Biotechnology
Over the years, companies and governments have been faced with the challenge of minimizing the costs in the healthcare sector. Among the strategies, the basic concept has been to slow down the pricing of drugs and other healthcare products. In the United States of America, this is an issue at the central talk of the famous Obama care. Biotechnology companies, especially the small ones, have had their share when it comes to facing the challenge of managing prices through bargaining power and other strategies. The biotechnology companies have made a massive stride in the consolidation insurance businesses. This means that small businesses in the biotechnology world have made this a factor that helps them improve and increase their bargaining powers. The biggest stumbling block has always been the pharmaceutical companies who possess huge insurance and bargaining power to talk off some prices and control the same. Through strategies such as the process of government involvement, some buying outs have been made so that such small companies can also have a way to bargain for prices. Through such government processes, the pressure is put on the relevant situations so that process can be bargain able with the great cover taken for the same. The same has enabled the small biotechnology companies to be able to have some significant distribution representation that, on top of that, helps in consolidation and corporation processes. With the same, they can have a presentable voice that is very effective during the pricing process. Despite these changes, it is always very significant to consider the only big issue at hand, which falls under R&D. With this issue, uncertain payoffs are frequently realized. This means a lot of evaluation has to be done seriously as if it was large capital investment. In this case, the only factor is that this has to be considered like the investments that are good only when they bring and create value for small businesses. A key factor of operating numbers is also a consideration that pushes the bargaining power among the biotechnology companies and their suppliers in the market. This is the story behind the diminished pricing power story. In the case of biotech companies that have not established their authority in the market, these numbers back up the same story. These small entities’ operating metrics show that the same effect revenue growth, which us the rising consideration of power in the bargaining table. The rise of space in the biotech industry means many of the main stakeholders in the same industry. Many industries are only the rise regarding biotechnology, which explains the change of things from back in the years.
In this industry, R & D processes are mainly used to help in the generation of drugs, especially those that have to be approved by the FDA. This also applies to the specific ones that have to be sold through the same distribution channels. What is seen here is a difference that only scientists can be able to understand. However, this is becoming very irrelevant since most of these departments that deal with R & D have been poaching other territories. The bargaining power, in this case, is lost from the instant mistakes. One, a lot of time is spent on researching the small biotech companies. This means a lot of money is lost, and the small companies put themselves in a riskier place than the pharmaceutical firms that hold the bargaining power in this area. Therefore, these pharmaceutical companies are keen on the life cycle differences in the industry rather than the business differences in the companies. Due to the stress in managing their powers to bargain, many companies in the biotech industry have been pushed because they are smaller than their counterparts. Due to this, they have even gone further to blur their line between the biotechnology world and pharmaceutical companies. Some of these companies have resolved to call themselves biopharmaceutical enterprises. For most of them, pricing and money machine is the factor towards this growth. In some significant ways, the companies are submerging high pricing issues by seeking a decisive end to bargain. This is because some pharmaceutical companies are majorly enjoying a sky-high operating margin than the small biotechnology enterprises. This is made possible by the fact that the same companies rely on accounting that makes and treats the R&D as an operating expense. This is even though this is the most significant capital that makes these firms possess. This is so many ways, depresses the reported profits and margins that they have.
