Sunday, July 3, 2011

Macro environment

The above macro environment analytical chart sourced from Pricewaterhouse (HERE)

Marketers ultimately have to ensure consumption of goods and services in the environment - outside of the company. The environment has a major influence on the marketing outcomes.

Marketing of pharma goods is affected by factors in the
a) macro environment
b) micro environment
c) internal environment

The marketing environment graphic from here.

The macro environment refers to the external factors that are outside the control of the firm. These factors are often analysed under the acronym: PEST

P for political
E for economic
S for social and cultural
T for technological

The PEST happenings shape the marketing approach and results significantly.

The winds of change (ie., enhanced media focus and calls for transparency) are blowing strongly on the healthcare sector. For eg., on page 2 of Deccan Herald (3.7.2011) an entire page is devoted to the pharma retail scene, with examples on how banned drugs are being sold and the need for better antibiotic policy. The DoP has also come out with a marketing code for pharmaceuticals in India. DoP (Department of Pharmaceuticals) has invited comments on the new code, and are seeking to make it a law if voluntary compliance from Indian pharma sector is not satisfactory. These political initiatives are certainly important - these have the potential to alter marketing outcomes emphatically.

P in PEST refers to the political (including legal) factors that affect marketing policy, strategy and results of a pharma firm. Today the 2 G spectrum issue shows graphically the impact that political and legal forces can have on enterprise fortunes.

E in PEST is the economic dimension of the macro environment.

The rising purchasing power of Indians has significant implications, since healthcare spend comes just after household routine provisions and clothes. Most of the medicine cost is borne from personal resources. The trend of Govt. pharmacies or other institutions, which provide free medicines or low cost medicines is another economic macro environmental factor. NPPA (National Pharmaceutical Pricing Authority) is a political, legal and economic factor, decisions of this body influences pharma enterprise fortunes.

S in PEST are the social and cultural forces of change

In China, the market penetration of modern medicines is lower than that of traditional Chinese medicinal products. In India, although allopathic medicines have good market penetration, the potential is higher, and traditional Indian medicines have a lesser market value.

Many other social or cultural factors influence market habits for consumption of healthcare products. For eg., Deccan Herald (page 2, dated 3.7.2011) has highlighted the growing mistrust between doctors and patients. There are many people who prefer to seek guidance of an outstation familiar doctor rather than the neighbourhood doctor, and patients look at medical advice for diagnostic tests or emphasis on particular brands prescribed by doctors, with a sense of suspicion. Social and cultural attitudes affect healthcare and pharmaceutical marketing outcomes.

Technological (the T of PEST)trends cause seismic shifts in market trends. Today, biogeneric market is the new frontier in medicine marketing. In 3 years to come, a significant value can be expected to come from biogeneric product range. It is a new biogeneric vocabulary that is gaining ascendancy in pharma, and getting traction. EGA (European Generic Medicines Association) offers a handbook on biogenerics for informational purposes. This organization is also working as a lobbying and change agent so that European pharma companies have generic products in their basket, rather than concentrating only on 'innovator medicines'. In India, the biogeneric queen company is Biocon - it is a billion dollar (Rs. 4000 crores plus sales value) annual sales turnover firm. The business model of Biocon reflects the importance of technology and its impact on financial results of a firm.

The micro environment refers to the outer factors that are more controllable (than the factors in macro environment) for a pharma firm. For eg., distributor behaviour, local regulatory agencies, customers, intermediaries etc.

The components of the internal environment of a company are: men, machines, capital etc. These aspects are well in control of the management.

Marketers also use other acronyms to understand the macro environment:

PESTEL: is the acronym of Political, Economic, Social, Technological, Environmental and Legal aspects of the macro environment that affect a pharma company's fortunes.

STEEPLE: expands to Social, Technological, Economic, Ethics, Political, Legal and Environmental aspects of macro environment. This framework is more important for charities and could also be considered for pharmaceutical companies since these enterprises are supposed to operate in an ethical environment, with a philosophy of ethical sales.

EPISTLE stands for Economic, Political, Information, Social, Technological, Legal and Environmental factors of the macro environment. The dimension of Information is given an exclusive focus. Information of/from the macro environment is said to be of high value for enterprises using EPISTLE framework for scanning the environment. The EPISTLE framework is useful for share brokerage firms.

STEEL PIE is the last and not so popular framework of macro environment analysis, it stands for Social, Technological, Environmental, Ethics, Legal, Political, Information and Economic factors. STEEL PIE covers all the points of macro environmental analysis.

ONE CAN CONSIDER MEDIA as a special macro environmental factor, given the fact that it is all pervasive and highly influential.

In the early 1990s and even earlier, macro environmental analysis was of little value to pharma firms. You needed to get a license for a brand or molecule, have the copycat (reverse engineering technology) procedure to manufacture, and then market it by employing MRs. Today, the situation is different, marketability of a pharma product or products of a healthcare enterprise, needs to have macro environmental analysis to be done continuously, to see how the political, legal, social, cultural, technological, environmental, ethical, economical, informational and other factors play and impinge on the firm's functioning.

In fact, the bigger the enterprise, the more it is impacted by macro environmental factors.

API (active pharmaceutical ingredient) manufacture was a hot trend up to late 1990s, however, availability of Chinese material proved to be a game changer. Today biogenerics is becoming hot ... similarly, media, legal and political aspects are increasingly influential. It is the era of macro environmental factors in pharma marketing today!

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