External Factor Evaluation (EFE) Matrix
An External Factor Evaluation is a method that used to review and evaluate the company's external factors such as economic, social, cultural, demographic, political, environmental, legal, technological, and competitive information. These factor evaluations prepared through the opportunities and the threats that are affecting the business. Since Eli Lilly & Company has opportunities in the external factors and has threats that could influence the company, the firm needs to recognize each of them and have an active method to handle those factors. However, the table below is the (EFE) matrix for Eli Lilly & Company.
Based on the results of the EFE Matrix of Eli Lilly & company evaluation as specified in the report above. It earned a weighted score of 2.93. However, based on the analysis of the information that the external factors could impact the business; therefore, the company has to recognize the opportunities and threats to avoid any problems in the future. Also, the weighted score explains that the firm had a significant influence on its possibilities and threats in producing new drugs more quickly.
As mentioned in the table, it shows that the substantial factor is the technology improvement that enables the company to create and produce new drugs faster and it also allows the business to be connected with its consumers, suppliers, and the global companies easily.According to Lilly, “The Lilly Cambridge Innovation Center will allow leading life science experts and organizations to explore how emerging technologies and connectivity can advance drug delivery and device innovation to improve patient health”. Therefore, we can understand that technology advancement is an essential factor for the business to improve patient health.
Also, as mentioned in number two in the table above that people nowadays want to live longer and try a new medication to accomplish that. Many people are getting diseases that need to be diagnosed and treated at a younger age, so they can prevent any risk to their health in the future. According to NASCAR, “The goal of Lilly Diabetes - driving awareness and education.” Therefore, Eli Lilly and company, must aware everyone about any diseases side effect and that they can provide the best medications to treat it. This gives the opportunity to the business to gain the customers trust, and people will understand that our company and services are made to help them.
As mentioned in the table, it shows that the substantial factor is the technology improvement that enables the company to create and produce new drugs faster and it also allows the business to be connected with its consumers, suppliers, and the global companies easily.According to Lilly, “The Lilly Cambridge Innovation Center will allow leading life science experts and organizations to explore how emerging technologies and connectivity can advance drug delivery and device innovation to improve patient health”. Therefore, we can understand that technology advancement is an essential factor for the business to improve patient health.
Also, as mentioned in number two in the table above that people nowadays want to live longer and try a new medication to accomplish that. Many people are getting diseases that need to be diagnosed and treated at a younger age, so they can prevent any risk to their health in the future. According to NASCAR, “The goal of Lilly Diabetes - driving awareness and education.” Therefore, Eli Lilly and company, must aware everyone about any diseases side effect and that they can provide the best medications to treat it. This gives the opportunity to the business to gain the customers trust, and people will understand that our company and services are made to help them.
The Internal Factor Evaluation (IFE) Matrix
The IFE matrix below is a strategy tool that is illustrating an internal strategic-management report of Eli Lilly & Company. This tool reviews and evaluates the main strengths and weaknesses in the functional areas of the company. It also provides a data for identifying and assessing the relationship between the areas of the business.
Why is this internal factor key?
The IFE Matrix is a tool that used for evaluating the strength and the weaknesses of companies. The IFE Matrix above was summarizing the critical internal environment of the business of Eli Lilly & Company. The table shows the strengths as well as the weaknesses that practiced within the firm. While looking at those factors, it indicates that Eli Lilly needs to work on improving and developing new technologies to help them create new and different drugs for different diseases. Therefore, the IFE Matrix is an essential factor for the company to look at many areas on where they can change and improve their products/services. Also, there are areas that the business was doing great at such as gaining the customer's satisfaction by maintaining their dedication to making other's lives healthier.
Why does this factor carry this much weight?
The factoring of the IFE Matrix displays that much of weight because Eli Lilly & Company can evaluate their business to understand and know how well they are succeeding. The Matrix above showed the industry has a weighted score of 2.67 which indicates that the company is in a stable and functional position. However, the most internal factor that was reflected a significant strength (4) for Eli Lilly because customer's satisfaction around the world was one of the primary purposes of the company. Eli Lilly offered their products in different places to enhance and treat various illnesses. With that said, the business has about 70 potential new drugs in human testing and a more substantial number of projects in preclinical development (#4), and it represented an essential strength of a critical factor rating (0.07). This significant factor will provide the company an excellent chance of making more and developed discoveries of new drugs.
However, there are also weaknesses that could affect the business negatively. One of those weaknesses is that Lilly has more sales in the US than the rest of the world rated (0.06). The company needs to expand its business globally, so they can sell their products for many different cultures. They also need to improve their companies’ connections to enhance their market shares. However, each element of those factors is ranging in different rates because this shows the company's work in different areas.
Another critical weakness that Eli Lilly needs to consider is in developing a drug for Alzheimer late-stage drugs rated (0.04). The business needs to improve new medications that treat Alzheimer. According to New York Times, "An experimental Alzheimer’s drug that had previously appeared to show promise in slowing the deterioration of thinking and memory has failed in a large Eli Lilly clinical trial, dealing a significant disappointment to patients hoping for a treatment that would alleviate their symptoms." Therefore, it is an essential element for the business to find new ways and researchers to create new hopes for people.
Why this rating for this factor?
