PHARMACEUTICAL INDUSTRY Introduction

Overview of the Industry The pharmaceutical industry has en !yed "reat pr!sperity as nineteen#ninety#ei"ht mar$ed an!ther stellar year %!r the industry& Pr!%its stayed in a sharp up#trend as '( !% the )* st!c$s in the industry +eat the Standard , P!!r-s .// Inde01 2hich r!se +y '3&*4& The pharmaceutical industry includes esta+lishments primarily en"a"ed in manu%acturin"1 %a+ricatin"1 and pr!cessin" medicinal su+stances int! %inished pharmaceuticals %!r human and 5eterinary use& Ethical +rand name dru"s1 "eneric pr!ducts1 and n!nprescripti!n !r !5er#the#c!unter medicati!n c!nstitute the pharmaceutical industry su+#sect!r& Str!n" and c!nsistent "r!2th in the mid#sin"le di"its is e0pected in the "l!+al pharmaceutical mar$et !5er the ne0t . years& 6!rld2ide sales are estimated t! reach 7)). +illi!n in 89991 up %r!m 899( sales !% 7)8/ +illi!n& :ey %act!rs dri5in" this pr! ected "r!2th include l!n" li%e e0pectancies1 str!n" dem!"raphic e0pansi!n in !lder se"ments !% the p!pulati!n1 a risin" standard !% li5in" in de5el!pin" c!untries and lar"e untreated p!pulati!ns1 such as pers!ns 2ith ele5ated ch!lester!l le5els& Increases in li%e e0pectancies create m!re health pr!+lems& As the 2!rld-s p!pulati!n a"es1 the demand %!r pharmaceuticals increases& The elderly are the sin"le lar"est "r!up !% users !% prescripti!n dru"s& An!ther ma !r %act!r %uelin" the c!ntinued "r!2th !% the industry is the intr!ducti!n !% +rea$thr!u"h dru"s& The ne2 pr!ducts are especially in the areas !% heart disease1 cancer1 arthritis1 dia+etes and HI;& An!ther trend is the de5el!pment !% <uality !% li%e pr!ducts1 2hich help t! $eep pe!ple l!!$in" and %eelin" y!un"& The pharmaceutical industry has a hist!ry !% mer"ers1 ac<uisiti!ns1 and +uy!uts that are n!t limited +y nati!nal +!undaries& =!int 5entures 2ith small dru" disc!5ery c!mpanies and research instituti!ns ha5e +ec!me p!pular as a 2ay t! access ne2 techn!l!"ies& In the early 899/-s1 the mer"ers 2ere primarily dri5en +y a desire t! cut c!st& In the late 899/-s research and de5el!pment !pp!rtunities appear t! +e the dri5in" %!rce& The pharmaceutical industry is !ne !% the m!st research#!riented sect!rs in the U&S& ec!n!my& R,D !utlays in 899( are e0pected t! e<ual '/4 !% t!tal industry re5enues1 c!mpared 2ith 8.&94 in 899/ and 88&*4 in 89(/& The industry e0perienced a m!re industry#%riendly en5ir!nment in 899*1 2hich helped the "r!2th !% the mar$et& >!!d and Dru" Administrati!n appr!5al times are n!2 sh!rter than in the past years1 and the num+er !% the appr!5ed dru"s is !n the rise& A%ter se5eral years !% a relati5ely sta+le pricin" en5ir!nment1 prescripti!n dru"#ma$ers ha5e als! recently +ein" increasin" prices& Overview of Four Companies& I& II& A++!tt A++!tt La+!rat!ries principle +usiness are pharmaceuticals1 nutriti!nal1 h!spital pr!ducts1 dia"n!stics and chemical and a"ricultural pr!ducts& A++!tt ser5es cust!mers in m!re than 8)/ c!untries thr!u"h !ut the 2!rld and has a 2!r$%!rce !% m!re than .31/// empl!yees 2!rld2ide& A++!tt-s missi!n statement is ?T! impr!5e li5es +y pr!5idin" c!st#e%%ecti5e health care pr!ducts and ser5ices?@.A& Head<uartered in n!rth su+ur+an Chica"!1 A++!t disc!5ers1 de5el!ps1 manu%actures1 and mar$ets health care pr!ducts all !5er the 2!rld&

A++!tt-s CEB1 Miles D& 6hite has +een in !%%ice %!r t2! years1 and he has helped the c!mpany reach rec!rd sales in 899( !% 78'&. +illi!n1 up .4 %r!m 899*& Net earnin"s increased 88&C4 t! 7'&) +illi!n1 and earnin"s per share r!se 8'&* percent t! 78&.8& This mar$ed A++!tt-s '3th c!nsecuti5e year !% d!u+le#di"it "r!2th in earnin"s per share& In Decem+er 899(1 the +!ard als! declared the )//th c!nsecuti5e di5idend t! +e paid +y A++!tt since 89'C& A++!tt-s strate"y is t! remain c!mpetiti5e1 +y e0pandin" and c!ntinuin" t! de5el!p inn!5ati5e pr!ducts that 2ill deli5er +etter health care& They als! 2ant t! %!cus !n internally de5el!ped pr!ducts1 e0ternal c!lla+!rati!ns1 and 2ell#tar"eted ac<uisiti!ns that p!ssess similar %inancial discipline& A++!t is c!mmitted t! disc!5erin"1 de5el!pin" and mar$etin" inn!5ati5e dru"s that impr!5e human health& A++!tt als! stri5es t! increase 5alue %!r their shareh!lders1 in !rder t! $eep in5estin" hea5ily in science and techn!l!"y& III& I;& Eli Lilly Eli Lilly is a "l!+al research +ased#+ased pharmaceutical c!rp!rati!n dedicated t! create and deli5er health care s!luti!ns t! ena+le pe!ple t! li5e healthier and m!re acti5e li5es& Lilly %!cuses in !ne sin"le se"ment !% the mar$et +y pr!ducin" li%e#science pr!ducts& Lilly-s t!tal sales r!se in 899( t! 79&' +illi!n %r!m 7*&9 +illi!n in 899*1 a 83 percent increase& Net inc!me als! e0perienced a si"ni%icant increase t! 7'&8 +illi!n1 and earnin"s per share increased +y C4 t! 78&98& Lilly is +ased !ut Indianap!lis1 Indiana1 and it empl!ys '91/// pe!ple ar!und the 2!rld& Lilly-s CEB1 Sidney Taurel1 di5ides their missi!n in t! %!ur partsD ?Ensure that all internal and e0ternal sta$eh!lders ha5e the in%!rmati!n res!urces&&&1 t! supp!rt Lilly-s inn!5ati!n strate"y1 t! pr!5ide health care s!luti!ns1 and t! +uild shareh!lder 5alue?@CA& Lilly-s %i5e main pr!ducts are Eypre0a1 Pr!Fac1 E5ista1 GemFar1 and Re!Pr!H they "enerated '&C +illi!n in sales and aided t! 9)4 !% the "r!2th in the sales& Lilly has t2! main strate"ies %!r "r!2thD ?disc!5erin"1 ac<uirin"1 and de5el!pin" pr!misin" candidatesH and t! realiFe their %ull p!tential in the "l!+al mar$etplace& In 899( %!r its %irst strate"y1 Lilly increased its R,D in5estments +y '*41 t! 78&* +illi!n& >!r the sec!nd strate"y Lilly e0panded sales %!rces in $ey mar$ets and increased their direct c!nsumer ad5ertisin" in the United States& Lilly-s d!es %ace s!me challen"es !n the upc!min" years1 such as the e0pirati!ns !% their U&S& Pr!Fac patents& Bnce "eneric c!mpetiti!n %!r Pr!Fac c!mes int! the mar$et s!metime in the year '//81 Pr!Fac 2ill 5ery li$ely +e !ut !% the mar$et& Lilly must pursue the de5el!pment !% ne2 antidepressants in !rder t! stay c!mpetiti5e in this mar$et& ;& ;I& Merc$ , C! Merc$ is a "l!+al1 research dri5en pharmaceutical c!mpany that disc!5ers1 de5el!ps1 manu%actures1 and mar$ets a +r!ad ran"e !% human and animal health pr!ducts1 directly thr!u"h !int 5entures1 and pr!5ides ser5ices thr!u"h Merc$#Medc! Mana"ed Care& Merc$ is +ased in 6hiteh!use Stati!n1 N=1 and its CEB is Raym!nd ;& Gilmartin& Merc$-s missi!n is t!D ?Pr!5ide s!ciety 2ith superi!r pr!ducts and ser5ices1 inn!5ati!ns and s!luti!ns that satis%y cust!mer needs and impr!5e the <uality !% li%eH t! pr!5ide empl!yees 2ith challen"in" 2!r$ and ad5ancement !pp!rtunities1 and t! pr!5ide shareh!lders 2ith superi!r rate !% return?@)A& Merc$-s ma !r pr!ducts include ;as!tec1 Prini5il1 Me5ac!r1 Pepcid and Pril!secH these pr!ducts acc!unted %!r ''4 !% 2!rld2ide human health sales in 899(& Un%!rtunately many !% these pr!ducts 2ill "! !%% patent in the years '/// and '//81 and this 2ill seri!usly hamper Merc$-s "r!2th !5er the ne0t ) t! . years& T!tal sales %!r Merc$ in 899( 2ere 7'3&9

