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FACTORS INFLUENCING PHARMACEUTICAL INDUSTRY OF PAKISTAN AND STRATEGIC ANALYSIS OF HIGHNOON LABORATORIES LIMITED

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.

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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.

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PHARMACUETICAL INDUSTRYOF PAKISTAN
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 than any industry.

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.

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PAKISTAN PHARMACUETICAL INDUSTRY
Although Pakistan’s pharmaceutical and healthcare sectors are expanding and evolving rapidly, about half the population has no access to modern medicines. Clearly this presents an opportunity, but much more work needs to be done by the government and industry's stakeholders. The value of pharmaceuticals sold in 2007 exceeded US$1.4bn, which equates to per capita consumption of less than US$ 10 per year and value of medicines sold is expected to exceed US$2.3 B by 2012. Pakistan is a developing pharmaceutical market, with a large population and economic progress evident, but per capita drug spending was rather low at around US$9.30 in 2007. Private spending accounts for 65% of total healthcare expenditure sourced through out-of pocket payments, international aid and religious or charitable institutions. Pharmaceutical spending accounts for less than 1% of the country's GDP, comparable to levels in some neighboring countries but above that in some of the South Asian countries.

MAJOR PLAYERS IN INDUSTRY

NAMES GSK ABBOTT LAB HIGHNOON LABS GETZ PHARMA SANOFI AVENTIS ROCHE

MARKET SHARE 11.6% 7.9% 6.3% 3.9% 3.8% 3.1%

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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.

EXPORTS AND IMPORTS
Pakistan is also exporting its surplus drugs to a large number of countries particularly to the Asian and African regions with an expanding trade in the newly emerged Central Asian States. About a hundred million strong populations of the Central Asian States, with almost no local manufacture of medicines, offers an attractive market for industries located in Pakistan. The share of pharmaceutical industry in exports has been reached to 4.04% that was 3.28% in 2008. So far as imports are concerned Pakistan imports nearly 95%of the basic raw-material used for manufacturing from countries such as China, India, Japan, U.K, Germany, and others and major importers are in Islamabad, Karachi, Lahore, Peshawar and Quetta.

BMI'S BUSINESS ENVIRONMENT RATINGS
Pakistan slipped from 13th to 15th and last place, out of the key markets assessed in the Asia Pacific region. In addition to the challenging economic environment, the country's pharmaceutical expenditure will also be shaped by the volatile political and security situation. Overall, it is expected that pharmaceutical market value to increase at a compound annual growth rate (CAGR) of 9.39% in local currency terms, reaching PKR206.9bn (US$2.3bn) in

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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.

MULTI NATIONAL MANUFACTURERS
At present 30 multinational pharmaceutical organizations are producing their products in Pakistan.

LOCAL MANUFACTURERS
411 units are involved in local pharmaceutical manufacturing.

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SOME KEY STATISTICS OF THE INDUSTRY

REGISTERED DRUGS REGISTERED MOLECULES R&D EXPENDITURES AVERAGE GROWTH RATE MARKET SHARE OF MULTINATIONAL COMPANIES MARKET SHARE OF LOCAL COMPANIES MARKET LEADERS

47000 1100 1% of the profit 11% 45%

55%

Glaxosmithkline

DRUG ACT 1976
The Pharmaceutical manufacture and trade in Pakistan is regulated through the Drug Act 1976, And the rules framed there under. This is a fairly comprehensive law. Pakistan was the first amongst the developing countries in the world to have introduced Good Manufacturing Practices as a mandatory requirement. Registrations are granted by the Central Licensing and Registration Boards. The Quality Control system at the federal and provincial levels is supported by the professionally competent drug inspectorates and laboratory services.

OPPORTUNITIES FOR INVESTMENT
Pharmaceutical industry in Pakistan is producing all the major pharmaceutical dosage forms. Similarly, there are some special products e.g. immunological, anti-cancer drugs, certain anti-

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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.

