Generoso Pharmaceutical and Chemicals, Inc.

Background of the Study Mr. David Generoso was a philosophy graduate of a sectarian university in the Philippines. A full scholar in 1972 of the same university, he gave up further studies on canon law after a year and decided to pursue more secular activities. He began his career in the Philippine pharmaceutical industry as a salesman in Central Luzon region. With his earnings, he married Elizabeth Reyes, a nurse and a certified public accountant and they have been blessed with 5 children. After 5 years of combing the Central Luzon region, in 1978, David established a company called Generoso Pharmaceuticals and Chemicals (GPC) with Elizabeth and a business associate Mr. Rafael Buenaventura, the team set up shop at the Generoso residence in Tarlac. An initial capitalization of P300 started the business with a dozen bottles from the pharmaceutical firms which they had been connected with before. Their initial market, was composed of the personal contact David and Rafael had made with doctors, pharmacists, and hospital administrators during their stint as a sales representative in the Central Luzon Region. GPC was able to establish a good track record fast and its customer base expanded beyond the region. David and Rafael had to hire extra hands to peddle their goods: 2 sales representative in 1978, 5 in 1979, 12 in 1980, 25 in 1981, 53 in 1982, and 75 in 1983. As GPC increased the volume of their operations, David, Elizabeth and Rafael moved their operation based was moved from the Generoso residence in Tarlac to a modest office in Quezon City. From its initial assets of P300 in 1978, GPC had total assets of P12 million in 1983 which consisted of a dozen vehicles, a few pieces of real estate in the Central Luzon Region, an office, a modest amount of inventory and cash. GPC was very liquid. David initial success in his attempt on manufacturing chemicals on veterinary medicine encouraged him to start his own line of pharmaceutical in 1983. But still, GPC remained more of a trading firm than a manufacturing concern. As David dream to put up laboratory for GPC s research and development, he began purchasing a pieces of laboratory equipment and storing them temporarily in his Tarlac Residence. In 1983, David urges something new and made a trip to United States and some European countries. During his trip, David established several contacts who could supply raw materials for him to sell to the leading pharmaceutical firms in the Philippines. He, likewise, invented a raw material which he sold to the leading manufacturers in the Philippines. Such activities made GPC a leading inventor of raw materials in the Philippines. An American principal who is a supplier of raw materials came to David to do business for GPC. GPC was able to establish a good track record starting with this principal. With GPC s wide supply base of raw materials, it

Apart from importation and distribution of finished products. Raw Materials Indenting Division and the Contract Manufacturing Division. As a result. Most of the local manufacturers are engaged primarily in the compounding and packaging of formulations that have been previously prepared. GPC suffers in their costly promotion expense with buyers including doctors. he has to leave the management of the company to Rafael which did not go very well. as much as the equivalent of six months worth of production. Elizabeth initiated GPC s reorganization to control over different product lines. the industry is far from self-sufficient. the country continues to rely heavily on imported pharmaceutical products and raw materials. which have averaged at U. Small manufacturers tend to cost cut in production costs in the absence of economies of scale. In addition. Cosmetics Division. As of 1988. It is very difficult to expand. There is a fast turnover of participants in the industry. David felt he had to be at his company again and GPC was able to recover from the reversal in trend of its financial performance and manage in pharmaceutical industry. which by the year 1988 was composed of several subdivisions: Pharmaceutical Distribution Division. most of which manufacture only their own brands and/ or brands licensed by foreign drug manufacturers and about six were engaged in contract manufacturing. the major contract manufacturers in the country now find themselves with a huge backlog of orders.853 million annually from 1982 to 1986 according to Foreign Trade Statistics of the Philippines. Inc. While there are many firms serving the local pharmaceutical market.S. based on retail sales statistics from the National Census and Statistics Office. $67. in many instance. No one is engaged in the extraction of active ingredients from locally available raw materials or in the formulation of new products from known active ingredients. and among them is GPC. . Small companies always constantly struggle the stigma of being a local company with inferior quality. Together they serviced an estimated market of at least P5. many of the existing pharmaceutical distributors also undertook the local manufacture of licensed foreign brands through the use of contract manufacturers. there were 32 large-scale pharmaceutical laboratories in the Philippines.Generoso Pharmaceutical and Chemicals.7billion. has become very competitive in the market because it can afford to offer lower prices for quality goods. Agrovet Division. there were an estimated 150 distributors of imported pharmaceutical products in the country. pharmacists and hospitals. While David was establishing GPC s source network for raw materials. With the growing demand for pharmaceuticals.

