I. Introduction
The aim of this essay is to present a business model analysis of the 10th largest pharmaceutical company in the world with $61.54 billion market capitalisation – Eli Lilly and Company (Lilly). The structure of this essay begins with introduction and limitation of analysis, followed by brief explanation about business model concept, then the analysis of Eli Lilly and Company’s current business model. After that, this essay will describe challenges that Lilly has faced in recent years and what Lilly might face in the future. This essay will also explore partnership arrangement among big pharmaceutical companies.
Colonel Eli Lilly, a pharmacist and veteran of American Civil War, established Eli Lilly and Company in 1867. The headquarters of Eli Lilly and Company is located in Indianapolis, U.S. In more than 135 years running its business, Lilly has several important roles in the development of pharmaceutical industry. In 1923, Lilly introduced Iletin, the world’s first commercially available insulin product, and was among the first companies to develop a method to mass-produce penicillin, the world's first antibiotic.
II. Business Model Concept
In order to analyse the business model of Eli Lilly and Company, it is necessary to examine relevant perspectives and definitions of business model concept. Business model indeed takes time to develop, as business model have to be reviewed and evolved. Shafer, Smith et al (2005) define business model as internal activities, including how firm represents its core logic and strategic choices to create and capture value. On the other hand, Zott and Amit (2008) refer business model not only as a structural template, but also concern about external constituents and product market...
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Transcelerate. (2012) ‘Position Paper: Risk-Based Monitoring Methodology’ Available at http://www.transceleratebiopharmainc.com/wp-content/uploads/2013/10/TransCelerate-RBM-Position-Paper-FINAL-30MAY2013.pdf [Accessed 30th November 2013]
Zott, C., Amit, R. And Massa, L. (2011) ‘The Business Model: Recent Developments and Future Research’, Journal of Management, vol.37, no.4 pp.1019-42 [Online]. Available at http://jom.sagepub.com/content/37/4/1019 [Accessed 24th November 2013]
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Threat of new entrants is relatively high. Companies forming alliances are potential rivals. Even if earlier such company was not considered to be a threat, after merging with some research and development company or forming alliance with another pharmaceutical company it would become a rival to Eli Lilly. The threat is however weakened by significant research and development costs necessary to successfully enter the business. Eli Lilly’s focus on a relatively narrow market of sedatives and antidepressants weakens the threat of new entrants, but other products that form lesser part of company’s sales such as insulin and others are exposed to high threat of new entrants. The need of obtaining certificates and licenses also weakens the threat of new entrants. Discussed above leads to the conclusion that threat of new entrants is medium.
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