Improvements of the marketing planning process in the pharmaceutical company - Essay Example

Improvements of the marketing planning process in the pharmaceutical company Executive Summary Actavis is the leading generic pharmaceutical company in the bulgarian market, outracing Sopharma by a margin of 8% market value share. It has been the major driving force behind the surge in growth rate of the Bulgarian pharmaceutical market despite being a small market in comparision to it’s other european counterperts. The sustained growth of Actavis is attributed to its continuously increasing portfolio, enhance ment in sales volume and value of its product(due to their better quality) , development of all-inclusive range of theurapeutic drugs, thechnological upgradation and commitment to intoduce new, safe and affordable drugs. However both the micro and marco market has been changing towards a phase of increasing modernisation, structural reforms, privitisation. Countering competitions and various barriers , sustaining and expanding it’s market share (domestic and foreign), increasing profitability and quality requires the formulation of effective marketing strategies. This is especially important in the recent senario where Bulgaria assesion to EU in 2007 leads it to make substaintial changes in the structure, which in turn affects the Pharmaceutical industry at large and Actavis in paticular. The effort to adopt a marketing mix suitable for achiveing its objectives started in 2004. Lucid marketing and sales objectives were devised. The Government thhrough NHIF is the major consumer of Actavis. In order to counter the various regulatory constraints as well as the problem of pricing Actavis should utilize the R&D resourses of it’s mother concern. This will hastening the process of new product launch as well as provide production cost relief.Costant monitoring of the market for patent expiry and developing new forms of original medicines is neccesary for exploiting the possibility of getting a patent.Collaboration and vertical integration with smaller competitors, distributors and pharmacie’s enhances its market share and defends it from foreign entrants.New and novel product lauches based on thorough R&D and employing Good Manufacturing practises is pertinent to counter the competition posed by substitutes. Product group should be appealing to the contemporary market. Assuming social responsibility, and employing competent and trained labour forces are also important. Production should be doen in compliance with the EU directives.More aggresive acquisition, promotion and advertising should be undertaken. Company Introduction ACTAVIS AD (formerly known as BALKANPHARMA) a generic pharmaceutical company was founded in 1999 due to privatizations of its three manufacturing sites at Dupnitza, Troyan and Razgrad, with a manufacturing tradition of half a century. It the Bulgarian branch of the MNC generic pharmaceutical group ACTAVIS HF (earlier PHARMACO). The group head quartered in Iceland has its operations in more then 25 countries. Actavis AD is the leading generic pharmaceutical company in Bulgaria enjoying substantial market share both in terms of value and volume. Currently operation and production have been segregated from marketing and sales and Actavis represents the marketing and sales aspect. The ratio of domestic sales and export sales is also significant (51%/49%). It continues to enjoy the traditional favored position both in the domestic market as well as in USSR. The entire capital and is owned by the mother concern and Actavis is the biggest tax payer in Bulgaria. It is the driving force in the Bulgarian domestic pharmaceutical market. Several restructuring has taken place to divert it focus from the safe and closed market to the more competitive open market. Ongoing efforts to incorporate the Good Manufacturing Practices into its manufacturing facilities are on. To counter foreign and domestic competition various aspects are being developed. ACTAVIS AD in 2002 became the only European pharmaceutical company with a green-field facility. It has an expansive portfolio of 200 active product registration in the domestic market and 900 in the export market. The company enjoys the status of the preferred local licensing partner for the foreign producers. With decline in the counterfeit drug market due to restructuring in line with EU accession, Actavis sales are likely to decrease as it has a substantial market share in this sector. Strong regional generics-based opposition could limit company growth, in particular given Bulgaria's non-EU status, with trade advantages for rivals based in new member countries.