Principles of Management Assignment

Academic year 2021-22

FYBBA Semester-I
Title: Analysing the Mission and Vision Statement of Pharmaceutical
Industry and Using the Porter’s Five Force Model to Analyse the
Pharmaceutical Industry.

SUBMITTED BY:

Daksh Sharma (A021) [email protected]

Falak Shah (A026) [email protected]
Manvi Jain (A042) [email protected]
Navnidh Kaur (A046) [email protected]
Ritika Makwana (A061) [email protected]
 PART-A

1. Reason for choosing the industry

India is the largest provider of generic drugs globally. Indian pharmaceutical

sector supplies over 50 per cent of global demand for various vaccines, 40 per
cent of generic demand in the US and 25 per cent of all medicine in the UK.
India enjoys an important position in the global pharmaceuticals sector. The
country also has a large pool of scientists and engineers with a potential to steer
the industry ahead to greater heights. Presently, over 80 per cent of the
antiretroviral drugs used globally to combat AIDS (Acquired Immune
Deficiency Syndrome) are supplied by Indian pharmaceutical firms

As an industry, pharmaceutical companies research, develop, and market

medicines made primarily from artificial sources. Some modern pharmaceutical
companies have a long history, such as Bayer AG, the German company whose
founder trademarked aspirin in 1899. Pharmaceutical products can take many
years to process through the research and development phases before finally
making it to market. Part of the lengthy R&D process includes gaining the
approval of the Food and Drug Administration (FDA). The largest companies in
this sector provide stable results, but the field continues to grow with new
companies appearing regularly.
The industry’s research and development (R&D) enterprise drives sizable
economic impacts. In the US, biopharmaceutical manufacturers spend more in
R&D relative to sales than any other manufacturing industry, investing more
than six times the average for all manufacturing industries.

The Indian pharmaceutical-sector industry supplies over 50 per cent of global

demand for various vaccines, 40 percent of generic demand in the US and 25
per cent of all medicine in the UK. India is the largest contributor in UNESC
with over 50-60% share.

Over the years, the pharmaceutical industry has ensured effective drug
manufacturing that helps in therapy, treatment and prevention of patient's life.
With the growing number of health disorders on the global level, the pharmacy
sector has evolved in producing medicines & drugs that improve quality of
living.
The pharmaceutical industry has greatly contributed to the increase in life
expectancy for men and women across the world. It has been reported that
pharmaceutical advancements accounted for 73% of the total increase in life
expectancy between 2000 and 2009, across 30 developing and high-income
countries. In 1900, global life expectancy was just 32 years; thanks to
advancements in medicines, this has more than doubled and today the average
life expectancy stands at 72 years.

Although many pharmaceuticals do directly cure conditions, they can also be

used to manage pain, symptoms or side-effects of other treatments, helping to
relieve discomfort. A study by the WHO showed that individuals who live with
persistent pain are four times more likely to suffer from depression, anxiety and
twice as more likely to have difficulty working than those who do not suffer
with pain. By providing treatments to manage pain, symptoms and side-effects,
pharmaceutical companies can improve patients’ quality of life, allowing them
the freedom to live healthier and more fulfilled lives.

Pharmaceutical companies are responsible for millions of jobs across the world.
In the US, the biopharmaceutical industry employs over 800,000 professionals
who work across a wide range of areas including scientific research, technical
support and manufacturing.

As well as driving medical progress by researching, developing and bringing

new medicines that improve health and quality of life for patients around the
world, the pharmaceutical industry is a key asset to the global economy. The
industry reached unprecedented heights in 2019, worth an estimated $1.3
trillion.

Equally, because of COVID-19, certain individuals responsible for running

clinical trials are demonstrating apprehension about performing such work due
to the fear of being infected by coronavirus. These individuals are thus
exhibiting an inclination to work remotely. Nevertheless, considering that the
running of clinical trials typically

Multiple economic indicators highlight that COVID-19 is negatively impacting

the global economy on a massive scale. Numerus international trade and
economic activities are experiencing the adverse effects of the pandemic. For
instance, in many countries, international passenger travel has been suspended.
Accordingly, global GDP and trade volumes are projected to drop sharply in the
first 6 months of 2020. To support this forecast, the US Department of
Commerce has reported that the US GDP decreased by 4.8% within the first
three months of 2020. Equally, citing the measures currently being taken to
contain COVID-19, the Organization for Economic Cooperation and
Development (OECD) has forecasted that global GDP may contract by 2.0% in
every month throughout 2020. Cumulatively, this reduction of GDP will amount
to 24% by the end of December 2020. Because of such harmful effects on the
world economy, COVID-19 is bound to adversely impact the economic
circumstances of organizations and firms that usually final.

