Strategic Analysis of ACI Pharmaceuticals Ltd.

Strategic Management
MGT602

Submitted by-

Md. Mushfiqur Rahman M1160A002

Asib Uddin Ahmad M1160A005
Md. Helal Uddin M1160A008

Supervisor
Mohammad Ali Rana
Course Teacher

Batch-01

Master of Business Administration

Army Institute of Business Administratation
Savar Cantonment, Savar, Dhaka

Date of Submission: 4th August, 2017

4th August 2017

Mohammad Ali Rana

Course Teacher
Strategic Marketing Management

Subject: Submission of Term Paper on ACI Pharmaceuticals Ltd.

Dear Sir,
With great gratification we are submitting our term paper on Strategic Analysis ACI
Pharmaceuticals that you have assigned to us in your Strategic Management course for MBA
program in 5th semester at AIBA. It is really an enormous prospect for us to congregate vast
information and grasp the subject matter in an appropriate way. We have found the research
activity quite interesting, beneficial & insightful and tried our level best to prepare an effective
& creditable report.

Our anticipation will assist to provide a clear idea about the ACI Pharmaceuticals. And through
extensive secondary and some primary research we have gathered the necessary information that
would facilitate the strategic analysis of the Company and their overall functioning. Through
systematic analysis, we have formulated a set of key recommendations which ACI
Pharmaceuticals may adopt for strategic planning and implementation which will be worth for
all the labor we have put in it. We welcome your entire query & take pride to answer them.

Sincerely yours,

No. Name ID Signature

1 Md. Mushfiqur Rahman M1160A002
2 Asib Uddin Ahmad M1160A005
3 Md. Helal Uddin M1160A008
 Acknowledgement

4th August 2017

Dear Reader,

This report has been conducted to fulfill the course requirement of Strategic Management of the
Army Institute of Business Administration, AIBA. This is a secondary research work done by
us. As a result, before using any information or data of this report, permission is strictly required
from us. The authorization of this report is valid until any further notice from us.

Thanks for your time.

Sincerely,

No. Name ID Signature

1 Md. Mushfiqur Rahman M1160A002
2 Asib Uddin Ahmad M1160A005
3 Md. Helal Uddin M1160A008
 Declaration

We hereby declare that a Term Paper on Strategic Analysis ACI Pharmaceuticals has been
prepared by us as the partial fulfillment of requirement for course of AIBA.

The given information is true and the source of collecting data is authentic. This report is
arranged for academic reason and we do not have any wrong intention or financial assistance.

This term paper is our original work and not submitted for the award of any other degree or other
similar titles or prizes and that the work has not been published in any journal or magazine.

We ensure that I do not try to hamper companies goodwill. This research we developed by our
opinion, it is not companies overview.

Sincerely yours

No. Name ID Signature

1 Md. Mushfiqur Rahman M1160A002
2 Asib Uddin Ahmad M1160A005
3 Md. Helal Uddin M1160A008
 Supervisor Certification

This is to certify that this Term Paper on Strategic Analysis ACI Pharmaceuticals A Study
On, ACI Limited, 245 Tejgaon Industrial Area, Dhaka, is prepared by Md. Mushfiqur Rahman
ID: M1160A002; Asib Uddin Ahmad ID: M1160A005 & Md. Helal Uddin ID: M1160A008
under my direct supervision for fulfillment of the course requirements. To my knowledge it is
his fundamental work and it has not been submitted to anywhere. So, this report is recommended
for the presentation.

Mohammad Ali Rana

Course Teacher

Strategic Marketing Management

 Executive Summery

Strategy is the direction and scope of an organization over the long-term: which achieves
advantage for the organization through its configuration of resources within a challenging
environment, to meet the needs of markets and to fulfill stakeholder expectations. The name of
term paper is Term Paper on ACI Pharmaceuticals. ACI pharmaceuticals is sister concern of
ACI Limited one of the leading conglomerate in Bangladesh. ACI Pharmaceuticals Ltd. In 1973,
the UK based multinational pharmaceutical company, ICI plc, established a subsidiary in Dhaka,
known as ICI Bangladesh Manufacturers Limited. In 1992, ICI plc divested its share to local
management, and the company was renamed Advanced Chemical Industries (ACI) Limited. ACI
formulates and markets a comprehensive range of more than 387 products covering all major
therapeutic areas, which come in tablet, capsule, powder, liquid, cream, ointment, gel,
ophthalmic and injection forms.