( SWOT Analysis of Actavis Strengths The leading pharmaceutical company in the Bulgarian market having a enviable reputation. Market position is further consolidated due to the sustenance of lead position for a long time. Biggest Sales Team in Market Expansive and diversified portflolio Home owned production facilities A global export strategy is viable due to modernized production facilities (GMP and ISO certified) Effcicent, qualified and trained team of proffessionals Percieved both as a international and local company. Significant capital base as well foreign market ownership gives it a competitive edge over others in the local market. Traditionally good and established trade relationships Traditionally good and established relationship with government Licensing agreements with significant number of MNC’s include important industry brands as Bayer, Roche, Merck & Co. Weaknesses The portfolio is relatively outdated Production facilities relatively old Presence of didtribution chain is not very significant Erupting problems of Pipeline Traditionally more focused on production than Marketing and Sales Internal integration is not well fomulated The company has been known as Balkanpharma for a long time so the brand name Actavis is still not strengthened n the consumers pshyche Bulgaria is still not a EU member thereby Actavis doesn’t enjoy similar trade benefits as it counter parts in the member nations The Balkan market is still recovering with low income status thus the short tem growth is hampered with significant investments and acquisitions here. Opportunities With introduction of the new reimbursement list the company is likely to become more price competitive thus driving sales in Bulgaria. The reference pricing system in reimbursed products may potentially to aid generic products. Cost containment reforms by the government to aid the generic companies might help Actavis Actavis represents the dominant force in the market with feeble domestic competition. Greater market penetration is achieved with growing international profile. The market has a potential to grow simultaneous with EU membership. Reimbursement make the market more structured and regulated Organisational advantage to withstand competition in marketing and branding Various possibilities of enhancing its distribution chain. Enhancement in inlincensing opportunities Optimised use of global pipeline Greater focus in the Local Market Threats Incresing level of competition especially in the distribution channels Aggressive cost containment measures by government There is a risk of Quality Asesment failure in old manufacturing sites in line with EU accession. The legal and financial structures are not fully EU compliant Actavis is a potential take over target for MNC’s contemplating regional market share growth.(PHF,2005) An analysis of the market status of Actavis AD within the Bulgarian pharmaceutical industry An analysis of the market status of Actavis AD within the Bulgarian pharmaceutical industry, along the significant economic determinants operating in all markets, namely, supply and demand, barriers to entry and the pricing of goods, production cost and profit, aids in understanding the company’s market status and in devising future strategies. Within the Bulgarian pharmaceutical sector the demand is mostly created by the public funds, namely National Health Reimbursement Fund; hospitals and Ministry of Health centralized tenders. The demand market is differentiated along three parameters, namely those goods which are reimbursed and those which are free sales ones; those which are for sale in hospitals and those which are sold at pharmacies; those which are patented and those which are generic. There is a possibility to enhance the demand in the pharmaceutical market. The supply market can best be represented by the volume in the pharmaceutical market. The market supply volumes merely indicate the part of the demands which has been satisfied, the actual sales. Actavis Ad enjoys significant market volume (35% in terms of market volume share and 18% in terms of market value share). It emerges as the clear leader outrunning its major business rival Sopharma by 8% in terms of market value share. Despite the small size of the Bulgarian pharmaceutical market(Polish market being ten times bigger) Actavis has recorded a significantly high growth rate attributed to it’s ever expanding portfolio in generic products, commitment to launch new, innovative , safe and price effective products as well as offer a complete range of therapeutically goods. However since the company deals with generic pharmaceutical drugs, the generic segment(local and foreign) comprises of its market. It has a wide ranging portfolio (as well as new product innovations) allowing it to compete with therapeutically groups in certain cases and has distribution network is chanellized to hospitals, pharmacies, reimbursed and non-reimbursed markets segments, in the generic drug market segment. All this has attributed towards market volume growth. The reimbursed market regulated by the NHIF is exceedingly important market segment especially with regard to Bulgaria pharmaceutical sector. Although Actavis Ad has various registered drugs which are reimbursable its inability to enter the newly resisted drugs into the NHIF list in 2004 resulted in a lower reimbursed sales and sales growth. These have however been entered into the new NHIF list, effective from 1st Feb 2005. Actavis has been the driving