PAKISTAN PHARMACUETICAL MANUFACTURE’S ASSOCIATION
The Pharmaceutical Industry is a human Industry which caters to the health of public and is therefore of significant importance. As such, the Pakistan Pharmaceutical Manufacturers' Association came into existence on January 26, 1961 and the Government of Pakistan through the Ministry of Commerce registered PPMA as the only Representative body of the Pharmaceutical Industry in the Country. The Government issued a License to this effect under Section 26 of the Companies Act, 1913 on July 18, 1961. The Association was formally incorporated under the Companies Act, 1913 by the Registrar of Joint Stock Companies.

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”

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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.

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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. The Expanded Immunization Program National Program for Hepatitis Prevention and Control National Tuberculosis Control Program National Malaria Control Program National HIV/AIDS control Program Women’s Health Program

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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%.

LICENSING REGISTERING AND ADVERTISING RULES 1976
Following are the formalities under Rule 16 of the Drugs.

1. LOCATION AND SURROUNDINGS
1.1. LOCATION

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

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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.

2. BUILDING LAYOUT AND ITS PRE-APPROVAL.
The building shall be of adequate size and suitable design and construction in view of the need for drugs to be manufactured and to suit the operations to be carried out. The site and layout plan of building shall be got approved from the Central Licensing Board or person authorized by it in this behalf before starting construction of the building and any minor subsequent changes in the layout plan will be communicated as and when made with a revised updated layout plan at the time of renewal of Drug Manufacturing License.

The following information/documents are required for the establishment of a

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.

(ii) Give Schedule of Section wise covered areas.

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(iii) Expected investment.

(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

C-Non Tax Revenue

C02-Receipts from Civil Administration and other Functions.

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.

(vi) Partnership deed.

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FLOW CHART OF PROCEDURE FOR LICENSING OF PHARMACEUTICAL UNIT

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Procedure of Drug Registration
Registration of a drug is granted by the Registration Board, set up by the Federal Government under the Drugs Act, 1976. This Board, which comprises 21 experts in the field, before registering a drug, satisfies itself of its safety, efficacy, quality and economy. The Board also takes into consideration the public interest. In addition, in respect of registration of a drug for local manufacture, it is ascertained that the manufacturer possesses matching facilities.

1.

An application for registration of a drug to be manufactured locally is made in a prescribed

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

Board for its orders.

4.

For every potency/strength of a drug a separate application is required.

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.

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6.

A registration may be suspended or cancelled or renewal denied if the holder of the

registration fails to comply with the conditions of registration.

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.

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FLOW CHART OF DRUG REGISTRATION

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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”

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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 Highnoon’s journey towards a healthier nation. Excel in meeting customer needs. Maintain leadership in national pharmaceutical industry Gain confidence of Doctors, Pharmacists and Consumer who use their products. Seek employee involvement, continuous improvement and enhanced performance goals. Encourage export business.

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.

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LANDMARKS
1985: Highnoon Laboratory started marketing of its first brand ULSANIC 500 mg tablets, a product of Chugai-Japan. 1986: Launch of world’s 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 world’s 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”

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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 highnoon’s 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”

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SOCIAL RSPONSIBILITY
Social responsibilities of highnoon stem from the founder’s 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
• • • • • • • Chugai Pharmaceutical Company Limited, Tokyo, Japan. Mitsubishi Tanabe Pharma, Osaka, Japan. Solvay Pharmaceuticals, Hannover, Germany. Almirall Laboratories, Barcelona, Spain. Choongwae Pharma Corporation, Seoul, Korea. TRB Chemedica International, Geneva, Switzerland. Bouchara Recordati, Levallois-Perret, France.

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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 company’s 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.

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THEARPEUTIC FOCUS BRANDS
Persistent emphasis on rapid growth of sales enabled Highnoon to improve its market share to 6.3%. Significantly, this growth was as much an outcome of effective life cycle management of the older product portfolio, as it was aggressive marketing of the newer brands. The major business segments for the company are alimentary tract & metabolism followed by cardiology. The rest includes systemic anti- infective, G.U system & sex Hormones, Nervous systems, Respiratory system and muscular- skeletal system.

