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Before taking a decision to enter Nigerian market, external factors that can influence the successful implementation of the entry strategy must be identified by Topicalcare Company. Such factors are Political, Economic, Socio-Cultural, Technological (PEST analysis) (Porter, 1989). Competition and industry factors, such are competitive rivalry, threat of new entrants, power of suppliers, power of buyers and threat of substitutes (Porter's five forces) have to be taken into consideration. Finally, existing opportunities and threats have to be investigated.
The current economic situation of Nigeria is very unstable.
Despite Nigeria’s entry into the many other African markets, economic factors negatively impact pharmaceuticals sales due to lack of consumer confidence, high unemployment, high volatility of interest rate and inflation (Erhum et al, 2001). Nigerian pharmaceutical market had been traditionally as a capital intensive industry, which made entrepreneurs wary to enter the market. However, due to recent liberalization policies, the more and more entrepreneurs are willing to invest in the industry, which has increased internal competition.
This in turn has forced the older companies to re-evaluate their position and come up with innovative strategies to market their products, which also hold true for the new players entering the market. This has in turn led to a more flexible form of organization than what was present in the past. Another distinguishing feature of Nigerian pharmaceutical market is the high number of small family-owned companies. Their presence introduce specific nature of competition in the Nigerian market, since small companies with established brand identities might be more flexible to the shifts in nature of demand, than their bigger rivals.
The pharmaceutical industry in Nigeria is a very dynamic industry which is prone to continuous and many times unexpected changes. This is due to the rapidly changing Nigerian economy which has a direct affect on the sales potential. A stable and balanced economy would allow the firms to be able to accurately forecast the various drug trends, which would enable them to reach the market in time. Nigeria is seen to develop its chemical and pharmaceutical sectors in accordance with ‘Porter’s Diamond’ theory as shown in Figure 3. 1 (Porter, 1989).
The global chemical industry was developed as a result of a strong need for chemical products necessary to respond to innovations in the scientific and manufacturing arenas, which gave birth to the pharmaceutical industry, although Nigeria is a big domestic market that suffers from a lack of raw material (Jacob, 2007). A good understanding of the four factors forming the Diamond demonstrates/explains the dynamics of this sector. Factor Endowment: a) Basic factors: Nigeria is a not a landlocked country (93,290 km? with 1,520 km? of water).
The availability of a coastline increases modes of export. Its central location in Africa allows it to widely communicate with its neighbours. Firms are mainly located in the south, creating a corridor from West Africa to North Africa. Moreover, the neutrality of the country in world affairs gives it an advantage for doing business regardless the position of its trade partners. b). Advanced factors: The availability of Oil and Gas resources in Nigeria has pushed the country to invest in the chemical industry through innovations as well as formation of highly skilled labour (Erhum et al, 2001).
Therefore, the abundance of exceptional chemical resources created a platform for the development of the pharmaceutical industry, which has always been strongly supported by: (i) high skilled scientists and the professionalism of the workforce able to transform quickly an idea into a fully developed product or service which enables them to innovate and respond rapidly to changes in internal and external environment, and (ii) the high expenditure on R&D – almost 25% of Africa’s research expenditure- based on modern technology is from Nigeria which makes the country a pioneer in scientific and technological innovation within the African standard. 2) Demand Conditions: This can be expressed through the social factors such as Human Development Index, for example, Nigeria is number 29th in the world with an index of 0. 532, 59% of literacy rate with 10 years school life expectancy, which explains the demanding behaviour of the Nigerian population (Omar, 2005). High spending on health if compared with other African countries ($857 per capita: 2nd in the continent) i. e. high quality product, has increased life expectancy (49.
86 years), hence the growth of the population 3) Related and Supporting Industries: TopicalCare being one of the first companies to develop the chemical industry in Africa has helped to develop a powerful competitive advantage in the Nigerian pharmaceutical sector (Jacob, 2007). The similarity of the two industries (chemical and pharmaceutical industries) has created a cluster, which contributes significantly to the Nigerian GDP (12th most important industry sector) and permits easy flow of resources between the two industries (Ritta & Trist, 2001). This is a competitive advantage that benefits the productivity, profitability and extension of valuable knowledge.
4) Firm Strategy, Structure and Rivalry: The emphasis on high education in science and chemistry was the basis for the Nigerian pharmaceutical industry and the enhancement of internal competition (Erhum et al, 2001). TopicalCare, for instance is counted among the top ten pharmaceutical companies in the country. This has created internal rivalries which encourage competition and innovation. Nigeria was known as a problem country, and in 1980s, according to the health minister almost 70% of drugs in the country were fak,w hich cast a huge negative impression upon the country, with almost all the African countries banning Nigerian drugs (Erhun et al, 2005). The pharmaceutical industry faces the clallenges of unchecked and unregulated flow of imported drugs, which also have many fake products in them.
In fact, almost all successful brands are prone to attack by counterfeiters and drug smugglers (Jacob, 2007). There is a major problem with counterfeit pharmaceuticals in the country and is known as a haven for such products. The pirating agencies market products that are expired and even some fake drugs which are unsafe for human health a dirt cheap prices. The ease of piracy clearly suggest a tendency to avoid duty due to the marked lax in law enforcement and policy regulation related to drug laws (Henisz, 2000). The crux of the matter is that drugs have come to be treated as just any other item of merchandise in Nigeria and are traded as such.
However, as sated by Omar, (2005) a manufacturer is better off in the long-run and that the odds favour him over the importer in whatever segment of the market. The problem of faking affects all types of brands that are both locally manufactured and imported. The faking is mainly on nationally advertised/promoted brands which attain the level of marketing success. However, it is less rampant on local brands because hardly do such brands owners invest enough resources on advertising and promotion of their brands in order to attain such status of success. It is for this reason that only successful locally manufactured brands of multinationals are more susceptible to faking e.
g Panadol, Halfan and Metholatum Balm (MAN Pharm, 2006) On the other hand, successfully promoted brands of foreign based manufacturers are very much more prone to being faked. Total drugs manufactured in Nigeria for year 2005 were worth $150 million and that it represented only 43. 4% of the market segment (MAN Pharm, 2006). As this represented 43. 4% of locally manufactured drugs, the total worth of locally manufactured drugs was $346 million. The over the counter (OTC) market was estimated to be about 85% of the total pharmaceutical market (MAN Pharm, 2006). The balance constitutes the ethical market which are drugs dispensed in public and private healthcare facilities.
In as much as the OTC market is motivated by self - treatment, the market is best classified according to therapeutic groups. In Nigeria, fifteen therapeutic groups have been identified, with dressings and medical consumables constituting the 16th group as shown in table 3. 1 (Erhun et al, 2005). The total market size from the demand point of view was about $900 million (MAN Pharm, 2006). Out of this estimate, PMG - MAN estimated that the local manufacturing component was 25% in 2004. However, from other data it was estimated that the local manufacturing component of the pharmaceutical (not of total Healthcare Industry) is now about 40%. Accordingly, the import component of the pharmaceutical industry is the balance of this estimated size.
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