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Researching ‘Firm level Strategy and Competitiveness’ for Sanofi Aventis Pakistan 2012
Enterprise: Sanofi-Aventis Pakistan Ltd. Plot 23, Sector-22, Korangi Industrial Area, Karachi-74900, Pakistan Research Partners: Syed Adnan Ali (Senior Product Manager) 0321-2162306 Omair Siddiqui (Assistant Product Manager) 0333-2169734 Name of IoBM researchers: Ayena Maqbool (9098) Humaira Akhter (8970) Tuba Iqbal (8725) Naureen Ansari (8696) Nashaf Hashimi (9442) Mashal Balani (9824)
This research instrument is used for researching the Business Strategy of Sanofi Aventis Pakistan: its external and internal researched environment, its competitors and its strategic implementation framework.
LETTER OF TRANSMITTAL
April 18, 2012
Mr. Javaid Ahmed Institute of Business Management, Karachi.
Respected Sir, This is the term report on “Researching firm level strategy and competitiveness for Sanofi Aventis 2012”.
The objective of the report was to research the business strategy of Sanofi Aventis Pvt. Ltd, its vision and mission, its current strategies, its external and internal researched environment, blue ocean strategy and evaluation of its strategic options.
The report has been completed after the perpetual hard work and determination of past 2 months.
If you have any additional questions, we would be pleased to answer them.
Sincerely, Ayena Maqbool (9098) Humaira Akhter (8970) Tuba Iqbal (8725) Naureen Ansari (8696) Mashal Balani (8924) Nashaf Hashimi (9442)
LETTER OF AUTHORIZATION
April 18, 2012
As students of IoBM, we have been authorized by Mr. Javaid Ahmed to prepare a term report on ―Researching firm level strategy and competitiveness for Sanofi Aventis 2012‖, for the course of Strategic Management to be submitted on April 18, 2012
The preparation of this term report required us to perform a thorough analysis of the pharmaceutical industry of Pakistan and formulate new strategies for Sanofi Aventis Pvt. Ltd. by carrying out internal company and external environment analysis, along with the issues involving strategic leadership and implementation in the company.
We would like to thank our course instructor; Mr. Javaid Ahmed for all the informative sessions that he delivered through-out the semester which greatly enhanced our practical management skills. We are extremely grateful for his guidance on this term report.
We would also like to thank Mr. Adnan Ali (Senior Product Manager) and Mr. Omair Siddiqui (Assistant Product Manager) at Sanofi Aventis Pakistan Pvt. Ltd. for their co-operation in this research project.
Sincerely, Ayena Maqbool (9098) Humaira Akhter (8970) Tuba Iqbal (8725) Naureen Ansari (8696) Mashal Balani (8924) Nashaf Hashimi (9442)
LITERATURE REVIEW ............................................................................................................. 6 CHAPTER # 1 ............................................................................................................................. 17 INDUSTRY STRUCTURE & MACRO-ENVIRONMENTAL ANALYSIS ................ 17 OVERVIEW OF PHARMACEUTICAL INDUSTRY IN PAKISTAN ............................. 18 PORTER’S 5 FORCES & PEST ANALYSIS FOR PAKISTAN PHARMACEUTICAL INDUSTRY........................................................................................................................... 22 INTRODUCTION OF COMPANY .................................................................................... 31 MISSION STATEMENT ..................................................................................................... 36 ANALYSIS OF SANOFI’S MISSION STATEMENT ....................................................... 36 RECOMMENDED MISSION STATEMENT FOR SANOFI AVENTIS ........................ 37 VISION STATEMENT ........................................................................................................ 37 EXTERNAL FACTOR EVALUATION MATRIX ............................................................. 38 COMPANY AND COMPETITOR ANALYSIS ................................................................ 40 CHAPTER # 2 ............................................................................................................................. 41 INTERNAL COMPANY VALUE CHAIN ANALYSIS .................................................. 41 INTERNAL VALUE CHAIN ANALYSIS .......................................................................... 42 CORE COMPETENCIES OF SANOFI AVENTIS ............................................................ 48 STRATEGIC COST MANAGEMENT PROCESSES OF SANOFI AVENTIS ............... 49 FINANCIAL RATIO TRENDS OF SANOFI AVENTIS ................................................... 50 INTERNAL FACTOR EVALUATION MATRIX .............................................................. 52 CHAPTER # 3 ............................................................................................................................. 54 STRATEGY ANALYSIS AND RECOMMENDATIONS .............................................. 54
................... 75 THE FOUR INTERNAL HURDLES TO STRATEGY IMPLEMENTATION ............................................................................................ 77 BIBLIOGRAPHY ............................................................... 66 QUANTITATIVE STRATEGIC PLANNING MATRIX FOR SANOFI AVENTIS .................... 74 STRATEGIC LEADERSHIP & IMPLEMENTATION ............................................................................................................................. 67 SELECTED STRATEGY FOR SANOFI AVENTIS................................................................................................................... 65 MATRIX ANALYSIS & TOWS SUMMARY ................................ 79 ...... 56 INTERNAL EXTERNAL MATRIX OF SANOFI AVENTIS................. 63 BCG MATRIX FOR SANOFI AVENTIS .................................................... 60 GRAND STRATEGY MATRIX FOR SANOFI AVENTIS: ................................ 58 SPACE MATRIX FOR SANOFI AVENTIS.............. 72 CHAPTER # 5 ............................................... 71 BLUE OCEAN STRATEGY FOR SANOFI AVENTIS ......... 70 CHAPTER # 4 ...........................................................................................................................................................GENERIC STRATEGY FOR SANOFI AVENTIS ............................................................................... 74 STRATEGIC LEADERSHIP MODEL FOR SANOFI AVENTIS ................................................................................................................................................................................................................................................ 71 BLUE OCEAN STRATEGY ...... 55 TOWS MATRIX OF SANOFI AVENTIS ......
LITERATURE REVIEW .
c) Evaluation 1 . which are designed to achieve these objectives. Strategic Management Steps a) Formulation The stage of the strategic management process that involves planning and decision making that leads to the establishment of the organization‘s goals and of a specific strategic plan. It entails specifying the organization's mission. A balanced scorecard is often used to evaluate the overall performance of the business and its progress towards objectives. Recent studies and leading management theorists have advocated that strategy needs to start with stakeholders expectations and use a modified balanced scorecard which includes all stakeholders. b) Implementation This stage of strategic management involves the use of managerial and organizational tools to direct resources towards achieving strategic outcomes. vision and objectives. Strategic Management Strategic management is a field that deals with the major intended and emergent initiatives taken by general managers on behalf of owners. to meet the needs of markets and to fulfill stakeholder expectations. and then allocating resources to implement the policies and plans. developing policies and plans. involving utilization of resources. often in terms of projects and programs. to enhance the performance of ﬁrms in their external environments. projects and programs.Strategy Strategy is the direction and scope of an organization over the long-term which achieves advantage for the organization through its configuration of resources within a challenging environment.
along with relevant examples and figures chosen from various sources. Vision Statement A vision statement is sometimes called a picture of your company in the future but it‘s so much more than that. In the strategy evaluation and control process managers determine whether the chosen strategy is achieving the organization's objectives. All strategies are subject to future modification because internal and external factors are constantly changing. Your vision statement is your inspiration. the framework for all your strategic planning. For external analysis. Then with the help of all these we have tried to locate the company in Porters Generic map and defined where the company is and where it should be to gain a sustainable competitive advantage. This section of the report emphasises on defining each and every tool that we have used in our report. 2 . Then we have performed an Internal Audit of the firm by examining the Value Chain Activities and determining the strengths and weaknesses with respect to the company‘s performance internally. This has been supported by an Internal Factor Evaluation Matrix (IFE). a vision is a statement about what an organization wants to become.The final stage in strategic management is strategy evaluation and control. In other words. Strategic Management Framework Certain strategic tools have been used for analyzing the company in focus throughout our research. porter‘s five forces followed by PEST analysis have been done which followed the external factor evaluation (EFE) and competitor profile matrix (CPM) for relative positioning of the firm.
The most influential analytical model for assessing the nature of competition in an industry is Michael Porter's Five Forces Model. which is described below: Porter explains that there are five forces that determine industry attractiveness and longrun industry profitability. A mission statement answers the question. "Why do we exist?" A Mission Statement defines the purpose of the organizations existence and its primary objectives. Porter of Harvard Business School in 1979.Mission Statement A mission statement is a brief description of a company's fundamental purpose. Its prime function is internal – to define the key measure or measures of the organization's success – and its prime audience is the leadership team and stockholders. These five "competitive forces" are 3 . Porter’s Five Forces Porter's five forces analysis is a framework for industry analysis and business strategy development formed by Michael E.
g. thereby reducing its attractiveness.i. Key barriers to entry include • • • • • Economies of scale Capital / investment requirements Customer switching costs Access to industry distribution channels The likelihood of retaliation from existing industry players. Threat of Substitutes The presence of substitute products can lower industry attractiveness and profitability because they limit price levels.g. As a result. Bargaining Power of Suppliers Suppliers are the businesses that supply materials & other products into the industry. shipbuilding) whereas other industries are very easy to enter (e. the analysis of supplier power 4 . Substitute products or services limit an industry‘s profit potential by placing a ceiling on prices. The threat of substitute products depends on: • • • Buyers' willingness to substitute The relative price and performance of substitutes The costs of switching to substitutes When the threat of substitutes is high. Supplier power is a mirror image of the buyer power. industry profitability suffers. If an industry does not distance itself from substitutes through product performance. ii. High entry barriers exist in some industries (e. estate agency. marketing. iii. Threat of New Entrants New entrants to an industry can raise the level of competition. or other means. restaurants). The threat of new entrants largely depends on the barriers to entry. it will suffer in terms of profitability—and often growth potential.
