Globalization Strategy of an Indian Pharmaceutical Company - Essay Example

? Country/product Brief This study will focus on globalization strategy of an Indian pharmaceutical company. The purpose of the report is toanalyze the market entry opportunity for an Indian pharmaceutical company in USA. Organization selected for the study is Lupin Ltd, which is an Indian MNC catering to more than 70 countries across the globe. The report will highlight the external business environment of USA and offer insights to entry opportunities for Lupin in USA. This study will also focus on the competition level in pharmaceutical market and future prospect for Lupin to establish itself in the USA market as a pharmaceutical giant. Table of Contents 2.1 Political Factor 5 2.2 Economic Factor 6 2.3 Social Factor 6 2.4 Technological Factor 7 2.5 Environmental Factor 7 2.6 Legal Factor 7 4.1 Opportunities 9 4.2 Barriers 9 Global pharmaceutical market is valued at € 484,151million but more than 47% of the market share is dominated by USA alone. US pharmaceutical industry has discovered almost 370 different drugs in last decade. 50% of drugs are in the area of heart disease or hypertension, Alzheimer’s disease, arthritis, Parkinson’s, and Cancer. Some of the well known pharmaceutical companies of USA are Amgen, Pfizer, Marc, and Bristol-Myers Squibb among others (Economy Watch, 2010). The pharmaceutical market is highly competitive as a number of established pharmaceutical companies operate in USA. In the context of the study Lupin Limited, an Indian pharmaceutical giant has been chosen as the organization to conduct the study. The next half of the report will present a brief background of the firm. 1.1 Background Lupin Limited is one of the Ivy League pharmaceutical companies of India. The company is presently headquartered in Mumbai, Maharashtra, India. It was founded in the year 1968 by Desh Bandhu Gupta. The company is known for providing best healthcare solution across the world. It is basically a research driven organization and has modernized research & development and centers in the city of Pune, India. Lupin serves in the area of cardio vascular and anti TB drugs. Some of the noticeable products of the company include generic drugs, contact lenses, pharmaceuticals and vaccines among others. The financial facts are also very encouraging for the company, it incurred a revenue of US$ 1.1 billion for the financial year ended march 2010 (Lupin world, n.d.). 1.2 Purpose of the Report The report will principally analyze the macro and micro environments of USA with the intention of finding business opportunities. Thus the report is primarily aimed to find the business opportunities of pharmaceutical companies in USA. In this respect the external business environment and internal factors will be comprehensively analyzed. 2.0 Macro and Micro Environment PESTEL analysis is carried out to assess the external environment associated with the venture. The external business environment includes political, economic, sociological, technological, legal and environmental factors. Hence a comprehensive analysis of US external environment will be carried out to identify the impacts of these factors for a new entrant like Lupin. The study will discuss the effect of each factor in USA market with respect to the pharmaceutical companies. 2.1 Political Factor The political aspect of PESTEL analysis gives us information regarding the political scenario of the country. The political factor also represents the current political stability of the country. It also takes into account the policies of government (Oxford University Press, n.d.). USA is considered as the most powerful country of the world in terms of its economy, armed forces and other aspects. The country has substantial influence on the global economy. USA has a well defined environmental regulations and protection act that helps the country to preserve the environment. Apart from that it also has structured policies for Taxation. In the market of USA differential pricing concept is used to prevent entry of low priced pharmaceutical drugs from abroad. Low priced product import ultimately perturbs the equilibrium established in patent protected drug market of the country and also affects the incentives to develop new drugs. Canada and other European countries is the major supplier of low price drug substitutes in the US market. Price of the imported drugs in the developing nations is lower with respect to USA market. There are efforts by USA governments to justify this differentiation to public on humanitarian ground. A pragmatic approach towards the problem is done by designing a program to subsidize the purchase price of drugs in the country for public. There are still doubts over the efficiency of instruments like Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 in context of the problem. Hence on an overall view the political condition of USA is stable and thus Lupin will not face any political issues in the process of their international expansion. However they have to remain conscious about pricing the products as the US Government is sensitive towards the pricing. 