PRICE DISCRIMINATION OF A PHARMACEUTICAL FIRM
A global pharmaceutical firm typically resorts to price discrimination wherein prices across different countries vary based on the people’s purchasing power at forefront ( 2001). As the demand in poorer countries like Africa is relatively more elastic than richer ones like United Kingdom, a pharmaceutical firm will adjust its prices to exploit the large but low purchasing power base of the population. To gain most of the concentration of public purchase, it could lobby to the host government for rivalry protection, security and distribution.
Some of the advantages of such strategy is mass production capability, and to some extent, greater realization of societal responsibility that can lead for international philanthropy associations to fund the firm’s research and development. This second benefit is far more useful for the firm in the long-run strategy as approximately 0 million dollars and 15 years are needed to launch a single drug to the market (, 2003). However, drawbacks are inevitable like host competitor’s engagement to price war that could have disastrous effects to the firm as price discrimination cannot survive in a perfectly competitive market structure. Another, there is also the possibility that the host population could divert selling of the discounted drugs to rich countries that can result to price distortion and lost of competitive position to other countries.
As a conclusion, the pharmaceutical firm should plan and benchmark alternatives in order to conceive future problems in price discrimination strategy. It could also develop strong and aggressive ties with international movement like United Nations that can be very effective intermediary to communicate to host countries’ government. Consequently, before it manages to plunge strategic planning and coordination prerequisites such as global competitiveness and huge financial base should be first establish to survive competition and absorb any long-term looses.
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Credit:ivythesis.typepad.com
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