The company was now a going concern valued at P40 million. health foods. fibers. The proposed project would cost approximately P135 million. Viewpoint Mr. the firm will capitalized on its location as a potential manufacturer of Pharmaceuticals for the ASIAN markets of multinational firms. The proposed project was to compound locally all products that it will manufacture and sell. as compared to other contract manufacturers to require up to about 6 months processing an order using outdated equipment. In the local market. David Generoso y President. The only thing that made David sad is that they need to hire a German expatriate to oversee the problem and the additional budget for the project. Inc. the project will position itself as a specialty pharmaceutical manufacturer which can manufacture products not currently available from the industries contract manufacturers. In 1988. . Heavy emphasis would be placed on applied research to extract and develop active ingredients from locally available raw materials. food supplements. and other over the-counter products. importing only the active ingredients and bulk materials that it is unable to produce locally. The lack qualified chemists is an industry problem for which GPC has not been spared. For the export market. Not even David was qualified. The American principal dropped his plans to David which came in time with the Generics bill (Annex A). the American principal offered his plans to David of GPC engaging in the contract manufacturing of pharmaceutical products for both the domestic and export markets. As a matter of strategy. Generoso Pharmaceutical and Chemical Inc.Generoso Pharmaceutical and Chemicals. That is why they need to hire German expatriate to oversee the project. the project will at the outset focus on those foreign Pharmaceutical firms whose products are imported and distributed in the country by GPC. Time Frame 1988 The American principal in GPC proposed that GPC engage in the contract manufacturing of pharmaceutical products for both the domestic and export markets and the Generics Bill came in. No Filipino chemist who specialize the technology of the project could qualify for GPC to remain competitive. The project will be capable of meeting most orders within a month.

Areas of Consideration The following are facts that play significant roles for the case: y The need to hire a German expatriate to oversee the problem and the additional budget for the project. the American principal offered his plans to David of GPC engaging in the contract manufacturing of pharmaceutical products for both the domestic and export markets. To be able to come up with the additional budget for the implementation of the project. In 1988. the project will position itself as a specialty pharmaceutical manufacturer which can manufacture products not currently available from the industry s contract manufacturers. Statement of the Problem To determine the possible actions the Generoso Pharmaceuticals & Chemicals. No Filipino chemist who specialize the technology of the project could qualify for GPC to remain competitive The company was now a going concern valued at P40 million.Generoso Pharmaceutical and Chemicals. y y y SWOT Analysis STRENGTHS y y y y y y y y y WEAKNESSES y y y y Liquidity of the Company A wide supply for raw materials Proprietary technology / superior technological skills Ready for expansion Ability to take advantage of economies of scale Better product quality Market share leadership Strong financial condition An attractive customer base y y Less quality of their products Expansions are too costly Lack of additional capital Poor management Capital constraints to finance future projects Short on financial resources Weak advertising and promotion . Inc. To have competition attractiveness and environmental strength. The proposed project would cost approximately P135 million. In the local market. Inc.( GPC ) should take in order to stay in competition. Objectives To have the ability to grow rapidly because of continuous strategic planning. where to find additional capital and to hire German expatriate to oversee the project.

2. GPC can borrow money from banks or other financial intermediaries. OPPORTUNITIES: THREATS: y American principal proposed project to y Stability of the economy GPC y Risky project because it s too y Generic Bill Act advantage to the firm costly y Business expansion y Fast turnover of participants in the industry y Integrating forward y Entry of new competitors y Ability to grow rapidly y Increasing rivalry of y Opening to exploit emerging new competition among industry technologies rivals y Costly regulatory requirements y Government new policies and regulatory restrictions Alternative Courses of Action 1. Disadvantages: a. Advantages: a. Inc. Early implementation of the project b. Can gain additional support for the project. The project can be financed. y y y y Product Innovation skills Conservative cash management policies Reputation of good customer service Fruitful collaborative partnerships with suppliers and marketing allies. Generates interest b. GPC should accept the project. the higher interests generates. c. Advantages: a. The borrower pledges some assets as collateral for the loan. c. Long term payments d. It will make the company stay in competition b. Creditors will provide the needed budget . The longer the period the debt is not paid.Generoso Pharmaceutical and Chemicals.

in order for them to stay in competition and reputation. Disadvantages: a. Inc.Generoso Pharmaceutical and Chemicals. The company can borrow from creditors or other financial intermediaries that will provide the needed budget.3 days Budget Remarks . The company will remain competitive. it will be costly Conclusion and Recommendation In the conclusion. As a Recommendation. I therefore recommend that the best alternative action is to accept the proposal of the project for Generoso Pharmaceuticals & Chemicals. Disadvantages: a. Action Plan Detailed Activities Discussed the company project Make a detailed plan of making the project Borrow money from banks Searching of German chemist Hiring of German chemist Person Responsible Owner and Principal Principal Owner Management Management Time Frame 1 day 1 week 1 month 2 weeks 2. b. the Generoso Pharmaceutical and Chemical Inc. Higher quality of products can be attained. The company will hire experienced German Chemists. Inc.(GPC) can pursue the proposed budget if they have sufficient fund to supervise the project.It is too costly and risky 3. Hiring of Qualified German Expatriate Advantages: a. who can make the company stays in the competition and can achieved high quality of products.

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