Analysis Bristol-Myers Squibb and other pharmaceutical companies have very limited space for the development of competitive advantage. This is due to the limitations set in patents available for new pharmaceuticals. Most chemicals in pharmaceutical products have an equivalently functional substitute making it possible to have multiple products on the market that have identical uses and outcomes. This being the case, pharmaceutical companies can’t rely on one particular product to provide competitive advantage.
Resources and Competencies| Value| Rarity| Imitability| Organized| Competitive Advantage? | R & D| Yes| Yes| Yes| Yes| Sustained| Brand Name| Yes| No| No| No| Parity| Product Diversification| Yes| No| Yes| Yes| Temporary| Research and Development Bristol-Myers Squibb’s greatest competitive advantage comes from their Research and Development (R & D). With nearly 40 compounds in development, a network of research facilities around the globe, and an annual R&D budget of more than $3. 58 billion annually, Bristol-Myers Squibb’s organization ranks as one of the premier R&D organizations in the industry.
It put 17% of its sales into Research and Development for 2009 which is 11% higher since 2007. This creates a great deal of value for the customer because it shows that they are dedicated to developing products that will provide excellent health benefits. This is rare because there are only a handful of large, research-based pharmaceutical companies willing to put such a large amount of annual sales into R & D. Merck, a research-based company, put almost 20% of their sales into R & D but Bristol-Myers Squibb’s other competitors like Johnson & Johnson and Proctor and Gamble Pharmaceuticals put only 1. % and 2. 6% of annual sales into R & D, respectively. This is because it is difficult to imitate research-based companies. Research-based companies have to focus on research as the driving force of their company. The market share for these companies relies on being able to put out newer and better products than the competition. Since Bristol-Myers Squibb’s is organized in this way, it has been able to keep the pace very well making it one of the largest research-based pharmaceutical company in the world. Brand Name
Bristol-Myers Squibb’s gains competitive parity from its brand name in that it has a good reputation for creating products that work well and are safe. This provides value to the customer because they know that the product was heavily researched before it was marketed to the general public. However, this is not rare among firms in this industry as all new products must be cleared by the Food and Drug Administration before it can be marketed which gives consumers a certain amount of security when choosing a product regardless of who produced it. This also means that it is somewhat easy to imitate.
Once you get past the start-up costs, if you produce a product that is not already patented and is approved by the FDA, your product is just as good as the competitors. The reason for the lack of rarity and ease of imitability of the brand name is that, like other pharmaceutical companies, Bristol-Myers Squibb does not push the brand name but rather the name they have assigned to their product. The company’s name does not appear in any of its product’s advertisements. This being the case they must diversify their product line. Product Diversity
Since researching new pharmaceutical products takes a great deal of time, the only way to keep the pace in the research and development department is to work on many different products concurrently. In addition, if you create a medication or treatment that eradicates the disease targeted, there is no more use in further research into that disease. This means companies must branch into similar areas. Bristol-Myers Squibb extended its product lines into areas such as rheumatoid arthritis and chronic myelogenous leukemia providing value to the company by increasing its customer base.
This is not a rare practice, as all pharmaceutical companies at some point will have to diversify in order to continue to compete. It can, however, be difficult to imitate as a very large investment would be necessary to start a new line of products into a new sub-industry. For research-based companies that already have a large investment into R & D, the impact will be lower but still significant. As this is a necessity for research-based pharmaceutical companies, Bristol-Myers Squibb is organized to exploit this competitive advantage as it has done in the past.