Bargaining Power of Buyers The bargaining power of buyers is greater when: • • • • • There are few dominant buyers and many sellers in the industry Products are standardized Buyers threaten to integrate backward into the industry Suppliers do not threaten to integrate forward into the buyer's industry The industry is not a key supplying group for buyers Buyer power is one of the two horizontal forces that influence the appropriation of the value created by an industry. Other factors are the extent to which the buyers are informed and the concentration or differentiation of the competitors. If suppliers have high bargaining power over a company. The most important determinants of buyer power are the size and the concentration of customers.typically focuses first on the relative size and concentration of suppliers relative to industry participants and second on the degree of differentiation in the inputs supplied. Intensity of Rivalry 5 . highly valued products Suppliers threaten to integrate forward into the industry Buyers do not threaten to integrate backwards into supply The industry is not a key customer group to the suppliers iv. Kippenberger (1998) states that it is often useful to distinguish potential buyer power from the buyer's willingness or incentive to use that power. v. willingness that derives mainly from the ―risk of failure‖ associated with a product's use. The bargaining power of suppliers will be high when: • • • • • There are many buyers and few dominant suppliers There are undifferentiated. then in theory the company's industry is less attractive.
economic. environmental regulations and tax policy. and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. suppliers. There are certain formal 6 . first. which are the employees of the organization. social and technological forces. second. Industry growth is slow. The micro environment is made of factors such as the customers. They refer to the degree of intervention of government in the economy. i. Other political factors are trade restrictions and political stability. on the basis on which they compete. competitors etc whereas. Social and Technological factors. distributors. helps determine the extent to which the value created by an industry will be dissipated through headto-head competition. High rivalry limits the profitability of an industry. However. the internal policies. and rivals are highly committed to the business and have aspirations for leadership. The intensity of rivalry is greatest if competitors are numerous or are roughly equal in size and power. rivals find it hard to avoid poaching business. Economic. The Pest Model PEST is the acronym for Political. In such situations. Political Factors Political factors include government regulations such as employment laws. on the intensity with which companies compete and. The degree to which rivalry drives down an industry‘s profit potential depends. Pest Analysis PEST analysis stands for "Political. factors making up the macro environment include political. Social. The internal environment is composed of the internal customers. mission and vision.The intensity of rivalry. is the most obvious of the five forces in an industry. the external environment is a broad category which has been divided into micro environment and macro environment. Economic. Exit barriers are high.
education. inflation and currency exchange rates. The EFE matrix is a good tool to visualize and prioritize the opportunities and threats that a business is facing. leisure activities. Economic Factors These affect the cost of capital and purchasing power of an organization. new technological platforms.and informal rules laid down by the government which every organization has to abide by in order to sustain its operations in a particular country. It provides competitive advantage to firms. iii. It can benefit consumers as well as the organizations providing the products. Technological Factors Technology is what drives the phenomena of globalization. Important political factors include: ii. These include age distribution. changing lifestyle. improves quality and leads to innovation. Technology reduces costs. iv. gender role etc. interest rates. diffusion of technology etc. attitude towards health and environment. Economic factors are those which have a direct impact on the capital loss of organizations and purchasing power of customers. Economic factors include economic growth. Social Factors Social factors are cultural aspects and demographic variables which are closely linked to the market potential and customers‘ needs. Major technological factors include rate of technological innovation. attitude towards career. technological development. External factors assessed in 7 . External Factor Evaluation External Factor Evaluation (EFE) matrix method is a strategic-management tool often used for assessment of current business conditions. rate of obsolesce of technology.
and other external forces. Internal factors include management. all the companies in CPM are measured on same scale by considering the same success factor. The higher rating show that firm strategy is doing well to support this critical success factors and lower rating means firm strategy is lacking to support the factor. In it. it contain all the important critical success factors of industry. political. a firm sets out to become the low-cost producer in its industry.the firm's breadth is often 8 . Cost Leadership Strategy Cost leadership is perhaps the clearest of the three generic strategies. IFE matrix also provides a basis for identifying and evaluating relationships among those areas. Internal Factor Evaluation Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing or evaluating major strengths and weaknesses in functional areas of a business. material and money. Michael Porter’s Generic Strategies i. Obviously there are some good and some bad for the company in the external environment and internal environment. every industry consider different success factor. and may even operate in related industries -. Success factor can vary from industry to industry. Competitive Profile Matrix Competitive profile matrix is essential tool used in strategic management process. Critical success factors are extracted after deep analysis of external and internal environment of the firm. manpower. economic.the EFE matrix are the ones that are subjected to the will of social. legal. The firm has a broad scope and serves many industry segments. The Internal Factor Evaluation matrix or short IFE matrix is used in strategy formulation. machine.
The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others. Focus The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. the primary activities are: • Inbound Logistics . These activities can be classified generally as either primary or support activities that all businesses must undertake in some form. of activities in the process of converting inputs to outputs. It is rewarded for its uniqueness with a premium price.involve relationships with suppliers and include all the activities required to receive. Most organizations engage in hundreds. transformation processes and outputs. The sources of cost advantage are varied and depend on the structure of the industry ii. iii. According to Porter (1985). and disseminate inputs.important to its cost advantage. It selects one or more attributes that many buyers in an industry perceive as important. Value Chain Process The idea of the value chain is based on the process view of organizations. made up of subsystems each with inputs. Differentiation In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. the idea of seeing a manufacturing (or service) organization as a system. even thousands. and uniquely positions itself to meet those needs. store. 9 .
consists of all activities involved in recruiting. and facilitate their purchase.is the acquisition of inputs. planning. and distribute the output. or resources. government relations. • Technological Development . Service . procedures and technical knowledge brought to bear in the firm's transformation of inputs into outputs.include all the activities required to collect. training. store. Marketing and Sales .pertains to the equipment. it consists of functions or departments such as accounting. Human Resource management .are all the activities required to transform inputs into outputs (products and services). Secondary activities are: • • Procurement . A core competence should be "competitively unique" 10 . finance.includes all the activities required to keep the product or service working effectively for the buyer after it is sold and delivered. induce buyers to purchase them. quality assurance and general management. for the firm. • Infrastructure . public affairs. hiring.• • • • Operations .serves the company's needs and ties its various parts together. Outbound Logistics . software. . compensating and (if necessary) dismissing or laying off personnel. developing. Such competences empower an organization to access a wide variety of markets. Executives should estimate the future challenges and opportunities of the business in order to stay on top of the game in varying situations. hardware. legal.activities inform buyers about products and services. Core Competencies A core competence is the result of a specific unique set of skills or production techniques that deliver value to the customer.
a department or a team. product management. TOWS SWOT acronyms for different arrangements of the words Strengths. strategic management. and portfolio analysis. you can use these techniques to think about the strategy of your whole organization. understanding your suppliers' business. You won't enjoy the scale economies of the larger 11 . SWOT are Analysis. and helping improve their processes" TOWS Matrix TOWS Analysis is a variant of the classic business and tool. You can also use them to think about a process. and your internal environment (weaknesses and strengths). Opportunities and Threats. so it's going to take a lot of hard work to get noticed. BCG Matrix This helps the company allocate resources and is used as an analytical tool in brand marketing. knocking down departmental barriers. or even your own skills and experience. By analyzing the external environment (threats and opportunities). your market presence is weak. Weaknesses.Strategic Cost Management Strategic cost management can be defined as" scrutinizing every process within your organization. a marketing campaign. These groups are explained below: Dogs: Low Market Share / Low Market Growth In these areas.
The IE matrix used to plot the organization divisions in nine cell diagram. And because market growth is low. and you should work hard to realize them. because the market isn't growing. it's going to take a lot of hard work to improve the situation. They aren't generating much revenue right now because you don't have a large market share. The IE is an important strategic tool which comes under the portfolio management considered much similar to BCG Matrix. each cell has some meaning associated which suggests strategies.players. so it's going to be difficult to make a profit. you're well-established. so it's easier to get attention and exploit new opportunities. they are in high growth markets so the potential to make money is there. It's only worth expending a certain amount of effort. Stars: High Market Share / High Market Growth Here you're well-established. But. The IE matrix is a continuation of the EFE matrix and IFE matrix models. Question Marks (Problem Child): Low Market Share / High Market Growth These are the opportunities no one knows what to do with. and your opportunities are limited. Internal External (IE) Matrix IE stands for Internal external as the name suggest that it‘s based upon internal and external factors of the organization. Cash Cows: High Market Share / Low Market Growth Here. In summarize way it can be defined as the strategic management tool which is used to analyze the current position of the divisions and suggest the strategies for the future for the better results. 12 . and growth is exciting! There should be some strong opportunities here.
and growth. Your strategies should focus on market penetration. strong competitive competitive weak position. In other cases. aggressive cost management is a way to play the end game. and IX are characterized with the harvest or exit strategy.The IE matrix can be divided into three major regions that have different strategy implications. If costs for rejuvenating the business are low. Cells VII. forward integration. market development. your tactical strategies should focus on market penetration and product development. V. and product development. II. In this case. VIII. GRAND STRATEGY MATRIX Based on four important elements of rapid market growth. Cells IV. and III suggest the ―grow and build‖ strategy. Grand Strategy Matrix has been emerged into a dominant tool in formulating cross-functional strategies. then it should be attempted to revitalize the business. a backward integration. To simplify the job of identification and selection of best fitting strategy the elements of the Grand Strategy Matrix actually form a four quadrant 13 . This means intensive and aggressive tactical strategies. and horizontal integration should also be considered. and VI suggest the ―hold and maintain‖ strategy. Cells I. From the operational perspective. slow market position.