force behind the 10.1% growth rate in the pharmaceutical sector in Bulgaria. However Actavis AD has had to face several shortcomings during 2004 like: inability of it’s newly registered products to make it to the NHIF list lead to reduction in reimbursable sales as well as sales growth; the fall of various of its major products from the national positive list; bankruptcy cases of its distribution companies in the Bulgarian domestic pharmaceutical market; continuing decrease in the quantity of reimbursement of it’s products. The generic pharmaceutical Bulgarian market is extremely competitive. However there are various limiting factors to competitions like price ceilings in of various reimbursable in the hospital and pharmacy as determined by state, restricting the demand and supply competition. In the non-reimbursable market too the prices have to be competitive with the other competitors in that segment. As far as Actavis is concerned the drugs are priced extremely low and thereby being almost completely reimbursable. But these prices are set without adequate cost and value estimation. Thus a new product launch is not an economically viable option when it is sold on such prices moreover even a product launched under such pricing is not able to get competitive edge in market share. The pharmaceutical industry is unique in the sense that the goods produced are extremely specific catering to specific needs. Unlike in other industry there is a third party involved (doctors) making the buying decision and not the individual consumer. Moreover in most pharmaceutical sector as well as in Bulgaria there is profound government regulation relating to pricing, the wholesale and retail limits, restrictions regarding reimbursement of medicines, manner in which prescriptions are written etc. These translate into a barrier of particular kind. Various regulatory rules and demands like patent laws also hamper generic product launch, more ever the procedural delays in getting a drug reimbursed is an obstacle in a volatile and dynamic market. The generic pharmaceutical market is excessively dependant on the distributors. The 10 distributor companies of Actavis are responsible for 85% of its sales target. The big players like Actavis are the major driving force in the Bulgarian market. However many distributors are facing the problem of bankruptcy there is a risk of financial imbalance. Higia’s which has been acquired by Actavis as a strategic step to enhance its distribution strength was one of the largest distributors in the Bulgarian pharmaceutical market. There has been a decline in the population of Bulgaria concomitant with the rise in number of old people. There is great scope for Actavis with increasing dependency of the rising number of the old population on health cater products. There has also been rise in awareness and consciousness of the people regarding health and health care products. The other Marco-economic factors that can effect the growth and development of Actavis Ad are the economic stability. The sale of generic drugs stands at about 15% of pharmaceutical sales but is rising due to lower costs and increased manufacturing. Forecasters expect to see this number grow. However, according to the Association of Bulgarian Pharmaceutical Manufacturers, regulations controlling the production of drugs are already EU-compliant. Bulgaria’s biggest problem will be strengthening enforcement of patent laws and Intellectual Property (IP) (Bulgaria). There is concern, particularly by the United States, that the Bulgarian government is favoring domestic producers unfairly against the manufacturers of newer, high-priced but often superior imported medicines. (BULGARIA – Quote) The privatization of the pharmaceutical industry is becoming more pronounced as companies begin to grow and consolidate. Pharmaceutical companies will need to keep a wide portfolio, specifically with a high number of drugs on the reimbursable drug list. Tighter restrictions as countries join the EU mean that some drugs will take longer to make the approved list. Companies will need to maintain this number as competition rises from the US, France and Germany. Some of other macroeconomic indicators that influence the development of the country, as well as the companies, are the financial and economic stability as well as growth, factors like , credit account, legal and financial structure, insurances, FDI ‘s, monetary aid from international community, inflation and unemployment. Critical Analysis of Marketing strategy Formulation of a competitive strategy by ACTAVIS AD is aimed at getting a competitive advantage in the pharmaceutical market in Bulgaria by adopting a unique proposition to gain the company’s targets like qualitative, market share and profit growth. Adopting a corporate strategy is beneficial when Actavis operations are in the similar milieu as the mother concern. In case of the particular Marco and micro environment that Actavis operates a specific marketing competitive marketing strategy has to be formulated. However the competitive strategies