BUS 690: Strategic Management

North South University

Pharmaceutical Industry of Bangladesh

In Bangladesh Pharmaceutical sector is one of the most developed hi tech sector which is contributing in
the country's economy. After the promulgation of Drug Control Ordinance - 1982, the development of this
sector was accelerated. The professional knowledge, thoughts and innovative ideas of the pharmacists
working in this sector are the key factors for this development. Due to recent development of this sector
we are exporting medicines to global market including European market. This sector is also providing
95% of the total medicine requirement of the local market. Leading Pharmaceutical Companies are
expanding their business with the aim to expand export market. Recently few new industries have been
established with hi tech equipments and professionals which will enhance the strength of this sector.

Bangladesh, currently having more than a couple of hundred manufacturing facilities with huge potential
in pharmaceutical formulations, is heading on a new path of industry economics for self-reliance. Aiming
at minimizing the import dependency on basic drugs, the country's prime concern is about building up of
own capability in the manufacturing of active pharmaceutical ingredients(APIs), base materials and other
allied industry inputs. The combined capacity of the industry for the pharmaceutical formulation is huge
and a number of companies have recently got approval from UNICEF as its global as well as local
supplier of pharmaceutical products.

Out of the total domestic requirement of medicines almost 95 per cent is met by the local manufacturing
and Bangladesh also exports formulations to 27 countries around the world. The current turnover of the
industry in Bangladesh is Tk. 3,000 crore. According to industry sources, the formulation industry in
Bangladesh currently grows at the rate of 22 per cent. With this estimate, the expected business in year
2005 is 50,000 million Tk. Today, Bangladesh is dealing with USA, India, China, Taiwan, Hong Kong,
European Union, Singapore, Malaysia, Pakistan, Sri Lanka, Thailand, Burma, Bhutan, Nepal, Yemen,
Mauritius, Vietnam, Kampuchea, Laos, Mexico, Columbia, Ecuador, Kuraso Russia, Uzbekistan,
Tazakistan, Kenya, Tunisia, Maldives, etc. as well as with the least developing countries where there is
hardly any industry for the production of pharmaceutical formulations.

Turnover from pharmaceutical sector is encouraging which is about 14% of total industry turnover is. This
position also indicates the positive sign for investment in pharmaceutical sector. Though the country has
all the potential to become a major global source of APIs and will also be able to produce drugs, which
are still under patent protection, as the TRIPS Council meet at Doha has declared the least developed
country (LDC) status to remain without patent regime till 2016, it needs active participation and
contribution from local as well as foreign companies to build upon the capability.

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North South University

However, the trend now seems to be favorable to the country as the domestic pharmaceutical industry as
well as the companies from neighboring countries like India, China and even MNCs have queued up to
put in investments on this front as every stakeholder will benefit of vast potential that Bangladesh can
offer. The local entrepreneurs are capable and willing to invest and collaborate with suitable foreign
partners in order to develop the existing API manufacturing facilities.

Presently top pharmaceutical companies in Bangladesh are also in the process of getting into bulk drug
production with collaborative technology, technology transfers and joint venture basis. The large-scale
players in the Bangladesh pharmaceutical industry currently include Square Pharma, Beximco, Alma,
Apson Chemicals, FEI, Araneta, General Pharma, Hudson Pharma and SKF among others. The MNCs
that have a major presence in the country's pharma sector are Aventis, Pfizer, Novartis and Astra
Zeneca.

Bangladesh's Largest Pharmaceutical Companies (by sales of 2008)

SquarePharmaSalesin$ Million(Year2008)
Drug
International
Aristopharma 5%
6%
Renata Square
6% 31%

Top 10
Opsonin
7%

ACI
7%
Eskayef
Incepta
7%
12%
Acme
8% Beximco
11%

Square
Square Incepta Beximco
Acme Eskayef ACI
Opsonin Renata Aristopharma
DrugInternational

Incept
Beximc 2
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North South University

About Square Pharmaceutical

Square was founded by Chairman Samson Chowdhury and three friends in 1958. Today, Square is the
largest Bangladeshi pharmaceutical firm with net revenues of 6.09 billion Taka (86.6 million USD) and
profits of 1.17 billion Taka (16.6 million USD) (Square Pharmaceuticals 2005-2006). In 1974, Square
entered into a third party licensing agreement with Jansen Pharmaceuticals (a subsidiary of Johnson &
Johnson) to manufacture and sell five Jansen patented products in Bangladesh. Square was presented
with a business opportunity that significantly changed it. With Jansen’s name on the product as well as
Square’s, Jansen had a vested interest to ensure product quality. Jansen therefore trained the local staff
and Square sent staff to Belgium for more training with Jansen. The collaboration also exposed Square to
international standards of quality manufacturing. The relationship had a profound affect on Square’s
executives and how they approached business. Chairman Chowdhury attributes much of Square
Pharmaceuticals’ success to this initial licensing arrangement. The arrangement ended in 1982 with the
new Drug Control Ordinance that prohibited this type of arrangement.

