Understanding Five Forces 

Porter’s Five Forces theory is a method used to assess the strength of an industry based on external factors affecting a company. This theory emerged from the Industrial Organization perspective, which is a management viewpoint that emphasizes the importance of external factors for gaining competitive advantage. The management figure who supports this perspective is Michael Porter, who  stated that the most important factor determining a company’s performance is the strength of the industry in competition. 

Definition of Threat  of Substitutes 

Threat of substitutes It refers to goods or services that can  replace similar products. The presence of substitute products or services will limit the potential profits that can  be gained from an industry. The more attractive the price alternatives offered by substitute products, the tighter the profit constraints for an industry. Therefore, with a growing variety of goods and service , the creation of substitute products also impacts the revenue for companies. This is related to whether consumers have  other options for the available products. 

Threat  of Substitutes ( HIGH ) 

Substitutes 

Substitutes for Kimia Farma products are alternative medicines or treatments from other brands that can  replace Kimia Farma’s products. These substitutes can  be in the form of generic drugs, over-the counter medicines, or herbal remedies. The main  factors that influence consumers’ decision to choose substitutes are price and  brand loyalty. If the substitutes are cheaper or offer better value,  consumers may switch. However, if they are loyal to Kimia Farma and  trust its quality, they are likely to stick with its products. Then, Kimia Farma products can  be replaced by substitute goods depending on two factor, price and consumer loyalty.  

Price 

The increasing sales of herbal or traditional medicines have  made people more confident in using herbal or traditional remedies, as they are considered more natural and  free from side  effects. Another reason for the use  of traditional medicine is its lower and  more affordable price 

compared to modern or generic drugs. In the case of over-the counter medicines, for example, chemical products from Kimia Farma can  easily  be replaced by competitor products. For instance, the flu medicine Sanaflu by Kimia Farma can  be replaced with Mixagrip by Kalbe, depending on consumer loyalty to Kimia Farma products. Therefore, it can  be said  that the threat of substitute products to Kimia Farma’s products is quite high. 

Consumer loyalty 

Consumer loyalty to the Kimia Farma brand plays  an important role in maintaining sales. If consumers are accustomed to and  trust the quality of Kimia Farma products, they may prefer to continue purchasing those products even if there are cheaper alternatives. On the other hand, if consumer loyalty is low, they are more likely to switch to more affordable or more attractive substitute products. 

External Analysis 

This analysis is conducted to observe external factors that may affect the development of the pharmaceutical industry, such as political, economic, social, technological, legal, and  environmental factors: 

 Politics Opportunity 

The government program on the independence of raw material production for medicines (BBO) by issuing Presidential Instruction No. 6 of 2016 to realize independence and  increase the competitiveness of the pharmaceutical industry. 

 Threat 

Policies from the Asian Economic Community (AEC) that provide a significant opportunity for imported medicines to enter Indonesia, increasing competition with domestic medicines. 

Economy Threat 

–The economic crisis that leads to an increase in the price of raw materials for medicines, particularly patented drugs, which is not followed by an increase in the purchasing power of the public during the pandemic. 

-The decline in public purchasing power during the pandemic, leading consumers to opt for cheaper and  more affordable medicines. 

Social Opportunity 

–The large population of Indonesia increases opportunities for public demand. 

-Product diversification by developing preventive medicine products as a strategy to address the healthy lifestyle trend in society. 

Threat 

The rising trend of healthy lifestyles that leads to a decrease in the consumption of generic medicines. 

Technology Threat 

The rapid development of digital technology with the emergence of digital health platforms that facilitate healthcare services online. 

Opportunity 

Creating partnerships with various digital platforms to develop digital-based health applications. 

Environment Opportunity 

Unpredictable climate changes that may lead  to the emergence of various disease outbreaks. 

Threat 

The low consumption of generic medicines due  to many people still preferring traditional medicine. 

The sources of the articles I am looking for are as follows : 

 https://binus.ac.id/malang/2020/0 8/p orters-five -force s-li m a-ha l-s ebelum-bersaing/  

 https://id.scribd.com/document/5 067 25159/FIV E-FORCE-ANALYS I S 

 https://jurnal.ugm.ac.id/jisph/article/downl oad/3 4 179/325 15 

-Keyza Naura Raffa Ridwan