The Y axis is based on the environmental stability (ES) and financial strength (FS) dimensions. Quantitative Strategic Planning Matrix or a QSPM provides an analytical method for comparing feasible alternative actions. SPACE MATRIX The SPACE matrix is a management tool used to analyze a company. they move it up on the list. and which way to go. The QSPM method introduces some numbers into this approach making it a little more "expert" technique. they usually have a prioritized list of strategies. When company executives think about what to do. Instead of different organizations a firm with many divisions can plot its divisions across Grand Strategy Matrix for the sake of devising best suited strategy for each division. If they like one strategy over another one. 14 . QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM) Quantitative Strategic Planning Matrix (QSPM) is a high-level strategic management approach for evaluating possible strategies. It focuses on strategy formulation especially as related to the competitive position of an organization. This process is very much intuitive and subjective. It is used to determine what type of a strategy a company should undertake. The QSPM method falls within so-called stage 3 of the strategy formulation analytical framework. The SPACE matrix is constructed by plotting calculated values for the competitive advantage (CA) and industry strength (IS) dimensions on the X axis.Matrix where relevant organizations in the analysis are positioned.
conversion to a new idea will spread like an epidemic. In blue oceans. who mobilize the commitment of the organization‘s key players. There are two ways to create blue oceans. But in most cases. There is ample opportunity for growth that is both profitable and rapid. is well known. once the beliefs and energies of a critical mass of people are engaged. In breaking through the boundary traditionally separating circus and theater. bringing about fundamental change very quickly. As will become evident later. this is what Cirque did. and who succeed in silencing the most vocal naysayers. which has its roots in epidemiology. a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry. companies can give rise to completely new industries. it made a new and profitable blue ocean from within the red ocean of the circus industry. demand is created rather than fought over. The theory suggests that such a movement can be unleashed only by agents who make unforgettable and unarguable calls for change. it hinges on the insight that in any organization. 15 . The main factor of blue ocean strategy is to create value (value innovation). In a few cases. Tipping Point Leadership The theory of tipping points. as eBay did with the online auction industry. who concentrate their resources on what really matters. untainted by competition.Blue Ocean Strategy: Blue oceans denote all the industries not in existence today—the unknown market space.
CHAPTER # 1 INDUSTRY STRUCTURE & MACRO-ENVIRONMENTAL ANALYSIS 17 .
As of 2012. the total export value of Pakistani-manufactured medicines around the world stood at $400 million. The top 50 companies have 82% of the market share. The Pakistani Pharmaceutical industry is growing at an annual growth rate of 11%. 80% of the local demand is met domestically while 20% is met through imports. exports are also likely to be boosted by new regional and global opportunities. 2011). the companies are fully documented and the prices of the medicines are set by the government by giving an upper cap. thus contributes significantly to the national economy. . which is more than the annual global growth rate of 8%. In the meantime. National companies comprise of the majority 55% of the companies in the industry and the fact is that this has risen over the years depicting an encouraging sign for the local investors. There are 2 associations of the pharmaceutical manufacturers: • • Pakistan Pharmaceutical Manufacturers Association (PPMA) Pharma Bureau (PB) As of today there are about 600 Pharmaceutical companies operating in Pakistan out of which 386 are operating units and among them. there were hardly any pharmaceutical companies in Pakistan. 18 . At the time of independence in 1947. The pharmaceutical industry is focusing to an Export Vision of USD 500 Million by 2013.OVERVIEW OF PHARMACEUTICAL INDUSTRY IN PAKISTAN Pakistan‘s Pharmaceutical industry is a rapidly growing industry which is highly competitive and challenging as well. 30 are MNCs producing the drugs (Aamir and Zaman. The pharmaceutical sector is also one of the most organized and regulated sectors of Pakistan. The foundation of the pharmaceutical industry of Pakistan was formally laid in 1950 with the establishment of local subsidiaries of foreign firms and formulation of imported raw material based medicines by local entrepreneurs.
respiratory diseases. In Pakistan. The major chunk of the research work is done by the MNCs in Pakistan. the national pharmaceutical companies have the majority contribution in the Research and 19 .9% 3. hepatitis. diabetes and thrombocytopenia.9% Highnoon Labs 6.8% 3. most research is being done in oncology. infectious diseases.Major Players in Industry Name Gsk Abbott Lab Market Share 11.1% Some Key Statistics Of The Industry Registered drugs Registered molecules R&d expenditures Average growth rate 47000 1100 1% of profit 11% Market share of multinational companies 45% Market share of local companies Market leader Source: (Aamir and Zaman.6% 7. whereas in India. 2011) 55% Glaxosmithkline RESEARCH IN PHARMACEUTICAL SECTOR: Pakistan‘s contribution to pharmaceutical research is very limited despite the fact that we are the world‘s sixth largest country in terms of population. cardiovascular diseases.3% Getz Pharma Sanofi Aventis Roche 3.
due to which the profit margins are shrinking Increasing cost of manpower and energy 20 . Most of the companies only allocate about 1% . The major hurdle in research in local pharmaceutical companies was the lack of government interest. BMI (Business Monitor International) believes the agreement will be of significant benefit to patients. including the export of medicines to Pakistan ultimately enforcing competitive pressure on the local pharmaceutical industry. which will not sit well with local or multinational drug makers. increasing drug maker‘s operational costs. the private sector cannot use even its available expertise to develop new products Key Trends & Developments Leaders of Pakistan's pharmaceutical industry have condemned the cabinet's recent unanimous decision to grant Most Favoured Nation (MFN) trading status to India. While the decision will benefit Indian trade to Pakistan. improving their access to affordable medicines. Furthermore. Without government support. The first major challenge which the pharmaceutical industry faces is the total government control on the prices of all the enlisted products Import of raw material which costs a lot of precious foreign exchange Rapid devaluation of the rupee against the major currencies.2% of the total budget for the research and development. (Pakistan Pharmaceuticals and Healthcare Report Q2 2012) Challenges Faced By the Pharmaceutical Industry Of Pakistan No doubt that the Pakistan pharmaceutical market is growing at a steady rate but there are certain challenges which pose a great threat to the industry.development. the shift from one regulatory authority to six will lead to more bureaucracy. According to BMI the creation of six Drug Regulatory Authorities and the replication of operations by the authorities will create inefficiencies in the drug approvals process in Pakistan.
the deteriorating law and order situation.4bn. Low R&D expenditure. due to which most of companies have suffered in terms of sales and also lack of reach to the customers in the affected areas Market access is challenging and operational risks are high Although Pakistan‘s pharmaceutical and healthcare sectors are expanding and evolving rapidly. which equates to per capita consumption of less than US$ 10 per year and value of medicines sold is expected to exceed US$2. The value of pharmaceuticals sold in 2007 exceeded US$1. but much more work needs to be done by the government and industry's stakeholders. Clearly this presents an opportunity. 21 .3 B by 2012. because of discontinuation of the policies Last but not the least. which can lead to the suffering of the masses for not conducting sufficient research on the newly emerging diseases in the Pakistani environment Political instability is another major factor which is emerging as the major challenge to the pharmaceutical industry. about half the population has no access to modern medicines like in Baluchistan and Khyber Pakhtunkhwua.
Does your product or service have any proprietary features that give you lower costs? 11. Can the newcomer expect strong retaliation on entering the market? Yes (+) No (-) The table above suggests that the barriers to entry in the pharmaceutical industry of Pakistan are quite high in case of setting up a totally new pharmaceutical company. These well established firms make it tough for new firms to enter into the industry. the major portion of the market share is held by a few firms. Does the newcomer to your industry face difficulty in accessing distribution channels? 8. Do large firms have a cost or performance advantage in your segment of the industry? 2. Also. Is a lot of capital needed to enter your industry? 6. because of the strong 22 . Are there any licenses. Does the newcomer have any problems in obtaining the necessary skilled people.PORTER’S 5 FORCES & PEST ANALYSIS FOR PAKISTAN PHARMACEUTICAL INDUSTRY THE THREAT OF NEW ENTRANT 1. materials or supplies? 10. Are there any established brand identities in your industry? 4. Do your customers incur any significant costs in switching suppliers? 5. This is because the existing firms in the industry have achieved economies of scale through increasing their capital intensity while the setup costs would be very high for the new entrants as expensive state-of-the-art machinery is required for operations in the pharmaceutical industry. Does experience help you to continuously lower costs? 9. insurance or qualifications that are difficult to obtain? 12. Is serviceable used equipment expensive? 7. Are there any proprietary product differences in your industry? 3. Moreover. new firms find it very difficult to acquire licenses and other qualifications from the regulatory bodies.
