Tuesday, January 31, 2012

FDA Approval And Drug Companies

We have talked about patents on drugs and the market environment for pharmaceutical companies in one of our most recent classes. I saw an article today that was posted on the NY Times (click here for link) saying that the FDA just approved a drug that will treat the underlying cause of cystic fibrosis. According to an article on the same topic on the Huffington Post, the drug will cost a whopping $294,000 per year for treatment for a single patient. As was stated in the article, this will place the drug company (of which now has two FDA approved drugs on the market) among the most expensive prescription drugs sold in the U.S. These specialty drug makers are known to charge $300,000 or more for drugs that treat very small groups of patients. It is a good example of how all the research costs need to be paid for by drugs that end up in approval. What do you think about this price point, is it simply just business?

Monday, January 30, 2012

First Mover Advantage


In a market characterized by high barriers to entry or increasing returns to scale, the first company to introduce a new product or innovation can gain a substantial competitive advantage which is difficult for competitors to overcome. This is referred to as first mover advantage. Some of the largest advantages of being first comes from creating the standards and rules for that innovation. Additionally, consumers will often remember the first brand to enter into a new market category which is priceless in the marketing world. So long as the first movers have the right set of competencies and organizational practice, the first mover can reap the returns from being in the right place at the right time.

Comparatively, A 1993 paper by Peter N. Golder and Gerard J. Tellis suggested that the progression of an idea and new product follows this progression: Innovation > Product Pioneer > First Mover > Fast Follower. The results of a study conducted by the group, found that forty seven percent of all market pioneers ended up failing and the majority of the remaining, had a small market share. Instead, the authors suggest that it is more beneficial to be in the "Fast Follower" category in order to capitalize on others mistakes. Take Amazon.com for example, they were a follower in the market behind books.com but was able to take the market by storm based on their competencies and innovation.

I believe that there is a distinct first mover advantage, however, it is largely dependent on the market need and how quickly the idea is adopted. In order to be a successful first mover, you must have a well thought out business plan that has strategies developed for any issues that may arise. Additionally, the company must be able to adapt quickly to the markets needs in order to properly capture all potential profits.

Tuesday, January 24, 2012

The iPhone Economy

Check out this interesting video from the NY Times. While I agree with this video for the most part, I have seen a number of companies bringing back shops to the mainland US due to rising shipping costs.

http://www.nytimes.com/interactive/2012/01/20/business/the-iphone-economy.html?ref=business