Burrough Welcome Essay

1149 words - 5 pages

Q1 The issue of over pricing AZT is a burning issue for Burroughs Wellcome Company thus causing negative publicity and the fears in my opinion are well founded as far as BW's future AIDS drugs and drugs for other diseases (Zovirax and Sudafed) are concerned.Within the current AZT market, the central consumers are AIDS and HIV patients in need of treatment. AZT's role to the patients is paramount; results show AZT extends patients life expectancy, increase their sense of wellness, boost their immune system, and help with weight gain. Clearly the benefits of AZT have a direct impact on the patients' quality of life; as a result patients' desire for the treatment is high. And that's the reason why the negative publicity won't impact the current sales of AZT in the absence of any substitutes (at present AZT is the only treatment available for HIV).However, when it comes to other 2 products (Zovirax and Sudafed) and any potential AIDS drug that BW might invent / discover in the future the situation is quite different. The backlash would affect the customer's emotional response . This would affect how a consumer thinks about a company and talk to others about it. The negative publicity would diminish BW's reputation with its customers, paving the way for the sale of substitute products by competitors. The customers would also change their role from being apostles to detractors thus telling others how bad the company is and why they should not buy BW's products. Thus this could be devastating to the BW's business affecting its brand image.Based on our five forces analysis, the industry is moderately attractive with the significant threats coming from possible substitute products and rivalry from direct competitors. Assuming that there are effective substitutes (which are either priced equally or lower to Zovirax and Sudafed) available for Zovirax and Sudafed, the buyers might shift to the substitutes. Several other compounds are in various stages of development and commercialization for AIDS. Also one or more drugs are expected to receive FDA approval by 1991. So AZT's timeframe as a monopolist is likely to be a short one and substitutes would be available for any potential AIDS drug that BW might invent / discover in the future. The rivals would capitalize on the negative publicity of BW thus increasing the market share of their products. Buyers would make a switch because of no switching costs. Also since there isn't much product differentiation so it will further make it easier for the consumers to make comparisons. We could also say that the price elasticity is higher in this case because of availability of effective substituites.In terms of implementation, BW should focus on marketing the reasons for higher prices to the public. Clearly many of the advocacy groups are misrepresenting some of the key data which suggests BW is price and profit gauging the patients. BW must do their best to defend their actions and explain their position in a manner...

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