+illi!n1 a 8C4 increase c!mpared t! 899*1 and net inc!me increased t! 7.&' +illi!n %r!m 7C&3 +illi!n in 899*& Merc$-s strate"y %!r "r!2th is dri5en +y si0 ma !r c!mp!nentsD disc!5er imp!rtant ne2 medicines thr!u"h +rea$thr!u"h research1 dem!nstrate the 5alue !% their medicines t! patients1 and t! +e the t!p#tier c!mpany in the health care industry& The !ther three c!mp!nents are their !peratin" pri!ritiesD ma0imiFe re5enue "r!2th thr!u"h c!mmitment t! research1 t! achie5e the %ull p!tential !% mana"ed pharmaceutical care1 and t! preser5e the pr!%ita+ility !% their c!re pharmaceutical +usiness& Pfizer Inc. P%iFer Inc& is a ma !r pr!ducer !% health care1 c!nsumer and a"ricultural pr!ductsH they %!cus !n disc!5erin"1 de5el!pin"1 and +rin"in" t! mar$et inn!5ati5e medicines t! enhance the li5es !% humans and animals& P%iFer cl!sed !ut 899( !n an e0tra!rdinarily str!n" n!te& 6!rld2ide re5enues increased ')4 t! 78)&. +illi!n1 and net inc!me r!se +y '34 t! 7)&) +illi!n& >!rtune ma"aFine named P%iFer !ne !% the m!st admired c!mpanies in the 2!rld and the 2!rld-s m!st admired in the pharmaceutical industry& Als! in =anuary !% 89991 >!r+es named P%iFer ?C!mpany !% the Year?& S!me !% the c!mpany-s ma !r pr!ducts include N!r5asc1 E!l!%t1 Eithr!ma01 Lipit!r1 ;ia"ra1 Cardura and Ien#Gay& P%iFer head<uarters is l!cated in Ne2 Y!r$1 NY1 and its CEB is 6illiam C& Steere1 =r& Mr& Steere states their missi!n statement in a 5ery simply 2ay1 ?At P%iFer1 li%e is !ur li%e-s 2!r$?@'A& T! %ul%ill this missi!n P%iFer %!cuses in %!ur strate"ies1 2hich ha5e dri5en the c!mpany t! +e am!n" the +est in the 2!rld& Their strate"ies are t! deli5er shareh!lders 5alue1 in the past . years P%iFer shares ha5e "enerated a t!tal return !% m!re than 39/4& They ha5e narr!2ed their %!cus t! !nly pr!duce 2hat they d! +est1 pharmaceutical pr!ducts& They 2ant t! ena+le pe!ple t! li5e +etter li5es1 and research sh!2s that m!re than 8* milli!n pe!ple ar!und the 2!rld turn t! P%iFer e5ery day t! help them li5e healthier& An!ther strate"y is t! +uild p!2er%ul partnerships in !rder t! c!me up 2ith +rea$thr!u"h medicines& P%iFer has m!re than */ ne2 pr!duct candidates in de5el!pment1 and nearly all !% its ma !r medicines are J8 !r J' in their cate"!ries& Industry Analysis ;II& ;III& D!minant Ec!n!mic Characteristics and Trends 2ithin the industry The mar$et siFe %!r pharmaceutical pr!ducts in 899( 2as 7)8/ +illi!n and e0pected t! rise t! 7)). +illi!n in 8999& The mar$et is di5ided +et2een prescripti!n#+ased and !5er#the#c!unter medicati!ns& Appr!0imately 3/4 !% 2!rld2ide pharmaceutical sales is de5!ted t! prescripti!n medicati!ns and C/4 t! !5er#the#c!unter medicati!ns& The ma !rity !% 2!rld2ide sales is +y c!mpanies +ased in the United States& 6ith e0pected re5enues !% 78C/ +illi!n in 89991 U&S& pharmaceutical c!mpanies 2ill deri5e appr!0imately 3.4 !% their sales %r!m d!mestic !perati!ns and ).4 !% sales %r!m %!rei"n cust!mers& The "r!2th rate %!r years 899C#899( in d!mestic sales 2as 3/4 2hile sales a+r!ad increased 384& Since 89(.1 pharmaceutical spendin" in the United States as a percenta"e !% t!tal health care e0penditures has risen %r!m C&94 t! *&'4 in 899*&@3A The pharmaceutical industry ran$s as the num+er !ne industry in the 2!rld in terms !% return !n assets1 return !n re5enue and num+er three in terms !% return !n e<uity %!r year 899* am!n" >!rtune .// c!mpanies& Am!n" the 8C pharmaceutical c!mpanies in the >!rtune .//

