Analysis of Dr.

Reddy’s Laboratories Ltd– SM Assignment

Submitted to-
Dr. Debadutta Kumar Panda

Submitted by-
Biswajit Sarma 19A2HP442
Soumya Mohapatra 19A2HP434
Siddharth Agrawal 19A2HP405
Ankur Srivastava 19A2HP453
Siddharth Vedula 19A2HP420
Siddhant Pradhan 19A2HP414
Introduction
Dr. Reddy's Laboratories Ltd (DRL) is committed to providing affordable and innovative
medicines for healthier lives. It is an integrated global pharmaceutical company and through its
three businesses - Pharmaceutical Services &Active Ingredients Global Generics and Proprietary
Products. The company's primary therapeutic focus areas are dermatology, gastrointestinal,
cardiovascular, diabetology, oncology, and pain management. Dr. Reddy's Laboratories was
established in the year 1984 in Hyderabad, and its major markets are USA India Russia & CIS
countries and Europe. The company made its beginning with the capital of Rs. 25 lakhs and as a
manufacturer of Active Pharmaceutical Ingredients and Intermediates (API). It commenced
operations with a single drug in a 60-tonne facility near Hyderabad India. The company went
public in the year 1986, and shares were listed on the Bombay Stock Exchange.
Value Chain Analysis
Primary Activities:
1. Inbound Logistics:
 Inbound logistics involves developing strong relationship with suppliers in
retrieving raw material, storing the inputs and internally distributing the raw
material and components to start production.
 Focus on aspects of transformation from raw materials to finished products.
 For example, by using Sustainable Packaging Initiative, eliminating the use of outer
shipper by collating the inner shipper and bundled it using a carry strap. This
initiative reduced usage of 2,135 tons of kraft paper material which in turn
increased load ability on pallet by 20%, thereby eliminating re-packing activity at
the USA and saving costs in packaging materials and logistics.

2. Operations:
 Dr Reddy’s operations begin with conversion of raw materials into its product and
its launch in the market. It also includes service market.
 It includes machining, packing, assembling and testing, maintaining and repairing
the equipment also falls into this category.
 The company’s reportable operating segments majorly are
 Global Generics: This segment includes the operations of the Company’s
biologics business. (Total revenue of 114,014).
 Pharmaceutical Services and Active Ingredients PSAI: This segment
consists of the Company’s business of manufacturing and marketing active
pharmaceutical ingredients and intermediates, which are the principal
ingredients for finished pharmaceutical products. This segment also
includes the Company’s contract research services business and the
manufacture and sale of active pharmaceutical ingredients and steroids.
(Total Revenue of 21,992).
 Proprietary Products: This segment consists of the Company’s business that
focuses on the research, development, and manufacture of differentiated
formulations and new chemical entities (“NCEs”).
  Total turnover from operations (as on 31st March 2018) is 93,593 million rupees.

3. Outbound Logistics:
 Outbound logistics include the activities that deliver the end product to the
customer, by passing through different intermediaries.
 They involve activities such as material handling, warehousing, scheduling, order
processing, transporting and delivering to the destination.
 For example, to support finished goods distribution in India, a Transportation Load
Builder application has been designed with which they can identify SKU sales,
ensure product availability, maximize truckloads which in turn reduce overall costs.
 They are also continually shifting their goods movement from air to sea to
effectively reduce carbon footprint thereby till now they have avoided 61,270 tons
of carbon emissions and continuing.

4. Marketing and Sales:

 Sales activities involves sales force, advertising, promotional activities, pricing,
channel selection, quoting and building relations with channel members.
 Marketing activities develop brand equity and help it stand out from the
competition.
 Our manufacturing, sales and marketing operations span over 25 countries.

5. Service:
 Post sales services play an important role in developing customer loyalty.
 Its support activities are to avoid damaging brand reputation, and instead use it as
a tool to spread positive word of mouth due to quick, timely and efficient support
services.
 The Company offers a portfolio of products and services, including Active
Pharmaceutical Ingredients (“APIs”), Custom Pharmaceutical Services (“CPS”),
generics, biosimilars, differentiated formulations and New Chemical Entities
(“NCEs”).

