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Pharamaceutical Industry Analysis of Pakistan PDF
Pharamaceutical Industry Analysis of Pakistan PDF
Group Members:
Abrar Ashraf, MBA (Banking & Finance), GIFT University, Gujranwala, Pakistan.
M. Awais Rafique , MBA (Banking & Finance), GIFT University, Gujranwala, Pakistan.
Salma Mehmood, MBA (Banking & Finance), GIFT University, Gujranwala, Pakistan.
Sitara Arif, MBA (Banking & Finance), GIFT University, Gujranwala, Pakistan.
EXECTIVE SUMMARY
This project is prepared to analyze the factors influencing pharmaceutical industry of Pakistan
and impacts of this industry on the economy of Pakistan. We have chosen Highnoon
Laboratories Ltd with a view to evaluate strategy making practices in this industry. Industrial
data was collected from Chamber of Commerce and Ministry of health .This project is a part of
our course Business Strategy & Policy. We visited Highnoon Laboratory Ltd with a view to
launch an internal audit of this company. We conducted unstructured interviews of the different
departmental heads after a little bit discussion we presented our questionnaire to respondents and
allowed them to complete it by themselves. The purpose of this structured questionnaire was to
gather information about environment and behavior of employees.
We have completed this project successfully. Main thing that we learn from this project is
experience of different strategy making practices involved in pharmaceutical industry of
Pakistan. We have been familiar with working environment as well as security and control
system of Highnoon laboratories. Their internal control system is not up to that esteem which is
required for such a big organization. They have safe guarded their profit margins by diversified
portfolio of their products and operational efficiency. We have taken information from the
website of ministry of health and chamber of commerce as well. The visit of Highnoon
Laboratory was also fruitful for getting information in this perspective. This project will open a
new horizon for further researches in this area. This report will be useful for Highnoon
Laboratories for the betterment in decisions regarding the road map in order to achieve the
quantified goals resulting in progressive march towards its strategic intent.
This project report indicates an insight of strategy making practices related to pharmaceutical
industry of Pakistan and also gives an informative view of strategy making practices involved in
Highnoon Laboratories Ltd.
HISTORICAL BACKGROUND
At the time of independence there were only two small units which were enabled to meet the
local demand. The rest of the medicines were imported. The decision taken in 1972 to abolish
brand names, restrict availability of essential drugs to 850, fix maximum retail prices across the
board and freely allow local manufacturer of all the essential drugs was in fact the life line for
the national segment of the industry. Due to several reasons, especially inaccessibility of new
researched medications this policy was ultimately reversed in 1976.
Since 1999 the Govt. has invested US$ 133 million in the pharmaceutical industry. The last 10
years was eventful for the Pakistan Pharmaceutical Industry because they have developed a large
number of domestic manufacturers. In 2006 there were 400 licensed pharmaceutical companies
in Pakistan, including 30 multinationals who had over 53% of market share. Today the industry
has developed technology, production and an infrastructure of imports. It is a well regulated
industry. It has domestic companies which are quite confident of doing good business.
NAMES
MARKET SHARE
GSK
11.6%
ABBOTT LAB
7.9%
HIGHNOON LABS
6.3%
GETZ PHARMA
3.9%
SANOFI AVENTIS
3.8%
ROCHE
3.1%
COUNTRY DEMAND
Pakistan meets 80% of its domestic demand of medicines from local production and 20%
through imports. The pharmaceuticals market size is Rs. 70 Billion (US $ 1.2 Billion),
approximately. The market for pharmaceuticals in Pakistan has been expanding at a rate of
around 10 to15% since last few years.
2014. Growth over our longer, 10-year, forecast is likely to be somewhat more subdued, at a
CAGR of 8.75% in local currency, as the operating environment stabilizes.
MAJOR SUPPLIERS
Major suppliers include United States, U.K., Germany, Switzerland, Japan, Holland and France.
BASIC MANUFACTURES
There are five units operating in Pakistan for the Semi Basic Manufacturing of pharmaceutical
raw material and still Pakistan has the capacity to absorb the significant investment in this field.
LOCAL MANUFACTURERS
411 units are involved in local pharmaceutical manufacturing.
47000
REGISTERED DRUGS
REGISTERED MOLECULES
1100
1% of the profit
R&D EXPENDITURES
AVERAGE GROWTH RATE
11%
MARKET SHARE OF
45%
MULTINATIONAL COMPANIES
MARKET SHARE OF LOCAL
55%
COMPANIES
Glaxosmithkline
MARKET LEADERS
diabetics, antidotes and products manufactured from biotechnology, which are still being
imported, in the finished form. These specific areas provide excellent opportunities for
investment. Only few bulk pharmaceutical raw materials are being manufactured locally and
most of the pharmaceutical raw materials are being imported in large quantities from different
countries of the world. This sector also gives challenge to explore and avail the opportunities.
The Pakistan Pharmaceutical Industry is a success story, providing high quality essential drugs at
affordable prices to Millions. Technologically, strong and self reliant National Pharmaceutical
Industry is not only playing a key role in promoting and sustaining development in the vital field
of medicine within the country, but is also well set to take on the international markets.
MAIN OBJECTIVE
The main objective of Pakistan Pharmaceutical Manufactures Association is not political. It is to
unit members in their common approach. Such as to encourage unity and mutual understanding,
Highnoon for healthier nation
improve the working conditions of pharmaceutical industries, promotion of the interest of trade,
industry, and services in Pakistan or outside Pakistan, adopt a unified approach in matters of
policy, resolve controversies and conciliate differences of opinion among members of the
Association, establish just and equitable principles in trade and commerce etc.
MEMBERS
At the time of establishment of PPMA there were only ten members throughout the country who
are the founder members of the PPMA and it was through their efforts that this Association came
into being. Now, today the Membership of the Association is 210 (Approximately), who possess
the license for manufacturing drugs granted by the Ministry of Health, Government of Pakistan
against a total number of 350 units approximately.