%!r 899*1 Merc$ 2as ran$ed 8st1 P%iFer .th1 A++!t 3th1 and Eli Lilly *th in terms !% re5enues& The prescripti!n dru" industry c!nsists !% hundreds !% c!mpanies ar!und the 2!rld& Durin" 899*1 U&S& sales 2ere primarily d!minated +y 8/ lar"e c!rp!rati!ns 2hich acc!unted %!r .)4 !% d!mestic mar$et sales& Appr!0imately )34 !% research and de5el!pment is c!nducted +y U&S& pharmaceutical c!mpanies %!ll!2ed +y =apan 2ith 894 !% 2!rld2ide research& B% 8.' ne2 dru"s intr!duced int! the 2!rld mar$et +et2een 89*. and 899C1 C.4 2ere intr!duced +y American c!mpanies1 8C4 +y Iritish c!mpanies and 94 +y S2iss %irms 2ith the +alance di5ided am!n" c!rp!rati!ns ar!und the 2!rld& U&S& %irms lead in their a+ility t! patent their inn!5ati!ns1 "l!+aliFe pr!ducts1 and de5el!p ne2 pr!ducts thr!u"h +i!techn!l!"ical research& The United States acc!unts %!r C/4 !% 2!rld2ide pharmaceutical sales1 Eur!pe )'4 and =apan 'C4& Bther areas !% the 2!rld acc!unt %!r C4 !% sales and this se"ment !% the mar$et is e0pected t! rise as pharmaceutical c!mpanies e0pand their sales in de5el!pin" c!untries& @3A Alth!u"h the United States is the +i""est c!nsumer !% pharmaceutical pr!ducts1 it spends less !n pharmaceuticals as a share !% t!tal healthcare e0penditures than m!st industrialiFed nati!ns& U&S& spendin" per capita ran$s %!urth in the 2!rld +ehind =apan1 >rance and Iel"ium& >!r pharmaceutical spendin" as a percenta"e !% "r!ss d!mestic pr!duct1 >rance leads 2ith 8&*41 =apan 2ith 8&.41 and the U&S& 2ith 8&84& Daily U&S& per capita spendin" %!r pharmaceutical pr!ducts in 899* 2as 7/&3C as c!mpared 2ith daily per capita spendin" %!r alc!h!l !% 7/&981 78&/* %!r teleph!ne ser5ice1 7'&(C %!r cl!thin"1 7*&9C %!r %!!d and 7(&C. %!r h!usin"&@8)A The !5er#the#c!unter cate"!ry !% pharmaceutical sales has nearly d!u+led since 89(*& This is due t! an increasin" e%%!rt +y manu%acturers t! increase ad5ertisin" aimed at c!nsumers 2ith an emphasis !n pr!duct in%!rmati!n and sel%#medicatin" in%!rmati!n& Durin" 899*1 the !5er# the#c!unter mar$et had d!mestic sales !% 783&3 +illi!n& Ri5alry am!n" c!mpetit!rs is intense as +rand rec!"niti!n has +ec!me increasin"ly imp!rtant as an appr!ach t! capturin" mar$et share& C!mpanies are increasin" ad5ertisin" +ud"ets t! pr!m!te the therapeutic +ene%its !% their dru"s in an e%%!rt t! di%%erentiate their pr!ducts %r!m c!mpetit!rs& Many e0istin" pharmaceutical c!mp!unds are standardiFed %!rmulati!ns that 5ary little in e%%icacy am!n" manu%acturers& The search %!r a di%%erentiated pr!duct that 2ill lead t! +l!c$+uster sales is !ne reas!n R , D1 ad5ertisin" and sales %!rce +ud"ets ha5e increased in recent years& Research and de5el!pment e0penditures are currently 89&34 !% t!tal industry re5enues 5ersus C4 !% sales %!r the a5era"e U&S& manu%acturin" industry& Appr!0imately a third !% R , D e0penditures are all!cated t! pr!misin" dru" c!mp!unds in clinical human trials& Phase I1 II1 and III acc!unt %!r '34 !% R , D e0penses 2hile phase I; a%ter pr!duct intr!ducti!n trials acc!unt %!r .&(4& Pr!cess de5el!pment c!nsumes 8/4 !% research e0penses1 C84 is all!cated t! pre#clinical %uncti!ns1 88&(4 "!es t!2ards e0tracti!n !% chemical c!mp!unds %!r e5aluati!n1 and t!0ic!l!"y and sa%ety acc!unt %!r .&C4& Ne2 pr!ducts are all!cated apr!0imately (/4 !% t!tal R , D e0penditures 2ith the +alance "!in" t!2ards impr!5ement !% e0istin" pr!ducts&@8)A Ris$ is hi"h in the pharmaceutical industry as e0penditures %!r research and de5el!pment %!r each dru" typically last thr!u"h a peri!d !% 8/ t! 8. years +e%!re a c!mp!und ma$es it t! the mar$et& >DA appr!5als "enerally ta$e 83 m!nths 2hich is d!2n %r!m )' m!nths in 89(*& It