After reading the case of Eli Lilly and Company. The rating for each part plays an essential role in the business. The higher the score, the more critical factor that the company operates in the industry. Most of those rates were scored higher on the strength of the company than the weaknesses. It indicates that the business is stable, and they need to have some improvement to grow and be the first top leading pharmaceutical company in the world. Eli Lilly also has to consider the lower scores and work on developing new methods to avoid any failure for the company. The company already represent a right brand image, and this image needs to main actively in the industry.
How should management interpret the total weighted score?
As mentioned above, Eli Lilly & Company overall rates of 2.67 in the Internal Factor Evaluation and 2.93 in the External Factor Evaluation. These scores mean it is over average in its capability to work on expanding its opportunities and strengths with itself and the industry. Eli Lilly needs to consider its ability to try developing new strategies for selling their products more globally. The business also needs to have technology advancement to reach out and deliver their drugs to many customers as possible. This method will build the trust and bring the relationship closer to the business and the consumers. However, Eli Lilly & Company is in a high market position because the company been rated to be one of the most significant pharmaceutical business in the world. The firm is still maintaining its commitment to their loyal customers, and with over 140 years in business, the management of the company will have to work on creating development to increase from its success in the market industry. The management will also need to build their business strength to enhance the weaknesses, so it can help the company develop a better vision for its future.
The IFE Matrix is a tool that used for evaluating the strength and the weaknesses of companies. The IFE Matrix above was summarizing the critical internal environment of the business of Eli Lilly & Company. The table shows the strengths as well as the weaknesses that practiced within the firm. While looking at those factors, it indicates that Eli Lilly needs to work on improving and developing new technologies to help them create new and different drugs for different diseases. Therefore, the IFE Matrix is an essential factor for the company to look at many areas on where they can change and improve their products/services. Also, there are areas that the business was doing great at such as gaining the customer's satisfaction by maintaining their dedication to making other's lives healthier.
Why does this factor carry this much weight?
The factoring of the IFE Matrix displays that much of weight because Eli Lilly & Company can evaluate their business to understand and know how well they are succeeding. The Matrix above showed the industry has a weighted score of 2.67 which indicates that the company is in a stable and functional position. However, the most internal factor that was reflected a significant strength (4) for Eli Lilly because customer's satisfaction around the world was one of the primary purposes of the company. Eli Lilly offered their products in different places to enhance and treat various illnesses. With that said, the business has about 70 potential new drugs in human testing and a more substantial number of projects in preclinical development (#4), and it represented an essential strength of a critical factor rating (0.07). This significant factor will provide the company an excellent chance of making more and developed discoveries of new drugs.
However, there are also weaknesses that could affect the business negatively. One of those weaknesses is that Lilly has more sales in the US than the rest of the world rated (0.06). The company needs to expand its business globally, so they can sell their products for many different cultures. They also need to improve their companies’ connections to enhance their market shares. However, each element of those factors is ranging in different rates because this shows the company's work in different areas.
Another critical weakness that Eli Lilly needs to consider is in developing a drug for Alzheimer late-stage drugs rated (0.04). The business needs to improve new medications that treat Alzheimer. According to New York Times, "An experimental Alzheimer’s drug that had previously appeared to show promise in slowing the deterioration of thinking and memory has failed in a large Eli Lilly clinical trial, dealing a significant disappointment to patients hoping for a treatment that would alleviate their symptoms." Therefore, it is an essential element for the business to find new ways and researchers to create new hopes for people.
Why this rating for this factor?
After reading the case of Eli Lilly and Company. The rating for each part plays an essential role in the business. The higher the score, the more critical factor that the company operates in the industry. Most of those rates were scored higher on the strength of the company than the weaknesses. It indicates that the business is stable, and they need to have some improvement to grow and be the first top leading pharmaceutical company in the world. Eli Lilly also has to consider the lower scores and work on developing new methods to avoid any failure for the company. The company already represent a right brand image, and this image needs to main actively in the industry.
How should management interpret the total weighted score?
As mentioned above, Eli Lilly & Company overall rates of 2.67 in the Internal Factor Evaluation and 2.93 in the External Factor Evaluation. These scores mean it is over average in its capability to work on expanding its opportunities and strengths with itself and the industry. Eli Lilly needs to consider its ability to try developing new strategies for selling their products more globally. The business also needs to have technology advancement to reach out and deliver their drugs to many customers as possible. This method will build the trust and bring the relationship closer to the business and the consumers. However, Eli Lilly & Company is in a high market position because the company been rated to be one of the most significant pharmaceutical business in the world. The firm is still maintaining its commitment to their loyal customers, and with over 140 years in business, the management of the company will have to work on creating development to increase from its success in the market industry. The management will also need to build their business strength to enhance the weaknesses, so it can help the company develop a better vision for its future.
SWOT Analysis
SWOT analysis is a crucial strategic planning method that can be used by Eli Lilly and Company directors to do a specific review and evaluation of the company. It is a helpful method to assess the present Strengths (S), Weakness (W), Opportunities (O) and Threats (T) that is facing Eli Lilly current business situations.