Moreover. Thus this low threat of new entrants makes it a favorable point for the industry. E . S .High technology is required to manufacture drugs and that requires large amount of capital investment which is again an obstacle for new entrants.brand image that these firms have in the market.No significant effect T . P E T Low Moderate High 23 . P . MFN status to India will increase the threats of new entrants as in the form of importers and Indian Pharmaceutical industry will likely to pose great threat on the existent pharmaceutical industry of Pakistan.Factors like deteriorated law and order situation and approval from Ministry of Health increases barriers to entry. the technical equipments are also very expensive which increase the barriers to entry. The high rate of inflation is also decreasing the threat of new entrants.The industry is growing rapidly but the prices of raw materials which are usually imported from foreign countries are increasing because of rupee depreciation. It is unlikely for the pharmaceutical companies to put the burden on consumers in the form of higher prices as the prices are being controlled by MoH. Prices of medicines are dictated and regulated by MoH so it is also lowering down the threat of new entrants.
BARGAINING POWER OF BUYERS 1. So. Are there a large number of buyers relative to the number of firms in the business? 2. also these customers are aware of the additional information needed. who then help to increase the general consumption of that medicinal drug by prescribing it to their patients i. There is not much cost associated with customers switching suppliers.e. If the pharmaceutical industry of Pakistan is growing at a rate of 12. the existing products are unique to some degree and have accepted branding. Your customers‘ businesses are profitable 10. the bargaining power of buyers is low. Your product is unique to some degree or has accepted branding. Does the customer face any significant costs in switching suppliers? 4. P . there is an enormous amount of information that the customers need about the products. Is there anything that prevents your customer from taking your function in-house? 7. You provide incentives to the decision makers. then naturally the demand is coming from the grass root level. each with relatively small purchases? 3. Is the buyer aware of the need for additional information? 6. Your customers are not highly sensitive to price.9% annually. Also. 24 . Yes (+) No (-) The primary customers of pharmaceutical companies are the doctors of the country. there is large number of buyers relative to the number of existing firms in the business. 8.No significant effect. Does the buyer need a lot of important information? 5. 9. The customers are price sensitive for certain brands but ready to buy some brands at any price because of their life-saving characteristic. making the industry structure attractive. Do you have a large number of customers. the general public. however. Overall.
and are becoming more concerned about the quality of the products. They are getting more concerned about the medicines that are being prescribed to them. etc. cheap substitutes available in the form of homoeopathic drugs etc. doctors prescribe medicines of only those companies whose products are superior in quality and have a good history. S – Because of increase in awareness of health related issues. T . All this information is being provided to the doctors. E S T Low Moderate High 25 . This factor is also increasing the bargaining power of buyers.E .With the advancement of information and technology.Government of Pakistan has only provided Rs 40 billion for both health and education sectors in the fiscal budget and also the minimum wage rate is also considerably low in the country. journals. . more and more researches about new diseases and their cures are being conducted. These factors tend to increase the bargaining power of buyers as they are forced to opt for low performing. people are becoming more health conscious. As a result. This factor tends to increase the bargaining power of buyers. who are keeping themselves updated through various seminars.
In Pakistan there are a large number of people who are not economically strong and cannot afford the medicines so they tend to move towards the homeopathic and herbal medicines that are much cheaper. This factor also increases threat of substitutes. E S Low Moderate High 26 . Due to the threat of different new diseases people are less willing to take chances with homeopathic and herbal medicines and follow the instructions of their doctors. their performance is not justified by their higher price.No significant effect. T . Your customer is not likely to substitute. 2. E – Availability of substitutes such as homeopathic. The customer will incur costs in switching to a substitute. gives rise to threat of substitutes. 3. Availability of the herbal and homeopathic medicines. does affect the products a bit but these medicines have significant performance limitation. herbal products and home remedies at cheaper prices.THREAT OF SUBSTITUTES 1. Substitutes have performance limitations that do not completely offset their lowest price.No significant effect. 4. Yes (+) No (-) The threat of substitutes is low in this industry as there are no real substitutes of the products in the pharmaceutical industry. P . This factor increases threat of substitutes. Or. S – The low literacy rate and lack of awareness sometimes make people move towards homeopathic medicines. Your customer has no real substitute.
I have many potential suppliers. Thus. 6. 2. So the rupee depreciation and rise in inflation would increase the cost of raw materials in the industry and hence adversely affecting the industry structure and due to the price control by Ministry of Health. all these factors contribute to moderately high bargaining power of suppliers. or Yes (+) No (-) 3. the inputs used by each company.The major inputs are imported from foreign countries like at Sanofi.BARGAINING POWER OF SUPPLIERS 1. such as various chemicals are mostly unique & differentiated and therefore cannot be easily substituted. it is not possible for companies to shift the burden of cost on consumers. The company goes through a complicated process of selecting its suppliers in order to make sure the quality of inputs match the company‘s specific criteria so this is a costly process for companies.No significant effect 27 .No effect E . My business is important to my suppliers. My inputs are standard rather than unique differentiated. This factor increase the bargaining power of suppliers. My suppliers would find it difficult to enter my business or my customers would find it difficult to perform my function in-house. S . P . 5. In order to remain competitive in the pharmaceutical industry. I can substitute inputs readily. I can switch between suppliers quickly and cheaply. My cost of Purchases has no significant influence on my overall costs. 7. and therefore they do not switch between suppliers and intend to stick to limited amount of suppliers who pass their selection criteria. raw materials are majorly imported from France and Germany. 4.
9. There are significant product differences and brand identities between the competitors. and superior quality products. There are noteworthy product differences and brand identities in the pharmaceutical industry. 5. My customers would incur significant costs in switching to a competitor. The industry is not cyclical with intermittent overcapacity. The fixed costs of the business are relatively low portion of total costs. Also it is not easy to exit in the industry since there are long-term commitments and specialized needed. 7. 2. 8. The competitors are diversified rather than specialized. The consumers (general public) do not incur any significant costs in switching to competitors products but usually the decision is influenced by the doctor‘s prescription. The products are 28 . pharmaceutical companies demand for superior quality and state-of-the-art supplies. Yes (+) No (-) 6. My product is complex and requires a detailed understanding on the part of my customer. 3.In order to come up with innovative. My competitors are all of approximately the same size as I am. The pharmaceutical industry is growing at a rate of 12. It would not be hard to get out of this business because there are no specialized skills and facilities or long-term contract commitments etc.9% annually and is highly competitive. The ratio of MNC and national companies is 54% and 46% respectively. The industry is growing rapidly.T . This factor tends to reduce the bargaining power of suppliers. 4. differentiated. E T Low Moderate High THREAT OF RIVALRY 1.
E . P . S . the pharmaceutical companies are threatened to lose their market share and thus this factor can bring rivalry among competitors. This factor tends to increase the rivalry in the industry.The changing trend towards higher consumer awareness about health issues. P E T S Low Moderate High 29 . and drugs require the companies to come up with innovative products and market them extensively. T .Since companies can‘t pass the burden on the consumers and the cost of producing drugs is also increasing so they try to get the market shares by aggressive marketing practices which in resultant is increasing the rivalry among competitors.Due to the decision of MFN status to India. diseases.With the advanced technology available to companies they are devising new mechanisms to operate and enhance their capacity to produce on the basis of modernized technology so this factor tends to decrease the rivalry. This analysis shows that the rivalry among existing competitors in the industry is moderate.complex and require total compliance to international standards.
Total Favorable 7 7 2 2 3 21 Moderate 4 2 1 1 2 10 Unfavorable 1 1 1 4 4 11 Implications Favorable Favorable Moderately Favorable Unfavorable Moderately favorable Favorable 30 . Threat of substitutes.Overall industry rating The threat of new entrants. Bargaining power of suppliers. Intensity of rivalry among competitors. Bargaining power of buyers.
Sanofi is the 6th largest pharmaceutical company in Pakistan with a 31 . vaccines as well as animal health. In 2011. Consequently in September 2005 the name of the company was changed to sanofi-aventis Pakistan limited. Specialty Chemicals business was sold to Clariant Pakistan Limited. was acquired by sanofi synthelabo to form a company called sanofi-aventis S. consumer health products. focused on patients‘ needs. During 2004 Aventis S. and the following year. the legal entity continues to remain the same i. and the core business was then restricted to pharmaceutical activities.A. Sanofi constantly adapts its development model to the world‘s emerging human and economic problems. the Agriculture business was spun off into a separate legal entity called AgrEvo Pakistan (Private) Limited. globally merged their life sciences business into a new company known as Aventis S. generics. The name of the company in Pakistan was changed to Aventis Pharma (Pakistan) Limited in November 2000. backed by a comprehensive portfolio of innovative products. mature prescription medicines. By virtue of its commitments. The company‘s growth is attributable to a regional approach to business operations. Agrochemical formulation started in 1985.A. Hoechst AG & Rhone Poulenc S.A. 1967 as Hoechst Pakistan Limited. sanofi-aventis changed its identity to Sanofi. In 1996. Corporate Profile The company was incorporated on December 8.INTRODUCTION OF COMPANY Group Profile Sanofi is a diversified global healthcare leader. In 1977 the company went public and was listed on the Karachi Stock Exchange. Hoechst Pakistan Limited changed its name to Hoechst Marion Roussel (Pakistan) Limited in June 1996. researching and developing medicines and vaccines to help improve the lives of the greatest possible number of people. However. In December 1999.A. Aventis Pharma (Pakistan) Limited was merged locally with Rhone Poulenc Rorer Pakistan (Private) Limited and the company changed it‘s name to Aventis Limited from April 2003. In line with the amalgamation globally.e sanofi-aventis Pakistan limited. Today. Manufacturing of pharmaceuticals and specialty chemicals started in 1973.
