industry analysis pharmaceutical manufacturing of brand name drugs group 45a leia eldreth- senior,...
TRANSCRIPT
INDUSTRY ANALYSISPHARMACEUTICAL MANUFACTURING OF
BRAND NAME DRUGS
Group 45A
Leia Eldreth- Senior, Human Resources, May 2011
David Watson- Senior, Entrepreneurship, May 2011
Deniece McCoy- Senior, Finance, May 2011
PHARMACEUTICAL MANUFACTURING OF BRAND NAME DRUGS
Merck & Co.
•Traded on New York Stock Exchange (MRK)
•Headquarters Located in White House Station, NJ
Pfizer Inc.
•Traded on New York Stock Exchange (PFE)
•Headquarters Located in New York, NY
INDUSTRY KEY SUCCESS FACTORS
• Manufacturing Efficiency
• Economies of Scale
• Inventory Turnover
Strength Analysis Scale Used: 1-5 1- Weak 5- Strong
Based on 2010 Data
• Allows companies to produce more product efficiently
• Critical deciding factor in industry competition
• Measured by: COGS/ Sales Revenue
• Lower is better for cost based strategies
MANUFACTURING EFFICIENCY
MANUFACTURING EFFICIENCYCOGS/ SALES REVENUE
Merck & Co.:
Manufacturing Efficiency:
$11,015,000/ $45,987,000 = .2
Strength Analysis: 3
Pfizer Inc.:
Manufacturing efficiency:
$13,196,000/ $67,809,000 = .19
Strength Analysis: 3
ECONOMIES OF SCALE
• Allows companies to decrease the internal cost of operation by reducing the cost per unit.
• Result of increased production
• Measured by: Costs/ Total Assets
• Lower number is better if company has a growth strategy.
ECONOMIES OF SCALE:COSTS/ TOTAL ASSETS
Merck & Co.:
Economies of Scale:
$11,015,000/ $105,781,000 = .104
Strength Analysis: 1
Pfizer Inc. :
Economies of Scale:
$13,196,000/ $195,014,000= .068
Strength Analysis: 5
INVENTORY TURNOVER• A measure of how often the company sells and
replaces its inventory. It is the ratio of annual cost of sales to the latest inventory.
• Affects both supply chain and value chain.
• Measured by: Revenue/ average inventory
• Higher inventory turnover is better if industry has product innovation
INVENTORY TURNOVER REVENUE/ AVERAGE INVENTORY
Merck & Co.:
Inventory Turnover:
$45,987,000 / $6,961,000 = 6.6
Strength assessment: 3
Pfizer Inc.:
Inventory Turnover:
$67,809,000 / $10,404,000 = 6.5
Strength assessment: 3
OVERALL STRENGTH ASSESSMENT
KSF Merck & Co. Pfizer Inc.
Manufacturing Efficiency
3 3
Economies of Scale
1 5
Inventory Turnover
3 3
Totals: 7 11
Average: 2.33 3.66
PROTECTION FROM HIGH- POWER THREATS
Manufacturing Efficiency:
•Determines capability for production to supply the demand
•Greater efficiency, higher profits with lower COGS
• Higher top line revenue
•Better efficiency leads to a competitive advantage with the ability
to allocate funds elsewhere
PROTECTION FROM HIGH- POWER THREATS
Economies of Scale:
•Profit = [(QUANTITY x AVERAGE SALES PRICE)] – COSTS
•EOS allows reduction of internal costs without reducing quality
of product
•Cost per unit decreases as production increases
•Protection: High power rival forces drive average price down,
lower internal costs of production allow for lower prices to be
passed onto customers without reducing profits.
SOURCES:
"Merck & Co, Inc. - Company Report US." IBIS World, n.d. Web. 10 Apr. 2011. <http://www.ibisworld.com/enterprise/default.aspx?entid=1208>.
"Pfizer Inc. - Company Report US." IBIS World, n.d. Web. 10 Apr. 2011. <http://www.ibisworld.com/enterprise/financialsannual.aspx?entid=1464>.