One of the tactics applied by many small pharmaceutical companies is to look for franchises. This gives them an opportunity to expand without investing heavily. In many ways, it is the perfect means to grow in a heavily competitive market.
One of the perks that is often offered is pharma monopoly or the complete control of a product in a market. In effect, the principal company hands over the entire marketing of the product in a given market to the franchise. But why is this necessary?
Most franchise are small companies with limited budgets. This can make it difficult for a small company to establish itself. Given the state of competition in the Indian market today, this can be a serious handicap. Not only do we have big corporations, we also have a number of small and medium firms competing in the same sphere.
A small franchise, hence, needs all the support it can get. The last thing it needs is competing with another firm for the same product. A franchise is the solution to this problem. This way one eliminates the competition for the same product, thereby helping them to save resources that would otherwise be spent in dealing with this.
Because the franchise has a monopoly over the product, it can control the supply cycle. Remember, prices are often determined by the supply. If there is too much demand for the product, a franchise will order accordingly. Similarly, a drop in demand can be adjusted in the same manner. With monopoly, the franchise is the only one controlling this cycle, which gives them some leeway in creating demands or planning their advertising cycle later. Without a monopoly, they have no way of controlling the supply.
Charting marketing strategy
An effective marketing strategy is built by taking into account demand, supply, competition, costumer perception and so on. It also asks for effective control over a product in a given market. As a mere franchise with other carrying the same product, this is not possible. You will be limited by the lack of any ownership and any strategy that you may devise can be jeopardised by a rival franchise.
Pharma monopoly of the product is, hence, essential to ensure that one has minimal control of a product in a market. You can then create a marketing strategy to suit the conditions in your segment.
Having control of profits
Monopoly of a product also gives a franchise a larger share of the profits. Monopoly means that you have the sole supply of a product. When it does well, you as the sole seller, bag up all the sales. This means the entire profit also goes you. If there are other franchises selling the same product in the given market, the distribution of sales and with it, the profit will also split, leaving you with a lesser share.
Building a business base
Running a pharma franchise is the perfect launch pad for a budding entrepreneur. Many businesses, have in fact, started as franchise for larger businesses. A franchise is in many ways the perfect way of starting your own business. While the investment is minimum (the product and much of the infrastructure is provided by the principal company), there is considerable support. If you are partnering with a good brand and reliable product, you are already placed to capitalise on a given market.
A monopoly gives us a 360 degree view of the market. Since you will be controlling the demand and supply, you are perfectly placed to gather date its patterns. You can collate and quantify consumer motivation, the marketing dynamics and so on. In the age of data, this is golden information.
Clearly a pharma monopoly is a win-win situation for all. While the manufacturer finds an invested partner, it equips the franchise to deal with competition, strategise for their own marketing and propaganda, while keeping having a greater share in the profits.