690 Final Report_1

8/8/2019 690 Final Report_1

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BUS 690: Strategic ManagementNorth South University

Pharmaceutical Industry of BangladeshPharmaceutical Industry of Bangladesh

In Bangladesh Pharmaceutical sector is one of the most developed hi tech sector which is contributing in

the country's economy. After the promulgation of Drug Control Ordinance - 1982, the development of this

sector was accelerated. The professional knowledge, thoughts and innovative ideas of the pharmacists

working in this sector are the key factors for this development. Due to recent development of this sector

we are exporting medicines to global market including European market. This sector is also providing

95% of the total medicine requirement of the local market. Leading Pharmaceutical Companies are

expanding their business with the aim to expand export market. Recently few new industries have been

established with hi tech equipments and professionals which will enhance the strength of this sector.

Bangladesh, currently having more than a couple of hundred manufacturing facilities with huge potential

in pharmaceutical formulations, is heading on a new path of industry economics for self-reliance. Aiming

at minimizing the import dependency on basic drugs, the country's prime concern is about building up of

own capability in the manufacturing of active pharmaceutical ingredients(APIs), base materials and other

allied industry inputs. The combined capacity of the industry for the pharmaceutical formulation is huge

and a number of companies have recently got approval from UNICEF as its global as well as local

supplier of pharmaceutical products.

Out of the total domestic requirement of medicines almost 95 per cent is met by the local manufacturing

and Bangladesh also exports formulations to 27 countries around the world. The current turnover of the

industry in Bangladesh is Tk. 3,000 crore. According to industry sources, the formulation industry in

Bangladesh currently grows at the rate of 22 per cent. With this estimate, the expected business in year

2005 is 50,000 million Tk. Today, Bangladesh is dealing with USA, India, China, Taiwan, Hong Kong,

European Union, Singapore, Malaysia, Pakistan, Sri Lanka, Thailand, Burma, Bhutan, Nepal, Yemen,

Mauritius, Vietnam, Kampuchea, Laos, Mexico, Columbia, Ecuador, Kuraso Russia, Uzbekistan,

Tazakistan, Kenya, Tunisia, Maldives, etc. as well as with the least developing countries where there is

hardly any industry for the production of pharmaceutical formulations.

Turnover from pharmaceutical sector is encouraging which is about 14% of total industry turnover is. This

position also indicates the positive sign for investment in pharmaceutical sector. Though the country hasall the potential to become a major global source of APIs and will also be able to produce drugs, which

are still under patent protection, as the TRIPS Council meet at Doha has declared the least developed

country (LDC) status to remain without patent regime till 2016, it needs active participation and

contribution from local as well as foreign companies to build upon the capability.

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However, the trend now seems to be favorable to the country as the domestic pharmaceutical industry as

well as the companies from neighboring countries like India, China and even MNCs have queued up to

put in investments on this front as every stakeholder will benefit of vast potential that Bangladesh can

offer. The local entrepreneurs are capable and willing to invest and collaborate with suitable foreign

partners in order to develop the existing API manufacturing facilities.

Presently top pharmaceutical companies in Bangladesh are also in the process of getting into bulk drug

production with collaborative technology, technology transfers and joint venture basis. The large-scale

players in the Bangladesh pharmaceutical industry currently include Square Pharma, Beximco, Alma,

Apson Chemicals, FEI, Araneta, General Pharma, Hudson Pharma and SKF among others. The MNCs

that have a major presence in the country's pharma sector are Aventis, Pfizer, Novartis and Astra

Zeneca.

Bangladesh's Largest Pharmaceutical Companies (by sales of 2008)

Square31%

Incepta

12%

Beximco11%

Acme

8%

Eskayef

7%

ACI

7%

Opsonin7%

Renata6%

Aristopharma6%

Drug

International5%

Square Pharma Sales in $ Million (Year 2008)

Square Incepta Beximco

Acme Eskayef ACI

Opsonin Renata Aristopharma

Drug International

2

TopS u

IncepBexi




About Square PharmaceuticalAbout Square Pharmaceutical

Square was founded by Chairman Samson Chowdhury and three friends in 1958. Today, Square is the

largest Bangladeshi pharmaceutical firm with net revenues of 6.09 billion Taka (86.6 million USD) and

profits of 1.17 billion Taka (16.6 million USD) (Square Pharmaceuticals 2005-2006). In 1974, Square

entered into a third party licensing agreement with Jansen Pharmaceuticals (a subsidiary of Johnson &

Johnson) to manufacture and sell five Jansen patented products in Bangladesh. Square was presented

with a business opportunity that significantly changed it. With Jansen’s name on the product as well as

Square’s, Jansen had a vested interest to ensure product quality. Jansen therefore trained the local staff

and Square sent staff to Belgium for more training with Jansen. The collaboration also exposed Square to

international standards of quality manufacturing. The relationship had a profound affect on Square’s

executives and how they approached business. Chairman Chowdhury attributes much of Square

Pharmaceuticals’ success to this initial licensing arrangement. The arrangement ended in 1982 with the

new Drug Control Ordinance that prohibited this type of arrangement.