France. Therapeutic Areas The company focuses on 7 major therapeutic areas to address the health needs of the greatest number Cardiovascular Vaccines Thrombosis Internal medicine Metabolic disorders Central nervous system Oncology Corporate Structure 32 .market share and growth rate of 4.A. consumer healthcare products.3%) respectively. Sanofi S.5%) and 16% (2010: 19. is one of the world‘s leading diversified healthcare companies offering medicines.1% (2010: 4. Today. generics and animal health products.
Patient Ensuring ethical 33 . Additionally. Corporate Social Responsibility Sanofi‘s approach to Corporate Social Responsibility (CSR) inspires all its activities while focusing on four main dimensions: Addressing patients‘ needs . diversification of portfolio.Top products Business Development Sanofi Pakistan has set a vision to reach Rs. The Business Development function will play a pivotal role in making this vision a reality by preparing to build a strong inorganic growth platform in the form of pre-launch planning for new product launches and new business additions to existing and new markets. 15 billion mark by the year 2015. identification of new channels and geographies for business expansion and external alliances and partnerships are all strategies which will help move towards this vision.
Ethics Promoting social commitments .integrity in business and research . transparently and fairly. a new Code of Ethics was launched during the year. Employees were given extensive training on the new code. 34 .People Limiting the Group‘s impact on the environment – Planet Ethics & Compliance Ethics is an integral part of the culture at sanofi-aventis Pakistan & guides the behavior and conduct of all employees enabling them to meet objectives efficiently. To keep in line with the changing industry dynamics. which was launched both in english and urdu languages.
Integrity •Acting Ethically •We commit to maintain the highest ethical and quality standards without compromise. standing up for what we believe in and pursuing our goals passionately. act and feel. It is the values they hold that make them the people and the company they are. in every continent. lives day to day. Therefore. in every country. Respect •Embracing Difference •We recognise and respect the diversity and needs of our people. our people. Always resilient. the wellbeing of our patients and in achieving a sustainable impact on the environment. patients and partners. we dare to challenge the norm. Solidarity •Socially Responsible •We are united in shared responsibility for our actions. Confidence •Standing Out •We are confident. values define their ethics and serve as the moral compass of the company. values define what they do and how they behave. ensuring transparent and constructive interactions through mutual trust. These are the values that every member of sanofi-aventis. They are the DNA of the company and distinguish us from other companies. in every part of the organisation. Values are how they all think.Core Business Values At sanofi-aventis. 35 . Innovation •Forward-Thinking •We encourage our people and partners to embrace creative solutions and excel through entrepreneurship.
ANALYSIS OF SANOFI’S MISSION STATEMENT Determining the essential components in the company’s mission statement Customer Product and Services Market Technology Survival. Growth. Profit Philosophy Self concept Concern for public Concern for employees Yes Yes Yes No Yes No Yes Yes Yes 36 .MISSION STATEMENT Sanofi‘s mission includes: • • • Create value by rapidly launching and successfully marketing innovative pharmaceuticals that satisfy unmet medical needs in large patient populations. Focus commercial resources on strategic brands to drive sales growth and maximize the value of existing and new global brands. enhancing our capabilities in drug innovation and commercialization. Aggressively recruit and retain top talent.
” VISION STATEMENT To become a diversified healthcare leader. Aggressively recruit and retain top talent. Focus commercial resources on strategic brands to drive sales growth and maximize the value of existing and new global brands. Philosophy Sanofi aims to provide best of them to customers and create values for themselves. Technology Sanofi aims to utilize state of the art technology to make the organization technologically efficient and for effective business operations.Recommended statements for missing components: 1. 2. enhancing our capabilities in drug innovation and commercialization. RECOMMENDED MISSION STATEMENT FOR SANOFI AVENTIS “Create value by rapidly launching and successfully marketing innovative pharmaceuticals that satisfy unmet medical needs in large patient populations. It aims to utilize best of their resources to make the organization technologically efficient and for effective business operation and provide best of them to customers and create values for themselves. focused on patients‘ needs Valued by patients & healthcare providers Sought-after as an employer Respected by the scientific community & our competitors 37 .
8%) and devaluation of local currency Aggressive competition by local companies due to their ability to launch new products in short time.18 0.30 0.increasing R&D cost Complete freezing of pharmaceutical product prices by MoH since 2011.10 2.9% per annum.14 0.1 4 3 3 2 2 3 0.1 1.06 2 3 0.05 0.04 1 0.30 0.15 0.12 0.16 0.07 0.05 0. 40-50% fake and Counterfeit drugs available in market MFN status to India opens up avenues for Indian pharmaceutical companies to Pakistan Scientist not coming to Pakistan due to deteriorated law and order situation.09 3 0.20 0.05 0.06 2 2 0.00 1 0. TOTAL 0.14 0.product pipeline is dry Pakistan pharmaceutical is US $2billion industry with growth rate of 12.04 0.06 0.08 0.threat to profitability Increasing cost of manpower and energy Ministry of Health dissolved in October 2011 due to which approvals for new products are pending.12 0.10 0.16 Weight Rating Score 38 .EXTERNAL FACTOR EVALUATION MATRIX Weighted Critical Success Factors Opportunities Increasing research work in field of oncology.27 0.08 2 0. Pakistan's high population growth rate Emergence of new diseases Some affected markets are not completely catered Growing market of blood and blood forming organs Growth in generic sector Threats Rising cost of production due to high inflation (10.04 0.07 2 0.12 0.
39 .8% . Sanofi should try to build partnerships with low cost suppliers particularly within Asia in order to reduce the cost of imports of raw materials. In the face of rising economic instability and exchange rate fluctuation. Sanofi Aventis is taking advantage of the existing opportunities and minimizing the potential adverse effect of external threats in an appropriate manner by the strategies they are implementing. Moreover Sanofi should guard against the threat of the rising costs due to high inflation (10.The Total Weighted Score of 2.as reported in March 2012) and devaluation of local currency. Sanofi should take advantage of growth in relatively new (emerging segments) segments of the industry like generic sector.34 in the External Factor Evaluation (EFE) Matrix denotes that Sanofi is responding well to the existing opportunities and threats in Pharmaceutical Industry. For this Sanofi should introduce generic medicines to capture high market share in this growing segment.
60 0.15 0.55 4 3 4 3 2 3 4 2 0. However.10 0. The profit margins are considerably lower than the industry average.00 3 4 2 4 2 3 4 3 Weighted Weighted Weighted Weighted Score Rating Score Rating Score Rating Score 0.15 4 4 4 4 4 4 4 3 0.20 0.60 0.30 0.20 0.COMPANY AND COMPETITOR ANALYSIS Key players in Pakistan‘s pharmaceutical industry include Glaxo Smith Kline. Sanofi should not compromise on its quality as this would make them lose their customer base.05 0. Abbott and Getz Pharma.40 0. Sanofi needs to introduce new products and diversify its product line by capturing untapped markets in order to increase and improve their overall financial position.45 0.20 0.80 0.40 0.10 0. 40 .20 0.80 0.25 The overall position of Sanofi is fine.45 0.95 4 3 3 4 3 4 4 3 0.80 0.30 0.20 0.80 0.15 3.60 0.80 0.20 0. Sanofi Aventis.30 0.40 0.05 1. Also.60 0.60 0.15 0.80 0.15 3. it needs to improve its financial position.20 0.15 3.30 0.60 0. Sanofi Aventis Critical Success Factors Product Quality Investment in R&D Financial Position Global Expansion Market share Distribution Positive brand image Promotion Total GSK Abbott Getz Weight Rating 0.20 0.10 3. The pharmaceutical companies do not have any other option to increase their market share except for building a strong customer base which can be achieved b providing the customers good quality products.45 0.
CHAPTER # 2 INTERNAL COMPANY VALUE CHAIN ANALYSIS 41 .
The employees are professionally trained. 42 . ii. Haemaccel Plant. the technical area of the plant is installed with air handling units separately. In order to avoid cross contamination. state of the art facility complying with the latest GMP and HSE standards. motivated workforce. compression and blistering operations allowing production of more than 1. Firm Infrastructure: For meeting global standards. which is the first blood plasma substitute manufacturing facility in Pakistan has a capacity of over 2 million bottles per year. working as a team in an environment. Its plants that are based in Karachi and Wah Cantt provide highest standard of quality and innovative pharmaceutical products. Pharma Manufacturing Plant has an extensive granulation.5 billion tablets and capsules per year. Sanofi realizes the importance of a good infrastructure.INTERNAL VALUE CHAIN ANALYSIS Support activities: i. Claforan Plant is considered as one most modern facility in the entire Asia Pacific region equipped with online filling and packaging operation and has a dedicated quality control laboratory meeting international standards. All manufacturing and cleaning activities are handled here. This plant is a result of transfer of state-of-the-art German technology to Pakistan. The packaging suite is integrated and has steaming manufacturing suite and comprising high-speed compact line installed by Marchesisni from Italy. which recognizes and rewards performance. Human Resource Management: Sanofi takes pride in the excellence of their human assets and teams who are committed towards the organizational success. Oral Liquid Plant is a highly sophisticated.
