Lupin Marketing Plan - Essay Example

Lupin Marketing Plan 1. Executive Summary The project discusses the marketing plan of Lupin Pharmaceuticals, which is among the top most pharmaceuticals a company in India. Lupin after creating a stable market share in the Indian market plans to enter the international market mainly US because of the growth opportunity encountered in the US pharmaceutical market. To enter the US market, Lupin adopted the ownership strategy as in wholly owned subsidiary to face the competition and create a market presence. The products are already made available in Latin America and has experienced huge success rate. The strategy adopted is of focus differentiation to tap the opportunity that prevails in America. The project highlights the top competitors of Lupin in US and also stated the strategy that Lupin should implement in order to succeed in the US market. The Porters Five forces have been used to analysis the attractiveness of the industry, SWOT to determine the internal and external factors of Lupin Pharmaceuticals. Perceptual map has also been prepared to analysis the competitor’s position in the industry so that Lupin can implement strategies accordingly along with the 4Ps. Finally to measure the effectiveness of the business plan, balance scorecard will be used which will determine the working and effectiveness of the strategies adopted and if any changes to be made in the business plan. Contents 1.Executive Summary 1 Contents 2 2. Introduction 4 3. Situation Analysis 4 4. SWOT Analysis 7 5. Evaluation of Alternative Strategies 9 6. Objectives 11 7. Recommended Strategy 11 8. Economic Evaluation 15 9. Implementation and Control 16 9.1 Managing, measuring and controlling 16 9.2 Contingency plan 16 Reference 17 Bibliography 18 Appendix 19 24 2. Introduction With globalization acting as a permanent as well as irreversible part of the economy and economic life providing the firms with both opportunities as well as challenges to prove themselves and compete in the competing market environment. Therefore international expansion has become one of the prominent strategic responses towards global dynamics for organizations. International expansion can be defined as a process through which the multinational enterprise enters and also invest in some foreign country in pursuit of strategic objectives (Luo, 1999, p. 5). The project report highlights the process of internationalization and the benefits involved in the process of going global. The company taken into consideration is Lupin pharmaceuticals which is among the top five pharmaceuticals companies in India. Lupin Pharmaceuticals plans to enter America with its product generic, specialty and API. The reason behind choosing America is that US is the largest market for pharmaceuticals and is also global leader in biopharmaceutical research. The US market provides a free pricing market and a favorable and also regulatory environment (Select USA, n.d). By entering the US market particularly America, Lupin aims to capture the market share and build in brand value in the international market. 3. Situation Analysis 3.1 Business Environment Political Pharmaceutical industry has over the years gathered political focus as well as pressure from the government across the globe and its impact has been highly experienced in US industry. The US pharmaceutical industry tends to operates differently as compared to other national industries. Consumers and patients do not pay for their drugs directly, but receive them through government run healthcare systems. Political factors play a huge role in the regulation of distribution, manufacturing and also sale of the pharmaceutical with regards to safety of its consumer. The Food and Drug Administration is the regulatory body in the US and sets a standard of quality (Castner, Hayes & Shankle, 2007). Economic The US pharmaceutical industry has been for decades among the most profitable and also growing sector encountered by the American economy. It is a contributor towards the health-care sector and generated about $1.3trillion accounting for about 13% of the economic output nationally and expected to reach 16% in 2010 and has the potential to cross 20% by 2040 (FTC, 2002, p. 4). Pharmaceuticals and the healthcare are relatively stable economic industry and contributes in the productivity, output and creation of jobs along with an increase in the price which has been moderate than rate of inflation (NAE, 1983). Social & Cultural Despite of economic downfall the healthcare and pharmaceuticals sector remained the most profitable sector and immune because the people at USA, America are unwilling to cut cost when health is at stake. The US pharmaceutical industry tends to operates differently than other national industries. The consumers and the patient do not have to pay for the drugs as the government provides them with a running healthcare system (Castner, Hayes and Shankle, 2007). The US Pharmaceutical industry has incorporated the ICH guidelines to provide with a better facility to the patient and the people. The four main categories include safety, quality, efficacy and multidisciplinary issues. Technology factors Technology plays a major role in the development of new products leading to innovations. The pharmaceutical industry is