Glaxosmithklines Retaliation Against Cross-Border Sales of Prescription Drugs
Case 1 :GlaxoSmithKlines Retaliation Against Cross-Border Sales of Prescription Drugs
Question1: what sort of power differential separated GSK from their customers?
Answer:
“GSK” According to its price differential strategy or price discrimination which is a sort of Monopolistic market power was separated from its customers, this power came from where? GSK had sufficient control over prescriptions drugs to determine significantly the terms on which other individuals shall have access to it and this power make GSK able to alter market price of prescription drugs in America.
Now I want to answer why GSK differential pricing was not successful and made separation between GSK and its American customers? as we know a firm with market power can raise prices without loosing customers ,but GSK was not successful in this case, because of several reasons(which I divide my reasons to, Marketing view, Ethical and social responsibility view and finally legality view :
1-According to the Kotler there is six necessary conditions for differential pricing ,I will discuss this section with describing these 6 necessary condition and how GSK fail about it, as follow:
1) The ability to segment the market.
2) The inability of consumers who buy at the lower price to resell product to the higher priced segment.
3) The inability of competitors to undersell the firm in the higher priced segment.
4)The cost of segmenting and policing the market must be less than the extra revenue generated by the differential pricing strategy.
5)The practice must not breed customer resentment.
6)The differential pricing must not be illegal.
In the GSK case, the firm used geographical location to segment the market (condition 1). Consumers paid a different price for the same drug based on where the drug was purchased. GSK justified the use of geographical pricing segmentation based on government price controls (in Canada and Europe) and lower wages (in Canada). Patent protection
Question1: what sort of power differential separated GSK from their customers?
Answer:
“GSK” According to its price differential strategy or price discrimination which is a sort of Monopolistic market power was separated from its customers, this power came from where? GSK had sufficient control over prescriptions drugs to determine significantly the terms on which other individuals shall have access to it and this power make GSK able to alter market price of prescription drugs in America.
Now I want to answer why GSK differential pricing was not successful and made separation between GSK and its American customers? as we know a firm with market power can raise prices without loosing customers ,but GSK was not successful in this case, because of several reasons(which I divide my reasons to, Marketing view, Ethical and social responsibility view and finally legality view :
1-According to the Kotler there is six necessary conditions for differential pricing ,I will discuss this section with describing these 6 necessary condition and how GSK fail about it, as follow:
1) The ability to segment the market.
2) The inability of consumers who buy at the lower price to resell product to the higher priced segment.
3) The inability of competitors to undersell the firm in the higher priced segment.
4)The cost of segmenting and policing the market must be less than the extra revenue generated by the differential pricing strategy.
5)The practice must not breed customer resentment.
6)The differential pricing must not be illegal.
In the GSK case, the firm used geographical location to segment the market (condition 1). Consumers paid a different price for the same drug based on where the drug was purchased. GSK justified the use of geographical pricing segmentation based on government price controls (in Canada and Europe) and lower wages (in Canada). Patent protection