Professional Documents
Culture Documents
Submitted by:
Pratikchya Basnet (19303)
MBA- Spring 2019
Submitted to:
Mr. Ajay Shrestha
Strategic Choice
Date: 05/04/2020
QUESTION 1:
Why have the BOP markets in developing countries such as India emerged as important
Industry analysis:
The pharmaceutical industry in India, as the case shows, was one of the fastest growing and
rapidly expanding markets worldwide. The market shows a lucrative possibility of sales for
companies tapping into the market with right strategy. By looking at the case, I found out that the
Indian market consists of such untapped areas which can be a source of market expansion for
companies in the pharmaceutical business. From the economic analysis to the consumer analysis,
India market shows potential for growth and innovation in the industry, with an estimated
valuation of around US$12 billion, the industry growth rate exceeded 21% in 2010. Projecting
forward, the industry was expected to grow at a compounded annual growth rate (CAGR) of
12.3% over the next few years, reaching nearly US$20 billion by 2015.
STRENGTH WEAKNESS
and operation.
OPPORTUNITIES THREAT
lifestyle.
From the above SWOT analysis of the industry, we can clearly see the attractiveness of the
industry and its potential in India. We can also infer from the case that increasing number of
companies are attracted towards this industry and are chalking out plans and strategies to
penetrate the market. The statistics suggest that although the growth opportunities are very high
in India, it is not evenly distributed throughout the country. International companies that were
entering the market were only focusing on a small, high income earning populations as their
In 2010, metros and Tier I cities contributed 45% to the industry revenue while the peri-urban
markets comprising of Tier II to Tier VI towns contributed 38%, and rural markets accounted for
only 17%. With 72.2% of India's total population living in rural areas, there was a significant
untapped opportunity at the Bottom of Pyramid for pharmaceutical companies. This means that
companies in the industry were ignoring more than 4 billion consumers earning less than US$ 2 a
day and constituting Tier 3 and 4 of the world’s economic pyramid. This data can be considered
one of the major reasons that MNCs and domestic companies have increasing interest in the BoP
markets of India.
MNCs in the consumer goods and FMCG departments stated to realize the opportunity
underlying in the untapped rural markets before the pharmaceutical companies did and shortly
after, the latter followed suit. Since the rural market in India constituted around 40% of the total
market value, companies had started to realize that sooner they tap into the rural markets with
Companies like Sanofi-Aventis upon research have also found significant opportunities
underlying in the BoP market. They observed that with factors contributing to the growth in rural
markets included rising income levels, the growing patient base, improvement in healthcare
infrastructure and wider health insurance coverage. This meant that the population in this market
might be able to afford medicines in larger quantity, preferably of higher quality and this
portrayed a huge market gap. Now, although the usage quantity in BoP market might be lower
than urban areas, the frequency of purchase was much higher. Also, the flourishing departmental
stores with foreign consumer durable brands added to the advantage. There was clear demand in
the rural markets of India and companies were starting to realize this.
The stagnant growth rate in the urban market as compared to the growing rural market portrayed
a lot of opportunities to domestic and international companies. Especially companies like Sanofi-
Aventis, who were regarded as a premium player in the urban market but lacked coverage in the
rural areas had added advantage to penetrate the untapped market. It would not only grow and
expand the company but also strengthen the position in the overall Indian market.
The BoP markets in the Indian have also attracted large drug manufactures due to reasons other
than demography and economy. Owing to India's rapid economic growth and changing lifestyles,
even among the low-income population, there had been a gradual shift in disease patterns in
lower-tier markets.
