Professional Documents
Culture Documents
BRNO
Bachelor thesis
Brno 2011
Acknowledgement:
I would like to thank Mr. Ing. Tomáš Pyšný, for supervising my bachelor
thesis and for his support and guidance throughout my work.
I declare that this thesis is my own work, which was written individually based
on the sources stated in the bibliography.
Keywords
SWOT analyis, internal analysis, external analysis, strategic management.
Abstrakt
Tato bakalářská práce se zabývá strategickým managementem farmaceutické
společnosti. Hlavním cílem této práce zhodnocení aktuální situace, které bude
založené na analýze vnějšího a vnitřního prostředí. Pro tuto analýzu budou
použity PEST analýza, Porter’s five forces, EFE matice, marketingový mix a IFE
matice. Tato práce obsahuje návrh možných strategií pro budoucí vývoj založený
na SWOT matici.
Klíčová slova
Strategický management, SWOT analýza, Analýza vnějšího a vnitřního
prostředí.
Table of contents 5
Table of contents
1 Introduction 9
4 Results 25
4.1 Company’s characteristics ...................................................................... 25
4.2 Company in general ................................................................................ 25
4.3 External environment analysis ............................................................... 26
4.3.1 PEST analysis .................................................................................. 26
4.3.2 Micro-environment analysis ........................................................... 32
4.3.3 Opportunities and threats identification ........................................ 35
4.4 Internal environment analysis ............................................................... 37
4.4.1 Organisational structure ................................................................. 37
4.4.2 Marketing mix .................................................................................. 41
4.4.3 Human resources ............................................................................ 45
4.4.4 Strengths and weaknesses indentification ..................................... 45
4.5 Strategy selection and formulation ........................................................ 47
6 Table of contents
5 Discussion 55
6 Conclusion 56
7 References 57
8 Appendixes 59
List of figures and graphs 7
List of figures
Figure. 1 Models of elements of strategic management 14
Figure. 5 IE matrix 48
List of Graphs
List of tables
Table. 1 Functional classification of organisational capabilities 21
1 Introduction
2.2 Methodology
For this particular topic which is strategic management of pharmaceutical
company, I based my thesis with reference to books, websites and publications
connected to this particular topic in order to get a background, and better
understanding of strategic management, its process and types. Surveyed
literature is listed in the “references” section of the thesis.
Based on the survey of literature related to this topic, the theoretical part is
applied in the “results” section on the selected company Beta, this chapter will
include the characterise of Beta company and focus on the process of strategic
management. It will contain the followings:
General information about the company, including business mission, goals
and vision
External environmental analysis, which based on PEST analysis and
competitive Porter’s analysis, as the external environmental factors can
influence the pharmaceutical industry and the company itself.
Internal environmental analysis, which includes in it organisational
structure, 4P’s of marketing mix (product, price, place and promotion) and
analysis of the characteristics of human resources.
Strategies selection and recommendation are done by using helpful tools
such as SWOT matrix (Table.7), Internal–External matrix (IE) which you
can refer to (Figure.5), and alternative strategies which include kotler’s
competitive strategy, and Porter‘s generic strategy for further development
and growth of the company. Internal–External matrix (IE) weighted scores
Objective and methodology 11
has on the X axis of the IFE total score and on the Y axis of the EFE total
score. The cells have the following characteristics:
1. Cells I, II and IV are characterised to “growth and build”. Main strategies
are aggressive and intensive tactical strategies. Includes products
development, market penetration and development.
2. Cells III, V and VII are characterised to “hold and maintain” tactical
strategies should be focused on penetrating new markets and developing
new products.
3. Cells VI, VIII and IX are characterised to “harvest or divest” a strategy of
asset reduction, withdraw a product or the business from a market.
Discussion and conclusion will be followed after the results section which will
consider which strategies will be the best to be implemented in the company.
12 Theoretical part
3 Theoretical part
3.1 Origin and definition of strategy
The word strategy is originally derived from Greece; it appeared during the time
of a leader named Kleisthenes (508-7 B.C), “stratçgos” was used in the military
aspects to defeat enemies. This word derives from:
“stratos” – meaning an army
“agein” – meaning leading/guiding
Over the years the form of using this term has been changed, strategy word was
expanded into business as many authors argued whether it is a quantitive or
qualitative process (Žufan, 2005).
Mintzberg defines strategy as plan that sets up the most important objectives,
policies and sequence of actions as a united form. When a strategy is well
structured for an organization helps to achieve outcomes that are based on the
organization’s internal competence; this can be gained through allocating and
ushering its resources, in addition to awareness of the changes of the
unknowable surrounding environment and of the competitive organisations
(Mintzberg and Quinn, 2003).
3.2 Management
According to G.A Cole management doesn’t have an exact definition, he
explained management as a general approach that result of it is to reach desired
objectives of an organisation by anticipating, planning, and followed by
organising the selected plans and controlling available resources (Cole, 1990).