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.

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PRODUCTION CAPACITY PER ANUM
OPERATION Encapsulation Compression Oral Liquid Oral Drops Blistering Cartonating *Based on single shift. UNIT Capsules Tablets Bottles Droppers Strips Cartons OUTPUT * Units In Million 274 671 8 6 77 90

RESEARCH & DEVELOPMENT
Their success depends on competent and productive R&D function. Being a leading local pharmaceutical company, highnoon has established an innovative R&D structure that encourages creativity and facilitates the accelerated development of new medicines to meet the customer needs their scientist are working hard to discover new ways of trading and preventing diseases. By this they are dedicated to bring diversified medicines for patients. They are one of the largest collaborators in the local pharmaceutical industry and work with academic institutions, Government and other pharmaceutical bio-technology companies.

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

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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 highnoon’s 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.

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ORGANIZATIONAL WHEEL

ANING FIN IT PL A NC E ION T HU UC D M O A R P

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ARKETING SU P PLY E M RC C

HA IN
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A DI C ME
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AF F AI RS
DM A

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Strategy-Formulation Analytical Framework
Stage 1
The Input Stage • • • • • • • • • Porter’s Five Forces Model Pest Analysis SWOT Internal Factor Evaluation Matrix (IFE) External Factor Evaluation Matrix (EFE) Strategic factor Analysis Summary Matrix (SFAS) Strategic Group Mapping Perceptual Mapping Competitive Profile Matrix (CPM)

Stage 2
The Matching Stage • • • • • TOWS Matrix Strategic position and Action Evaluation (SPACE) Matrix Boston Consulting Group (BCG) Matrix Internal-External (IE) Matrix Grand Strategy Matrix

Stage 3
The Decision Stage Quantitative Strategic Planning Matrix (QSPM)

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THE INPUT STAGE
PORTERS FIVE FORCES MODEL
Porters five Forces Model is used for industry analysis and it implies that risk adjusted rates of return should be constant across firms and industries. According to numerous economic studies it has affirmed that different industries can sustain different levels of profitability, part of this difference is explained by industry structure. External threats and profits move into opposite direction.

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.

BARGAINING POWER OF SUPPLIERS
Suppliers of pharmaceutical industry of Pakistan are the originators and large research based companies located in developed countries. They are a few in numbers as compared with pharmaceutical companies in Pakistan. Therefore they have strong bargaining power with them.

BARGAINING POWER OF CUSTOMERS
It is very sensitive to switch from one product to another because it is a life concern so customers cannot switch easily from one reliable product to the other. On the other hand there are many

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pharmaceutical companies offering a wide range of products. So, the bargaining power of customers is at moderate level.

THREAT OF NEW ENTRANT
Pharmaceutical industry of Pakistan is growing rapidly and there is still significant potential for growth. There are chances of some new entrants but this threat is at moderate level. It is not easy to establish a new pharmaceutical company in Pakistan due to requirement of huge investment.

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.

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IMPACT OF PROFITABILITY

Threat/Power

High
Competitive Intensity Bargaining power of suppliers Bargaining power of costumers

Moderate

Low

Threat of new Entrants Threats from substitutes
Moderate

High

Low

Profits

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PORTER’S FIVE FORCES AND GENERIC STRATEGIES

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.

BARGAINING POWER OF SUPPLIERS
Highnoon laboratory has three to four suppliers at a same time. So they have better insulation from employees.

BARGAINING POWER OF CUSTOMERS
Due to high quality and reliable products highnoon laboratory is better positioned and continuously adding efforts to the best of their capabilities.

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THREAT OF NEW ENTRANT
Highnoon laboratory is involved in the betterment and prosperity of the nation by health caring in efficient manner that’s why they are in a better position to deter new entrants in the market.