SQUARE: Vision, Mission & Objective

VISION
We view business as a means to the material and social wellbeing of the investors, employees and the
society at large, leading to accretion of wealth through financial and moral gains as a part of the process
of the human civilization.

MISSION
Our Mission is to produce and provide quality & innovative healthcare relief for people, maintain
stringently ethical standard in business operation also ensuring benefit to the shareholders, stakeholders
and the society at large.

OBJECTIVE

Our objectives are to conduct transparent business operation based on market mechanism within the
legal & social frame work with aims to attain the mission reflected by our vision.

SQUARE: Quality Policy

Ensure strict compliance with WHO cGMP standards and local regulatory norms in every phase of
sourcing & procuring quality materials, manufacturing, quality assurance and delivery of medicines.

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North South University

Ensure all activities through documented Quality Management System (QMS) complying International
Standard requirements of ISO 9001 through continuously developing Human Resources by regular
training and participation.

SQUARE is committed to undertake appropriate review, evaluation and performance measurement of

processes, business activities and Quality Management System for continual improvement to ensure
highest standard, customer satisfaction, developing human resources and company's growth.

SQUARE: Export Market

1. Exports pharmaceutical finished products since 1987

2. Offers quality products at competitive price
3. Offers more than 250 off-patent and on-patent molecules
4. Offers facilities for contract manufacturing
5. Provides assistance in product promotion and training in overseas markets

Present Markets
Square pharmaceutical’s is already supplying products to the following markets:

Europe: UK
Asia: Afghanistan, Bhutan, Cambodia, Hong Kong, Iraq, Macau, Malaysia, Myanmar, Nepal, Papua New
Guinea, Sri Lanka, Tajikistan, The Philippines, Vietnam, Yemen
Africa: Comoros Islands, Eritrea, Gambia, Ghana, Kenya, Libya, Malawi, Mauritania, Mauritius,
Mozambique, Niger, Rwanda, Sierra Leone, Somalia, Sudan, Tanzania
South America: Belize, Costa Rica, Guatemala

Markets under Exploration

Asia: Iran, Iraq, Kuwait, Laos, Maldives, Mongolia, Qatar, Saudi Arabia, Thailand, UAE
Africa: Algeria, Botswana, Central African Republic, Chad, Ethiopia, Ivory Coast, Nigeria, Rwanda, South
Africa
South America: Jamaica, Chili

About Incepta

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North South University

Incepta was founded in 1999. It wants to position itself as a research-based dosage form manufacturing
firm with a global presence. It currently focuses on more technologically advanced products such as
sustained-release tablets, quick mouth dissolving tablets, barrier-coated delayed-release tablets, etc.
Incepta is interested in adding API production and reverse engineering capabilities to its business.
Incepta has grown rapidly. Within five years of its establishment, it became the third largest Bangladeshi
pharmaceutical firm. By 2004, Incepta’s turnover stood at 1.2 billion Taka and a product portfolio of 125
brands and almost 1,500 employees. A young and entrepreneurial management team, which gained its
experience in international, regulated markets such as Europe and the United States, is credited with
much of its success. To fund this growth, Incepta did not use bank financing, except for a small amount
during the first two years. The start-up team initially capitalized from family and friends and has funded
expansion through annual earnings.

About Beximco

Beximco is one of Bangladesh’s largest pharmaceutical exporters. It began exporting to Russia in 1992.
Learning how to register products in foreign markets was a challenging experience for Beximco, but it
proved profitable. Export profits were 37% higher than from domestic sales. After Russia, Beximco
expanded to other markets. It is currently registered to export to 23 countries: Botswana, Cambodia,
Georgia, Ghana, Hong Kong (China), Kenya, Iran, Malaysia, Mozambique, Myanmar, Nepal, Pakistan,
The Philippines, Russia, Somalia, Singapore, South Korea, Sri Lanka, Taiwan, Ukraine, Vietnam, and
Yemen. In the early 2000s, Beximco started to upgrade its facilities to obtain export certification to more
regulated markets.

