OTH Final Report

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Dr. Reddys Laboratories

Corporate Strategy

Joseph AJ (F09023), Luca Crivellari (F09119), Vikas Antony (F09117)

7/23/2010



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Contents

THE INDIAN PHARMACEUTICAL MARKET ................................ ................................ ................................ ..... 3

OBJECTIVES ................................ ................................ ................................ ................................ ................................ 6

LITERATURE REVIEW ................................ ................................ ................................ ................................ ............ 6

INTRODUCTION TO DR. REDDYS LABORATORIES ................................ ................................ ...................... 7

Company Profile and History ................................ ................................ ................................ ........................... 7

Milestones ................................ ................................ ................................ ................................ .............................. 7

ASSESSMENT ................................ ................................ ................................ ................................ ............................. 8

Vision ................................ ................................ ................................ ................................ ................................ ....... 8

Vision-Dr. Reddys ................................ ................................ ................................ ................................ ............... 8

Mission ................................ ................................ ................................ ................................ ................................ .... 8

Mission-Dr. Reddys ................................ ................................ ................................ ................................ ............ 9

CORE COMPETENCIES ................................ ................................ ................................ ................................ .......... 10CORPORATE CULTURE ................................ ................................ ................................ ................................ ......... 12

SWOT ANALYSIS ................................ ................................ ................................ ................................ ..................... 15

PEST ANALYSIS ................................ ................................ ................................ ................................ ....................... 17

STRATEGY................................ ................................ ................................ ................................ ................................ . 19

REFERENCES ................................ ................................ ................................ ................................ ........................... 22



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THE INDIAN PHARMACEUTICAL MARK ET

The Indian Pharmaceutical Industry today is in the front rank of India¶s science-based

industries with wide ranging capabilities in the complex field of drug manufacture and

technology. A highly organized sector, the Indian Pharma Industry is growing with a doubledigit pace. It ranks very high in the third world, in terms of technology, quality and range

of medicines manufactured. From simple headache pills to sophisticated antibiotics and

complex cardiac compounds, almost every type of medicine is now made indigenously.

Playing a key role in promoting and sustaining development in the vital field of

medicines, the Indian Pharma Industry boasts of quality producers and many units approved

by regulatory authorities in the USA and the UK. International companies associated with

this sector have stimulated, assisted and spearheaded this dynamic development in the past 53

years and helped to put India on the pharmaceutical map of the world

The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered

units. It has expanded drastically in the last two decades. The leading

250 pharmaceutical companies control 70% of the market with market leader holding nearly

7% of the market share. It is an extremely fragmented market with severe price competition

and government price control



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The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered

units. It has expanded drastically in the last two decades. The leading

250 pharmaceutical companies control 70% of the market with market leader holding nearly

7% of the market share. It is an extremely fragmented market with severe price competition

and government price control.

The pharmaceutical industry in India meets around 70% of the country's demand for bulk

drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals

and injectibles. There are about 250 large units and about 8000 Small Scale Units, which

form the core of the pharmaceutical industry in India (including 5 Central Public Sector

Units). These units produce the complete range of pharmaceutical formulations, i.e.,

medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals having

therapeutic value and used for production of pharmaceutical formulations.

Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the

drugs and pharmaceutical products has been done away with. Manufacturers are free to

produce any drug duly approved by the Drug Control Authority. Technologically strong and

totally self-reliant, the pharmaceutical industry in India has low costs of production, low

R&D costs, innovative scientific manpower, strength of national laboratories and an

increasing balance of trade. The Pharmaceutical Industry, with its rich scientific talents and

research capabilities, supported by Intellectual Property Protection regime is well set to take

on the international market.

According to McKinsey analysis, the Indian pharmaceutical market will triple from 2005 to

2015 and six trends will be causing this growth:

y doubling of disposable incomes and the number of middle-class households,

y expansion of medical infrastructures

y greater penetration of health insurance

y rising prevalence of chronic diseases

y adoption of product patent

y aggressive market penetration driven by the relatively small companies.



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It has forecasted that from a market size of US$ 6.3 billion in 2005, the Indian

pharmaceuticals market will grow about US$20 billion by 2015. This implies a compounded

annual growth rate of 12,3%.

By 2015, the Indian pharmaceuticals market will be ranked among the top 10 in the world

overtaking Brazil, Mexico, South Korea and Turkey. More importantly, the incremental

market growth of US$14 billion from the decade is likely to be the third largest among all the

markets. The US and China are expected to add US$200 billion and US$23 billion

respectively.



