Dr Reddys Laboratories Overview - Essay Example

?Topic: Case Study Affiliation: Dr Reddy's Laboratories: An Overview The year 1984 saw the establishment of the Dr Reddy's Laboratories Company in India. Domestic markets were in dire need of bulk drugs, necessitating the establishment of the company to account for this need. Domestic production efforts were employed in the production process since the company at its establishment time had not diversified its technology base to international standards. Successful drugs production laid a strong operational base for the company right after successfully producing its first product that went by the name Methyl Dopa. Few years later, towards the end of the 1980s, the company’s business aspect has taken a significant position in the pharmaceutical industry. Given its potential in the industry, it had by this time enough resources and effective production processes to produce products for both domestic and international markets. As a matter of fact, the company by this time had sophisticated production processes that enabled it to provide sophisticated products in the market. As a result, its ability to export its products was rising, especially after successfully reaching the U.S market through multinational companies that it made products for. As its business line gained momentum towards the 1990s, European and Japanese suppliers were consistently being overtaken by Dr Reddy's Laboratories. Its popularity kept rising as more and more markets demanded the company’s quality products. In the same period, the company diversified its market and product aspects, targeting more markets within and without and also producing more pharmaceutical products as demand increased. The primary interest in this pursuit since then has been to exploit favourable patent and regulatory systems around the world especially in the U.S in order to engage in generic products production, thereby creating strong brand images for its products and gaining an exclusive control of the pharmaceutical market locally and internationally. Today, the company enjoys successful global operations in numerous countries, serving diverse markets and offering numerous pharmaceutical products across international markets. Strategic Position as at 2003 Business entities are governed by set goals and objectives. These goals and objectives influence decision making processes within and without the organizations in a bid to achieve the set goals and objectives. The strategic position of a business or a company for that matter is highly dependent on the activities undertaken by the company in regard to its operations and business performance. The success or failure of a business with time determines the strategic position of that business at a given point in time (Barbara, 2009, p.132). In order to achieve the set goals and objectives and therefore realize successful business operations and performance, strategies to the realization of these goals and objectives must be specified. As at the year 2003, the operations and business performance of Dr Reddy's Laboratories had already taken strong foundation and operational environment around the world. Just like any other business, the operational environmental is always characterized by uncertain events that are either beneficial or loss-oriented. Legal battles are inevitable from time to time and Dr Reddy's Laboratories is no exception. For Dr Reddy's Laboratories, the year 2003 was crucial in determining its strategic position. The management and the company’s leadership had to place the company within the globalization context even as it dealt with legal and operational challenges. This year saw the performance of the company take a down turn, owed to legal and operational concerns. The company had engaged in a number of legal battles especially those that it had been pursued by other stakeholders in the industry within and without India. In terms of operations, significant challenges were emerging in both domestic and international markets. Specifically, the production of generic pharmaceutical products experienced strict regulatory and monitoring measures especially in the USA. The management as a result faced a significant dilemma as to the actions that would that would counter the emerging operational forces. Even with these significant events that in one way or another affected the business aspects of the company, a number of activities were undertaken to persistently maintain the global position of the company. Discovery of new drugs is one of the activities that the company pursued to maintain its success domestically and internationally. The company engaged in a discovery trail, targeting branded and generic pharmaceutical products as new markets merged. An aiding action to this activity was a company expansion strategy that targeted other countries around the world other than India and the United States. As part of the expansion strategy, Dr Reddy's Laboratories engaged in acquisition strategies, targeting different companies that had the potential to assist in the realization of its business goal and objectives. The underlying interest was to provide quality pharmaceutical products, given that it had already taken up most of domestic and internal pharmaceutical supplies. Further to this pursuit, the strategic position of the company was defined by stock exchange and diversified market share. This is evidenced by its American Initial Public Offer (IPO) and establishment of business operations in Europe just before the year 2003 (Justin, 2008, p.42). The year 2003 events defined specific areas of business interests that were crucial in enhancing global business undertakings. Company Growth since its Establishment As earlier mentioned, the company was established in the year 1984. Since then, the company has experienced tremendous growth across all its product lines and business aspects. The company engages in the manufacture of a wide range of pharmaceutical products, among them active pharmaceutical ingredients, generic and branded finished dosages, specialty pharmaceuticals and biopharmaceuticals (Jagdish, 2008, p.73). These products have been developed as the company pursues its expansion strategies since its establishment. Different strategic tools and frameworks are used in evaluating the growth and development of a business entity. In the case of Dr Reddy's Laboratories, the following strategic tools and frameworks apply: SWOT analysis, scenario planning, competitive analysis, goals grid, supply chain analysis and Situation-Target-Path (STP) framework for growth monitoring (Dilip, 2007, p.257). The company’s growth is accounted for by the strengths, weaknesses, opportunities and timing of its business undertakings. In scenario planning, every action that the company takes is bound to some decision making. The decisions made relate to specific business conditions that need to be addressed at some point in time. Competitive analysis evaluates the position of the company in the context of rival