THREATS FROM SUBSTITUTE
Highnoon laboratory has intensive research and development department to accomplish the varying needs and interests of the customers on competitive and affordable prices. Therefore they can defend against substitutes on competitive grounds.

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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 Trade restrictions and tariffs Political stability

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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”

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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 Population growth rate “Highnoon for healthier nation”

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• • •

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.

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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 Rate of technological change

NATURE OF CHANGE
Technology is changing day by day. Pharmaceutical industry should acquire new and advanced technologies to compete in the market.

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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.

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PEST IMPACT MATRIX

Highnoon Laboratories Ltd

Nature of change

Impact Opportunities of Change

Threats

Strategic response
Efficient Portfolio Management

Political Change

Price Fixation

Low profit margins

Long Term

Economic Change

Inflation & Exchange Rates Fluctuation

Increase in cost Increase in Diseases Growth opportunities

Pressure on cost

Focus on operational efficiency Research & Product Development

Increase in population Cross border Relationship Terrorism Global Alliances

Social change

Decrease in sales Increase in market share Economies of scale Growth opportunities Competitive Advantage

Reduction in profits

Strong Business relationship Focus on market capitalization Human resource & Funds allocation

Technological Change

Advanced Technology

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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

• • • • • •

Providing high quality products Efficient capacity management Patent & copy rights Human resource Continuous improvement Financial stability

• • • • •

Distributional channel Shortage of space Utilization of funds Lack of variety of products Internal control system

Opportunities

Threats

• • • • •

Molecule development opportunity Market potential for veterinary products Market growth opportunities Global alliances Related products

• • • • •

Government policies Exchange rate fluctuations Inflation risk Cross border relationship Terrorism

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EXTERNAL FACTOR EVALUATION (EFE) MATRIX
EFE Matrix method is a strategic-management tool often used for assessment of current business conditions. The EFE matrix is a good tool to visualize and prioritize the opportunities and threats that a business is facing. The EFE matrix is very similar to the IFE matrix. The major difference between the EFE matrix and the IFE matrix is the type of factors that are included in the model. While the IFE matrix deals with internal factors, the EFE matrix is concerned solely with external factors. As far as the highnoon laboratory is concern the opportunities and threats are given below

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.

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They make research products for them. But they have opportunity to develop a molecule so that it may reduce their cost.

MARKET POTENTIAL FOR VETERINARY PRODUCTS
Highnoon Laboratory is only focusing on Allopathic products they have opportunity to create market for Veterinary products also. It needs a separate plant for production therefore it requires a huge investment.

MARKET GROWTH OPPORTUNITIES
Population is growing day by day and increase in population is automatically increase diseases. For pharmaceutical industry it is a market growth opportunity.

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.

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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. It’s an ultimate threat for them for a long time.

EXCHANGE RATE FLUCTUATION & INFLATION RISK
Exchange rate fluctuation & inflation risk is also a long term threat for pharmaceutical industry in Pakistan it is because they import 95% of the raw material for their products and if the prices increase their cost increases. As far as Highnoon Laboratory is concern they are also importing a huge amount of raw material for the production of their products.

CROSS BORDER RELATIONSHIP & TERRORISM
Cross border relationship and terrorism is also long term threat. They import huge amount of raw material from abroad if the Government ban on the trade from that particular country due to any

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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. Molecule development opportunity Market potential for veterinary products Market growth opportunities Global alliances Related products Threats Government policies Exchange rate fluctuations Inflation risk Cross border relationship Terrorism Total Weighted Score (1) Poor, (2) Below Average, (3) Above Average, (4) Superior.

Weight 0.05 0.05 0.2 0.1 0.05 0.2 0.1 0.1 0.05 0.1 1

Ratings 2 2 4 4 2 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

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INTERNAL FACTOR EVALUATION (IFE) MATRIX
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 basis for identifying and evaluating relationships among those areas. The Internal Factor Evaluation matrix or short IFE matrix is used in strategy formulation. The IFE Matrix together with the EFE matrix is a strategy-formulation tool that can be utilized to evaluate how a company is performing in regards to identified internal strengths and weaknesses of a company.