should be developed without losing site of the corporate strategies, as this will provided it with added advantage through the internal tools or processes used to disarm its competitors. Competitive forces represented by consumer power The government (NHIF) represents the major customer for Actavis in the Bulgarian pharmaceutical market. Due to scarcity of buyer (customers) and large presence of seller the buyers have greater bargaining power implied by the price ceilings, guidelines for doctors, substitution of generic products etc. Actavis usually has a large portfolio and so this can be used to its advantage in cutting through this “competitive force” by devising the subsequent strategies: Actavis can take advantage of the highly developed research and development in the mother concern to lessen the production cost of the generic product launches. This will additionally less the time for making new registration and thus making it a “cost leader”. Another strategy is to collaborate with competitors, with under-developed sales force but with valid registration of products. This will enable Actavis to simultaneously train its field force, forge better market routes as it prepares to launch products in this group. Actavi’s chief competitors have gained by vertical integration of this sort employing tactics like buying out the liabilities of the competitor companies. The focus should be oriented to groups with contemporary relevance. For example if the focus is on metabolism enhancers than the complete range of drugs catering to this should be developed so that it can have better control over pricing. Substantiated effort has been made in this regard and Actives plans to introduce 3 new drugs within the CVD group. The launch of Linopril is the first of this line of product. Actavis can adopt the strategy of aligning with other generic drug company to put up a united front and bargain for better reimbursement and pricing. In 2005 the Ministry of Health undertook a review of the price structure of pharmaceuticals in Bulgaria based upon surrounding countries. It has also added more names to its lists of reimbursable drugs. Competitive force represented by supplier power Actavis doesn’t have ample supplier so it should look for new and cheaper suppliers especially in the Asian market, thus reducing the exorbitant (85% of production expense) expenses incurred for the active ingredients used in production. There should be at least three suppliers for each active ingredient, so that Actavis can have greater bargaining power in terms of price. These can be easily substituted and the incidence of supplier market volatility affecting production is less thereby enhancing production efficiency and making way for faster launches. Competitive force represented by new entrants The market has greater scope for new entrees with various policies, regulations and reforms for enabling Bulgarian integration with the EU. To address this threat the most effective strategy is to integrate vertically with various distributors and pharmacies especially the best ones in the field as well as establishing franchise chains. This is more of a possibility because of the small size of the Bulgarian market. Sopharma in 2004 has made huge investments in developing its distribution channels by buying out the companies liabilities. As a part of strategic plan to add the distribution strength to its manufacturing strength Actavis acquired the Bulgarian distribution major Higis in 2005 September. Competitive force represented by substitutes To counter the threat of substitute similar strategies used against the consumer power should be employed here as well. Apart from that the R&D strength should be concentrated on monitoring the patent expiry scenario, as well as for developing wide rage of products and developing products which are distinct in type from the original so that there is a possibility of gaining a patent. The patenting laws are likely to become more stringent in line with the EU accession hence the not only should Actavis push for patent’s it should aim for developing better quality so as to meet the EU requirements. Competitive force represented by intensity of current rivalry The analysis of Bulgarian pharmaceutical market gives proof of existence of severe competition. All above strategies applied, will help ACTAVIS to gain competitive advantage versus competitors. In addition to that several specific competitive approaches can be applied here too. Acquiring smaller companies or entering an agreement to provide them with out-licensed production opportunity while employing their current production ability. Thus Actavis as the Bulgarian pharmaceutical leader can also gain a competitive edge over the foreign entrant in the market. Cost is reduced when production cost of small volume products are removed. An aggressive opposing stance as an established local generic pharmaceutical company will make it advantageous for the competing forces from outside especially with the non-EU status of Bulgaria. Since the efficient and trained labor force is