15-Low-End Competitor May Not Stay at the Low End

One of your competitors may be a low-end player today. If that competitor stays at the low end, the likelihood is that its share of the market will not exceed 15%, even if it is quite successful. However, that very success may breed a significant challenge to industry leaders in the future. If the low-end competitor is earning a good return on investment, it may enter the market for the industry’s higher-end products in order to enhance its own profits and future.

The pharmaceutical industry offers a current example of the phenomenon of a low-end competitor attempting to migrate into the Standard Leader products. Indian generic drug manufacturers, including Dr. Reddy’s Laboratories Ltd., Ranbaxy Laboratories and Glenmark Pharmaceuticals have realized great success and profits in the generic drug business. These are low-end Price Leader companies. Each is a type we call a Predator competitor. Each of these companies is reinvesting some of those profits from its low-end sales into research and development on proprietary drugs. If these early stage investments into the proprietary end of the pharmaceutical business succeed, these formerly low-end companies may well challenge the Mercks and Pfizers of the world.

If this trend seems unlikely, consider that Charles Schwab, Dell, Nucor Steel and Wal-Mart all got their starts at the low end of the market. For more on low-end competitors, see “Turmoil Below: Confronting Low-End Competition” in the Tools/Perspectives section of StrategyStreet.

Posted 4/21/08

Update:

Patent law in India tends to discourage the research and development of proprietary pharmaceutical preparations there.

In 2020 the Indian pharmaceutical competitors remain Price Leaders, largely Predator producers of generic drugs. The Indian pharmaceutical industry is the world’s 3rd largest by volume and 14th largest in terms of value in 2020.  India is the largest provider of generic drugs globally. The Indian pharmaceutical industry meets over 50% of global demand for various vaccines, 40% of generic demand in the U.S. and 25% of all medicine in the U.K

Government policies in India have retarded the opportunities for Indian pharmaceutical companies to enter higher-margin segments of the industry. Creating a successful product innovation approach requires that you first stop losing customers and then respond to their clear market needs. See more HERE.

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THE SOURCES OF STRATEGYSTREET.COM: For over 30 years we observed the evolution of more than 100 industries, many hostile.  We put their facts into frameworks applicable to all industries and found patterns.  Strategystreet.com describes the inductive results of these thousands of observations and their patterns.