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All praise is for Allah Almighty, the Creator of this world Who enables me to do this work. No work in reality is the sole effort of its writers as many people Like the foundation stone contributes silently. It is unequivocally stated that among such silent contributions Sir Manqoosh Ur Rehman, Lecturer Dept. of Management Sciences, CIIT Lahore stands prominent. His confidence in us, all his motivations to do something authentic gave the basic impetus for undertaking this interesting task. Our project is a result of discussions with my group members Adeel abid, and Alina Anjum, their enthusiasm and hard work made this work possible, in the end I thank all of my fellows who discussed with me their valuable views. Finally and most importantly, I am very thankful to our parents, who pray for our success day night.
International Business Project
Table of Contents
DESCRIPTION INTRODUCTION PHARMACEUTICAL COMPANIES IN PAKISTAN PAGE # _01 _03
KINDS OF PRODUCTS_________________________________________04 SUPPLIERS___________________________________________________05 SUPPLY CHAIN MANAGEMENT________________________________06 OPERATING MECHANISM____________________________________07 CAPITAL EXPENDITURE _ 08
International Business Project
All human societies have medical beliefs that provide explanations for birth, death, and disease. Throughout history, illness has been attributed to witchcraft, demons, adverse astral influence, or the will of the gods. These ideas still retain some power, with faith healing and shrines still used in some places, although the rise of scientific medicine over the past millennium has altered or replaced many of the old beliefs.some of the stages thorough which the process of curing illness has passed are as:
Herbalism Indian medicine Egyptian medicine Babylonian medicine Persian medicine Chinese medicine Hebrew medicine Greco-Roman medicine Islamic medicine European Renaissance and Enlightenment medicine Modern medicine Medical inventions 7000 BC—1000 AD 1000—present
In this course the scientific medicines were introduced in the late 1800 and early 1900. The modern techniques made some useful contribution to the field of medicine and now almost every disease in the world can be cured with the help of these medicines. Asian and African countries have always been faced by the shortage of medical facilities and if there are any facilities it is far from the range of common man. That’s why we have to import a lot of the necessary and important medicines from abroad or they are produced by foreign firms in Pakistan we do not have any national company or resource from where we can fulfill these necessities. Injections and vaccinations are one kind of medicines which is used for quick relief. In recent years Asia specifically pacific Asia and Korea, Japan has been the hub of export and import of all sorts of medical goods and surgical commodities. Multiple reasons come into play for this recent change in the international market. Cheaper labor rates, sound understanding of engineering excellence, massive support systems to cater to the ongoing demands of the healthcare industry have all attributed to the overall success of the healthcare industry especially for the Asian
International Business Project countries. Korea is certainly no exception to the rule. Korea has become one of the leading exporters of an array of medical goods that are now known for their exceptional quality and engineering excellence. Korea is also a very sound economical play ground for international investors and companies that want to use the skills sets of Korea to improve and compete in different and new avenues. In countries like Pakistan where there is extreme shortage of medical supply and even if there is availability of medicine than their rates is reaching the shores of sky. Due to the shortage of investment in this sector and improper conditions its better to import it from foreign countries. Korea as the largest and cheapest producer of medicines and pharmaceutical products will be a better market and will help us to fulfill our medical needs cheaper than other resources. Pakistani market will be an opportunity for Korean products especially in pharmaceutical industry. Pharmaceutical industry in South Korea is one of the emerging hotspots in Asian region. Currently valued at US $ 8 billion, the domestic pharma sector has been registering a double digit growth over the years. With the introduction of product patent system in 1987, multinational companies have taken a firm foothold and continued to expand their presence in Korea's domestic pharmaceutical market. Korea's efforts to provide medicines at affordable costs have led the industry to innovation. The country developed pharmaceutical bulks via the development of its own synthesis methods, making it possible to ensure the substitution of pharmaceutical raw materials, nearly three and a half decades ago.
