Problem Statement
Asif Rajar, the Regional Vice President, wanted into introduce Lexapro by replacing Cipram in Korea while Jin-Ho Jun wanted to introduce it later.Moreover, there was also a conflict on the ways to allocate the marketing resources in Korea between them. The main conflict was to decide the expenditure on doctors to build relationships and whether product should be marketed to all tier doctors or the only the first tier.
PEST Analysis
The PEST analysis considers the Political, Economic, Social and Technological aspects of the business to analyze the external environment in which a company operates.
Political
The price of a drug is set by the government insurance regulator in Korea. In order to keep the prices high, a law firm is hired to convince the government to keep the prices high. The government has opened the pharmaceutical market for foreign multinational in order to service loans taken from the International Monetary funds after the recession of 1997. In Korea, any multinational company which wants to operate in Korea has to form a partnership with a local company, otherwise it would be treated unfairly by regulators, price boards and practitioners.
Economical
In 2005, the Korean pharmaceutical became the 11TH largest pharmaceutical market in the world due to the separation of pharmaceutical into prescription only and over the counter medication. South Korea has 1.5% of the world’s CNS pharmaceutical market share by country. The Asian markets have been rising by the average rate of 11.3% per year. These figures clearly shows that the potential to earn large profits in Asian markets such as Korea are very high.
Social
South Korean is a Confucian society where the elder member of the society are respected. People do not give much importance to mental disorders as compared to fatal diseases like cancer and heart disease. Therefore, limited resources are found in Korea to treat mental illness. However, it is changing after the suicides of a well-known businessman’s son and very popular Korean actress due to depression. People begin to worry about these disorders.
Technological
Technology advancement in the production of new drugs drive this industry. As soon as the drug is developed, it is patented so that the founder can take benefits of the drugs by pricing it higher. A monopoly is created as other companies would not copy it due to the patent. However, as soon as the patent is over, the price of the drug falls and the company is unable to get as many benefits as it can when it was patented.
SWOT Analysis
This analyses considers the strengths, weaknesses, threats and opportunities of a business to make effective decisions.
Strengths
The company has specialized in the CNS division of the pharmaceutical market. It has arrived with many innovative products such as Lexapro in the market. It has been able to take first mover advantage due to smaller response times for the introduction of new products in the market. The introduction of Cipram in Korea is an example. The Korean division has been performing extremely well. The company has established itself in European and the American markets as well.
Lundbeck Korea Managing an International Growth Engine Case Solution
Weaknesses
The company is only focusing on CNS market, which is very small as compared to the entire pharmaceutical market. It has the policy of following the corporate strategy all over the world, giving little authority to country managers to make decisions according to the local conditions. As conditions in each region differ, similar strategies may not be successful everywhere. It is largely dependent on Lexapro and Ebixa for most of its revenue. In 2005, Lexapro derives 55% of Lund beck’s revenue. This dependency on these products is dangerous because the competitive advantage will be lost as the patent on these products is over.
Opportunities
South Korea is an emerging market for them. Therefore, it can be exploited to their advantage. Moreover, as an innovator, it has resources to develop drugs to the changing requirement of people. The company has the opportunity to further penetrate into the market and exploit its potential. The Switch over campaign strategy can be used for the purpose.
Threats
It is an unknown market for Lund beck. This market is strictly controlled by government which can introduce laws that can be detrimental for the business. There is also a threat that the patents agreements may change over time.............
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