Sales can drop, leaving drug companies scrambling to pick up the slack. While some look to consolidate resources through a merger, others believe that signing pacts with other companies is the best way to shore up their product pipelines. The pharmaceutical industry consists of numerous players, all of whom hold only a small market share of the industry. Figure 1 is an industry snapshot from Fortune Global 500 list which ranks companies in terms of global revenues. Vertical integration occurs when a company is involved in all levels of production for a product, from gathering the raw materials to distributing the finished goods.
Horizontal integration occurs when a business expands in size and scope.
Pharmaceutical firms hold only a small market share. They produce numerous products, often specializing in product lines. These companies choose to compete on research and development, innovation, and strong customer focus, and reducing cost.