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Ranbaxy - Strategy management
 

Ranbaxy - Strategy management

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    Ranbaxy - Strategy management Ranbaxy - Strategy management Presentation Transcript

    • Content• Introduction1. Ranbaxy has the choice of continuing as the manufacturer of imitative generic drugs or becoming the developer of proprietary medicines. Discuss the pros and cons of each strategy. Could it do both?2. Should Ranbaxy focus its attention on developing markets or the developed markets of the USA and Europe.3. Does India have a suitable infrastructure for innovation.• Conclusion• References 2
    • Introduction Ranbaxy Laboratories Limited is Indias largest pharmaceutical company. Ranbaxy was started by Ranbir Singh and Gurbax Singh in 1937 as a distributor for a Japanese company Shionogi. Headquarters Located in Gurgaon, Haryana, India Incorporated on 16th June, 1961 at Delhi. Manufacture drugs, medicines, cosmetics and chemical products. In 2008 acquired by Daiichi Sankyo Japanese co. Global company, present in 46 countries and manufacturing ,facilities in 6 countries 3
    • 1. Ranbaxy has the choice of continuing as the manufacturer ofimitative generic drugs or becoming the developer of proprietarymedicines. Discuss the pros and cons of each strategy. Could it doboth? Mintzberg suggests only 10%–30% of intended strategy is realized. External factors (political situation, production cost, labor cost) Emergent strategy - the decisions that come out from the complex processes in which managers interpret the intended strategy and adapt to changing external situation. Mintzberg, H., & Waters, J. A. (1985) 4
    • 1. Ranbaxy has the choice of continuing as the manufacturer ofimitative generic drugs or becoming the developer of proprietarymedicines. Discuss the pros and cons of each strategy. Could it doboth? External Environment Rising production cost Patent Act of 1970 (7 years) Rapid Stiff 2005 developments competition WTO another in in generic accession Patent act infrastructure market in 1995 (20 years) (Chaudhuri, S. 2005) 5
    • 1. Ranbaxy has the choice of continuing as the manufacturer ofimitative generic drugs or becoming the developer of proprietarymedicines. Discuss the pros and cons of each strategy. Could it doboth? Before a suitable strategy can be found, it is helpful to consider characteristics of both products: – Generic drugs - Product characteristics • low price and high volume • patent free •trust unimportant • brand unimportant (e.g. asprin, paracetemol, etc.) – Requirement = low –cost production destination – Patent drugs – Product characteristics • High cost of R&D • Highly skilled R&D • Long time R&D (5 years minimum) •Trust important •Brand important (e.g. Glaxo, Zeneca, Pfizer, etc.) – Requirement – highly educated, technically advanced, high trust, well connected (with other complimentary pharmaceutical organisations, universities, etc.) 6
    • 1. Ranbaxy has the choice of continuing as the manufacturer ofimitative generic drugs or becoming the developer of proprietarymedicines. Discuss the pros and cons of each strategy. Could it doboth? Ranbaxy’s strategic resources • Cheap labour • Continuingly improving level of skills • IT technology • Acquired company and strategic alliances (ex: Germany’s Betapharm Arzneimittel) • Improvements in infrastructure 7
    • 1. Ranbaxy has the choice of continuing as the manufacturer ofimitative generic drugs or becoming the developer of proprietarymedicines. Discuss the pros and cons of each strategy. Could it doboth? Generic Drugs Patent medicines + low product price + 10 years without taxes on patent medicines + high revenue (in India) + researchers at Datamonitor predicts that the + high potential success as improving patent expirations will be from now till 2016. education level, rising IT technology (pick 2011-12. ex: clopidogrel bisulfate (Plavix), + middle class as potential segment for sales for the first time) - high investment in R&D -Rising production cost in India compeered to - long period to invent and testing new product Newly developing countries (Indonesia, China, - high cost of advertising Philippines) - 20 years patent protection (Chaudhuri, S. 2005) 8
    • 1. Ranbaxy has the choice of continuing as the manufacturer ofimitative generic drugs or becoming the developer of proprietarymedicines. Discuss the pros and cons of each strategy. Could it doboth?For an organisation to obtain a sustainable competitive advantage Michael Porter suggestedthat they should follow either one of three generic strategies. Strategy 1 Cost Leadership. Strategy 2: Niche strategies Strategy 3: Differentiation Generate profit Patent product Focus on manufacturing generic Haberberg and Rieple, 2008 Recommendation : Ranbaxy is rapidly loosing one of its competitive advantage such as low production cost as India is fast developing country, thus production cost increases, so to be sustainable there is a need to move manufacturing to N.D.Cs. 9