Business mission
Business mission statement is simply the answer of the question: why the
organisation exists? The answer defines the unique purpose and identity of an
organisation. The mission is a specified statement that describes the product or
service areas in which the company attempts to satisfy customer’s needs.
Mission is very important to be set correctly as it reflects in a way the priorities
and the decision making of the managers. (Thompson and Arthur A., 1993)
Business vision
Vision describes future plans of an organisation; it is based more on the
managers believes who wish to achieve particular visionary goals in the long
run. Some of these goals can be underestimated or out of reach for realization,
at the end phase managers set up challenging targets in which they see the
organisation to become in long term future. (Plamínek, 2000)
The aim of the external analysis is to help the organisation to understand and
evaluate the situation of the external environment in order to improve
organisation’s strategic planning and to anticipate critical threats and
opportunities that can face the organisation. The analysis is approached by
using the most known key tools which are the PEST analysis, and competitive
analysis using the Porter’s five forces model. (Capon. C, 2008)
PEST analysis
This analysis consists of four factors Political and legal, Economic, Socio-
cultural and Technological: (Dransfield. R, 2005)
Political and legal: consist of governmental bodies and national bodies that
make decisions and influence the political viewpoint in connection on how
the businesses operate. The government has an influence on the fiscal and
legal polices in addition on alliance and agreements.
Economic factors: the economic environment is mainly influenced by the
domestic economic policies and global economic trends; there are several
factors which contribute to the economic environment such as economic
growth, unemployment, inflation, energy prices, income distribution and
many other economic trends.
Social-cultural factors: is based on analysis of society, it the analysis of
population growth, demographic issues, education, religion, migration rate
and other demographic changes in relation with cultural behaviour and
trends.
Technological factors: refers to improvement, rate of technology change in
manufacturing and business processes that should be monitored in relation
to competition particularly with cost- effectiveness and performance of the
techniques, equipment, and materials used in business processes.
Micro-environment analysis
The five frame forces were introduced by Porter to analyse an industry
structure, and to assess the attractiveness of the industry. It consists of the
following five forces:
1. Threat of entry: there are several barriers that protect incumbents from
new entrants who need to overcome these factors in order to compete with
them. The higher the barrier levels are the more difficult for the new
competitors to enter the market. The typical barriers are: (Johnson,
Scholes and Whittington, 2008)
1.1. Scale and experience. One of the most important barriers in industry is
economies of scale, for new entrants is very difficult and expensive to
reach large economic scales as incumbents, therefore new entrants
must invest large financial resources on capital requirements for
example in R&D, research costs are large causing entrants to have
higher unit costs in comparison with the same volume produced by
Theoretical part 17
Tangible resources consist of physical assets and financial assets that are
present in the organisation.
Human resources employees who work in the organisation provide their skills,
knowledge, attitudes and experience. In addition to that, human resources have
major contribution in achieving goals by their willingness to communicate,
motivate and collaborate at work.
20 Theoretical part
There are two analyses which help with the identification of organisation’s
capabilities:
Functional analysis. According to each of the organisation’s functional
area; capabilities are identified in so called functional classification
approach of organisational capabilities.
Value chain analysis. Porter represented the categories of activates in the
organisations in a chain, these activities are distinguished according to
their priorities. Primary activates are those directly connected in the
transformation of inputs into product and services for customers and
providing after-sales services. Support activities are those linked with the
primary activates to improve their efficiency and provide better product or
service differentiation.
Theoretical part 21
4 Results
4.1 Company’s characteristics
Beta Pharmaceuticals (plc.)1 is a public limited company founded located in
Jordan. This company manufactures and markets wide range of generic,
injectable and in-licensed pharmaceutical products. The company’s business is
mainly focused on the Middle East and North Africa (MENA), but also operates
across USA and Europe.
Mission
Beta’s mission is “we are committed to improving people’s lives”. It focus on
providing patients with “better access to high quality, cost effective medicines in
key therapeutic areas” for daily basis.
The company defines clearly what type of product to which market and to whom
it is provided.
Vision
Defines the main economical objective and interest, in the following vision
status:
1 The company Beta Pharmaceuticals (plc.) will be further stated in the thesis as Beta
26 Results
Build Beta into a “world class and leading specialty pharmaceutical company”
through organic growth and by acquisitions.
Strategy
The main strategy for growth is to develop diverse and strong product portfolio
according to the changing needs of patients of the market. Currently Beta is
more focused on therapeutic targets of the cardiovascular and metabolic areas.
Decision of the product portfolio is done easier by the help global research as
patient’s needs are identified based on the region where ageing population with
changing life style are examined.
Other key parts of the strategy are expanding geographic reach by integrating
acquisitions and pursuing further acquisitions especially in the MENA region so
that the company will strengthen its position in the market. Second Improving
partnerships and relations with stakeholders within the healthcare value chain.
Enlarging the in-licensed product portfolio to enable further launching of new
innovative medical treatments.