investing a huge amount on its R&D to innovate and develop medicine which can cure diseases. Thus with the help of latest technology R&D can become the core and achieve a competitive advantage in the industry. Market Analysis The global pharmaceutical market after a slow growth rate in the past two years which was mainly due to economic slowdown has been on the path of recovery followed by growth. The global pharmaceutical industry is predicted growth rate of about 6.5% in between 2011 and 2013 depending on factors like low cost, increasing prevalence of disease globally and also increase in cost of capital of the consumers (RNCOS, 2011). US pharmaceuticals has entered a period of stagnation due to expiry of patent, less insured patient along with greater use of discounts and rebates contributing to the growth process. However despite of the major drawbacks it can be still said that the US pharmaceutical market is still the most attractive because of its large size, newly approved and innovative designs and also because of its high priced medicines. In 2011 the US pharmaceutical accounted to US$337.1bn and experienced a growth by 1.8% in 2012 amounting to US$343.1bn (Business Wire, 2012). The fastest growing segment of the pharmaceutical industry is generics and biological. The US generic market is estimated to produce 41% of the global sales amounting to $34billion (ITA, 2010, p. 4-5). Competitive market analysis The US is a highly competitive market in the pharmaceuticals industry and faces a stiff competition not only from the local competitors but also foreign companies which has entered the US pharmaceutical market. to further proceed with the pare it is necessary to determine the competitiveness in the US market so that Lupin Pharmaceuticals before entering the US market and establishing themselves in America can work on its positive as well as negative aspect. The top 10 pharmaceuticals companies are shown in the following table Table 1: Top Pharmaceuticals Companies in US (Source: CNN Money, 2012) According to CNN Money, Pfizer ranks 40 in fortune 500 pharmaceuticals companies followed by Johnson & Johnson and Merck. Lupin Pharmaceutical is also one of the top most pharmaceutical companies operating in India. Thus analyzing the market condition, the nature of competition would help Lupin to formulate strategies and mode to enter the US pharmaceutical market. Porters five force will help to analysis the competiveness of the industry at a larger prospective. 4. SWOT Analysis A SWOT Analysis is conducted to determine the internal and external factors of the company, the internal factors constituting of strength and weakness of the company and external factors consist of opportunity and threats. The main reason behind conducting SWOT is to overcome the weakness by incorporating the strength of the firm and reducing the threats through available opportunity to the firm (Fine, 2009). Strength Lupin is the largest manufacturer for anti tuberculosis drug It ranks among the top 10 pharmaceutical companies in India Lupin has marked its presence in the sector for drugs with relation to Asthma, Diabetes, Pediatrics and others. It is the largest generic player in the Japanese market the acquisition with I’rom pharmaceutical has helped it to increase its product portfolio Business grew by 192% in the third quarter of the financial year 2012 (ICRA, 2012). Weakness Lupin depends highly on its global formulation of business and not on the Indian market Lack of technology updates and less forecasting takes place Operates only on low growth segment low product recall which means inefficient marketing promotions Opportunity Opportunity lies with approval of new products Adoption of the international expansion strategy Entering the emerging markets such as Japan, US and Europe Strategic initiatives taken by the company Threat Intense competition among the firms Lack of R&D in Lupin Pharmaceuticals legal proceedings to enter the foreign markets 5. Evaluation of Alternative Strategies 5.1 Alternative Market Entry Strategies Before entering the foreign market it is essential for any organization to determine the attractiveness of the industry to decide upon the mode of market entry. By analyzing the Porters Five force, it can be concluded that the US market still remains to be the most attractive market to enter and Lupin expansion strategy to enter America will bring in healthy revenues and gain market position internationally. The option available to Lupin is ownership strategy-wholly owned subsidiary, joint venture and export strategy. Advantage for entering through wholly owned subsidiary is that there lays liberty to establish strategy for the subsidiary, do not have to share the profits with the partners and can be integrated into global network. However the disadvantage being fraud, stealing and misuse of inventory, cash and brand name (Gillespie, et al., 2010, p. 264). In a joint venture the foreign firm invites the outside firm to share stock ownership but it is not as popular as before. Entering through joint venture can ease a lot of pressure as the partner is well aware of the prevailing market conditions. 