    • 1. Ranbaxy has the choice of continuing as the manufacturer ofimitative generic drugs or becoming the developer of proprietarymedicines. Discuss the pros and cons of each strategy. Could it doboth? Conclusion: If Ranbaxy has the appropriate strategic resources, it is recommended that it: • Continues to produce generic drugs, possibly moving production to a destination where production factors are lower; • Begin developing new patented drugs in India. 10
    • 2.Should Ranbaxy focus its attention on developing markets or thedeveloped markets of the USA and Europe.Potter’s Diamond: Presence of High quality, Specialized inputs available to Firm: Skilled & Educated work force. Local availability of supporting industries in clusters than an Isolation The nature and sophistication of local customer needs The rules and incentives that govern competition: Government policies and investment programs to encourage innovation Potter (1990) 11
    • 2. Should Ranbaxy focus its attention on developing markets or thedeveloped markets of the USA and Europe. Potter’s Diamond: Developing Countries USA and Europe Firm’s structure, strategy and High level of competition in High level of competition in rivalry generic market, which is generic market, which is stimulate innovation stimulate innovation (Merck & Co., Inc) Factors conditions Low cost of production (Russia, High level of workers skills, China), increasing Good infrastructure, infrastructure, Participation in International Organization (WTO,NAFTA,EU) Demand condition Growing demand, middle class High level of life an demand Related and supporting Improving level of educations High level of education and IT industries technologies Ranbaxy should consider partnerships in Russia and China because India is geographically, culturally, ideologically and politically closer to Russia and China than to Europe or US. 12
    • 2. Should Ranbaxy focus its attention on developing markets or thedeveloped markets of the USA and Europe. Recommendations:  Merger and Acquisition, which will give access create TRUST and to foreign market IMAGE of the Ranbaxy company and resource.  Partnership and Strategic Alliances to create synergy effect. 13
    • 3. Does India have a suitable infrastructure for innovation. India’s Investment for Infrastructure in following sectors (US$ billion) Geiger and Rao (2009) 14
    • 3. Does India have a suitable infrastructure for innovation. India’s Employment scale Geiger and Rao (2009) 15
    • 3. Does India have a suitable infrastructure for innovation.Global Competitive Index (GCI) today is portraying mixed picture of India’s competitiveness as it is constrained by few structural problems simultaneously having rapid economic growth being the world fastest growing economy: Pro ‘s Con ‘s • Huge domestic market and rapid • Not having very strong groundwork of growing middleclass boosting investment competitiveness to sustain and accelerate and consumption. its growth in near future. • Sophisticated financial markets which is • Increasing red tape and corruption in helping business to develops. governmental institutions. • Knack for innovation with high degree of business sophistication . • Investing in vital areas of competitiveness which will help India when its value chain will move upwards. Geiger and Rao (2009) 16
    • 3. Does India have a suitable infrastructure for innovation. • The present infrastructure is improving, especially in some areas (Bangalore, Mumbai and Delhi). – Education – Transportation I m – Energy supply p r – institutional and regulatory infrastructure o v i for trials and pharmaceutical n g – Communications – Heterogeneous Population. Kapur And Ramamurti (2001), 17
    • 3. Does India have a suitable infrastructure for innovation. Conclusion : Following key areas efficiently tackles with the problems discussed earlier: • India does have a suitable infrastructure for innovation when compared in certain areas with its competing countries. • Also, India is at par with much more advanced economies in the world having vibrant democracy and favorable demographics trends. THUS, answer is YES India does have suitable infrastructure for innovation also, in Pharmaceutical industry. 18
    • Conclusion• Ranbaxy should consider its production on both products and move its manufacturing to N.D.C because production cost in India is increasing fast (Russia and China).• Company should expand to developing countries as well as to US and Europe.• India is at par with much more advanced economies in the world having vibrant democracy and favorable demographics trends and does have suitable infrastructure for innovation also, in Pharmaceutical industry. 19
    • ReferencesPotter, M., (1990), The competitive advantage of nations, London : MacmillanMintzberg, H., & Waters, J. A. (1985). Of strategies, deliberate and emergent. Strategic Management Journal, p.p.257–272.Chaudhuri, S. (2005) The WTO and Indias Pharmaceutical Industry: Patent Protection, TRIPS, and Developing Countries, Oxford University Press Pharmacy Times, p.p.52- 52.Kapur , D. And Ramamurti, R., (2001), “India’s emerging competitive advantage in services”, Academy of management Executive , 15 (2)Haberberg, A. and Rieple, A.,(2008), Strategic Management, Oxford university Press NYGeiger, T., and Rao S.P. (2009) , “The india’s competativeness review”, world economic 20 forum.
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