Challenges And Risks For Bex Pharma Business Essay


Bex Pharma is multinational pharmaceutical company. This company has main head office in Dhaka (Bangladesh). In Pakistan pharmaceutical market they import the medicine, store them and perform the function of sales, distribution and marketing. Bex Pharma is private company with 200 employees who perform various tasks. Bex Pharma was located in Lahore and had four million rupees (approximately £18000) monthly sale. The company dispatched the stock to various distributors who further distribute in to various pharmacies and chemist stores within their vicinity. Pakistan has a very vibrant and forward looking Pharma Industry. At the time of independence in 1947, there was hardly any Pharma industry in the country. Today Pakistan has about 400 pharmaceutical manufacturing units including those operated by 25 multinationals present in the country. The Pakistan Pharmaceutical Industry meets around 70% of the country's demand of Finished Medicine. The domestic Pharma market, in term of share market is almost evenly divided between the Nationals and the Multinationals.

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Pakistan's US$1.62bn pharmaceutical market is the 10th largest in Asia Pacific. The National Pharma industry has shown a progressive growth over the years, particularly over the last one decade. The industry has invested substantially to upgrade itself in the last few years and today the majority industry is following Good Manufacturing Practices (GMP), in accordance with the domestic as well as international Guidance. Currently the industry has the capacity to manufacture a variety of product ranging from simple pills to sophisticated Biotech, Oncology and Value Added Generic compounds.

Although Pakistan's pharmaceutical and healthcare sectors are expanding and evolving rapidly, about half the population has no access to modern medicines. Clearly this presents an opportunity, but much more work needs to be done by the government and industry's stakeholders. The value of pharmaceuticals sold in 2007 exceeded US$1.4bn, which equates to per capita consumption of less than US$ 10 per year and value of medicines sold is expected to exceed US$2.3 B by 2012.

Pakistan is a developing pharmaceutical market, with a large population and economic progress evident, but per capita drug spending was rather low at around US$9.30 in 2007. Private spending accounts for 65% of total healthcare expenditure sourced through out-of pocket payments, international aid and religious or charitable institutions. Pharmaceutical spending accounts for less than 1% of the country's GDP, comparable to levels in some neighbouring countries but above that in some of the South Asian countries. The forecast period is likely to witness the marginal strengthening of the generics sector, albeit more in terms of volumes than values. The share of generics is also likely to increase further as major drugs come off-patent in the near term, to the likely benefit of the generics-dominated local industry.

The Pakistan Pharma industry is relatively young in the international markets with an export turnover of over US$ 100 Million as of 2007. Pakistan Pharma Industry boasts of quality producers and many units are approved by regulatory authorities all over the world. Like domestic market the sales in international market have gone almost double during last five years. The Pharma industry is focusing to an Export Vision of USD 500 Million by 2013. In the meantime, exports are also likely to be boosted by new regional and global opportunities.

The Pakistan Pharmaceutical Industry is a success story, providing high quality essential drugs at affordable prices to Millions. Technologically, strong and self reliant National Pharmaceutical Industry is not only playing a key role in promoting and sustaining development in the vital field of medicine within the country, but is also well set to take on the international markets.(PPMA 2010)

Organizational Environment:

Bex Pharma Organization structure can be seen in Appendices p.16. Any organization has two kinds of environment which is Internal and external environment. In the internal environment we analyze the skills and capabilities required to perform various task. These can be analyzed by Resource audit, core competencies, and value chain analysis and change management. In External analysis we analyze the external environment. For that purpose we used the Pestle analysis, Swot analysis, Porter five Forces and Ansoff Matrix. Ansoff matrix is mainly concerned in future decision.

Internal Business Environment: Has the following

Resource Audit: classified in to various categories

Physical resources are building, equipment land and so on

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Human resources are mainly skills; know how, strong teams, good management and so on

Financial resources are ability to raise cash, rich parent and so on

Other resources and intangibles which may include goodwill, brand names and trade relationship.

By assessing these we came to know that which are our strength and weakness. Do we need some help outside the organization and properly useful of resources to maximize the outputs.

Analysis of cost and profit: it is also tool which used to check the progress in term of financial setup

Bench marking is objectively to compare resources, capabilities and process with the highest standard that have been achieved anywhere. This requires comparison with world class. In the resource audit it is very important to explore all resources to show maximum output. However it also analyzed that we have to get the resources from outside to accomplish the task. This is very important tool used to check the capabilities of organization.

