Strategic Management Essay
This report examines an Indian pharmaceutical industry has a have biggest impact on Cipla in its operating environment, i made a comprehensive analysis Cipla with three analyzing tool, that is PESTEL, SWOT and Porter Five Forces. Starting with PESTEL analysis, political is not the advantage for Cipla, excepting those policy I mentioned in essay, free market index is very low in India.Significant socio-cultural trends identified by the report are the emerging trends, this sector is one of the sectors in Sunrise India. It ‘grew by about 10% every year. Indian companies have only 7% of the shares of the global pharmaceutical market, but is expected to become a major player in the drug design innovative and active pharmaceutical ingredients (API). There are 74 FDA-approved manufacturing facilities in India, more than in any country outside the United States.
Research firm Global Insight in London estimated that the global market share of the generics sector is India will be increased by 33% over the next 5 years. Three main value creating functions Cipla are: inbound logistics, where the control Cipla’s distribution of its products to help ensure the quality and efficiency of the distribution; operations through which the inventory management and the evaluation process rigorous quality help in the creation of value; and marketing and sales, in which advocacy Cipla ensure it remains competitive. We found three resources and capabilities Cipla be your highly efficient supply chain in the world, the reputation of the brand and its effective management of the upper level most valuable Formulation Research and Development at Cipla is carried out by experienced technicians chemical scientists, and. The R & D center is oriented towards the development of technologically challenging products. Over the years, the team of R & D innovation Cipla has created several distinctive technology-based products that improve patient comfort and compliance. Cipla’s mission is to be a leading global healthcare company which uses technology and innovation to meet everyday needs of all patients.
1. PHARMACEUTICAL COMPANY
Cipla Limited is an Indian pharmaceutical company as well as is well known all over the world because of its strong performance and future potential growth. This company maintains world class quality among all their products and services. Since inception caring has been the core of everything at Cipla ltd. This company aim is to be a leading global healthcare company which uses technology and innovation to meet everyday needs of all patients. The development of economic globalization, the enterprise merger and reorganization is an effective way to increase their competitiveness, maintain the living space and sustainable development. In the essay, through PESTLE, SWOT and Porter’s five forces analysis of Cipla Limited to understand the pharmaceutical industry in India. Cipla Limited was founded in 1935 by Khwaja Abdul Hamied Indian nationalist scientist, during the years of history, the headquarter is located in Mumbai central, India (Mumbai).
The campaign is engaged in innovative pharmaceutical, life of science which balances the cutting of edge technology and innovation with the everyday needs of all patients. By 2013, Cipla has 27500 employees in several branches all over the world. The company incurred 10.36 billion Indian rupees in 2013 on employee benefit expenses, In 2013, inclined its stake in South African joint venture CIPLA Medpro nearly 50% to 100% of the share capital of $4.56 U.S billion to strengthen its position in the African continent in 2012, the company has slashed prices of the three life-saving cancer drugs of 50-64%.The successes of Cipla have to own to its strong strategic management.
Cipla’s research and development focuses on developing innovative products and drug delivery Systems and has given India and the world many ‘firsts’. In a tightly regulated environment, the Company’s manufacturing facilities have approvals from all the main regulators including USFDA, UKMHRA, WHO, MCC, ANVISA, and PMDA which means the company provides one universal standard of quality both domestically and internationally. It forces on release the new products, especially its proprietary, innovative and high quality products. Then it makes sure to provide quality comprehensive after-sales service, provide the innovative solutions to local customers. The strategic management becomes the key element to help Cipla’s success.
2. PESTLE ANALYSIS
Identifying PESTLE influences is a very useful way of summarizing the external environment in which a business or industry operates ‘these issues affect the strategic development of business’. The acronym stands for the Political, Economic, Social, Technology, Legal and Environment. “PESTLE analysis is concerned with the environmental influences on a business”.
