Group Project Report

Course: Strategic Business Management

PEST ANALYSIS

Submitted By:
Group #: 2
Roll No Name
20110009 Muhamamd Mohkum Awaisi
20110134 Asad Alam
20110199 Muhammad Talal Moin
20110033 Hira Naseem
 Political:

Opportunities

1. China's Xingong Investment Group will help Pakistan build a traditional Chinese medicine
research and development platform, introduce Chinese medicine industry and establish its
manufacturing plant in Pakistan. This is due to the Chinese government trying to help the
Pakistani Pharma industry in developing and create a low reliance on imports

Threats

1. Diplomatic relations poor with India, leading to a cease in trade with India. Around 50% of
medicines made in Pakistan use raw material from India. Although the ban was lifted, if in future
india cuts off trade, Pakistan’s pharmaceutical industry would be crippled.
2. Newly elected government introduced a price hike. Federal government has recently issued a
notification from its regulatory agency the Drug Regulatory Authority of Pakistan (DRAP)
through which the prices were increased from 15% to 24%.
3. Ministry of National Health Services is considering introducing a policy to crack down on
alliances between doctors and pharmaceutical companies, for the sake of public healthcare. This
would have an adverse impact on the marketing and sales of most big Pharma companies.

Economic

Opportunities:

1. CPEC is a major opportunity, will Chinese firms already looking to invest and future prospects
for growth being positive. By 2025, CPEC is expected to bring a huge of Chinese entrants into
Pakistan which are more innovative due to better technology which is good for the industry..
2. Special Economic Zones (SEZs) would be made through due to CPEC with proper facilities
which shall boost the industry by provision of strategic benefits. .

Threats:

1. Overall a poor economic outlook and falling stock market indicate a slowing down in economic
growth. Due to heavy taxation, regulation and currency depreciation, the Pharma industry has
taken a hit. Pakistan’s GDP is expected to be 3.3% for 2019, as opposed to 5.4% in 2018. This is
expected to also slow the growth in Pharma industry. Slowdown has already lead to negative
growth in large-scale sectors such as textiles, automobiles and Pharmaceuticals.
2. Further currency depreciation is expected to increase the cost of imports. Medicines have an
inelastic demand hence consumers will have to bear the brunt of this price hike. The rupee has
already been devalued at a record pace this year.
 Social:

Opportunities:

1. Level of literacy is expected to increase, and the population is also increasing so demand for
pharmaceutical products are expected to increase. Medicines are a necessity so consumers are
going to buy regardless of prices, such as in the case of life-saving drugs.
2. People are becoming more health conscious, especially with regards to physical fitness and
nutrition, so Pharma companies have an opportunity to cater to this growing class of consumers.
Weight loss and vitamin supplements are one category that are bound to be affected by these
changings attitudes towards healthcare.

Threats:

1. Given the current level of literacy, a lot of consumers especially in rural areas opt for herbal or
traditional forms of medicine. These are expected to decline but they still constitute a significant
portion of potential customers.

Technological:

Opportunities:

1. Development of Chinese funded manufacturing plants: According to an agreement

signed in 2019, China's Xingong Investment Group will work in collaboration with
Pakistan to build a traditional Chinese medicine research and development platform.
Chinese investors are looking to introduce the Chinese medicine industry and establish
its manufacturing plant in Pakistan.
2. Cheaper APIs due to CPEC: A formal framework based on mutual trade between
Pakistan and china through CPEC can lead to increased import of finished goods and
APIs (active production ingredients) at cheaper prices. These APIs are essential for the
manufacturing process and their provision at cheaper rates can be beneficial for the
industry.

Threats:

1. Decreasing share in global market: The lack of any FDA (Food and Drug Authority) approved
pharmaceutical manufacturing plant in Pakistan is preventing pakistan from increasing its share
in the global pharmaceutical market. Analysts said pharmaceutical exports are unlikely to make
 any mark given the long lags in innovation of new products, absence of research and development
and increasing inflexibility in setting prices.
2. Reliance on imported APIs (Active pharmaceutical ingredients):95% of the APIs in Pakistan
pharmaceutical industry are imported. The industry does not have the technological capability to
manufacture the raw materials itself and increasing rupee depreciation is leading to a monumental
increase in prices.
3. Lack of R&D investment:95% of Pakistan’s pharma industry produces generic drugs. There is a
substantial lack of investment by Pakistani pharmaceutical companies on laboratory or clinical
research which increases reliance on imported products.