There is a direct influence on the legal system by the Islamic law and customs.
In relation to pharmaceuticals, raw materials must not consist of pork
substances, which it is possible to be used in other countries.
Economic factors
GDP is the key indicator of how well the country is economically performing.
Jordan faced problems after the Gulf War in 1991 because during the 90’s oil
was imported from Iraq at concessionary prices. Since 2003 oil was imported
primarily some Gulf Cooperation Council member countries at market prices.
After 2003 GDP real growth rate started to improve gradually due to
implementation of significant economic reform policies, such as opening the
trade regime by singing free trade agreements with many organisations,
privatizing state-owned companies, lowering tax in Aqaba Special Economic
Zone (ASEZ) for private sector lead to growth of foreign investments.
The highest rates of GDP growth with 6.30% in 2007 as export and service
sector were having best results. Tourism contributed in the results as it reached
its highest rate when Petra was announced as new Seven Wonders of the Word.
The past two years because of the global economic crises Jordan's GDP growth
significantly dropped but it is expected to grow back slowly.
Inflation rate has been increasing over the last 7 years in high rate especially in
2009 inflation rate was dramatically high, it reached almost 15% . Jordan was
annually suffering from high inflation rate due to combination of local and
global factors. High rate was due to oil and to electricity because Jordan imports
almost all of its oil affecting inflation by the high prices. Another reason is the
28 Results
Unemployment rate is relatively high even though the Jordanian economy has
improved. This problem could be explained by many reasons, starting with high
population rate as in most of cases one or more member’s supports the whole
family. Furthermore, wrong distribution of working power in the labour market
as the most of Jordanians are highly educated, either they immigrate to the Gulf
or they don’t do manual work, as most of the manual work is done by
immigrants from neighbouring countries.
Another economic factor is exchange rate. Since 1995 the Jordanian Dinar has
been pegged to the U.S. Dollar. The exchange rate has been fixed in constant
trend at 0.708 (buy) and 0.710 (sell) Dinar to the dollar. The Dinar fluctuates
against other currencies according to market force of supply and demand
factors but due to the policy of maintain JD stability, exchange rate doesn’t rise
over major currencies. This can be beneficial when American dollar is
depreciated the Dinar can benefit in terms of increase rate of exports, as the
Results 29
Socio-cultural factors
The age structure of Jordan is quite different than it is common in Europe, as
the population is relatively young; it is estimated that 59.9% of the population is
between 15-64 years old and only 4.8% older than 64 years (Table. 8) but it is
expected that the rate of older population will increase rapidly over the next
years. In addition to that, Jordan’s population growth rate is stable but high
around 2.2% for the past 4 years (Table. 9). According to the Jordanian
statistical office for 2010 there are 6 113 000 inhabitants with 40% who are
economically active.
Education plays a major role in the social factors one of the indicators is literacy
rate which is estimated with 92.8 % of the total population. Second indicator
can be education level. According to UNESCO’s standard classification of
education the table below shows the change of the percentage of inhabitants in
different education level in years 2002 and 2008. Represented by Gross
Enrolment Ratios (GER) it is the number of students attending a level of
education regardless to their age expressed as a percentage of the whole
population.
GER(%) GER(%)
Educational
for for
level
2002 2008
Pre-primary
33 I36
enrolment
Primary
101 97
enrolment
Secondary
87 88
enrolment
Tertiary
30 41
enrolment
The data show that more students are getting more educated, it is more noticed
especially in the percentage of pupil who enrolled to the Tertiary level which
increased by 11% in 2008, in comparison with 2002 this indicates that people
are focusing more on the higher educational levels. Higher literacy and
educational level helps the country to establish a better working force that can
provide more effective results in the economy.
30 Results
Health indicators are very important to Beta as they are majorly connected with
its business. In addition to age structure and life expectancy, identification of
major causes of death can bring an opportunity to Beta to focus more on areas
where it can produce products that can contribute to decrease the rate of life
loss. According to World Health Organization life loss in relation to health can
be divided into three sectors:
Communicable. Consists of infectious diseases that are able to transmit
form one person to another. In the graph it is about 29% of people die
because of it in Jordan.
Non-communicable. Also known as (NCD) referred as chronic diseases
which are non-infectious with slow progression, they include cancer, heart
diseases, diabetes, etc. this type of diseases are the most common causes of
death as they represent 53% which is the highest rate of cause of death in
relation to health.
Injuries. Mainly related to physical injuries which have the minimum rate
of cause of death.
Results 31
The company Beta should also consider the amount of investment into research
and development of its pharmaceutical products, as the costs of R&D are
increasing also it can be considered to be risky because the final results are
unknown. However, pharmaceutical’s production is based on high technology,
automatic production machines with different speed production levels and with
32 Results
Threat of entry
Even though pharmaceutical industry is considered to be very profitable and
attractive to new entrants but very difficult to enter the market. Therefore, the
threat of new comers in this type of business is relatively low due to high
barriers. These barriers are mainly connected with the expenses of research and
development and marketing of the products that need to be distributed by
highly trained sales force which are considered to be the most influential factors
that leads the companies to succeed, other factors will be mentioned below.
