Stars (=high growth, high market share) - use large amounts of cash and are leaders in the business so they should also generate large amounts of cash. - Frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold share, because the rewards will be a cash cow if market share is kept.
<ul><li>Cash Cows (=low growth, high market share) </li></ul><ul><li>Profits and cash generation should be high, and because of the low growth, investments needed should be low. Keep profits high </li></ul><ul><li>-Foundation of a company </li></ul>
<ul><li>Dogs (=low growth, low market share) </li></ul><ul><li>avoid and minimize the number of dogs in a company. </li></ul><ul><li>beware of expensive ‘turn around plans’. </li></ul><ul><li>- deliver cash, otherwise liquidate </li></ul>
Question Marks (= high growth, low market share) have the worst cash characteristics of all, because high demands and low returns due to low market share. - If nothing is done to change the market share, question marks will simply absorb great amounts of cash and later, as the growth stops, a dog. - Either invests heavily or sell off or invest nothing and generate whatever cash it can. - - Increase market share or deliver cash
Justification STAR:- The rating on Reliance Industries Ltd. reflects the company's global scale of integrated operations with a strong competitive position in its core petrochemical and oil refining business and intermediate financial risk profile
In The Scenario Of Reliance Global Management Services Has Achieved A Considerable Position In The World Market. Besides All These Factors A High Investment And Growth Rate Is Being Procured. RELIANCE ENGINEERING ASSOCIATES (P) LTD: Reliance engineering associates (p) ltd has not been in form of providing lot of amount as per current base; hence it needs lot of amount to stand the business. RELIANCE RETAIL: Reliance Retail is the retail business wing of the Reliance business having high growth rate and high market share. They are not for long term investment but they generated cash for the organization
QUESTION MARK Justification: RELIANCE PETROLEUM LTD: In the current reliance market condition, this is something equalizing to high growth rate and low or optimum investment.
JUSTIFICATION (CASHCOWS) RANGER FARMS LTD: Ranger Farm deals in food , fruits and vegetables and consumer products hasn't achieved a dominant market position, that's what don't generate much cash. We need much cash because things are changing every minute in Reliance Retail of the market conditions to stand the firm rigidly. low growth and high investment is primarily observed.
RELIANCE BIOPHARMACEUTICALS: Reliance Biopharmaceuticals is providing world-class therapies and recombinant biopharmaceuticals for the treatment of both acute and chronic diseases in European market. This requires focused efforts at keeping large amount of cash to grow their market share. RELIANCE OILS & GAS: Krishna-Godavari (KG) D-6 block is amongst the five largest deepwater gas projects globally. It was the largest discovery of natural gas in world in financial year 2002-2003. Gas production is expected to transform India’s energy landscape having low growth rate and is expected to double market share the current level of indigenous gas production.
Justification: (DOGS) PETROCHEMICALS: Revenue for the petrochemicals segment for the year decreased marginally from Rs 53,000 crore to Rs. 52,767 crore (US$ 10.4 billion). According to recession period their low market share in a highly low growth market.
Overview about Pharma Industry <ul><li>Estimated $700 bn in 2007. </li></ul><ul><li>Growth rate 6% in CAGR(Compound Annual Growth Rate). </li></ul><ul><li>Expected to reach $937 bn in 2012. </li></ul>
Industry Competition <ul><li>Most competitive industries in the country with as many as 10,000 different players. </li></ul><ul><li>Top player in the country has only 6% market share and top five have 18%. </li></ul><ul><li>High growth prospects. </li></ul><ul><li>Very low entry barriers. </li></ul><ul><li>Fixed cost requirement is low and need for working capital is high. </li></ul>
Bargaining Power of Buyers <ul><li>End user of the product is different from the influencer (read Doctor). </li></ul><ul><li>Consumer has no choice but to buy what doctor says. </li></ul><ul><li>Buyers are scattered and they as such does not wield much power in the pricing of the products. </li></ul>
Bargaining Power of Suppliers <ul><li>Pharma industry depends upon several organic chemicals. </li></ul><ul><li>Very competitive and fragmented industry. </li></ul><ul><li>Chemicals are largely a commodity. </li></ul><ul><li>Suppliers have very low bargaining power. </li></ul><ul><li>Pharma industry can switch from their suppliers without incurring a very high cost. </li></ul>
Barriers to Entry <ul><li>Most easily accessible industries for an entrepreneur in India. </li></ul><ul><li>Capital requirement for the industry is very low, creating a regional distribution network is easy. </li></ul><ul><li>Point of sales is restricted in this industry in India. </li></ul><ul><li>Creating brand awareness and franchisee amongst doctors is the key for long-term survival. </li></ul><ul><li>Quality regulations by the government may put some hindrance for establishing new manufacturing operations. </li></ul><ul><li>Impending new patent regime will raise the barriers to entry. </li></ul>
Threat of Substitutes <ul><li>One of the great advantages of the pharma industry. </li></ul><ul><li>Demand for pharma products continues and the industry thrives. </li></ul><ul><li>Key reasons for high competitiveness in the industry is that as an on going concern. </li></ul><ul><li>Key reasons for high competitiveness in the industry is that as an on going concern. </li></ul>
Conclusion <ul><li>Industry is not static in nature, it's dynamic. </li></ul><ul><li>Larger players in the industry will survive with their proprietary products and strong franchisee. </li></ul><ul><li>In the Indian context, companies like Cipla, Ranbaxy and Glaxo are likely to be key players. </li></ul><ul><li>Change in the patent regime, will see new proprietary products coming up, making imitation difficult. </li></ul><ul><li>Government too will have bigger role to play. </li></ul>