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ACCA Strategic Professional · Strategic Business Leader · Competitive forces

Calder Pharma holds patents on a drug expiring in two years. Analysts expect generic manufacturers, which already have capacity and distribution, to enter then. Which assessment of the threat of new entrants is most appropriate for Calder's strategic planning?

The threat is low while the patent protects Calder but will rise sharply on expiry, because generic firms already have capacity and distribution. Barriers are time-limited here, so Calder should plan responses now, such as new products or stronger branding.

  1. AThe threat is currently low but will rise sharply as the patent barrier is removed, so Calder should plan for it nowCorrect
  2. BThe threat is permanently low because pharmaceuticals always have high barriers
  3. CThe threat is high now because generics firms can legally copy the drug today
  4. DThe threat is irrelevant because generics firms are substitutes, not entrants

Explanation

Patents are a legal barrier that protects Calder until expiry. Once removed, entrants with existing capacity face low remaining barriers, so the threat rises. Planning should anticipate this change, for example through brand building or new products.

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