We choose Square Pharmaceuticals Limited for the project as they are the market leader in our country
and their expansion strategy is also highly innovative. Below are the some evidences behind our choice:

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North South University

Evidence for Outstandingly Successful

1,40,00,000
SquarePharmaProfitabilityAnalysis
Figures in '000
1,20,00,000

1,00,00,000

80,00,000

60,00,000

40,00,000

20,00,000

-
2005-05 2005-06 2006-07 2007-08 2008-09

Turnover (Gross) Net Profit Total Assets

Square pharmaceuticals net profit took a considerable increase over the recent years. Whereas, the total
turnover and total assets have significantly increased over the years.

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North South University

SquarePharmaGrowth Vs. IndustryGrowth

25.00% 22.94%

20.00% 18.83%
17.50%
15.80%
14.30%
15.00% 13.08%

9.81%
10.00% 8.60%
6.91%

5.00% 4.08%

0.00%
2004 2005 2006 2007 2008

IndustryGrowth rate Square'sgrowth rate

Principal Source of their Competitive Advantages

1. Strong Distribution Channel

SPL has the strongest distribution network for smoothing distribution of medicines to all parts of the
country. Currently it has 15 depots all over the country. Those are situation at Dhaka, Pabna, Bogra,
Rangpur, Khulna, Barisal, Comilla, Mymensingh, Chittagong, Noakhali, Sylhet, Tangail, Rajshahi,
Faridpur and Naryanganj. It uses own transport system to deliver its product to the stockliks and retailer.

2. Human resource management

Year 2007-08 2006-07 2005-06 2004-05 2003-04

Executives 1,525 1,242 1,143 949 895
Staffs 1,110 913 796 740 686
Workers 929 846 764 705 661

All manufacturing units are staffed with adequate number of Professionals related to Pharmaceutical
sciences in accordance with WHO guidelines in order to produce good quality, safe and effective drugs
and pharmaceuticals.

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North South University

Adequate number of other supporting trained and skilled technical personnel is employed for smooth
functioning of the manufacturing plant. SPL has a dedicated team of adequate professionals for smooth
functioning of the company.

It has a team of more than 300 well-trained employees to market it’s product countrywide which is second
to none. Square strives for best compensation to all the employees who constitute the back-bone of the
management and operational strength of the company through a pay-package composing salary/wages,
allowances, bonuses, profit participation, leave salary and superannuation & retirement benefits.

In order to improve productivity of human input, the company continuously provide formal and informal
training to the employees at every echelon of operation and management. During the year under 2008
2247 person received in-house or in-operation/on the job training at home and abroad which will
ultimately make great contribution to the company's profitability as well their own remuneration in due
course.

3. Revenue Management Model

Total revenues are highly dependant on sales from a small number of drugs. Because, In the
pharmaceutical industry, the pharmaceuticals products are divide in to two broad categories: (a) Over the
Counter (OTC) - Can be advertised of commercialized (b). Prescribed only Medicine (POM) - Strictly
regulated in terms of pricing and approaches. SPL strives to increase the sale of those POM drugs.

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North South University

4. Marketing Mix

Price
(All most
regulated)

Product Square Place

(Medicine) Pharma (Domestic &
Foreign)

Promotion
(Personal selling
through
relationship)

Product: SPL develops, produces, and markets drugs of different therapeutic groups licensed for use as
medications. The Bangladeshi Pharmaceutical Market is primarily a generic market producing both
patented and off-patented products. This is popularly known
as Branded Generic Market since any manufacturer can produce the same molecule (either patented or
off-patented) and market it in different brand names. SPL is not beyond this scenario. It produces off-
patented molecule and market it in it’s own brand. The product list according to generic segment can be
found in appendix part.

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North South University

Price: Drug pricing is heavily dependent on the National Drug Policy adopted by Directorate of Drug
Administration of Bangladesh Govt. Governments agencies act as a countervailing power in pricing
pharmaceuticals. As per the NDA 2005, regulatory authority pursuing “Rational pricing” of drugs to ensure
essential drugs available to the end-users at affordable prices. On the basis of that policy, SPL has been
pursuing two different kinds of pricing policy:
a. For OTC product, all most similar price as the competitors’.
b. For POM product, competitive pricing.