Strategic management of ACI Pharmaceuticals involves strategy development, which is

comprised of five stages of modern strategic management theory (2011-2015). PESTEL
analysis stands for "Political, Economic, Social, and Technological, Environmental and Legal
analysis" and describes a framework of macro-environmental factors used in the environmental
scanning component of strategic management. SWOT Analysis of ACI Pharmacy. In BCG
matrix ACIs position is in dogs. Bangladeshi firms generate 82% of the market in
pharmaceuticals; locally based MNCs account for 13%, and the final 5% is imported.
The top 30 to 40 companies dominate almost the entire market; the top 10 hold 70% of
domestic market share; and the top two, Beximco and Square, capture over 25% of the
market. ACI has 3% market share in the pharmaceutical industry. The industry structure is
relatively concentrated. In Break-even analysis If ACI wants to make a target profit, it must sell
more than 208,333 at Tk. 14 each. If ACI invested Tk. 40,00,000 and wants to set price to earn
a 20 percent return or Tk.
 Table of Content
Page No
Chapter 1 Introduction

1.1 Statement of the problem

1.2 Origin of the study
1.3 Objectives of the study
1.4 Scope of the study
1.5 Limitation of the Report

Chapter 2 Organization Profile

2.1 Background of the Organization
2.2 Corporate Information
2.3 Organizational Structure
2.4 Products and services of the Organization
Chapter 3 Review of literature
Chapter 4 Methodology of the Study
4.1: Research Design
4.2: Sampling design
4.2.1: Sampling Frame
4.2.2: Sampling Technique
4.2.3: Sample Size
4.3 Data Collection
4.3.1 Primary sources
4.3.2 Secondary sources
4.3.3: Data Analysis
Chapter 5 Data Analysis
5.1 PESTEL analysis
5.2 Five Forces Model
5.3 SWOT Analysis
 5.4 Value chain Analysis
5.5 The BCG Matrix
5.6 Break Even Analysis
Chapter 6 Recommendation & Conclusion
6.1 Recommendations

6.2 Conclusions
Chapter- One
Introduction

1.1 Statement of the problem

In order to address the complexity of the strategic management concept we have chosen to
develop a model with the purpose to connect and relate the external and internal perspectives by
conducting an in-depth analysis of a chosen company. The model also strives to be easily
communicated, applicable and understandable for managers and employees on different levels
within the organization.

The purpose of this term paper is to develop a simplified model that combines the external and
internal perspective of strategic management and apply this to ACI Pharmaceuticals.

1.2 Origin of the study

Leibold et al. (2002) recognize the critical strategic management challenge in the first decade of
the 21st century to become how organizations can continually adapt, shape, change, innovate,
create and network. This in order to survive in their market environment that quickly is becoming
more unpredictable.

According to Dess et al. 2005 strategic management is concerned with the analysis of strategic
goals (vision, mission and strategic objectives) along with the analysis of the internal and
external environment. In 1997, Henderson & Mitchell acknowledged the need for careful study
of how internal capabilities and the competitive environment mutually influence each other
which is still believed to be an unfulfilled need as for today. Drawing together contrasting
perspectives in the area of strategy is the start of the process to address the complex demands in
todays highly competitive environment (Jenkins & Ambrosini, 2002). With this discussion in
mind the problem concerns the combination of the two perspec- tives in a simplified model that
is easier to understand and communicate for a business manager.
According to Jenkins & Ambrosini (2002) this complexity arises from the need for questions
that address different levels of analysis and different dynamics relating to organizations and their
strategies. This is a major challenge for managers who are used to manage the resources they
control on a day-to-day basis (Johnson et al. 2007).

