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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 focusing on a specific range of products or services. In the case of Pfizer, it's engaged in highly specialised areas within the healthcare and pharmaceutical sectors. This specialisation is crucial in these fields because they require extensive research, development, and specialized skills from employees. Therefore, by concentrating on a narrow range of products, Pfizer can allocate more resources to innovate and improve its offerings, leading to better health outcomes and potentially higher profits.
Furthermore, the healthcare market is significantly characterised by high research and development costs. Given that Pfizer does not compete directly with other businesses for the same products in international markets, it gains a competitive edge in pricing. By offering unique treatments, Pfizer can charge a premium in specific countries while ensuring sufficient revenue to cover high R&D expenses.
Step 2
Risks of Specialisation
Answer
While specialisation has advantages, it poses risks as well. For instance, Pfizer could become vulnerable to sudden changes in market demand. If there’s a shift to health products that Pfizer does not provide, the company may miss out on potential sales and growth. Additionally, research and development in pharmaceuticals can be a fluctuating and costly endeavour. If a particular area of specialisation fails to resonate with the market, the impacts can significantly reduce profitability and may lead to unrecovered investment costs.
Step 3
International Competitive Advantage
Answer
On an international scale, Pfizer's specialisation allows it to position itself uniquely within the global market. The company can capitalise on its status as a low-cost producer in certain aspects, which can allow for competitive pricing strategies. Additionally, this competitive advantage could mean that Pfizer focuses its efforts on mass-market products, such as painkillers, while still managing to retain a higher profit margin compared to competitors who may lack the same level of specialisation.
Step 4
Conclusion
Answer
In conclusion, while specialisation presents Pfizer with a solid competitive advantage when trading internationally, it is essential also to recognise the associated risks. The focus on specialised products can lead to substantial profits through innovation and pricing strategies; however, the vulnerability to market changes and the intense competition in the pharmaceutical sector highlight the need for sustained market awareness and adaptability.