5.2 Alternative Target Market, Positioning and Marketing Mix Strategy It is important for firm to set up business in those markets where the demand for the products are relatively high and are expected to rise over the ears. Lupin alternative target market includes US and UK. It plans to target either the US market where the pharmaceutical industry has been experiencing a stagnant growth are or UK where the demand are high and is in a growing stage. Lupin Pharmaceuticals will try to position itself as the most innovative pharmaceutical company in US and UK and also delivering the best quality in the generic sectors. 5.3 Alternative Generic Strategies The US pharmaceutical market is one of the key markets and experienced a huge growth in the past. But over the years it has been experiencing stagnant growth rate and Lupin wants to tap the opportunity and create a market position in the US industry. Adopting the international competitive strategy, Lupin will be able to reach its objective of capturing the market share and dealing efficiently with its partners and producing quality products. The options available to Lupin are low cost, differentiation and focus strategy. Generic strategy is applied by gaining a competitive advantage over the competitors by way of offering greater perceived value which is achieved through lower prices or else delivering more benefits and justifying the high price. With low cost the company will be able to earn more profits, differentiation will help the firm to create an image different from that of the competitors and focus refers to niche market and creating a brand name in the niche market. 5.4 Preferred Strategy From the alternative options, the most preferred strategy which Lupin should adopt to enter the international market are to adopt the ownership strategy through the wholly owned subsidiary as it will be able to control the target market. The target market being America because US is facing a stagnant market growth and is the right time for any foreign company to enter and create a market position with the focus differentiation strategy the firm will be able to create a competitive advantage over the other pharmaceutical companies based in US market. The firm aims to position itself as an innovative company with high level of R&D to innovate and make new medicines to fight against diseases. 6. Objectives Specific: Lupin objective is to create a brand name in the US pharmaceutical industry and capturing the market share in America. This will enhance the brand value and will be able to expand its business into other foreign countries Measurable: The objective of the company should be measurable in both quantitatively and qualitatively. Lupin can measure qualitative objective by attracting more number of pharmaceuticals companies to do business with them and by introducing more innovate products which will prove to be helpful. Quantitative would be to achieve the targeted sales growth rate. Attainable: The objective of the company is based on the mutual understanding between the company and its partners. In the case of Lupin pharmaceutical, it would be an understanding between the company and its partners in US market. Relevant: analyzing the growth rate of pharmaceutical industry it can be said that the objective set is relevant and can be achieved successfully. Timely: The objectives set must be achieved within a specific time period. Lupin short term objective would be to attain a profit of 15% in the next six months and its long term goal would be to become one of the key players in the US pharmaceutical market. 7. Recommended Strategy Analyzing the market trends of US it can be said that the consumers are willing to spend more on healthcare sector and pharmaceuticals as they tends to value them more than any other factors. Therefore Lupin can adopt the focus strategy where the firm concentrates mainly in one or more segments and builds up a specialist knowledge in particular segment. Lupin pharmaceuticals has created a highly specialized niche market and adopting the focus strategy along with focused differentiation approach Lupin plans to enter the US stagnant pharmaceutical industry. Lupin has been concentrating on its R&D to manufacture products which are in demand and are needed. product of high quality are always on demand and since the US government contributes a major portion in healthcare of the population, Lupin by adopting the focus differentiation strategy will likely to increase the revenue and generate sales in US market. Lupin pharmaceuticals have targeted the US market and plan to enter America.US is one of the key markets for pharmaceuticals and it would be profitable for Lupin to enter the market particularly when US pharmaceutical industry has reached a position with stagnant growth rates. The Americans give high priority to healthcare and pharmaceuticals and the government are also equally participative. Lupin would aim to target the top brands along with technology firms so that the company is able to increase its stake in the US market. The target market will be the pharmaceutical companies and technology firms which are open to new inventions and changes and targeting them to enter the US pharmaceutical market, America through which Lupin Pharmaceutical would gradually build a place in the US market and introduce product which would be helpful and required by the US population. Lupin Pharmaceuticals plans