Cambridge International as and a level Economics Ebook

diversifi cation
. Th
is is where a fi rm, small 
or large, produces or sells a range of diff erent products. 
Th
e reasons behind this tend to be to spread risk or 
more aggressively, to exploit an opportunity in 
the market. Diversifi cation is particularly in evidence 
in so-called conglomerates such as Unilever, Nestlé, 
SELF-ASSESSMENT TASK 
7.13
Small firms in Pakistan’s pharmaceutical industry
On the surface, the pharmaceutical industry is not one 
that immediately comes to mind when researching small 
firms. Yet in 2011, there were around 600 pharmaceutical 
companies in Pakistan, almost 400 of which were 
manufacturers. Multinational corporations (MNCs) such 
as GlaxoSmithKline and locally owned Getz Pharma 
have a large share of the market but the growth of small 
firms has severely damaged their market share. Less 
than half of total production is now in the hands of MNCs 
compared to more than 70% five years ago.
The changes to the pharmaceutical industry are best 
seen in a national context. Pakistan is a poor economy 
with an increasing population that requires more and 
more resources to be put into its health care system. The 
economy has had its fair share of woes in recent years: 
slow growth, high inflation and the ongoing devaluation 
of the rupee against other major currencies. As a 
consequence, the Ministry of Health is only prepared to 
pay low prices for the drugs it needs. This clearly helps 
small firms.
National firms have seen the country’s economic 
position as an opportunity to produce generic drugs, 
products that have to be prescribed by medical 
professionals. The patents for these are invariably held 
by MNCs; when these expire then it is a signal for small 
producers to enter the market.
Source:
Adapted from M. Aamir and K. Zaman, 
International Journal of Business and Information Technology
, June 2011.
Read the feature below and then answer the questions that follow.