04.01.2013

Influence of business models of IT industry for marketing of pharmaceutical companies

 There is no sector of the economy that does not use the informational technologies in its work today. TOP-managers of pharmaceutical companies, except the implementation of IT technologies in their companies, blamed the problem on the study and implementation of business models that have been successfully used in the software IT companies and companies in other industries.

With every day more administrative and production business functions are related to the software. In 1990 the cost of software products were 32% of the total cost of IT, in 2011 - about 60%.¹

Removal the accent from the product to the open platform

Traditional operational models of other industries are attached to the production cycle, suppliers, channels, promotion and marketing.

This is due to the dominance of companies with the traditional model of production and availability of more time to react on market changes and demands. Products in these companies produced within their own companies, and require more resources and have lower rates of growth.

High growth rate of IT industry in the development of software products occurs due to the use of patents and developments of new products of outside companies and scientists, the flexibility of forming development teams for specific projects and tasks, more levels of outsourcing staff with high qualifications. Thus, in the IT industry, the operating business model became an open platform. IT industry predominantly uses a matrix organizational structure.

Product development process is characterized by the active application of finished development of products or components through the purchase of patents, acquisitions developers to perform tasks in a specific project.

The process of developing and improving the product has a continuous nature, which provides rapid response to changes in demand, improve characteristics or eliminate deficiencies.

This model is effective, both in product development and in the implementation of the functions and tasks of marketing. For instance, "Farm-ROST" the first company on the Ukrainian market who offered "Pharmacy project" that started in 2006. Pharmaceutical companies in Ukraine is more beneficial not to create such a product "from scratch", but involve an external provider of such a marketing product that will save and budget, and time.

In the information society, that is replacing the industrial society, to the forefront come out transmission of the information and speed of its response. For example, the financial sector has a system of data on borrowers under the credit bureau that allows troubled borrowers cut off during their study. The credit bureau is funded by its members, but to make such a product without partner participation of the majority of creditors impossible. Another example, the feasibility of data confirms the experience of the joint project of P&G and Wall-Mart. As a result, inventory management on the shelves of the largest U.S. retailer employees P&G, a network of Wall-Mart was able to: increase sales by retailing matrices, reduce inventory each outlet, to increase the turnover of working capital, to ensure smooth process of production. Company P&G was able to increase sales by increasing customer satisfaction through the availability of the desired product on the shelf.
The importance of information for the pharmaceutical market is undeniable. Companies involved in the quantitative analysis of pharmaceutical sales, can’t perform inventory management tasks in retail pharmacies at this stage due to various factors.

Market needs the platform of data exchange between pharmacies and pharmaceutical companies to enable pharmacies and suppliers to increase product turnover. Neither pharmacy nor distributors can Implement this exchange platform because of conflict of interest and the degree of consolidation. At the same time, pharmaceutical manufacturers can work together and implement such a project on the basis of the model of the Credit Bureau in the financial sector, but that requires equidistant integrator of information from retail pharmacies and pharmaceutical manufacturers.

Pharmaceutical manufacturers have the information about the balance of its products in key pharmacy chains, supplied and sold commodity items. It gives an opportunity to plan their production, to distribute the product in the warehouses of distributors, reduce the need for working capital better.

Igor Vovkodav director of "Farm-ROST", notes that «Market has a strong demand for information platforms of controlling the movement of inventory in order to effectively management of the financial, material, human resources. In order to reduce the cost of such a platform independent marketing companies are able to offer low cost solutions of collection and processing of such platforms for pharmaceutical producers".

Increasing of revenue due to the introduction of new models of cooperation in business

Innovative companies from other sectors of the economy are increasingly combine products, services and data to create new product lines. Companies from engineering to manufacturing goods profile, have integrated into their products information platforms, provided competitive advantages of products and created new subcategory of products with a higher barrier of entry for competitors.

For pharmaceutical market develops a unique situation when the pharmaceutical retail and pharmaceutical manufacturers can benefit from information exchange with each other. Pharmacies have the actual sales information headings in their networks and want to automate the process of inventory management, but it requires significant capital investments. Pharmaceutical manufacturers, having received information about the movement of their products in the retail pharmacy will be able to increase sales. Who have to pay for such model of interaction? According to assessment of Ivan Natalchenko, head of the "Pharmacy Project" of "Farm-ROST" company, "This project has a high demand from retail and pharmaceutical manufacturers. Financing of software and centralization of data processing can take on pharmaceutical manufacturers, and the introduction of the product in pharmacy chains and the support can take the medicine retail".

By implementing the project, the pharmacy chain will increase the profitability of the business through analysis and sales management at a higher level than allow existing software solutions based on 1C. 

Pharmaceutical manufacturers being able to combine financial efforts on the model of the Credit Bureau provides important management information about the actual sales to end users and the movement of inventory in a retail location. In order to protect the information implementation of such a project should be performed by independent pharmacies and manufacturers integrator of information.

According to the forecast of "Farm-ROST" specialists pharmaceutical producers will increasingly use open platform of doing business in product development and marketing. Pharmaceutical retailers and manufacturers have the opportunity to increase the profitability of the business through the introduction of project data on sales and movement of goods in pharmacies by an independent integrator of data collection and processing.

¹ Competing in a digital world: Four lessons from the software industry/Hugo Sarrazin and Johnson Sikes/ McKinsey & Company/ February 2013/  www.mckinseyquarterly.com 

Analytical service of "Farm-ROST"