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Value Chain

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Porter’s Five Force Analysis of Spectrum Pharmaceutical

Porter’s five force analysis is used to analyze Spectrum Pharmaceutical in the pharmaceutical industry. Porter’s five forces analysis is a method of analyzing an industry and a company’s business strategy. It uses five fundamental forces that determine competition within an industry and how a company functions within that industry. These five forces involve market forces and pricing power of the business, suppliers and customers. The first force that a company must deal with is the bargaining power of customers. In relation to Spectrum Pharmaceutical, the customers have very little power to bargain prices with the company. The products that Spectrum provides are unique niche products that the customer cannot obtain anywhere else. This gives the customers little bargaining power with the company. This makes the products that Spectrum produces more profitable for the company, but more expensive to the customer. This makes the products more expensive however, which makes them more profitable for the company. There are few substitutes for these products, which reduces the buyers leverage to negotiate lower prices. The buyers have little concentration which reduces their ability to negotiate lower prices. Due to lack of alternative products there are few substitutes for Spectrum’s products. All these reasons combined together give the buyer of the products little force to negotiate lower prices, but give the company a lot of power to maintain their high prices. The second force in the analysis is the bargaining power of suppliers. In this instance, the suppliers to Spectrum have little power to affect the price of the final product. There are several different firms that can supply Spectrum with the necessary products for spectrum to manufacture their products. This gives the suppliers little leverage to...

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