We are proud of the hi-tech, essential and high quality National Pharmaceutical Industry which
has significance for the country in term of self-reliance to a great extent. The Pharmaceutical
industry Comprises around 411 manufacturing units including over 350 national or Pakistani
owned and licensed manufacturing unites and 25 licensed International subsidiaries of well
known worldwide based Pharmaceutical Corporations. However, we treat all such units as our
national because all the people who work in this industry are all Pakistanis. PPMA feels strongly
about the fact that all its members possess all requisite facilities necessary for the production of
pharmaceuticals of quality and should comply with CGMP standards.
10
HEAD OFFICE
PPMA has its head office located at KARACHI with two Regional offices in Punjab & NWFP.
ROLE OF GOVERNMENT
Government of Pakistan is taking important initiatives with a view to support pharmaceutical
Industry. In this perspective the Government has setup an independent drug registration and
pricing authority. In Pakistan the Ministry of Industries decides about the drug pricing. In
the Biotechnology sector, Pakistan has initiated many programs. It is planned to setup
Biotechnology plant worth Rs400 million to meet the growing needs of quality medicines in the
country.
Substantial increase in public sector spending shows the involvement of Government to enhance
the standing of Pharmaceutical Industry with to ensure public welfare. Some major public sectors
programs have been initiated to address the health care needs of the population such as:
The National Program for Family Planning and Primary Health Care.
11
The public sector health development expenditure increased from Rs.4.3BN in 2003-04 to Rs.6
BN in 2004-05, and Rs.9.5 BN in 2005-06. Ministry of commerce has given 50% subsidy to
pharmaceutical companies for registration of their exported products in foreign countries for
export from 1998-2003. The government has also formed a policy recently allowing companies
to produce raw-materials locally. Companies in Pakistan rely heavily on China, India, Germany,
UK and Japan for raw-material imports.
FACT: Health care spending in Pakistan in 2009 is Rs.226.5 BN. GDP has been allocated for the
health sector in 2009 was only 0.7%.
The premises shall be located preferably in an industrial area and in any case not in any
residential or commercial area.
1.2. SURROUNDINGS
Premises shall be situated in an environment that, when considered together with measures to
protect the manufacturing processes, presents minimum risk of causing any contamination of
materials or products. It shall be away from filthy surroundings and shall not be adjacent to an
12
open sewerage, drain public lavatory or any factory which produces a disagreeable or obnoxious
odor or fumes or large quantities of soot, dust or smoke which may contaminate the drugs being
manufactured or adversely affect their quality. Existing units shall keep the surroundings under
their control to be clean.
1.3. - The size of the plot shall not be less than 2000 square yards.
pharmaceutical unit:-
(i) A detailed layout plan in duplicate, for approval in terms of paragraph 2 of section 1 of
Schedule-B, under the Drugs (Licensing, Registering and Advertising) Rules, 1976. the layout
plan may be drawn to comply with the Good Manufacturing Practices as laid down under the
aforesaid rules.
13
(iv) Fee @ of Rs. 1000/- per section as may be proposed in the layout plan to be
deposited under the following head of account and submit original Chelan
C028-Social Services.
C02841-Health-Other Receipts.
(v) A list of the drugs intended to be manufactured, indicating the dosage forms and the generic
names of the drugs.
14
15
1.
Form-5 under the Drugs (Licensing, Registering and Advertising) Rules, 1976. An application
for registration of a drug to be imported is made in a prescribed Form-5 (A) under the said rules.
For import purpose a sole agent in Pakistan is required to be nominated by the principal /
manufacturer abroad.
2.
The respective offices evaluate the application. It takes 3-6 months to process the
applications for branded generic drugs and 6-12 months in respect of new molecules.
3.
Once the application is complete and has been evaluated it is placed before the Registration
4.
5.
A registration is issued for a period of five years at a time, after which it is renewable on an
application. Once an application for renewal has been made in time, the registration continues to
be in force till the decision on the application.
16
6.
The Federal Government has set up Expert Committees including a committee on Biological and
a committee on Veterinary Drugs for furnishing opinion after drug's evaluation. The Registration
Board also considers these opinions.
17
18
HIGHNOON LABORATORIES
HISTORICAL BACKGROUND
We have selected Highnoon Laboratories from pharmaceutical industry in order to conduct
strategic analysis of this distinctive company and to compare its strategic march with industry
trend. Highnoon was incorporated in 1984 in the historical and culturally rich city of Lahore
called the heart of Pakistan. It took initiative with a culture of commitment, competitiveness and
distinction in every area of its operations. So far as its strategic alliance is concerned it is trend
setter and leading company in the industry right from its initiation up till now. The organizational
structure allows the employees the freedom, which is necessary to further initiative and
creativity. Employees can take appropriate decisions and implement these with conviction. This
approach has enabled highnoon to bring forth world-class capabilities in marketing, sales,
research & development and production. Highnoon continues on its path to discovery, scaling
new heights and seeking new and higher challenges which are essence of pharmaceutical
industry.
STRATEGIC INTENT
We at Highnoon laboratories limited understand the duties of being responsible corporate citizen
and stand true to our conviction and promise to work for the betterment and prosperity of our
people.
Highnoon for a healthier nation
19
MISSION STATEMENT
We strive to maintain excellence in our business practices with the objective to benefit the
medical community, consumers, stakeholders and employees and to improve quality of life by
providing quality products.
OBJECTIVES
These objectives are the hallmarks of Highnoons journey towards a healthier nation.
Gain confidence of Doctors, Pharmacists and Consumer who use their products.
Pharmaceuticals are the substances that are aimed to treat, cure, prevent or recognize diseases
and relieve pains through their applications. Research and discovery are the essence of
pharmaceutical industry, and its success has played a vital role in maintaining pre-eminent
position of the pharmaceutical industry in the world today. Such activities demand a sustain rate
of huge investment over a long period. Pharmaceutical industry devotes huge resources to R&D
more then any industry.
20
LANDMARKS
1985: Highnoon Laboratory started marketing of its first brand ULSANIC 500 mg tablets, a
product of Chugai-Japan.
1986: Launch of worlds latest research molecules for anti-hypertensive, HERBESSER tablets, a
product of Tanabe-Japan.
1986: Construction of a new modern manufacturing facility on a 202, 500 sq. ft. Area started at
17.5km Multan Road, Lahore. Total covered area of new facility is 108,064 sq. ft.
1990: new facility at present place started functioning and first batch of TRESS ORIX FORTE
was produced and filled on automatic filing and sealing line.