2.2 Economic Factor It includes the issues like the economic stability of a country, the level of income, and other economical factors. US have a mixed, capitalist economy, which is run by the presence of superior infrastructure, natural resources and high amount of productivity. International Monitory Fund (IMF) stated that the U.S. A. has a GDP of $14.870 trillion which is about 24% of the global GDP. Apart from that disposable income among the US citizens are also high. Private sector ranked highest in industry structure by 55.3% and government function in 24.1% and lastly local government functions in 20.6% (CIA, 2012). Hence USA has a stable economic situation. In USA market pharmaceutical sales in terms of Consumer health reached its pinnacle in 2011. The sales volume is completely unaffected by high unemployment rate or government funding strategies which made a sluggish economic rate for USA. Reverse effect of High healthcare costs and consumer quest for alternate healthcare solution resulted in sales of OTC drugs, vitamins and dietary supplements. Also in March, 2011, U.S. Food and Drug Administration (FDA) has taken over the control for three of Johnson & Johnson’s plants after time and time recalls about issues related to violations of ongoing good manufacturing acts .The US economy Which will show a lower-than-average growth rates up to 2015 and unemployment rate also will continue as a negative force for consumer spending (Euromonitor, 2011). Thus considering all the aforementioned factors it can be stated that Lupin will hold a great opportunity of getting success due to the stable economic condition of USA. 2.3 Social Factor Social factors play a major role for an association to commence and run its venture. The social factors include trends in demographics such as population size, age, cultural factors and consumer activities. The total area of USA is close to 1.9 billion acres. Apart from that USA also has cultural diversity. It is also the home for various racial groups. Most of the USA population consists of white people which are about79.96% and black population of 12.85% (CIA, 2012). A vast majority of consumers in USA has to buy drugs at higher price with respect to other country. This high pricing creates a problem for low income group people. American population currently cannot buy drugs from Canadian pharmacy through online shopping. Major American consumer still trust on branded drugs manufactured by well known pharmaceutical companies. Disease like flu is a common thing in US households. Due to unhealthy lifestyle patterns, percentage of people suffering from diabetes and cardiac disease is also increasing (CIA, 2012). Considering the preferences of the US consumer Lupin has to develop a trust for themselves. Since the US population prefers branded and known products, it will be a tough task for the company to change the preference overnight. 2.4 Technological Factor Technological factor analyzes the technical infrastructure of a country such as information system, electronic data exchange and management information system. It also includes rate of new product development, increase in process automation and impact of internet on human being. USA ranks among the top technically developed countries. It develops a number of innovative electronic gadgets. Technology also has a huge impact on the pharmaceutical industry. The science of genomics has incorporated major breakthrough in application of innovative technique in drug development. High-throughput screening is the new buzz word for application of robotics in the field of drug development. Few other techniques that have been used by major USA pharmaceutical companies in recent times are X-ray crystallography and facilities like genetic modeling and microscopes with laser techniques. 2.5 Environmental Factor The environmental factors of a country include natural phenomenon such as natural disasters, weather patterns, climate etc. Pharmaceutical industry is highly affected by the environment of a country. Environment is USA can be subdivided in following manner. The mainland has medium temperature and cold weather in Alaska and tropical environment in Hawaiian Islands. This environment helps to spread disease like flu. Pharmaceutical drugs are perishable products and temperature of USA is ideal to preserve drugs (drugs for infants and heart disease mainly). Hence environment will act as a favorable factor for Lupin. 2.6 Legal Factor The legal factors of a country includes the laws for employment, favoritism, biasness, health and safety and antitrust. The country has a very well structured legal framework. US constitution is created in 1787 and ratified in 1788. Bill of rights was passed in 1791. US constitution replaced article of confederation. In USA federal judges are appointed by president and appellate court’s review judged by only federal judges. Patent act was passed in 1952 while the copyright act in 1976. In USA a drug has to go through several testing module. A pharmaceutical company only can test the efficacy of a drug on human body after it gets clear result in animal studies. Pharmaceutical companies have to submit their drug manufacturing plan to the FDA in the format of an Investigational New Drug Application (IND). The company can only go for testing their drug on human after their IND is approved by FDA. 3.0 Customer segments   The segmentation of US population is depicted below: - Age Group Percentage Male Female 0-14yrs 20.1% 32,107,900 30,781,823 15-64yrs 66.8% 104,411,352 104,808,064 65 years and above 20.1% 17,745,363 23,377,542 (Source CIA, 2012.) It takes a lot of time to manufacture a market ready drug due to stringent healthcare regulation in USA. It is clear from above table that large numbers of citizens in USA belong to older age group and as a result of that risk of heart related disease and disease related to high blood pressure and obesity is high in the country. Most common heart disease for people in USA is coronary heart attack which took more than 0.45million lives in 2005. In 2010, heart disease was a major threat for all USA citizens and it took more than $300 billion dollar from pocket of customers in the US. Lupin can clearly target the customer segment of heart related problems and can try to provide better healthcare solution to USA citizen with the help of their extensive research and development facility (Anti-aging-source, n.d.). 