2.1 POLITICAL AND LEGAL FACTORS
Government spending increases the revitalization of the pharmaceutical industry. The increase of government-led investment provides a material basis for developing pharmaceutical industry, and indirectly promotes personal and social health care spending, and the expansion of medical market. The New Health Care plan further clarify that the train of thought and scope of government pricing, and the pricing mechanism of the new regulations has published in the new drug, patented drugs and generic drugs to standardize the pharmaceuticals price regulation.
The plan also ask that establish a scientific and reasonable medicine price mechanism to reasonable adjustment scope of government pricing, improve the pricing method and its transparency; use price leverage to encourage enterprises for independent innovation to promote the production and use of national essential drugs. For new drugs and patented drugs’ price shall be gradually decided before economic evaluation system. In addition, for the pharmaceutical industry there is a huge segment power supply is chronically ill and highly inefficient. The government puts the surplus generated by the efficient units in the clearing price on account of inefficient units benefiting unduly subsidizes them. 2.1 ECONOMIC FACTORS
Economic factors include economic growth, interest rates, exchange rates and inflation. These factors have a big impact on how businesses operate and make decisions. For example, the excise duty, customs duty, service tax, Professional tax and a host of other levies and taxes payable. On an average amount of not less than 40-45% of the costs. India is a regime of high interest rates; therefore, the cost of funds is twice that in the United States. The rapid growth of disposable income of urban residents and rural areas, paved the way for further spending on the medical market. The per capita income of an average Indian is low. Therefore, spending on health care is a low priority. 2.2 SOCIAL-CULTURAL FACTORS
First of all, Social factors, including cultural aspects and health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company’s product and works as a pharmaceutical company. This also depends on the way how people are living in modern era because of change in people life style and mind. For example, smoking, tobacco, alcohol, and poor oral hygiene is adding to the problem of health. Moreover, in India, poor sanitation and contaminated water sources prematurely end the lives of nearly 1 million children under five every year. But today the new generation with higher education becomes more and more consumers nucleus, and recently India relaxes the one-child policy, which can form the huge potential market in the future two to three years.
2.3 TECHNOLOGICAL FACTORS
Technology mainly refers to national science and technology system; Technological factors include technological aspects such as R & D activity, automation, technology incentives and the rate of technological change. They can determine barriers, minimum efficient production level and influence outsourcing decisions. In addition, technological changes can affect the cost, quality, and lead to innovation. In India, infrastructure improves a lot in recent years, such as traffic system, network system, fundamental manufacturing and operating structure, which can reduce companies’ operating cost and increase their productivity. Moreover, India positively launches research and development projects in pharmaceutical field coordinating with some academic industry.
2.4 ENVIRONMENTAL FACTORS
Pharmaceutical companies have to meet some threats due to the development and change of the natural environment. In order to avoid the threat of natural environment, the pharmaceutical companies have to analysis and understanding the tendency of changes in the natural environment. Environmental factors include ecological and environmental aspects such as weather, climate and climate change, which may especially affect industries such as tourism, agriculture and insurance and all that kind of look like a large influence on the production of medicine and the price, which for many pharmaceutical companies represent a serious threat to the survival and development.