Scale and experience. Economies of scale are important in pharmaceutical
production as machines produce drugs in large volumes which give an
advantage over entrants in terms of production costs, also pharmaceutical’s
R&D costs are very expensive to invest in especially to new entrants besides
financial investments it requires experience as it highly contributes with
achieving better results.
Differentiation. Due to the history and good reputation of the company, it
acquired customer’s loyalty as its products are differentiated from others.
Beta has more than 700 dosages strengths in various forms; it provides a
huge range of products according to customer’s needs. In 2010 Beta
launched 4 approved generic and 36 injectable. It is important to launch
new products with new compounds and dosages continuously, therefore it
is difficult for entrants to choose the right technology and strategy to
overcome this barrier.
Capital requirements. It requires a large amount of financing needed to
acquire skilled staff, technology and assets to start in the pharmaceutical
industry, pharmaceuticals is considered to belong to the businesses that
require a very intense capital to be able to compete in the market.
Regularity policy. There are many laws and regulations which are
internationally assigned by WHO, in connection to patenting, marketing
and drug testing, in order to protect drug innovation from being copied
illegally by competitors and to protect the consumers of the drugs.
Implementing these regularities is costly as they have to be followed
precisely and ethically.
Threat of substitutes
Generally speaking about the pharmaceutical products (medicines) substitutes
can be considered to be supplements in form of minerals and vitamins that help
the immune system, and alternative therapies (for example herbals, bio-
Results 33
Power of Buyers
The main customers are pharmacies, hospitals, distributors, whole sellers,
health organisation, and government agencies. It is very important for
pharmaceutical companies and Beta to satisfy and win their customer’s loyalty.
The company divided their customers into three categories according to their
locations:
Power of suppliers
In pharmaceutical industry there are few suppliers present on the market whose
threat can be considered to be medium to low. At the present Beta’s most
important suppliers considered to be around 25 different suppliers who are
related directly and indirectly to pharmaceutical industry.
One of the main suppliers for this industry is labour force; for this type of
business most of the staff members have a degree or an experience in pharmacy.
Therefore they can have a bargaining power over the industry as the industry is
mainly dependent on a narrow labour segment but their power is still relatively
in low rate.
34 Results
In addition to labour, other suppliers are those who provide raw materials such
as chemical organics, product packaging materials can include syringes for
injectable products, equipment needed for production and researches, and
technology. Other possible supplier can be biotechnology firms, they are more
known as partners rather than suppliers because biotechnology firms take the
risks and costs of clinical trials to provide formula compounds to them so that
Beta will manufacture and sell these products. This is done due to Beta’s
expertise in manufacturing and marketing which can enhance the product value
making it more profitable to co-operate together.
According to the location and market share of Beta and its daughter companies
in the Middle East and North Africa, its main international competitors in terms
of sales are the market leaders in MENA, such as Sanofi-aventis, Pfizer, and
local competitors operating in Jordan such as Medipharma.
Beta is trying to become more known internationally but still its market share
and product portfolio is less in comparison with the international companies
that contribute with the worldwide market share. Locally Beta can be
considered to be one of the market leaders due to its continuous innovation.
Libya where Beta has a daughter company, the boarders of the country
were closed therefore the facility was closed for a while but now it is open.
EFEMatrix
External Factors
Weight Reaction Score
Opportunities
Technology innovation 0.15 3 0.45
Licensing agreements 0.10 3 0.30
Increase of U.S. government expenditures on
0.06 2 0.12
Health care
Emerging markets and globalisation of new
0.05 3 0.15
products
Increase of life expectancy 0.04 1 0.04
Growing on demand for non-communicable
0.04 4 0.16
diseases
Increase of number of graduates 0.02 2 0.04
Threats
Competition 0.13 3 0.39
Strict regulations 0.10 4 0.40
Margins setup 0.07 2 0.14
Increase of interest in Biotechnology 0.06 3 0.18
Recession and financial crises 0.06 2 0.12
Political instability in MENA region 0.05 1 0.05
Appreciation of Dollar 0.04 1 0.04
Lack of educated women as working force 0.03 4 0.12
Total 1.00 x 2.70
The average weighted score is 2.5, Beta lies above the average with 2.70
indicating that the company is reacting well with the external factors especially
towards the most influential factors such as technology innovation, competition,
regulations and price control. Some of the threats that the company is not
reacting well towards political instability, appreciation of the Dollar. It should
react better towards the opportunity of increase of US expenditures on health
care.