There are also few exceptions. If SPL introduces a product first in the market, it charges little bit higher
price than it’s competitors, but within the rules and regulations of Drug Administration.

Place: SPL has the strongest domestic distribution network for smoothing distribution of medicines to all
parts of the country. Currently it has 15 depots all over the country. Those are situated at Dhaka, Pabna,
Bogra, Rangpur, Khulna, Barisal, Comilla, Mymensingh, Chittagong, Noakhali, Sylhet, Tangail, Rajshahi,
Faridpur and Naryanganj. It uses own transport system to deliver its product to the stockist and retailer.
SPL also exports its products to 31 countries.

Present Export Market Covers

Myanmar Nepal Kosovo Kenya
Libya Mauritius Malawi Yemen
Tanzania Sri Lanka Somalia Vietnam
Afghanistan Ukraine Uzbekistan Ghana
Iraq Benin Botswana Bhutan
Cambodia Comoros Island Tajikistan
Mozambique Gambia Niger Rwanda
Papua New Guinea Sierra Leone Macau Countries

Promotion: Public advertisement for medicine, especially POM drug is strictly prohibited in Bangladesh.
But it may be done for OTC medicine to some extent. However, no pharma company in Bangladesh is
engaged in such advertisement. SPL heavily depends on personal selling through rapport building and
maintaining. A team of sales representatives, called MPO have been employed to meet with physicians to
explain the merits, demerits, indication, contraindications, etc. of the medicine with the help of literature,
brochure, pad, booklet, leaflet, gift item etc. That is, the Medical Promotion Officers promote the
companies product to doctors front with the help of different promotional materials. If a new drug is to be
more expensive, then it needs to demonstrate that its superior performance is worth it.

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Its promotional activities can be illustrated as follows:

Relation Development
Marketing& Sales
Core Customer
Literature, brochure, pad, Team
booklet, leaflet, gift itemetc.
EndCustomer

Non-coreCustomer
(Retailer)

Customer (Stockist)

Customer (C&F)

5. Consistent up-gradation

SPL’s another strategy is upgrading and adopting new technology for it’s manufacturing plants
consistently so that it can produce quality product with comparatively lower cost.

6. Low manufacturing cost through vertical integration

To expand it’s market with low cost products, SPL’s strategy is to integrate itself more vertically so that it
can get the raw materials cheaply. It has its own API manufacturing facilities and more API factory is
being established.

7. Research and Development Activities:

As a part of corporate social responsibility for good governance the company maintains a team of
scientific pharmaceutical experts who continuously conduct research and development programs for
improving quality of products, reduction of cost, adaption of products that are free of intellectual property
rights and innovative products. These efforts have enabled the company to add new products to its

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North South University

product lines e very year to the benefit of the common men of the country and the shareholders. The
success in this field has secured the leading position for the company in the pharmaceutical sector.

8. Technological up-gradation:

The company is endeavoring to upgrade and adopt new technology in production, quality control,
distribution and administration of its products to patients. During the year 07-08 the company invested an
amount of 36 million in improving its laboratory.

Company’s Most Important Rival

Brand Image
Unrenowned OTC market
Poor capturing to the opinion leaders
Infrastructure
Headcount
Raw materials
Followers
Poor distribution policy in the local market
Not operating in low cost market
Insufficient working capital

Organizational Competencies & Strengths of Management process

The Philosophies as have been adopted by Square Pharmaceuticals Ltd. are as follows:

• Businesses should support and respect the protection of internationally proclaimed human rights
within their sphere of influence;
• Make sure that they are not complicit in human rights abuses.
• Businesses should uphold the freedom of association and the effective recognition of the right to
collective bargaining;
• The elimination of all forms of forced and compulsory labor;

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• The effective abolition of child labor and