1993: Local manufacturing of HERBESSER also started.
1994: Highnoon laboratory adopted multi dimensional approach and embarked on exports with
first order to Turkmenistan.
1996: Highnoon laboratory launch worlds latest ACE inhibitor brand TANATRIL tablets of
Tanabe-Japan.
1996: Highnoon laboratory announced gratuity schemes along with already provided staff
provident fund for the welfare and benefit of the employees.
1998: Highnoon Laboratory earned ISO 9002 certificate.
2000: Staying true to its vision of a healthier nation, highnoon introduce HEPROVAC-B
recombinant vaccine for hepatitis-B.
Highnoon for healthier nation
21
2002: Highnoon inaugurated a separate anti biotic facility on 7500 sq. ft. covered area.
2002: Highnoon formulized arrangements with ALLIANZE, EFU to provide hospitalization
insurance plans for its employees and there immediate family members.
2002: Highnoon started manufacturing and marketing of RHEUOSXIB, first CELECOXIB ever
launched in Pakistan and that reached to unprecedented sales volumes in a very short span of
time.
2003: ICAP and ICMAP awarded highnoons annual report-2002 the fifth best corporate report
in related sectors.
2004: Highnoon successfully negotiated acquisition of brand titled TRES ONIX FORTE.
2004: DYNALOG Service (Pvt) Ltd, wholly owned subsidiary of highnoon laboratories Ltd
established and start working with the paid up capital of Rs. 20million for the distribution and
marketing of highnoon as well as for the other local and international companies products.
2008: Asthma and COPD portfolio that includes ROTACAPS and ROTAHALER, launched.
2009: ZOTTER 250 mg capsule for upper respiratory tract infections, launched.
2010: COMBIVAIR 100, 200, and 400 for asthma and COPD launched.
QUALITY POLICY
Highnoon is being seen as one of the most innovative aggressive and professional marketing
outfits in the industry. This has been achieved through consistent toil and sweat for quality that
has become a second name for them in the market.
Highnoon for healthier nation
22
SOCIAL RSPONSIBILITY
Social responsibilities of highnoon stem from the founders vision of a healthier nation. In the
role of a good corporate citizen, highnoon is fully committed to its social obligations. This
encompasses fine areas like promoting art and culture, valuing in sports, supporting education
and social causes for the well being of the society.
With the passion to serve the nation highnoon has been supporting Fatimid Foundation, Care
foundation, Government College University (GCU) welfare society, University College of
Pharmacy, Old Ravian Union, Khoj Society Dispensary and Zoological Gardens of Lahore.
Apart from serving the nation management of highnoon has establish a trust for employees by
the name of Highnoon Employees Welfare Trust (HEWT).
BUSINESS PARTNERS
23
FINANCIAL HEALTH
Their financial profile leaves them well positioned to pursue their corporate strategy while
maintaining disciplined approach and continuous evaluation of their product portfolio to better
focus on core strengths and overall profitability. Diversity of their product range enabled them to
fortify their position and the company generated sales revenue of Rs. 2.33 BN in 2009. This was
the highest in the companys history growing at CAGR of 21%. The company demonstrated
resilience in the economically difficult times and maintained overall margins, despite increase in
raw material and other cost due to weakness of our currency and inflationary trends, by
maintaining higher volumes and lower operating cost. Their total assets of the company have
risen to Rs. 1746 MN and the shareholders equity rose to 498 MN. The company maintain
adequate capital base so as to maintain invertors, creditors and market confidence and to sustain
future development of the business.
24
PRODUCTION
Production of any medicine in the best form and quality is a very demanding process it is their
mission to ensure that the equipment and machinery employed in the production process are of
the top most quality. They are keeping this in mind that their manufacturing facility is equipped
to cater the needs of the 21st century.
Production plant comprises of the most modern equipment from UK, USA, Germany, France,
and Italy. Their qualified and highly skilled staff is fully cognizant with recent developments in
pharmaceutical technology. All manufacturing operations are strictly adhered to specific
procedures that assure highest standard of quality and manufacturing. In the field of medicines
that is competitive yet challenging, the company keeps on introducing novel and innovative
manufacturing techniques to stay abreast with the changes and competition.
While maintaining current the good manufacturing practices (CGMP) of producing quality
medicines, the company constantly improves its system.
25
UNIT
Encapsulation
Capsules
274
Compression
Tablets
671
Oral Liquid
Bottles
Oral Drops
Droppers
Blistering
Strips
77
Cartonating
Cartons
90
CONTRACT MANUFACTURING
A number of companies turn to highnoon for contract manufacturing. Highnoon manages its
capacity efficiently and caters well to the manufacturing needs of these marketing concerns. In
26
2007 a toll manufacturing agreement was sign with OBS health care for contract manufacturing
of one their products. This, no doubt, is yet another indicator of the esteem at which the industry
places highnoons manufacturing capability. Such as Ovafin, Prolifen, Esgerd, Angiocard-SR
etc.
EXPORT BUSINESS
With an aim to reach out to the world and provide the quality pharmaceutical products at
affordable prices. Highnoon started its export activities in 1994.
To strengthen the export business they are planning to tab other potential regions of the world. In
line with the company objectives, the export business will have significant share in the overall
business of the company in the future.
They export their products to the following countries
Hong Kong
Afghanistan
MACAU
UAE
Philippines
Sri Lanka
Saudi Arabia and some others.
27
ORGANIZATIONAL WHEEL
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28
Pest Analysis
SWOT
Perceptual Mapping
Stage 2
The Matching Stage
TOWS Matrix
Stage 3
The Decision Stage
Quantitative Strategic Planning Matrix (QSPM)
29
COMPETITIVE INTENSITY
So far as industry analysis is concerned it implies that rivalry among existing firms in
pharmaceutical industry is almost at moderate level. Pharmaceutical companies are competing on
the basis of quality, cost, product range and research and development.
30
pharmaceutical companies offering a wide range of products. So, the bargaining power of
customers is at moderate level.
THREAT OF SUBSTITUTES
Research and development are the essence of pharmaceutical industry. Every pharmaceutical
company in Pakistan is making efforts for the betterment of their research and development
department. Still there is a significant threat of substitute products because of rising discoveries
and pacing research and development in the whole world.
