Problem Case Analysis Report

Problem Case Analysis Report

Problem Case Analysis Report: Cialis

Introduction

            The process of introducing a new product into the market is not an easy task for many organizations. Firms face risks and challenges associated with unpredictable market environments when exploring new markets. For instance, competitor firms that deal with similar products are always on the lookout to get a sneak into their competitors’ research and development programs. In the same way, the target customer groups for the new product may not treat the new innovation in the same manner in which it was planned and anticipated. Furthermore, consumers’ mindsets may not yet be wholly developed to accept a more advanced or enhanced innovative service due to insufficient information on the new technology. Lilly ICOS LLC faces these predicaments as it tries to introduce Cialis, a new erectile dysfunction drug for men in a local and international environment that is already dominated by Viagra. Lily ICOS should develop a clear and visible new product strategy to increase the potential of its new product to succeed.  This is a problem case analysis report that explores the potential challenges that Cialis is expected to meet when launching an erectile dysfunction product in a market that is already dominated by Viagra.  

Case Analysis Report: Cialis

List of Relevant Facts

            Qualitative Facts

  1. Mark faced the challenge of launching a new erectile dysfunction product in a competitive environment dominated by Viagra, which enjoyed the highest level of brand recognition.
  2. Barbato was optimistic about the prospects of Cialis, a new innovative drug that was meant to fight impotence and erectile dysfunction in men.
  3. After successful clinical trials, the organization presented a new drug application to the Food and Drug Administration (FDA).
  4. The organization applied to the European Agency for assessment of Medicinal Products.
  5. The company needs to ensure that Cialis differentiates itself from Viagra, which is the leading competitor.

Quantitative Facts

  1. Viagra, which is Ciali’s competitor, generates sales of more than $1 billion yearly.
  2. A 20mg oral dose of Ciali improves erectile ability by 81 percent, with a lasting impact of 36 hours
  3. On the other hand, Viagra’s impacts last for only 4 hours.
  4. Approximately 30 million men in the United States and 150 million people worldwide suffer from chronic erectile dysfunction
  5. The target markets for Ciali also include men aged from 40 to 70 years, who suffer from erectile dysfunction.
  6. In 2009, there were 7 million Viagra dropouts in the United States compared to 3 million current users, thereby providing a strong ground for launching Ciali.

Internal Controllable Facts

Marketing Mix (4Ps)

            Product

            Lily ICOS is involved in the development and sale of pharmaceutical products. The main product that should be launched is Cialis. The innovative product has an active ingredient referred to as tadalafil. The product is designed through a joint effort by Lilly, which is one of the global pharmaceutical giants, and ICOS, a small biotechnology company. The product has the potential to generate promising outcomes for people who suffer from impotence and erectile dysfunction. Cialis has various features and properties that will attract prospective customers. For instance, a 20 mg oral dose of Cialis improves the capability of about 81 percent of men who suffer from male impotence to react to sexual stimulation over an extended period of time (Ofek, 2010). Unlike Viagra, which works for only four hours, Cialis has the ability to stimulate users for more than one day (36 hours). Therefore, the new product provides customers with a significantly wider window of opportunity to select the right moment of intimacy.

Place

            Lilly ICOS has embraced various strategies to ensure that its products are accessible to clients across different parts of the world. For instance, the organization has designed various shop outlets in which customers can make their purchase decisions, mainly in urban centers. However, to increase its accessibility to users in remote areas, the company has partnered with both pharmaceutical shops and healthcare institutions to have their products included in their shelves. For instance, a customer can access Cialis by simply visiting a nearby pharmacy and making purchase decisions. In healthcare institutions such as hospitals, physicians can administer the medication to patients who suffer from impotence. Cialis’s accessibility to customers has been made easier by making it an over the counter medication (Ofek, 2010). The company also held talks with major pharmaceutical retail organizations to support it in marketing and distributing its products across the European region.

Pricing

Lilly ICOS uses a competitive pricing strategy in its marketing mix because of top competing brands such as Viagra. In some markets, strict government regulations set a ceiling for the pricing of its Ciala products. Therefore, there are limits beyond which the organization cannot increase its prices despite the high operational costs that the company incurs. Therefore, Lilly ICOS utilizes a mix of cost-based and value-based pricing strategies for Cialis. Cost-based pricing takes into account the costs incurred in developing, packaging, and transporting the products. Under the cost-based strategy, the organization incorporates all the expenses incurred to bring the product to the market and add an acceptable profit on top. Essentially costs in areas such as research and development, distribution, manufacture, and package are utilized to calculate the overall price of the product. The added profit margin is typically based on the organization’s objectives or target, including what is acceptable for the type of product and users.

Lilly ICOS also utilizes a value-based pricing strategy for its Cialis product. The pricing strategy is based on the perceived value that the product offers to target customers. Unlike Viagra, which only stimulates users for 4 hours, the value of Cialis maintains stimulation for more than a day. Therefore, the purpose of value-based pricing is to uncover the right blend of the product attributes, costs, organizational profit targets, and pricing that meets the needs of clients. The company’s pricing works by first exploring the perceived value of the products based on its key stakeholders and the degree to which a price premium can be employed. A properly designed market research and intelligence strategy with payers, physicians, and patients are essential in understanding the perceived value of the product and the bottlenecks that can be overcome (Ofek, 2010). The pricing strategy may sometimes generate tensions between setting a slightly lower price than the research suggests thereby reducing challenges. Furthermore, Lilly ICOS uses pharmaco-economic data to set prices. More precisely, the potential cost-savings that the product brings to the present management of the disease are determined to get an acceptable premium price.

