M III

Shubham Sharma

MBA06145 C 24/02/2021

Strategic Management-I

Professor Pragya Bhawsar

Declaration:

1. I have submitted faculty feedback 30 minutes prior to appearing in the End-Term Exam.
2. I have not copied the answer/matter in this answer booklet from my classmate, internet and any
other sources.

Signature of the Student

 Mid-Term Environment

Ans 1(a):
To conduct an environmental and an industry analysis of any industry, the vital questions that we
need to answer are:

1. What are the boundaries of the industry?

2. What is the structure of the industry?

Here is the Pestel Analysis to sort out the large-scale climate impacts of the aircraft business:

Political: In this investigation the public authority needs to fortify the economy and, thus,
therefore, will uphold nearby aircrafts by setting rules, like special rights. Each administration
notwithstanding, will presumably do as such. Subsequently there's no undeniable preferred
position between rivalries. The policy centered issues have a wide scope of impact, so they are
not the central issues that spending carriers are confronting.

Monetary: This is distinguished as the most significant factor to carrier organizations,

particularly to spending aircrafts. The impacts allude to the large-scale financial factors, for
example, the public development rates and the trade rates. As spending aircrafts, they will focus
harder on the activity costs, for example, fuel cost. It turned into a major issue for spending
carriers due to the expanding cost of fuel. That may decrease the favorable circumstances and the
organizations will be less serious than previously. Then again, the downturn will lead more
individuals to pick spending carriers.

Social: With the improvement of Asian nations specifically China, there are an ever increasing
number of individuals choosing to study or go in Europe. Lately, the way of life of neighborhood
individuals has likewise changed. They will in general make a trip abroad to make the most of
their lives. A large portion of these individuals are not affluent like understudy. The spending
carriers along these lines, will be their most ideal decision to decrease the movement costs.

Mechanical: The development of innovation helps the aircraft organizations diminish expenses
and complete assignments all the more adequately. The new kind of airplane can assist with
decreasing the consuming of fuel; and new innovation can likewise make the security check
more proficient and precise.
Natural: European nations focus harder on ecological issues, particularly ozone depleting
substances from fossil fuel byproducts. Additionally as far as the case, carrier organizations need
to pay the natural assessments for the commitments they make to a dangerous atmospheric
devation. Specifically, it is awful information for spending aircrafts. Costs will increment and the
organizations need to keep up great brand picture in the buyer's insight. Besides, clamor
contamination and energy utilization can't be disregarded under such conditions.

Lawful: Some legitimate activities, for example, particular air terminal rights are coordinated
against the particular aircrafts. As spending carriers, which have higher serious force, they
should focus harder on the legitimate powers to forestall misfortune. Despite what might be
expected, they can likewise step up over illicit guide to rivals.

Ans 1(b)
i)New Entrants to an Industry-
The expense of section into an industry will depend to a limited extent on the plausible response
from existing contenders If a potential participant anticipates that the incumbents should react
powerfully to make its visit in the business an exorbitant and terrible one, it might well choose
not to enter. Passage can be stopped by contestant's need to get appropriation channels for its
administrations. Existing aircrafts may have attaches with channels dependent on long haul
relations, top notch administration and even elite agreements. On the planet today, the aircraft
business is soaked to the point that there is not really space for rookie to enter the market. The
greatest for this is the expense of passage. The carrier business is quite possibly the most costly
ventures, because of the expense of purchasing and renting airplanes, wellbeing and safety
efforts, client care and labor.

ii)Bargaining Power of Buyers-

Buyers address a serious power since they can offer down costs, request better caliber or more
administrations, and set up contenders to contend with one another, all to the detriment of
aircrafts productivity. The force of each significant purchaser bunch relies upon various
attributes of its market circumstance and on the general significance of its buys from the business
contrasted and the business' general business. Business class travelers are a carriers decision of
the purchaser bunch which they offer to as a pivotal vital choice. There is a measure of pressing
factor clients can put on carriers, along these lines influencing its costs, volume and benefit
potential.
iii)Bargaining force of Suppliers-
Suppliers who work with the carrier business like the Jet A1 fuel providers, caterers and extra
parts providers who have added to the disintegration of benefit, and extraordinary rivalry
confronting the aircraft business. It is critical to perceive work as a provider in the carrier
business, and one that applies incredible force. There are generous observational proof that scant,
profoundly gifted representatives (for example specialists and pilots) and additionally firmly
unionized work can deal away a critical part of expected benefits in the aircraft business. Where
work is firmly coordinated, and supply of scant representatives compelled from development
they can be a factor in rivalry. Government which has been examined essentially regarding its
conceivable effect on section boundaries should likewise be perceived as a possibly ground-
breaking purchaser and provider particularly with public transporters. Ordinarily, government's
job as a provider or purchaser is resolved more by political factors instead of by monetary
conditions, and this likely is an unavoidable truth.

iv)The accessibility and danger of substitutes-

Substitutes for air travel incorporate going via train, transport or vehicle to the ideal objective.
The level of this danger relies upon different factors like cash, accommodation, time and
individual inclination of explorers. The opposition from substitutes is influenced by the
simplicity of with which purchasers can change over to a substitute. A key thought is normally
the purchasers exchanging costs.