31
IMPACT OF PROFITABILITY
Threat/Power
High
Moderate
Competitive
Intensity
Low
Bargaining power
of suppliers
Bargaining power
of costumers
Threat of new
Entrants
Threats from
substitutes
Moderate
Low
Profits
High
32
COST LEADERSHIP
Cost leadership describes a way to establish the competitive advantage. Cost leadership, in basic
words, means the lowest cost of operation in the industry. The cost leadership is often driven by
company efficiency, size, scale, scope and cumulative experience. A cost leadership strategy
aims to exploit scale of production, well defined scope and other economies, producing highly
standardized products, using high technology.
COMPETITIVE INTENSITY
Highnoon laboratory is better able to compete due to highly committed and sophisticated
employees.
33
34
PEST ANALYSIS
PEST analysis is a useful tool for understanding the big picture of the environment in which we
are operating, and the opportunities and threats that lie within it. By understanding the
environment in which we operate (external to your company or department), we can take
advantage of the opportunities and minimize the threats.
Specifically the PEST or PESTLE analysis is a useful tool for understanding risks associated
with market growth or decline, and as such the position, potential and direction for a business or
organization.
POLITICAL CHANGE
Political factors include government regulations and legal issues and define both formal and
informal rules under which the firm must operate. Some examples include:
Tax policy
Employment laws
Environmental regulations
Political stability
35
NATURE OF CHANGE
In pharmaceutical industry prices are fixed by ministry of health. It exposes a significant risk on
pharmaceutical industry.
IMPACT OF CHANGE
Profit margin of pharmaceutical industry will be reduced due to price fixation policy.
THREAT
Price fixation is a long term threat for pharmaceutical industry.
STRATEGIC RESPONSE
Highnoon laboratory is involved in efficient portfolio management of its products resulting in
sophisticated profit margins.
ECONOMIC CHANGE
Economic factors affect the purchasing power of potential customers and the firm's cost of
capital. The following are examples of factors in the macro economy:
Economic growth
Interest rates
Exchange rates
Inflation rate
Highnoon for healthier nation
36
NATURE OF CHANGE
Inflation and exchange rate fluctuations are important factors influencing pharmaceutical
industry of Pakistan because raw material such as molecules and supporting material is imported.
IMPACT OF CHANGE
Inflation and exchange rate fluctuations expose a risk of increase in cost because main cost
involved in pharmaceuticals is import of raw material.
THREAT
This change will increase pressure on cost control functions.
STRATEGIC RESPONSE
Highnoon laboratory have to consider operational efficiency in order to reduce the impact of this
threat.
SOCIAL CHANGE
Social factors include the demographic and cultural aspects of the external macro environment.
These factors affect customer needs and the size of potential markets. Some social factors
include:
Health consciousness
37
Age distribution
Career attitudes
Emphasis on safety
NATURE OF CHANGE
Population is increasing day by day resulting in increased demand of pharmaceutical products.
Cross border relationships have also strong influence on pharmaceutical industry of Pakistan.
Supporting material is imported from India and China. So, cross border situations of India and
Pakistan do matter. Terrorism and global alliance are also important factors stimulating the
standing of pharmaceutical industry of Pakistan.
IMPACT OF CHANGE
Diseases are increasing day by day due to increase in population. Sales will be reduced due to
cross border relationship and terrorism activities. Due to global alliance market share increases.
THREAT
Unfavorable cross border relationships and terrorism will have a threat on pharmaceutical
industry of Pakistan.
OPPORTUNITIES
Increase in population and global alliance are growth opportunity for pharmaceutical industry to
explore further markets.
38
STRATEGIC RESPONSE
Increase in population creates demand for pharmaceutical industry which can be explore through
strong research and product development. Unfavorable cross border relationships and terrorism
activities can cause reduction in profits which can be control through building strong business
relationships with business partners. Global alliance is a growth opportunity which can be
achieved by focusing on market capitalization strategies.
TECHNOLOGICAL CHANGE
Technological factors can lower barriers to entry, reduce minimum efficient production levels,
and influence outsourcing decisions. Some technological factors include:
R&D activity
Automation
Technology incentives
NATURE OF CHANGE
Technology is changing day by day. Pharmaceutical industry should acquire new and advanced
technologies to compete in the market.
39
IMPACT OF CHANGE
Massive production is possible through advanced technologies by which they can achieve
economies of scale.
OPPORTUNITY
Economies of scale will strengthen the standing of highnoon laboratory because it would be a
competitive advantage.
STRATEGIC RESPONSE
Whenever new technology is evolved need for trained and skilled employees arise. Either
training of existing employees or hiring of new employees is required. Huge funds allocation is
needed in this perspective.
40
Nature
of change
Political Change
Economic Change
Social change
Impact
Opportunities
of Change
Threats
Strategic
response
Price Fixation
Low profit
margins
Long Term
Efficient Portfolio
Management
Increase
in cost
Pressure
on cost
Focus on
operational efficiency
Increase
in population
Increase in
Diseases
Cross border
Relationship
Growth
opportunities
Reduction in
profits
Decrease in
sales
Strong Business
relationship
Terrorism
Global Alliances
Technological Change
Advanced
Technology
Increase in
market share
Growth
opportunities
Economies of
scale
Competitive
Advantage
Focus on market
capitalization
Human
resource &
Funds allocation
41
SWOT MATRIX
The concept of determining strengths, weaknesses, threats, and opportunities is the fundamental
idea behind the SWOT model. To present the model in a more understandable way, scholars
came up with so-called SWOT matrix. SWOT matrix is only a graphical representation of the
SWOT framework.
Strengths
Weaknesses
Opportunities
Distributional channel
Shortage of space
Utilization of funds
Lack of variety of products
Internal control system
Threats
Government policies
Exchange rate fluctuations
Inflation risk
Cross border relationship
Terrorism
42
OPPORTUNITIES
MOLECULE DEVELOPMENT OPPORTUNITY
A molecule itself is the smallest particle of a substance that retains the chemical and physical
properties of the substance and is composed of two or more atoms, a group of like or different
atoms held together by chemical forces. In other words molecule is basically an actual drug such
as in LOPRIN the drug present is ASPARIN which is basically a molecule mostly used as a pain
killer. In HILIN the drug is PREGABALIN which is a molecule used for Neuropathic pain etc.
