There are five forces identified by porter their relevance will be necessary for evaluating companies identified in the pharmaceutical and tobacco industry in the Middle East.
CAD Pharmaceuticals Middle East pharmaceutical industries LLC
The company is located in Riyadh in the KSA, a state of art facility for the manufacture of active pharmaceutical Ingredients (API). The company is a leading facility in the Middle East and producing commodities which are needed for now, and the future has the five forces very important to it. On competitive rivalry, the impact is not huge for this company since it is renowned as a leading product developer in APIs and following cGMP standards in making products. As such it has a competitive edge over similar industries in the KSA. To contain competition it has joined alliances with other companies such as SPIMACO, ACDIMA, Dishman, and Takamul. The bargaining power of suppliers is low due to the monopoly of the company in the KSA. Monopoly has been attributed to huge control over suppliers which means companies can shift the prices as they wish (Posner 1978). The same impact is on the customer bargaining power as consumers have little to no impact save on the kind of product they prefer (Coe & Hess 2005). The effects of substitute products and new entrants are null to this company as a leading product producer and is likely going to be the leading company in MENA by 2020 (CAD, n.d.). The profits margins are high due to monopoly and market control.
British American Tobacco Middle East
It is part of the larger company of the British American Tobacco, but this branch is headquartered in Jumeirah Lake Towers in Dubai. It has a global presence but is subject to stiff competition in the Middle East because the product it produces has other brands that sell in the region too. Competitive rivalry is high in the Middle East, and the tobacco industry has been ranked as the top growing industry in the region. Tobacco international line, Wael Ereidi international, Akiki Cigars, Dubek ltd, Manchester cigarettes are just but a few of the many competitors in this region. Customers can easily switch to other suppliers and hurt this entities business which has even led to the smuggling of tobacco in this region (Nakkash & Lee, 2008). The suppliers are many hence the company has little power influencing prices, and the customers have very high bargaining power. The industry has been described as growing like fire hence entering into the industry seems pretty easy with the current makers and distributors mentioned and the numbers still growing hence the threat to novel entrants is real (Gilmore et al 2015). There are over 760 distributors and makers of cigarettes and other tobacco products in this region hence switching or substituting products is easy save for renowned brands by specific players (Lahrichi, 2015).
References
CAD (n.d.). Become the most preferred partner for APIs. Retrieved fromhttps://www.cadmiddleast.com/en/cad/vision-mission
Coe, N. M., & Hess, M. (2005). The internationalization of retailing: implications for supply network restructuring in East Asia and Eastern Europe. Journal of Economic Geography, 5(4), 449-473.
Gilmore, A. B., Fooks, G., Drope, J., Bialous, S. A., & Jackson, R. R. (2015). Exposing and addressing tobacco industry conduct in low-income and middle-income countries. The Lancet, 385(9972), 1029-1043.
Lahrichi, K. (2015). Tobacco industries in the Middle East are spreading like cancer…and here’s why. Retrieved fromhttps://www.albawaba.com/business/tobacco-industries-middle-east-are-spreading-cancerand-heres-why-682936
Nakkash, R., & Lee, K. (2008). Smuggling as the “key to a combined market”: British American Tobacco in Lebanon. Tobacco control, 17(5), 324-331.
Posner, R. A. (1978). Natural monopoly and its regulation. J. Reprints Antitrust L. & Econ., 9, 767.
So what are the key concepts from the course text that can be applied?