SQUARE: Vision, Mission & ObjectiveSQUARE: Vision, Mission & Objective

VISION

We view business as a means to the material and social wellbeing of the investors, employees and the

society at large, leading to accretion of wealth through financial and moral gains as a part of the process

of the human civilization.

MISSION

Our Mission is to produce and provide quality & innovative healthcare relief for people, maintain

stringently ethical standard in business operation also ensuring benefit to the shareholders, stakeholders

and the society at large.

OBJECTIVE

Our objectives are to conduct transparent business operation based on market mechanism within the

legal & social frame work with aims to attain the mission reflected by our vision.

SQUARE: Quality PolicySQUARE: Quality Policy

Ensure strict compliance with WHO cGMP standards and local regulatory norms in every phase of

sourcing & procuring quality materials, manufacturing, quality assurance and delivery of medicines.

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Ensure all activities through documented Quality Management System (QMS) complying International

Standard requirements of ISO 9001 through continuously developing Human Resources by regular

training and participation.

SQUARE is committed to undertake appropriate review, evaluation and performance measurement of

processes, business activities and Quality Management System for continual improvement to ensure

highest standard, customer satisfaction, developing human resources and company's growth.

SQUARE: Export MarketSQUARE: Export Market

1. Exports pharmaceutical finished products since 1987

2. Offers quality products at competitive price

3. Offers more than 250 off-patent and on-patent molecules4. Offers facilities for contract manufacturing

5. Provides assistance in product promotion and training in overseas markets

Present Markets

Square pharmaceutical’s is already supplying products to the following markets:

Europe: UK

Asia: Afghanistan, Bhutan, Cambodia, Hong Kong, Iraq, Macau, Malaysia, Myanmar, Nepal, Papua New

Guinea, Sri Lanka, Tajikistan, The Philippines, Vietnam, Yemen

Africa: Comoros Islands, Eritrea, Gambia, Ghana, Kenya, Libya, Malawi, Mauritania, Mauritius,

Mozambique, Niger, Rwanda, Sierra Leone, Somalia, Sudan, Tanzania

South America: Belize, Costa Rica, Guatemala

Markets under Exploration

Asia: Iran, Iraq, Kuwait, Laos, Maldives, Mongolia, Qatar, Saudi Arabia, Thailand, UAE

Africa: Algeria, Botswana, Central African Republic, Chad, Ethiopia, Ivory Coast, Nigeria, Rwanda, South

Africa

South America: Jamaica, Chili

About InceptaAbout Incepta

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Incepta was founded in 1999. It wants to position itself as a research-based dosage form manufacturing

firm with a global presence. It currently focuses on more technologically advanced products such as

sustained-release tablets, quick mouth dissolving tablets, barrier-coated delayed-release tablets, etc.

Incepta is interested in adding API production and reverse engineering capabilities to its business.

Incepta has grown rapidly. Within five years of its establishment, it became the third largest Bangladeshi

pharmaceutical firm. By 2004, Incepta’s turnover stood at 1.2 billion Taka and a product portfolio of 125

brands and almost 1,500 employees. A young and entrepreneurial management team, which gained its

experience in international, regulated markets such as Europe and the United States, is credited with

much of its success. To fund this growth, Incepta did not use bank financing, except for a small amount

during the first two years. The start-up team initially capitalized from family and friends and has funded

expansion through annual earnings.

About BeximcoAbout Beximco

Beximco is one of Bangladesh’s largest pharmaceutical exporters. It began exporting to Russia in 1992.

