Biotechnology, a strategic planning orphan: towards an effective strategy framework for biotechnology firms

Abstract

Drug development biotechnology firms are most appropriately conceptualized as intermediaries in the pharmaceutical R&D value chain. Because they generally do not launch products themselves, generate significant revenues or compete in traditional markets, the established strategic planning frameworks and tools, such as SWOT, PESTLE and Gap analysis, have little utility. Porter’s Five Forces Model (FFM) is a strategic planning framework that is prominent in texts, but has not been applied to biotechnology firms to any significant extent. This study reports on its application in one drug development biotechnology firm and concludes that, like the other techniques, FFM also fails for biotechnology firms. This is because it is rooted in traditional, highly-competitive markets, where profit maximization is the goal, and not the world of the R&D intermediary, where value creation is the measure of success. Despite the misfit of the FFM for biotechnology firms, the notion that strategy can be derived by consideration of the forces that influence success may provide the basis for a new strategy framework relevant to the business of biotechnology.