v)Rivalry between existing rivals-

In the carrier business, this takes the natural type of moving for position utilizing strategies like
cost rivalry, publicizing fights, item presentations and expanded client care. An arrangement of
activities and responses could conceivably leave the business in general good. A few types of
rivalry, outstandingly value rivalry is profoundly precarious and are probably going to leave the
entire business in a more terrible circumstance from a benefit viewpoint. Contention is likewise
high in the carrier business because of high fixed expenses. As a large part of the expense of a
flight is fixed; there is an incredible open door for carriers to sell unsold seats economically,
which brings about evaluating battles between the aircrafts. Carrier Industry contention can be
unstable when an industry faces high leave hindrances, factors that keep organizations
contending despite the fact that they might be acquiring low or even negative profits from
venture.
Ans (c):
1. Industry News
The basic step in identifying trends is to know your industry very well. Industry association
newsletters and journals, set Google alerts for keywords, sign up for reports and statistics, do
industry surveys (this will give you insight into what information they want to gather) and watch
what others are doing in your industry.Also read books and blogs (don’t neglect the comments
area), attend seminars, visit trade shows and research new techniques, methods and offerings.
2. Identify key influencers
Do you have any key influencers in your industry? They could be a pioneer from within, or an
outside influencer, someone who is not directly in your industry but often leads the way in
purchase decisions like a celebrity, blogger, reviewer, commentator or sometimes even family
member of your potential customer.
3. Get in the mind of your customers
Your customers’ opinion is the one that counts the most given they are the ones paying you!
Keeping this in mind conduct a survey to ask your customers about what they want from your
products and industry as a whole. What frustrations aren’t being met? What ideas do they have
for new innovations and offerings? Has their product or service requirements changed as a result
of business growth or lifestyle changes? Extract as much information as you can to ensure you
are meeting the markets demands.
4. Social media
Anywhere a lot of your potential customers gather and talk can offer great information on new
trends, needs and opportunities. This is why social media is so great, it can give you a lot of
feedback and sometimes brutally honest insight into what your custom

5. Web Resources
There are websites that can also help you monitor popular content Like Google Trends,
YouTube’s trend dashboard, BuzzFeed, and Mashable to name a few.

Ans (d):
The airline industry is the best example of an entirely dependent sector on fossil fuels and
availability. In fact, about 30% of the costs of the industry goes towards fuel. The airline industry
faces following threats and risks:

Competitiveness:
Due to ticket pricing, there is a cut throat battle faced by the top airline. Developed airlines are
challenged by low-cost airlines eating up their share of the market. Top premium airlines have
been forced to reduce their ticket fares to about 15-20 per cent to consolidate their market share.
In the long run, such a price slash would lead to a price war between airlines.

The Fuel Factor:

Rising Fuel price is the biggest threat to the airline industry in the modern world. The high costs
have led to many airlines imposing fuel surcharges on customers. One of the essential parts of
the industry is aviation turbine fuel (ATF). The Indian government has not lowered the price of
jet fuel in proportion to the drop in foreign crude oil price. Although, if there is a rise in crude
prices, the rise in fuel costs would ultimately increase the airline's operation. In addition, to cover
the increased cost of operations, it could push airlines to go for an upward fare revision. Why, 45
percent of the operating expense of an airline accounts for jet fuel. The ATF price has seen a rise
of nearly 30 percent over the past year, and about 25 percent in just the last six months.

Higher Airport Cost:

The high (aeronautical) airport charges imposed by India's Airport Authority are higher. These
international airport charges are higher than those payable at domestic airports designated as
domestic airports. As a result, India's domestic airlines Additional expenses are incurred at
designated international airports without any additional facilities being obtained. According to a
recent survey, the airport charges imposed by Indian airports (domestic and international
terminals) are one of the highest in Asia and the Gulf countries. This creates a greater risk for
aviation companies.
Labor
Many airlines have suffered because of issues like pilot walkouts and staff strikes.

Ans 2(a):
The environment is basically the aggregate of all the situations that affect it.

Characteristice of an environment could be:

(i) It is complex,
(ii) It is dynamic,
(iii) It is multi-faceted
(iv) It has a far-reaching impact.

For almost 2 decades now, Brazil has experienced an essential cycle of economic and political
stability which has led to the generation of a positive effective on the country’s economic
development. It is imperative to point out that this expansion has not been continuous and, at
certain times, the growth rates have been much lower than those observed in other emerging
countries.
Brazil was one the last countries to enter the global financial crisis in 2009 and one of the first
ones to overcome this ‘quicksand’ period. However, especially in the last 2 years, what we can
note is that the Brazilian economy is strongly tied to the global economic environment, and
showcases a close connection to the performance of emerging countries.
Brazil was impacted by the economic slowdown in Europe and the USA. Furthermore, the
business environment in Brazil is favorable and especially in relations to the performance and
development of the pharmaceutical industry, albeit with significant challenges which need to be
dealt with and overcome by the Brazilian market.