3. SWOT ANAYSIS
A scan of the internal and the external is an important part of the strategic planning process. Internal environmental factors for the industry can be classified as strengths (S) or weaknesses (W), and external factors, such as opportunities (O) and threats (T). This analysis of the strategic environment is referred to as a SWOT analysis. 3.1 STRENGTHS
As we all know, Cipla comes under top 10 pharmaceutical company in the world. So that’s why Cipla has a well known and trusted campaign in pharmaceutical industry, in other words, Cipla has a good reputation, which can make a positive effect on its sales volume and potential market. On the other hand, technology is extremely critical for company, it can enhance technology level and diversify the products, and even reduce company’s cost and increase productivity. Cipla has developed good positive image by providing support to cancer patients by issuing drugs at low cost, Imminent commencement of the Fixed-Dose combination for treatment of uncomplicated “P. falciparum” malaria to tackle the 200+ million cases of malaria globally and Initiation of ‘No Touch Breast Scan’ a step forward in the screening technology in India. Has a strong employee force of over 26,000. A foremost player in anti-infective and anti-asthmatic formulations are showing as the strengths of Cipla limited in pharmacy sector. 3.2 WEAKNESSES
Every coins has two sides, the drawbacks of Cipla cannot be ignored. This company has lots of disputes on some products like Taxotere, this kind of product can do harm immune system because this medicine is used for breast cancer, lung cancer, stomach cancer etcetera and, increasing the risk of diarrhea or vomiting, high fever ,chills, body aches and more on. And at that time, Cipla give the victims compensation up to INR 2.30 billion , which has an adversary effect on its reputation. And these kinds of events greatly discourage investors, reducing the investment confidence, which may highly affect company’s revenue. Therefore, Cipla has low liquidity injections, and Cipla had faced problems during negative campaign by AHF (AIDS Healthcare Foundation). That why its operating activities may be affected and even suffer more financial crisis. There is another obvious weakness, that is high charges comes from two aspects, one is because of violation of regulations and reputations, charged by based-on government, another is because of high expenditure on research and development. 3.3 OPPORTUNITIES
Cipla’s opportunity mainly comes from three aspects, firstly, now in the developing countries like India, as an emerging market, company should have to capture and then dominate this market, only if doing like this, can a company have competitive position. If you want to capture a market ahead of other pharmaceutical company, Cipla should be the leader and pioneer by releasing products ahead of others. Because Cipla has strong research and development as a backbone and increased investment in the budding markets, to push expansion in the global economy. Secondly, Cipla always do philanthropy like domination, which can enhance confidence of shareholders and investors, it may increase company’s potential profit. Thirdly, it may be the opportunity for most of pharmaceutical companies to expand by the way of multinational. Cipla have operated in more than 150 countries already. Cipla do merges and acquisitions, which can diversify its services and products, and then enhance its research and development.
CIPLA’s threats are exhibited as below. On the one hand, regulations and actions and even the policy can increase the threats in the terms of credibility as it has been happening in the past decades. On the other hand, CIPLA confronts strong challenge and menace coming from its core competitor like Sun pharma, Dr. Reddy lab. Lsupin, Ranbaxy and lots of company and so forth in the process of capturing and dominating emerging market. last but not the least, CIPLA faces some problems such as the patent of its some products is going to expire, and if no further impressive actions and measures be adopted, CIPLA may suffer greater loss because of government’s stipulations and regulations. Moreover, Constant price rises in the Indian country is taking its toll and compounding the problem. The Indian Rupee depreciated as compared to the US Dollar and at last fluctuations in currency exchange rates have a noteworthy impact on the Company’s operations and financial results.