The Eli Lilly is one of the best companies in its industry. The business manages its leading positions in the market by thoroughly analyzing and evaluating the SWOT analysis. The SWOT analysis a very interactive method and needs sufficient coordination between different areas within the company to help the business to know its essential internal factors. Those departments such as finance, marketing, operations, management, etc., must be considered when making this analysis. However, the below SWOT analysis will make possible alternative approaches that Eli Lilly can consider when moving forward with its development/discoveries.
SO Strategies
SO (strengths-opportunities) strategies perform by using the business's internal strengths to make an influence on the external opportunities. Eli Lilly and Company has critical Internal Factors of selling drugs all over the world and the external opportunity of developing markets by having a secure distribution system that can expand the majority of its markets. This approach would include building a robust dealer relationship that can help in selling the company's products and also invest in teaching the sales employees, so they can have the information of all merchandise to explain to the customer how he or she can benefit from it.
The development of innovative medicines at a reasonable cost is another SO approach that the company needs to take into consideration. Eli Lilly has an internal strength that includes having experienced workers in highly developed labs. This strategy will give them an advantage through maintaining their high-quality products and by achieving their purposes through producing better products in at low cost. According to Statista, “In 2011, Eli Lilly's top product Cymbalta generated almost 4.2 billion U.S. dollars of revenues”. This means that their strategy of making great development medicines at a reasonable price will give the opportunity for business to sell its products to many people as they wished, and they will have the chance to expand the awareness of many illnesses using their products.
WO Strategies
The WO (weaknesses-opportunities) is the elements where Eli Lilly can develop. This strategy improves the internal weaknesses areas where industry can expand by taking advantage of external opportunities for moving to a competitive position in the market.
Eli Lilly current weaknesses involve an investment in new technologies. The business needs to invest more money in technology to organize the operations of their development. At this time, the advance in technologies not included with the idea and purposes of the company.
This strategy informs us that the business needs to work on having more advanced technologies to expand their business. According to Pharmaceutical-technology, “Eli Lilly would like to be in a position to play a larger role in the biotech pharmaceutical market in the future. Steven Paul, Lilly’s executive vice president of science and technology, said: “Inside these new buildings, the latest in highly sophisticated technologies and equipment for conducting biotech research and development have been incorporated. Taken together – the facilities, the technologies, and an interdisciplinary approach – we’ve created a new model for Lilly that gives the company a competitive advantage in bringing breakthrough medicines to patients in a more efficient, productive, and dependable manner.” Therefore, this strategy will give the business a significant advantage in bringing the best medicines to the patient in more better ways.
ST Strategies
The ST (strengths-threats) is a strategy that benefits the business's strengths to prevent the consequence of the external threats. Eli Lilli provides efficient and high-quality formulated drugs that are developed by skilled employees. Having the drugs available when the customers need it, is a tremendous strategic prospect because Eli Lilly is one of the most excellent pharmaceuticals company in the world that had made discoveries on new drugs to treat different illnesses around the world. Eli Lilly will use its strength in drug production to benefit from the external threat of development of same known drugs by competitors. The new innovative methods can support the business to create a better and same known drug at a higher level of development and to advertise it using the company’s current customers.
WT Strategies
WT (weaknesses-threats) is a strategy that works carefully to overcome internal weakness and bypass the external threats. Eli Lilly has high erosion rate in the workforce compared to its competitors. The business has to work on consuming a lot of training and developing their employees to avoid any better development by its opponents. This threat can make Eli Lilly lose many consumers and suppliers due to this attrition. According to Lilly, "Lilly requires ongoing training and education of its employees on the application of the Lilly values and individual obligations under applicable legal requirements and company policies." Therefore, the business must keep on providing targeted training in some areas to its employees whose work functions are influenced by these risk areas.
The Eli Lilly is one of the best companies in its industry. The business manages its leading positions in the market by thoroughly analyzing and evaluating the SWOT analysis. The SWOT analysis a very interactive method and needs sufficient coordination between different areas within the company to help the business to know its essential internal factors. Those departments such as finance, marketing, operations, management, etc., must be considered when making this analysis. However, the below SWOT analysis will make possible alternative approaches that Eli Lilly can consider when moving forward with its development/discoveries.
SO Strategies
SO (strengths-opportunities) strategies perform by using the business's internal strengths to make an influence on the external opportunities. Eli Lilly and Company has critical Internal Factors of selling drugs all over the world and the external opportunity of developing markets by having a secure distribution system that can expand the majority of its markets. This approach would include building a robust dealer relationship that can help in selling the company's products and also invest in teaching the sales employees, so they can have the information of all merchandise to explain to the customer how he or she can benefit from it.
The development of innovative medicines at a reasonable cost is another SO approach that the company needs to take into consideration. Eli Lilly has an internal strength that includes having experienced workers in highly developed labs. This strategy will give them an advantage through maintaining their high-quality products and by achieving their purposes through producing better products in at low cost. According to Statista, “In 2011, Eli Lilly's top product Cymbalta generated almost 4.2 billion U.S. dollars of revenues”. This means that their strategy of making great development medicines at a reasonable price will give the opportunity for business to sell its products to many people as they wished, and they will have the chance to expand the awareness of many illnesses using their products.
WO Strategies
The WO (weaknesses-opportunities) is the elements where Eli Lilly can develop. This strategy improves the internal weaknesses areas where industry can expand by taking advantage of external opportunities for moving to a competitive position in the market.