Promotion

Lilly ICOS can utilize various promotional strategies to attract current and prospective customers. Lilly ICOS is a new organization that is entering the market. Therefore, the company should monitor the degree of competition in the sector. The advertizing strategy of the organization focuses on using celebrity endorsements to increase the credibility of the drug product. Celebrities can create a perception of trustworthiness, believability, and persuasiveness needed to boost the sales of Cialis. The company can use various advertizing channels to promote Cialis, for instance, internet, broadcast media, as well as newspapers and magazines.

External Uncontrollable Facts

PESTEL Analysis

            Political and Legal Forces

            The political and legal environments the organization operates influence the performance of the company. In the pharmaceutical sector, the Food and Drug Administration (FDA) is the primary regulatory board that determines whether or not Lilly ICOS can be approved to commence its third phase of submission. The regulatory organization also charts the clinical trials to which a drug should be approved to proceed to the market place. The company is facing strict regulations in its operations. For instance, it incurred approximately $350 million in legal and regulatory standards for Cialis to get approved. The FDA has also sanctioned Direct to Consumer advertizing, which can provide a major breakthrough for pharmaceutical organizations. Political and legal factors also influence the company’s performance in the European Union.

            Economic

 Local and global economic conditions influence how an organization operates in different markets. There is also a direct relationship between the level of income and education and erectile dysfunction. Most people with erectile dysfunction fall under middle and upper class. The United States has approximately 67 percent of erectile dysfunction patients who are completing their post-primary education with a high earning of about $60000 (Ofek, 2010). Presently, the average expense for Viagra is about $66. The sales volume is also influenced by the exchange rates of different currencies of its markets. Economic conditions in the local and international markets, income, education, and social status of individuals influence their purchasing decisions.

            Socio-cultural Forces

            Lifestyle and cultural factors of different markets influence the performance of the product. For instance, public attitudes and perceptions of erectile dysfunction can impact consumers’ buying behavior. For instance, some customers may feel embarrassed to appear in pharmaceutical stores to seek treatment drugs. Younger men are more embarrassed than their elderly counterparts. At the same time, physicians may desire effectiveness, safety, as well as accountability for 70 percent of desirable attributes. Knowledge on the drug’s performance also differs across different health professionals such as physicians and urologists. Lifestyle and cultural factors such as age and public attitudes towards erectile dysfunction drugs influence their decision to purchase treatment drugs.

            Technological Factors

            Technology can radically improve the efficiency and operations of the company. The company’s investments in research and development can be viewed as a technological issue that influences the microenvironment of Lilly ICOS. The organization presently invests the lowest nominal amount of all the three organizations. The company is increasingly investing in technological innovations that can promote mass production of its products for timely distribution to different outlets. Therefore, using various technological tools influence individual’s decisions to seek erectile dysfunctional treatment.   

SWOT Analysis

Strengths

            The organization generated net income percentage sales that were stronger than that of Pfizer and Bayer in 2000. These sales include high investments in research and development and reduced sales general administrative than competitors. In addition, the joint venture of the company serves as a source of competitive strength Eli Lilly provides strategic value to the development of successful partnerships due to its experience in distributing drugs to the market. The Cialis drug provides more value and benefits to prospective customers than Viagra.

            Weaknesses

            The organization underestimated the launching of the product considering its short time span of FDA approval. The company hopes to launch the product in 2002. In addition, the company witnessed a low compound annual growth rate (CAGR) in the European markets. In Germany, it registered CAGR of 3.6 percent and 14.8 percent in France. In addition, Bayer is posing a competitive threat since it offers a niche drug that treats diabetes along with erectile dysfunction.

            Opportunities

 The organization has been performing excellently in the North American market. For instance, Lilly ICOS registered a high CAGR of 16.4 percent in the United States. In the United Kingdom, the company registered a CAGR of 20.6 percent. The company also has high prospects of growth among couples who are both married or living together. Furthermore, the improved level of literacy on erectile dysfunction has the potential to increase the growth rates of the product.

            Threats

            The company faces stiff competition from Viagra, which is the leading brand in erectile dysfunction treatment. In addition, the organization operates in environments characterized by stringent regulations. For instance, the company had to go through the long process of approval from the FDA for it to launch a product in the American market. The organization faced similar predicaments in the European markets when it had to seek approval from the European Union drug regulating body.

Recommendation

            Cialis is a newly launched product that does not yet enjoy brand recognition compared to Viagra. Although the product has more benefits than Viagra, it might not perform well due to its weak brand name. Therefore, Lilly ICOS should allocate its financial resources and strategies to boost the product’s brand awareness across different international markets. Emphases should also be placed on informing prospective customers on the potential benefits that the new product will offer compared to its rivals’. Brand awareness can enable customers to differentiate the products’ features from others, thereby boosting sales and profitability.

Reference

Ofek, E. (2010). Product team Cialis: Getting ready to market. Harvard Business School.

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