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.

EFFICIENT CAPACITY MANAGEMENT
A number of companies turn to highnoon laboratories for contract manufacturing. Highnoon manages its capacity efficiently and caters well to the manufacturing needs of these marketing concerns. In 2007 another toll manufacturing agreement was signed with OBS health care (formerly Organon) for contract manufacturing of one of their products. This, no doubt, is yet “Highnoon for healthier nation”

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another indicator of the esteem at which the industry places highnoon’s manufacturing capability. Such as Ovafin, Prolifen, Esgerd, Angiocard-SR etc.

PATENTS & COPY RIGHTS
The 50% of revenue of highnoon labs comes from research based products. They have taken the patent and copy rights of highly advanced products from international business partners to capture market share for that particular product which cannot be produce by other companies.

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.

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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.

LACK OF VARIETY OF PRODUCTS
Highnoon laboratory is producing so many products but still they need to produce more products such as they are already producing capsules, tablets, bottles, droppers, strips, cartoons but they are not producing creams, inject able powder etc.

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INTERNAL CONTROL SYSTEM
Basically highnoon laboratory has all the departments and its integration and coordination among different setups of highnoon play a vital role to keep the wheel of businees rolling. But still they lack one department of Internal Control who possess a control over the working of all the departments.

IFE MATRIX

Internal Strengths 1. 2. 3. 4. 5. 1. 2. 3. 4. 5. Providing high quality products Efficient capacity management Patent & copy rights Human resource Continuous improvement Internal Weaknesses Distributional channel Shortage of space Utilization of funds Lack of variety of products Internal control system Total Weighted Score (1) Major Weakness, (2) Minor weakness, (3) Minor Strength, (4) Major Strength.

Weight 0.2 0.1 0.1 0.1 0.1 0.1 0.05 0.05 0.05 0.15 1

Ratings 4 4 3 4 4 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

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STRATEGIC FACTORS ANALYSIS SUMMARY MATRIX
SFAS Matrix is a list of comapny’s 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 Factors Weight Rating Weighted Score Short Human Resource (S) Product Quality (S) Distribution Channels (W) 0.075 4 0.3 ü ü ü ü Duration Intermediate Long ü

0.2

4

0.8

0.075

2

0.15

Internal Control 0.1 System (W) Market Growth Opportunities (O) Global Alliance (O) Government Policies (T) Exchange Rate Fluctuations (T) Total 0.2

2

0.2

4

0.8

0.075

4

0.3

ü ü ü

0.2

4

0.8

0.075

4

0.3

1

3.65

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STRATEGIC GROUP MAPPING
Strategic group mapping categorizes industry competitors into meaningful groups based on at least two strategic variables. The size of circle shows the market share of companies lying in that circle. Close competitors fall in same circle. Circles which are close to each other are also close competitors. These companies have the following characteristics •

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. They are also close competitors.

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PRODUCT RANGE & PRODUCT QUALITY
Highnoon laboratory is providing high quality products and moderate product range that’s why it is close to CCL and SPL. CCL is offering high quality with low product range while CCL is offering high product quality with high product range.

GROUP MAP

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BRAND IMAGE & DISTRIBUTION CHANNEL
Highnoon laboratory has moderate distribution channel along with high brand image. CCL and SPL are its close competitors having moderate and low distribution channel respectively. Both CCL and SPL have high brand image as of highnoon laboratory.

GROUP MAP

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GLOBAL EXPANSION & MARKET PENETRATION
Highnoon Laboratory and CCL highly focusing on market penetration along with moderate focus on global expansion. SPL has moderate focus on market penetration and global expansion.

GROUP MAP

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PERCEPTUAL MAPPING/POSITIONING MAP
Perpetual Mapping/Positioning Map is used to develop a market positioning strategy for product or service, this map often used to help the organization to identify a positioning strategy.