Some of the training programs included: • • • • • • Licensed 2 Sell – a global initiative rolled out to all sales team (150 employees). developmental programs and promotion/incentive activities all revolve around creating an exemplary team. Extensive training on technical aspects and sales certification process. Business Management Certification Program to 45 employees. The year 2011 saw a number of programs dedicated to human talent recognition. Sanofi invests heavily in the training and developments of its employees. The company imparted total training of 3394 days to 2022 employees focusing on improving managerial. (Way to Excellence) a customized. W2E. Participation of Sanofi Pakistan‘s employees as facilitators in ‗Evolve‘ (a regional program to coach young High Potentials from different affiliates) • • Mapping for Leadership. The human resource policies.innovation and creativity. District Managers‘ training for new/promoted DMs to develop their capabilities. development and career progression. young university graduates. At Sanofi the following concerns pertains to HR: Sanofi not only recruits experienced talent but also provides opportunities to potential talent. personal and functional effectiveness. business and future outlook. an advanced leadership program for all supervisors including the Management Committee. The company also takes part in job fairs in the leading business schools of the country. 43 . technical program for enhancing in-clinic performance of the sales force. The new recruits also undergo a comprehensive orientation program which helps in enhancing and improving their understanding of the company. New Product Training to around 200 employees.
Some of their business process projects have been very successful which include: eTMS system . performance. a global leader in biotechnology. Sanofi is working on an advanced tetravalent vaccine for dengue.It manages sales force monitoring.Dengue fever is the second most widespread endemic tropical diseases after malaria. the iBGStar won the prestigious red dot design award 2011 in the category of life science and medicine. thereby enhancing management decision making. and developing a vaccine is extremely challenging. No specific treatment exists for this disease. The organization has managed to eliminate manual work as much as possible. primary and secondary sales consolidation had several enhancements such as: ePR (Electronic Purchase Requisition system) . With its innovative features and ease of use. strengthening Sanofi‘s reputation as a global center for excellence in rare diseases. incentives.iii. The system integrates with SAP to ensure budget controlling as well. Based on an innovative biotechnology approach. iBGStar .The iBGStar is the first blood glucose meter that connects to a Smartphone. Some of their innovations include: Genzyme: Applying the most advanced technology to treat rare diseases.It is used to automate and simplify approval process. This compact device allows independent diabetes management for people with diabetes. Technology: Sanofi-Aventis continues with its policy to invest more and more in IT and keeps on upgrading their machinery and related infrastructure. From 2010-2011 the under-developed vaccine has progressed to the next phase of development. A tetravalent vaccine to prevent dengue fever . The recent acquisition of Genzyme. brings access to the most advanced technologies in life science. 44 . improve documentation and internal controls.
Procurement: Sanofi ensures procurement of high quality inputs that comply with the highest social. and electronic daily call reporting that automates field expenses re-imbursement and KPI calculation. a thorough and extensive evaluation of suppliers is done in order to select the most experienced and competent suppliers who provide high quality raw material as per the quality requirement of the company. GIMc . By 2011. It also saves time in accessing change requests or to check status. eAED (Electronic Approval) . Projects can be transparently reviewed and approved by regional management and corporate teams. Results of electronic daily calls are cross referenced with our secondary sales and as a result steers our marketing and sales planning process. Sanofi also manages its process of movement of raw materials from suppliers to warehouse effectively.Used for projects of higher financial values. cGate . comes from Germany and France. ethical and environmental standards. which is a paperless change management system for industrial processes. email. A major portion of the raw material purchased. iv. around 1880 suppliers were evaluated. scientifically and methodically and are in full compliance with the cGMP 45 . The system is GMP compliant and improves control and documentation. Primary activities: i. ii. Inbound Logistics: Before choosing the suppliers. Operation: All the developmental activities carried out at Sanofi are managed and conducted intelligently.A portal for their sales force with communication highlights.A global change management system.
It receives stocks from WAH Warehouse and KARACHI Warehouse and sell that to Retailers and Wholesalers in local market through their 16 Regional Distributors. It has warehouses where products are properly stocked and maintained with due diligence. Outbound Logistics: Sanofi has a world-class. Sanofi distributes its stocks directly to different institutions like doctors. Goods flows chart 46 . iii. state-of-the-art pharmaceutical warehouses situated in Wah Cantt and Karachi. government and private hospitals. Sanofi has a better managed quality control department which ensures that all products meet the quality standards and certifications. dispensaries by experienced distributors.guidelines. Sale is done to all Institutions including Government and Private Hospitals all over the country. Its ongoing strategy is to increase investment in technology. It is done directly by the company but supplied through 12 Institutional Agents.
each product requires a different marketing strategy. Services: Sanofi provides after sales service by asking their customers for any help regarding detailed description of a particular product or helping their consumers gather sufficient number of consumers so that they can deliver their message to them and thus can create profits for them by catering to the greater number of people.iv. The changing customer needs are well understood by the marketing department of Sanofi which is well equipped with expert marketers. This ultimately requires huge investment and promotion budget on marketing which Sanofi is already doing. Marketing & Sales: Information regarding the proper use of medicine is provided by Sanofi through its well marketed channels and promotional marketing strategies. This is done through marketing representatives with strong mission to achieve the objectives. v. Since there are large numbers of products. Marketing of medicine is usually through seminars and conferences which introduces and explains the benefits of medicine and their importance with changing consumer needs. 47 .
CORE COMPETENCIES OF SANOFI AVENTIS 1. efficacy and safety. chemists and engineers who not only identify novel mechanism of actions but they also transform innovative concepts into effective treatments. pharmacists. 48 . They are very strong in these sectors and also have a first mover advantage. Specialized knowledge and know how in key sectors i. purity. The R&D team of Sanofi is composed of highly qualified and trained scientists.e. Highly innovative Research & Development Sanofi has built a revitalized R&D organization which is focused on meeting unmet needs of the patients and delivering truly innovative solutions. The products made by this team comply to the internationally accepted standards of quality. They have led the field in insulin manufacturing as well as in diabetes research and development for 88 years: from the first manufacture of insulin through to the development of Lantus which they launched a little over a decade ago. 2. in Diabetes and Antibiotics Sanofi is a very well established French multinational company in the market of diabetes and anti-biotic.
distribution and marketing costs effectively. Sanofi also has a large pool of highly skilled labor force which has to be looked after. It also conducts seminars and workshops. The organization‘s marketing department is active and launches new campaigns to create awareness. The increase is attributable to the pharmaceuticals business activities with increased spending on advertising and promotional activities coupled with higher utility. They can do backward integration with their suppliers and increase partnership locally as well as internationally which can also reduce cost of raw material as the price hike of raw material is increasing globally. traveling & conveyance. The corporation is continuously transforming the business to meet the challenges that lie ahead.STRATEGIC COST MANAGEMENT PROCESSES OF SANOFI AVENTIS Sanofi Aventis does not use Activity Based accounting system. Raw Material Cost Sanofi outsources the raw materials for production out of which majority of raw materials are imported from abroad mainly Germany and France. This increases the transportation expenses of 3rd party contractors. iii. Operational Costs (warehousing. freight & transportation 49 .8% to 18. of distribution. manufacturing & workforce) Sanofi has a state of the art plant which is continuously improved and upgraded. Costing is done departmental wise by a team of accountants that are hired by the company. Sanofi controls the transportation.4% this year. Distribution and marketing expenses have increased as a % of net sales from 17. and eventually increases overall costs for Sanofi. the cost incurred for advancement and maintenance is high. ii. It includes the following costs: i. handling. Distribution and marketing Cost Sanofi distributes its products all over Pakistan which is done through different channels.
2011) where as average growth rate of industry was 11%.1 Times 3.25% 11% Financial Ratio Trend Analysis The growth rate of Sanofi for 2011 was 16% (Business Recorder. indicating that other 50 . The increase was offset by reduced selling expenses especially commission expenses pertaining to the vaccines tender business.9 Times 6. adverse exchange parity impact relating to imported items.9 Times 1.62% 10. The major concern uncovered by the ratios is that the operating and net profitability of this company is very low when compared with the industry average.16% 12.costs.2% 7% 16% INDUSTRY AVERAGE 5. Falgyl and Taxotere family. FINANCIAL RATIO TRENDS OF SANOFI AVENTIS INDICATOR Inventory Turnover Current Ratio Net Profit Margin Return On Assets Operating Margin Growth SANOFI AVENTIS 3. Total sales including both pharmaceutical and vaccine sales of the company grew by 23. This shows that Sanofi is growing at a much better rate than the market. This was mainly driven by volume growth of key pharmaceutical brand and exploration and materialization of growth opportunities (which included licenses acquired for certain pharmaceutical products as well as new line extension for Amaryl.29 Times 1. depreciation charge and the impact on account of general inflation.0% 5.7%.
Sanofi has to increase its profitability as it seems there is still untapped potential in the market which the company is forgoing. Inventory Turnover is lower than the industry average indicating that it is taking more days to sell the inventory so an action needs to be taken here. in order to compete aggressively in the Pharmaceutical industry and increase their profit share. 51 . The data suggest that the company has to curtail it expenses.companies are making a better return on their investment and earning more profits due to more sales & lesser cost structures.
INTERNAL FACTOR EVALUATION MATRIX Critical Success Factors Strengths Highly innovative R&D Specialized knowledge and know how in diabetes and antibiotics Strong medical marketing team State of the art plants Robust training program Extensive distribution network through 16 regional distributors Strong diversified product portfolio World leader in vaccines Strong and recognized brand name in most of therapeutic segments Effective monitoring and control system through new technology (ePR.21 0.06 0.02 0.15 0.13 0.15 0.15 0.00 1 2 2 0.05 0.18 0.07 0.1 0.40 0.30 0.06 0.1 0.10 3.33 52 .05 1.04 0.14 0.06 Rating 4 4 3 3 3 3 4 4 3 Weighted Score 0.02 0.05 3 0.06 0.60 0.52 0. cGATE) Weaknesses Low profit margin as compared to industry average Strict credit policy New launches are not much as compared to the competitors TOTAL Weight 0.56 0. GIMc. eTMS.