Development of a molecule is a big challenge and normally it is not developed by the third world
countries because it requires a lot of funds and research. Therefore the pharmaceutical companies
take the patents and copy rights of that molecule for a certain time periods as Highnoon
Laboratory is doing now. They have franchises of their business partner at international level.
43
They make research products for them. But they have opportunity to develop a molecule so that
it may reduce their cost.
GLOBAL ALLIANCE
Highnoon laboratory is having enough capacity for the production of medicines. They are also
doing outsourcing for other companies such as for Solvay Pharmaceuticals in Germany. They
provide the raw material to them. Highnoon only produce those products for them. They have
opportunity to explore for more market share globally through export opportunities.
RELATED PRODUCTS
Another opportunity foe Highnoon Laboratory is the production of related products such as
surgical items, gloves, masks and other equipments related to pharmaceutical industry. By doing
this they can acquire a huge market share.
44
THREATS
GOVERNMENT POLICIES
Ministry of health has the sole authority to manage the pharmaceutical industry in Pakistan. They
are responsible to control the prices, drug registration, and company registration; in short they
are controlling all the activities of pharmaceutical industry. They fix the prices of products and
companies are not allowed to sell those products on above prices as prescribed by the ministry of
health. They have to sell those products on that price even if the cost of that product is more then
the price prescribe by the ministry of health. Highnoon Laboratory is also suffering from loss in
some products due to price fixation by ministry of health. But due to their efficient portfolio they
cover their loss from other products. Its an ultimate threat for them for a long time.
45
reason they may suffer loss. Terrorism activities are also increasing day by day which
deteriorates the image of Pakistan in front of international investors.
EFE MATRIX
Opportunities
1.
2.
3.
4.
5.
1.
2.
3.
4.
5.
Weight
Ratings
0.05
0.05
0.2
0.1
0.05
2
2
4
4
2
0.2
0.1
0.1
0.05
0.1
1
4
4
3
2
4
Weighted
Score
0.1
0.1
0.8
0.4
0.1
0.8
0.4
0.3
0.1
0.4
3.5
46
STRENGTHS
HIGH QUALITY PRODUCTS
In pharmaceutical industry the quality of products matters a lot because they are directly related
to health of a human. As far as highnoon labs are concern they are maintaining that quality of
product according to the ISO standard and also they are maintaining their standard according to
international requirements. By doing this they obtain the license of research based products.
Their 50% revenue comes from research based products.
47
another indicator of the esteem at which the industry places highnoons manufacturing
capability. Such as Ovafin, Prolifen, Esgerd, Angiocard-SR etc.
HUMAN RESOURCE
Efficient and skilled employees are a huge source for any organization and the main factor which
contributes a lot is the loyalty of employees. In the case of highnoon labs the employees are well
efficient, skilled and loyal towards their work which is the major strength of highnoon
laboratories.
CONTINUOUS IMPROVEMENT
Highnoon Laboratory is improving day by day due to all the strengths illustrated above. Their
revenue margin is increasing every year which shows their continuous improvement.
48
WEAKNESSES
DISTRIBUTION CHANNEL
Highnoon laboratory has its own distribution channel but it is not as strong as other companies
having. Highnoon should improve its distribution channel globally. So it can compete with the
other pharmaceutical laboratories.
SHORTAGE OF SPACE
There is no doubt that highnoon laboratory is managing their operations very well but still there
is lack of space for departments and production area too.
UTILIZATION OF FUNDS
Highnoon laboratory is generating profits every year so they have enough potential to explore
further markets instead of only utilizing those funds to acquire the patents and copy rights of
research based products.
49
IFE MATRIX
1.
2.
3.
4.
5.
1.
2.
3.
4.
5.
Internal Strengths
Weight
Ratings
0.2
0.1
0.1
0.1
0.1
4
4
3
4
4
0.1
0.05
0.05
0.05
0.15
1
2
2
2
2
2
Weighted
Score
0.8
0.4
0.3
0.4
0.4
0.2
0.1
0.1
0.1
0.3
3.1
50
Weight
Rating
Duration
Weighted
Score
Short
Intermediate
Long
Human
Resource (S)
0.075
0.3
Product Quality
(S)
0.2
0.8
Distribution
Channels (W)
0.075
0.15
0.2
Market Growth
Opportunities
(O)
0.2
0.8
Global Alliance
(O)
0.075
0.3
Government
Policies (T)
0.2
0.8
Exchange Rate
Fluctuations
(T)
0.075
0.3
Total
3.65
51
Profit potential is same for all the companies lying in the same circle and those who
belongs to the close circle.
Driving forces are also almost the same for these companies.
52
GROUP MAP
53
GROUP MAP
54
GROUP MAP
55
HIGH PRODUCT
QUALITY
SPL
Highnoon
Abbott
CCL
Feroz
&
son
LOW FINANCIAL
HEALTH
HA
MI
LT
ON
CEBOSH
HIGH FINANCIAL
HEALTH
LOW PRODUCT
QUALITY
Highnoon laboratory have good repo in eyes of customer and investors because of its high
quality and stable financial health.
56
VERTICAL ANALYSIS
This figure shows that CCL is responding more to the mentioned critical success factors as
compare to Highnoon Laboratories and Searle Pakistan Ltd. So far as highnoon laboratory is
responding more to these success factors as compare with Searle Pakistan Ltd. So, highnoon
laboratories avail a strong position in its competitors.
HORIZONTAL ANALYSIS
So far as each critical success factor is concern the response and position of these three
companies is as follows
57
PRODUCT AVAILABILITY
Weighted Score of highnoon laboratories and CCL are 0.45 which is more than the weighted
score of Searle Pakistan Ltd. So, the distribution channel of highnoon laboratory and SPL is
more competitive than SPL resulting in better product availability.
PRODUCT RANGE
With reference to product range CCL bears strong position as compare with highnoon laboratory
and highnoon laboratory is having strong position as compare with SPL.
PRODUCT DEVELOPMENT
Highnoon laboratories and CCL are more competitive and insuring effeceint product
development
GLOBAL EXPANSION
CCL and SPL are more competitive than Highnoon laboratories in global expansion. Highnoon
is a local company involved in exports on moderate level.