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.

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COMPETITIVE PROFILE MATRIX (CPM)
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. CPM includes both internal and external factors to evaluate overall position of the firm with respective to their major competitors. We have taken Searle Pakistan Ltd and CCL as a competitor of highnoon laboratories on the basis of strategic group mapping.

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

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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 QUALITY & BRAND IMAGE
CCL, Highnoon Laboratories, and SPL are maintaining product quality in same passion. As they are close competitors of each other they have same brand image.

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.

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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
Highnoon Laboratories Rating Weighted Score 3 4 4 3 3 2 4 3 0.45 0.8 0.2 0.3 0.45 0.2 0.6 0.3 Searle Pakistan Ltd Rating Weighted Score 0.3 0.8 0.2 0.2 0.3 0.3 0.6 0.2 CCL Rating Weighted Score 0.45 0.8 0.2 0.4 0.45 0.3 0.6 0.4 3.6

Critical Success Factors Product availability Product Quality Brand image Product range Product development Global expansion Customer loyalty Market penetration Total

Weights

0.15 0.2 0.05 0.1 0.15 0.1 0.15 0.1

2 4 4 2 2 3 4 2

3 4 4 4 3 3 4 4

1 3.3 2.9 (1) Poor, (2) Below Average, (3) Above Average, (4) Superior.

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THE MATCHING STAGE
TOWS MATRIX
The TOWS Matrix indicates four conceptually distinct alternative strategies, tactics and actions. It is proposed as a conceptual framework for a systematic analysis that facilities matching the external threats and opportunities with the internal weaknesses and strengths of the organization.

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.

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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 SBU’s. 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.

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TWOS MATRIX

IF

Strengths

Weakness
1.Distribution Channel 2.Shortage of space 3.Utilization of funds 4.Lack of variety of products 5.Internal control system

EF E

E

1.Providing high quality products 2.Efficient capacity management 3.Patent & copy rights 4.Human Resource 5.Continuos Improvement

Opportunities
1.Molecule development opportunity 2.Market potential for veterinary products 3.Market growth opportunity 4.Global alliance 5.Related Products

SO Strategies
Increase in sales (S1, S2, O2, O5) Expand business in globally (S3, S5, O4) Efficient Human Resource department S4, O1, O3

WO Strategies
Develop forward integration & SBU’s (W1, W2, W3, W4, O1, O2, O3, O4, O5 )

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)

WT Strategies
Focus the government policies and develop the internal control system (W5, T1)

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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.

Space Matrix Strategic Management Method
The SPACE matrix is broken down to four quadrants where each quadrant suggests a different type or a nature of a strategy:
• • • •

Aggressive Conservative Defensive Competitive

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SPACE MATRIX

FS
Conservative
+6 +5 +4 +3 +2 +1

Aggressive

CA
-6 -5 -4 -3 -2 -1

0 -1 -2 -3 -4 -5

IS
+1 +2 +3 +4 +5 +6

Defensive

-6

Competitive

ES

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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.

Internal Strategic Dimensions • •

Financial strength (FS) Competitive advantage (CA)

External Strategic Dimensions • •

Environmental stability (ES) Industry strength (IS)

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

share, product quality, capacity utilization and technological know how.

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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.

The following are a few model technical assumptions: • • • • • •

By definition, the CA and IS values in the SPACE matrix are plotted on the X axis. CA values can range from -1 to -6. IS values can take +1 to +6. The FS and ES dimensions of the model are plotted on the Y axis. ES values can be between -1 and -6. FS values range from +1 to +6.

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.

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SPACE MATRIX Internal Strategic Position
X Competitive (CA) (-6 Worst, -1 Best) A X I S -3 -2 -2 -3 Average: -2.5 Market share Product Quality Capacity Utilization Technological Know How

External Strategic Position
Industry (IS) (+1 Worst, +6 Best) 5 4 5 4 Growth Potential Profit Potential Technological Know How Ease of entry 4.5

Average: Total axis X score: 2

Financial (FS) Y (+1 Worst, +6 Best) 4 A X I S Average: 3.67 2 5 Shareholders’ Equity Ease of Exit Risk Involved in Business

Environmental (ES) (-6 Worst, -1 Best) -2 -4 -2 -5 Rate of Inflation Price Range Competitive Pressure Demand variability

Average: Total axis Y score: 0.46

-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.