Trade Performance: Imports of Pakistan (2006, in USD thousands)
Import value Industry
Growth Number of Number of Net trade of imported supplying imports products countries in value (% p.a.)
machinery; reactors, etc Miscellaneous chemical products Pharmaceutical products
29,825,75 4 nuclear 3,343,977 373,929 244,408
33 24 14 14
2881 425 52 23
159 78 51 46
-12,892,881 -3,231,029 -362,410 -157,722
Trade Performance: Exports of Korea (2002-2006, in USD thousands)
Value 2002 US$ '000
Value 2003 US$ '000
Value 2004 US$ '000
Value 2005 US$ '000
Value 2006 US$ '000
International Business Project pharmaceutical products, Medicaments(including 119,277 veterinary medicaments) Miscellaneous chemical 564,069 products. Essential oils, perfume 2,811 and flavour materials
142,784 658,411 3,548
171,336 767,584 4,597
198,285 913,996 4,544
234,772 1,139,891 4,239
PHARMACEUTICAL COMPANIES IN PAKISTAN
There are many firms working in Pakistan in pharmaceutical industry. Some of them are worlds leading firms such as GlaxoSmithKline, Getz, GlaxoSmithWellcome, BristolMyers Squibb, Searle etc. in addition to these firms a lot of importer also import from US. Europe, china, Korea, and India some the leading firms working in Pakistan and information related to them are given as:
Headquartered in the UK and with operations based in the US, GSK is one of the industry leaders, with an estimated seven per cent of the world's pharmaceutical market. But being a leader brings responsibility. Every hour GSK spend more than £300,000 (US$562,000) to find new medicines. GSK produce medicines that treat six major disease areas – asthma, virus control, infections, mental health, diabetes and digestive conditions. In addition, GSK are a leader in the important area of vaccines and are developing new treatments for cancer. KEY FACTS Every second...GSK distribute more than 35 doses of vaccine Every minute...more than 1,100 prescriptions are written for GSK products Every hour...GSK spend more than £300,000 (US$562,000) to find new medicines Every day...more than 200 million people around the world use a GSK brand toothbrush or toothpaste Every year...GSK factories produce 9 billion Tums tablets, 6 billion Panadol tablets and 600 million tubes of toothpaste
During 2007, the Bristol-Myers Squibb Patient Assistance Foundation and companysponsored programs under the Lifelines of Care initiative assisted more than 290,000 indigent patients in the U.S. in filling prescriptions with pharmaceuticals valued at more than $236 million at wholesale prices.
International Business Project Number of Employees: 42,000 Global Sales: $19.3 billion Businesses: Pharmaceutical products.
Searle Pakistan limited
Searle Pakistan Limited (SPL) was incorporated in Pakistan as a Private Limited Company on October 5, 1965 as a subsidiary of G.D. Searle & Co., U.S.A.In 1966, Searle Pakistan (Private) Limited acquired a small manufacturing facility in S.I.T.E. and production of Aldactone, Lomotil, Diodoquin, Ovulen, Neomycin Sulphate, Probanthine and Hydryllin, etc. started there. Over the years the operation expanded and during 1984 construction of a new factory started. During mid 1986 manufacturing operations of high quality pharmaceutical products commenced at this newly built factory at Plot # F-319, S.I.T.E. Area, Karachi, measuring 5.24 acres. The company employs 586 permanent staff members including a dedicated sales force of 302 persons who call on doctors, pharmacists, retail outlets and wholesalers to promote the company’s products. The sales force is assisted by a team of 30 marketing support personnel. Our main focus will be on the import of medicines and injections from Korea initially we will focus on three types of injections then seeing the opportunity in the market we will expand our area of business to other business too. Initially we can not take such big risk and as budget constraints are also there so we have to really take care of that. We have contacted two Korean companies who manufacture pharmaceutical products who are contacted through our friends who have previously contact with these firms and have good corporate relations who will also take care of the orders and delivery and any paper work that is necessary for the contract. Membership with LCCI will be attained for which the necessary requirements are fulfilled. Furthermore Letter of credit will also be attained from National Bank of Pakistan.