Learning how to register products in foreign markets was a challenging experience for Beximco, but it

proved profitable. Export profits were 37% higher than from domestic sales. After Russia, Beximco

expanded to other markets. It is currently registered to export to 23 countries: Botswana, Cambodia,

Georgia, Ghana, Hong Kong (China), Kenya, Iran, Malaysia, Mozambique, Myanmar, Nepal, Pakistan,

The Philippines, Russia, Somalia, Singapore, South Korea, Sri Lanka, Taiwan, Ukraine, Vietnam, and

Yemen. In the early 2000s, Beximco started to upgrade its facilities to obtain export certification to more

regulated markets.

We choose Square Pharmaceuticals Limited for the project as they are the market leader in our country

and their expansion strategy is also highly innovative. Below are the some evidences behind our choice:

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Evidence for Outstandingly SuccessfulEvidence for Outstandingly Successful

-

20,00,000

40,00,000

60,00,000

80,00,000

1,00,00,000

1,20,00,000

1,40,00,000

2005-05 2005-06 2006-07 2007-08 2008-09

Square Pharma Profitability AnalysisFigures in '000

Turnover (Gross) Net Profit Total Assets

Square pharmaceuticals net profit took a considerable increase over the recent years. Whereas, the total

turnover and total assets have significantly increased over the years.

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8.60%

17.50%

4.08%

15.80%

6.91%

13.08% 14.30%

22.94%

9.81%

18.83%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2004 2005 2006 2007 2008

Square Pharma Growth Vs. Industry Growth

Industry Growth rate Square's growth rate

Principal Source of their Competitive AdvantagesPrincipal Source of their Competitive Advantages

1. Strong Distribution Channel

SPL has the strongest distribution network for smoothing distribution of medicines to all parts of thecountry. Currently it has 15 depots all over the country. Those are situation at Dhaka, Pabna, Bogra,

Rangpur, Khulna, Barisal, Comilla, Mymensingh, Chittagong, Noakhali, Sylhet, Tangail, Rajshahi,

Faridpur and Naryanganj. It uses own transport system to deliver its product to the stockliks and retailer.

2. Human resource management

Year 2007-08 2006-07 2005-06 2004-05 2003-04

Executives 1,525 1,242 1,143 949 895

Staffs 1,110 913 796 740 686Workers 929 846 764 705 661

All manufacturing units are staffed with adequate number of Professionals related to Pharmaceutical

sciences in accordance with WHO guidelines in order to produce good quality, safe and effective drugs

and pharmaceuticals.

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Adequate number of other supporting trained and skilled technical personnel is employed for smooth

functioning of the manufacturing plant. SPL has a dedicated team of adequate professionals for smooth

functioning of the company.

It has a team of more than 300 well-trained employees to market it’s product countrywide which is second

to none. Square strives for best compensation to all the employees who constitute the back-bone of the

management and operational strength of the company through a pay-package composing salary/wages,

allowances, bonuses, profit participation, leave salary and superannuation & retirement benefits.

In order to improve productivity of human input, the company continuously provide formal and informal

training to the employees at every echelon of operation and management. During the year under 2008

2247 person received in-house or in-operation/on the job training at home and abroad which will

ultimately make great contribution to the company's profitability as well their own remuneration in due

course.

3. Revenue Management Model

Total revenues are highly dependant on sales from a small number of drugs. Because, In the

pharmaceutical industry, the pharmaceuticals products are divide in to two broad categories: (a) Over the

Counter (OTC) - Can be advertised of commercialized (b). Prescribed only Medicine (POM) - Strictly

regulated in terms of pricing and approaches. SPL strives to increase the sale of those POM drugs.

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4. Marketing Mix

SquarePharma

Price(All mostregulated)

Place(Domestic &

Foreign)

Promotion(Personal selling

throughrelationship)

Product(Medicine)

Product:Product: SPL develops, produces, and markets drugs of different therapeutic groups licensed for use as

medications. The Bangladeshi Pharmaceutical Market is primarily a generic market producing both

patented and off-patented products. This is popularly known

as Branded Generic Market since any manufacturer can produce the same molecule (either patented or

off-patented) and market it in different brand names. SPL is not beyond this scenario. It produces off-

patented molecule and market it in it’s own brand. The product list according to generic segment can be

found in appendix part.

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Price:Price: Drug pricing is heavily dependent on the National Drug Policy adopted by Directorate of Drug

Administration of Bangladesh Govt. Governments agencies act as a countervailing power in pricing

pharmaceuticals. As per the NDA 2005, regulatory authority pursuing “Rational pricing” of drugs to ensure

essential drugs available to the end-users at affordable prices. On the basis of that policy, SPL has been

pursuing two different kinds of pricing policy:

a. For OTC product, all most similar price as the competitors’.

b. For POM product, competitive pricing.