is 5ery unli$ely that a c!mp!und de5el!ped +y a pharmaceutical c!mpany 2ill e5er +e used in the retail mar$et& Bnly 8 in ./// c!mp!unds 2ill e5entually +e s!ld and less than !ne third !% all mar$eted dru"s 2ill pr!5ide a return t! rec!up R , D e0penditures& The a5era"e c!sts ass!ciated 2ith +rin"in" a dru" t! mar$et is 7.// milli!n 2hile the pr!duct li%e !% a prescripti!n dru" a5era"es 8/ years& The ma !rity !% pharmaceutical distri+uti!n is thr!u"h 2h!lesalers 2ith h!spitals1 mana"ed care !r"aniFati!ns and retail pharmacies as the +i""est cust!mers& Direct sales t! physicians1 retailers1 h!spitals and !thers acc!unts %!r appr!0imately )/4 !% distri+uti!n& Iul$ purchasin" practices ha5e "i5en lar"e +uyers c!nsidera+le +uyin" p!2er as h!spitals and mana"ed care !r"aniFati!ns c!ntinue t! see$s reducti!ns in e0penses& There are se5eral underlyin" trends in the 2!rld that are c!ntri+utin" t! the demand %!r pharmaceutical dru"s& The a"in" !% the +a+y +!!m "enerati!n and increasin" li%e e0pectancy rates are e0pected t! increase the demand %!r prescripti!n dru"s !5er the ne0t '. years& The num+er !% pe!ple +et2een C. and 3C years !ld 2ill increase C84 +y '/8.& Gi5en the rise in a"e p!pulati!n and li%e e0pectancy rates ar!und the 2!rld and the le5el !% pharmaceutical use +y a"in" indi5iduals1 "r!2th in the industry sh!uld remain in an up2ard trend& Increases in ad5ertisin" +ud"ets ha5e increased !5erall demand %!r pharmaceutical pr!ducts& T!tal direct#t!#the#c!nsumer @DTCA ad5ertisin" in 899( 2as 78&) +illi!n1 up %r!m 783) milli!n in 899)& T!tal ad5ertisin" e0penditures durin" the %irst hal% !% 899( 2as 7)&8 +illi!n 2ith (/4 tar"eted t!2ards physicians and '/4 t!2ards DTC in the %!rm print media and tele5isi!n ad5ertisements& The increase in ad5ertisments is a resp!nse +y the industry t! the "reater de"ree !% in%luence c!nsumers ha5e in the ch!ice !% their pharmaceutical treatments& @3A General Economic Conditions Affecting the Industry The pharmaceutical industry is relati5ely immune %r!m the e%%ects !% ec!n!mic cycles& Demand %!r the industry-s pr!duct remains c!nstant in up and d!2n ec!n!mic cycles as mar$et demand is a %uncti!n !% the !5erall health !% the p!pulati!n& H!2e5er the "l!+aliFati!n !% the pharmaceutical industry increases the ris$ ass!ciated 2ith %!rei"n in5estments and e0chan"e rates& The %irms in this industry see$ t! minimiFe ris$s +y usin" hed"in" practices such as %!rei"n currency %!r2ard#e0chan"e c!ntracts1 +!rr!2in" in %!rei"n mar$ets1 and usin" currency s2aps& P!rter M!del Ri5alry am!n" c!mpetiti5e sellers# This is a str!n" %!rce as c!mpetiti!n has increased am!n" the ma !r players in this industry& StandardiFed %!rmulati!ns !% dru" c!mp!unds ha5e increased price c!mpetiti!n in cate"!ries such as the hypertensi5e and c!r!nary care mar$et& Di%%erentiati!n strate"ies ha5e +een %!cused !n alternati5e use research %!r dru" %!rmulati!ns in an e%%!rt t! increase the pr!duct li%e !% indi5idual pharmaceutical pr!ducts and e0tend their use t! treatment !% !ther diseases& Niche mar$et c!ncentrati!ns ha5e +een used t! pr!5ide hi"her returns +y s!me c!mpetit!rs +ut the ma !rity !% manu%acturers ha5e an e0tensi5e ass!rtment !% pr!ducts t! !%%er users& Recent price increases acr!ss the +!ard %!r all manu%acturers ha5e put pressures !n c!mpanies t! deri5e "reater pr!%its thr!u"h the implementati!n !% !peratin" e%%iciencies in an e%%!rt t! increase pr!%it mar"ins&

>irms in !ther industries !%%erin" su+stitute pr!ducts# A str!n" %!rce a%%ectin" +randed pharmaceutical pr!ducts is the increasin" demand %!r "eneric pharmaceuticals as a 2ay t! c!ntain c!st& In 899*1 CC4 !% all prescripti!ns 2ritten 2ere %!r prescripti!n dru"s 2ith that %i"ure e0pected t! increase t! 334 +y '//)& Generic dru" c!mpanies d! n!t ha5e the c!sts ass!ciated 2ith research and de5el!pment& As a result1 "eneric dru"s typically sell %!r retail prices 3/#9/4 +el!2 +randed prices& Porter !Forces "odel P!tential Ne2 Entrants# This is a 2ea$ c!mpetiti5e %!rce& The pharmaceutical mar$et in the United States is am!n" the hi"hest ran$in" in terms !% +arriers t! entry& The c!st ass!ciated 2ith years !% research and de5el!pment1 "!5ernment re"ulat!ry c!mpliance and ris$ ass!ciated 2ith the industry disc!ura"es ne2 entrants %r!m enterin" the mar$et& Iuyers# This is a m!derate c!mpetiti5e %!rce& Recent pressure has +een put !n pharmaceutical manu%acturers t! c!ntain price increase& The p!2er !% lar"e +ul$ +uyers such as mana"ed care !r"aniFati!ns and h!spitals has had s!me pressure !n manu%actures t! c!ntain c!sts& H!2e5er1 recent price increases in alternati5es such as "eneric dru"s ha5e reduced +uyer-s +ar"ainin" le5era"e&Iranded pharmaceuticals c!ntinue t! +e a c!st#e%%ecti5e treatment& Suppliers# The c!ncentrati!n !% the ma !rity !% industry sales am!n" 8/ lar"e pharmaceutical c!mpanies has decreased the +ar"ainin" p!2er !% suppliers& The pharmaceutical industry is a ma !r cust!mer !% the chemical industry& The chemical industry has an incenti5e t! maintain c!mpetiti5e pricin" practices 2hich enhance the c!mpetiti5eness !% the ma !r player-s pr!ducts in the pharmaceutical industry& IK& Industry Prospects and Overall Attractiveness

The industry 2ill +ene%it %r!m the a"in" p!pulati!n and increasin" li%e e0pectancy rates thr!u"h!ut the 2!rld 1 and an increase in the p!tential num+er !% candidates %!r pharmaceutical use& Increasin" emphasis !n health standards ar!und the 2!rld and !n the c!st#+ene%it relati!nship !% pharmaceutical use 2ill %urther increase the demand %!r the industry& The industry is attracti5e 2ith !peratin" pr!%it mar"ins e0ceedin" )/4 2hich is appr!0imately t2ice the S , P Industrial Inde01 and net earnin"s as a percenta"e !% sales a5era"in" 8*&94 5ersus .&C4 %!r "eneral industry !5er the last . years& Pharmaceutical c!rp!rati!ns ha5e l!2er interest e0penses1 ra2 materials c!sts1 ta0 rates and "eneral and administrati5e c!st as a percenta"e !% sales 2hen c!mpared 2ith m!st industries& B5erall the pharmaceutical industry is 5ery attracti5e 2ith a+!5e#a5era"e pr!%ita+ility&@3A Performance Analysis T!tal industry sales ha5e +een increasin" steadily %!r the last . years& In 899(1 the pharmaceutical industry had sales !% 78'C13/9&C milli!n in the US& >r!m 899C thr!u"h 899* sales 2ere 7**1388&8 milli!n1 7981/)9&/1 78/81.(/1 and 788/1(C(&8 milli!n1 respecti5ely&@8)A Industry sales "r!2th ha5e "r!2n +y 3/4 !5er the last %i5e years and the trend is e0pected t! c!ntinue in 8999& Industry sales "r!2th %!r each year has als! increased %!r the last %i5e years& The "reatest sales "r!2th realiFed 2as 899. 2ith 8*&)4 "r!2th %r!m the pre5i!us year& The sec!nd "reatest "r!2th 2as in 899(1 2ith sales "r!2th !% 8'&C841 8993 had a sales "r!2th !% 88&.*4 and 899* 2ith 9&8'4& The least "r!2th realiFed 2as in 899C1 2ith !nly a )&C4 "r!2th %r!m the pre5i!us year& Industry net pr!%its ha5e als! +een steadily risin" al!n" 2ith sales& In 899*1 the industry had net