QUESTION 2:
Why Sanofi-Aventis decided to develop and leverage an innovative business model (Prayas)
Sanofi-Aventis was one of the few companies who realized the potential of the untapped markets
in India. The first players in any market have an advantage that can help a company capture
market share, take advantage of price premiums, increase and retain profits, and thrive in a
competitive market. Increasingly, this paradigm is being played out in India’s rural
pharmaceuticals market. With increasing incomes and improving healthcare infrastructure, small
cities and villages are emerging as high growth markets for multinational pharmaceutical
companies and their Indian counterparts. Companies have started to make rigorous strategies on
how to penetrate these markets to claim the growth potential. They are setting up focused
distribution channels and developing locally trained sales personnel. Some are focusing on
regularly updating rural doctors on their product portfolios and on any other developments in
In this light, Sanofi-Aventis came up with their own strategy to penetrate the rural market. They
realised that their usual strategies were not going to work on the rural markets of India, so they
did a thorough research. They observed several significant players in the market who were
offering variety of products, while enjoying high cost advantage and many players who went by
penetration strategies and had larger reach and coverage. Sanofi-Aventis also realised the
working mechanism of the market as being unorthodox and unethical. Thus, the challenge of
developing innovative business model to attain maximum profit while also providing affordable
and accessible drugs to the BoP market could be solved by an innovative business module called
Rigorous research was conducted in the process and Sanofi-Aventis found the opportunity gap
underlying, that in these markets there was no gap of products, but there was a large gap of
knowledge. Thus, they realized that integrating this somewhere with the business strategy
possessed a new and much stronger business model waiting to unfold for company. The
physicians and doctors in the rural areas lacked medical knowledge and resources to upgrade
their knowledge. Lack of computer access and skills combined with low internet facility in these
areas possessed as a challenge to learning. On the other hand, the scenario in the urban areas
were completely different, they had numerous opportunities for continuous medical education
through various sources. This was an opportunity for large pharmaceutical companies to fill the
gap in the rural market through infrastructure and that is why Prayas, by Sanofi-Aventis came
into picture.
Another significant buying behavior among the rural consumers was the overconfidence in their
chemist or physician. People never questioned the physicians, and took their advices religiously.
But since these doctors relied on outdated medical practices or knowledge, they often mis-
diagnosed the diseases. It was also common for BoP patients to receive symptomatic treatment
from doctors (i.e., based on their symptoms rather than diagnosis of the cause). So, when Prayas
was formed, the focus was on selling the products through a socially sustainable model that will
be efficient and capable of fulfilling the latent needs of doctors in Tier II and rural areas. Thus,
the module of Prayas was built in such a way that these doctors that the consumers had so much
faith in would be the representatives prescribing the medicines by Sanofi-Aventis in return for
The increasing competition and situational factors in the Indian market demanded a very unique,
innovative and effective strategy to penetrate the BoP consumers. Sanofi-Aventis, realizing this
came up with the module of Prayas and hoped to gain a competitive advantage over their
competitors. The module was designed in such a way that everyone involved reaped a benefit of
some kind, at all levels. The module was based on workshops fulfilling the knowledge gap
earlier identified in the market and since they did not promote any brands in the seminars, it
reflected the unbiased nature of Prayas, which could be later put to use. The intangible value that
Prayas provided was hard to replicate and replace. The strategy could also be compared to the
18th century cosmetic brand, Elizabeth Arden, the 19th century Helena Rubenstein or what the
modern day Ram Dev Baba applied to build their own brand, entering the market through
philanthropy, creating a need in the market, being competitive throughout the gestation period
Should Sanofi-Aventis re-evaluate its product mix for rural markets? For the next few
years, should the company remain focused on the acute care segment in low-tier markets,
consolidate its position and gain a firm footing in that segment, or should it expand its
Industry analysis
The development of product portfolio was one of the major challenges faced by Prayas; statistics
available showed that the market value of prescriptions in the lower tier markets amounted to
INR 104.3 millions for acute therapy and INR 23.1 millions for chronic therapy. The CAGR
however shows that the prescription for chronic therapy is 20.5%, where as it is only 14.7% for
the acute therapy, which is considered a good ratio for an industry with a CAGR of 12.3%. A
research done by WHO and UNICEF stated that out of 1963 million prescriptions by doctors in
low tier markets, majority were for ailments related to respiratory, gastrointestinal, infectious and
nutritional diseases, which shows the dominance of acute segment in the market.
Company analysis
Challenge was not just building portfolio but also manufacturing the drugs according to portfolio
for Sanofi-Aventis. They had realized that strong brand identity needed to be formed so that
doctors could relate more, and secure more participation to increase penetration in the rural
market. Sanofi had to choose between its existing business units for associating Prayas, and after
conducting research, concluded that Hoechst was the best choice. Given Hoechst’s popularity
among doctors in the rural markets, and its value they continued to carry on that legacy. The
company already has many existing brands in the acute drug segment from the Hoechst, so it was
Sanofi-Aventis was not the only company that saw the opportunity in the lower tier markets in
India. Prayas by Sanofi-Aventis faced a lot of competition before and after its commencement
from various domestic and international companies. Strategies related to product development,
sales and marketing and operational efficiency has been opted by various organizations.