53 . Sanofi should make use of this knowledge to come up with more innovative medicines for diabetic patients in order to maintain its position in the diabetic market. Sanofi is pioneer in insulin and also has specialized knowledge in the filed of diabetes.The Total Weighted Score of 3.33 in the Internal Factor Evaluation (IFE) Matrix denotes that Sanofi is honing its strengths and overcoming weaknesses effectively. Sanofi should improve its profit margins that are comparatively lower than the industry average. Sanofi should also continue to develop its highly innovative R&D facilities so that it‘s able to maintain this advantage and further strengthen and improve its diversified portfolio.
CHAPTER # 3 STRATEGY ANALYSIS AND RECOMMENDATIONS 54 .
to provide better health to the general public. It is the pioneers in insulin and has specialized knowledge and know how in diabetic and antibiotic market. In addition to this. worldclass R&D research. The strategy of broad differentiation is in line with that objective i.e. It has a diversified and strong product range targeted towards the mass market. The company‘s aim is to provide superior quality products to the mass market while complying to the cGMP standards.GENERIC STRATEGY FOR SANOFI AVENTIS Low Cost Broad range of buyers Differentiation Overall low-cost Provider strategy Diffrentiation Strategy Market Target Narrow buyer segment Best-cost provider strategy Focused low-cost strategy Focused diffrentiation strategy Sanofi Aventis has the 5th highest market share in Pakistan pharmaceutical industry and its growth rate is considerably higher than the growth rate of the entire pharmaceutical market. particularly the 55 . Therefore. It manufactures its products using state of the art mechanical plants. pharmaceutical companies. Sanofi should not change this strategy as its mission is to launch and successfully market innovative pharmaceuticals for large patient population. we find that Sanofi is following the generic strategy of broad differentiation. considering all this information.
Growth in generic sector W-O strategies -Increase profit margin by capturing generic medicine market. Effective monitoring and control system through new technology (ePR. Some affected markets are not completely catered 6. New launches are not much as compared to the competitors EXTERNAL FACTORS (IFAS) OPPORTUNITIES 1. Specialized knowledge and know how in diabetes and antibiotics 3. Pakistan pharmaceutical is US $2billion industry with growth rate of 12. (S1. eTMS. Low profit margin as compared to industry average 2. Pakistan's high population growth rate 4. Emergence of new diseases 5. Increasing research work in field of oncology.ones in the generic drugs business cannot sustain without catering to a broad market.S3. Robust training program 6. State of the art plants 5.product pipeline is dry 2. World leader in vaccines 9. They need high revenues for R&D and process improvements in order to remain competitive in the market. (S1-O1) -Further diversify its product portfolio by entering into the generic medicine sector (S7-O7) -Enter the blood & blood forming organs market through medical marketing team and highly innovative R&D.9% per annum. Strong and recognized brand name in most of therapeutic segments 10. (W3-O4) 56 .O6) -Use strong distribution network and come up with generic drugs for markets of Baluchistan and Khyber WEAKNESSES INTERNAL FACTORS (IFAS) 1. (W1-O7) -Launch new products particularly vaccines for malaria and medicine for dengue in order to get ahead of the competitors. Extensive distribution network through 16 regional distributors 7. cGATE) S-O strategies . Growing market of blood and blood forming organs 7. Strict credit policy 3. Strong diversified product portfolio 8. TOWS MATRIX OF SANOFI AVENTIS STRENGTHS 1.Use R&D to develop drugs in the field of oncology. GIMc. 3. Highly innovative R&D 2. Strong medical marketing team 4.
THREATS 1.Attract potential customers by giving easier credit terms to distributors. Increasing cost of manpower and energy 8.increasing R&D cost 6. Pakhtunkwua that are not completely catered (S6-O5. (W2-T5) -Upgrade the production process in order to launch standardized products faster than the competition. 3. Complete freezing of pharmaceutical product prices by MoH since 2011. Ministry of Health dissolved in October 2011 due to which approvals for new products are pending.O7) S-T strategies . MFN status to India opens up avenues for Indian pharmaceutical companies to Pakistan 5. 40-50% fake and Counterfeit drugs available in market 4. Scientist not coming to Pakistan due to deteriorated law and order situation. Rising cost of production due to high inflation (10.threat to profitability 7.Conduct seminars and other health awareness programs in different Institutions to educate people about the harmful effects of counterfeit medicines (S3-T3) -Reduce costs by using effective monitoring and control system through new technologies. (S10-T7) -Partnership with Indian companies for diabetes and antibiotics market to overcome competition with local companies (S2-T2.T4) W-T strategies -Profit margin can be increased by partnering with the Indian pharmaceutical companies. Aggressive competition by local companies due to their ability to launch new products in short time. (W1-T4) . (W3-T2) 57 .8%) and devaluation of local currency 2.
INTERNAL EXTERNAL MATRIX OF SANOFI AVENTIS The weighted score of IFE and EFE for SANOFI make it fall in box IV. Sanofi can implement the strategy of Backward Integration and be its own supplier. The firm may go for the following strategies: Backward/Forward Integration: To overcome high cost of raw materials. 58 . The recommendation for the firm is to grow and build.
Use R&D to develop drugs in the field of oncology that can cure cancer related diseases. Market Development: Use strong distribution network and come up with generic drugs for markets of Baluchistan and Khyber Pakhtunkwua that are not completely catered by pharmaceutical companies 59 . Horizontal Integration: Sanofi may form consolidation with other firms in order to strengthen its processes like improve its production process. Market Penetration: Sanofi may build strong marketing strategies and conduct market penetration by coming up with new marketing techniques for the current markets that also include using social media as one of the marketing tools like facebook. Enter into ‗Blood & Blood Forming Organ‘ market by conducting strong R&D. incentives etc Product Development: Coming up with new and better vaccines for diseases like dengue. online competitions.
16% -Operating margin is 7% and industry average is 12.29 times -Current Ratio is 1.25 60 .9 times which is lower than industry average of 5.SPACE MATRIX FOR SANOFI AVENTIS INTERNAL STRATEGIC POSITION Financial Strength (FS) Rating .Firm‘s Inventory Turnover is 3.9 times -ROA is 5.2% where as industry is at 10.25 TOTAL ES Average -12 -3 Rating Rating Industry Strength (IS) -Bargaining power of consumers is low as there is no compromise on health -Ranked 4th in the pharmaceutical sector -Price regulations decreased freedom and competition -Rivalry among firms is moderate as switching depends on doctor‘s prescription TOTAL IS Average -2 -Sanofi operates in with a differentiation strategy.75 +13 +3.25% +2 EXTERNAL STRATEGIC POSITION Environmental Stability (ES) Rating -High Inflation -3 +3 +2 +2 -Substitute prescriptions by physicians -Price freeze on pharmaceutical sector has made profits tight -Difficult to acquiring license -4 -3 -2 TOTAL FS Average Competitive Advantage (CA) -Product quality is high +9 +2. -Innovation -2 -Specialized in key sectors of diabetes and Antibiotics -1 +4 -2 +4 +2 +3 TOTAL CA Average -7 -1.1 times whereas industry is at 1.
market development.25-3 = . product development and joint venture.25-1. Competitive strategies include backward.X-Axis Industry Strength = 3. forward and horizontal integration. Sanofi may suitably pursue the following Competitive Strategies: 61 . market penetration.75 3.75 = 1.5 Y-Axis Financial Strength = 2.25 Competitive Advantage = -1.25 Environmental Stability = -3 2.75 Recommended Strategies Under SPACE matrix Sanofi falls in the Competitive region.0.
Enter into ‗Blood & Blood Forming Organ‘ market by conducting strong R&D. online competitions. Backward/Forward Integration: To overcome high cost of raw materials. 62 . incentives etc Product Development: Coming up with new and better vaccines for diseases like dengue. Horizontal Integration: Sanofi may form consolidation with other firms in order to strengthen its processes like the production process. Use R&D to develop drugs in the field of oncology that can cure cancer related diseases. Sanofi can implement the strategy of Backward Integration and be its own supplier. Market Penetration: Sanofi may build strong marketing strategies and conduct market penetration by coming up with new marketing techniques for the current markets that also include using social media as one of the marketing tools like facebook. Market Development: Use strong distribution network and come up with generic drugs for markets of Baluchistan and Khyber Pakhtunkwua that are not completely catered by pharmaceutical companies Joint Venture: Sanofi may form partnerships with Indian companies that will not only drive out the unnecessary costs out of the business but also strengthen the competitive edge of the company.
GRAND STRATEGY MATRIX FOR SANOFI AVENTIS: Sanofi has a strong competitive position and is in an industry that is characterized by rapid market growth. RAPID MARKET GROWTH Quadrant II Quadrant I WEAK COMPETITIVE POSITION STRONG COMPETITIVE POSITION Quadrant III Quadrant IV SLOW MARKET GROWTH 63 .