pr!%its !% 7'819(. milli!n1 up 7'1(99 milli!n %r!m 8993& B5erall the pharmaceutical industry sales "r!2th is str!n" and is li$ely t! c!ntinue1 especially 2ith the inn!5ati!n !% ne2 dru"s in the %uture& The pr!%ita+ility rati! %!r the pharmaceutical c!mpanies l!!$s "!!d c!mpared t! the industry a5era"e& The a5era"e "r!ss mar"in %!r the %!ur c!mpanies 2asD P%iFer 2ith (8&((41 A++!tt 2ith 3'&3.41 Lilly 2ith *(&8'4 and Merc$ 2ith 38&(C4& The "r!ss mar"in %!r the c!mpanies 2ere <uite sta+le and there 2ere n! dramatic chan"es in the "r!ss mar"in durin" the past %i5e years& The industry had an a5era"e return !n asset @RBAA !% 8/&934 %!r years 899) thr!u"h 899*& A++!tt1 Merc$1 and P%iFer 2ere a+!5e the industry a5era"e 2ith 8*&3C41 8C&C41 and 88&341 respecti5ely& Lilly had the l!2est percenta"e c!mpared t! the !ther c!mpanies and the industry1 its a5era"e RBA 2as !nly C&C4& The a5era"e return !n e<uity @RBEA %!r the industry 2as 'C&C4& A++!tt1 Merc$1 and P%iFer 2ere a+!5e the industry a5era"e 2ith a5era"es !% 'C&C41 )(&941 and '9&84 respecti5ely& LillyLs RBE 2as +el!2 the industry 2ith 8/&*4& @8/A C!mparin" the li<uidity rati!s 2ith the c!mpanies and the industry1 2e see that all %!ur c!mpanies 2ere +el!2 the industry a5era"e !% 8&3) %!r current rati! and 8&88 %!r <uic$ rati!& The current rati!s %!r A++!tt1 Lilly1 Merc$ and P%iFer 2ere 8&//81 8&'*1 8&C(1 and 8&'91 respecti5ely& The industry had an a5era"e de+t t! asset rati! !% ..&8 and de+t t! e<uity rati! !% 8')&8(.& All %!ur c!mpanies 2ere cl!se t! the industry a5era"e h!2e5er1 Lilly and P%iFer 2ere sli"htly a+!5e& Bne reas!n 2as in 899C +!th c!mpanies carried s!me de+t and had tr!u+le li<uidatin" their assets& They had an a5era"e %i0ed asset turn!5er !% 8&C* and t!tal asset turn!5er !% &**& A++!tt and P%iFer 2as m!re e%%icient in utiliFin" its plant and e<uipment c!mpared t! the !ther c!mpanies& Bn the !ther hand1 Merc$ and Lilly 2ere n!t& They 2ere +el!2 the industry a5era"es& Merc$ had the hi"hest earnin"s per share "i5en t! their shareh!lders c!mpared t! the !ther c!mpanies& In 899*1 Merc$ had earnin"s !% 7)&() 2hile A++!tt had 78&/(1 and P%iFer 2ith 78&'8& All %!ur c!mpanies had steady increases in earnin"s e0cept %!r Lilly1 their earnin"s %ell t! a M7)&./& There 2ere many %act!rs that c!ntri+uted t! LillyLs l!2 earnin"s +ut the main %act!r 2as their 2rite d!2n !% their PCS su+sidiary& #ecommendations 8&C!ntinue t! see$ intellectual pr!perty ri"hts pr!tecti!n in de5el!pin" nati!ns& Pr!tectin" the pharmaceutical pr!perty ri"hts 2ill eliminate c!py#cat dru"s and l!st pr!%its in th!se c!untries& '&Gi5en the increase in li%e e0pectancy1 c!ntinue t! pursue research in pharmaceutical pr!ducts1 2hich enhance the <uality !% li%e %!r the a"in" p!pulati!n& These pr!ducts such as 2rin$le creams1 hair l!ss pre5enti!n pr!ducts1 and early pre5enti!n pills %!r AlFheimer disease 2ill +e in hi"h demand& )&E0pand a2areness !% pharmaceutical +ene%its in less de5el!ped re"i!ns1 such as S!uth America1 China and India& As !% 899(1 934 !% pharmaceutical "l!+al sales are c!ncentrated in three main re"i!ns U&S&1 Eur!pe and =apan& Gl!+al a2areness !% pharmaceutical +ene%its 2ill pr!duce !pp!rtunities %!r the pharmaceutical industry t! e0pand& Investment Evaluation The pharmaceutical industry has a +el!2#a5era"e sensiti5ity t! the state !% the ec!n!my& This industry 2ill tend t! !utper%!rm !thers 2hen the ec!n!my e5entually enters a recessi!n& St!c$s !%

ma !r pharmaceutical c!mpanies tend t! ha5e +etas l!2er than the mar$et p!rt%!li! due t! l!2er a5era"e mar$et ris$s& The st!c$s !% A++!tt1 P%iFer1 Lilly1 and Merc$ all ha5e +etas !% less than !ne& Merc$ has se5eral patents e0pirin" in the near %uture1 2hich c!uld si"ni%icantly a%%ect %uture earnin"s& Alth!u"h Merc$ has a c!nsistent up2ard trend in earnin"s and di5idend payments1 the lac$ !% patent pr!tecti!n %!r s!me !% its ma !r pr!ducts may lea5e the c!mpany in a p!siti!n una+le t! c!ntinue mar$et d!minance& 6ith an !utstandin" pr!duct line and patent pr!tecti!n1 2e ha5e ch!sen P%iFer as the +est in5estment am!n" !ur %!ur c!mpanies& P%iFer has a PNE !% C) times earnin"s 5ersus an industry a5era"e !% )/ re%lectin" in5est!r-s 2illin"ness t! pay a premium %!r P%iFer-s earnin"s& P%iFer has the lar"est sales %!rce in the industry c!nsistin" !% 8C1.// sales representati5es 2!rld2ide e0ceedin" industry leader Merc$-s 8'13//& 6ith dru"s such as ;ia"ra and Lipit!r1 P%iFer is "ainin" !n the mar$et share currently held +y Merc$& Durin" 899(1 P%iFer-s mar$et capitaliFati!n r!se */4 placin" P%iFer am!n" the 2!rld-s 8/ m!st 5alua+le c!mpanies& P%iFer has c!nsistently raised di5idends %!r )' c!nsecuti5e years& Durin" the last %i5e years P%iFer has re2arded its shareh!lders 2ith a t!tal return !% 39/4 re%lectin" rein5ested di5idends and capital "ains& An in5estment !% 78/1/// in 899) 2!uld +e 2!rth 7*918C/ as !% Decem+er )81 899(1 assumin" di5idend rein5estment&@*A

$i%liography
8& httpDNN222&st!c$master&c!m '& P%iFer 899( Annual Rep!rt1 httpDNN222&p%iFer&c!m )& Merc$ 899( Annual Rep!rt1 httpDNN222&merc$&c!m C& Lilly 899( Annual Rep!rt1 httpDNN222&lilly&c!m .& A++!tt 899( Annual Rep!rt1 httpDNN222&a++!tt&c!m 3& Standard , P!!r Industry Sur5eys1 HealthcareD Pharmaceuticals1 Decem+er 8*1 899(& *& 6hy P%iFer is S! H!t1 Da5id Stipp1 >BRTUNE Ma"aFine1 May 881 899(& (& Inside the >!rtune .//1 >BRTUNE Ma"aFine1 April '*1 899(& 9& ;alueline 8/& C!mpustat 88& httpDNNyah!!&c!m 8'& 6all Street =!urnal 8)& Pharmaceutical Research Manu%acturin" Ass!ciati!n1 httpDNN222&phrma&!r"
Barriers to Entry in the Global Industry

