Pharmaceutical Industry PESTEL Analysis
The management of a company uses PESTEL analysis to weigh the factors that can hinder or promote the industry's growth. From this PESTEL analysis of the pharmaceutical industry, it can identify how political, economic, socio-cultural, technological, ecological, and legal issues can impact the conditions of the pharmaceutical industry.
2. Background of Pharmaceutical Industry
It is crucial to know about the background of the pharmaceutical industry to do PESTEL analysis. The birth of the pharmaceutical industry dates back to the early 20th century, which was initiated with the discoveries of penicillin and insulin. Soon after that, mass production started. Thus the pharmaceutical industry flourished. The pharmaceutical industry has shown rapid growth within the past few years. The Indian pharmaceuticals market has experienced growth at a CAGR of 5.64 percent. During FY11-16, the industry increasing from US$ 20.95 billion in FY11 to US$ 27.57 billion in FY16.
3. Pharmaceutical Industry PESTEL Analysis
The PESTEL analysis pharmaceutical industry can give companies an idea about the external factors which can have a temporary or lasting impact on the pharmaceutical industry. The given list shows the effect of the external factors:
For any business to flourish, it is essential to have a stable political condition. Here are some political conditions which can impact the pharmaceutical industry :
- Most countries maintain frameworks that include guidelines about safety standards, certifications, etcetera. They also mark the banned drugs, which may cause health hazards. If a pharmaceutical company fails to follow those regulations, its business may suffer severely.
- Administrations of most countries try to gain control over the price of the drug to make it affordable for people. It may toll on the growth of pharmaceutical companies.
- Governments of some countries subsidize the pharmaceutical companies to keep the essential drugs within the commoners' reach. It helps the companies to survive in the competitive market.
The economy of any direct impacts the businesses. The pharmaceutical industry is also affected when the economic conditions of a country get affected. The PESTEL analysis pharmaceutical industry can identify the economic conditions which can affect the pharmaceutical companies :
- As the economic conditions of the countries are developing with time, the household income of people is also increasing. It may allow them some essential drugs. They may have the urge to buy costlier drugs, which were previously out of reach for many people.
- The researchers are constantly working on drug modification, resulting in more beneficial and potential drug production. As people are buying those drugs, the pharmaceutical industry is also flourishing.
- The average healthcare spending of the families is increasing. If there are aged people in a family, there are more chances of high healthcare expenses. It also includes the cost of medicines. It is also giving the pharmaceutical companies to earn better profit even after following Government guidelines about pricing.
Socio-cultural factors of any country can impact the industries within the periphery of the country. The pharmaceutical industry is not an exception, and the sociological conditions dominate it gravely. Here are some sociological conditions which can impact the growth of the pharmaceutical industry:
- The lifestyle of people has people incredibly fast yet stagnant. As a result, more people are moving towards obesity. Thus, facing health conditions like diabetes, thyroid, hypertension. The patients need continuous medication to deal with this. Hence the sales of the pharmaceutical companies are also increasing.
- As the healthcare system has improved all over the country, the number of the aging population is also growing. Hence, there is a need for more medicines for them than for the younger ones. It creates a greater demand in pharmaceutical companies resulting in their expansion.
- Many people are concentrating on having a healthy lifestyle while doing exercises, eating healthy. It may result in a decrease in the demand for drugs in the future.
The pharmaceutical industry is greatly dependent on technological innovations. The PESTEL analysis pharmaceutical industry can show how the technical conditions can affect the business :
- The pharmaceutical industry is greatly dependent on technology. The research and biotechnological innovations have resulted in the production of drugs that are good in quality and have low production costs. It will allow more people to get access to medicines that they previously could not afford.
- The drugs require proper storage conditions. Technology has made it easier to preserve medicines and transport them without getting harmed due to unpleasant conditions.
- Technology has provided pharmaceutical companies with the chance to reach more companies through campaigns. They can also deliver the medicine at the door, which has increased the reach of the companies. It can also increase the revenue of pharmaceutical companies.
Environment is a significant concern, and the impact of waste materials on the environment has worried the environmentalists. Here are some ecological issues which may affect the pharmaceutical industry:
- As the production of drugs is related to a large carbon footprint, many countries are coming up with regulations to decrease the effect on the environment. As abiding by these regulations may be costly for the new companies, they may fail to establish their business.
- The production of drugs results in the creation of different biotechnological pollutants. They may be hazardous for people's health. The company needs to take care of this waste to maintain the safety of the people.
- Like other companies, pharmaceutical companies may take up some corporate responsibilities towards the environment. They can donate money or campaign for some environmental causes, which can help them create a better image.
A nation's legal conditions do not have much direct impact on the pharmaceutical industry. However, there can be some indirect issues that may affect the growth of the pharmaceutical business. The PESTEL analysis pharmaceutical industry can help to point out the legal aspects which can work on the growth of the pharmaceutical industry :
- As pharmaceutical products are one of the essential ones, the government always uses laws to control the fraud regarding the expiration dates and manufacturing of the batch of drugs. If a company fails to adhere to the set guidelines, it may have to face legal proceedings.
- Pharmaceutical companies are mainly dependent on their database. If they get affected by cyber threats, the customer may lose their confidence in them. It can affect their business as well.
- Pharmaceutical companies should maintain strict legal guidelines while formulating the framework for their business and researches. They ensure the safety of the products. It helps them to avoid legal issues. Thus, allowing them to stay away from the high expenses of proceedings.
4. Key Takeaways
The PESTEL analysis pharmaceutical industry shows that the pharma industry has ample scope for expansion in the future. Some essential drugs may capture the market for a long time. At the same time, the government guidelines to cut off the price may impact the growth of the pharmaceutical industry to some extent. The companies can make strategies to increase the business while adhering to the government guidelines. It can help them develop their business, and at the same time, they can avoid the potential harms.
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