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OBJECTIVES

The primary objective of this paper is to study the vision and mission of Dr. Reddy¶s

Laboratories and corroborate whether the strategy which it has adopted falls in line with its

mission and vision statements.

LITERATUR E R EVIEW

An organization is created to achieve some purposes, which is decided by the CEO and the

top management team. Top executives decide on the end purpose the organization will strive

for and determine the direction it will take to accomplish it. It is this purpose and direction

that shapes how the organization is designed and managed. Indeed, the primary responsibility

of the top management is to determine an organization¶s goal, strategy and design, therein

adapting the organization to a changing environment. Middle managers do much the same

thing for major departments within the guidelines provided by the top management.

The direction setting process typically begins with an assessment of the opportunities and

threats in the external environment, including the amount of change, uncertainty and resource

availability.

Top management also assess internal strengths and weaknesses to define the company¶s

distinctive competence compared with other firms in the industry. The assessment of internal

environment often includes an evaluation of each department and is shaped by past

performance and leadership style of the CEO and the top management. The next step is to

define overall mission and official goals based on the current fit between external

opportunities and internal strengths. Specific operational goals or strategies can then be

formulated to define how the organization is to accomplish its overall mission.

The choices top managers make about goals, strategies and organization design have a

tremendous impact on organizational effectiveness. Top managers and middle managers must

select goals for their respective units and the ability to make these choices largely determine

the firm success. Organizational design is used to implement goals and strategy and also

determine organization success.



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INTR ODUCTION TO DR. R EDDY¶S LABORATORIES

Company Profile and History

Established in 1984, Dr. Reddy¶s Laboratories (NYSE: RDY) is an emerging global

pharmaceutical company whose purpose is providing affordable and innovative medicines for

healthier lives. Dr. Reddy¶s is vertically integrated with a presence across the pharmaceutical

value chain through its core businesses of Global Generics, Pharmaceutical Services &

Active Ingredients (PSAI), and Proprietary Products, which includes New Chemical Entities,

Biosimilars and Differentiated formulations. The company¶s products are marketed globally,

with a focus on India, US, Europe and Russia. Dr. Reddy¶s conducts NCE drug discovery

research in the areas of metabolic disorders, cardiovascular indications, anti-infective and

inflammation.

From the corporate profile posted on the website, it is possible to understand many of the

features of this pharmaceutical giant. The peculiarities we want to underline are:

y Its global presence: the focus in on the US, Germany, India and Russia but it has

wholly-owned subsidiaries in the US, UK, Russia, Brazil, New Zealand, Turkey and

Mexico;

y Three product lines;

y High commitment towards employee satisfaction;

y High commitment towards social responsibility issues.

Milestones



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ASSESSMENT

Vision

A vision statement is sometimes called a picture of a company in the future but it¶s so much

more than that. The vision statement is your inspiration, the framework for all your strategic

planning.

A vision statement may be applied to an entire company or to a single division of that

company. Whether for all or part of an organization, the vision statement answers the

question, ³Where do we want to go?´.

What you are doing when creating a vision statement is articulating your dreams and hopes

for your business. It reminds you of what you are trying to build.

While a vision statement doesn¶t tell you how you¶re going to get there, it does set the

direction for your business planning. That¶s why it¶s important when crafting a vision

statement to let your imagination go and dare to dream ± and why it¶s important that a vision

statement captures your passion.

Unlike the mission statement, a vision statement is for the management team and the other

members of the company, not for customers or clients.

When writing a vision statement, the mission statement and the core competencies can be a

valuable starting point for articulating values.

Vision-Dr. Reddy¶s

To become a discovery-led global pharmaceutical company

Mission

The overall goal for an organization is often called the mission, the organization¶s reason for

existence. The mission describes the organization¶s vision, its shared values and beliefs and

its reasons for being. It can have a powerful impact on the organization. The mission is

sometimes called the official goals. Official goal statements typically define business

operations and may focus on values, markets and customers that distinguish the organization.



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One of primary purposes of a mission statement is to serve as a communication tool. The

mission statement communicate to current and prospective employees, customers, investors,

suppliers and competitors what the organization stands for and what it¶s trying to achieve. A

mission statement communicates legitimacy to internal and external stakeholders, who may

join and be committed to the organization because they identify with its state purpose. Most

top leaders want employees, customers, competitors, suppliers, investors and the local

community to look on them in a favourable light, and the concept of legitimacy plays a

critical role. The corporate concern for legitimacy is real and pertinent.