Like many industries, any new entrant into the pharmaceutical sector will be faced with various "hurdles" that have been previously erected by already established businesses and by national and international standards and regulations. These include, but are not limited to: :: :: :: :: :: economies distribution capital access regulatory to of product scale differentiation re"uirements distribution policy: manufacturing, established and channels: patents, R !, brands financial preferred regulatory marketing, and resources arrangements standards sales

products,

relationships

:: switching costs - employee retraining, new e"uipment, technical assistance The barriers to entry are e#tremely high in the pharmaceutical industry. $any of the top firms have "significant manufacturing capabilities that are hard to replicate". %lso, they have e#tensive patents that guarantee the

protection of their products while they defend their brands with large marketing budgets. &ince any emerging pharmaceutical company can e#pect a sharp retaliation from the established competitors in the pharmaceutical industry, the overall threat of entry into the global marketplace is relatively low in comparison to other international industries. The largest factors that influence the success of many pharmaceutical companies are capital re"uirements and financial resources, regulatory policies, and research and development. %ll three of these factors can influence one another and a lapse in one area can be disastrous for the future of the company.

Introduction Abbott Laboratories Ltd. Are has the market value of being among the 50 companies in the United States and has been recognized around the world with e pansions covering almost the ! continents and distributes to "#0 countries worldwide. In retrospection$ Abbott was founded b% &r. $ considered one of the founders of modern pharmac%$ because of his invention of the dosimetric granules through the use of an alkaloid. 'ollowing the first few %ears of success in the business$ &r. shifted and e tends his research focus to s%nthetic medicines courtes% of &r. as the one who gets to convince &r. to venture into the promising new field of growth. In "("5$ from )ompan% the emergence of what is now known as the Abbott Laboratories. *ith the reach heritage being in the business for more than a centur%$ the men and women behind Abbott have been constantl% driven to a common goal$ the advancement of medical science to be able to help people in enriching healthier lives. Abbott Laboratories Ltd. is a health care compan% with bases across the globe which aims to discover new medicines$ develop new technologies and alternatives to managed health. Abbott products e tend from being that of care to nutritional products and innovative laborator% diagnostics. 'urther$ Abbott+s sweeping products goes from catering health needs of infants up until to the golden %ears. Indeed$ the products of Abbott foster holistic approach towards giving people a health% living. 'or the fiscal %ear ,005$ Abbott+s sales amounted to -,,.# billion

in which -".. billion has been allocated to the research and development which pla%s a pivotal role in the continuing success of Abbott.

/ain 0art

Overview of Theories

1 )ore )ompetence2 3"((04 5he 6ournal of 3"((04 is descriptive of the development and maintaining core competence in a compan%. It e plores the different leading companies core competences and describes how these big time companies gets to engulf core competence in the business world. It is said that in the short1run$ the competitiveness of a compan% stems from the attributes on price7performance of current products while in the long1run$ the core competence is spawned from coming up with innovative unlikel% products stemming from the building abilit% power at lower costs that is more hasten than that of the competitors. 5here are four var%ing definition of core competence. 'irst$ denotes to the collective learning in the organization. Second$ competence spells involvement and deep

communication to working across the borders of the organization. 5hird$ competence is not diminishing in use wherein it is sort of like glue that binds the e isting businesses. 'inall%$ there are three named test to gauge core competence in a compan%. 5he% are the provision of potential accessibilit% to a wide arra% of markets$ the impeccable contribution

to the perceived customers+ benefits of end products and the distinction which is barel% susceptible to imitation.

1 8esourced1based 9iew2 3"((.4 5wo themes about marketing strateg% in the "((0+s dominates$ among the two is the resource1based view 38:94 of the firm. 5he 8:9 seeks to e pound on the firms sustainabilit% of competitive advantage which are drawn from 8:9+s two main approaches. 'irst$ is the resource1based approach that emphasized on the rent earning capabilit% of internal scarce resources 3 "((#4. Second$ is the d%namic capabilities approach that looks into how resources and capabilities are being developed in the conte t of the firm which in turn$ stresses the need for e ternal market orientation to achieve competitive success. 5he contention of resource1based theorists suggests that for strateg% to be sustainable it has the apparent need to be etched in the resources and capabilities of the firm. In this 6ournal$ it discusses two fundamental approaches in the creation of advantage over competitor 3 "(.0$ "(.54 through cost leadership and differentiation. )ost leadership evokes firms to seek similar attractive offerings to the market without necessaril% lowering internal cost while in differentiation$ it tries to make the offerings distinctive and diverse in the market1place such that the distinctiveness would provide add1 on value to customers and 3 "((#4 persuades customers to bu% brought about b% the modifications in the offering. In lieu to the ;uest in gaining competitive advantage$ the positioning of the firm in the marketplace is vital. 5here are seven named positioning in which firms must consider and constantl% work on to find themselves having the best positioning as possible. 'irst$

the competitive positioning pertains to the firms+ choice of occupanc% that in line with the combination of a chosen target and the differential advantage it seeks to create. Additionall%$ 3"((<4 suggested three main wa%s in competitive positioning$ variet% positioning$ needs1based positioning and the access1based. Second$ the price positioning$ particularl% the offering of low1price positioning wherein$ it re;uires keeping close e%es to the incurring of costs. 5hird is the ;ualit% positioning and has been followed b% innovation positioning$ service positioning$ benefit positioning and the tailored positioning accordingl%.

1 /arket1focused 8esources$ )ompetitive 0ositioning and 'irm 0erformance2 . 3,00"4 5his 6ournal produces a theoretical model that incorporates the relationship between three variables namel%$ market1focused resources$ competitive positioning and firm performance. 'urther$ it e plores two central issues for marketing strateg%$ the establishment of competitive positioning$ in which a firm chooses to position itself or its products as central to the creation of marketing strateg% and how can these position be defended against possible imitation from the competitors. An in1depth anal%sis as to how positions are created can be found in the strategic management literatures. *ith the aim to have that competitive edge$ several topologies of resources has been proposed$ stressing that intangibles 3 "((#= . "((,4 are most likel% to meet the conditions necessar% to generate advantage. Additionall%$ there appears to be an emerging consensus that a resource1advantage theor% of competition is effective in e plaining firm diversit% and performance heterogeneit% 3 "((<4. *hereas$ the sustainabilit% or defense of that advantage is perceived to be achievable through deplo%ment of protective mechanisms aims to preserve and protect that advantage. Several t%pical isolating mechanisms are causal ambiguit%$ path dependenc%$ economics and legal barriers. 5he proposed model

has two starting points= one is the formulation of marketing strategies wherein it advocates an e ternal orientation to the development of strateg% b% providing emphasis on the market environment and second$ is the firm and organizational resources.