companies in the industry. This enhances the undertaking of essential business actions that aim at promoting the competitive advantage of the company in the industry. Goals grid on the other hand is an operational outline of activities that lead to the achievement of the company goals and objectives within a given time frame. Supply chain analysis assesses all-round business aspects to strike a balancing relationship between the company and the users of its products (Sergio, 2007; Marc, 2009). Consumers of pharmaceutical products demand these products, and it is the firm’s supply chain that account for consumer needs. Company growth is tailored towards effectively meeting the consumer demand. Finally, STP framework is utilized in strategic planning, relating business situations to business targets in pursuit for growth and expansion. The combination of the above mentioned strategic tools and frameworks explains the exhibited growth scenario of the Dr Reddy's Laboratories Company. Two years after its establishment, the company decided to go public as one of its strategic plans to oversee the growth and expansion of the company. This strategic action saw the company enter the international market in the year 1986. The company did not only identify opportunities in the international market, but there was a demand loop to account for too. This was enhanced by its strength in competition and provision of quality products at a time when they were demanded. Its planning and operational efficiency played a central role in the company’s establishment locally and international. Towards 1990s, the company had already begun diversifying its product portfolio. The company engaged in formulations operations as early as 1987 after successfully obtaining all relevant approvals. As part of its growth strategy, it undertook its first acquisition action in the year 1988 when it acquired Benzex Laboratories in a bid to expand its business activities. The acquisition was part of its strategic planning for growth and development prior to its business interests. It is important to note that in order to do this the company utilized the earlier mentioned strategic tools and frameworks through assessing and evaluating all variables that define each of them. The company consistently pursued its growth and expansion activities from time to time, as it captured more and more market share locally and internationally. New territories became its target variable in its growth pursuit, extending its exports to Europe among other countries. As time progressed, economies were developing and the pharmaceutical industry was evolving fast. In this regard, the company saw the need to undertake drug discovery through pharmaceutical research and development. A drug discovery programme was set up by the company in the year 1993 while it still considered establishing new venture outside India. Throughout the 1990s, the company embraced diversity in production and in business portfolio, an activity that the company successfully pursued. The 21st Century marked a new dawn for the company. It started by successfully being listed on the New York Stock Exchange (Fernando, 2009, p.252). This was an indication that its growth had hit an international influential position in the pharmaceutical industry. Even with the acquisitions that the company had successfully undertaken, it still engaged in merger activity, for example the Cheminor Drugs Limited merge in the year 2001. Its strategic plans continued to be realized in the following years especially when it undertook its first international acquisition of UK firms. New products also characterized its growth around this period. By the year 2006, the company revenues had hit a one billion dollar mark; the same year that it acquired the fourth largest German company by the name Betapharm (Suseela, 2011, p.105). To date, the company’s growth trend continues to exacerbate, leading to the realization of high turnover and profit that surpasses that of competing firms in the pharmaceutical industry. Becoming a Discovery-led Pharmaceutical Company Rationale for Acquisition of Betapharm Dr Reddy's Laboratories acquired the German pharmaceutical company by the name Betapharm in the year 2006. The rationale for this acquisition looks into various factors both internal and external to the company. To start with, the acquisition was part of the company’s growth and expansion strategies, the primary being entry into foreign markets. Indeed, the company successfully entered the German market through this acquisition. By the time this acquisition was undertaken, the pharmaceutical industry in German was to enter. Significant barriers to market entry had been installed, meaning that gaining access to the German market was tricky. However, Dr Reddy's Laboratories identified a viable and legal path to gain entry into the German market through the acquisition. The German market for generic pharmaceutical products was unique in comparison to other world markets. It was characterized by distinct features that captured the interest of many companies that operated international businesses. Dr Reddy's Laboratories for example prescribed its generic products by determining the products’ active ingredient. However, this was not the case in Germany. Generic pharmaceutical products in Germany were prescribed by brand (Pederson, 2008, p.468). As a result, the German market’s mode of dealing and handling generics was totally different from that of other countries around the world. Betapharm was also a significant influencer of the generics market in Germany, thus the reason why Dr Reddy's Laboratories targeted it. Amid these unique market characteristics that are different from those of other pharmaceutical markets in the world, Dr Reddy's Laboratories aim to diversify its product portfolio and therefore offer a variety of generic pharmaceutical products in the German market. The idea was to capture a larger market share using the beta brand name. On the same note, the German healthcare sector is effectively managed and regulated. In this regard, a consistent environment of operation with less fluctuation in product prices and product demand is relatively guaranteed. Impact after Acquisition The idea behind the acquisition was to expand Dr Reddy's Laboratories’ business operations and therefore improve its market share. This would mean a high turnover and profit margin with a successful acquisition. The impact of the acquisition on Dr Reddy's Laboratories was not less than expected. However, there emerged a number of factors that had to be accounted for, even when they had not primarily received serious treatment during the conception of the acquisition project. These are: government regulation and statutory health insurance funds (Suseela, 2011, p.128). Government regulation was and continues to be undertaken through the Economic Optimization of Pharmaceutical Care Act, while the statutory health insurance funds are monitored and regulated by the Federal Association of Health Insurance. Although