1.2 Objectives of the study

The main objective of the report is to fulfill the requirement of Strategic Management course.
The objective of the study may be viewed as:

i. Broad/General Objective: The Prime objectives of term paper preparing are to gather practical
knowledge regarding different kinds of Strategic Models and operations. This practical
orientation gives us a chance to co-ordinate the theoretical knowledge with the experience.

ii. Specific Objectives: The following are the objectives for this practical orientation in company.
To get an idea about the PESTEL analysis of ACI pharmaceuticals Ltd.
To analyze Porters Five Forces of ACI pharmaceuticals Ltd.
To analyze the SWOT (strength, weakness, opportunities, and threats) of ACI
pharmaceuticals Ltd.
To analyze value chain of ACI pharmaceuticals Ltd.
To analyze Break Even of ACI Pharmaceuticals Ltd.
To make on the basis of analysis and give some recommendations for increasing the
market share.
To make on the basis of analysis and give some recommendations to overcome the
current condition of ACI pharmaceuticals Ltd as Strategic management aspect.

1.4 Scope of the study

The study has dealt with the Strategic Management of ACI pharmaceuticals Ltd. which is
established in 89 Gulshan Avenue, Dhaka-1212. The overall functions performed in the Strategic
Management will be covered by top level management of business unit for the study. The
corporate office of the ACI was also contacted to have meaningful information regarding the
study.

1.5: Limitation of the Report

This report will only consider Strategic Management System of ACI Limited, Study on
Pharmaceuticals business unit. To make a report authentic, all sort of information were not easy
to acquire. ACIhave been faced several problems during my study. Alone with these ACItry to
give our best effort to make the report inclusive. Some limitations were-
The main hindrance behind preparing this report was time. The tenure of the course
period is only four months. So it is not possible to go through in depth within this short
span of time.
Inaccurate or contradictory information.
A very limited period of day was found suitable for gathering information.
The information was taken by self which might crept few errors on the research.
Chapter-Two
Organization Profile

2.1 Background of the Organization

ACI pharmaceuticals is a sister ACI Limited was established as the subsidiary of Imperial
Chemical Industries (ICI) in the then East Pakistan in 1968. After independence, the company
was incorporated in Bangladesh in 1973 as ICI Bangladesh Manufacturers limited as a Public
Limited Company. In 1992, the company was divested to local management and the name of the
company changed to Advanced Chemical Industries (ACI) Limited. ACI inherited the rich ICI
culture of product quality, customer service and social responsibility. Initially in 1992, ACI
started primarily with pharmaceutical business with a turnover of BDT 80 million only but
later the new management brought about fundamental changes in the policies and in the year
2008 turnover grew to over BDT 7,365 million. The Company has diversified business interest
in pharmaceuticals, agricultural including fishery & livestock and consumer brands. At present,
ACI has three strategic business units along with 11 subsidiaries, 3 joint ventures and 1 associate.
ACI is the first company in Bangladesh to achieve ISO S001 in 1995 for quality management
and also the first company to achieve ISO 14000 in 2000 for environmental management system.
ACI is also the first company from Bangladesh to become the honorable member of United
Nation Global Compact. It is the only Bangladeshi company which was declared as a notable
COP (Communication on Progress) recognized by UNGC (United Nation Global Compact). ACI
has been accepted as a founding member of community of Global Growth Companies by the
World Economic Forum which is the most prestigious business networking organization in the
world.
However, ACI pharmaceuticals is one of the leading pharmaceuticals company in Bangladesh.
It is one of the top most pharmaceuticals companies that have large contribution in the society
and controls.

ACI Pharmaceutical is one of the leading and diversified global conglomerates in Bangladesh,
with offices in all major cities, employing over 5000+ employees and dedicated to bringing the
highest quality products and services to our customers. ACI have an annual turnover of US $100
million with diversified interests in Pharmaceuticals, FMCG, Information Technology Services,
Aviation Services, Printing & Packaging Services, Trading Services, C & F Services, Apparels
and more. The conglomerate has an outstanding record of all around excellence and growth in
the relevant business activities.

The ACI Pharmaceuticals Ltd. continuously seeks to expand its production facilities, add
employees and increase its sales and marketing efforts. According to the latest statistics, out of
about 300 Pharmaceutical companies in the country, The ACI Pharmaceuticals Ltd is one of the
top five.