1 )apabilities Approach to /arket1driven >rganizations2 3"((?4

5he 6ournal of

3"((?4 tackles the capabilities approach to strateg% that

characterizes market driven organizations. As defined b% 3"((?4$ capabilities are comple bundles of skills and collective learning$ e ercised through organizational processes that ensure superior coordination of functional activities. It is noted that companies that are better e;uipped to initiate responsiveness to pertinent market re;uirements and sense of anticipating abilit% to the altering conditions are likel% to indulge long1run competitive advantage and superior profitabilit%. /arket orientation represents superior skills in understanding and satisf%ing customers 3"((04. 5he principal features are a set of beliefs that puts the customer+s interest first 3. "((#4$ the abilit% of the organization to generate$ disseminate$ and use superior information about customers and competitors 3 "((,4 and the coordinated applications of inter1functional resources to the creations of superior customer value 3 "((0= "(..b4. /oreover$ the supporting propositions that a market orientations is positivel% associated with superior performance 33. "((#= "((,= "((0= "((,4 5he emerging capabilities approach otherwise called as the resourced1based theories$ in terms of strateg%$ offers a new perspective in market orientation where in seeks to identif% the sources of defensible competitive positions distinctivel% such that it would be

resistant to imitation. 'urther$ the approach cites two related advantages2 assets and the capabilities. 5o contrast both advantages$ according to 3"(.(4$ capabilities differ from assets such that it cannot be ;uantif% b% monetar% value and are so deepl% embedded in the organization routines and practices that is not susceptible to imitation or interchangeable. 5he competitive forces approach 3"(.04 and the related entr% deterrence approach 3"((04$ which have been the dominant paradigms in the strateg% field 3 3"(("4$ have a different answer as to how superior performance can be achieved. 5hese approaches put the emphasis on the intensit% of competition in the industr% and market segment that determines the profit potential. 5he firm seeks a position in an attractive market that it can defend against competitors. In contrast$ the capabilities approach serves as a locator of the sources of defensible competitive position in the distinctive$ hard1to1duplicate resources that encompasses the integrations of assets and capabilities the firm has graduall% developed 3 "(.!= . "(("4. 5hus$ management+s task is to determine how best to improve and e ploit these firm1specific resources 3"((,4$ although in times of turbulence the challenge of developing new capabilities comes to the fore 3 "(("= "(.?4 An emphasis on building distinctive capabilities or competencies can be found in 3"(5!4 and 3"(5(4 and is featured in the strengths and weaknesses component of the earl% business polic% frameworks 3 "(<(4. &istinctive capabilities refer to the upholding of market position that is invaluable and unmatchable and in which consistentl% sets a superior performance. /oreover$ distinctive capabilities are robust and can be used in different wa%s to speed the firm+s adoption to environmental change 3 "(("= "((04. 'urther$ there are two subparts of distinctive ;ualities that are e;uivalentl% important in

bringing in e ternal realities to the attention of an organization. 5he market sensing capabilit% evaluates the capabilit% of organization in determining continuousl% sense changes in the marketplace and the pre1emptive anticipation of appropriate responses to marketing actions wherein the process of market sensing follows the usual se;uence of information processing activities that organizations use to learn 3"((?= "(.5= "(("= "(..= "((?4. )ustomer1liking capabilit%$ on the other hand$ comprises the skills$ abilities and processes evident in the achievement of collaborative customer relationship wherein$ for successful collaboration to occur it necessitates a high level of purposeful cooperation aimed at maintaining a trading relationship over time 3 "(..= "(..4.

1 8esource Advantage 5heor%2 3"((<4

81A theor% proposes that firms+ ;uest for superiorit% in the financial performance in spite of the fact that all firms cannot be superior simultaneousl%$ thus$ in 81A competition it necessitates d%namism. 5here are five assumptions in 81A theor% namel%2 3"4

superior7inferior performance results from occup%ing marketplace positions of competitive advantage7disadvantage which results from comparative advantage7disadvantage in the resources. :% resources$ it refers to the tangible and intangible entities that are available to firms that permit firms to efficientl% or effectivel% produce market offerings that have a value for market segments$ 3,4 innovation pla%s a ke% role in 81A theor%$ whether proactive or reactive innovation$ such that it have recognition on the entrepreneurial skills of the people and entrepreneurial capabilities of firms wherein it e presses clearl% the competitive

processes which ma% in turn led to economic change$ 3#4 81A theor% reveals that despite of the absence of entrepreneurial firms that engages in proactive innovation$ competition d%namism would still ensure the market1based economic s%stems$ 3?4 81A theor% not onl% incorporates the higher1order learning 3 "((<4$ it e plicitl% shows the competition processes motivates both the proactive and reactive innovation and as to how the firms learn from the competition process itself and 354 the theor% highlighted managerial implications and so as the important public polic% issues relative to market1based economies. >verall$ 81A is perceived to five views$ competition as an evolutionar% process$ the technolog% as a non1 rival and in part an e clusive resource in the process of production$ innovation as an outcome of competition processes$ firms engulfing a rational e pectation that superiorit% in financial performance is due to innovations and that societal institutions either facilitates or inhibits induced competition growth.

The Abbott Laboratories Ltd.

As Abbott Laboratories emerges$ it had entered the period of growth that is characterized b% war 3the *orld *ar II4$ strategic ac;uisitions and the ;uest for scientific pursuits since companies at that time was also establishing themselves in the business 6ust like Abbott. 'rom the 3"((04 identification of core competence$ Abbott Laboratories is indicative of the three measures that falls into the conte t of core competence. 'irst is the offering of wide arra% of markets. In Abbott$ the% e tremel% have the competence in pharmaceuticals and the advancement of medical science as having have had e tended their products from

the continuum of care being that of medicines$ from producing nutritional products$ like @nsure$ and technolog% driven laborator% diagnostics that offers state1of1the1art medical devices and pharmaceutical therapies. /oreover$ Abbott is considered to be the global leader in vitro diagnostics from which it evolved from immunodiagnostics as their cornerstone. Second$ the contribution to the perceived customer benefits of the end products that is reflective of Abbott strong commitment to the advancement of science that focuses in the areas of unmet medical needs such as the fields of laborator% and molecular diagnostics that seeks for earl% detection for related medical conditions so that cure can be given and prevention can incur. And lastl%$ it is the competence of Abbot+s 8A& organization that is works collaborativel% together at high efficienc% that is difficult to imitate. Buided b% the Abbott+s mission$ the Blobal 0harmaceutical 8esearch and &evelopment 3B08&4 organization$ works together collaborativel% in constantl%

discovering$ developing innovative medicines to be marketed and aimed to improve the unmet scientific needs and cure the ill1health of patients$ as Abbott centers caring as the foci of their work. Abbott Laboratories would not be competitive if it has not placed itself in the right position in the market. 5he competitive positioning$ including the variet%$ needs1based positioning and access1based positioning$ all together greatl% fits in to the diverse characteristics of the people with different medical needs such that these people would be inclined to spend mone% for the promotion of good health and the urge of sta%ing health% as much as possible. 5he market of Abbott is e tremel% ver% rich since it is essentiall% all the people from ever% walks of life and from all borders across the globe needs to have a dose of pharmaceutical products to combat illnesses$ diseases$ or 6ust plainl% foster good health% living. 'urther$ the innovative positioning of Abbott is where the% sta% almost unbeatable. Across time$ the% have been the leaders in pharmaceutical business and