58
CUSTOMER LOYALTY
All of these three companies have equally loyal customers according to our analysis.
MARKET PENETRATION
CCL has the ability to penetrate into the market where as highnoon laboratory and SPL is still
trying to penetrate into the market.
CPM MATRIX
Critical
Success
Factors
Product
availability
Product
Quality
Brand image
Product range
Product
development
Global
expansion
Customer
loyalty
Market
penetration
Total
Highnoon
Laboratories
Rating Weighted
Score
0.15
0.45
0.2
0.05
0.1
0.15
Weights
Rating
CCL
Weighted
Score
Rating
Weighted
Score
0.3
0.45
0.8
0.8
0.8
4
3
3
0.2
0.3
0.45
4
2
2
0.2
0.2
0.3
4
4
3
0.2
0.4
0.45
0.1
0.2
0.3
0.3
0.15
0.6
0.6
0.6
0.1
0.3
0.2
0.4
1
3.3
2.9
(1) Poor, (2) Below Average, (3) Above Average, (4) Superior.
3.6
59
SO STRATEGY
Use strengths to take the advantage of opportunities.
ST STRATEGY
Use strengths to avoid threats.
WO STRATEGY
Overcome weakness by taking advantage of opportunities.
WT STRATEGY
Minimize weakness and avoid threats.
As for as Tows matrix is concerned Highnoon laboratories is using the efficient capacity
management and provide the high quality products to take the high market potential
for
veterinary and related products due to avail these opportunities obviously more increase in sales.
60
Due to the efficient human recourse department of Highnonn increase the market growth
opportunities.
By using the strengths like provide high quality products continuous increase in sales and use the
patents and copy rights is to avoid the threats and Highnoon penetrate into other markets and also
improve the cross border relationships. And overcome the weaknesses like to increase the verity
of products and fair utilization of funds and develop the forward integration like increase the
distribution channels and improve the shortage of space to create the different SBUs. Finally
minimize the weakness and avoid the threats to focus the government policies and develop the
effective control system which helps to avoid the unfair transactions in Highnoon laboratories.
61
TWOS MATRIX
IF
EF
E
Strengths
Opportunities
SO Strategies
Threats
1.Government policies
2.Exchange rate fluctuation
3.Inflation risk
4.Cross border relationship
5.Terrorism
ST Strategies
Penetrate in other Markets
(S1, S2, S4, S5, T2, T3, T4)
Weakness
1.Distribution Channel
2.Shortage of space
3.Utilization of funds
4.Lack of variety of products
5.Internal control system
WO Strategies
Develop forward integration &
SBUs (W1, W2, W3, W4, O1,
O2, O3, O4, O5 )
WT Strategies
Focus the government policies
and develop the internal control
system (W5, T1)
62
SPACE MATRIX
The SPACE matrix is a management tool used to analyze a company. It is used to determine
what type of a strategy a company should undertake. The Strategic Position & Action Evaluation
matrix or short a SPACE matrix is a strategic management tool that focuses on strategy
formulation especially as related to the competitive position of an organization.
Aggressive
Conservative
Defensive
Competitive
63
SPACE MATRIX
FS
Conservative
Aggressive
+6
+5
+4
+3
+2
+1
CA
IS
0
-6
-5
-4
-3
-2
+1
-1
+2
+3
+4
+5
+6
-1
-2
-3
-4
-5
Defensive
-6
ES
Competitive
64
This particular SPACE matrix tells us that our company should pursue an aggressive strategy.
Our company has a strong competitive position in the market with rapid growth. It needs to use
its internal strengths to develop a market penetration and market development strategy. This can
include product development, integration with other companies, acquisition of competitors, and
concentric diversification.
The SPACE Matrix analysis functions upon two internal and two external strategic dimensions
in order to determine the organization's strategic posture in the industry. The SPACE matrix is
based on four areas of analysis.
There are many SPACE matrix factors under the internal strategic dimension. These factors
analyze a business internal strategic position. The financial strength factors often come from
company accounting. We used SPACE matrix factors such as shareholders equity, ease of exit
and risk involved in business. We have used the following competitive advantage factors market
65
Every business is also affected by the environment in which it operates. SPACE matrix factors
related to business external strategic dimension that we have used in environmental stability are
rate of inflation, price range, competitive pressure and demand variability. In external strategic
dimensions factors related to industrial strength are growth potential, profit potential,
technological know how and ease of entry.
The SPACE matrix calculates the importance of each of these dimensions and places them on a
graph with X and Y axis.
By definition, the CA and IS values in the SPACE matrix are plotted on the X axis.
The SPACE matrix is constructed by plotting calculated values for the competitive advantage
(CA) and industry strength (IS) dimensions on the X axis. The Y axis is based on the
environmental stability (ES) and financial strength (FS) dimensions.
The following figure shows what values were used to create the SPACE matrix displayed above.
66
SPACE MATRIX
Internal Strategic Position
X Competitive (CA)
Industry (IS)
-3
Market share
Growth Potential
-2
Product Quality
Profit Potential
-2
Capacity Utilization
-3
Ease of entry
Average:
-2.5
Average:
4.5
Environmental (ES)
Shareholders Equity
-2
Rate of Inflation
Ease of Exit
-4
Price Range
-2
Competitive Pressure
-5
Demand variability
I
S
Average:
3.67
Average:
-3.25
Each factor within each strategic dimension is rated using appropriate rating scale. Then
averages are calculated. Adding individual strategic dimension averages provide values that are
plotted on the axis X and Y.
67
SUPPORTING CALCULATIONS
SBU
Revenues
Profits
Revenue
Contribution
Profits
Industry
Contribution Sales
Growth
Rate
Relative
Market
Share
H.L
2.33 BN
100%
36.31%
0.7
846 MN
12%
Highnoon laboratory is a single SBU. It is a well known pharmaceutical company with revenues
of 2.33BN. Gross Profits are 846MN which is 36.31% of its total revenues. Industry sales growth
rate is 12%. Market share of highnoon laboratory is 6.3% while market leader Glexosmith has
market share of 11.6%. Therefore relative market share of highnoon laboratory is 0.7. It implies
that highnoon laboratory lies in stars quadrant. They are using huge funds in order to earn profits
Highnoon for healthier nation
68
there must be large cash flows in order to get market share otherwise the results will be in cash
cow and then ultimately becomes a dog which is a worst situation for a company.
