Term Paper

Performance dynamics of Beximco Pharmaceuticals Ltd.

By
Md. ----------------
ID No. -----------------
MBA Program
Summer Semester 2010
MGT506: Strategic Management

School of Business
United International University
Dhaka Bangladesh
2010

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 Table of Content
Topic Page
1. Historical Background 03
2. Company profile 03
3. Organizational Structure 03
4. Market Scenario 04
5. Business level Strategy Pursued 05
6. Relationship between Business Level Strategy and Performance 06
7. SWOT Analysis 07
8. Possible Measures to Improve Performance 08

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Historical Background
Beximco Pharma is a leading edge pharmaceutical company and is a member of the Beximco Group,
the largest private sector industrial conglomerate in Bangladesh. The firm started operation in 1980,
manufacturing products under the licenses of Bayer AG of Germany and Upjohn Inc. of USA and
now have grown to become nation's one of the leading pharmaceutical companies, supplying more
than 10% of country's total medicine need. Today Beximco Pharma manufactures and markets its own
`branded generics' for almost all diseases from AIDS to cancer, from infection to asthma, from
hypertension to diabetes for both national and international markets.

Company Profile
Beximco Pharma manufactures a range of dosage forms including tablets, capsules, dry syrup,
powder, cream, ointment, suppositories, large volume intravenous fluids, metered dose inhalers etc. in
several world-class manufacturing plants, ensuring high quality standards complying with the World
Health Organization (WHO) approved current Good Manufacturing Practices (cGMP). They also
contract manufacture for major international brands of leading multinational companies.

Organizational Structure
BPL is completely governed and maintained by a corporate body. The chief of the
organization is the Chief Executive Officer and the total operation is divided into Marketing,
Sales, Commercial, Manufacturing, Finance and Accounting, Product Planning, Business
Research and Development, and MIS departments each supervised by a director. Directors of the
departments report directly to the CEO.

Bearing the demands of dynamic environment in mind BPL designed its organizational structure as
highly adaptive and flexible. It is a Learning Organization that has developed the capacity to
continuously learn, adapt and change. In BPL employees are highly trained and empowered to handle
diverse job activities and problems. They have minimal formalization with narrow span of control.
The organizational members share information openly and collaborate on work activities.

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For internal communication, BPL follows a strictly formalized Intranet based electronic
communication system as well as informal verbal communication. For external communication BPL
uses both internet based electronic communication and an array of printed communication
material. All the external communications are supervised, mostly by Director, Marketing and in
some cases by Director, Sales.

Market Scenario
In Bangladesh the pharmaceutical sector is one of the most developed hi-tech sectors which is
contributing in the country's economy. The national companies account for more than 65% of the
pharmaceutical business in Bangladesh. Except Beximco Pharma other leading companies are
Square Pharma, Incepta Pharmaceuticals. Navana Pharma Ltd., Opsonin Chemical Industries Ltd.,
Aventis Pharma Ltd. Etc.

Among them Square Pharma is the market leader at this moment. BPL follows Square Pharma at the
2nd position. The analysis of the two company’s financial data shows that for the year 2007-2008
gross profit of BPL was 1,629,514,837(BDT) and Square Pharma was 3,401,781,806 (BDT) .

There are a number of reasons why BPL could not beat Square Pharma for the first position.
The most relevant of them are stated here.
 Fewer Markets Served: Square Pharma serves a larger market than BPL while BPL
concentrates on market focus. For example, unlike Square Pharma BPL does not do business
in the credit market. They only serve the premium market.
 Producing Injectables: Again BPL does not manufacture or market Injectables where this is a
huge market. In contrast, Square Pharma has a range of 44 injectables and has sold
28,289,000 units in the year 2007-2008.
 Product Range: BPL has a fewer range of products than Square Pharma does. BPL
manufactures only over 300 products in comparison to Square Pharma’s over 500
products.

In international market the main competitors for pharmaceutical companies in our country are
India and China. The challenge faced in open market competition is the scarcity and unavailability

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of raw materials in local market. So, companies in our country have to import these materials from
abroad (India, China and a few countries from Europe) at high price. Besides, the privileges of
being LDC as a result of the Patent Law will no longer be in effect after 2015.