Socioeconomic Aspects
5th largest country, in terms of both land area and population, with 8.51 million sq. km and close
to 200 million residents, Brazil in 2012 recorded a GDP of US $2.2 trillion, making it the
world’s 7th largest GDP.
Other factors regarding the Brazilian economy can be as mentioned below:
1. 2nd largest agricultural producer in the world
2. Largest global supplier of mineral commodities
3. Robust and extremely qualified financial system
4. Diversified industry base
5. Geographical Location advantage

Healthcare in Brazil
A striking aspect is the fact that Brazil is the only one in the world to provide a free and universal
public healthcare system. Hence, the taxes paid by Brazilians cover all sorts of services and
treatments offered and facilitated by the national health system without charging anything
additional charges to the user.
At the same time, Brazil has more expenditures in the private health system than the government
run system. In 2010, expenditures under healthcare in Brazil totaled US $193 billion, according
to the WHO. Of these total figures, about 47% of the revenue came in from the public sector,
through the national health system (SUS), and the other dominant 53% came from the private
sector.

Dynamics of the Pharmaceutical Industry are as follows:

The pharmaceutical industry has shown significant progress in Brazil, benefitting from the
growth in healthcare expenditures in totality, and specifically by the increase in household
income. From 2007 to 2011, retail drug sales had increased by 80%+, from R$23.6 billion to
R$43 billion, according to an Interfarma report basis the IMS health data.
According to another study done by Scrip Insights, of the total retail pharmaceutical sales of US
$25.8 billion in 2011, US $18.3 billion represented prescription drugs and US $7.5 billion over
the counter.
Despite having increased over the past few years, the Brazilian people’s purchasing power is still
relatively quite low. This together with the popularity of generic and similar drugs, ensures a
leadership position for the local manufacturers in drug sales.
One of the best-selling medications in Brazil are the ones which help reduce cholesterol and high
blood pressure, in addition to a significant portion size of drugs not requiring prescriptions and
others related to lifestyle, much like Cialis and Viagra, to quote an example.
Upto 80% of the medication expenditures are for low-cost products, which is a phenomenon
related to the low purchasing power of the locals, as compared with developed markets.

Marketing & Sales

An extremely important challenge in Brazil is related to the generic drug industry. With tighter
margins, various companies have revised their aggressive discount policies, which many a times
went as high as 90%. The increased product costs and resultant reduced margins led many
companies to lessen discounts granted on medication. As per the law, generic drugs are 35%
cheaper than the corresponding reference drug. But average discounts on these products exceed
50%.

Between 65% to 75% of medication is delivered by local distributors. While only 25-35% goes
directly to the retailers.

Regulatory & Investments

The regulatory problem is another vital pain point which has drawn attention from the
government and directly concerns the companies that operate in the local market. Although
Brazil has made some important adjustments in recent years, there are still existing brittle
scenarios which need to be addressed.

Ans 2(b):
With the advent of new diseases in the world, such as the coronavirus, research, development,
and production of new drugs are essential for maintaining and improving basic public health
conditions, a goal that is considered a development priority. As a result, the pharmaceutical
industry has always been and will remain one of the most important businesses in the world,
reaching a revenue of more than 1.25 trillion U.S. dollars in 2019. In Latin America, Brazil is the
only country that ranks amongst the top pharmaceutical markets worldwide. With a global
market share of approximately 2.6 percent, the country’s pharmaceutical industry reached a total
revenue of almost 32 billion U.S. dollars.

The Brazilian pharmaceutical business

The drug production market, as part of the manufacturing industry, is very important for Brazil’s
economy in terms of value added and employment generation. With a production value of more
than 41 billion Brazilian reals in 2018, the Brazilian pharmaceutical market employed nearly 993
thousand people in the wholesale and retail segments, divided among almost 128 thousand
companies. In addition, expenditures on salaries and remunerations reached approximately 25
billion Brazilian reals in both segments combined.
An industry run mostly by national companies
In regard to leading pharmaceutical producers, the U.S. company Pfizer or the Swiss corporation
Roche stand out, as they account together for more than 101 billion dollars of the global industry
revenue in 2019. However, in the Brazilian market, domestic companies lead the business and
rank highly on the list of producers. For example, Aché Laboratorios Farmacéuticos S.A., a
prominent 100-percent Brazilian-owned pharmaceutical corporation, reached a revenue of more
than four billion Brazilian, with sales reaching more than 210 million units of pharmaceutical
products in 2019. Prescription drugs made up more than 75 percent of the company’s sales,
reaching a value of over three billion Brazilian reals.
Research and development
More than in any other industry, the pharmaceutical sector is highly dependent on scientific
research and development. Clinical trials, in particular, are a crucial step in the process of new
drugs becoming available on the market. In 2018, Brazil accounted for more than two percent of
the total clinical trials worldwide, against rates such as nearly 35 percent in the U.S., or more
than 23 percent in China. However, on a regional level, Brazil is the Latin American country
where most clinical trials were performed, as well as being the country with the second largest
number of trial participants, after Argentina.