to adopt the ownership strategy which is regarded as one of the most expensive method in internationalization and involves in the development of its own subsidiary (Gillespie, et al, 2010, p.263). This entry mode requires high level of involvement and commitment with regards to management, resources and time and is undertaken when the demand are assured. US pharmaceutical market is among the key players and the demand remains to be high and is even expected to increase in the near future. Lupin entry mode indicates that the firm is planning for a long term view and thus entering America with wholly owned subsidiary strategy will be beneficial for the firm. Positioning of the product or brand forms an integral part of the business plan. It is necessary to position the products in the customer’s mind which gradually leads to sale of the products. Lupin Pharmaceuticals will try to position itself as the most innovative pharmaceutical company and try to establish themselves in America. Since the market is highly competitive it becomes necessary to determine the competitors position and then formulate strategies accordingly. Through perceptual map, the competitors position in the US market have been determined based on demand for the product and effectiveness, Perceptual Map Demand Effectiveness The above perceptual map shows the position of the top pharmaceutical companies based in US. Pfizer remains to be the top pharmaceutical company with very high demand in the market place and also effective followed by Johnson and Johnson and Merck. Lupin needs to capture the market position in America and create awareness about its product. Lupin has the potential to make it big and become one of the top selling brands in America. After determining the positioning of the company, marketing mix needs to be determined. Marketing mix comprises of the 4 Ps product, price, place and promotion. 4 Ps Product: Lupin Pharmaceuticals aims to introduce high value pharmaceutical product in the American market and at the same time improve the manufacturing capacity and also offer products according to the emerging life style in the pharmaceutical segment. Since the company already entered Latin America with its generic products it plans to introduce its generic product along with specialty. Place: The place decided by Lupin pharmaceutical to enter is America, the US market. The products will be distributed through the C&F agents from India to America. Lupin will adopt three level of distribution channel in order to sell its product in America. Price: The strategy adopted by Lupin Pharmaceutical is of focus differentiation strategy and thus the price charged by the company will be relatively high because of the differentiation in its product. The price will be set by the firm itself depending upon the product and the demand for it. Lupin will adopt the price skimming strategy where the products will be charged initially at a high price to recover the cost spent during international expansion. Promotion: Lupin will promote its product in America by means of advertising which will generate awareness in the minds of the customers. Advertisements will be made through print ads, newspaper and also through television. Tying up with big brands will also promote the company product to a great extend. The promotional strategy needs to be different from that practiced in India. The mindset of the population of America is different from that of Indians and thus implementing the same promotional strategy might result in negative response. The promotional activities are assumed to cost $9000 (Appendix A) Personnel: the human resource plays a major role in the business plan. Lupin will hire the best possible people to serve the company who are able to innovate and develop new products. Process: the medicines prepared will undergo through a process which will be tested and then served to the target market to avoid any sort of complications. Physical Facilities: the company will adapt to the latest technology so that it is able to innovate and compete in the US market. 8. Economic Evaluation 8.1 Planning Assumption It is a contributor towards the health-care sector and generated about $1.3trillion accounting for about 13% of the economic output nationally and expected to reach 16% in 2010 and has the potential to cross 20% by 2040 (FTC, 2002, p. 4). Sales are assumed to be $350,000 in the 1st year (2012) and gradually increase in the next 2 years. 8.2 Financial Planning The below table shows the income statement for Lupin for the next three years i.e. from 2012 to 2014 (Refer Appendix C) 8.3 Sensitivity Analysis Best Case Scenario: It is assumed that sales has increased to $450,000 in year 1 and assuming sales will be high in Year 2 and year 3 also. The net income will stand at $457000 for the first year and so on. As a result the company will be able to invest more on its R&D. (Appendix D) Worst Case Scenario: Let us assume that the sales has accounted for only $200000 and the expenses incurred has amounted more than the sales resulting in a negative income. The income stood at ($127950), negative balance resulting in a loss for the company and it will be difficult for Lupin to overcome the loss as it is predicted to incur a loss in the next two years also. Therefore investing in