Overall, pharmaceutical companies play a pivotal role in helping patients and

communities. They provide more than potential cures and lifesaving treatments;
they also create fulfilling jobs and fuel the global economy. Looking ahead, the
industry will continue to firmly establish its importance in the world by creating
more exciting and ground-breaking treatments.
2. Reason for  selecting the companies 
CIPLA:

Cipla is one of India’s largest pharmaceutical firms that have been made to
adjust their operations due to the recent changes in the environment. Cipla is a
global pharmaceutical company whose goal is ensuring no patient shall be
denied access to high quality & affordable medicine and support. Cipla’s
journey began in 1935 when the founder, Dr K A Hamied, set up an enterprise
with the vision to make India self-sufficient in healthcare. Over the past 77
years, they have emerged as one of the world’s most respected pharmaceutical
names, not just in India but worldwide.

Cipla beat expectations riding the demand for Covid medication. The Street is
likely to push the stock to its record high hit in 2015. While US business
revenues declined, the company's domestic business sales grew in double-digits.
The company is the market leader in respiratory and inhalation therapies that
were under spotlight due to Covid. Cipla has achieved zero net debt position
due to improved collections and profitability.

Cipla sells active pharmaceutical ingredients to other manufacturers as well as

pharmaceutical and personal care products. Cipla has 34 manufacturing units in
8 locations across India and a presence in over 80 countries. The primary focus
areas for R&D were development of new formulations, drug-delivery systems
and APIs (active pharmaceutical ingredients). Cipla also cooperates with other
enterprises in areas such as consulting, commissioning, engineering, project
appraisal, quality control, know-how transfer, support, and plant supply.

MANKIND:

Mankind Pharmaceuticals, a key player in acute therapies, has sharpened its

focus on chronic therapy drugs (like anti-diabetics and cardiac) and is eyeing 50
per cent revenue from this segment in three years. In fact, it recently applied to
drugs regulator Drugs Controller General of India (DCGI), seeking approval to
start phase 1 human trials of its novel anti-diabetes drug, which has completed
animal trials.

Mankind Pharma which was started in the western part of UP with a meagre Rs
35-40 lakh in 1995, is now ranked 9th largest pharma company by sales in the
fiercely competitive and fragmented drug retail market. It now has set itself an
ambitious aims to be the No 1 company in India by 2015.

They chalked out a two-pronged strategy to tap the country’s Rs 36,000 crore
retail market. One, in a country whose about 50% of population lives below the
poverty line and two-third live in villages, “pocket friendly pricing” would
remain the key. So they got the drugs made at third party manufacturers to cut
cost and launched their drugs with modest margins.
Second, contrary to traditional pharma drug marketing wisdom, it adopted a
‘flanking strategy’. They promoted and established its brand in less competitive
and inexpensive small town and rural markets. Then, with the established
brands, it would catch rivals unawares in urban market, with a price as low as
one-fourth of market leaders.

SUN PHARMA:

Sun Pharmaceutical Industries Ltd. (Sun Pharma) is the fourth largest specialty
generic pharmaceutical company in the world with global revenues of over US$
4.5 billion. Supported by more than 40 manufacturing facilities, they provide
high-quality, affordable medicines, trusted by healthcare professionals and
patients, to more than 100 countries across the globe.
The way of life at Sun Pharma is a combination of Sun and Ideology
They are the first among Indian pharmaceutical companies to realise and
embrace the importance of investing in research.

Their core strength lies in their ability to excel in developing generics and
technologically complex products backed by their dedicated teams in
formulations, process chemistry, and analytical development.
Sun Pharmaceutical company’s capabilities extend beyond the development of
differentiated products, including liposomal products, inhalers, lyophilized
injections, nasal sprays, and controlled release dosage forms. The R&D is led
by a strong team of more than 2000 scientists.