There are also few exceptions. If SPL introduces a product first in the market, it charges little bit higher

price than it’s competitors, but within the rules and regulations of Drug Administration.

Place:Place: SPL has the strongest domestic distribution network for smoothing distribution of medicines to all

parts of the country. Currently it has 15 depots all over the country. Those are situated at Dhaka, Pabna,

Bogra, Rangpur, Khulna, Barisal, Comilla, Mymensingh, Chittagong, Noakhali, Sylhet, Tangail, Rajshahi,

Faridpur and Naryanganj. It uses own transport system to deliver its product to the stockist and retailer.

SPL also exports its products to 31 countries.

Present Export Market Covers

Myanmar Nepal Kosovo Kenya

Libya Mauritius Malawi Yemen

Tanzania Sri Lanka Somalia Vietnam

Afghanistan Ukraine Uzbekistan Ghana

Iraq Benin Botswana Bhutan

Cambodia Comoros Island Tajikistan

Mozambique Gambia Niger Rwanda

Papua New Guinea Sierra Leone Macau Countries

Promotion:Promotion: Public advertisement for medicine, especially POM drug is strictly prohibited in Bangladesh.

But it may be done for OTC medicine to some extent. However, no pharma company in Bangladesh is

engaged in such advertisement. SPL heavily depends on personal selling through rapport building and

maintaining. A team of sales representatives, called MPO have been employed to meet with physicians to

explain the merits, demerits, indication, contraindications, etc. of the medicine with the help of literature,

brochure, pad, booklet, leaflet, gift item etc. That is, the Medical Promotion Officers promote the

companies product to doctors front with the help of different promotional materials. If a new drug is to be

more expensive, then it needs to demonstrate that its superior performance is worth it.

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Its promotional activities can be illustrated as follows:

Core Customer

End Customer

Non-core Customer(Retailer)

Customer (Stockist)

Customer (C&F)

Marketing & Sales Team

Relation Development

Literature, brochure, pad,booklet, leaflet, gift item etc.

5. Consistent up-gradation

SPL’s another strategy is upgrading and adopting new technology for it’s manufacturing plants

consistently so that it can produce quality product with comparatively lower cost.

6. Low manufacturing cost through vertical integration

To expand it’s market with low cost products, SPL’s strategy is to integrate itself more vertically so that it

can get the raw materials cheaply. It has its own API manufacturing facilities and more API factory is

being established.

7. Research and Development Activities:

As a part of corporate social responsibility for good governance the company maintains a team of

scientific pharmaceutical experts who continuously conduct research and development programs for

improving quality of products, reduction of cost, adaption of products that are free of intellectual property

rights and innovative products. These efforts have enabled the company to add new products to its

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product lines e very year to the benefit of the common men of the country and the shareholders. The

success in this field has secured the leading position for the company in the pharmaceutical sector.

8. Technological up-gradation:

The company is endeavoring to upgrade and adopt new technology in production, quality control,

distribution and administration of its products to patients. During the year 07-08 the company invested an

amount of 36 million in improving its laboratory.

Company’s Most Important Rival

Brand Image

Unrenowned OTC market

Poor capturing to the opinion leaders

Infrastructure

Headcount

Raw materials

Followers

Poor distribution policy in the local market

Not operating in low cost market

Insufficient working capital

Organizational Competencies & Strengths of Management processOrganizational Competencies & Strengths of Management process

The Philosophies as have been adopted by Square Pharmaceuticals Ltd. are as follows:

• Businesses should support and respect the protection of internationally proclaimed human rights

within their sphere of influence;

• Make sure that they are not complicit in human rights abuses.

• Businesses should uphold the freedom of association and the effective recognition of the right to

collective bargaining;

• The elimination of all forms of forced and compulsory labor;

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• The effective abolition of child labor and

• Eliminate discrimination in respect of employment and occupation.

• Business should support a precautionary approach to environmental challenges:

• Undertake initiatives to promote greater environmental responsibility;

• Encourage the development and diffusion of environmentally friendly technologies.

• Business should work against corruption in all its forms, including extortion and bribery.

• Square strives, above all, for top quality health care products at the least cost reaching the lowest

rungs of the economic class of people in the country. Square values our social obligations.

• Square owes our shareholders and strive for protection of their capital as well as ensure highest

return and growth of their assets.

• Square strives for best compensation to all the employees who constitute the back-bone of the

management and operational strength of the company through a pay-package composing

salary/wages, allowances, bonuses, profit participation, leave salary and superannuation &

retirement benefits.