America with a small amount of capital will eventually lead to loss for the company. (See Appendix E) 9. Implementation and Control 9.1 Managing, measuring and controlling The action plan has been shown in Appendix B; Lupin will adopt the balanced scorecard to manage the international expansion strategy as well as in measuring the business and controlling the international business in America. The business perspective will allow the managers to determine and see how the business is running and whether the products are in relation with the demand. The products are launched keeping in mind the customer’s rate of acceptance. Since the Americans are more into generic product most of Lupin products are also falls in the category of generic. Finally determining the financial perspective will also allow the company to determine the success rate in America and through the adoption of balance scorecard Lupin will be able to manage measure and control the overall activities of the business. Analyzing the company growth rate and demand for the products in India it can be concluded that the financials of the company are at a growing stage as the NPAT stood at 8,099.8 at the end of financial year 2011 as compared to 6,489.3 in 2010. With sufficient capital, Lupin Pharmaceuticals is set to enter America and create a brand name and image of being the most innovative company. 9.2 Contingency plan In case of any defaults or failure contingency plan made by the firm will help in change of strategy and other necessary factors. If the mode of entry is not successful and if Lupin faces difficulty to adopt the wholly ownership strategy, it can go for the next best option available to the company and this is decided on contingency plan. In case of failure of Plan A contingency plan would take into consideration Plan B, the next best option available. Reference Business Wire, 2012. United States Pharmaceuticals and Healthcare Report Q3 2012: in May 2012, Swiss Pharmaceuticals Firm Novartis Acquired US Dermatology Specialist Fougera. [Online]. Available at: < http://www.businesswire.com/news/home/20120803005650/en/Research-Markets-United-States-Pharmaceuticals-Healthcare-Report> [Accessed 18 September 2012]. Castner, M. Hayes, J. and Shankle, D., 2007. The Global Pharmaceutical Industry. [Online]. Available at: < http://www.duke.edu/web/soc142/team2/political.html> [Accessed 18 September 2012]. CNN Money, 2012. Industries. [Online]. 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Appendix Appendix A Promotional Budget ($) Advertisements ($)4000 Television: 2500 Newspaper: 1000 Hoarding: 500 Events ($)3000 Seminars: 1500 Medicals camp:1500 PR ($)2000 Total ($)9000 Appendix B Action Plan Task Responsible Start Date Completion Date Decide on the target market The management Beg of 2012 Mid of 2012 Decide on the mode of entry and enter the market The Management Mid of 2012 End of 2012 Generate awareness Marketing team Mod of 2012 End of 2012 Concentrate on new product R&D Production dept End of 2012 Beg of 2013 Tie up with major pharmaceutical in US Top management Beg 2013 Mid 2013 Appendix C:   Income Statement   Year 1 (2012) Year 2 (2013) Year 3 (2014)   Debit Credit Debit Credit Debit Credit Sales   $ 350,000.00   $ 367,500.00   $ 385,875.00 Purchase $ 30,000.00   $ 31,500.00   $ 33,075.00   Salaries $ 20,000.00   $ 21,000.00   $ 22,050.00   Electricity Bill $ 3,000.00   $ 3,150.00   $ 3,307.50   Advertising Bill $ 9,000.00   $ 9,450.00   $ 9,922.50   Set up cost $ 24,000.00   $ 25,200.00   $ 26,460.00   Depreciation Expenses $ 239,950.00   $ 251,947.50   $ 264,544.88   Closing Inventory   $ 7,000.00   $ 7,350.00   $ 7,717.50               Net Income $ 31,050.00   $ 32,602.50   $ 34,232.63                 Total $ 357,000.00 $ 357,000.00 $ 374,850.00 $ 374,850.00 $ 393,592.50 $ 393,592.50 Table 1: Profit & Loss Account Appendix D Best case Scenario   Income Statement   Year 1 Year 2 Year 3   Debit Credit Debit Credit Debit Credit Sales   $ 450,000.00   $ 472,500.00   $ 496,125.00 Purchase $ 35,000.00   $ 36,750.00   $ 38,587.50   Salaries $ 20,000.00   $ 21,000.00   $ 22,050.00   Electricity Bill $ 3,000.00   $ 3,150.00   $ 3,307.50   Advertising Bill $ 9,000.00   $ 9,450.00   $ 9,922.50   Set up cost $ 24,000.00   $ 25,200.00   $ 26,460.00   Depreciation Expenses $ 239,950.00   $ 251,947.50   $ 264,544.88   Closing Inventory   $ 7,000.00   $ 7,350.00   $ 7,717.50               Net Income $ 126,050.00   $ 132,352.50   $ 138,970.13                 Total $ 457,000.00 $ 457,000.00 $ 479,850.00 $ 479,850.00 $ 503,842.50 $ 503,842.50 Appendix E Worst Case Scenario   Income Statement   Year 1 Year 2 Year 3   Debit Credit Debit Credit Debit Credit Sales   $ 200,000.00   $ 210,000.00   $ 220,500.00 Purchase $ 30,000.00   $ 31,500.00   $ 33,075.00   Salaries $ 25,000.00   $ 26,250.00   $ 27,562.50   Electricity Bill $ 3,000.00   $ 3,150.00   $ 3,307.50   Advertising Bill $ 10,000.00   $ 10,500.00   $ 11,025.00   Set up cost $ 24,000.00   $ 25,200.00   $ 26,460.00   Depreciation Expenses $ 239,950.00   $ 251,947.50   $ 264,544.88   Closing Inventory   $ 4,000.00   $ 4,200.00   $ 4,410.00               Net Income $(127,950.00)   $ (134,347.50)   $(141,064.88)                 Total $ 204,000.00 $ 204,000.00 $ 214,200.00 $ 214,200.00 $ 224,910.00 $ 224,910.00 Read More