Eli Lilly current weaknesses involve an investment in new technologies. The business needs to invest more money in technology to organize the operations of their development. At this time, the advance in technologies not included with the idea and purposes of the company.
This strategy informs us that the business needs to work on having more advanced technologies to expand their business. According to Pharmaceutical-technology, “Eli Lilly would like to be in a position to play a larger role in the biotech pharmaceutical market in the future. Steven Paul, Lilly’s executive vice president of science and technology, said: “Inside these new buildings, the latest in highly sophisticated technologies and equipment for conducting biotech research and development have been incorporated. Taken together – the facilities, the technologies, and an interdisciplinary approach – we’ve created a new model for Lilly that gives the company a competitive advantage in bringing breakthrough medicines to patients in a more efficient, productive, and dependable manner.” Therefore, this strategy will give the business a significant advantage in bringing the best medicines to the patient in more better ways.
ST Strategies
The ST (strengths-threats) is a strategy that benefits the business's strengths to prevent the consequence of the external threats. Eli Lilli provides efficient and high-quality formulated drugs that are developed by skilled employees. Having the drugs available when the customers need it, is a tremendous strategic prospect because Eli Lilly is one of the most excellent pharmaceuticals company in the world that had made discoveries on new drugs to treat different illnesses around the world. Eli Lilly will use its strength in drug production to benefit from the external threat of development of same known drugs by competitors. The new innovative methods can support the business to create a better and same known drug at a higher level of development and to advertise it using the company’s current customers.
WT Strategies
WT (weaknesses-threats) is a strategy that works carefully to overcome internal weakness and bypass the external threats. Eli Lilly has high erosion rate in the workforce compared to its competitors. The business has to work on consuming a lot of training and developing their employees to avoid any better development by its opponents. This threat can make Eli Lilly lose many consumers and suppliers due to this attrition. According to Lilly, "Lilly requires ongoing training and education of its employees on the application of the Lilly values and individual obligations under applicable legal requirements and company policies." Therefore, the business must keep on providing targeted training in some areas to its employees whose work functions are influenced by these risk areas.
Industry Analysis
Porter's Five Forces is a strategic, powerful tool that helps the strategic managers in evaluating the industry in which their businesses operate in determining strategies to stay in a strong position in the market. It also benefits the firms to identify strategies to gain an advantage by knowing the competitiveness of the business situation or understanding the markets that might influence the potential profitability. This method will support the business by being able to change the approaches they need and take advantage of a strong position or develop a weak one and avoid using incorrect steps in future.
The Porter's Five Forces below center on how Eli Lilly and Company can develop sustainable competing advantages in drug businesses. The managers at Eli Lilly and Company will use Porter Five Forces to establish an essential position within the drug businesses and explore valuable opportunities in the Healthcare field.
1) Threats entry of potential/new competitors. (LOW)
2) A degree of rivalry among existing competing firms. (Best/high value)
3) Bargaining power of customers. (Medium)
4) Bargaining power of suppliers. (Low)
5) Potential threats of developing substitute products. (Best/high value)
The Porter's Five Forces below center on how Eli Lilly and Company can develop sustainable competing advantages in drug businesses. The managers at Eli Lilly and Company will use Porter Five Forces to establish an essential position within the drug businesses and explore valuable opportunities in the Healthcare field.
1) Threats entry of potential/new competitors. (LOW)
2) A degree of rivalry among existing competing firms. (Best/high value)
3) Bargaining power of customers. (Medium)
4) Bargaining power of suppliers. (Low)
5) Potential threats of developing substitute products. (Best/high value)
Threats entry of potential/new competitors
New entrants of potential/new competitors in drug businesses are low, but it can also change due to different influences that pharmaceutical companies might affect the business. Therefore, Eli Lilly and Company can resolve this threat by decreasing the costs of the products and implementing new value plans to gain more consumers. Eli Lilly and Company must handle all those threats and create powerful strategies to challenge its potential competitors.
On the other hand, even if there are businesses that are not currently recognized as a threat to Eli Lilly and Company, a merger or acquisition with any drug development and research business or building partnership with another drug firm it could turn into a competitor to Eli Lilly. For example, a medical drug business can take advantage of merging with Eli Lilly through gaining information and knowledge on how Eli Lilly manages its business and then can leave Eli Lilly and use the same ways or methods to develop and gain customers. However, this threat got decreased by significant exploration and development expenses that are required to enter the market successfully.
Eli Lilly’s focus on a comparatively narrow business of drugs and antidepressants which could reduce the risk of new entrants, but different products which represent a significant portion of company’s sales such as insulin are exposed to a higher threat of new entrants of new competitors. The requirement of getting licenses also decreases the risk of further entrants. The review above leads to the conclusion that the threat of new entrants is still low, but Eli Lilly must consider new ways to avoid any of these risks.
Furthermore, Eli Lilly and Company can manage these threats of new/potential entrants through innovating different and unique products and services that represent the company's purposes in different ways. The innovation of new products brings not just new consumers to the business, but also provide the old buyers the reason to purchase Eli Lilly's products again. According to Info Entrepreneurs article, “developing entirely new and improved products and services - often to meet rapidly changing customer or consumer demands or needs”. Also, investing funds in research and development could lead the new entrants to the decision not to join a robust industry where the established experts such as Eli Lilly and Company keep representing its business in positive way. It significantly decreases the opportunities for the new firms for not to become new players in the industry.
