They may also have to cut their services. This could also push growth growth even higher into the next year or two.
Nucleon General EnvironmentThere are several external factors that affect the pharmaceutical company. Social: There is increasing demand for drugs because of high mortality rates of adults. Legal: The introduction of new drugs is closely regulated by FDA. Economic: Booming economy after 1980s is leading to increase in pharmaceutical companies. Political: Increase in minimum wage has leaded an increase in affordability of baby boomers. Technology: progress in biotechnology can be used to discover, develop and produce new drugs.
VRIO AnalysisThe table 1 shows the status of the resources and capabilities of Nucleon, Inc. Product Design: Product design is a valuable, rare and organized to exploit its full potential; however it is still imitable as issues with patenting always exists. This puts the company with temporary competitive advantage. Research and Development: The Companys research and development is an important resource and capability, as it is the companys core competency. At present it is both valuable and rare, however, again it is imitable, and not yet organized to fully exploit it, thereby providing the company with only parity in terms of competitive advantage. Human Resource: The Companys human resources are valuable, rare, inimitable and fully exploited. It has a strong team with very good skill and know-how hence puts the company in sustained competitive advantage. Innovation: The Companys innovation provides it with the most competitive advantage through the fulfilment of all the requirements for sustained competitive advantage.
Product DifferentiationProduct CRP-1 is differentiated from its competitor in terms of its uniqueness. It can be used for two major therapeutical applications: one for tropical treatment of burn wounds, the other for acute kidney failure and Nucleon has a strong patent position on the CRP-1 molecule.
Cost LeadershipNucleon will be the sole supplier of CRP-1 if it passes the clinical trials. Hence Nucleon can dictate the price of CRP-1. It will be able to attend the temporary advantage with its own in-house manufacturing plant and skilled human resources.
Vertical IntegrationFigure 4 shows the value chain of Nucleon and presently it is at the pre clinical trials stage. This clearly signifies that Nucleon is less vertically integrated. Nucleon has finished the pre-clinical trial with positive results and they are ready to perform clinical trial on human. It is now trying to accomplish more stages of value chain by forward vertical integration. Now as Nucleon is ready to perform clinical trial on human, nucleon has to consider different manufacturing options. It has to choose the right decision whether to vertically integrate or not vertically integrate to sustain in short run