scarce these can be attracted to Actavis by offering the most competitive remuneration in the market. This translates in cost reduction incurred for training. Being the market leaders as far as the generic drugs market is concerned they are also technologically well equipped to satisfy the EU norms. Hence Actavis should lobby for eliminating the transition time for the integration with EU. This is an obstacle for the non EU generic drug companies. However Actavis has to constantly monitor the market for new technological changes and integrate them after making a cost and value estimation. Suggested improvements In order to devise an effective marketing strategy both the quantitative and the qualitative objectives have to be set in a focused way. The target market and the tactics employed to gain greater market share in terms of value and volume have to be formulated through an implementation plan. Proper promotion, communication and advertising tools have to be devised in order to enhance brand image, brand awareness, recognition, brand loyalty, positive attitude and knowledge of the various new updated and novel products both in the local as well as foreign markets. A combination of media’s should be applied for this purpose. Actavis should operate as a corporate which realizes its social responsibility. A primary example of this is Actavis’ support of its Indonesian community. On April 13, 2006, Actavis presented the SOS Children’s Villages, which is part of an international child welfare organization, with a check for $7,500 to combat Dengue fever (Actavis support, 2006). This is just one example of the corporation’s dedication to its people. Continual market monitoring and analysis regarding consumer behavior and consumer satisfaction is required. The fact that consumer satisfaction is important is increasingly being realized and this has lead to the formation of a website where consumers can register their complaint about any product. Acquisitions provide a way for Activis to expand sales. In 2004, sales rose 43% due to mergers and acquisitions. In 2005, Actavis has acquired assets in Bulgaria, the Czech Republic, Slovakia, India, Hungary and the United States (Europe’s Hot Growth, 2005). Actavis must continue to acquire holdings in the United States in order to reach the goal of 20% of sales coming from that country (Europe’s Hot Growth, 2005). One huge acquisition that Actavis is busy pursuing is Pliva of Croatie. Petursson, a financial analyst at Kapustin Bank in Iceland, some big name patents are due to expire in the next five years. These patents are from some huge-name companies such as Pfizer and Merck. Actavis will act on these opportunities to break into these markets (Europe’s Hot Growth, 2005). Actavis Bulgaria will act along with the European Generics medicine Association (EGA) to educate consumers as to the affordability and innovation of generic drugs. Basically, the public must know that generics are typically priced from 20 to 80 % less than the original on which it is based. This competition is good for the market and promotes innovation while preventing multinational monopolies (Generic Medicines DATE). Greater alignment with the EU directives can ensure that proposed accession of Bulgaria as an EU member will translate into wider possibilities and not threats. Conclusions The devised strategies have to be carefully evaluated, using various combinations at the appropriate time to achieve the desired target. Being a part of a competent multinational generic pharmaceutical corporation signifies that it has various advantages like purchasing the market rights of various markets from a European manufacture including that of Bulgarian market. In the Bulgarian market Actavis Ad is the leading generic pharmaceutical company. The Bulgarian pharmaceutical market and its sales and development are likely to escalate with continued economic stability, privatization and market reforms as it nears the date of integration with EU. Actavis as the Bulgarian leader intends to adopt a more completive strategy aimed at expanding it’s market presences (from local Bulgarian and Russian market to other European market).However the Marco and the micro market forces are dynamic and Actavis Ad has to develop and effectively implement dynamic competitive market strategies as well as continue to benefit from the corporate strategies of a strong international mother concern. References About Actavis, 2004,Actavis creating value in pharmaceutical, (online) available at http://www.actavis.com Association of Bulgarian Pharmaceutical Manufacturers (2004) Pharmaceutical bulletin of the association of Bulgarian Pharmaceutical Manufacturers, issues 2 &3. Sofia Actavis completes its acquisition of Higia AD in Bulgaria,2004, Actavis creating value in Pharmaceutical (online)avialable at www.actavis.com Belohlav, J. (1993) Quality, strategy and competitiveness. 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Bourgeois, L., Strategy and environment: a conceptual integration. Academy of Management review, (5), 1, p.25-39 Read More