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Dr. Reddy’s formed a chemical based company named Dr. Reddy’s Laboratories to manufacture and supply active pharmaceutical ingredients to domestic drug companies by identifying a potential opportunity to do business in the chemical sector. This gave Dr. Reddy’s opportunities to popularize it s brand by formulating its own drugs to sustain in the highly competitive single product base market. To bypass the cut throat competition in domestic market, DRL seized the opportunity to venture overseas markets and formed another company named Cheminor Drugs Ltd to manufacture and bulk supply drugs (whose patents have expired) to pharma companies in US, Italy, Spain and Japan
After this extraordinary achievement of bein first Indian company to expand overseas, Dr.
Reddy, formed four pillar based strategy comprising – product diversification, international expansion with branded formulation, & growth in Generic businesses. It was also well supplemented by efforts in building of capabilities in new drug discoveries to set required vision in front of the rapidly growing organization.
This is considering the overall vision of Dr. Reddy himself who wanted not only acquire wealth but also quench his thrust of doing R&D in chemical sector. While growing exponentially overseas, Dr Reddy’s maintained all major asset base in India to retain its cost leadership.
This was one of the reasons DRL products were attractive overseas especially in US. DRL took the systematic approach and entered easier markets, where patent regimes were lose, like Eastern Europe, Latin America, South East Asia etc. Post this DRL focused on Russia, China, Brazil and Mexico for further growth.
Till, 1993 DRL & Cheminor Drugs Ltd were having the image of bulk chemical manufacturer and a “copy cat” drug manufacturer. To change this image, DRL identified the need of building in house R&D capabilities and founded DRF in 1993. This was to focus on new drug discovery and thus DRF was kept independent entity to be lean, swift and flexible.
While venturing into the completely new areana, DRF faced major hiccups in the beginning in terms of lack of talent base in India. DRF strategize new HR policies based on special remuneration and incentives to promote in-house research. To supplement this, DRF also started fully subsidized lab in US, named Discovery and an service firm to support the pharma companies in research. These all efforts were to complement the in-house research in the areas of therauptic drugs. To support these activities, the required funds were raised from US, Europe. While doing this DRL used its market image and string balance sheets.
To sum up, the key for the success till FY 2000 was Dr. Reddy’s strategies to remain aware of the development across globe, capitalize on the opportunities and tapping global markets to ensure sustainable profitable growth. Post 2000 Era. It is the time, where DRL faced fierce competition in their home ground. The changing time and threat of competition sort of enforced a need of structured approach towards their management and businesses processes.
With the change of management from Dr. Reddy to Mr. Prasad and Mr. Satish Reddy, the whole DRL businesses were brought under the single corporate umbrella of Dr. Reddy’s Laboratories Ltd. While doing so, the new management formed 7 different BUs focusing on individual verticals with desired autonomy. This move provided the organization a most needed Corporate identity, logo and common vision mission, with which the management got the necessary harness over its diverse businesses.
Post this, the new management continued DRL legacy of tapping growth opportunities, found new avenues viz Generic drugs, Specialty (branded generic drugs) drugs and New drug discoveries. In Generics, DRL seized the opportunity to earn profits and growth while exploiting the lacunas in the international patent laws in the areas of ANDAs. Specialty was another growing segment DRL ventured in where the generic drugs were sold with DRL brand and New drug discoveries was on the therapeutic areas which were less competitive.
While diversifying, DRL had to manage across cultures, time zones and geographies. DRL maintained the Matrix organization structure keeping interest of each businesses and extracting maximum from each geographics. All the SBU were strategically controlled by the corporate focusing on each SBU development, performance with very little interference. While doing so the management also ensured the cross pollination of learning and experiences. In nut shell, the new management post FY 2000, capitalized its strong base in API and generic drugs and ventured into new segment with higher risk with considerable growth and image make over opportunity 2. We don’t feel that DRL can succeed in chasing the daring vision of specialty generic drug area due to following challenges/
Finally, there would be major threat of lose patent regimes in the new discoveries, where their claims can be challenged and over earning potentials could be at stakes. DRL used same tactics the in past for their own advantage.
With matrix organization structure, it will be difficult for DRL to tying sets of people with completely different objectives and still maintain the required exclusivity in work and out put. The new drug discoveries would require consistent flow of talented workforce for core research. The paucity of talent pool would the major concern to DRL going ahead. In addition to this DRL has to groom and motivate these researchers differently than the core businesses which may lead to high employee dissatisfaction and turnover.
In addition this, being under same umbrella, maintaining effective communication down the level with clear objectives would be a challenge. If DRL has to follow its chase to set up and grow the specialty drug business, it is necessary that they treat it as separate entity focusing on research jointly with Indian and foreign universities and developing formulation. The accepted formulation then can be brought in for manufacturing and distribution through existing BUs.
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