In 1990. Burroughs Wellcome was passing significant resources on happening a better intervention for AIDS than what they presently had ( which is AZT ) . Some functionaries in Burroughs Wellcome feared that if Burroughs Wellcome did non diminish the monetary value of AZT by 20 % in 1990. so a recoil from the populace will negatively impact the gross revenues of Burroughs Wellcome’s other 2 merchandises ( Zovirax and Sudafed ) and any possible AIDS drug that they might invent/discover in the hereafter ( in other words. clients may halt buying the aforesaid BW’s current/potential drugs owing to the negative promotion of BW ) . Do you believe their frights are good founded? Give grounds for your reply.
In my sentiment. Burroughs’ fears that the recoil from public will negatively impact the gross revenues of its other two merchandises ( Zovirax and Sudafed ) and that of any possible AIDS drugs they might invent/discover in future are good founded.
In the present scenario AZT is the lone drug available for intervention of AIDS. The benefits of AZT have a direct impact on the patients’ quality of life ; as a consequence patients’ desire for the intervention is high. Since AZT is the lone drug which can widen patient’s life anticipation and hike their immune system. its importance to the patients is overriding. Hence. in the short run the negative promotion will non hold any impact on the gross revenues of AZT and BWC can travel in front without any farther cut in the monetary value of AZT. and retrieve portion of its past-costs and roll up some financess for investing in R & A ; D for future drugs. But since one or more drugs is expected to obtain blessing by the terminal of 1991 AZT’s timeframe as a monopolizer is likely to be a short 1.
However. when it comes to other BWC’s other two merchandises ( Zovirax and Sudafed ) in market and any possible AIDS drug that BWC might invent/discover in the hereafter the state of affairs is rather different. The negative promotion which BWC is bring forthing by keeping monetary value of AZT would decrease BWC’s repute with its clients. paving the manner for the sale of replacement merchandises by rivals. Here BWC needs to see both long-run effects of customers’ emotional reaction every bit good as the short-run economic result since every dealing influences how clients think about the company. It could be lay waste toing for BWC’s concern if the ‘apostles’ start turning off from the company and get down stating others how bad the company is and why they should non purchase BWC’s merchandises.
Analyzing the porter’s five forces. the pharmaceutical industry seems to hold seeable menaces from replacement drugs. If there are effectual replacements available. at same or similar monetary values. for Zovirax and Sudafed the purchasers might do a displacement to the replacements. Besides. several other compounds are in assorted phases of development and commercialisation for AIDS intervention and are expected to have FDA blessing by 1991. Of peculiar note. is the drug DDI ( Bristol Myers ) which displays similar consequences as AZT yet has the advantage in that it appears to be less toxic to the patients. Clearly BWC needs to be concerned about DDI. and its effects on AZT. if the preliminary consequences turn out to be accurate. So AZT’s timeframe as a monopolizer is likely to be a short one and replacements would be available for any possible AIDS drug that BWC might invent/discover in the hereafter. The challengers would capitalise on the negative promotion of BWC therefore increasing the portion of their merchandises. Buyers would do a switch because of no shift costs. Besides. since merchandise distinction is minimum. it will be easier for the consumer to compare the two drugs.
Hence. pricing AZT excessively high and making a negative image of the company may ensue in loss of its patients and disaffection of consumers.