KINDS OF PRODUCTS
The following type of medicines will be imported initially. All of them will be vaccines. Initially they will be imported in limited quantity. Then looking to the market we will expand our area of business. Here are some names and their description:
International Business Project
The Various Types of Common Vaccines
Vaccine Type Live, weakened vaccines Disease Measles, mumps, rubella (German measles), polio (Sabin vaccine) and chicken pox Advantage Produces a strong immune response so can provide life-long immunity with 1–2 doses. Disadvantage Not safe for people with compromised immune systems. Needs refrigeration to stay potent.
Inactivated Cholera, flu, or "killed" hepatitis A, vaccines rabies, polio (Salk vaccine)
Safe for people with compromised immune systems. Easily stored and transported; does not require refrigeration. Lower chance of adverse reaction.
Usually requires booster shots every few years to remain effective.
Subunit Vaccines Conjugate Vaccines
Research can be timeconsuming and difficult.
Haemophilus influenzae B
Safe for people with Usually requires immune compromised booster shots every
International Business Project (or Hib) and pneumococcal vaccine systems. few years to remain effective.
The suppliers have been contacted through the reference of our friend who is already engaged in this business for more than 5 years. So contact with the suppliers will not be a big problem. However the suppliers name and their addresses have been mentioned below. They will provide us two types of medicines mainly vaccines and as I said earlier which will be expanded to more variety of products. The types of medicine are discussed earlier and their description and usage as well. Here are the names and addresses of two suppliers who are contacted:
Kyung Dong Pharmaceutical Co Ltd.
Kyung Dong Pharmaceutical Co., Ltd. is a Korean company engaged in the manufacture and sale of pharmaceutical products for multiple therapeutic fields The Company’s three main product groups are comprised of finished compounds and raw materials. 535-3Daeyang-riYanggam-myeon Hwasung445-930 SouthKorea +82-31-3520990 (Phone) +82-02-5775195 (Fax)
KunWha Pharmaceutical Company
For the fiscal year ended December 2003, the company generated sales revenue of $50.5 million (50,813,058,000 KRW). During the same period, the company recorded net income of $4.5 million (4,496,171,000 KRW). KunWha Building Karak-Dong, 94 Songpa-gu 160
Seoul 138South Korea Tel: 82 2
International Business Project 431 3100 443 5757 Fax: 82 2
SUPPLY CHAIN MANAGEMENT
The supply chain process of our business will be simple. This starts from ordering the sample of the vaccines and their approving of ministry of health or any legal authorities. Formally our supply chain will contain the following important steps: Complete information about the products and their specification Reviewing the information given by the exporter or the supplier Ordering the sample Checking the samples, and confirming the order Confirmation of order and delivery
In this procedure banks will also be involved who will act as intermediary between us. However that procedure will be discussed later. After the delivery takes place and the issues of tariffs and duties are resolved the products will be shipped to our outlet or shop in Lahore near any big hospital which will be specialized for any type of vaccines first and then we will try to expand our area of business. The above points also contains some small points, like in information will collect information about the products their specification, quality, delivery time and product sample. Secondly after that exporter give information about their products then payment modes are decides and the sample is ordered. After that if any deficiency found in product will be reported and the order will be confirmed, in the last stage the delivery of the order is confirmed. One point to be noted that in all this process two banks will be involved, one from each side.. Fortunately all the supplier are operating in the same city i.e. Seoul which is the hub of Korean industry this will be a plus point because we will have to collect the order from the same point.
