Eli Lilly
1. Porter’s Five Forces Analysis
- Threat of New Entrants.
In pharmaceutical business the threat of new entrants is relatively high. Companies forming alliances are potential rivals. Even if earlier such company was not considered to be a threat, after merging with some research and development company or forming alliance with another pharmaceutical company it would become a rival to Eli Lilly. The threat is however weakened by significant research and development costs necessary to successfully enter the business. Eli Lilly’s focus on a relatively narrow market of sedatives and antidepressants weakens the threat of new entrants, but other products that form lesser part of company’s sales such as insulin and others are exposed to high threat of new entrants. The need of obtaining certificates and licenses also weakens the threat of new entrants. Discussed above leads to the conclusion that threat of new entrants is medium.

- Bargaining Power of Buyers
It tends to be high in pharmaceutical business as main sales are done using whole sales. Institutions that purchase drugs in large quantities are considering the discounts that drug producers are willing to give and therefore are able to influence price. As long as Eli Lilly have competitors with similar products it is obvious that bargaining power of buyers is high for the industry. Buyers with smaller volumes of purchases do not influence price policy, but such buyers are outnumbered by wholesale buyers. It is also important that people purchasing drugs for themselves are usually covered by healthcare insurance and therefore are not interested in pulling price down. Yet the volumes of sales to such buyers are not significant. Bargaining power of suppliers is high.

- Bargaining Power of Suppliers
It is relatively not high. There exists possibility to switch supplier at low cost and supplier brands are not powerful. There exists a little possibility of forward integration. All of the above makes the bargaining power of supplier low. In Eli Lilly’s case it is true that the power of suppliers is reversal of the buyer’s power.

- The Threat of Substitutes
The threat of substitutes is not very high. Traditional medicine using drugs as a curing remedy is a main mean for treatment used by almost all healthcare institutions. Substitutes such as sport, yoga, alternative medicine are not very popular and unlikely to become such. However for the main product Prozac, which is an antidepressant drug, alternatives are possible because treating depression using alternative medicine, psychologist’s help and other means is more probable than treating of physical disease by similar means. The threat of substitutes is low, which is a significant advantage.

- Competitive Rivalry
The rivalry is tense in this business. However the competitiveness is rather unique in pharmaceutics. High costs of research and development hold the appearance of new rivals. It is also true that rivals are usually focused on a rather small market of specific medication. The main rivals Novo Nordisk A/S, Pfizer and Smithkline are narrowly oriented companies which however give Eli Lillys hard time producing such products as Zoloft – Prozac alternative. The competitive rivalry in the business is medium.

2. Resource Based View
- Tangible Assets - production facilities, manufacturing plant, equipment, cash, stores in over 150 countries of the world, shares of other companies of the industry.
- Intangible Assets – patents, research and development teams, technologies, brand identity, developments, shares in the research projects, worldwide experience of selling drugs.
- Organizational Capabilities – delivery system, dealer and supplier networks, global network, sales network.

3. Value Chain Analysis
Eli Lilly’s Primary activities
- Inbound logistics. Storing of raw materials requires special treatment as it deals with storing of highly sensitive chemical elements and inorganic matters. This activity is supported with technology development activities, procurement activity.
- Operations. The firm produces drugs using patented method. This activity requires skilled labour and deep knowledge. The activity is supported by technology development activity and infrastructure activity.
- Outbound logistics. The process of getting products to customers does not require special treatment and specific supporting activities. Transportation is done by usual means.
- Marketing and Sales. Company sells its products to governmental organizations and large healthcare institutions. This activity requires negotiating contracts and discussions with buyers. Very often discount method is applied. This activity is supported by infrastructure activity.
- Service. This activity is done by healthcare institutions and doctors who prescribe medicine for treatment. The firm is involved is service activity at a small extent.

4. SWOT analysis.
- Strengths
Well known brand is a competitive advantage of Eli Lilly. Patents that do not allow competitors sell same products is another strength. Global market is also a great advantage.
- Weaknesses
Worldwide performance makes management weak as board of directors is located in US and managerial decisions have to be made in different countries with understanding of local characteristics of business.
- Opportunities
Research and Development allows the opportunity to come to the market with brand new product which can become the major product of the company. It is also possible to expand the production line, the variety of produced goods therefore coming into larger market.
- Threats
The rivals may come up with a similar product which can substitute Eli Lilly’s products. Expenditures on research and development, which are significant part of company’s costs, may not bring positive results. Certain types of products form significant share of sales which makes company dependable on one or two of its products.

Developing Grand Strategy
The market is growing, new products appear, new markets open. This means that the sector is strong. Based on the previous analysis the competitive position of a company is average. In this situation the choices for grand strategy will be the following:
1. Seek underserved niches. It may be possible that some areas in the medical industry are not covered properly. May be there is a need in some particular drug or service which is yet not available on the market.
2. Increase market penetration for existing products and services. Promotional campaigns and proper marketing will help gain new markets. Possibly if going globally - new markets can be discovered in countries which are not currently covered with company’s activities.
3. Enhance and extend existing products and services. May be some consulting services may be added to existing products. Research and development can lessen side effects of existing medicine.

4. Strategic partnerships can be developed with customers. Discounts, exchange of services may be applied.

5. Exploit assets via joint ventures. Joint ventures may be formed with research and development companies, retailers, and suppliers.
6. Develop related products for existing customer base. Study of needs of existing customers and development of new drugs and medical products based on those studies is needed. It is possible that Eli Lilly can produce some medical appliances along with it’s existing products. For example sell insulin measuring devices for home use along with insulin itself.
7. Increase penetration via distributors and third parties.

Generally company should adopt growth strategy using diversification of it’s existing products and markets.

Conclusions.
Eli Lilly Company is one of the leaders in pharmaceutical business. Yet, it is exposed to dangers of being overshadowed by rivals. Dependence on the sales of Prozac and it’s patent does not benefit the company, therefore a strategy of growth should be adopted by company. It will allow company to focus on different types of products which will make company insured from the risk connected with existence of rivals ready to come up with a cheaper or more effective substitute for main types of Eli Lilly’s products. Global marketing makes growth process easier. New markets in different countries are constantly opening where rivalry is not as tense as in the US. Putting efforts to sales marketing would also benefit the company. As long as it is already good at that no significant and threatening changes will be required, just little adaptation of marketing strategy to the current conditions of the market.