University of Twente Student Theses


Delivering Medicines to the Poor Profitably: Investigating Business Models of Profitable Pharmacy Companies at the Base of the Pyramid

Frederiks, A.J.-P. (2010) Delivering Medicines to the Poor Profitably: Investigating Business Models of Profitable Pharmacy Companies at the Base of the Pyramid.

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Abstract:This master thesis researches the success factors of business models of profitable pharmaceutical companies at the Base of the Pyramid (BOP). Due to huge profitable business opportunities for health related products and services in BOP countries ($158.4 billion), there are a few BOP companies that have entered this market. However, it is unknown why these companies can be profitable, despite the low prices these medicines have. Because the business model of a company enables a company to create and capture value and therefore determines the profitability, this research looks at the business models of such companies. In this research a theoretical framework has been built to describe the business models of pharmaceutical companies at the Base of the Pyramid. This framework has been operationalised to capture these business models. To study the success factors of these business models a document analysis has been undertaken and the results have been verified during an interview with an expert on this subject. Four pharmacy companies have been found that deliver medicines to the poor and are profitable doing so. This research has found out what business model characteristics have contributed to the profitability of these companies. One characteristic is that the companies focus reducing the customers' effort to get the medicines. The companies have an innovative value proposition where they focus on making the medicines available and accessible to the poor. Next, the companies focus on purchasing phase of the value life cycle. Their most important resources are intangible. The value configuration they use is based on a value chain configuration: selling the same solution (the medicine) to the problem (the illness). Next to that, partnerships are very important to these companies. They cannot do the job on their own and, therefore, these companies have partnerships with other companies to help them. It is important that these partner firms are no competitor of the company. The pricing strategy these companies use is based on a differential pricing method, in order to get volume-based discounts or to be able to change prices due to local competitors. Another aspect that is important for these companies is that they educate their customers on the benefits and use of their generic medicines, as many customers do not trust generic medicines. To be profitable these companies also need to operate at a large scale to keep the costs low. For the poor it is expensive to travel far, therefore the shops that sell the medicines should position themselves at places that the customers come often, such as a community centre. The last characteristics that has been identified is that the business models compete on price and availability and these business models are therefore not very advanced, compared to other business models.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
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