• Eliminate discrimination in respect of employment and occupation.
• Business should support a precautionary approach to environmental challenges:
• Undertake initiatives to promote greater environmental responsibility;
• Encourage the development and diffusion of environmentally friendly technologies.
• Business should work against corruption in all its forms, including extortion and bribery.
• Square strives, above all, for top quality health care products at the least cost reaching the lowest
rungs of the economic class of people in the country. Square values our social obligations.
• Square owes our shareholders and strive for protection of their capital as well as ensure highest
return and growth of their assets.
• Square strives for best compensation to all the employees who constitute the back-bone of the
management and operational strength of the company through a pay-package composing
salary/wages, allowances, bonuses, profit participation, leave salary and superannuation &
retirement benefits.
• Square strives for the best co-operation of the creditors & debtors the banks & financial
Institutions who provide financial support when Square needs them, the suppliers of raw
materials & suppliers who offer them at the best prices at the opportune moments, the providers
of utilities-power, gas & water etc. and the customers who buy our products & services by
redeeming their claim in time by making prompt payment and by distributing proper product on
due dates to our customers.
• Square strives for fulfillment of our responsibility to the government through payment of entire
range of due taxes, duties and claims by various public agencies like municipalities etc.
• Square strives, as responsible citizen, for a social order devoid of malpractices, anti-
environmental behaviors, unethical and immoral activities and corruptive dealings.
• Square strives for practicing good-governance in every sphere of activities covering inter alia not
being limited to, disclosure & reporting to shareholders, holding AGM in time, distribution of
dividends and other benefits to shareholders, reporting/dissemination of price sensitive
information, acquisition of shares by insiders, recruitment & promotion of staff, procurement &
supplies, sale of assets etc. all that directly and indirectly affect the interest of concerned groups -
the shareholders, the creditors, suppliers, employees, government and the public in general.
• Square strives for equality between sexes, races, religions and regions in all spheres of our
operation without any discriminatory treatment.
• Square strives for an environment free from pollution and poisoning.
• Square strives for the achievement of millennium development goals for the human civilization.

Recommendation for the Company

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Expanded Missionary selling technique:

Doctors are the only opinion leader in SPL’s present strategy. It may be partially good, but can not be
perfect as the completion becomes more intense day by day. There are some other parties who has the
scope and ability to act as “opinion leader” and to motivate the buyer. These potential “opinion leaders”
are remaining unexploited. SPL has enough resources to let them add value to the company. Hereby we
are proposing a hypothetical model to correct this strategy-

Profit Sharing
Customer (Stockist)

Marketing& Sales Non-coreCustomer

Team (Retailer)

Core Customer
(Doctors)

EndCustomer
(Patient)

In this model, Retailers have been selected as new opinion leader, besides the doctors & physicians. In
return, they will enjoy above average profit margin by selling SQUARE product.

Customer once, client forever:

Client is more profitable than customer in terms of both transaction as well as positive word-of-mouth
communication. He himself can be an opinion leader. So, I am suggesting to adopt some programs that
will let its customers be transformed into clients. The following model would better describe this concept

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SPL has a strong brand image in pharmaceutical industry. It will facilitate this strategy. We are citing
some instances here which may be useful for this strategy:

a. Mobile Hospital service with free treatment and medicine.

b. Health awareness program in rural area.
c. Modernization of educational institute or public hospital etc.

Today’s plant tomorrow’s tree:

Those who are student of MBBS today, tomorrow they will become doctor. Therefore, SPL may approach
them to establish and maintain a long-term rapport.

What I have today, other will have tomorrow:

SPL is always striving to maintain the highest product portfolio among the competitors for its product
development strategy. Holding the heaviest product folio should not be the ultimate goal at all. Emphasis
must be given on how early a new product can be launched in the market place than the competitor.

Keep pace with the race:

Today’s world is changing very rapidly, in every sphere. Therefore, updating production plant alone is not
enough to cope with the new environment. SPL has to have a keen eye if there is any change in HR
development, transport, information technology, consumer relation management, medical science and so
on.

Integrate greatly:

SPL imports 80% raw materials of its total requirements. This is an weakness if it wants to consistently
expand its market. So it requires either more Active Pharmaceuticals Ingredients (API) plants or increase
in present production capacity.

Innovation is the destination:

Pharma is on the brink of a scientific and technological revolution that will ultimately transform both the
nature of the medicines it makes and how it makes them. In future, then, Pharma will not only make the
white powders, creams and tablets it has traditionally produced, it will manufacture a complete mix of
biopharmaceuticals, parenterals and diagnostics. Making targeted treatment solutions will generate

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North South University

greater revenues than conventional drugs and offset the increasing competition from generic producers.
But it will also require the restructuring of the entire pharmaceutical value chain, including the fixed asset
base and downstream distribution.

Concentrating on Export Market:

At this moment Beximco captures the highest export market. So Square should also concentrate in the
global arena.

List of Abbreviations Used

SPL : Square Pharmaceuticals Ltd.

API : Active Pharmaceutical Ingredients.
POM : Prescription Only Medicine
OTC : Over The Counter

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