GLAXO SMITHKLINE:

Since merging in December 2000, GSK’s information management group has

continued to build on the great efforts of both GlaxoWellcome and SmithKline
Beecham in provision of document delivery and access to published
information.

GlaxoSmithKline's Pharmaceuticals business has a broad portfolio of innovative

and established medicines in respiratory, HIV, immuno-inflammation and
oncology. They plan on strengthening their R&D pipeline through a focus on
immunology, human genetics and advanced technologies in order to deliver
transformational new medicines for patients. This world-leading Consumer
Healthcare business combines science and consumer insights to create
innovative everyday healthcare brands that consumers trust and experts
recommend for oral health, pain relief, cold, flu and allergy, digestive health
and vitamins, minerals and supplements.

Since the pandemic began, they have been seeking ways to harness our
scientific expertise and technology to make a difference. As a result, the
company is working with.

As a result, the company is working with several partners to develop potential

COVID-19 vaccines and treatments as quickly and safely as possible.
Consistent with their values and role as a science-led global healthcare
company, GSK is continuing to make decisions informed by the latest science
and in consultation with leading health authorities.
JOHNSONS & JOHNSONS:

By most measures the single largest pharma company in the world, US-based
Johnson & Johnson (J&J) is also arguably one of the most well-known drug
makers among the general public.

Johnson & Johnson (JNJ) is probably one of the world's most recognizable
multinational corporations. The New Brunswick, New Jersey, based company
has been in business for more than 130 years and employs over 130,000
individuals. With operations in 60 different countries, it is one of the world's
largest health and Wellness Company

Some of its iconic brand names can be found in households across the world,
including Band-Aid, Listerine, Visine, and Tylenol. But just how did this
company become the corporate giant that it is today? This article looks at the
history of the company and some of the strategies it uses to make itself a
household name. Over the years, the company pushed further into the heal.
Part of Johnson & Johnson's success has to do with its successful line of brands.
If you’ve ever bandaged a wound, rinsed your mouth, applied lotion, sanitized
your hands, battled a headache, substituted sugar, or treated heartburn, there's a
very good chance that you did so courtesy of Johnson & Johnson’s research and
development.

Some of the most popular names in the company's portfolio include Band-Aid,
Listerine, Aveeno, Stayfree, Lubriderm, Visine, Tylenol, Zarbee's, and Bengay
—all household names.
3. Evaluation matrix- “MISSION STATEMENT"

MANKIND: To be able to provide cost-effective, innovation based on superior

quality pharmaceutical products across the globe that improves the lives of the
patients.

CIPLA: To be a leading global healthcare company which uses technology and

innovation to meet every day needs of all patients.

JOHNSONS & JOHNSONS: our credo stems from a belief that consumers,
employees and the community are all equally important.

SUN PHARMA: The mission of sun pharma is good health and happiness for
all .We believe in utilizing modern science to bring out the essence of nature
and provide efficient and high quality medicines at affordable prices.

GLAXO SMITHKLINE: Help people to do more, feel better, live longer.

 3. EVALUATION MATRIX
Components
Compani Custom Produ Marke Technolo Concern for Philoso Self Concer Concern
es ers cts ts gy survival, phy - n for for
growth and con public employees
profitability cept image

MANKIN Yes Yes Yes Yes No Yes Yes No No

D
CIPLA Yes Yes Yes Yes Yes No No Yes No
JOHNSO Yes Yes Yes No Yes Yes Yes No No
NS &
JOHNSO
NS
SUN Yes Yes Yes Yes Yes Yes Yes Yes No
PHARM
A
GLAXO Yes No No Yes Yes Yes No Yes Yes
SMITHK
LINE
 4. Frequency distribution of all the
components

2
Mankind

CIPLA
1
JHONSON&JHONSON

SUN PHARMA
0 GLAXO SMITHKLINE
er
s ts ts gy ilit
y
ph
y pt ag
e
uc ke lo b o ce m
om o d ar n o ta s co
n i
st Pr M ch ofi ilo lf- bl
ic
Cu Te pr Ph Se u
d rp
an fo
th rn
r ow n ce
l, g Co
iv va Here;
ur 1 REPRESENTS NO
ors
f 2 REPRESENTS YES
rn
n ce
Co

5. The most common component is CUSTOMERS.

6. The best mission statement is of SUN PHARMA- Its

mission statement covers comparatively more
components and describes the company’s will to deliver
customer friendly products and establish goodwill in the
market. Also, it articulates on the amalgamation of nature
with medicine which is indeed an added bonus.

