Question

Monopoly

One page--Memo

You are working in the Pharmaceutical Industry, your boss the CEO has decided to that he would like to acquire 40% additional market share and buy out the other firms in the market. He is concerned about backlash from antitrust advocates. Your assignment is to provide him a detailed 1 page briefing on all the methods as well as tools and techniques he can use to make a case, that condensing the market will actually benefit consumers. you are to provide hard data and analysis in this briefing. If you provide good detailed recommendations you will get promoted. If you don't, your job will be in jeopardy. Good luck!

Answer 1

Ans....
US Pharmaceutical sector is not experiencing substantial growth rate. It was close to 8-9 % during the 2014 -15 and now projected to be around 3- 4 % over the next five years. US biggest concern is health care sector which accounts for over $ 3 trillion expenditure annually. Acquisition of new firms can be justified on following grounds:
Health care sector is suffering from fall in Research and development activities due to intense competition and subdued revenue. Hence, acquisition of new firms would help existing firms to invest in new research and development activities. R & D would lower the cost of pharmaceutical industries in long run and that would help consumers in form of reduced prices of medicines.
Acquisition of new firm, would reduce the cost of production, since due to competition, production capacity of firms run below the potential level. Thus, cost of production rises and welfare of consumers get reduced.