BCG MATRIX
0.9
0.8
0.7
0.6
0.5
Low
0.4
0.3
0.2
+20
+15
Pr o
fi t
In d u s t r y S a l e s G r o w t h R a t e
1.0
Medium
+10
+5
Medium
Stars
Question Marks
Cows
Dogs
0
-5
-10
-15
Low
-20
0.1 0.0
69
1. Score from the EFE matrix this score is plotted on the y-axis
2. Score from the IFE matrix plotted on the x-axis
We calculated IFE matrix for highnoon laboratory. The total weighted score is 3.1 which point
the company with an above average internal strength. We have also calculated the EFE matrix
for the same company. The total weighted score EFE matrix is 3.5 which indicates high ability to
respond to external factors. These values are plotted on IE matrix. This IE matrix tells us that our
company should grow and build its position.
70
3.0
Weak
Average
2.0
High
3.0
Medium
2.0
Low
1.0
EFE
IFE
1.0
71
GRAND STRATEGYMATRIX
The model defines the situation of a company through the market growth and their competitive
position in the market. There are four quadrants that the company can be categorized such as:
QUADRANT 1
Quadrant I indicates that the company is in rapid market growth and strong competitive position.
Company can continue concentrating on their current business. However, a company with excess
resources may consider vertical integration.
Market development
Market penetration
Product development
Forward integration
Backward integration
Horizontal integration
Concentric diversification
QUADRANT 2
Quadrant II indicates that the company is in rapid market growth and weak competitive position. F
Company needs to evaluate their present approach to the market and identify why the current strategy
is not effective. The company will then adopt the grand strategy options accordingly.
72
Market development
Market penetration
Product development
Horizontal integration
Divestiture
Liquidation
QUADRANT 3
Quadrant III indicates that the company is in slow market growth and weak competitive position.
Company should decrease resources used by the particular business. Another way is that company
Retrenchment
Concentric diversification
Horizontal diversification
Conglomerate diversification
Liquidation
73
QUADRANT 4
Quadrant IV indicates that the company is in slow market growth and strong competitive
position. Company has excellent position and can choose to diversify into more highly profitable
areas.
Concentric diversification
Horizontal diversification
Conglomerate diversification
Joint ventures
The model allows better implementation of strategy because of the intensified focus and
objectivity. It conveys a lot of information about corporate plans in a simplified format.
However, it may not be as simple as it seems, upon application to real life due to the unforeseen
factors and also complications in the business world. In addition, the relationship between
market share and profitability differs in different industries.
74
GRAND MATRIX
Quadrant - 2
1. Market development
2. Market penetration
3. Product development
4. Horizontal integration
5. Divestiture
6. Liquidation
WEAK
COMPETITIVE
POSITION
Quadrant - 1
1. Market development
2. Market penetration
3. Product development
4. Forward integration
5. Backward integration
6. Horizontal integration
7. Concentric diversification
Quadrant - 3
Quadrant - 4
STRONG
COMPETITIVE
POSITION
1. Conglomerate diversification
2. Concentric diversification
3. Horizontal diversification
1. Conglomerate diversification
2. Concentric diversification
3. Horizontal diversification
4. Divestiture
5. Liquidation
6. Retrenchment
4. Joint ventures
As far as the highnoon laboratory is concerned it lies in the quadrant 1 of GRAND strategy
matrix due to rapid market growth and strong competitive position.
75
When company executives think about what to do, and which way to go, they usually have a
prioritized list of strategies. If they like one strategy over another one, they move it up on the list.
This process is very much intuitive and subjective. The QSPM method introduces some numbers
into this approach making it a little more expert technique.
The Quantitative Strategic Planning Matrix or a QSPM approach attempts to objectively select
the best strategy using input from other management techniques and some easy computations. In
other words, the QSPM method uses inputs from stage 1 analyses, matches them with results
from stage 2 analyses, and then decides objectively among alternative strategies.
76
KSF of IFE
& EFE
Weights
Strategic Alternatives
Market
Development
Market
Penetration
Product
Development
AS
AS
AS
TAS
TAS
TAS
Strengths
Quality
0.2
0.4
0.4
0.8
Capacity
Management
0.1
0.4
0.3
0.3
0.1
0.4
0.3
0.4
Human
Resource
0.1
0.4
0.4
0.4
77
improvement
0.1
0.3
0.2
0.4
Distributional
channel
0.1
0.1
0.1
0.3
Shortage of
space
0.05
0.1
0.1
0.1
Utilization of
funds
0.05
0.05
0.15
0.15
Lack of variety
of products
0.05
0.1
0.05
0.1
Internal control
system
0.15
0.3
0.3
0.15
Molecule
development
0.05
0.1
0.15
0.1
Market
potential for
veterinary
products
0.05
0.15
0.1
0.15
Market growth
0.2
0.4
0.4
0.6
Global alliances
0.1
0.2
0.3
0.3
Related
products
0.05
0.1
0.1
0.05
Government
policies
0.2
0.4
0.1
0.6
Exchange rate
fluctuations
0.1
0.2
0.2
0.2
Inflation risk
0.1
0.2
0.6
0.1
Weaknesses
Opportunities
Threats
78
Cross border
relationship
0.05
0.1
0.1
0.1
Terrorism
0.1
0.1
0.2
0.2
4.5
4.6
5.5
BLOCK 2
This QSPM compares three alternative strategies such as forward integration, backward
integration and horizontal integration. These three strategies belong to same block. According to
the QSPM backward integration is most feasible strategy for highnoon laboratory because its
total attractiveness score is 3.6, which is individually greater than of forward and horizontal
integration.