Backward/Forward Integration: To overcome high cost of raw materials. Horizontal Integration: Sanofi may form consolidation with other firms in order to strengthen its processes like the production process. 64 . incentives etc Product Development: Coming up with new and better vaccines for diseases like dengue. Use R&D to develop drugs in the field of oncology that can cure cancer related diseases. Market Penetration: Sanofi may build strong marketing strategies and conduct market penetration by coming up with new marketing techniques for the current markets that also include using social media as one of the marketing tools like facebook. Sanofi can implement the strategy of Backward Integration and be its own supplier. Market Development: Use strong distribution network and come up with generic drugs for markets of Baluchistan and Khyber Pakhtunkwua that are not completely catered by pharmaceutical companies. online competitions. Enter into ‗Blood & Blood Forming Organ‘ market by conducting strong R&D.Recommended Strategies: According to GRAND matrix Sanofi lies in the first quadrant which suggests that the company may go for the following strategies.
BCG MATRIX FOR SANOFI AVENTIS FLAGYL PLAVIX TARIVID TELFAST NO-SPA LANTUS APPROVEL TAXOTERE SOLOSTAR CLEXANE AMARYL DAONIL 65 .
MATRIX ANALYSIS & TOWS SUMMARY 66 .
00 4.00 ---2.28 ---0.00 0.00 ---4.15 0.20 ---0.00 3.10 0.QUANTITATIVE STRATEGIC PLANNING MATRIX FOR SANOFI AVENTIS Critical Success Factors Strengths Highly innovative R&D Specialized knowledge and know how in diabetes and antibiotics Strong medical marketin team State of the art plants Robust training program Extensive distribution network through 16 regional distributors Strong diversified product portfolio World leader in vaccines Strong and recognized brand name in most of therapeutic segments Weight 0.08 0.00 2.13 0.00 1.30 0.07 0.14 0.00 2.40 ---0.00 ---1.00 4.00 ------0.00 0.02 0.14 ------- 67 .05 0.14 0.06 2.10 0.06 0.39 1.28 0.15 0.06 Strategic Alternatives Use strong distribution network and come up with generic drugs Use R&D to for markets develop of drugs in the Baluchistan field of and Khyber oncology Pakhtunkwua AS TAS AS TAS 4.00 0.52 3.
05 ---- Use strong distribution network and come up with generic drugs for markets of Baluchistan and Khyber Pakhtunkwua AS TAS ------1.product pipeline is dry Pakistan pharmaceutical is US $2billion industry with growth rate of 12.00 0. eTMS.10 1.05 1.00 ---------- ---------1. Pakistan's high population growth rate Emergence of new diseases Some affected markets are not completely catered Weight Use R&D to develop drugs in the field of oncology AS TAS 4.04 0.05 0.32 0. cGATE) Weaknesses Low profit margin as compared to industry average Strict credit policy New launches are not much as compared to the competitors SUBTOTAL 0.05 0.Effective monitoring and control system through new technology (ePR.06 ------1.00 1.00 1.04 0.06 0.00 ------0.05 2.9% per annum.20 68 0.08 0.48 Critical Success Factors Opportunities Increasing research work in field of oncology.00 1. GIMc.05 .00 4.05 0.05 0.00 ---0.05 0.00 ------- 0.00 0.00 1.04 0.73 1.02 0.
07 0.07 0.00 0. 40-50% fake and Counterfeit drugs available in market MFN status to India opens up avenues for Indian pharmaceutical companies to Pakistan Scientist not coming to Pakistan due to deteriorated law and order situation.16 0.81 69 .threat to profitability Increasing cost of manpower and energy Ministry of Health dissolved in October 2011 due to which approvals for new products are pending.09 0.07 ---0.00 ---0.00 ---1.20 ------1.10 0.00 1.00 1.00 ---0.00 0.01 2.06 0.00 ------- 0.06 ---- 0.06 1.08 0.09 3.07 0.06 SUBTOTAL SUM TOTAL ATTRACTIVENESS SCORE 0.20 ------1.00 ---- 0.10 ------- ------- ---4. 0.16 0.00 ---- 0.00 1.00 2.27 1.00 ------- 0.33 2.06 ---1.06 ---- 2.00 0.40 0.8%) and devaluation of local currency Aggressive competition by local companies due to their ability to launch new products in short time.00 1.Growing market of blood and blood forming organs Growth in generic sector Threats Rising cost of production due to high inflation (10.00 0.06 0.28 3.04 2.increasing R&D cost Complete freezing of pharmaceutical product prices by MoH since 2011.
According to Mr. Adnan Ali. 70 . Oncology is one of the seven major therapeutic segments on which Sanofi focuses. Only some of the few major players worked on oncology but currently there are no upcoming products in this field. extensive research has been done in the field of oncology but product pipeline is still dry. Therefore. Sanofi should invest heavily in R&D for the development of products in this field and make use of the extensive research that has been already done.SELECTED STRATEGY FOR SANOFI AVENTIS “Use R&D to develop drug in the field of oncology” The QSPM results clearly indicate new product development in the field of oncology as highly lucrative business opportunity for Sanofi Aventis.
CHAPTER # 4 BLUE OCEAN STRATEGY 71 .
The experts of the same organization said that if this were to happen. which is not very much liked by many patients. STRATEGY CANVAS FOR SANOFI AVENTIS 72 . it will create a blue ocean for itself by making the competition irrelevant. the only way to take in insulin is through injections. Sanofi has specialized knowledge and know how in diabetes market. There is argument among experts whether or not insulin can be taken into the body in the form of capsule or tablets without causing any limitations in performance or adverse side-effects. So if Sanofi develops this new drug. Pakistan would be fourth with 13. 2010).8 million diabetic patients (Daily times. the figure can increase to 450 million by 2030. Presently. Sanofi also has an edge because they are the pioneers in insulin and according to Mr.BLUE OCEAN STRATEGY FOR SANOFI AVENTIS “Develop a new tablet or capsule for insulin” The number of diabetes patients in Pakistan is increasing. Adnan Ali. International Organization for Diabetes‘ statistics experts said that there are approximately 300 million people affected by this disease and if effective measures are not immediately taken.
the process of creating syringes. the better replaced product would be tablets as it is convenient for consumers to use 73 . provide ease to patients Raise • R&D---.after eliminating the insulin syringes. Process complexities---.more focus on patients rather than doctors.inconvenience of using injections will be reduced and patients would easily be able to take insulin in the form of capsules rather than using injections Focus on doctors----.ERRC Model for Blue Ocean Strategy of Sanofi Aventis Eliminate • • Insulin injections---. its needles of different sizes etc Reduce • • Inconvenience-----.heavy investment in R&D will be required for the development f this new drug Create: • Insulin tablets---.it would be eliminated because of the hassle it gives to diabetic patients.
CHAPTER # 5 STRATEGIC LEADERSHIP & IMPLEMENTATION 74 .
with clarity of responsibility and authority Highly skilled. pharmacists. individual and team effort that can bring out creative synergies. Acquisition of Genzyme. product characteristics and therapeutic areas. chemists and engineers Organizational goals are clearly communicated across the organization. brings access to the most advanced technologies in life science 75 . Highly innovative Research and development team composed of highly qualified and trained scientists. state of the Sanofi has a divisional Sanofi‘s culture encourages art facilities complying with the structure in order to support learning and enhances latest GMP and HSE standards strategic initiatives. Claforan Plant is considered as one most modern facility in the entire Asia Pacific region equipped with online filling and packaging operation Each division is further segmented according to the socio-demographics and socio-economic factors of the customers (doctors and patients).STRATEGIC LEADERSHIP MODEL FOR SANOFI AVENTIS RESOURCES STRUCTURE CULTURE Highly sophisticated. Sanofi is equipped with innovative technology and IT. professionally trained and motivated workforce. IMS subscription for easy access to highly valuable research data for further developments.
Sophisticated process management tools to eliminate manual work like eTMS , ePR, eAED, cGate and GIMc systems.
Well established marketing and distribution network
THE FOUR INTERNAL HURDLES TO STRATEGY IMPLEMENTATION
1. Resource hurdle
Sanofi‘s resources comprise of professionally trained and motivated workforce as well as state of the art plants complying with the latest GMP and HSE standards. They also keep upgrading their machinery and installing new IT solutions for their problems. So when it comes to strategy implementation, availability of resources is not a problem but the problem lies with allocation of resources. Therefore resources must be wisely allocated by Sanofi by directing them to productive segments from unproductive ones.
2. Cognitive hurdle Sanofi‘s employees are well committed to its core values and they are considered as the important part in strategy making and implementation process. According to Mr. Adnan Ali when any new strategy is made, proper sessions are held with employees before strategy implementation. Also, cross functional teams are made in this regard to take the feedback of the employees as well as to make them understand the need for a strategic shift. As a result, there is no cognitive hurdle, when it comes to implementation of strategies at Sanofi Aventis.
3. Motivational hurdle
Employees at Sanofi are committed to the vision and mission of the company and it is ensured that the workforce work under the standards of quality. Sanofi keeps its employees motivated by providing them training and setting their goals aligned with the organizational over all objectives of provide the best solution to the patients and also reward the employees by providing them compensation packages which fulfills their needs. Therefore at Sanofi, there is no motivational hurdle in strategy implementation.
4. Political hurdle
Due to the change in strategy, power shift in Sanofi will also occur and that would lead to obstruction in the pathway of strategy implementation, because the people will be fearful to lose their position and stature. Because the expansion in the company will hire more employees and new technologies can also put the jobs of some positions in jeopardy. So in order to overcome this hurdle, kingpins need to be given the target of designing their own teams and communicate the strategy with them.
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