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BOSTON CONSULTING GROUP MATRIX
The BCG Matrix is based on the product life cycle theory that can be used to determine what priorities should be given in the product portfolio of a business unit. To ensure a long term value creation, a company should have a portfolio of products. But as far as highnoon laboratory is concern the scenario is little bit different. Highnoon laboratory is itself a business unit. BCG matrix has two dimensions Relative market share and Industry growth rate. It means the bigger a firm has its relative market share or the faster the products market share grows the better it is for the company. Scales defined on relative market share is from 0.0 to 1.0in which high indicates 1.0 medium is for 0.5 low is for 0.0 whereas scale define on industry growth rate is from-20 to +20 in which -20 indicates low 0 is for medium and high is for +20.

SUPPORTING CALCULATIONS

SBU

Revenues

Profits Revenue Contribution

Profits Industry Contribution Sales Growth Rate

Relative Market Share

H.L

2.33 BN

100%

846 MN

36.31%

12%

0.7

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”

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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

Relative Market Share Position
High
1.0 0.9 0.8 0.7 0.6

Medium
0.5 0.4 0.3 0.2

Low
0.1 0.0

In d u s t r y S a l e s G r o w t h R a t e

High

+20 +15
Pr o fi t

+10 +5

Stars

Question Marks

Medium

0 -5 -10 -15

Low

Cows

-20

Dogs

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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. The IE matrix is a continuation of the EFE matrix and IFE matrix models.

The IE matrix is based on the following two criteria:

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.

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Internal and external matrix Strong
4.0 3.0

Average
2.0

Weak

IFE
1.0

High
3.0

Medium
2.0

Low
1.0

EFE

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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.

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• • • • • •

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

should diversify resources by investing in other businesses in order to expand.

• • • • •

Retrenchment Concentric diversification Horizontal diversification Conglomerate diversification Liquidation

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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.

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GRAND MATRIX

RAPID MARKET GROWTH

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 STRONG COMPETITIVE POSITION

Quadrant - 3

Quadrant - 4

1. Conglomerate diversification 2. Concentric diversification 3. Horizontal diversification 4. Divestiture 5. Liquidation 6. Retrenchment

1. Conglomerate diversification 2. Concentric diversification 3. Horizontal diversification 4. Joint ventures

SLOW MARKET GROWTH

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.

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The DECISION STAGE
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.

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.

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QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM) FOR HIGHNOON LABORATORY
BLOCK 1 Firstly we have taken key success factors from EFE & IFE matrices and gave them same weights as in EFE & IFE matrix. This QSPM compares three alternative strategies such as market development, market penetration and product development. These three strategies belong to same block. So far as our analysis is concerned we suggest that product development is most feasible strategy for highnoon laboratory because total attractiveness score of this strategy is 5.5 which is individually greater than total attractiveness scores of market penetration and market development strategies.

KSF of IFE & EFE

Weights Market Development AS TAS

Strategic Alternatives Market Penetration AS TAS Product Development AS TAS

Strengths Quality Capacity Management Patent & copy rights Human Resource 0.2 0.1 2 4 0.4 0.4 2 3 0.4 0.3 4 3 0.8 0.3

0.1

4

0.4

3

0.3

4

0.4

0.1

4

0.4

4

0.4

4

0.4

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improvement

0.1

3

0.3

2

0.2

4

0.4

Weaknesses
Distributional channel Shortage of space Utilization of funds Lack of variety of products Internal control system