KSF of IFE
& EFE
Weights
Strategic Alternatives
Forward
Integration
Backward
Integration
Horizontal
Integration
AS
AS
AS
TAS
TAS
TAS
Strengths
Quality
0.2
0.6
0.6
0.4
Capacity
Management
0.1
0.2
0.2
0.3
0.1
0.2
0.1
0.3
Human
Resource
0.1
0.2
0.3
0.2
improvement
0.1
0.2
0.1
0.2
79
Weaknesses
Distributional
channel
0.1
0.1
0.1
0.1
Shortage of
space
0.05
0.05
0.05
0.05
Utilization of
funds
0.05
0.1
0.05
0.1
Lack of variety
of products
0.05
0.1
0.05
0.05
Internal control
system
0.15
0.15
0.15
0.3
Molecule
development
0.05
0.05
0.05
0.05
Market
potential for
veterinary
products
0.05
0.05
0.05
0.1
Market growth
0.2
0.4
0.6
0.2
Global alliances
0.1
0.1
0.2
0.1
Related
products
0.05
0.05
0.05
0.05
Government
policies
0.2
0.4
0.6
0.2
Exchange rate
fluctuations
0.1
0.1
0.2
0.2
Inflation risk
0.1
0.2
0.1
0.2
Cross border
0.05
0.1
0.05
0.1
Opportunities
Threats
80
relationship
Terrorism
0.1
0.1
3.45
0.1
3.6
0.1
3.3
81
APPENDIX
Anti dotes
An antidote is a substance which can counteract a form of poisoning.
Anti diabetic
Anti-diabetic drugs treat diabetes mellitus by lowering glucose levels in the blood.
Backward integration
Acquisition by a firm of its suppliers.
Biotechnology
Biotechnology is a field of applied biology that involves the use of living things in engineering,
technology, medicine, and other useful applications.
CAGR
Compound Annual Growth Rate means the year-over-year growth rate of an investment over a
specified period of time.
CGMP
Current Good Manufacturing Practices.
82
CCL
Computational chemistry laboratory
Competitive profile matrix
Competitive profile matrix is an essential strategic management tool to compare the firm with the
major players of the industry. Competitive profile matrix shows the clear picture to the firm
about their strong points and weak points relative to their competitors. The CPM score is
measured on basis of critical success factors, each factor is measured in same scale mean the
weight remain same for every firm only rating varies. The best thing about CPM that it includes
your firm and also facilitates to add other competitors make easier the comparative analysis.
Concentric Diversification
A growth strategy in which a company seeks to develop by adding new products, also called
convergent diversification, to its existing product lines to attract new customers.
83
Forward integration
Acquisition by a firm of a larger part of its distribution chain, moving it closer to selling directly
to its ultimate customers
Five Forces model of Michael Porter
Five Forces model of Michael Porter is a very elaborate concept for evaluating company's
competitive position. Michael Porter provided a framework that models an industry and therefore
implicitly also businesses as being influenced by five forces. Michael Porter's Five Forces model
is often used in strategic planning.
Grand Strategy Matrix
This is also an important matrix of strategy formulation frame work. Grand strategy matrix it is
popular tool for formulating alternative strategies. In this matrix all organization divides into four
quadrants. Any organization should be placed in any one of four quadrants. Appropriate
strategies for an organization to consider are listed in sequential order of attractiveness in each
quadrant of the matrix.
Horizontal integration
Absorption into a single firm of several firms involved in the same level of production and
sharing resources at that level.
Internal Factor Evaluation (IFE) matrix
Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing or evaluating
major strengths and weaknesses in functional areas of a business. IFE matrix also provides a
Highnoon for healthier nation
84
basis for identifying and evaluating relationships among those areas. The Internal Factor
Evaluation matrix or short IFE matrix is used in strategy formulation.
Immunological
Immunology is a broad branch of biomedical science that covers the study of all aspects of the
immune system in all organisms.
Landmarks
Landmarks mean achievements.
Molecule
A molecule is defined as an electrically neutral group of at least two atoms in a definite
arrangement held together by very strong (covalent) chemical bonds.
Market development
The process of finding new markets for products a company is already making.
Market penetration
Trying to increase sales of a firm's present products in its present markets, usually through a
more aggressive marketing mix.
Product development
Offering new or improved products for current markets.
85
Perceptual mapping
Perceptual mapping is a graphics technique used by asset marketers that attempts to visually
display the perceptions of customers or potential customers.
PEST analysis
PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes
a framework of macro-environmental factors used in the environmental scanning component of
strategic management.
Quantitative Strategic Planning Matrix (QSPM)
Quantitative Strategic Planning Matrix (QSPM) is a high-level strategic management
approach for evaluating possible strategies. Quantitative Strategic Planning Matrix or a QSPM
provides an analytical method for comparing feasible alternative actions. The QSPM
method falls within so-called stage 3 of the strategy formulation analytical framework.
SWOT analysis
SWOT analysis, method, or model is a way to analyze competitive position of your company.
SWOT analysis uses so-called SWOT matrix to assess both internal and external aspects of
doing your business. The SWOT framework is a tool for auditing an organization and its
environment.
Strategic intent
Strategic intent is a high-level statement of the means by which your organization will achieve
its vision.
Highnoon for healthier nation
86
Stockholders
Normally stockholders are within the company and may include internal clients, management ,
employees, administrators, etc.
Substitute products
Two goods are substitutes in demand if, when the market price of the first good raises, the price
of the second good also rises, and vice-versa.
SFAS Matrix
SFAS Matrix is a list of companys external and internal strategic factors in one table and SFAS
matrix includes only the most important factors gathered from environmental scanning and thus
provides the information essential for strategy formulation.
Strategic group mapping categorizes industry competitors into meaningful groups based on at
least two strategic variables.
The Internal-External (IE) matrix
The Internal-External (IE) matrix is another strategic management tool used to analyze working
conditions and strategic position of a business. The Internal External Matrix or short IE matrix is
based on an analysis of internal and external business factors which are combined into one
suggestive model.
87
88
TOWS matrix
TOWS matrix: Uses a SWOT analysis to develop strategies by matching strengths with
opportunities, using opportunities to reduce weaknesses, using strengths to overcome threats, and
reducing weaknesses and avoiding threats.
Veterinary products
These products used to cure animal diseases.
89
REFERENCES
Mr. Jawad Naeem , Marketing manager: Highnoon laboratories limited Lahore , 2010
Miss. Iram naila, Chief Executive of Regulatory authorities: Highnoon laboratories limited
Lahore 2010
Dr. Arif, President : Ministry of health Lahore division , 2010