Companies such as Lupin, Elder Pharmaceuticals and Novo- Nordisk developed a similar model
to Sanofi-Aventis for penetrating the lower tier markets. They also focused on maintaining
relationships with the doctors, promoting best practices, training, serving end consumers through
medical awareness and building brand. Competitors are also found to have developed strategic
If we look at Exhibit 15, Relative contribution across major therapy areas for various
Pharmaceutical, Dr. Reddy’s Lab and Zydus Cadila. Sanofi- Aventis’s portfolio of drugs consists
majority of acute therapies and less of chronic therapies. Since the company is planning to
venture into the chronic department, let’s evaluate the situational competition in that area. Sanofi
is contributing 33% in the chronic area, followed by 29% in ‘other’ category and 23% in the
Pain/Analgesics. Companies with major contribution in the chronic therapy seem to be Sun
Pharmaceutical with 33% contribution, and Dr. Reddy’s laboratory with 23% contribution.
Similarly, in the Pain/ Analgesics Dr. Reddy’s is contributing 21%, followed by other companies
contributing 10% each. However, Dr. Reddy’s seem to focus more on Gastro than the Pain/
Analgesics. All of these companies showed more sales turnover than Sanofi- Aventis. Zydus
Cadila has a sales turnover of INR 4754 millions, Sun Pharmaceutical has INR 3533 millions
and Dr. Reddy’s has INR 3118 million at the rural and emerging markets. Sanofi’s sales turnover
Now, competitors in the lower tier markets have come up with very successful marketing
strategies as well. Arogya Parivar by Novartis made portfolios of common ailments like diarrhea,
nutrition for women and children. Their products are lowly priced and catered to more than
16,000 pharmacies. Sanjeevani by Pfizer made a portfolio of only well known brands by them
for the rural market. Novo Nordisk ventured in diabetes drugs through public awareness.
Strategic choices:
From Exhibit 14, Contribution to various therapy areas, we can infer the growth of chronic
therapy in detail. The highest CAGR in the Tier 2 market can be seen in the Anti- cancer
department with 47.2%, followed by Anti- diabetes with CAGR of 23.6% and Hospital Solutions
and Cardiology with 19.5% each. All these departments belong in the chronic care department.
The anti-diabetic category in India grew 29% annually in 2010, while cardiovascular and
nervous system disorder drugs witnessed 22% growth in the same period. With 199 million
Indians expected to reach the critical age of 60 years and above by 2028, the Indian geriatric
population was another key segment that held the potential to influence the sales of chronic care
Owning to the rapid economic growth and changing lifestyles, there has been an observable shift
in the disease pattern of the lower tier population. Increased health awareness and superior health
diagnosis has made chronic care a promising area for pharmaceutical companies in the market.
Prayas deals with acute portfolio majorly and has very limited chronic drugs in the mix. The
statistics however shows a potential growth for chronic care in the years to come rather than the
acute segment.
Since companies should focus on long term goals rather than short term achievements, and it is
clearly stated in the case that investing in the chronic care would be beneficial in the long term, I
would suggest Prayas to diversify the portfolio of drugs and include chronic care solutions as
well. We can see that Cancer solutions, Cardiology solutions, Diabetes solutions is gaining
momentum in the market, so starting the penetration with these drugs would be a good idea.
Prayas is creating a very intangible and unique value in the market through its acute care
portfolio along with the workshops, however the sales growth has been limited to just 11%
compared to the 16.5% growth of the domestic market. This leaves us questioning the efficiency
of the portfolio mix of Prayas. Sanofi is considered a premium player in the Tier 1 markets, with
strong presence and reach; however it is not the case in the lower tier markets. There is clearly a
One of the challenges that Prayas is facing is becoming self sustaining, and to achieve that
expansion of product portfolio to keep up with the competition and to grow is a must. Sales
contribution from Prayas has almost tripled since its launch, registering 100% growth year-on-
year, which shows the potential this initiative carries. The company is benefitting from the
intangible value creation in several ways, from connections with doctors to increasing
acceptance among the patients. This intangible resource requires time to convert into monetary
value but will bring bigger benefits to the company in the long run. Goodwill is something very
hard to create for any company and Prayas has been reaping value from its goodwill ever since
commencement.
Thus, although capital investments and resources are required in the current times to expand the
portfolio, it can be said with certainty that those will not be expenditures for the company. So,
from all the data and analysis, I will suggest portfolio expansion.