It has very clarified organisational structure where each unit has specified
responsibility and managers to direct their departments. The disadvantage is
the communication among these units is difficult, as there is no effective
integrated communication system between the units which can make it easier
and faster for employees working in different departments to exchange
information
Board of directors
Govern and lead the company; they formulate, supervise and inspect procedures
and policies within the company. Contribute to major financial management in
relation to profits, as they decide about annual budgets. Attend meetings and
evaluate annual performance of Beta. Support company’s mission, promotion
and provide its needs. There are several units that are connected to the board of
directors and with each other such as:
Internal inspection which involves control over the internal environment
with connection to employees, ethical and environmental responsibilities
Strategic planning concentrates on formulating and informing employees
about any changes of strategies after have been selected and approved by
the board of directors
Legal consultant to ensure that Beta operates legally in all aspects ensures
contracts with customers and suppliers to be fluffing legal terms and
conditions.
Public relation and investor relation director with assistance of secretaries
who coordinate meetings, conferences, deal with public relations, and press
releases. Maintain the follow of information internally and externally and
maintain calendar scheduling of company’s activates.
There are main 5 departments directed to the managing director:
Sales and marketing department
This department has the following responsibilities:
desired quality been achieved. Final step is to write a report with approval
that products are qualified to be sent to the store.
Maintenance of equipment used in production process. Help with repairing
of machines when faulty.
Procurement department
API sourcing analysing and finding cost effective suppliers who provides
good quality of active ingredients needed in the production process.
Purchasing dealing with suppliers, long-term planning of required supplies
and purchasing of daily basis needs for the company.
Stores stock control movement and storage of input materials. Final
products are kept in regulated and controlled conditions, to maintain
products safe till expedition date.
Logistics deals with company’s distributors, choosing effective distributors.
Determine and evaluate transportation systems, deal with transporters,
delivery time and transports costs.
Results 41
Product
Products are sold to customers in relation to the therapeutic categories:
42 Results
Number of
Category Description
products
Described against infectious diseases i.e
Anti-Infectives virus ,bacterial, fungi and protozoa (ex. 167
Penicillins)
Focus on psychiatric, neurological and
Central Nervous pain management, i.e
57
System (CNS) migarine,alzheimer, depression, narcotic
(ex. Ibuprofen)
Cardiovascular and Connected to heart diseases and blood
59
Diabetes vessels. i.e stroke, coronary heart disease
Described against respiratory diseases i.e
Respiratory System 40
tuberculosis, asthma, lung cancer
Gastroenterology Related to nutrition, digestion process
52
and Metabolism and obesity (ex. Ranitidine)
Concerns gynecology, andrology and
Genitourinary
diseases occur in urinary and genital 3
System
organs
Oncology Cancer treatment 33
Providing patients who got an organ
Transplantation transplant with immunosuppressive 1
agent
To treat hormonal diseases and disorders
Hormones 7
i.e growth hormone, steroid hormone
Described for skin diseases including all
Dermatology 28
types of skin infections
Described to treat pain sensation
Anesthetics 13
including muscle relaxants
To treat connected disorders of muscles,
Muscoloskeletal
nerves, joints, bone, and conditions of 54
System
Osteoporosis
Used to treat for allergies, contain agents
Anti-Histamines to release histamine in the body against 22
allergic reactions
Beta divided these categories into three main sectors which are internally
recognised in the company and according to these sectors the company
calculates their yearly share of revenues. The main categories are:
Results 43
Price
They use a formula to calculate the final price for the customers. This formula is
based on the mark-up percentage which is determined by the decision of the
company’s management and the product costs. The mark-up percentage is
subtracted from 100% so that the cost price is divided by the remaining
percentage therefore giving the selling price to the customer. The remaining
percentage includes the net profit, with all forms of costs spent on the product
such as operational costs, patents costs, discounts, transportation, insurance
and labour costs.
Depending on the quantity ordered and the strength of dosage of the drug, the
final prices differ. Customers can negotiate with Beta with regards to discounts
percentage on quantity ordered, usually offers around 10% off as a quantitive
discount but percentage variation mainly depends on negotiation.
Orders are delivered to the customer usually on the quantity ordered, raw
material availability and on the length of transportation to the customer. The
44 Results
Promotion
They try to combine personal selling with public relations. It has an extensive
sales and marketing capabilities. One of the largest teams in the company
consists of sales and marketing representatives as their main way to promote
products through personal selling. The compnay believes in establishing better
relationship with its customers through this way of promotion as
representatives visit their customers and potential customers working in
pharmacies, hospitals, physician centres and other groups to provide them with
necessary information, catalogues, and products samples.
In many occasions Beta’s representatives attend various exhibitions,
conferences, events and seminars around the world. In addition to press
releases, it publishes quarterly financial reports, annual information updates
and presentations to inform about performances level, and yearly aims of the
company. All these information about the company and products are provided
on the website where details are clearly stated to viewers in a user friendly form.
Beta organises yearly events and seminars to raise awareness against cancer and
diabetes among employees and public, also distribute brochure campaigns to
inform about causes and dangers of these diseases.