Mission-Dr. Reddy¶s

Commitment to providing Affordable and Innovative medicines for healthier lives.

There exists a two pronged focus on:

Affordability: Dr. Reddy¶s believes that high cost of many medicines puts them out of the

reach of millions of people who desperately need them. They take very seriously their

responsibility to help alleviate the burden of disease on individuals and on the world.

Through their Global Generics business, they provide high quality, lower-cost alternatives to

innovator drugs.

Innovation: Despite the great advances of medical science, there are still far too manydiseases for which there are no cures or no satisfactory treatments. The company believes that

innovation ± in research, processes and technologies ± holds the key to finding solutions for

unmet or inadequately met medical needs. Their Proprietary Products business is dedicated to

discovering new or better treatments than currently exist. In addition, their Custom

Pharmaceutical Services business works with Innovator companies and emerging biotech

firms to accelerate the development of new molecules, while lowering research costs.



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COR E COMPETENCIES

A Core Competency is a deep proficiency that enables a company to deliver unique value to

customers. It embodies an organization's collective learning, particularly of how to coordinate

diverse production skills and integrate multiple technologies. Such a Core Competencycreates sustainable competitive advantage for a company and helps it branch into a wide

variety of related markets. Core Competencies also contribute substantially to the benefits a

company's products offer customers. The distinguishing feature of a Core Competency is that

its hard for competitors to copy or procure. Understanding Core Competencies allows

companies to invest in the strengths that differentiate them and set strategies that unify their

entire organization.

In keeping with its vision and mission, the company has identified the following core

competencies essential for attaining business objectives:

Deep Manufacturing Expertise

The company has 16 world-class manufacturing facilities of which 9 have a long history of

regular USFDA inspections. With an annual capacity of nine billion tablets/ capsules a year,

dedicated to servicing the more regulated markets, one of its finished dosages facilities is

among the largest in Asia. The facilities are designed to respond to a wide range of

technologies - oral solids, injectibles, topicals, inhalers, cytotoxic, hormonals and other

dosage forms.

Likewise the firm¶s API facilities offer lean manufacturing, adhere to stringent regulatory

guidelines and continually drive cost competitiveness. Such manufacturing capabilities and

inherent expertise to navigate intellectual property road blocks makes Dr. Reddys a preferred

partner for some of the world¶s leading pharmaceutical companies.

Globally Synchronized Supply Chain

The company puts the needs of its partners and customers first. Its globally synchronized

supply chain and a comprehensive Information technology platform helps assure customers

of timely delivery and superior inventory turns. The uninterrupted success of its customers¶

business is the firm¶s foremost promise.



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Regulatory Performance

Over the years Dr. Reddys has built an expertise in understanding the regulatory frameworks

of the various countries in which it operates. This has given them a distinctive edge, for

themselves and their customers. They have built a successful track record of timely and

extensive approvals. As an example, the firm is among the leaders in terms of Abbrevaited

New Drug Applications (ANDAs) in the US.

Quality & Product Responsibility

At Dr Reddy¶s, quality control and quality assurance systems are strictly followed as

specified by regulatory requirements in each of the geographies in which they operate. For

them, product responsibility extends through the life cycle of the product- from product

development to manufacture to product release to post-launch. They comply with the

internationally accepted International Conference on Harmonization (ICH) guidelines in

product development and have independent quality control and quality assurance teams to

ensure multi-stage quality compliance.



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CORPORATE CULTUR E

Culture is the set of values, norms, guiding beliefs and understanding that is shared by

members of an organization. Everyone participates in culture, but culture generally goes

unnoticed. It is only when organization try to implement new strategies or programs that goagainst basic cultural norms and values that they come face to face with the power of culture.

Organizational culture exists at two levels. On the surface are visible artefacts and observable

behaviours, the ways people dress and act, the symbols, the stories and ceremonies

organization member shares. The visible element of culture, however, reflects deeper values

in the minds of organization members. These underlying values, assumptions, beliefs and

thought process are the true culture.

Culture provides members with a sense of organization identity and generates in the acommitment to beliefs and values that are larger than themselves. Though ideas that become

part of culture can come from anywhere within the organization, an organization¶s culture

generally begins with a founder or early leader who articulates and implements particular

ideas and values as a vision, philosophy or business strategy. When the idea and value leads

to success, they become institutionalized, and an organizational culture emerge that reflects

the vision and strategy of the funder or leader.