• Square strives for the best co-operation of the creditors & debtors the banks & financial

Institutions who provide financial support when Square needs them, the suppliers of raw

materials & suppliers who offer them at the best prices at the opportune moments, the providers

of utilities-power, gas & water etc. and the customers who buy our products & services by

redeeming their claim in time by making prompt payment and by distributing proper product on

due dates to our customers.

• Square strives for fulfillment of our responsibility to the government through payment of entire

range of due taxes, duties and claims by various public agencies like municipalities etc.• Square strives, as responsible citizen, for a social order devoid of malpractices, anti-

environmental behaviors, unethical and immoral activities and corruptive dealings.

• Square strives for practicing good-governance in every sphere of activities covering inter alia not

being limited to, disclosure & reporting to shareholders, holding AGM in time, distribution of

dividends and other benefits to shareholders, reporting/dissemination of price sensitive

information, acquisition of shares by insiders, recruitment & promotion of staff, procurement &

supplies, sale of assets etc. all that directly and indirectly affect the interest of concerned groups -

the shareholders, the creditors, suppliers, employees, government and the public in general.

• Square strives for equality between sexes, races, religions and regions in all spheres of our

operation without any discriminatory treatment.

• Square strives for an environment free from pollution and poisoning.

• Square strives for the achievement of millennium development goals for the human civilization.

Recommendation for the CompanyRecommendation for the Company

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Expanded Missionary selling technique:

Doctors are the only opinion leader in SPL’s present strategy. It may be partially good, but can not be

perfect as the completion becomes more intense day by day. There are some other parties who has the

scope and ability to act as “opinion leader” and to motivate the buyer. These potential “opinion leaders”

are remaining unexploited. SPL has enough resources to let them add value to the company. Hereby we

are proposing a hypothetical model to correct this strategy-

Marketing & Sales Team

Non-core Customer(Retailer)

Customer (Stockist)

End Customer(Patient)

Core Customer(Doctors)

Profit Sharing

In this model, Retailers have been selected as new opinion leader, besides the doctors & physicians. In

return, they will enjoy above average profit margin by selling SQUARE product.

Customer once, client forever:

Client is more profitable than customer in terms of both transaction as well as positive word-of-mouth

communication. He himself can be an opinion leader. So, I am suggesting to adopt some programs that

will let its customers be transformed into clients. The following model would better describe this concept

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SPL has a strong brand image in pharmaceutical industry. It will facilitate this strategy. We are citing

some instances here which may be useful for this strategy:

a. Mobile Hospital service with free treatment and medicine.

b. Health awareness program in rural area.

c. Modernization of educational institute or public hospital etc.

Today’s plant tomorrow’s tree:

Those who are student of MBBS today, tomorrow they will become doctor. Therefore, SPL may approach

them to establish and maintain a long-term rapport.

What I have today, other will have tomorrow:

SPL is always striving to maintain the highest product portfolio among the competitors for its product

development strategy. Holding the heaviest product folio should not be the ultimate goal at all. Emphasis

must be given on how early a new product can be launched in the market place than the competitor.

Keep pace with the race:

Today’s world is changing very rapidly, in every sphere. Therefore, updating production plant alone is not

enough to cope with the new environment. SPL has to have a keen eye if there is any change in HR

development, transport, information technology, consumer relation management, medical science and so

on.

Integrate greatly:

SPL imports 80% raw materials of its total requirements. This is an weakness if it wants to consistently

expand its market. So it requires either more Active Pharmaceuticals Ingredients (API) plants or increase

in present production capacity.

Innovation is the destination:

Pharma is on the brink of a scientific and technological revolution that will ultimately transform both the

nature of the medicines it makes and how it makes them. In future, then, Pharma will not only make the

white powders, creams and tablets it has traditionally produced, it will manufacture a complete mix of

biopharmaceuticals, parenterals and diagnostics. Making targeted treatment solutions will generate

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greater revenues than conventional drugs and offset the increasing competition from generic producers.

But it will also require the restructuring of the entire pharmaceutical value chain, including the fixed asset

base and downstream distribution.

Concentrating on Export Market:

At this moment Beximco captures the highest export market. So Square should also concentrate in the

global arena.

List of Abbreviations Used

SPL : Square Pharmaceuticals Ltd.

API : Active Pharmaceutical Ingredients.

POM : Prescription Only Medicine

OTC : Over The Counter

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