Answer to Question #320162 in Microeconomics for Mulweli

Question

“The SA pharmaceutical industry is expected to deliver R73bn in sales by 2025, according to

Invest SA’s Fact Sheet published by the department of trade & industry. That’s a significant

increase on the predicted estimate of R51bn for this year alone, ensuring that the

pharmaceutical industry is one of the most actively growing sectors in SA, and a huge

contributor to the country’s bottom line.Using the Structure – Conduct - Performance (SCP) paradigm, discuss the current ‘state of

affairs’ of the pharmaceutical industry in South Africa. Be mindful to outline the associated

SWOT analysis.

Answer 1

Based on the Structure-Conduct- Performance framework that claims that the market structure is the determinant of firm's conduct which in turn reflects her performance.

• There are many determiners of market structure among them being;competition and diversity in products.
• Firm's conduct is determined by the do's of the firm based on the environment the industry is in.They include price making and product differentiation among others all aimed at exploiting more market.
• The performance which is the main goal of every firm fostering the success of the industry. Factors like profitability of the firm and productive efficiency are indicators of firm's performance.

For SA pharmaceutical industry it's current state based on the above information,this year's sales and the expected sales by 2025. I therefore conclude the following about her current status:I

1. It provides a low competitive environment for her firms.With this there is much possibility of existence of barriers to entry into the market possibly enjoying such favours from the government for it's a huge contributor to the country.
2. The firms in the industry diversify in their products and thus each firm enjoys a market share.
3. The industry owns her rights in price making.Hence she fixes prices that favour them to make a significant returns
4. The industry owns the market power and therefore her firms utilizes it by taking any options to maximize their value economically
5. The industry's profitability is high due to the market power they own.