Rivalry among existing competing firms
The degree of rivalry among existing competing firms is at a high value in this industry, it will drive the business to lower its prices. But since, Eli Lilly and Company works in a pretty competitive drug business. It means that this rivalry could impact on the long-term profitability of the company. However, the competitiveness is somewhat different in pharmaceutical companies, because of the high expenses of research and development that could influence the appearance of new competitors. Also, rivals frequently are concentrated on a small market part of a medication.
Therefore, Eli Lilly and Company can manage the intense rivalry among existing competing firms in drug industry through creating strategies to create different products so that it can challenge better. Also merging with competitors to expand the business size instead of competing with them, could increase the market development within the industry.
Bargaining power of customers
Customers are usually challenging a lot. They want to get the most excellent products that are available but pay the lowest prices. This kind of challenges could influence on Eli Lilly and Company profitability in the long term, because the business cannot continue lowering its products for the customers due the market changes and costs that might affect the company in the future. On the other hand, patients have lost their ability to bargain for lower prices nowadays because the rates of the development and research in generic drugs had increased. According to Consumer Reports “rising drug costs pose special challenges because, unlike many other expenses, drugs usually aren’t optional purchases. But even if the consumers of Eli Lilly and company are loyal to them, they would still look for discounted products to purchase.
Also, healthcare companies get the drugs in large quantities, which this could influence on pharmaceutical businesses to provide some discounts as well. But since Eli Lilly has rivals with comparable products, it is evident that the bargaining power of customers is medium for the business. Customers with the smaller amount of purchases don't influence the price strategy; but wholesale customers could affect the pricing strategy for sure. According to Consumer Reports, “people who saw drug price increases were also more likely to make tough financial choices and, in some cases, even delay retirement to maintain their healthcare coverage. Therefore, it is essential that customers who are buying drugs for themselves have healthcare insurance to cover the cost of the products and thus those people are not involved in bargaining for lower prices.
However, Eli Lilly and Company can manage those problems through creating some robust strategies that help the business gain many customers. This method will be useful in a couple of ways. It will decrease the bargaining power of the customers, and it will also give an opportunity to the business to organize its marketing and product development and process.
On the other hand, customers always look for better and high quality of products; if Eli Lilly and Company keep on innovating new or different products, then it can narrow the bargaining power of consumers. By this method, the new products will decrease the desertion of existing consumers to the competitors of Eli Lilly and Company.
Bargaining power of suppliers
Most of the companies in the drug industries get their new materials from various suppliers. Suppliers in a great situation can reduce the margins Eli Lilly and Company can obtain in the business. Also, dominant suppliers in healthcare area use their bargaining ability to achieve higher prices from the companies in drug manufacturers. Therefore, the whole influence of dominant supplier bargaining power is that it reduces the entire profitability of drug companies.
Furthermore, the bargaining power of suppliers at this point at a low value. It means that there is a chance to change supplier at low charge and find different suppliers with different brands that offer lower costs. According to Entrepreneur article, “work as hard on building a good supplier relationship as you do building a relationship with your customers. And be loyal to your good suppliers. They are essential to your business's good health and growth. They are a nuanced bootstrapping strategy.” Therefore, in Eli Lilly’s situation, it is normal that the power of suppliers is a reversal of the customer's control. This gives a clear vision that Eli Lilly and Company must create a robust supply connection with various suppliers so if the prices of the raw materials are high in one supplier then the company will be able to shift to another supplier that offers lower and better costs.
Potential threats of developing substitute products
Since there are many similar products and services satisfy consumer demand in many ways, drug business also experiences this kind of threat in its industry. The need for generic medications rather than brand-name medicines has grown because of the prices, but customers need to understand that generic drug business does not invest enough on its research and development process which this makes them sell their products at a lower price. According to FDA “to further facilitate generic drug product availability and to assist the generic pharmaceutical industry with identifying the most appropriate methodology for developing drugs and generating evidence needed to support ANDA approval, FDA publishes product-specific guidance describing the Agency’s current thinking and expectations on how to develop generic drug products therapeutically equivalent to specific reference-listed drugs. “Therefore, customers must understand that brand-name products are safer to take because those we developed according to the researchers and development process.
However, since the potential threats of developing substitute products or services are high in value, then the company can provide an advantageous method that is different from the existing offerings of the market. Eli Lilly and Company can manage these methods through understanding the consumers need rather than what the customer is purchasing. Especially with the pharmaceutical industry because the customer needs something that cures the diseases.
Also, offering the services to the customers rather than just trying to sell them the products helps the business to gain their customer loyalty. Eli Lilly can provide full of information to its customer about each research that they are done for a specific drug so that the customer can have an idea of their services and products at the same time. Also, this makes the consumer knows much more information about the medications and how it will cure any illnesses.
Furthermore, according to the above analysis of Porter’s Five Forces of Eli Lilly and Company, we can conclude that the strategic managers can get a full understanding of what influences the profitability of the company in the drug business. They can also recognize the competition, changing shifts in advance and can quickly develop a strategy that can create better opportunities to challenge any threats. Therefore, through identifying the Porter Five Forces as mentioned above in great details, Eli Lilly and Company 's managers can consider those forces to help the business in their favor.
