45337850 mgt-company-analysis-beximco-pharma

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45337850 mgt-company-analysis-beximco-pharma

  1. 1. Term Paper Performance dynamics of Beximco Pharmaceuticals Ltd. By Md. ---------------ID No. ----------------MBA Program Summer Semester 2010 MGT506: Strategic Management School of Business United International University Dhaka Bangladesh 2010 1
  2. 2. Table of Content Topic 1. Historical Background 03 2. Company profile 03 3. Organizational Structure 03 4. Market Scenario 04 5. Business level Strategy Pursued 05 6. Relationship between Business Level Strategy and Performance 06 7. SWOT Analysis 07 8. Possible Measures to Improve Performance 08 Page 2
  3. 3. Historical Background Beximco Pharma is a leading edge pharmaceutical company and is a member of the Beximco Group, the largest private sector industrial conglomerate in Bangladesh. The firm started operation in 1980, manufacturing products under the licenses of Bayer AG of Germany and Upjohn Inc. of USA and now have grown to become nation's one of the leading pharmaceutical companies, supplying more than 10% of country's total medicine need. Today Beximco Pharma manufactures and markets its own `branded generics' for almost all diseases from AIDS to cancer, from infection to asthma, from hypertension to diabetes for both national and international markets. Company Profile Beximco Pharma manufactures a range of dosage forms including tablets, capsules, dry syrup, powder, cream, ointment, suppositories, large volume intravenous fluids, metered dose inhalers etc. in several world-class manufacturing plants, ensuring high quality standards complying with the World Health Organization (WHO) approved current Good Manufacturing Practices (cGMP). They also contract manufacture for major international brands of leading multinational companies. Organizational Structure BPL is completely governed and maintained by a corporate body. The chief of the organization is the Chief Executive Officer and the total operation is divided into Marketing, Sales, Commercial, Manufacturing, Finance and Accounting, Product Planning, Business Research and Development, and MIS departments each supervised by a director. Directors of the departments report directly to the CEO. Bearing the demands of dynamic environment in mind BPL designed its organizational structure as highly adaptive and flexible. It is a Learning Organization that has developed the capacity to continuously learn, adapt and change. In BPL employees are highly trained and empowered to handle diverse job activities and problems. They have minimal formalization with narrow span of control. The organizational members share information openly and collaborate on work activities. 3
  4. 4. For internal communication, BPL follows a strictly formalized Intranet based electronic communication system as well as informal verbal communication. For external communication BPL uses both internet based electronic communication and an array of printed communication material. All the external communications are supervised, mostly by Director, Marketing and in some cases by Director, Sales. Market Scenario In Bangladesh the pharmaceutical sector is one of the most developed hi-tech sectors which is contributing in the country's economy. The national companies account for more than 65% of the pharmaceutical business in Bangladesh. Except Beximco Pharma other leading companies are Square Pharma, Incepta Pharmaceuticals. Navana Pharma Ltd., Opsonin Chemical Industries Ltd., Aventis Pharma Ltd. Etc. Among them Square Pharma is the market leader at this moment. BPL follows Square Pharma at the 2 position. The analysis of the two company’s financial data shows that for the year 2007-2008 gross profit of BPL was 1,629,514,837(BDT) and Square Pharma was 3,401,781,806 (BDT) . nd There are a number of reasons why BPL could not beat Square Pharma for the first position. The most relevant of them are stated here. Fewer Markets Served: Square Pharma serves a larger market than BPL while BPL concentrates on market focus. For example, unlike Square Pharma BPL does not do business in the credit market. They only serve the premium market. Producing Injectables: Again BPL does not manufacture or market Injectables where this is a huge market. In contrast, Square Pharma has a range of 44 injectables and has sold 28,289,000 units in the year 2007-2008. Product Range: BPL has a fewer range of products than Square Pharma does. BPL manufactures only over 300 products in comparison to Square Pharma’s over 500 products. In international market the main competitors for pharmaceutical companies in our country are India and China. The challenge faced in open market competition is the scarcity and unavailability 4
