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Assess the ways in which specialisation might give a business, such as Pfizer, a competitive advantage when trading internationally. - Edexcel - A-Level Business - Question 2 - 2017 - Paper 1
Question 2
Assess the ways in which specialisation might give a business, such as Pfizer, a competitive advantage when trading internationally.
Worked Solution & Example Answer:Assess the ways in which specialisation might give a business, such as Pfizer, a competitive advantage when trading internationally. - Edexcel - A-Level Business - Question 2 - 2017 - Paper 1
Step 1
Specialisation and Competitive Advantage
Answer
Specialisation refers to a business concentrating on a specific range of products or services. In the case of Pfizer, the healthcare and pharmaceutical market is notably dominated by a few large multinationals, which is underlined by the record year in 2015 for global healthcare mergers. This concentration allows Pfizer to leverage large amounts of research and development as well as specialist skills, enabling them to innovate effectively and develop specialized medicines.
Additionally, specialisation provides Pfizer with a competitive edge by allowing them to charge premium prices for their unique products in their respective markets, such as specialty medications, which are not widely available.
Step 2
Global Revenue Opportunities
Answer
To maintain sufficient revenue levels, healthcare companies like Pfizer often need to expand internationally. By specializing, Pfizer can target countries where there is significant demand for their specific healthcare products. This opens up approximately 70 additional markets with distinct needs and preferences, allowing Pfizer to increase its market share worldwide, thus enhancing profitability and scalability.
Step 3
Avoiding Direct Competition
Answer
Due to specialisation, Pfizer avoids direct competition with other pharmaceutical businesses that offer similar products. For example, they may not compete directly with firms like AstraZeneca within the same market for certain medications. This absence of direct competition enables Pfizer to establish a strong market position and gain a competitive advantage by pricing their products favorably in specific countries.
Step 4
Risks Involved in Specialisation
Answer
However, specialisation can also render a business vulnerable to fluctuations in market demand. If Pfizer does not diversify effectively, they may miss out on potential health product markets that experience sudden growth. Potentially, economic downturns affecting specialized health products could negatively impact their profitability. Therefore, while specialisation can foster significant advantages, it necessitates careful evaluation and potential diversification strategies.