The operating mechanism starts with membership with the Lahore chamber of commerce and industry. Once you have decided to start a business of import or export immediately you register with the LCCI, it is very necessary step if you have to make an LC or letter of credit in any bank. A letter of credit is a means of marketing payments for the import of goods. It is issued by the buyer’s bank in favor of seller. All terms and conditions are stated in it. The person who purchases the goods from the other country is called buyer and he requests for opening L.C. Membership with LCCI There are three type of membership with the LCCI we will be having associate membership because of less annual turn-over. The main steps of procedure are as:
International Business Project Fulfilling the legal requirements.
Issuance of Certificate of Origin and Attestation of Commercial Documents.
Issuance of Visa Recommendation Letter.
For Employee :For salaried senior executive of the firm, a certificate mentioning
their designation, period of service, monthly salary and copies of paid tax challan shall also be accompanied with the application. Establishment of Letter of Credit (L/C) A party receiving an import license must establish an L/C/ through a foreign exchange bank within the effective time period. In an unavoidable circumstance, however, the period can be extended by submitting to the competent bank an application for amendment to the L/C. When arranging the L/C, the same information as noted on the import authorization form must be used. The amount of the L/C should not exceed the authorized amount, and it must be expressed in the same currency specified in the import authorization form. Receipt of Transport Documents The foreign exporter having received the L/C, ships the goods according to the conditions of the L/C and negotiates with the exporter's bank a documentary bill which is issued using the transport documents as security. The exporter's bank then sends the transport documents to the bank which issued the L/C, and after the L/C opening bank has verified that the conditions of the transport documents are consistent with those of the L/C, it settles the account of the import transaction and transfers the transport documents to the importers. The importer submits the bill of lading (B/L) to the shipping company and collects the imported freight. If, however, the freight has already arrived but the transport documents have not, the importers may present a letter of guarantee (L/G) to the shipping company and receive the freight in advance, after receiving from the importer's bank the L/G prepared under fixed conditions. Customs Clearance The importer unloads the imported freight from the ship and places it in a bonded area, and then submits a report of import to the superintendent of the customs house. The customs clearance report can only be prepared by a consignee, employing a certified customs specialist or a certified customs clearance corporation. Upon receipt of the import report, the customs house inspector will verify that the contents of the imported merchandise correspond with that described in the import authorization form and confirm the documentation is in order. The tariff on the merchandise is then calculated and levied, and an import approval is presented to the person reporting the import. This person may remove the imported merchandise from the bonded area. After doing so, the import procedures are completed. In all these processes two banks will be involved one from each side. You can say the transaction will be held between the banks. The bank in Pakistan i.e. MCB will contact
International Business Project one of Korean bank where supplier have accounts. Some of the payment will be made before the delivery to the Korean bank where the supplier has account. They will ship the order to the place and then when we take the products from the bank at that time we will make the rest of the payments. After which our bank will make payment to the supplier’s bank.
CAPITAL EXPENDITURE (in Rupees)
Outlet (shop) security...........................................................….......300, 000
Setup costs………………………………………………………...50, 000
Account in bank……………………………. …………………….50, 000 Membership fees with LCCI………………...................................4500(Total) Contact with the suppliers and collecting necessary information...250, 000(Total)
The above project was really an opportunity for us to learn about the trade procedure. Pakistan’s import has always been greater and most of which involves the import of oil. In the pharmaceutical industry Pakistan has always been lagging behind. Most of our pharmaceutical products come from India and china. Although it is more convenient from these countries but still there is room for trade with other countries. And Korea is one of the emerging countries in this field. To import from a new market will be a new experience and opportunity for us to explore. Although some of the small scale businesses are already importing fro these countries but they are in small numbers. Initially it will be not good to take high risk but we are sure the increasing success of this business will help us to explore more area of this field and broadened our area of our business. In Pakistan the lack of technology and labor is a big issue and for this industry both those things are required. So it is beneficial for us to import these items if we don not have competitive advantage in this field. This will also increase the quality of the products and lower the costs as in Korea both the technology and labor is available at low cost.
International Business Project
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