New entrants of potential/new competitors in drug businesses are low, but it can also change due to different influences that pharmaceutical companies might affect the business. Therefore, Eli Lilly and Company can resolve this threat by decreasing the costs of the products and implementing new value plans to gain more consumers. Eli Lilly and Company must handle all those threats and create powerful strategies to challenge its potential competitors.
On the other hand, even if there are businesses that are not currently recognized as a threat to Eli Lilly and Company, a merger or acquisition with any drug development and research business or building partnership with another drug firm it could turn into a competitor to Eli Lilly. For example, a medical drug business can take advantage of merging with Eli Lilly through gaining information and knowledge on how Eli Lilly manages its business and then can leave Eli Lilly and use the same ways or methods to develop and gain customers. However, this threat got decreased by significant exploration and development expenses that are required to enter the market successfully.
Eli Lilly’s focus on a comparatively narrow business of drugs and antidepressants which could reduce the risk of new entrants, but different products which represent a significant portion of company’s sales such as insulin are exposed to a higher threat of new entrants of new competitors. The requirement of getting licenses also decreases the risk of further entrants. The review above leads to the conclusion that the threat of new entrants is still low, but Eli Lilly must consider new ways to avoid any of these risks.
Furthermore, Eli Lilly and Company can manage these threats of new/potential entrants through innovating different and unique products and services that represent the company's purposes in different ways. The innovation of new products brings not just new consumers to the business, but also provide the old buyers the reason to purchase Eli Lilly's products again. According to Info Entrepreneurs article, “developing entirely new and improved products and services - often to meet rapidly changing customer or consumer demands or needs”. Also, investing funds in research and development could lead the new entrants to the decision not to join a robust industry where the established experts such as Eli Lilly and Company keep representing its business in positive way. It significantly decreases the opportunities for the new firms for not to become new players in the industry.
Rivalry among existing competing firms
The degree of rivalry among existing competing firms is at a high value in this industry, it will drive the business to lower its prices. But since, Eli Lilly and Company works in a pretty competitive drug business. It means that this rivalry could impact on the long-term profitability of the company. However, the competitiveness is somewhat different in pharmaceutical companies, because of the high expenses of research and development that could influence the appearance of new competitors. Also, rivals frequently are concentrated on a small market part of a medication.
Therefore, Eli Lilly and Company can manage the intense rivalry among existing competing firms in drug industry through creating strategies to create different products so that it can challenge better. Also merging with competitors to expand the business size instead of competing with them, could increase the market development within the industry.
Bargaining power of customers
Customers are usually challenging a lot. They want to get the most excellent products that are available but pay the lowest prices. This kind of challenges could influence on Eli Lilly and Company profitability in the long term, because the business cannot continue lowering its products for the customers due the market changes and costs that might affect the company in the future. On the other hand, patients have lost their ability to bargain for lower prices nowadays because the rates of the development and research in generic drugs had increased. According to Consumer Reports “rising drug costs pose special challenges because, unlike many other expenses, drugs usually aren’t optional purchases. But even if the consumers of Eli Lilly and company are loyal to them, they would still look for discounted products to purchase.
Also, healthcare companies get the drugs in large quantities, which this could influence on pharmaceutical businesses to provide some discounts as well. But since Eli Lilly has rivals with comparable products, it is evident that the bargaining power of customers is medium for the business. Customers with the smaller amount of purchases don't influence the price strategy; but wholesale customers could affect the pricing strategy for sure. According to Consumer Reports, “people who saw drug price increases were also more likely to make tough financial choices and, in some cases, even delay retirement to maintain their healthcare coverage. Therefore, it is essential that customers who are buying drugs for themselves have healthcare insurance to cover the cost of the products and thus those people are not involved in bargaining for lower prices.
However, Eli Lilly and Company can manage those problems through creating some robust strategies that help the business gain many customers. This method will be useful in a couple of ways. It will decrease the bargaining power of the customers, and it will also give an opportunity to the business to organize its marketing and product development and process.
On the other hand, customers always look for better and high quality of products; if Eli Lilly and Company keep on innovating new or different products, then it can narrow the bargaining power of consumers. By this method, the new products will decrease the desertion of existing consumers to the competitors of Eli Lilly and Company.
Bargaining power of suppliers
Most of the companies in the drug industries get their new materials from various suppliers. Suppliers in a great situation can reduce the margins Eli Lilly and Company can obtain in the business. Also, dominant suppliers in healthcare area use their bargaining ability to achieve higher prices from the companies in drug manufacturers. Therefore, the whole influence of dominant supplier bargaining power is that it reduces the entire profitability of drug companies.
Furthermore, the bargaining power of suppliers at this point at a low value. It means that there is a chance to change supplier at low charge and find different suppliers with different brands that offer lower costs. According to Entrepreneur article, “work as hard on building a good supplier relationship as you do building a relationship with your customers. And be loyal to your good suppliers. They are essential to your business's good health and growth. They are a nuanced bootstrapping strategy.” Therefore, in Eli Lilly’s situation, it is normal that the power of suppliers is a reversal of the customer's control. This gives a clear vision that Eli Lilly and Company must create a robust supply connection with various suppliers so if the prices of the raw materials are high in one supplier then the company will be able to shift to another supplier that offers lower and better costs.