Secondary Activities:
Secondary activities support the primary activities in the value chain. It includes firm
infrastructure, human resource management, technology development and procurement. We will
look into each of these in detail.
1. Firm Infrastructure: Firm infrastructure includes overall quality management, accounting
system, financing power and strategic decision. These all factors allow Dr Reddy to
improve its performance and gain competitive edge over the competitors. It helps to
optimize the overall value chain by supporting the smooth flow of primary activities.
2. Human Resource Management: Dr Reddy utilizes its human resource power by carefully
analyzing its components which are recruiting, selecting, training, rewarding and
performance management. Effective management of human resource decreases
competitive pressure like motivation and skills of the employee force. Employee
 satisfaction reduces employee turnover which minimizes cost. Proper training and
selection of employee also decreases cost. Reduction in turnover also increases employee
specialization.
3. Technology Development: Technology plays vital role in the value chain as it interconnects
all the aspects that is operations, marketing, distribution and human resource activities.
Companies like Dr Reddy regularly updates their technology like automation of repetitive
activities, discontinuation of redundant work activities and speeding up the overall work
processes to minimize the cost by maximum production. Some examples are automation
software, technology supported customer service, product design, process design and
research and data analytics.
4. Procurement: Procurement in value chain analysis includes getting all items which is
required in producing the finished product. It includes procurement of raw materials,
supplies, machineries, equipment etc. It connects all the departments of value chain, so Dr
Reddy carefully analyze its procurement processes of inbound logistics, operations and
outbound logistics.

SWOT Analysis
Strengths:
As a leading firm in the pharmaceutical business, Dr. Reddy's Laboratories Limited has some
characteristics that help in its growth in the business focus. These characteristics not merely help
it to verify the bit of the general business in existing markets, yet, what's more, help in entering
new markets.
 New product innovation: Successful track record of developing new products. Ex-
Launched Peg-Grafeel ITM to fight infection in chemotherapy.
 Strong distribution channel: Over the years, Dr. Reddy's Laboratories Limited has
constructed a solid dispersion organize that can arrive at most of its latent capacity
showcase. The wholesalers are spread all around more than 50 nations with substantial
reach and collusions. Ex-1.5 million units sold of the above new drug. Also, it has a
connection with a doctor base of more than three lakhs.
 Strong Supply Chain Network: The Supply chain system of DRL is very sturdy with 2000+
stockists just as 1,00,000 retailers covering average by and vast market and the fares of the
items to 50+ nations
 Automation activities: it and a stable workforce of 20000 representatives working for the
organization around the world, carried consistency of value to Dr. Reddy's Laboratories
Limited things and has engaged the association to scale up and cut back subject to the
premium conditions in the market. For consistency of quality.
 Successful record of customer satisfaction with new plan and products: Through its
association with numerous specialists and different projects like Purple Health care
program, Dr.Reddy's has had the option to fabricate high consumer loyalty and
maintenance with 200 new drugs.
  High Brand Recognition with Strong Free Cash Flow: Since the organization is there in the
business since 36 long years and it has dynamic advertising wing, Dr. Reddy's has built up
a powerful brand acknowledgment in execution and industry methodology which has
additionally empowered the organization to charge a premium contrasted with its rivals.
And it has stable free incomes that give assets in the hand of the organization to venture
into new activities.

