Introduction
Genzyme’s focus on orphan drugs has a considerable impact on its competitive edge. The biotechnology industry requires huge capital investments, which accounts for the fact that most investors prefer selecting cheaper industries. Moreover, many companies do not venture into this business because of the high risk that it presents. The target market is rather limited and includes less than 5 percent of the world’s population (ranging between 10,000 and 200,000 people globally for different diseases) who suffer from rarely occurring health conditions. In this light, competition cannot be viable and the possibility of the appearance of competitive drugs is reduced to a minimum. All these factors allow Genzyme to create a monopoly with a low level of competition explained by marked exclusivity (Franco 2013).
Since the company enjoys relative autonomy for its product, the bargaining power of customers is undermined: patients suffering from rare diseases have to deal with unceasing pain and high risks of premature death, which makes them accept all options of treatment. Thus, the company had an advantage in pricing the products at its sole discretion (Drummond & Towse 2014).
Innovational management
Production of any kinds of drugs requires significant expenses and time. In the case of orphan drugs, specialized technology, resources, and competencies are required to achieve success, which implies that the resource base of the company has to be expanded. The company must employ highly competent specialists for development, production, and clinical trial of medications to avoid losses in case of failure (Franco 2013).
The biotech company should also bear in mind that it needs a ready market for its products as the high costs of production may affect market performance. Thus, such companies also have to invest much money in market research to find their niche (Franco 2013).
Genzyme’s focus on orphan drugs seems to make sense if we analyze the company’s performance over the recent years: it features a high return on investment and revenue that allows conducting advanced research and developing production technologies. The company has been placed on the list of the most respected enterprises in the US (Drummond & Towse 2014). Aside from minimal competition, the prosperity of Genzyme is explained by a higher frequency of rare ailments. The strategy is promising as such patients are ready to spend any amount of money to improve their condition.
Genzyme seems to have a long-term strategic intent consisting of diversification of the market (through the production of other medications) that would ensure future financial sustainability.
The success of the Genzyme largely depends on its diversification strategy as it allows attracting more customers. This way, the financial turnover of the company, as well as the division of labor, can be increased. It will contribute to Genzyme’s productivity through the minimization of costs. However, the major disadvantage consists of a large quantity of resources diversification requires. Moreover, additional costs can be incurred since the company will need specialized labor provided by high-quality professionals. Venturing into other areas of medicine also implies a higher level of competition, which can also harm the company’s current revenue (Drummond & Towse 2014).
Conclusion
Despite difficulties that Genzyme may face entering new markets, it still has a great number of opportunities to enhance its performance. First and foremost, it should consider offering medical services to customers along with rare drugs as most of such patients are in need of close medical attention that cannot be provided by other health care organizations. In addition, it could also be profitable to invest in the development of new technologies and equipment (e.g. cheaper MRI). This approach will diversify the company’s activity, which is a good way of boosting its performance.
Reference List
Drummond, M & Towse, A 2014, ‘Orphan drugs policies: a suitable case for treatment’, The European Journal of Health Economics, vol. 15, no. 4, pp. 335-340.
Franco, P 2013, ‘Orphan drugs: the regulatory environment’, Drug Discovery Today, vol. 18, no. 3, pp. 163-172.