Culture serves two critical functions in organizations: to integrate members so that they know

how to relate to one another, and to help the organization adapt to the external environment.

Internal integration means that members develop a collective identity and know how to work

together efficiently. Its culture that guides day-to-day working relationships and determines

how people communicate within the organization, what behaviour is acceptable or not and

how power and status are allocated. External adaptation refers to how the organization meets

goals and deals with outsiders. Culture helps guide the daily activity of workers to meet

certain goals. It can help the organization to respond rapidly to customer needs or the moves

of a competitive advantage. Culture plays a key role in transforming an organization¶s

performance from average to truly great.

The organization¶s culture also guides the employee decision making in the absence of

written rules or policies. This, both functions of culture are related to building the

organization¶s social capital, by forging either positive or negative relationships both within

the organization and with outside.



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Once again, keeping with its Vision and Mission statement, Dr, Reddy¶s strives to imbibe the

following corporate culture to further its operational effectiveness:

y The company seems truly concerned about sustainability and environmental issues,

we can see it because the commitments of the company have been reported several

times along the corporate annual review and website.

y It has put in motion a kind of strategic philanthropy because it¶s producing products at

a low price so that everybody (or almost) can afford them.

y The company seems to have a transparent kind of communication, given that all the

documents are available on the website along with financial data, reports and

statement.

y It cares for its employees, given that it has won the award for ³best company to work

for´ in biotech/pharma industry by the Great place to work Institute in collaborationwith the Financial Times.

y The company seems to have a global culture given that it has many participation and

connection abroad and many of the non-executive directors in the board are non-

Indian.

y It has high commitments towards the employees that can be stated through those

concepts:

o Attract, develop and retain multi skilled high-performers;

o Create a learning organization;

o Develop and nurture young leaders;

o Promote teamwork and collaboration;

o Build a diverse workforce and meritocracy.

The traits of the organisational culture that we have explained till now need to merge with the

culture of all the employees the company has. This is an even more difficult task to

implement given that the people employed at Dr. Reddy¶s come from more than 40 nations

worldwide.

In our opinion, a message of the chairman Dr. Anji Reddy can summarize the common

pattern of beliefs and ideals shared among the people in the organization:



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³If the world¶s burden of disease is to be diminished, it needs science that is both good and

cost-effective. India has the potential to deliver on science that is both. I have great

confidence in our army of chemists and biologists. And I firmly believe that walking on the

trail of innovation will lead to creating a great company -a company that doctors, patients,

investors and the public will admire´.



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SWOTANALYSIS

SWOT analysis is a strategic tool used to evaluate theStrengths, Weaknesses,

Opportunities, and Threats involved in a project or in a business venture by specifying the

objective of the business venture or project and identifying the internal and external factorsthat are favorable and unfavorable to achieve that objective. It helps in generating strategic

alternatives from a business alternative.

SWOT Analysis for Dr. Reddy¶s Laboratories

STR ENGTHS WEAKNESS

y Strong market portfolio

y Has a product portfolio of over 150

APIs and 20 products under

development

y Wide range of anti-cancer drugs

developed

y Expertise in developing innovative

product formulations

y Research driven-6120 employees

worldwide including 951 scientists in

which 323 are dedicated towards new

drug discovery research

y Partnerships with key players in the

market space

y Markets pharmaceutical products in

over 115 countries

y Wholly owned subsidiaries in US and

Europe

y Low cost base

y May lose out to countries in the west

because of a more stable currency

y Over reliance on partnerships

y Lack of strategic partnerships needed

to develop products, thereby

competing effectively in global

markets

y Comparatively less focus on generic

drugs

y Lack of robust patent registration

mechanisms in India, which affects

sales of its products

OPPOR TUNITIES THR EATS

y Lack of middlemen in its value chain

y Excellent supply chain management

y Need for FDA approval for all

products



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y Opportunities to increase domestic

footprint after reforms in patent

legislations

y Time consuming FDA trial process

affecting revenues from the US and

Europe markets

y Competition from US and European

companies

y Concerns about legal problems with

Pfiezer and judgment in respect of

certain acquisitions



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PESTANALYSIS

PEST analysis is basically an evaluation of the macro-economic environment in which an

organization operates, expressed in terms of the impact of Political, Economic, Social and

Technological factors on it.