Research shows that both buyers and sellers extract surplus from a strategic alliance agreement. However, it is essential to note that this surplus division between the buyers and sellers mainly depends on these parties’ bargaining power. Different factors affect the weakness or strength of the party’s bargaining positions. One of these factors is the relative size between the biotechnology firm and the pharmaceutical company. Differences in the size of the firms affects the bargaining positions of the companies. When dealing with large pharmaceutical companies, small biotechnoloaffectanies tend to be at a disadvantage when it comes to the bargaining power. This is because the large pharmaceutical companies have higher bargaining positions.nces in this case are mainly formed and bent to rules that favor the large pharmaceutical companies. When dealing with large pharmaceutical companies, the small biotechnology companies are acquired entirely. The contract terms referring to asset purchase, acquisition, and equity stake tend to favor the large pharmaceutical companies. In such cases, the buyer of the R&D services have a higher bargaining power that then sellers of the service. The size of a business tends to place significant final constraints on a firm. Large pharmaceutical companies in most cases tend to be less financially restricted than smaller companies. A small biotechnology company or startups tend to operate under strict economic limits. Large pharmaceutical companies often have public statuses which makes it easy for them to access the financial market. This bears on its financial constraints. Another factor that affects the bargaining power of biotechnology companies that provide the R&D services to large pharmaceutical companies is the entity’s region of operation. The region of a firm’s place of operation is a significant variable to put in consideration since there are differences that exist on technological levels and market conditions depending on regions. The link between bargaining power and regional location of the small biotechnology companies results from the differences in stock markets. Small biotechnology companies find the stock markets high since such firms are often seeking to be financed. In the United States for example, the exchange rates are best suited for larger biotechnology companies. The number of a firm’s previously contracted strategic agreements is yet another factor to consider when it comes to bargaining power under strategic alliances. Large pharmaceutical companies often have a higher number of contracted agreements than small biotechnology companies. The familiarity with contract terms favors the large pharmaceutical companies giving them a better bargaining power than the small biotechnology companies. In the case of biotechnology companies however, firms that have knowledge regarding strategic alliances tend to be in a position to develop more advanced and new products in allknowirms that do not have adequate knowledge regarding the same. It is therefore essential to note that previous experiences in strategic alliances among sellers tends to affect their bargaining power in contracting strategic alliances. However, controlling several characteristictendt are related to the bargaining power of a firm tends to affect the extracted surplus by buyers. When these characteristics are controlled, the extracted surplus of buyers decreases while that of sellers increases relatively. Research shows that it is for this reason that the bargaining power of small biotechnology companies has been increasing in relation to that of large pharmaceutical companies. Other than this, the market of small biotechnology companies haaboutowing efficiently. The main reason behind the growth is the fact that contract prices have been approaching biotechnology companies’ market values. Several factors have led to the increasing ning power of small biotechnology companies. One of these factors is the success that these companies have gained in developing R & D services that have attracted more investors. This has helped improve the financial conditions of small biotechnology companies. As compared to the bargaining position of biotechnology companies, pro-patent policies tend to reduce the large bargaining positions of pharmaceutical companies. Generally, there is usually a significant difference in the bargaining positions of buyers across countries. The bargaining power of companies operating in the United States is higher than that of companies operating in Europe and other countries. Most biotechnology companies are based in the United States; hence they tend to have greater bargaining power than pharmaceutical companies. When it comes to business between small biotechnology companies and large pharmaceutical firms, the direct acquisition is usually a less popular operation choice. This is mainly because companies tend to fear the integration and collaboration of innovative players in larger organizations. The reason behind this is that the interaction is feared that it would affect the productivity of R&D services. Where biotechnology and pharmaceutical companies opt for acquisition, companies must be in a position to maintain their individuality and productivity intact. Direct acquisitions affect the bargaining power of small biotechnology companies. In such situations, large companies have a more significant bargaining position as compared to small biotech firms. This is often the case since small biotechnology companies are usually searching for financing, which they obtain once fully acquired. Over the years, the biotechnology industry has lost a lot of money due to market values and operating metrics changes. The enterprise value is one factor that can be used to explain the loss that the biotechnology company faces. Most biotechnology companies trade at very high multiples mainly because they earn very little due to their small bargaining power. However, over time, as they grow and become large companies that can match their pharmaceutical counterparts’ trading power, the biotechnology companies become large contributors to earnings made in the drug industry, hence increasing their bargaining power. The aging of the biotechnology industry is creating diversity in the space of the biotechnology industry. This reduces the burden that the small biotechnology companies invest in growth hence compromising their bargaining positions.