Results 45
Good reputation and relations over the past years Beta kept good relations
towards its customers and suppliers by fulfilling its contracts, terms of
payments and ethical responsibilities.
Rewarding employees program is done every 3 months by provision of
monetary bonuses and non-monetary rewards, further more giving
opportunities to shift to higher positions at work. A motivation program
was introduced recently to help in motivating employees in order to
increase their efficiency, productivity, feel of recognition and belonging at
work place.
Weaknesses
Lack of communication between departments in relation to the size of the
company and diverse locations of it daughter companies the
communication is more complex and doesn’t have an effective system of
communication which can help in easier and direct connection between
departments within Beta and its daughter companies in relation to
knowledge and orders processing.
Inefficient disturbers recently there are problems with some of distributors
as they are intermediates between Beta and customers who in many cases
delivered products that are faulty packaged, bringing a bad image for the
company and causing problems with their distributors.
Lack of maintenance staff or unavailable spare parts due to lack of skilled
people who work at field of machines maintenance; it consumes time to fix
any problems that can occur especially during production of an urgent
order. Furthermore, some spare parts of machines are unavailable at the
market which forces them to contact original supplier for spares which can
be more costly to buy and timely consuming to deliver these missing parts
which can affect production process.
Very low number of in-licensed products in comparison to world-wide
competitors, Beta does not invest much in R&D to develop new in-licensed
products and also doesn’t have much experience like other competitors to
develop new drugs at fast rate.
Presence of slow production due to older production technologies, only in
some of it’s facilities have older type of technology used for production
which can decrease the production rate, therefore increasing costs
Results 47
IFE Matrix
Internal Factors
Weight Reaction Score
Strengths
Highly skilled employees 0.15 3 0.45
Intensive promotion 0.13 4 0.52
Wide product portfolio 0.10 3 0.30
Acquisitions 0.08 2 0.16
Size of facilities 0.07 1 0.07
Rewarding employees program 0.06 3 0.18
Good reputation and relations 0.03 2 0.06
Weaknesses
Presence of slow production due to older type
0.12 3 0.36
production technologies in some facilities
Very low number of in-licensed products 0.09 2 0.18
Inefficient disturbers 0.07 2 0.14
Lack of maintenance staff or unavailable spare
0.06 1 0.06
parts
Lack of communication between departments 0.04 2 0.08
Total 1.00 x 2.56
The total weight score is 2.56 that just almost lay on the average of 2.50 which
means that the company reacts well but still has to improve more in with all in-
fluences. The most contributing factors of the result are skilled employees, in-
tensive promotion, wider product portfolio and presence of older type of ma-
chines in some facilities.
Figure. 5 IE matrix
Source: Žufan, 2005, results of the matrix is my own work
Kotler’s strategy
According to Kotler’s strategies Beta is applying two different strategies when
comparing to MENA market and the international market. In relation to the
international market the compnay is considered to be a follower as the market
share in world-wide is still very low and follows market leaders, like other
followers produces large number of generic products which have expired patent
rights. Furthermore, it didn’t launch large number of in-licensed products that
can challenge and compete with the market leaders. On the other hand, due to
lack to highly developed companies in the MENA region, Beta is considered to
be one of the market leaders, as its market share in MENA among 10 best
sellers.
Porter’s strategy
Beta strategy of focus strategy but uses both combinations of cost and
differentiation in it.
They use cost strategy and focus strategy simultaneously. This is done by
implementing of focused low cost strategy in relation to production of products
belonging to the generic segment as they are a favourable option to price
sensitive customers who rather buy less expensive and similar to original
branded products. Beta sells generic products majorly to the U.S. market.
Results 49
SWOT analysis
S-O strategy
1. Find new markets
Beta provides high quality of various products that gave the company a
good reputation over the years; as a result of emerging markets and
globalisation it can take an advantage of it to penetrate new markets
through its direct relations with potential customer and also by finding
new distributors who can provide products to more regions around the
world.
2. Capitalize facilities
Capitalizing with new machines and technologies due to available
capacity of facilities can bring an advantage to the company to enlarge its
product portfolio and can also gives a potential to develop new product
pipelines related to non-communicable diseases as the interest of
providing treatments to these diseases is growing.
3. Penetrate the U.S market with other branded and injectable products
The U.S. government is increasing its expenditures in the health care
which can motivate Beta to sell more generic products and offer its
branded and injectable products by taking an advantage of its well
promtion strategy. However, the USA market is big so as future plans
Beta can make acquisitions there, as it will help the company to grow and
decrease its costs while producing and marketing within the country.
4. Increase number of branded-generic products
Increase of interest of licensing agreements that are related with
branded-generic products enables them to bring more profits by these
agreements and also encourage launching new products with the help of
its highly skilled employees to produce and market more number of
products effectively.
S-T strategy
1. Improve competitive advantage
Beta can overcome and reduce the threat of competition as currently it
has a wide number of products, therefore by taking the advantage of its
reputation and effective promotion through personal selling; Beta can
build flexible production according to its customer’s needs.