Value chain analysis: Porter (1985) introduced the new concept of value chain. His definition of value is the price that a customer is prepared to pay for an offering. Value chain analysis divides the enterprise in to a chain of activities.

Figure (1).Value chain analysis

Primary activities are directly concerned with the creation or delivery of a product or service.

Support activities: Each of these groups of primary activities is linked to support activities and these help to improve the effectiveness or efficiency of primary activities.

Bex Pharma main activities are marketing and sales and operation which are supported by effective procurement, technology and infrastructure. For the value chain, there should be effective communication and team work. (Johnson and Scholes 1999)

Supply chain analysis: is the extension of value chain concept in which the focus is on the value contributed by different players in a supply chain rather than on the different activities of single enterprise. It is a tool of both internal and external analysis as it is review the value contributed by each player from raw material supply to final consumer.

Identifying core competence: A technical or management subsystem which integrates diverse technologies, process, resources and know how to deliver products and services which confer sustainable and unique competitive advantage and added value to an organization. (Tampoe 1994)

Change management theory:


Driver establishes the overall context with which any organizational change occurs. Change is catalyzed by number of forces that trigger first awareness and then action. These signals are originate from organizational environment or market place. Driver act as signal to indicate the change (Anderson and Anderson, 2010)

Internal Drive Resistance Leadership and vision Technology License and up gradation Culture and Management Style Employee Dissatisfaction External Driver Globalization Merger and acquisition Customer satisfaction Collaborative partnership

Figure (2) Internal and external driver effect on Business environment

Note (Arrow thickness show the strength)

Globalization brings the new changes and challenges for the organization. Multinational companies really suffer due to change and make the strategy accordingly. In change management, following theories tool can be used.

Deming Change Cycle:

Deming (1950) give the model regarding the change which is also known as PDCA Cycle. Model has four main parts which is shown below.

Consolidate the processes

Establish a new way of working

What is to be achieved?

Who will be affected?

Where and when happen?

Each step of procedure

4 Act 1 Plan

Act and monitor the results

Train where required

Manage the processes

Do the results meet expectation?

Is modification required?

3 Checks

2 Do what the plan requires

Figure (3). Deming Change Cycle by Deming. (Grieves 2010, p.339)

2 Root cause Analysis: Anderson and Fagerhaug (2006) explained the root cause analysis.

Root cause analysis is a structured investigation that aims to identify the true cause of problem and action necessary. It is similar to cause and effect model. This could be simple with one cause and complex with multiple causes. This can be shown in diagram below. This is the problem solving technique.

What is problem/? A problem is a state of difficulty that needs to be resolved. (Worknet)

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Poor Inventory Poor sales

Dead/ Over Stocking/ Expires

Manual order and recoding system

Old System

Figure (4). Root Cause Analysis. (Anderson and Fagerhaug, 2006 p.5)

Bex Pharma managers planned to use the root cause model to find out the problem. When the problem is identified they used problem solving process to find out the solution which is shown in diagram (4) Bex Pharma Managers realized the symptom which is poor sale then they analyze the problem.

External Environment:








Figure (5).PESTLE analysis

Political: these are political factors which are influenced by Government new policies and rules .This is also affected by tax policy, labour law and trade restriction. This factor overall influence the strategy of organization. If there is political unrest it will create problems for business.

Economic: These factors include economic growth, interest rate, exchange rate and inflation rate. During processing or formulating marketing plan these factors should be considered. Now a day there is recession and every business is struggling so we have to consider it.

Social: It associated customer preference, culture, and living style of population, population growth and attitude.

Technological: In recent century the world is revolutionised by technology. The technology change very rapidly. Research and development and automation are main part of this. Globalization also brings the knowledge of new technology which business has to respond.

Legal: In this we include the health and safety, employment law, consumer law and discrimination law.

Environmental: The environmental factors include environment and ecological change. More companies are interested in climate change e.g. Mark and Spencer introduced plan A which is echo friendly. This is mainly associated with proper handling of waste materials.(Cannon 1998)

Five Forces Model

Porter five forces: Porter (1980) explains the five forces who affect the marketing strategy.

