Phase 3 – Porter’s Five Forces Analysis

Threat from New Entrants:

Threat from New Entrants is low for proprietary products because of the following reasons:

 The government’s regulation and rules provides subsidies and promotes setting up of new
ventures but it is difficult to survive the gestation period and reach a stage of maturity
 Threats of entry comprise of two main factors Cost and Legal implications.
 Forming of alliances like one with “boots “will help Unichem in building up brand and
enhancement of marketing strategy which will increase the entry barriers for new entrants
 Switching Cost is high as company holds patent for their products and customers will not
switch medicines frequently
 Entry barriers are high as entrants are insignificant when compared to the total number of
enterprises in this category

While Unichem also produces generic drugs. In this sector the Price is a pivotal differentiating
factor in the purchase decision, as customers will seek alternatives with lower prices in case
other generic drugs are available. Hence any new entrant can enter and fight on price,
showcasing higher threat in case of generic drugs.

Bargaining Power of Suppliers:

Active Pharmaceutical Ingredients (APIs) are integral part of a pharmaceutical company’s
success. Difficult-to-manufacture APIs such as steroids, sex hormones and peptides give
bargaining power to suppliers, however, generic APIs do not have much of that power. The
Pharmaceutical industry is dependent on organic chemicals and the major chemicals used in
pharmaceutical industry are a commodity thus they are readily and easily available giving low
bargaining power to suppliers. The equipment used in manufacturing and R&D are also available
from multiple suppliers, and the supplier switching cost is also very low thus overall in
pharmaceutical industry bargaining power of suppliers is low.

Bargaining power of customers:

There always exists a downward pressure on the prices of pharmaceutical products of Unichem
Laboratories Ltd. as its customers will always demand or bargain for lower prices so as to make
available the products at much affordable prices as opposed to the high prices, in general, of the
company’s products. However, the bargaining power on the part of customers is marginally high
as other firms already supply generic pharmaceutical drugs or generics for chronic therapy areas
and these generics are already available at relatively lower costs accessible to the masses, leading
to high level of competition and varied choices available to the customers.
Also, Unichem Laboratories Ltd. is one of the leading generics manufacturer in the country
which further re-strengthens its stronghold in the industry and stands counter to the bargaining
power of its consumers. One of the firm’s product, Losar holds the number one position for anti-
hypertensive cardiology treatment. Further, the company has a vast range of flagship brands like
TG Tor, Olsar, Tolol and Trika which makes Unichem one of the largest players in Cardiology
Therapeutic segment.
Moreover, Unichem also do business in the business to business segment by providing other
companies solutions for API (Active Product Ingredients) development. These business customer
do own a major amount of bargaining power as these APIs can also be sources from Chinese
Manufacturers which form a major procurement markets for such products.

Threat of Substitutes
Products of Unichem:
Unichem products are divided into two groups Formulations and Active Pharmaceuticals
Ingredients.
Threat from Lifestyle changes:
Consumers have become increasingly aware about Ayurveda, yoga. The government of India’s
AYUSH initiative has given a major fillip to this movement.
According to the Annual report of Unichem, “the dynamics of the Indian pharma market are set
to change in times to come with Government sponsored programmes such as “Jan Aushadhi”
coming to the fore where the Government will make a bulk purchase of generic medicines from
private companies. Under the scheme, the Government plans to open around 3,000 Jan Aushadhi
stores by the end of 2016.”

Inter competition Rivalry:

The Indian pharmaceutical industry is third largest globally in terms of volume which is
characterized by intense competition in the presence of major players like Sun Pharma, Lupin,
Dr. Reddy’s Lab, Cipla and Aurobindo Pharmacy. Unichem Laboratories Ltd. has a market
capitalization of Rs. 2488.60 crores. In this range, the direct competitors for the company are JB
Chemicals, Shashun Pharma, Indoco Remedies, Granules India and AstraZeneca among many
others. The competition from large players is high because of huge financial backing.
Despite of all this, the growth opportunities for a company like Unichem Laboratories Ltd. are
favorable as many drugs are going off-patent in a big market like the US. Besides, Unichem
coming with new patents will only provide a competitive advantage against its direct
competitors.

References:
1. http://www.ibef.org/download/Pharmaceutical-January-2017-D.PDF
2. http://economictimes.indiatimes.com/unichem-laboratories-ltd/quotecompare/companyid-
12882.cms
3. http://www.ibef.org/industry/pharmaceutical-india.aspx
4. https://www.ukessays.com/essays/information-technology/strategic-evaluation-
documentation-of-boots.php
5. http://www.nistads.res.in/images/ISTIP/report/Report-Pharmaceuticals.pdf
6. http://www.unichemlabs.com/pdf/financialhighlights/Annual_Report2015-16.pdf
7. http://www.investopedia.com/articles/markets/051316/industry-handbook-pharma-
industry.asp
8. http://www.brandindiapharma.in/uploads/documents/Pharmaceutical-%20January
%202016.pdf