Analyse the different type of business risks that can affect the pharmaceutical industry.
International business risks are described by all type of unfavourable external environment. This mainly occurs due to inability to predict the future and not having any alternative business plans for dealing with sudden change. Origin of international business risk is due to changes in the overall Global political and economic scenario. The degree of impact related to each business change varies from one company to another depending upon their influence in the international market.
The current business report aims to analyse the different type of business risks that can affect the pharmaceutical industry. The West Pharmaceutical Services (WPS) will be chosen for the current analysis. The impact of international business risk will be described by using the example of the above mentioned company. The West Pharmaceutical is an US-based company, which is famous for delivering technologically advanced components that are needed in Healthcare centre for better and premium quality of service. The delivery network of the company is spread all across the globe, which is highly dependent upon the international trade policies. The company has also initiated business partnership with many top biotechnology and Pharmaceutical brands across the globe. The company has also aimed to maintain diverse culture in workplace, which has helped them to improve the productivity (Westpharma.com, 2018).
The report will analyse the different type of international business risks that are faced by the pharmaceutical industry. The impact of the Global operation will be discussed in details, which is believed to have ultimate impact on the stakeholders and the client of the organization. The importance of risk management for the pharmaceutical industry will also be a major focusing point of the report. This will help to provide proper recommendations to the West Pharmaceutical Service for dealing with all feature crisis in the international market.
According to Meyer and Peng (2016), it is essential for all multinational corporations to analyse the international market environment that is necessary for predicting all type of business risks. In order to prepare proper contingency plan, it is essential for the corporation to analyse the cause, source and impact of different type of business risks.
Dyllick and Muff (2016), have mentioned about commercial business risks, which is believed to have a major impact in the international market compared to that in domestic environment. While an organisation is planning to enter the international market, it is highly essential to analyse the deal with the sudden changes. This mainly occurs due to the sudden change in the supply and demand market. The change in the exporter’s policy is the main cause of uncertainty within the business environment. The lack of information flow is also believed to be a major flaw in the export delivery system. As new company competitor and brands enter the market, there is a significant change in the demand and supply market. This is due to the sudden change in pricing policies that are implemented by the market new entrants (Gras and Mendoza-Abarca 2016).
The transportation cost is believed to be one of the major components in international business. It is crucial for companies like Western Pharmaceutical Services, which is highly dependent upon delivering their stocks in the global market to have advanced level of logistics operations. Nevertheless, the changes in the foreign exchange rate can have a significant impact upon the transportation cost. As the competitive environment in the international market is changing rapidly, a group of International suppliers are using their strength International suppliers are using their strength of quick transportation for delivery at much lower rates (Sawik 2015). The change within the import duties is also believed to be one of the major parts of commercial risks. This can affect the overall establishment of a multinational company in the foreign market. The manufacturing facilities that are implemented by the exporters also believed to have a significant impact due to the barriers in the commercial trade policies. This will increase the challenge within the competitive environment of a particular industry.
Jackson (2016), has focused on different types of political environment that can improve the International business environment. The political instability in a particular region can be a major operational challenge as it is necessary to change the business plan accordingly. The business laws that are implemented also depends on the political decisions by local government. The operation of cost of the company also depends upon the political assets that are implemented by the government. The election of a region, which results in the change of political party in power can have a major impact on the business policies. This is more vulnerable in places, where there is instability in the government as the matter of business laws are subject to regular changes. The operational cost in business also increases due to the rapid change in the external business policies. The operational risks are therefore highly integrated with the political environment of an area (Butler 2016). The delivery system of West Pharmaceutical is highly dependent upon the operation of the logistics. Due to the change in the operational management system, the company can face inefficiency in the total volume of lead production. The major challenge in the given aspect is that the company is not able to manage the operational cost, thereby causing loss of financial assets. This can have ultimate impact on the pricing strategies as the companies will be forced to increase the price. The consumer behaviour will have direct effect due to the operational cost rises. Hence, the companies may face the risk of losing customers.
The technological risk is also considered to be essential and a significant operational challenge. The technical infrastructure plays a major part in dealing with all types of major business plan. The lack of security protocol within electronic transaction process can be regarded as one of the major risks. This is mainly due to the threat from cyber criminals, who can hack essential classified information thereby compromising the confidentiality. The operational department of a company also has to enhance the technological infrastructure in order to sustain better in the international market. The business communication in define parts of the globe is also dependent upon the use of Technology. Hence, the challenge within the technological infrastructure can cause risk by compromising the overall business operations (Dunwoody and Peters 2016).