Abbott continuall% e cels in coming up with innovative inventions. Abbott+s innovations in medical products are seen from the diversified products$ businesses and therapeutic areas the% have been offering such that respected Abbott scientists shares Abbott+s dedication towards the common goal of the advancement of science to be able to provide healthier lives to the people. @ver% Abbott scientist un;uestionabl% and ferventl% seeks out new innovative wa%s to come up with clinical solutions to come to terms with patients need. 'or e ample$ in the case of finding the cure for the CI9$ Abbott ma% have not come up %et with the proven cure for CI9 but Abbott+s focus to this area is constantl% graduall% improving as currentl% the% are able to produce new and improved CI9 medicines that minimize the tendenc% for the immune s%stem to be severe. Dot onl% the% are able to produce it$ the product availabilit% of the CI9 medicines are being distributed to government$ health care institutions and organizations worldwide via Abbott Access program$ especiall% to the developing countries that are less able to afford these medicines. Caving have had established that competitive edge for decades$ it is assumed that Abbott Laboratories is able to protect its advantage. >f the man% protecting mechanisms emplo%ed b% Abbott to secure its competitive positioning$ path dependenc%$ where process would pass through critical time dependent stages$ is salient in the firm. 'or instance$ in Abbott+s

pharmaceutical drug development group$ their work is subdivided into four dependent phases to ensure that the product is monitored. In phase " E #$ the group conducts clinical research to the drug candidates to be able to assess their ;ualifications and act on the plausible confounding variables$ if an%$ thus$ avoiding them. 5he last phase$ after have had go through to the drug candidates$ to closel% look on their safet% and gather possible valuable data if there coe ists additional therapeutic indications. 5he interesting challenging feature of capabilities approach b% 3"((?4 is the building of distinctive capabilities of the firm. /arriot for instance$ for man% %ears now the% have

been constantl% chosen and preferred b% customers as being the number one hotel in the world in giving customer satisfaction. *hat accounts for /arriot+s reputation is that the% constantl% seek to satisf% their costumers with the superb services and other intangibles the% incorporate to their service offerings. Abbott did 6ust that$ like that of a /arriott$ but of course$ certainl% in a different wa%. In this instance$ we would illustrate the workforce e cellence of Abbott that is presumabl% to be one of intangible asset Abbott has. *ith about <5$000 people emplo%ed$ Abbott has earned the recognition as an emplo%er of choice from local$ national and international level as the% provide emplo%ees with a workable environment to help Abbott people succeed with their endeavors with the inclusion of programs for the emplo%ees that ranges from health care benefits$ convenience and wellness services and long1term retirement package. 5he passion for turning science into caring proves to be an endearing commitment that place emphasis on the value for life. Abbott+s F0romise for LifeG statement signifies what Abbott in general believes in$ the value that the% hold and thrive to deliver ;ualit% work outputs ever%da% for Abbott+s stakeholders. 5hus$ is in itself is indeed distinctive of Abbott$ a promise that goes be%ond mere accumulation of profit$ but that is of putting importance to save and improve lives for ever%bod%. Devertheless$ Abbott falls into the conte t being that of a market1 driven firm because of Abbott+s abilit% to have the market sense capabilities a step ahead from their competitors and have the anticipating abilit% to be responsive in the attraction and retaining customers. 'rom the 81A theor% perspective$ Abbott sta%s to be in a competitive form as it seeks to be superior in the financial performance through their inventions of innovative products and sees the evolutionar% process of competition as alwa%s competitive such that the% continuall% seek for the advancement of science in their own wa% to come to terms with it. In "(.0+s marks the e pansion of specialization and e pertise for Abbott in which

the% divested other products to be able to concentrate on their strong point of e celling in the ;ualit% of health care products in ever% stages of life. 5o name several Abbott+s areas of e pertise the% are in anesthesia$ animal health$ anti1infectives$ cardiovascular$ diabetes care$ hematolog%$ clinical chemistr%$ immunolog%$ metabolics$ neuroscience$ molecular$ nutrition$ oncolog%$ pain care$ renal care$ spine and virolog%. >verall$ the% contribute to the financial superiorit% of Abbott because the areas of e pertise covers a wide1ranging capabilities$ from top to bottom of the human anatom% and the identification of the valuable areas that needs medical attention. Abbott is able to utilize and e plored$ especiall% the unmet medical areas which cues Abbott to produce products innovativel% to the market according to these needs. Donetheless$ aside from the established strategic positioning of Abbott in the marketplace$ it is from these unmet areas Abbott can gain an advantage and such that the% can generate financial assets in pursuance of being superior in the financial performance.

)onclusion and Improvement 8ecommendation 5his essa% had e plored on the four different views of how to be able to gain and benefit from the ac;uisition of competitive advantage. 'rom the different views of the authors namel%$ 3"((04$ 3"((.4$ 3"((?4 and 3"((<4$ it has been seen that the Abbott Laboratories Ltd. has incorporated the different means to have that competitive advantage$ which in turn$ benefited the Abbott of sta%ing top in the pharmaceutical business for man% %ears and in the future. /oreover$ Abbott deepl% understands the nature as to how d%namic competition can be and the market world in general. A pioneer and master in innovation b% being a proactive innovator rather than a reactive innovator.

It is seemingl% hard to recommend improvements for Abbott as it has proven itself to the world. As far as competitiveness is concerned$ undoubtedl% Abbott is able to come to terms with that and possess promising capabilities for the sustenance and maintenance in the future. 0erhaps if re;uired to give recommendation$ it would be to a bit minimize in the e penditure for the 8A& organization even though it is understandable that the Abbott relied on efficienc% and effectiveness of Abbott+s 8A& so that the% would be able to invest some of the mone% to some organizations in Abbott that needs improvement or support$ which in turn$ the% can benefit from$ provided that it leads to the ma imization of the other resources. 5he overl% focus on one aspect ma% limit the effective functioning of the other aspect and brings in to the imbalance of the e;uilibrium of the firm or corporation.

Company Perspectives&
A++!tt-s 5isi!n is t! +e the 2!rld-s premier health care c!mpany& Simply put1 2e 2ant t! +e the +est##the +est empl!yer1 the +est health care supplier1 the +est +usiness partner1 the +est in5estment and the +est nei"h+!r& 6hile A++!tt is +r!adly di5ersi%ied1 all !% its th!usands !% pr!ducts and pe!ple are dedicated t! a c!mm!n missi!nD t! impr!5e li5es +y pr!5idin" c!st#e%%ecti5e health care pr!ducts and ser5ices&