7. VISION STATEMENT
 MANKIND: To be a global pharmaceutical company, most admired for its
Affordability, Quality and Accessibility of products.

MANKIND
Parameter Yes/no Your take on it

Is it concise enough yet Yes The statement is ardent and very inspiring. It shows the
inspirational flexibility of the company not only to be the best
possible option in the market but also to provide best
service and affordable rates available in the market.

Does it clearly answers: what Yes The statement clearly indicates the company’s will of
do we want to become running a profitable firm that conducts business with
honesty and integrity and making meaningful
contributions to the people it serves .

Is it aspiring Yes The statement shows the firmness of the company to

serve the best products at cheap rates, affordable for
each section of the society and accessible to everybody.
This signifies both economic and social factors.
 CIPLA: To be the first global biotech company to provide high-quality
products at affordable prices that will enable access for millions of patients
worldwide by the year 2025. To meet the everyday needs of all the patients.

CIPLA
Parameter Yes/no Your take on it
Does it clearly answers: what do Yes The company’s vision statement is a comprehensive
we want to become statement identifying the company’s core strengths,
which would enable it to achieve its futuristic goals
.
Is it concise enough yet Yes The vision statement is brief and be holistic in nature.
inspirational This means that the visions statement is complete in
its description and information of what the company
desires, and how it plans to achieve its long term goals
strategically.

Is it aspiring Yes The statement shows that the company sells the
products at affordable prices which are accessible to
all sections of the society and wishes to meet the
needs of all the patients.

SUN PHARMA: Reaching People And Touching Lives Globally As A Leading

Provider Of Valued Medicines

SUN PHARMA
Parameter Yes/no Your take on it
Does it clearly answer: what do Yes Ability to excel in developing generics and
we want to become technologically complex products backed by their
dedicated teams is the vision of this company

Is it concise enough yet Yes Company continues to firmly establish its

inspirational importance in the world by creating more exciting
and ground-breaking treatments.

Is it aspiring Yes The main aim of this is Let your work speak for
you; always put ‘we’ before ‘me’ and learn from
mistakes.
 JOHNSONS & JOHNSONS: For every person to use their unique experiences
and backgrounds, together – to spark solutions that create a better, healthier
world.” The statement is proof that Johnson & Johnson is a company that values
the individual capabilities of everyone. It then uses these to impact on the lives
of others in the world.

JOHNSONS & JOHNSONS

Parameter Yes/no Your take on it
Does it clearly answer: what do No The statement isn't clear enough about what they
we want to become want to become but they have a sense of
responsibility for their users

Is it concise enough yet Yes The statement is very inspiring. It shows that it is a
inspirational company that values the individual capabilities of
everyone. It then uses these to impact on the lives
of others in the world.

Is it aspiring Yes The statement clearly portrays the firmness of the

company to serve the best products and to create a
better and healthier world

GLAXO SMITHKLINE: The opportunity to make a difference to millions of

lives every day.

GLAXO SMITHKLINE
Parameter Yes/no Your take on it
Does it clearly answer: what do No They want to make a difference to millions of lives,
we want to become however they have not species what changes the
company will undergo to make this possible

Is it concise enough yet Yes Their commitment is what enables them to enhance
inspirational the quality of peoples’ lives and help provide them
with quality products

Is it aspiring Yes GSK Consumer Healthcare follows its core values of

keeping consumers first, demonstrating respect for
people, acting with integrity, and operating with
transparency.
 PART B

THREATS OF SUBSTITUTE PRODUCTS:

Customers influence competition by gaining more value by influencing lower
prices, demanding better quality or greater service at the expense of industry
profitability. The power exerted by customers is determined by the level of
differentiation of products /services, for example in the oil and pharmaceutical
business, the level is high and customers have more power. Therefore, in these
sectors it is common practice for customers to undertake vertical integration
backwards, i.e., to acquire his supplier due to the holding of patent or to reduce
the risk of supply. The number of buyers is little relative thereto of suppliers,
the buyer’s power is going to be stronger. Conversely, if the buyers are
widespread, then their business is additionally smaller, and that they are easy to
ignore for a producer.