The corporate social responsibility is one of the major principles of the modern day business, which helps to ensure that the business organisation is able to look after the needs of the environment and society. In the given contact it is important to mention about environmental risk. The companies need to ensure that all the manufacturing unit are not causing any harm to the local ecosystem. This is directly associated with the reputation of an organization as the firms, who are not able to follow the guidelines of corporate social responsibility are not able to maintain the reputation of the society. There is also the risk of violating the legal guidelines that are implemented by the environmental commission (Franks et al. 2014).
The pharmaceutical companies like WPS are facing Global challenges in the form of business regulation issues. With the emerging market in the International Scale, it is essential to deal with the problems of risks from the competitors. It is also important to note that with the advancement of Technology, number of companies can incorporate new Strategies in research and development programme. This includes designing of advanced level of drugs and medical instruments that are aimed to enhance the process of diagnosis and treatment.
Mazzucato and Parris (2015), have mentioned about the quality issue in the manufacturing of Pharmaceutical products and Technology as one are the major challenge that is currently faced by the industry. It is important to note that minor negligence in the matter of dealing with the quality issue can cause major operational risk for the pharmaceutical companies. In the given note, it is important to highlight the corruption issue, which is regarded as one of the major threat in modern-day Pharmaceutical business operation. The global industry has faced loss of 300 million dollars due to corruption. This has been a major burden to the global health department, as the quality of Pharmaceutical products and Technologies have been heavily compromised (Lusher 2018).
There also have been major report of big Pharmaceutical brands bribing the doctors for recommending their product over that of the rivals. This can have direct impact on the trust level of the consumers as they will not be able to depend on the suggestion provided by the physicians. The cause of the corruption is mainly due to the fact that major Pharmaceutical brands are misusing their power in order to gain competitive advantage unethically. This is also caused due to the political system in many nations, where the Pharmaceutical brands even bribe the political parties to manage their operational functions.
They are also has been many reports about Pharmaceutical brands publishing false data to the public domain about the effectiveness of a medical drug. This can increase the risk of spreading misleading information to the public and cause greater controversy in the matter of dealing with health-related matters (Topp et al. 2017). There also has been minimum amount of investment in the operations of quality control in all major pharmaceutical brand. According to the report of DiMasi et al. (2016), the top 10 Pharmaceutical brands in all over the globe spends only 3% of their total expenditure on in the department of quality control operations. Hence, the quality issue is one of the major cause of external threats for the pharmaceutical industry.
The marketing issues have also been one of the primary cause of international risks. This is caused due to the unlawful selling by fake logo of big brands. This is also caused due to the lack of monitoring in the marketing of the pharmaceutical products. With the expansion of major Pharmaceutical brands in the international market, there has been rapid change that is responsible for reshaping the future of Healthcare services.
It is important to note that major advancement in Healthcare Technology assessment is regarded as high risk for the pharmaceutical industry. The advancement of Information Technology the Healthcare organisation are able to use sophisticated data that are collected from the market. These data are used in the advanced level of scientific research and development program that are aimed to design Complex drugs for dealing with advanced form of diseases. There has been frequent report of high level security violations within the pharmaceutical brands. Over 50% of the data are being hacked each year that contains information related to drug design of the pharmaceutical products (Sands et al. 2016). Once this information is being leaked into public domain, there is higher risk of misusing the same to manufacture poor quality and fake products. This can also compromise the reputation of big Pharmaceutical brands. There is also critical information related to the clinical trials that are done in the research labs of the Pharmaceutical companies. These are the major issues that need to be dealt with as it can cause violation of the legal protocol of the company.
The political risks are considered to be one of the major element of international business. In the context of the pharmaceutical industry, which is currently in a dynamic state due to increase in the total number of partnerships, mergers and acquisitions, it is important to properly assess the external political environment. The price of medicinal products and drugs and highly dependent upon the government standards. In Singapore, the government has maintained the Standard Drug List (SDL). There are standard protocols that are implemented, which contains detailed information about the legal permission level of each substance within each type of drugs. The WPS has to strictly follow the legal procedures of drug manufacturers and machinery as they are planning to initiate their market in Singapore (Moh.gov.sg 2018). This is the major issues in the given context is direct legal violation of drug manufacturing.