4.0 Market entry opportunities & Barriers Every company trying to expand their wings into the international market will hold some opportunities as well as barriers. In context with the US pharmaceutical market, it is very intensely competitive due to the presence of pharmaceutical giants such as Pfizer, Eli lily, Genzyme, Amgen etc. 4.1 Opportunities 1. With the given favorable political condition Lupin holds the opportunity to conduct business successfully in the US market. 2. The economic condition is also favorable which allows the company to manufacture costly drugs. 3. Also with the favorable environmental situation the company can produce maximum drugs with reduces risk of drugs getting perished. 4.2 Barriers The company may face following barriers while entering in USA market 1. High development cost for a new drug. 2. Stringent FDA policy for drug development. 3. Limitation of subcontracting and contract research. Table 1- Current Contract Research Deal for LUPIN CRAMS partner CRAMS product(s) DMS (US) API for cephalosporins Fujisawa (Japan) Cefixime Apotex (Canada) Cefuroxime, Axetil, Lisinopril (Source: Greene, 2007, p.13) 5.0 Channels of distribution Lupin can go for a distribution model which is directly based on partnership with large USA pharmaceutical companies to cater USA market. They can also go for developing active pharmaceutical ingredients (like hormones and drugs) for USA market and channelize it through their USA partner. Lupin can go for distribution channel which consists of c&f agents, stockiest, sub stockiest or retail outlets spanned through USA. Secondary sales can be done via distribution channel established by Lupin. Lupin can use guidance of Weyth on how to expand distribution network across USA via sales team. 6.0 Competitive threats Lupin will face competition from three type of competitors.1-Multinationals who are constantly trying to improve different category of pharmaceutical drugs and also using latest robotic technology to provide better healthcare solution. 2. Online drug stores from countries outside USA who are catering to large number of American customer with their low cost drug solutions. 3. Indian MNCs are also trying to enter in USA market with their product portfolio and diverse distribution network. 7.0 Recommendations 1. Lupin must compete directly with other MNCs in USA market by product differentiation with better pricing. Competing with the MNCs will help the company to position itself in the list of elites. 2. The company must go for direct merger with other pharmaceutical companies in USA to minimize the risk factor or they can go for acquisition of small pharmaceutical companies of USA and user their technical expertise to cater to the market. 3. Sub-contracting is a new trend in USA market, Lupin can go for contract research and custom manufacturing services (CRAMS) which consist of producing active pharmaceutical ingredients for new chemical entities (NCE) and finally generic drug for USA pharmaceutical MNCs. Currently Indian pharmaceutical companies caters at least 15% of contract research market. Lupin’s partnership with Wyeth contributes 40% of its US revenues (Sangani, 2010). 8.0 Conclusion This analysis gives a brief overview of USA pharmaceutical market and market environment associated with it. Lupin will face a competitive market environment to enter in USA market due to lack of knowledge of local culture and also lack of financial resources to compete with international pharmaceutical giants. Lupin has already adopted international marketing strategy to enter in USA market which is based on merger and acquisition. Finally it will be a breakthrough marketing story if Lupin can position itself among the top pharmaceutical brands in the US. 9.0 References Anti-aging-source. (No Date). A List of Heart Diseases, The Number One Killer Disease in The US. Retrieved from http://www.anti-aging-source.com/list-of-heart-diseases.html. CIA. (2012). North America: United States. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/us.html. Economy Watch. (2010). US Pharmaceutical Sector (USA Pharmaceutical Industry). Retrieved from http://www.economywatch.com/sector-watch/us-pharmaceuticals.html. Euromonitor. (2011). Consumer Health in the US. Retrieved from GMID database. Greene, W. (2007). The Emergence of India’s Pharmaceutical Industry and Implications for the U.S. Generic Drug Market. Retrieved from http://www.usitc.gov/publications/332/working_papers/EC200705A.pdf. Lupin world. (No Date). Corporate Overview. Retrieved from http://www.Lupinworld.com/corporate-overview.htm. Oxford University Press. (No Date). PESTEL analysis of the macro-environment. Retrieved from http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm. Sangani, P. (2010). Lupin transforms into a global Pharma Company. Retrieved from http://articles.economictimes.indiatimes.com/2010-04-30/news/27578338_1_kamal-k-sharma-Lupin-generic-players. Read More