The buyer’s power mainly associated with the large quantity buyers example
Government institutions. The institutions has considerable bargaining power
with drug companies and exerts strong downward pressure on drug prices The
Consumer has no choice but to buy what has been prescribed to them therefore
their power is low in the pharmaceutical industry. The buyers are scattered and
they as such does not wield much power in the pharmaceutical pricing

Buyers Concentration- If the amount of buyers is little relative thereto of

suppliers, the buyer’s power is going to be stronger. Conversely, if the buyers
are widespread, then their business is additionally smaller, and that they are
easy to ignore for a producer.
Switching cost- If switching costs are low for a buyer, then any dissatisfaction
with a producer or a product will cause a loss of business. This is often because
the customers are going to be ready to find an alternative with minimum hassle
and inconvenience.

Price sensitivity- If the buyers are sensitive to changes in prices and may stop
the purchase from producers, then it becomes difficult to ignore their demand.

A product is considered as a substitute when it achieves a similar effect through

a different technology from the original pharmaceutical product. A feature of
substitutes for pharmaceutical products is the lack of patent, which is why most
often substitutes are considered between original and generic products instead
of their price

Substitutes -Pharmaceutical alternatives are defined as drug products that have

the same therapeutic moiety, but are different salts, esters, or complexes of that
moiety, or are different dosage forms (e.g., immediate release vs extended
release) or strengths.

Companies are concerned that substitute products or services may displace their
own. The threat of substitution is high when rivals, or companies outside the
industry, offer more attractive and/or lower cost products. Buyers then have the
opportunity to make a performance/price trade-off. The cost of switching is also
a factor. If it is high, the threat of substitution is low.

Relative price performance of substitute - Once a drug loses its patents, generic

drug manufacturers start selling copycat versions at substantially lower prices.
A drug that netted $100 million a year in profit could become one that earns
only $1 million a year in profit overnight. Additionally, there is a major
international problem with counterfeit drugs. The best of these counterfeits
duplicate a real drug's formula and sell it at a lower price, which hurts
corporate profits. The worst counterfeits are made with low-grade materials
and can destroy the reputations of legitimate products.

Buyer’s propensity to substitute – Due to high cost of medicines or drugs the

customers often try the substitutes

Perceived level of product differentiation- Product differentiation is important

for a number of market-competitive reasons:
  Value creation
 Non-price competition
 Quality differentiation
 Brand loyalty
 No perceived substitutes
 Combat key challenges in pharma marketing.

BARGAINING POWER OF SUPPLIER:

This force has high level when suppliers do not depend on the industry for
revenue, offer unique products or there is no substitute for the products.
Suppliers negotiate with each other and influence in the absence of reserve
suppliers or when there is only one specific supplier. It can be argued that
suppliers are a market force when they manage to transfer costs to industry
participants.
At the initial stage of the value chain, the development of new pharmaceutical
products, suppliers are linked to the human factor and its qualifications.
Suppliers include universities and laboratories with which new pharmaceutical
products are being developed.
At the next stage, the clinical trials, suppliers are determined by holding of a
patent and the conditions for carrying out the trials phases. The main suppliers
are the manufacturers of medical equipment and consumables, as they have the
bargaining power to raise the prices of pharmaceutical products. Manufacturers
of chemical compounds represent suppliers at the stage of pharmaceutical
product manufacturing. Suppliers of packaging materials have limited.

THREAT OF NEW ENTRANTS:

Despite the new reality after the global financial crisis (2007–2008) and the
pandemic of corona virus COVID 19 (2020), high barriers to entry, brand
loyalty and the sales threshold remain a challenge for new entrants.
The pharmaceutical industry, like most manufacturing and service industries,
tends to transform into oligopolies, i.e. narrow number of large firms to
dominate the market. The wave of vertical integration between pharmacy
groups and wholesalers in the 1980s is a key barrier to entry, as it makes it
difficult for both independent pharmacies and other players to reap the same
benefits from wholesalers.
New entrants in the pharmaceutical industry must take action to establish the
brand among physicians and pharmacists, gain the trust of patients, to meet the
expectations of patients’ organisations and government regulators.
Pharmaceutical research companies have the lowest threat from new entrants
due to the need for large investments in human, financial and time resources.
For pharmaceutical company-patent holder, the competent authorities have a
decisive influence with regulations for new entrants by reducing time and
financial costs. For pharmaceutical companies for generic pharmaceutical
products, distribution channels are crucial. The leading factor is overcoming
inertia in customer preferences and long-term contracts with the health care
system.
For pharmaceutical companies targeted on hospital market, the ability of
hospitals to make payments and the government’s practice of assuming public
hospital debt are essential. Biotech and generic firms are major competitors to
research-based pharmaceutical firms. The introduction of a new organic product
or the expiration of a patent contributes to the emergence of new entrants.