50 Results
W-O strategy
1. Implement newer technologies to increase quality and mass production
Results 51
Strengths Weaknesses
Internal Highly skilled employees Presence of slow production
environment Intensive promotion due older production
technologies in some facilities
Wide product portfolio
Very low number of in-
Acquisitions
licensed products
Size of facilities
Inefficient disturbers
Rewarding employees
External Lack of maintenance staff or
program
environment unavailable spare parts
Good reputation and relations
Lack of communication
between departments
Opportunities S-O strategy W-O strategy
Technology innovation Find new markets Implement newer
Licensing agreements (S2,S3,S7,O4) technologies to increase
Increase of U.S. government Capitalize facilities quality and mass
expenditures on Health care (S5,O1,O4,O5) production (W1,O1)
Penetrate the U.S. Improving
Emerging markets and
market with other communication system
globalisation of new products
branded and injectable within the company
Increase of life expectancy (W4,O2,O4)
products (S2,S3,O3)
Growing on demand for non- Hire more people in the
Increase number of
communicable diseases maintenance staff
branded-generic
Increase of number of products (S1,O2) (W4,O5)
graduates
Threats S-T strategy W-T strategy
Competition Improve competitive Seeking for more co-
Strict regulations advantage operation with
Margins setup (S2,S3,S4,S7,T1) biotechnological firms
Increase women force to increase number of
Increase of interest in in-licensed products
in the company
Biotechnology
(S1,S7,T7) (W2,T4,T1)
Recession and financial crises Invest more into on
Invest into API team to
Political instability in MENA Lower costs by finding R&D researches
region efficient suppliers that (W2,T1,T3)
Appreciation of Dollar provide good quality at Finding efficient
Lack of educated women as lesser price (S1, T5,T6) distributors (W3,T1)
working force
Cash Flow projection based on innovation in $000
Year1 Year2 Year 3 Year 4
Operating Activities
Cash paid by customers 10,155.86 12,187.04 12,694.83 12,897.95
Sales and marketing costs 3,698.99 3,735.98 3,885.41 4,040.83
General and administrative costs 900.98 928.01 955.85 994.08
Cash paid for employees 3,890.00 4,006.70 4,086.83 4,209.44
Other operating expenses 569.05 569.05 540.59 546.00
Net cash flow from operating activities 1,096.85 4,044.16 7,270.29 5,493.09
Investing Activities
Purchase of property, plant and Equipment ‐ ‐ 4,539.12 1,815.65
purchase on intangible assets ‐ ‐ 345.68 ‐
Net cash flow from Investing activities ‐ ‐ 4,884.80 1,815.65
IRR 16%
Figure. 6 Cash flow projection of introducing branded and injectable products to U.S. market
Source: own work
A simple cash flow statement is done after analysing the U.S. market of expected
costs and revenues when introducing branded and injectable products. As the
expenditures increased on the health care, I expected of around 10% share of
these two types of products to mark up from total US sales, therefore giving an
estimate of around 10M dollars as cash paid by customer which gradually will
increase by 27% by the end of the fourth year. Costs are mainly connected in the
first two years of marketing and selling these products intensively with starting
amount of more than 3.6 M dollars. This expense will be steady of 4% increase
in third and fourth year. At the start it is estimated of having 100 people
operating on it, however these employed staff will have college degrees therefore
the minimum expected wages of around $ 37000 and bachelors can receive of
US $ 50000, these estimates are based on the statistical results of wages US
full-time workers above 25 years old.
The investment activities are considered as future plans after the company
starts to achieve better cash flow results, this strategy can bring an opportunity
54 Results
IRR is calculated as the final part of this strategy, to provide a better view on the
rate of return on this investment, as it is shown the result is 16% which is not
quite high due to introduction of early further investment into property and
purchasing of intangible assets but on the other hand, we can consider it to be
profitable as the company already is selling its generic products and by
introducing these other types it can bring better results in future.
5 Discussion
When analysing the characteristics and the strategy aimed by the company, it
can be noticed that the management is on the right track to achieve expected
aims while comparing it to the results of the internal and external analysis of
Beta. The main strengths of the company should be emphasized as it has
developed a good reputation over the years of high quality and wide range of
offered products. However, there are weakness which should be eliminated such
as rate of production in some facilities and lack of developing in-licensed prod-
ucts when compared to international competitors.
According to the analysis of the current situation and SWOT analysis of Beta, it
shows that the company is doing well based on the total scores of EFE 2.70
matrix and IFE matrix of 2.56 which belongs to hold and maintain strategy;
however the management can focus more on increasing their product portfolio
to increase the company’s market share. Also they should penetrate the U.S.
market with injectable and branded products as they already sell generic
products which make it easier to market their other products with their existing
customers in that country. Other strategies which contribute to achieving better
results are finding efficient distributors, rewarding employees, capitalizing free
space in facilities and further acquisitions in the future.