  5. 5. of raw materials in local market. So, companies in our country have to import these materials from abroad (India, China and a few countries from Europe) at high price. Besides, the privileges of being LDC as a result of the Patent Law will no longer be in effect after 2015. Business level Strategy Pursued Beximco Pharmaceuticals Ltd. is a leading edge pharmaceutical company is acclaimed for its outstanding product quality, world-class manufacturing facilities, product development capabilities and outstanding professional services. Beximco Pharma is the pioneer in pharmaceutical export from Bangladesh and has received National Export Trophy (Gold), the highest national accolade for export, for record three times. Beximco Pharma has adopted several Business Level Strategies regarding growth and market focus with the view to achieving organizational goals. As Growth Strategy BPL have decided to enter into nine new international markets in Asia, Middle East, Pacific Islands, Africa and Central America and have registered 107 products in different markets. Besides, BPL signed a Long Term Arrangement with the Global Supply Division of UNICEF (Denmark) to supply 60,000 units CFC free metered dose inhaler product over a two year contract period. During the first quarter of 2008, BPL has entered into 3 new international marketsnamely, Afghanistan, Kiribati and Solomon Islands. Their Short Term plan to build facility to manufacture Small Volume Parenterals (SVP), Opthalmic and Nebulizer Solutions has progressed as scheduled. They are planning to commence marketing of these products by first quarter of 2009. Their strategic strengths include strong recognition of brands, highly skilled work force and diversified business mix. Their two brands - Neoceptin R (Ranitidine) and Napa (Paracetamol) are the top two selling brands in the Bangladesh Pharmaceutical market. 5
  6. 6. Relationship between Business Level Strategy and Performance Beximco Pharma (BPL) is a leading edge pharmaceutical company is acclaimed for its outstanding product quality, world-class manufacturing facilities, product development capabilities and outstanding professional services. Its strategic strengths include strong recognition of brands, highly skilled work force and diversified business mix. Being a Learning Organization the core essence of Beximco Pharma is its entrepreneurial spirit in every sphere of its management. In this spirit, the tasks of each managerial function are carried out through Management by Objective approach. The recipient of three times `gold' national export trophy, Beximco Pharma is the largest exporter of pharmaceuticals from Bangladesh. They are the only pharmaceutical company in Bangladesh received this highest national accolade for export, for record three times. They market their brands through their own professional sales and marketing teams in African, South Asian and other markets. The firm also supply products to renowned hospitals and institutions in many countries, including Raffles Hospital and K K Women & Childrens' Hospital in Singapore, MEDS and Kenyatta National Hospital (KNH) in Kenya, Jinnah Hospital, Agha Khan Hospital and Shaukat Khanum Memorial Hospital in Pakistan. Beximco Pharma is also an enlisted supplier of World Health Organization (WHO) and UNICEF. Beximco Pharma has a strong market focus and is anticipating continued future growth by leveraging business capabilities and developing superior product brands and markets. In particular they are very interested in developing a strong export market in USA and Europe. To meet the future demand they have invested over US 50 million dollar to build a new state-of-the-art manufacturing plant, confirming to USFDA and UK MHRA standards. This new plant will also offer contractmanufacturing facility to leading pharmaceutical companies, especially from Europe and US. Business level strategies developed by BPL help them to earn competitive advantage through quality products, superior services, and outstanding customer relationship. Innovation strategies have been the key to their success both in product differentiation and in product promotion. BPL had been the first-mover to bring Marketing Approach rather than traditional Selling Approach in local pharmaceuticals industry. BPL also believes in Focus Strategy and concentrates on a particular segment of the market. They strive to retain existing customers as well as to attract new ones. BPL has developed unique customer service through their Unbiased Medical Service. BPL has also developed superior human resource for earning competitive advantage in the market. 6
  7. 7. Swot Analysis Strength Employee Empowerment Capability to Bring Innovation & product differentiation Outstanding Product Quality World Class Professional Service Weakness Insufficient Working Capital Not Operating in Low Cost Market. Opportunities Ability to Retain Growth & market Focus In difficult Operating Situations Ability to Exploit Opportunities of Patent Law as an LDC in International Market. Threat Strong Competitors in Domestic & International Market. Political Instability Government & International Regulations. Rising Trend of Material Price 7