Business level Strategy Pursued

Beximco Pharmaceuticals Ltd. is a leading edge pharmaceutical company is acclaimed for its
outstanding product quality, world-class manufacturing facilities, product development capabilities
and outstanding professional services. Beximco Pharma is the pioneer in pharmaceutical export from
Bangladesh and has received National Export Trophy (Gold), the highest national accolade for export,
for record three times.

Beximco Pharma has adopted several Business Level Strategies regarding growth and market focus
with the view to achieving organizational goals. As Growth Strategy BPL have decided to
enter into nine new international markets in Asia, Middle East, Pacific Islands, Africa and
Central America and have registered 107 products in different markets.

Besides, BPL signed a Long Term Arrangement with the Global Supply Division of UNICEF
(Denmark) to supply 60,000 units CFC free metered dose inhaler product over a two year contract
period. During the first quarter of 2008, BPL has entered into 3 new international markets-
namely, Afghanistan, Kiribati and Solomon Islands. Their Short Term plan to build facility to
manufacture Small Volume Parenterals (SVP), Opthalmic and Nebulizer Solutions has
progressed as scheduled. They are planning to commence marketing of these products by first quarter
of 2009.

Their strategic strengths include strong recognition of brands, highly skilled work force and
diversified business mix. Their two brands - Neoceptin R (Ranitidine) and Napa (Paracetamol) are the
top two selling brands in the Bangladesh Pharmaceutical market.

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Relationship between Business Level Strategy and Performance

Beximco Pharma (BPL) is a leading edge pharmaceutical company is acclaimed for its outstanding
product quality, world-class manufacturing facilities, product development capabilities and
outstanding professional services. Its strategic strengths include strong recognition of brands,
highly skilled work force and diversified business mix. Being a Learning Organization the core
essence of Beximco Pharma is its entrepreneurial spirit in every sphere of its management. In this
spirit, the tasks of each managerial function are carried out through Management by Objective
approach.

The recipient of three times `gold' national export trophy, Beximco Pharma is the largest exporter of
pharmaceuticals from Bangladesh. They are the only pharmaceutical company in Bangladesh received
this highest national accolade for export, for record three times. They market their brands through
their own professional sales and marketing teams in African, South Asian and other markets. The firm
also supply products to renowned hospitals and institutions in many countries, including Raffles
Hospital and K K Women & Childrens' Hospital in Singapore, MEDS and Kenyatta National Hospital
(KNH) in Kenya, Jinnah Hospital, Agha Khan Hospital and Shaukat Khanum Memorial Hospital in
Pakistan. Beximco Pharma is also an enlisted supplier of World Health Organization (WHO) and
UNICEF.

Beximco Pharma has a strong market focus and is anticipating continued future growth by leveraging
business capabilities and developing superior product brands and markets. In particular they are very
interested in developing a strong export market in USA and Europe. To meet the future demand they
have invested over US 50 million dollar to build a new state-of-the-art manufacturing plant,
confirming to USFDA and UK MHRA standards. This new plant will also offer contract-
manufacturing facility to leading pharmaceutical companies, especially from Europe and US.

Business level strategies developed by BPL help them to earn competitive advantage through
quality products, superior services, and outstanding customer relationship. Innovation strategies
have been the key to their success both in product differentiation and in product promotion. BPL had
been the first-mover to bring Marketing Approach rather than traditional Selling Approach in local
pharmaceuticals industry. BPL also believes in Focus Strategy and concentrates on a particular
segment of the market. They strive to retain existing customers as well as to attract new ones.
BPL has developed unique customer service through their Unbiased Medical Service. BPL has
also developed superior human resource for earning competitive advantage in the market.

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Swot Analysis
Strength
Employee Empowerment
Capability to Bring Innovation & product differentiation
Outstanding Product Quality
World Class Professional Service

Weakness
Insufficient Working Capital
Not Operating in Low Cost Market.

Opportunities
Ability to Retain Growth & market Focus In difficult Operating Situations
Ability to Exploit Opportunities of Patent Law as an LDC in International Market.

Threat
Strong Competitors in Domestic & International Market.
Political Instability
Government & International Regulations.
Rising Trend of Material Price

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Possible Measures to Improve Performance
Any organization is deeply effected by its environment. The macro political and economic
environment of our country is so full of uncertainty that the managers of business
organizations of Bangladesh face very difficult challenges to cope with the ever changing situations.
The biggest challenge for the managers in the pharmaceuticals industry is the competition.
Bangladesh is now self dependent in the pharmaceuticals the political and economic instability
there are other factors like international and domestic laws and regulations, rising trend of
material price, high rate of inflation, obsolete technology, increased security problem, dire country
image etc which effect the job of managers in our country most.