Potential threats of developing substitute products
Since there are many similar products and services satisfy consumer demand in many ways, drug business also experiences this kind of threat in its industry. The need for generic medications rather than brand-name medicines has grown because of the prices, but customers need to understand that generic drug business does not invest enough on its research and development process which this makes them sell their products at a lower price. According to FDA “to further facilitate generic drug product availability and to assist the generic pharmaceutical industry with identifying the most appropriate methodology for developing drugs and generating evidence needed to support ANDA approval, FDA publishes product-specific guidance describing the Agency’s current thinking and expectations on how to develop generic drug products therapeutically equivalent to specific reference-listed drugs. “Therefore, customers must understand that brand-name products are safer to take because those we developed according to the researchers and development process.
However, since the potential threats of developing substitute products or services are high in value, then the company can provide an advantageous method that is different from the existing offerings of the market. Eli Lilly and Company can manage these methods through understanding the consumers need rather than what the customer is purchasing. Especially with the pharmaceutical industry because the customer needs something that cures the diseases.
Also, offering the services to the customers rather than just trying to sell them the products helps the business to gain their customer loyalty. Eli Lilly can provide full of information to its customer about each research that they are done for a specific drug so that the customer can have an idea of their services and products at the same time. Also, this makes the consumer knows much more information about the medications and how it will cure any illnesses.
Furthermore, according to the above analysis of Porter’s Five Forces of Eli Lilly and Company, we can conclude that the strategic managers can get a full understanding of what influences the profitability of the company in the drug business. They can also recognize the competition, changing shifts in advance and can quickly develop a strategy that can create better opportunities to challenge any threats. Therefore, through identifying the Porter Five Forces as mentioned above in great details, Eli Lilly and Company 's managers can consider those forces to help the business in their favor.
(SWOT) Matrix
Eli Lilly and Company is one of the best companies in the pharmaceutical industry. The business keeps its leading position in the market through carefully evaluating the SWOT Matrix analysis. However, this section will use this tool to develop strategies that Eli Lilly and Company can consider for its future business. The SWOT matrix will also support the Eli Lilly to create purposes through giving the possibilities to get the best decisions that work to reduce threats, weaknesses, and develop strategies to promote the business's strengths. Therefore, the Strengths, Weaknesses, Opportunities, and Threats (SWOT) Matrix will allow the managers of the Eli Lilly and Company to establish a matching technique for four types of strategies. Those strategies include the following:
1) strengths-opportunities (SO) strategies
2) weaknesses-opportunities (WO) strategies
3) strengths-threats (ST) strategies
4) weaknesses-threats (WT) strategies.
The above strategies for each section formed through matching critical external and internal parts in the elements of strength to get an advantage over its external opportunities. And developing internal weaknesses by using the excellent position of external opportunities; using the internal forces to overcome the influence of external threats and decreasing internal inadequacies to bypass any external threats. By matching the critical factors of internal and external factors, some approaches created in SO, WO, ST and WT below to identify the best approaches for the business.
1) strengths-opportunities (SO) strategies
2) weaknesses-opportunities (WO) strategies
3) strengths-threats (ST) strategies
4) weaknesses-threats (WT) strategies.
The above strategies for each section formed through matching critical external and internal parts in the elements of strength to get an advantage over its external opportunities. And developing internal weaknesses by using the excellent position of external opportunities; using the internal forces to overcome the influence of external threats and decreasing internal inadequacies to bypass any external threats. By matching the critical factors of internal and external factors, some approaches created in SO, WO, ST and WT below to identify the best approaches for the business.
SO Strategies
Eli Lilly and Company is the 10th-largest pharmaceutical company in the world. The business has an internal strength that they can take advantage of its external opportunities to develop innovative medicine at a lower cost. Its primary forces involve new product development of drug discoveries. According to Phrma, “each patient battling a disease or managing a chronic condition lives in the hope that tomorrow will bring a new medicine that delivers better health. America’s biopharmaceutical research companies share the same goal, constantly developing new medicines that can prevent diseases, improve patients’ health, and save lives.” Eli Lilly shares the same purpose which is making medications that help people live longer and healthier. Therefore, the business should join strategic firms to develop and market substitute products for consumers at reasonable prices. This method can help the business to increase its profits by gaining different and new customers. It will also benefit the strength of the company by creating an opportunity for advertising their products at various places
WO Strategies
Eli Lilly and Company can improve its internal weaknesses by taking advantage of its external opportunities to developing medicines more quickly through using the newest technologies and research to enhance and expand its products/services. But its significant threats are rival’s companies who are creating similar drugs at lower cost. Those businesses are not well known enough for customers. Their products could have a negative impact on customers. According to Elsevier, "using computer technology and analytical tools to train a “machine” to see more than we can — is one way that technology can help streamline the process of finding and developing new drugs." Therefore, Eli Lilly has an excellent opportunity to overcome this weakness by using the technology/social media to inform the customers about the innovation of their new products or services. This method will also help the business to gain the trust of its consumers and suppliers easily through maintaining their purposes in providing the customer's the high-quality products through using the technology to solve any issues they might face. Also, according to Elsevier, "researchers are learning is that by using certain technologies early in the drug-development process, they can identify issues that might cause a drug to fail early on, in many cases before the compound even goes into clinical testing. Then they can either modify the compound to address the issues, while maintaining the therapeutic effects or make an early decision to no longer pursue the drug candidate, thereby averting a more expensive later stage failure."
