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- 1. 1 | P a g e INDUSTRY ANALYSIS ON PORTER’S FIVE FORCES ANALYSIS Name of Industry: Biotechnology Submitted by: SATYAM (110048) SHIVAM SINGH (110049) SHIVANI SHRIVASTAVA (110050) SUBHAM KUMAR (110051) SHUBHAM SINHA (110052) SIDDHANT RANJAN (110053) SIDDHARTHA SHRIVASTAVA (110054) A glance of Biotechnology Industry The biotechnology sector of India is highly innovative and is on a strong growth trajectory. The sector, with its immense growth potential, will continue to play a significant role as an innovative manufacturing hub. The sector is one of the most significant sectors in enhancing India's global profile as well as contributing to the growth of the economy. India is among the top 12 biotech destinations in the world and ranks third in the Asia-Pacific region. India has the second-highest number of US Food and Drug Administration (USFDA)– approved plants, after the USA and is the largest producer of recombinant Hepatitis B vaccine. Out of the top 10 biotech companies in India (by revenue), seven have expertise in bio- pharmaceuticals and three specialise in agri-biotech. India has no dearth of talent in biotechnology, as a number of institutions, both government and autonomous, provide the necessary opportunities for the students seeking to obtain a degree in this sector. The Government of India has provided adequate scope to this sector by providing facilities for Research and Development (R&D) in the field of biotechnology The Indian biotech industry holds about 2 per cent share of the global biotech industry. The biotechnology industry in India, comprising about 800 companies, is expected to be valued at US$ 11.6 billion in 2017. The government has to invest US$ 5 billion to develop human capital, infrastructure and research initiatives if it is to realise the dream of growing the sector into a US$ 100 billion industry by 2025, as per Union Minister for Science and Technology, Mr Harsh Vardhan. Biopharma is the largest sector contributing about 62 per cent of the total revenue followed by bio-services (18 per cent), bio-Agri (15 per cent), bio-industry (4 per cent), and bioinformatics contributing (1 per cent). India's biotech sector has attracted a significant amount of attention over the past two decades. Several global companies have aggressively joined hands with Indian companies due to India's strong generic biotechnology potential. A Network of Technology Centres and promotion of start-ups by Small Industries Development Bank of India (SIDBI) are among the steps taken by the Government of India to
- 2. 2 | P a g e promote innovation and entrepreneurship in the agro-industry proposed by the Ministry of Micro, Small & Medium Enterprises (MSME) in a new scheme. The Government of India has taken several initiatives to improve the biotechnology sector in the country as well as offer enough scope for research in this field. The Department of Biotechnology (DBT) along with other government-funded institutions such as National Biotechnology Board (NBTB) and many other autonomous bodies representing the biotechnology sector are working together in order to project India as a global hub for biotech research and business excellence. PORTER’S FIVE FORCES ANALYSIS The threat of new entrant (Low): The industry has limited competition and a low threat of new entrants. Biotech firms require huge amounts of funding to finance their large R&D budgets. Not having ample cash is one of the biggest barriers. Specialization also creates barriers. For instance, knowledge about cancer and heart disease is quite high therefore there are very few experts in this field. Last but not least it can take up to 10 years to bring a biologic drug to the market. Higher start-up capital requirement as well as investment intensive operation (R&D, clinical trials etc.) Strict government policies
- 3. 3 | P a g e The threat of Substitute product (Low): Buyers may face uncertainty or inconvenience will switching Existing substitute product (generics) satisfy price, value and quality expectation Brand loyalty really exists Bargaining power of suppliers (Medium): Biotech companies are unique because most of their value is driven by intellectual property. Unlike in other industries, the nature of their business does not force them to rely on suppliers. Scientific tools, materials, computers, and testing equipment are highly specialized but the likelihood of these companies invading on biotech line of business is not vertical. Low switching cost easily available Bargaining power of customer (Medium): Switching cost depends on drug (generic versus patent) A substitute is available for some drugs Buyers are fragmented with only a few influential ones (i.e. government agencies) Product may be a critical input Biotech companies are bounded by long term contracts. Niche speciality products have some pricing power. Competitive rivalry (Low): Growth opportunities for biotechnology companies are expected to grow in the next few years, with many products goings off-patent in the US and other countries, thus increasing competition. Indian biotech companies will face competition from big companies, backed by huge financial muscle.