Legal

Opportunities:

1: Govt crackingdown against illegal medicines which are smuggled or illegally sold which shall increase
profit in the industry

Threats:

1. Increasing regulation of unethical marketing practices: Ministry of National Health Services

(NHS) has announced that it is going to introduce a regulatory mechanism to crack the alliance
between medical professionals and pharmaceutical industry. Officials have mentioned that there
have been increasing concerns over unethical marketing practices of pharmaceutical industries.
Offering perks and privileges to doctors in exchange for recommendations and approval of their
product by pharmaceutical industries has become a subject of increasing concern for the
government.
2. Increasing regulation over DRAP (Drug Regulatory Authority of Pakistan) by NHS: Taking
notice of the sale of medicines at 10 times higher rates compared to that of reputed companies,
the Ministry of National Health Services (NHS) has stopped the Drug Regulatory Authority of
Pakistan (Drap) from enlisting medicines without fixation of their prices.
3. Highly regulated industry:The pharma industry in Pakistan is highly regulated, with
establishment of agencies such as the MRA (medicine regulatory authority) which is which
regulated collaboration initiatives with foreign bodies. Increasing governmental control over
liscening, importing, inspection and appointment of governmental inspectors, marketing
regulations and quality control provisions have lead to little autonomy left to the market to
operate freely.

Environmental:
Opportunities:

1. .Increased demand due to Climate change: Rising temperatures can lead to increase in vector-
borne diseases, which can therefore increase the demand for vaccines, the European
Pharmaceutical review suggests. Tropical diseases, such as Dengue or yellow fever, will find
more locations to thrive in due to higher transmission period of the virus. The World Health
Organization (WHO) predicts that “climate change will have an overwhelmingly negative impact
on the world’s health”, the consequences of which can lead to increased demand for medication,
particularly in a country like Pakistan where mechanisms for combating against climate change
are negligible at best.

Threats:

1. Rising demands may cause supply shortages: It may be necessary for the industry to enhance its
research efforts to cater to climate-crisis induced diseases. Increasing volumes required can cause
a gap between the demand and supply provided, given that the industry does not review its
current production capacity and the need to increase supplies of medication and vaccines.

Political Economi Social Technology Legal Environment

c
O 1: China And 1: CPEC 1:Increasing 1:Chinese 1:New Govt 1: Increased
Pakistan provision Population Funded Plants making laws demand due to
Economic for Chinese (2) (2) against climate change
Alliance Investment 2: Increased 2: Cheaper API smuggled/illega (3)
(CPEC) (3) and Chinese Fitness due to CPEC l medicine (2)
Firms Trend (2)
(2)
entering(3)
2: Special
Economic
Zones (1)
Sub 3 4 4 4 2 3
Total
T 1:Diplomatic 1: Inflation 1: Many 1: Decreasing 1: DRAP (-1) 1: Increased
Relations getting high people still Global Market Demand leading
with India (-3) using Share (-2) 2: Regulation to shortages (-1)
(-4) 2: Currency homeopathi on Unethical
Devaluation c 2: Imported Marketing (-1)
2: Newly (-3) (-1) APAs (-1)
elected 3: Highly
government Regulated
introduced a Industry (-1)
price hike.
(-3)

3: Ministry
of Health
 cutting down
on collusion
(-2)
Sub -9 -6 -1 -3 -3 -1
Total
Gran -6 -2 3 1 -1 2
d
Total

Rationale: CPEC like many say in Pakisan is seen as a political decision which can be a game changer
for the Economic Conditions in Pakistan. It is believed that it shall bring a lot of investment of Pakistan as
Foreign Direct Investment as well as bring a few Chinese Companies in Pakistan which might be a very
important economic factor for the overall profitability of the industry which is seen as the performance
variable in the casual loop diagram. This has also been given a higher score than all others. Now these
Chinese firms which are very far ahead of Pakistan in technological terms shall bring in more
technological best practices in Pakistani industry which will decreasing ineffeciencies and extra cost
increasing overall profitability in industry and this shall further drive more Chinese firms to come and
invest in Pakistan as the industry shall be seen as as profitable venture for them. All these variables are
given the highest score because they are most important to the industry’s profitability (Our performing
variable)