Furthermore, Eli Lilly and Company should create a financial system to determine the consumer’s need through analyzing the markets of the products. This method can benefit the business by identifying the drugs that need to be developed or changed so they can create better and different medicines to encourage consumers to live a healthier life.
ST Strategies
Eli Lilly and Company can use internal strengths to decrease the influence of external threats in merging with merge with different suppliers to develop new strategies to lower the cost of production. The company must work on creating connections with suppliers to buy the materials they need at a fixed price to develop one production system to include the research and development of each element that been used in each drug. According to Chron, "a fixed-price contract gives both the buyer and seller a predictable scenario, offering stability for both during the length of the contract.” Therefore, when business change the cost of materials or service, the fixed price agreement can be a strong advantage for the industry. This method will help the business to determine the demand for those materials easily. Also, Eli Lilly needs to expand the market research to find different strategies for selling its products to many consumers. This method will make the business understand the most necessary medication for its customers.
WT Strategies
Eli Lilly and Company can decrease internal weaknesses to avoid external threats by investing more in training employees in different places. Skilled workers will increase the profit of the business, and it will also help the industry to gain the customer loyalty by offering the best products/services in a very professional way. Eli Lilly can also work with successful businesses in which their drugs are still under FDA testing for approval. The company can offer its competitors this technique so that they can merge together to maintain the customer’s need for medications at a higher level.
However, according to the above SWOT analysis/matrix, the managers decided to realize the importance of all internal strength and weakness of the business. Eli Lilly will consider each factor and strategy to move on forward and maintain its position in the market.
Eli Lilly and Company is the 10th-largest pharmaceutical company in the world. The business has an internal strength that they can take advantage of its external opportunities to develop innovative medicine at a lower cost. Its primary forces involve new product development of drug discoveries. According to Phrma, “each patient battling a disease or managing a chronic condition lives in the hope that tomorrow will bring a new medicine that delivers better health. America’s biopharmaceutical research companies share the same goal, constantly developing new medicines that can prevent diseases, improve patients’ health, and save lives.” Eli Lilly shares the same purpose which is making medications that help people live longer and healthier. Therefore, the business should join strategic firms to develop and market substitute products for consumers at reasonable prices. This method can help the business to increase its profits by gaining different and new customers. It will also benefit the strength of the company by creating an opportunity for advertising their products at various places
WO Strategies
Eli Lilly and Company can improve its internal weaknesses by taking advantage of its external opportunities to developing medicines more quickly through using the newest technologies and research to enhance and expand its products/services. But its significant threats are rival’s companies who are creating similar drugs at lower cost. Those businesses are not well known enough for customers. Their products could have a negative impact on customers. According to Elsevier, "using computer technology and analytical tools to train a “machine” to see more than we can — is one way that technology can help streamline the process of finding and developing new drugs." Therefore, Eli Lilly has an excellent opportunity to overcome this weakness by using the technology/social media to inform the customers about the innovation of their new products or services. This method will also help the business to gain the trust of its consumers and suppliers easily through maintaining their purposes in providing the customer's the high-quality products through using the technology to solve any issues they might face. Also, according to Elsevier, "researchers are learning is that by using certain technologies early in the drug-development process, they can identify issues that might cause a drug to fail early on, in many cases before the compound even goes into clinical testing. Then they can either modify the compound to address the issues, while maintaining the therapeutic effects or make an early decision to no longer pursue the drug candidate, thereby averting a more expensive later stage failure."
Furthermore, Eli Lilly and Company should create a financial system to determine the consumer’s need through analyzing the markets of the products. This method can benefit the business by identifying the drugs that need to be developed or changed so they can create better and different medicines to encourage consumers to live a healthier life.
ST Strategies
Eli Lilly and Company can use internal strengths to decrease the influence of external threats in merging with merge with different suppliers to develop new strategies to lower the cost of production. The company must work on creating connections with suppliers to buy the materials they need at a fixed price to develop one production system to include the research and development of each element that been used in each drug. According to Chron, "a fixed-price contract gives both the buyer and seller a predictable scenario, offering stability for both during the length of the contract.” Therefore, when business change the cost of materials or service, the fixed price agreement can be a strong advantage for the industry. This method will help the business to determine the demand for those materials easily. Also, Eli Lilly needs to expand the market research to find different strategies for selling its products to many consumers. This method will make the business understand the most necessary medication for its customers.
WT Strategies
Eli Lilly and Company can decrease internal weaknesses to avoid external threats by investing more in training employees in different places. Skilled workers will increase the profit of the business, and it will also help the industry to gain the customer loyalty by offering the best products/services in a very professional way. Eli Lilly can also work with successful businesses in which their drugs are still under FDA testing for approval. The company can offer its competitors this technique so that they can merge together to maintain the customer’s need for medications at a higher level.
However, according to the above SWOT analysis/matrix, the managers decided to realize the importance of all internal strength and weakness of the business. Eli Lilly will consider each factor and strategy to move on forward and maintain its position in the market.