BARGAINING POWER OF BUYER:

Buyers Concentration- If the amount of buyers is little relative thereto of

suppliers, the buyer’s power is going to be stronger. This is often because the
customers are going to be ready to find an alternative with minimum hassle and
inconvenience.
Price sensitivity- If the buyers are sensitive to changes in prices and may stop
the purchase from producers, then it becomes difficult to ignore their demands.
Customers influence competition by gaining more value by influencing lower
prices, demanding better quality or greater service at the expense of industry
profitability. The power exerted by customers is determined by the level of
differentiation of products/services, for example in the oil and pharmaceutical
business, the level is high and customers have more power. f the amount of
buyers is little relative thereto of suppliers, the buyer’s power is going to be
stronger. Conversely, if the buyers are widespread, then their business is
additionally smaller, and that they are easy to ignore for a producer. Bargaining
power of Buyer In the Pharmaceutical industry the buyers' power is mainly
associated with the large quantity buyers example Government institutions .The
institutions have considerable bargaining power with drug companies and
exerts strong downward pressure on drug prices. The Consumer has no choice
but to buy what has been prescribed to them, therefore, their power is low in
the pharmaceutical industry. The buyers are scattered and they as such does not
wield much power in the pharmaceutical pricing.

Customers influence competition by gaining more value by influencing lower

prices, demanding better quality or greater service at the expense of industry
profitability. The power exerted by customers is determined by the level of
differentiation of products /services, for example in the oil and pharmaceutical
business, the level is high and customers have more power. The number of
buyers is little relative thereto of suppliers, the buyer’s power is going to be
stronger. Conversely, if the buyers are widespread, then their business is
additionally smaller, and that they are easy to ignore for a producer.

Bargaining power of Buyer- In the Pharmaceutical industry the buyers' power

is mainly associated with the large quantity buyers example Government
institutions The institutions have considerable bargaining power with drug
companies and exerts strong downward pressure on drug prices The Consumer
has no choice but to buy what has been prescribed to them, therefore, their
power is low in the pharmaceutical industry. The buyers are scattered and they
as such does not wield much power in the pharmaceutical pricing

Buyers Concentration- If the amount of buyers is little relative thereto of

suppliers, the buyer’s power is going to be stronger.

RIVALRY AMONG EXISTING COMPETITORS:

A small number of large diversified multinational companies, based mainly on

science and research, compete in the market.
The competitive rivalry is determined by the status of offered pharmaceutical
product – with patent and without patent. Competition for patented
pharmaceutical products is determined by the innovations made and by the
number of introduced new pharmaceutical products.
Competition for patented pharmaceutical products is determined by the
innovations made and by the number of introduced new pharmaceutical
products. Competition between companies for original pharmaceutical products
focuses on specific therapeutic sub-markets rather than on geographically
limited areas to achieve economies of scale and scope, and to overcome the high
cost of innovative research.
Competition for non-patented pharmaceutical products is geographically limited
to a specific country in whose market the patent for original pharmaceutical
product has expired. The products can be highly differentiated by their clinical
efficacy.
The countries’ plans to reduce the effects of global financial crisis (2007–2008)
are aimed at stimulating the use of generic pharmaceutical products given the
limited budgets, which has raised barriers to exit from the sector. In most cases,
the competing products are locally produced and in limited cases, there is a
competition between importers to ensure a continuous supply of pharmaceutical
products, including competition between logistic and distribution firms.
The competition is price based for over-the-counter pharmaceutical products, as
well as some marketing tools such as location of points of sales and their
opening hours according to the product’s life cycle.