Weaknesses:
 Declining Market Share: In spite of the fact that the income of the organization is
expanding year on year, the piece of the overall industry is declining. This is on the
grounds that the business is developing faster than the organization. The
pharmaceutical industry CAGR is 22.4% India while Dr.Reddy's CAGR is simply 0.5
%.
 Supplier Loyalty: Since a similar provider is supplying to contenders like Aptar and
Lupin, Aurobindo Pharma, Sun pharma, and Rockwell, etc. also, this is eexpanding the
provider haggling power and unfavorably influencing the steadfastness of the providers
which is a significant downside.
 High Innovation Cost: With the appearance in innovation there is constantly a
need to innovate to hold the upper hand, however, this development comes at a
higher cost which in some cases makes it infeasible.
 FDA Trials: The items need to go through the severe and basic FDA preliminaries earlier
to entering the market, which makes it expensive and devours part of time expanding the
difficulties in the starting of the new items in the market.

Opportunities:
• Good Biologics & Cytotoxic Infrastructure to deal with the necessity of the oncology
market for future growth in the segment when compared to the competitors.

• Its core competencies can be used for success in similar other relevant fields. A similar
example can be - GE healthcare research which helped it to develop better Oil drilling
machines.

• The new technological innovation can provide an opportunity for Dr. Reddy's Laboratories
Limited to practice differentiated pricing strategies in the market. It will enable the firm to
lure new customers and to maintain its loyal customers with excellent service and through
other value-oriented propositions.

• New trends in the medical industry due to recent development in new types of illness can
generate business for the Dr. Reddy's Laboratories Limited. It provides a great opportunity
to build new revenue streams and diversify into new product categories too.
 • New customers from online channels – Over the past few years, the company has invested
a tremendous sum of money into the online platform. This investment has opened a new
sales channel for Dr. Reddy's Laboratories Limited. In the next few years, it can serve its
customers better by fulfilling their needs using big data analytics.
Threats:
• The Rising cost of raw material can pose a threat to Dr. Reddy's Laboratories Limited
profitability. The raw material cost has risen from around Rs. 1820 crores in 2018 to Rs.
2103 crores in 2019.
• The imitation of low quality and the counterfeit product is also a threat to Dr. Reddy's
Laboratories Limited for products, especially in the emerging markets and low-income
markets.
• The development of new technologies by the competitors or market disruptors could be a
serious threat to the industry in the long run. Also, the growing strengths of local
distributors present a threat in some markets as competitors pay higher margins to the local
distributors.
• The company's operating in numerous countries has exposed it to many currency
fluctuations, especially because of the volatile political climate in numerous markets across
the world.
• Changing consumer buying behavior from an online channel could be a threat to the
existing physical infrastructure is a driven supply chain model.
• The increasingly stringent regulations for new drug development poses a threat to the
innovation and development of new drugs.

VRIO Analysis
Valuables:
 The financial resources of Dr Reddy’s require huge initial investment and working capital
to imitate. These resources have been acquired by the company through profits over the
years. New entrants and competitors would require same amount of profits for a long period
of time to accumulate such financial resources.
 Its patents are unique as they are first in its kind. This allows the firm to sell its products
without competitive interference. This results in more revenue for the firm. These patents
also provide licensing revenue when it licenses these patents out to other manufacturers.
Rare:
 The employees of this firm rare resources. The employees are highly trained and skilled,
which is not the case with employees in other firms. The better compensation and work
environment ensure that these employees do not leave.
  The distribution network is a unique resource for the firm. This is because competitors
would require a lot of investment and time to develop a better distribution network than
that of Dr Reddy’s. These comprehensive network is possessed by very few firms in the
industry.
Imitable:
 The local food products are not much costly to imitate. These can be acquired by
competitors if they invest a significant amount in research and development. These also do
not require years of experience. So, the local food products provide a temporary
competitive advantage that competitors can acquire in the long run.
Organization:
 The financial resources, Patents, Distribution network and Employees of Dr Reddy’s are
well established and have been in use for a long period of time. Therefore, these resources
prove to be a source of competitive advantage for the firm.
 REFERENCES:

 M. E. Porter, Competitive Strategy (New York: Free Press, 1980)

 A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
 O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
 L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
 R. E. White, Generic Business Strategies, Organizational Context and Performance: An
Empirical Investigation, Strategic Management Journal7 (1986)

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