PEST Analysis

POLITICAL ECONOMIC

y Over-regulation by the government

by way of stringent price control

measures

y Problems created by inappropriately

framed patent laws leading to several

competing companies manufacturing

and marketing the same product under

a different brand name

y Existence of a huge PSU segment in

the pharma industry which is

chronically sick and highly

inefficient. The government diverts

surpluses from efficient units into

these sick units thereby unduly

subsidizing them

y The government¶s decision to charge

excise duty on MRP rather than cost

of manufacturing, thereby making

finished products more costly

y The Government provides extra

drawbacks to some units located in

specified area, providing them with

subsidies that are unfair to the rest of

the industry, bringing in a skewed

development of the industry. As a

y Very small percentage of the GDP

spent on healthcare

y Low per-capita income per individual

leading to lesser priority for regular

healthcare check ups

y High incidence of tax - Excise duty

(State & Central), Customs duty,

Service tax, License fees, Royalty,

Pollution clearance tax, Hazardous

substances (Storage & Handling)

license, Income tax, Stamp duty etc

y Low number of registered medical

practitioners

y Inadequate storage and transportation

facilities for special drugs owing to a

poor road and rail network



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result, pharma units have come up at

place unsuitable for a best cost

manufacturing activity.

SOCIAL TECHNOLOGICAL

y Rampant poverty

y Poor sanitation facilities

y Preference for household treatments

handed down over generations

y Widespread prevalence of hakims,

tantriks etc

y Increasing pollution levels

y Increase in the number of smokers

y Ignorance about benefits of

vaccination etc

y Rampant prevalence of superstitions

y Huge unemployment

y Progress in automation across the

industry

y Recent advances in bio-sciences

including stem cell research etc

y Newer drug delivery systems

y Increased focus on Research &

Development



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STRATEGY

Based on references in numerous press releases, the investor presentation and the mission

statement available on the company website, it could be inferred that the company adopts a

Low Cost Strategy to ward off competition and capture the market. The idea is to increasecapabilities in such a way so as to be able to offer the lowest price for quality drugs in the

market. It does this through an improved supply chain management system, elimination of

middlemen in the value chain, an innovative business model and a robust research and

development initiative.

Their strategy pans out in the following ways



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The success of this strategy is shown by the following



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In conclusion we feel that the strategy of Dr. Reddy¶s Labs is in line with its vision and

mission, as reflected in its financial performance over the past 5 years.However, with the

space in which the company operates getting increasingly smaller and much more

competitive with each passing day, we also feel that Dr. Reddy¶s incorporate the elements of

knowledge sharing among its employees, thereby creating a lean and agile workforce which

is insulated from change and competition to a large extent owing to its competitive

advantage.



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R EFER ENCES

y R.L. DAFT ± Organizational theory, structure and design, Cengage Editions, 2009

y K. ASWATHAPPA, SADH NA DASH ± International Human Resource

Management, McGraw Hill Editions, 2008y R. REGIS ± Strategic Human Resource Management and Development, Excel Books

Editions, 2008

y Web resources:

y Indian Pharma 2015, unlocking the potential of the Indian pharmaceuticals market,

McKinsey&Company

y The Indian pharmaceutical market 2011, Business Insight

y http://www.drreddys.com/index.html

y http://en.wikipedia.org/wiki/Strategic_planning

y http://sbinfocanada.about.com/od/businessplanning/g/visionstatement.htm

y http://www.iloveindia.com/economy-of-india/top-50-companies/dr-reddy.html

y http://www.drreddys.com/aboutus

y http://www.fundinguniverse.com/company-histories/Dr-Reddys-Laboratories-Ltd-

Company-History.html

y Dr. Reddy¶s Company analysis report

y Dr. Reddy¶s Investor Presentation

y Dr. Reddy¶s Corporate Brochure

y Edelweiss Report

y Fundamental Analysis-Dr Reddy¶s Lab

y Report on the Indian Pharma market

y India Pharma report 2015

y Dr. Reddy¶s Annual report

y Dr. Reddy¶s Factsheet



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India Pharma2015.pdf

Dr Reddys annualreport.pdf

FactSheet Drreddys.pdf

Company analysisreport.pdf

Dr.Reddys InvestorPresentat ion.pdf

DrReddys CorporateBrochure.pdf

Edelweiss Report. pdf Fundamental Analysis-Dr Reddys L

Report on t he IndianPharma market.pdf

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