0.1

1

0.1

1

0.1

3

0.3

0.05

2

0.1

2

0.1

2

0.1

0.05

1

0.05

3

0.15

3

0.15

0.05

2

0.1

1

0.05

2

0.1

0.15

2

0.3

2

0.3

1

0.15

Opportunities
Molecule development Market potential for veterinary products Market growth Global alliances Related products

0.05

2

0.1

3

0.15

2

0.1

0.05

3

0.15

2

0.1

3

0.15

0.2 0.1 0.05

2 2 2

0.4 0.2 0.1

2 3 2

0.4 0.3 0.1

3 3 1

0.6 0.3 0.05

Threats
Government policies Exchange rate fluctuations Inflation risk

0.2

2

0.4

1

0.1

3

0.6

0.1

2

0.2

2

0.2

2

0.2

0.1

2

0.2

3

0.6

1

0.1

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Cross border relationship Terrorism

0.05

2

0.1

2

0.1

2

0.1

0.1

1

0.1 4.5

2

0.2 4.6

2

0.2 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 Forward Integration AS Strengths Quality Capacity Management Patent & copy rights Human Resource
improvement

Strategic Alternatives Backward Integration AS TAS Horizontal Integration AS TAS

TAS

0.2 0.1

3 2

0.6 0.2

3 2

0.6 0.2

2 3

0.4 0.3

0.1

2

0.2

1

0.1

3

0.3

0.1

2

0.2

3

0.3

2

0.2

0.1

2

0.2

1

0.1

2

0.2

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Weaknesses
Distributional channel Shortage of space Utilization of funds Lack of variety of products Internal control system

0.1

1

0.1

1

0.1

1

0.1

0.05

1

0.05

1

0.05

1

0.05

0.05

2

0.1

1

0.05

2

0.1

0.05

2

0.1

1

0.05

1

0.05

0.15

1

0.15

1

0.15

2

0.3

Opportunities
Molecule development Market potential for veterinary products Market growth Global alliances Related products

0.05

1

0.05

1

0.05

1

0.05

0.05

1

0.05

1

0.05

2

0.1

0.2 0.1 0.05

2 1 1

0.4 0.1 0.05

3 2 1

0.6 0.2 0.05

1 1 1

0.2 0.1 0.05

Threats
Government policies Exchange rate fluctuations Inflation risk Cross border

0.2

2

0.4

3

0.6

1

0.2

0.1

1

0.1

2

0.2

2

0.2

0.1 0.05

2 2

0.2 0.1

1 1

0.1 0.05

2 2

0.2 0.1

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relationship Terrorism

0.1

1

0.1 3.45

1

0.1 3.6

1

0.1 3.3

FINDININGS AND RECOMMENDATIONS
We have chosen product development from block one and backward integration from block 2. While we have another option of concentric diversification but it is not feasible because of potential growth in pharmaceutical industry and consequently Highnoon laboratory is not focusing on a single product. So, with the help of analytical procedure and experience of the market we have developed intuition and prioritized the product development strategy. So we suggest them to adopt product development strategy for further enhancement and betterment in existing products or developing new ones resulting in increased sales. They are using resource based model by focusing on core competencies that are considerably valuable, rare, costly to imitate and well organized. Highnoon is a sign of well organized and formal organization.

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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.

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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.

External Factor Evaluation (EFE) matrix External Factor Evaluation (EFE) matrix method is a strategic-management tool often used for assessment of current business conditions. The EFE matrix is a good tool to visualize and prioritize the opportunities and threats that a business is facing. Encapsulation Molecular encapsulation, in chemistry, the confinement of an individual molecule within a larger molecule.

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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”

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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.

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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”

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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 company’s 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

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.

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The 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. The BCG matrix The BCG matrix or also called BCG model relates to marketing. The BCG model is a wellknown portfolio management tool used in product life cycle theory. BCG matrix is often used to prioritize which products within company product mix get more funding and attention. PPMA Pakistan Pharmaceutical Medical Association. 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. Therapeutics Branch of medicine concerned with the treatment of disease.

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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.

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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

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