Bangladesh can substantially increase pharmaceuticals export if the government extends support to
local producers after this year when WTO rules on pharmaceuticals for developed and developing
nations comes into effect. From the next year, the developing countries will lose their patent rights to
sell products. The main challenge for Beximco Pharma is now to bring down production cost to offer
medicines in the international market at a competitive price. For this, raw materials must be produced
locally. Producing countries will lose their rights to sell pharmaceutical ingredients at current prices
after 2004 due to the WTO rules. However, the least developed countries do not have to provide any
patent protection for pharmaceuticals until 2016 as the WTO has extended the deadline only for them
through Trips (Trade-Related Aspects of Intellectual Property Rights). In the changed scenario, prices
of ingredients will increase significantly, so countries will certainly loss their export markets. At
present Bangladesh imports 80 percent of total raw materials required for the industry. Of the
requirement, 70 percent comes from India while the rest comes from China, England, Switzerland,
Germany and Malaysia. Countries like Kenya, Tanzania, Malawi and Uganda have a huge
pharmaceuticals market for Bangladesh. At present, Bangladesh is exporting pharmaceutical products
to over 50 countries of the world. The major markets for Bangladesh's pharmaceutical exports include
Korea, Brazil, the Netherlands, Myanmar, Sri Lanka, Pakistan, Yemen, USA, India, South Africa,
Ukraine, Vietnam, Kenya, Norway, Sweden, Indonesia and Hong Kong.

To be successful, relentless contribution and dedication of the organizations management is very

much needed. To compete in international as well as in local market in adverse situation the
managers work has become much more difficult in today’s ever changing business environment.
Developing plans in a dynamic situation demands critical analysis of the situation and strict adhering
to the core principal of the organization. As Beximco Pharma is decentralized organization and core

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values are cherished by everyone within the organization, operating in dynamic situation is easier than
it seems.

The pharmaceutical industry in this country is undoubtedly one of the most promising
industries. However, the industry is not operating without any problems. This part of the report states
the possible steps that could be taken to mitigate the gravity of the difficulties that threat the
industry. As one of the leading pharmaceutical company Beximco Pharma also faces these
problems that are bar to achieve organizational goals effectively. To sort out these problems
here some suggestions are recommended.

Coping with Instable Economic State: To cope with the ever changing economic environment,
the management of BPL should always be watchful and should constantly analyze the
organization’s overall environment. As a learning organization BPL should keep their practices of
flexibility to encourage innovation for the times of much needed change. Again, as Government is
going to pass a new version of law, involving the pharmaceutical industry Beximco Pharma should
prepare their arrangements to cope with the coming changed business environment.

Handling Competitions: Since, BPL’s business strategy is to focus on particular segments of the
total market they should be operating with the view to becoming the market leader of those areas. In
the mean time, they should look forward to grow their business as much as possible both in national
and international market.

Negotiating with the Government: In order to ensure more prospects in the import and export
activities of raw materials Beximco needs to negotiate to adjust several business laws and regulations
with the Government. Such approach can be proved as a benefit of the company.

Market Diversification: After 2015, privileges as LCD regarding Patent Act will expire. So
BPL must get ready to compete in a more challenging situation in the international market
where, India will be the biggest contestant. BPL will have to concentrate on the Generic
medicines that are the products that are produced in mass scale and marketed by several companies
under different brand name, where the formulation of this product is almost same. Prices of
the products are under this category are competitive. Bangladesh mainly concentrates on this
category, as labor cost is one of the lowest in the world. Again, Beximco pharma can operate on off-
patent products as after years of business the formulations of Patent Medicines are sold in the market
so that others can go into mass production. Thus the company can take a better position by
maximizing profit in an open market economical condition.

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Conclusion
In recent highly competitive medicine manufacturing sector, streamlined operations and effective
business relations are essential. To improve information exchange with its many partners, Beximco
Pharmaceuticals Ltd. decided to introduce leading-edge supplier and customer relationship
management capabilities.

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