Patent is an important element in the pharmaceutical industry which is regarded as intellectual property. This aims to protect the copyright of a product so that it cannot be illegally manufactured by any other company without the permission of the discoverer (Wang et al. 2017). Patent in the pharmaceutical industry is considered to be symbol of innovation. This intellectual property rights of the patent provide permission to the owner to sell and market the product. Nevertheless, there is a controversial relationship between the intellectual property laws and the provision for the new drugs. The major risks that are involved in the given context are due to the high pricing of new drugs that are introduced in the market. Due to the legal protocols of patent it is not possible for another brand to manufacture the same drug. Hence, the manufacturer of the new drug takes the advantage of monopoly market to gain maximum volume of profit in a short span of time. There are many clear cases of human rights violation, where people are not able to purchase higher price drugs (Millum 2008).
The intellectual property is regarded as one of the valuable resources for all type of pharmaceutical industries. Nevertheless, the recent challenges within the Healthcare system that arises due to the emergence of new diseases has caused major risk in the international business. The companies are often forced to give away their intellectual property right in order to reduce the price of a drug. The example of ulcer treatment drug can be given in the context. In 2004, one of the American drug manufacturers is forced to give away patent of the ulcer drug just three years after its launch. This was mainly due to the pressure from the generic companies, who were attempting to prepare more advanced level of drugs. Hence, there was a greater risk of losing competitive advantage while maintaining the intellectual property rights. As the genetic industry related to the pharmaceutical companies are becoming more aggressive, multinational corporations like WPS are facing more challenge in maintaining their intellectual property right. There are frequent complaints of violation of human rights in getting proper medical service as the company is posing higher price in the patent drugs (Ma et al. 2015).
It is also important to mention that intellectual property can also be violated if essential information about the manufacturing of drugs is being leaked into the market. The pharmaceutical companies in the current days are facing high level of threats from external sources, where they can lose the credit of introducing a new drug into the market.
Till now the report has discussed various type of international risks that can be encountered by the multinational corporations with special focus on Pharmaceutical brands like WPS. The main strategy that can be implemented in order to overcome the external threats and business risks is to access the external condition of the market. The PESTEL analysis tool can be used to analyse the political environment in Singapore, which will help to identify the respective threats and risks that the company has to overcome. It is also possible to understand the economic environment along with the technological infrastructure that can help in the business operation function. This process can be executed by collecting essential information related business environment in Singapore (Hopkin 2017).
In initial stage, it is recommended to have a slow start in international trading transaction. It is, therefore, possible to identify all type of small issues in operational function that can be resolved in quick process. Peltier (2016) has added that in order to deal with the security issues of information being leaked in the public domain, it is essential to make small financial transaction in the international market. In order to expand the range of international trading, it is essential to establish effective business partnership with local suppliers of an area.
It is also important to mitigate the risk of foreign currency exchange. Frequent changes in the demand and supply rate within the international market has resulted in fluctuation in the values of international currency. Terzi et al. (2015), have recommended dealing with the logistical risk, which is essential in the context of buying goods from local suppliers. It is crucial to have diverse range of suppliers, which will provide enough options to the multinational companies to reduce the risk of product shortages.
In order to deal with the regulatory risks, it is essential to understand the local business laws implemented by the government. The companies have to change their business plan according to the local regulations. This will help to ensure that they can gain popularity among local consumers and secure their position in the international market.
Conclusion
In the concluding note, it can be said that International Business risks are mainly caused due to uncertain political and economic environment in the Global market. It is important to classify different type of business risks in the form of commercial, political, technological and environmental. All these risks have direct impact on the Global operation of a company. In the given context the pharmaceutical industries are facing a threat due to increasing challenge in the competitive environment.
There have been cases of corruption that has threatened the reputation of big pharmaceutical companies like WPS. In the given context it is highly recommended for the company to strictly follow the ethical guidelines of selling and manufacturing drugs and other technological products related to health care service. It is also essential to follow the legal protocol related to Patent violation. This will help to ensure that the price of drugs and other health care products are not high.
It is also recommended to analyse the external business environment of Singapore, which will help them to predict all type of future crisis situation that can compromise upon the business performance of the nation. It is also important to strictly abide by the ethical principles that can help the company to gain social reputation within the brands of Singapore
References
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