I think that these main suggested strategies can help Beta to grow and be more
successful on the market. By implementing and continuous control of
mentioned strategies, the management can review the effectiveness of them or
make changes and improvements of these strategies. However, there are many
tools and other alternative strategies that can be analysed by the management of
the company but due to thesis limit, all these tools and strategies cannot be
mentioned and used in it.
56 Conclusion
6 Conclusion
Every management should predict and observe the changing environment in
order to formulate and adjust their strategies according to these changes. Fast
Implementation and continuous controlling are important for the company to
be able to compete better within its industry market.
Due to the limited frame of this bachelor thesis, was not available to elaborate
more on all possible strategies and tools into details. Therefore implementation
and control of these strategies are not included into this thesis. I hope my elabo-
ration will have a value to the management of the company and it is realistic for
them to apply it.
References 57
7 References
ARMSTRONG. M, STEPHENS. T. A handbook of employee reward management
and practice. Kogan Page Publishers,2005. ISBN 97-807-4944-343-6. 478
pages
CAPON. C, Understanding Strategic Management. Pearson Education, 2008.
ISBN 9780273694984. 419 pages
COLE, G.A., Strategic management, DP Publications, London 1994. ISBN 18-
5805-101-0. 267 pages
DRANSFIELD. R. GCE AS Level Business Single Award for OCR. published by
Heinemann, 2005. ISBN 9780435401153 192 pages
GRANT, R. M. Contemporary strategy analysis : text and cases. 7th edition,
Hoboken, N.J.: Wiley, 2010. ISBN 978-0-470-74709-4. 926 pages
JOHNSON. G, SCHOLES. K, WHITTINGTON. R, Exploring corporate strategy: text &
cases, 8th Education, 2008, ISBN 02-7371-192-X. 878 pages
KOTLER. P, SHALOWITZ, R. JOHN. S, Strategic Marketing For Health Care
Organizations: Building A Customer-Driven Health System. John Wiley
and Sons, 2010. ISBN 9781118047170. 576 pages
MACMILLAN. H, TAMPOE. H. Strategic management: process, content and
implementation. Oxford University Press, 2000. ISBN 01-9878-229-2. 361
pages
MINTZBERG. H, B. AHLSTRAND, J. LAMPEL. Strategy Safari. Free Press, February
2001. ISBN-10: 0684831732. 416 pages
MINTZBERG. H, SUMANTRA GHOSHAL. The strategy process: concepts, contexts,
cases, 4th edition, Pearson Education, 2003. ISBN 97-8027-365-120-8. 489
pages
MORDEN. T, Principles of strategic management. 3rd edition, Ashgate
Publishing, Ltd., 2007 ISBN 9780754644743. 627 pages
PEARCE, JOHN A. STRATEGIC MANAGEMENT : formulation, implementation and
control, 4th edition. Homewood, Irwin 1991. 1049 pages.
PLAMÍNEK J. Synergický management: vedení, spolupráce a konflikty lidí ve
firmách a týmech. Argo, 2000 .ISBN 9788072032587. 328 pages
PORTER, M. E. Interbrand choice, strategy, and bilateral market power.
published by Harvard Univesity Press, 1976. ISBN 06-7445-820-6. 264
pages
PORTER, M. E. On competition. 2nd. Illustrated. Harvard Business Press, 2008.
ISBN 9781422126967. 544 pages
PORTER, M. E. The Competitive Advantage of Nations. New York: The Free
Press. A Division of Macmillan, 1990. ISBN 0-02-925361-6. 855 pages
58 References
Internet Sources
JORDAN’S STATISTICS OFFICE, population age strucutre and growth rate [on-line].
2010. [cit. 2011-4-5] http://jorinfo.dos.gov.jo/home.aspx
8 Appendixes
<15 yr 15-64 yr 65+
Year
percentage percentage percentage
2005 37.32 62.7 3.2
2006 37.32 62.7 3.2
2007 37.32 62.7 3.2
2008 37.30 59.5 3.2
2009 37.30 59.5 3.2
2010 35.30 59.9 4.8
Table. 8 Size of population according to age structure.
Source: own work 2011 based on data from Jordan statistics
Population
Year inhabitants growth
rate (%)
2005 5473000 2.3
2006 5600000 2.3
2007 5723000 2.2
2008 5850000 2.2
2009 5980000 2.2
2010 6113000 2.2
Table. 9 Number of inhabitants and population growth rate.
Source: own work 2011 based on data from Jordan statistics
Educational
Employed Inactive Unemployed
level
Less than
3.4 95.2 27.7
secondary
Secondary 6.1 92.1 22.8
Intermediate
27.0 64.2 24.5
diploma
Bachelor’s
degree and 48.6 34.2 26.2
above
Total (%) 11.2 85.0 25.4
Table. 10 Status of the labour market of women aged 15+ and educational level for year 2008
Source: own work 2011 based on data from Europa, Note: Figures do not add in rows or in
columns