Question 1The greeting card industry is comprised of paper stationery, writing equipment, greeting cards. According to the Datamonitor (2003), greeting cards and stationery account for 65.1 percent of the market and the compound annual growth rate (CAGR) was at 2.8 percent between 1999 and 2003. This is a $7.5 billion per year industry with 3000 publishers making up the industry. These range from small family run business like Blue Mountain (www. bluemountain. com) to major publishers such as Hallmark (www. hallmark. com). In 2003, the wholesale greeting card industry in the U. S. was estimated at about $3.5 billion (Datamonitor 2003).
This industry is not highly regulated by the government. In contrast, the medical supply industry, which include pharmaceuticals, wound care, over the counter medicines like Tylenol, is highly regulated by various government entities. The medical supply industry includes major companies such as Johnson and Johnson, Merck, Proctor and Gamble and Novartis. Johnson and Johnson is currently the industry leader. The pharmaceutical industry is very attractive if a firm can afford to enter with high manufacturing, research, development and regulatory risks. According to Yahoo Finance, the pharmaceutical industry has nearly a twenty- percent earnings growth this year (Yahoo 2006), and market capitalization worth is 1,188 billion dollars.
Organizations today are subject to an increasing number of regulations that entail compliance. From Sarbanes-Oxley to the Health Insurance Portability Accountability Act (HIPAA), companies are required to adhere to a multitude of standards and regulations. The greeting card industry is most impacted by Sarbanes-Oxley act, as there does not, aside from trade and accountancy laws, exist a government-regulated board specifically for this industry. However, there is the Greeting Card Association industry trade group (GCA) who “is the trade organization representing greeting card and stationery publishers, and allied members of the industry” (GCA 2006).
The primary objective of this organization, which was created and developed by the industry, is “to represent the industry before government and regulatory agencies, to serve as an information service center for its members, and to monitor trends and developments that may impact the industry” (GCA 2006). The pharmaceutical industry is highly regulated by consumer protection medication laws such as HIPPA. In addition to various national and international regulations, there are many more rules that stem either from regional or local governments or industry oversight committees.
For the pharmaceutical and medical supply industry, the FDA is the driving regulatory body: The Federal Food, Drug, and Cosmetic Act (FD& C Act) provides legal authority for inspections and access to factories, vehicles, equipment, records, processes, and controls necessary to determine that drugs are being produced in conformance with regulations that have the force of law. (FDA 2006). The government regulates the pharmaceutical industry highly for the health and safety of consumers. The greeting card industry is not regulated because in general, consumer choice does not impact the medical health of that consumer.
In the relatively perfect economic theory of supply and demand, it could be assumed that people will only buy based on need, and that the correct provisions will be distributed to satisfy that need. Unfortunately, in the pharmaceutical industry, there must be market regulations on what can be sold, to whom it can be sold, and how it can be sold. This government regulation seeks to preserve the health of the consumers.
Secondarily, because of the very high income potential, there have been government stipulations and regulations applied to mergers and acquisitions. Pfizer, maker of Lipitor, the leading drug to reduce harmful blood cholesterol, announced that it would pay $1.3 billion for Esperion Therapeutics, a small drug company (Yahoo Finance 2006). Other acquisitions include Johnson and Johnson’s purchase of Guidant promoting the manufacturer to become a leader in the industry (Yahoo Finance 2006).