the acquisition opened up opportunities and new markets for Dr Reddy's Laboratories, the effects of the two bodies on the operations of the company in Germany cannot be ignored. The free market concept was likely to be constrained. However, the acquisition had its benefits with regard to the fact that Dr Reddy's Laboratories operated under the notion of being a discovery-led pharmaceutical company. The competitive advantage of the company took a new position in the international market. Betapharm was an influential mover in the German pharmaceutical market. All its successful operations had now been transferred to Dr Reddy's Laboratories. On the same note, the company rightfully marketed its products using the Betapharm brand. Over and above the competitive advantage, the company diversified on its raw materials and manufacturing processes bases, thereby increasing its production capacity and products supply to both local and international markets. Under the discovery-led motive, the acquisition enhanced research and development into brand and generic pharmaceutical products. The therapeutic areas prioritized in this pursuit include but not limited to: metabolic disorders, cardiovascular disorders, bacterial infections, inflammation and cancer (Fredelic, 2010, p.68). The 2006 Betapharm acquisition was an eye opener to internal agreements and collaboration between Dr Reddy's Laboratories and pharmaceutical industries around the world. As a result, the acquisition helped place the company at a better position in the world pharmaceutical arena. Sustainability of the Company’s Success in the Globalization of Industry Context Globalization continues to condense world markets into a global village. Sustainability of a company’s success in this context requires that the company remains internationally competitive in all its business aspects and prospects. That is to say that the company that maintains its competitive advantage over rival firms sustains its success in the globalization context (Bettencourt, et al.2002, p.98). Success sustainability on the same note is highly influenced by brand identity. The company must retain a brand identity that is unique to its business aspects and one that is easily identified in the various markets it serves. Over and above this, the sustainability of the company’s success with globalization should be one that is driven by creative and innovative research and development. Although globalization is deemed to tamper with success sustainability in business operations due to increased numbers of stakeholders in various markets, the Dr Reddy's Laboratories case depicts long term success sustainability even with the persistent globalization of the pharmaceutical industry. The company has commercialized its infrastructure globally, targeting specific strong markets around across the globe. Once it gets hold of the most influential pharmaceutical markets in the world, gaining control of smaller markets will not be a hard nut to crack. In this pursuit, the company has special interest in Europe, India, Russia and the U.S (Fredelic, 2010, p.68). The manufacturing locations are strategically placed, taking advantage of existing and emerging markets. Globalization is centrally concerned with opening up existing markets and providing new opportunities that necessitate the need for new markets. With manufacturing locations that exploit such opportunities as they emerge, it is hard to refute the fact that Dr Reddy's Laboratories’ success is sustainable as globalization exacerbates. The manufacturing locations of the company are hosted in countries that are actually the first to realize and take advantage of opportunities that globalization offers relative to other countries across the globe. Another aiding factor in the sustainability of the company’s success is research and development. Consumer products keep changing, and so are the tastes and preferences of these consumers (Beise, 2004, p.271). On the same note, the contemporary world is facing new and complicated health issues that need to be addressed through vigorous research and development. Since the company is deeply rooted in discovery, research and development becomes its strategic choice in formulating and implementing plans that are consistent with globalization activities. With this, its survival through competition is guaranteed and its success is therefore sustainable. Sustainable success is based on accounting for future company welfare today. Dr Reddy's Laboratories’ stocks are listed in the New York Stock Exchange among other strong exchange markets around the world. By so doing, the firm’s operational risks posed by an uncertain future are reduced or minimized. The same objective is achieved through the running of joint ventures in a number of countries (China, South Africa and Australia) as well as operating wholly-owned subsidiaries in U.S, UK, Germany, Brazil and Russia (Fredelic, 2010, p.68). As markets open up and consequently converge into a global village, this diversification is an indication of a sustainable success. Customer satisfaction is also a measure of success sustainability. The company’s results are driven by satisfaction of its customers. When such a strategy is adopted, there are high chances that consumers are less likely to switch to another company when all their needs are addressed. Both the company and the customers are essential in the undertaking of the underlying business. However, the customers constitute the market share that is eyed by the entire industry. It is therefore the company to ensure that it stands a higher chance relative to its rivals to effectively and efficiently meet consumer and customer needs. When the needs basket has been accounted for, the company fulfils customer satisfaction in the short run and in the long run. Response to customer needs offers the company a significant market position. Conclusion Dr Reddy's Laboratories has grown from a single business entity to an international mover in the pharmaceutical industry in the world. The management and the entire leadership of the company has relentlessly pursued growth and expansion strategies that have seen the company rise to giant pharmaceutical company it is today. It is evident that the business environment is characterized by numerous challenges; social, economic and political, but the persistence to pursue the set goals and objectives should be the primary focus of any given business entity. Identifying market gaps and undertaking the relevant actions to account for these gaps is essential in determining the success of the company. Strategic planning is purely informed by strategic decisions and choices, just like it is the case with Dr Reddy's Laboratories. References Barbara, J, (2009), Entrepreneurial Behaviour, Glenview, IL: Scott, Foresman and Co. Beise, M, (2004), Lead markets: Country-specific drivers of the global diffusion of innovations. New York: Cengage Learning. Bettencourt, A, et al. 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