Porter five forces mainly provide the information about market, competitors, buyers and supplier. By proper analyzing these factors, the specific business sector can achieve the competitive advantage. The new entrants are always threat which can enter in the market. The existing competitor can affect by unique product, superior quality, customer care and service. The buyers can be targeted by their socio culture trends and preference. By analyzing the various suppliers we can amend the term and condition which are suitable for organization and business.



Competitors Rivalry


Potential Entrants

Threat of new entrants Bargaining power of suppliers Bargaining power of buyers Threat of substitutes Figure (6) Five forces model by Porter. (Cheverton 2004, p.29)

Rivalry competition always acts as barrier for new entrants. (Bonne et al. 2010)

SWOT Analysis This model is given by Humphery (1960). This is the basic model which gives the information of the business and organization strength and weakness. The opportunity and threat which can organization have. By this basic model we can analyze the internal as well as external environment.

Stake holder analysis by Ansoff matrix:

Kellaway (1999) has suggested that the only way for a company to stand out is by not having a mission statement at all as they seem to be the same.

Stake holder is any group with an interest in the activities and result of enterprise. Different group of stakeholder tend to differ in their values and tend to have different views. Analysis of stakeholder cannot be precise but it is useful to identify


Least Important

Consult and Involve

Avoid Annoying

High Extent of power


Low High Inclination to exercise power

Figure (7) Model for analysing stake holder power

These tool help to determine where we are standing and what should we do for future. The strategy can be formulated accordingly. Now we will discuss the strategy and planning.

What is strategy: Drucker (1955) describe that management has no choice but to anticipate the future, to attempt to mould it or balance short range and long range goal.

Mintzberg (1989) also describe that manager's work at an unrelenting pace and their activities are characterised by brevity, variety and discontinuity.

Corporate strategy: is concerned with the overall purpose and scope of the organization to meet the expectation of owners and or major stake holders and add value to different part of the expertise.

Goold et al. (1994) give the historical development of thinking on corporate strategy.

How the concepts of corporate strategy have developed




Corporate strategy


Overload at centre




Quest for growth

General Management Skill



Resource allocation

Portfolio planning

Balanced portfolio


Value gaps

Value base planning



Defining the core business

Dominate logic core competencies

Linked Portfolio


Share holder value

Exceeding cost of capital

Focus on value

Source: Adapted from M. Goold, A. Cambell and M. Alexander, Corporate Level strategy, Wiley (1994)

Amram and Kulatilaka (1999) suggest that many strategic choices can be valued directly by marketers by assessing them as financial option. Corporate strategy also addresses the question to extent of the corporation and is necessarily closely related to mergers and acquisition. Corporate strategy must address the question about the direction, values and scope of business as a whole and how it intends to operate .In practice corporate strategy are sensitive to the demands of financial market. These can limit the logic of strategy management.

In Publicly quoted business, corporate level strategy is heavily influenced by the expectation of share holders and the stock market. The second level can be thought in terms of business unit strategy. Strategy is about how to compete successfully in a particular market and how advantage over competitors can be achieved. New opportunity can be identified and created in markets. It also concern with the customer need, demands, long term profitability and market growth or measure of efficacy. There are some models which summarise and show the link between them.

The strategic Planning, implementation and control processes

Planning Implementing Controlling

Measuring Result

Diagnosing result

Taking corrective action



Corporate planning

Divisional planning

Business planning

Product planning

Figure (8)Strategy planning and implementation

Strategy Formulation: Brews and Hunt (1999) explained that planning process need several years to bed down and begin to produce results.

There are eleven steps or things which are mainly consider in formulation

Customer awareness, Supplier relationship, Stakeholder influence, understanding of competence, Awareness of technological changes and innovation, Mix of people involved in the process, Encouragement and understanding of top management, Communication and feedback, A sound logic and balance of process, Process design and consider role of external support.

Tri angle of corporate strategy

Competitive Advantage


Resources Vision Business

Goal & Objectives

Co Ordination Control

Organization, systems process

Figure (9) Corporate Triangle

Source: Adapted from Collis and Montgomery (1998) corporate advantage, Harvard business review

This is the basic triangle which is supported by organizational business structure and system. Strategy is directly influenced by the business environment and change accordingly to achieve the objectives and goals. Strategy is planned with respect of business environment.