  8. 8. Possible Measures to Improve Performance Any organization is deeply effected by its environment. The macro political and economic environment of our country is so full of uncertainty that the managers of business organizations of Bangladesh face very difficult challenges to cope with the ever changing situations. The biggest challenge for the managers in the pharmaceuticals industry is the competition. Bangladesh is now self dependent in the pharmaceuticals the political and economic instability there are other factors like international and domestic laws and regulations, rising trend of material price, high rate of inflation, obsolete technology, increased security problem, dire country image etc which effect the job of managers in our country most. Bangladesh can substantially increase pharmaceuticals export if the government extends support to local producers after this year when WTO rules on pharmaceuticals for developed and developing nations comes into effect. From the next year, the developing countries will lose their patent rights to sell products. The main challenge for Beximco Pharma is now to bring down production cost to offer medicines in the international market at a competitive price. For this, raw materials must be produced locally. Producing countries will lose their rights to sell pharmaceutical ingredients at current prices after 2004 due to the WTO rules. However, the least developed countries do not have to provide any patent protection for pharmaceuticals until 2016 as the WTO has extended the deadline only for them through Trips (Trade-Related Aspects of Intellectual Property Rights). In the changed scenario, prices of ingredients will increase significantly, so countries will certainly loss their export markets. At present Bangladesh imports 80 percent of total raw materials required for the industry. Of the requirement, 70 percent comes from India while the rest comes from China, England, Switzerland, Germany and Malaysia. Countries like Kenya, Tanzania, Malawi and Uganda have a huge pharmaceuticals market for Bangladesh. At present, Bangladesh is exporting pharmaceutical products to over 50 countries of the world. The major markets for Bangladesh's pharmaceutical exports include Korea, Brazil, the Netherlands, Myanmar, Sri Lanka, Pakistan, Yemen, USA, India, South Africa, Ukraine, Vietnam, Kenya, Norway, Sweden, Indonesia and Hong Kong. To be successful, relentless contribution and dedication of the organizations management is very much needed. To compete in international as well as in local market in adverse situation the managers work has become much more difficult in today’s ever changing business environment. Developing plans in a dynamic situation demands critical analysis of the situation and strict adhering to the core principal of the organization. As Beximco Pharma is decentralized organization and core 8
  9. 9. values are cherished by everyone within the organization, operating in dynamic situation is easier than it seems. The pharmaceutical industry in this country is undoubtedly one of the most promising industries. However, the industry is not operating without any problems. This part of the report states the possible steps that could be taken to mitigate the gravity of the difficulties that threat the industry. As one of the leading pharmaceutical company Beximco Pharma also faces these problems that are bar to achieve organizational goals effectively. To sort out these problems here some suggestions are recommended. Coping with Instable Economic State: To cope with the ever changing economic environment, the management of BPL should always be watchful and should constantly analyze the organization’s overall environment. As a learning organization BPL should keep their practices of flexibility to encourage innovation for the times of much needed change. Again, as Government is going to pass a new version of law, involving the pharmaceutical industry Beximco Pharma should prepare their arrangements to cope with the coming changed business environment. Handling Competitions: Since, BPL’s business strategy is to focus on particular segments of the total market they should be operating with the view to becoming the market leader of those areas. In the mean time, they should look forward to grow their business as much as possible both in national and international market. Negotiating with the Government: In order to ensure more prospects in the import and export activities of raw materials Beximco needs to negotiate to adjust several business laws and regulations with the Government. Such approach can be proved as a benefit of the company. Market Diversification: After 2015, privileges as LCD regarding Patent Act will expire. So BPL must get ready to compete in a more challenging situation in the international market where, India will be the biggest contestant. BPL will have to concentrate on the Generic medicines that are the products that are produced in mass scale and marketed by several companies under different brand name, where the formulation of this product is almost same. Prices of the products are under this category are competitive. Bangladesh mainly concentrates on this category, as labor cost is one of the lowest in the world. Again, Beximco pharma can operate on offpatent products as after years of business the formulations of Patent Medicines are sold in the market so that others can go into mass production. Thus the company can take a better position by maximizing profit in an open market economical condition. 9
  10. 10. Conclusion In recent highly competitive medicine manufacturing sector, streamlined operations and effective business relations are essential. To improve information exchange with its many partners, Beximco Pharmaceuticals Ltd. decided to introduce leading-edge supplier and customer relationship management capabilities. 10

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