4. PORTER’S FIVE FORCES ANALYSIS
The model of five forces analysis was developed by Michael Porter to analyze the competitive environment in which a pharmaceutical company works. This is a framework for industry analysis and business strategy development. It uses concepts developed in Industrial Organization economics (IO) to derive five forces that determine the competitive intensity and therefore the benefit of the global market. Help the Porter Five Forces Model strategic business managers analyze the sector in which the companies operate to determine what can be done to gain an advantage over existing competitors and also to determine how attractive a particular area would be for new entrants. 4.1 BUYER POWER IS LOW
The bargaining power of customers is also described as the market of products: the capacity of customers to put the firm under pressure, which also affects the sensitivity of customers to price changes. Companies can take steps to reduce the power of buyers, such as the implementation of a loyalty program. The purchasing power is higher if the buyer has many alternatives, such as hospitals and other healthcare organizations to buy in bulk and put pressure on pharmaceutical companies to keep prices under control and regular patients have lost bargaining power due to increases in prices of generic drugs. Cipla come under the top 10 pharmaceutical company in the world, and the price of most of its products is fixed, decided by company but under different country’s drug price policy. What is more, the customer of Cipla is scattered, under the condition that customer core is not centralized; their bargaining power will be diluted. Moreover, most of its products are patented, so customer has less choice, so the bargaining is small against company. 4.2 SUPPLIER POWER IS LOW
The supplier influence the profitability and product competitiveness of the existing pharmaceutical companies mainly by the ability of increasing the price inputted and reducing the unit value of quality. The strength of the material supply power is decided by the product of the drug firms. When the pharmaceutical raw materials provided by the supplier occupy a larger proportion in the product engaged by the buyer, or the raw materials is necessary, the potential bargaining power will greatly enhanced. For Cipla, many suppliers have registered in its portal to do business with Cipla, which actually make a sense of competitiveness within the suppliers and Cipla do not need to suffer a very high cost. So it is hard for the suppliers to increase their price. 4.3THREATS OF NEW ENTERANCE IS LOW
When new entrants in the pharmaceutical industry have brought new production capacity and new raw material, they want to get a certain market share in saturated pharmaceutical markets, which will cause the competition with the existing pharmaceutical companies in the items of raw materials and market share. But it has to say that the threat of new entrants is low. A new pharmaceutical company’s establishment needs a lot of investment. They also need to do many researches to understand the market. The most important thing is that they have the hit product to absorb their customers. And the innovation of new products also exist a huge risk. 4.4 THREATS OF SUBSITUTE PRODUCTS IS LOW
Existing two pharmaceutical company’s belongs to the pharmaceutical industry may produce some productions that are substitute of others. Competition on substitute can have an influence on company’s competitive strategy. If one product has lower price and higher quality even more effective, it most likely becomes substitute of similar product in this industry compared with another one, in this market, there are certain kinds of substitute of Cipla’s product like those products manufactured by small company. Because their operating cost is relatively small compared with Cipla, these products have more price competitive advantages if customer’s mind is prone to price element not the higher quality; But most customers in market are prefer drugs’ quality and effective, Cipla’s products got sufficient funds as its backbone, so its products with higher quality and more effective, it counts for why it is relatively hard be replaced by other products. 4.5 RIVARLY AMONG EXISTING FIRMS IS HIGH
In the pharmaceutical industry, for most pharmaceutical companies, their interests are closely related. Every company has their own strategy; its goal is to make themselves have more advantage than competitors. So, it is the inevitable result, in process of the implementation will cause the phenomenon of conflict and confrontation, which brings the existing competition among enterprises. Such as, Sun pharma has already started to attempt to monopolize the industry depending on continuous development of products. In these circumstances, Cipla also encounter some strong competition from these various companies, especially in the field of obtaining patency for the products, marketing its products and increasing the market share.
The changing global scenario in the sector needed to make important strategic decisions to maximize our effectiveness health. Any activity that must have vision, mission, objectives and organizational structure. To cover the entire company criteria or the need to take a strategic decision to build from where you can reach the point of your main goal. Businesses should support all major processes other factors. I understand that strategic planning has the opportunity to face our next crisis. Provides effective drugs within a sustainable budget for health care, with a specific focus on information to patients on diseases and treatment options. Recommendations
The Cipla recognizes the Pharmaceutical Forum is the part of a broader health information context, as identified as India’s second largest drug firm. Cipla bags award in the Field of Export of Pharmaceuticals during the year conferred the Highest Award ‘Platinum’ and In April 2013, former US President Bill Clinton praised Cipla and other Indian generic drug companies for their contribution in the fight against HIV/AIDS and noted that their cheap drugs saved millions of lives. In addition, all relevant performers, including national authorities, the Commission, the parties to the public health and industry, should ensure high quality information and then commit to implement and use the principles of quality fundamentals. Member States, stakeholders and the Commission are invited to implement specific recommendations identified to increase the accessibility and dissemination of health information in health centers. The optimal use of national budgets should take into account the needs of patients.
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