2.2 Corporate Information

In 1973, the UK based multinational pharmaceutical company, ICI plc, established a subsidiary
in Dhaka, known as ICI Bangladesh Manufacturers Limited. In 1992, ICI plc divested its share
to local management, and the company was renamed Advanced Chemical Industries (ACI)
Limited.
ACI formulates and markets a comprehensive range of more than 387 products covering all
major therapeutic areas, which come in tablet, capsule, powder, liquid, cream, ointment, gel
,ophthalmic and injection forms. ACI also markets world-renowned branded pharmaceutical
products like Arimidex, Casodex, Zoladex, Atarax etc. from world-class multinational
companies like ASTRAZENECA, UK and UCB, BELGIUM in Bangladesh.
ACI is actively engaged in introducing newer molecules and Novel Drug Delivery Systems
(NDDS) to meet the needs of the future.
ACI introduced the concept of quality management system by being the first company in
Bangladesh to achieve ISO 9001 certification in 1995 and follows the policy of continuous
improvement in all its operations.
Aligned with the concept that a pharmaceutical must ensure effective management of
environment, ACI complies with standard environment management policy, thus adorned with
EMS 14001 in 2000.

ACI maintains a congenial and supportive relationship with the healthcare community of
Bangladesh, with the belief that business excellence can only be achieved through pursuit of
quality by understanding, accepting, meeting and exceeding customer expectations.
The management of ACI, a competent team of professionals, thus operates with a progressive
attitude to provide effective solutions to satisfy the customers needs, through its products and
services of uncompromising quality.

Under the leadership of the experienced and dynamic business head, Chief Operating Officer
Mr. M Mohibuz Zaman, this highly skilled and motivated team of professionals is dedicated in
formulating effective strategies to meet the challenges in the ever-changing market, developing
new products tailored to satisfy the customers current needs, exploring new opportunities in both
home and abroad, and working for consistent growth and increased market share for ACI.

2.3 Organizational Structure

Chairman

Managing Director

Head of Creative Director, Corporate Affairs

Communication

Executive Director, Director, Business

Finance & Planning Department

Secretarial Affairs Head of Risk Management &

New Venture Internal Audit

Chief Operating Officer,

Manager MIS
Pharmaceutical

Executive Director,
Consumer Brand

Executive Director,
Agribusiness

Executive Director,
ACI Logistics
2.4 Products and services of the Organization

2.4.1 Products

ACI formulates and markets a comprehensive range of more than 387 products covering all major
therapeutic areas, which come in tablet, capsule, powder, liquid, cream, ointment, gel ,ophthalmic
and injection forms. ACI also markets world-renowned branded pharmaceutical products like
Arimidex, Casodex, Zoladex, Atarax etc. from world-class multinational companies like
ASTRAZENECA, UK and UCB, BELGIUM in Bangladesh.

2.4.2 Services

i) Scientific seminars

ACI frequently arranges seminars and symposia covering a wide range of medical topics attended
by members of health care community. The faculty of these programs usually consists of both
reputed medical experts and experts from marketing team of ACI and its international principals.

ii) Continuing medical education of physicians and surgeons

ACI regularly arranges CME programs of both physicians and surgeons all over the country.
These programs cover medical problems frequently faced by the practitioners, update their
knowledge, and make them aware of the new therapies and medical technologies.

iii) Clinical meetings

ACI arranges clinical meetings, covering case related medical problem faced by the physician in
their daily practice. Every meeting is being supported by audio-visual media.

iv) Responding to doctors queries

It is the most regularly performed task of the marketing team of ACI. The company has developed
a postage paid business reply card attached to every literature in which the doctors usually send
their queries. ACI tries to provide a comprehensive answer to the queries of the physicians
covering all the details.

v) Medical illustration and audiovisual aids

ACI is ready to assist in preparing presentation packages including computer slides,

transparencies and printed text whenever medical experts wish to share their experiences and
results of their research with the health care community.

vi)Reprint services

ACI provides the doctors with reprints of selected publications on topics that can assist the doctors
in their professional practices.

vii) Info Medicus

ACI publishes quarterly medical newsletter for the physicians with current medical information
particularly emphasizing common diseases.
Chapter-Three
Review of literature

Definition of Strategy

There are several definitions to be found when researching the concept of strategic management
and strategies in general, in order to make it clear we present the definitions which this thesis is
based upon.

Strategic management is the development of corporate strategy, and the management of

an organization according to that strategy. Strategic management focuses on achieving and
maintaining a strong competitive advantage. It involves the application of corporate
strategy to all aspects of the organization, and especially to decision making. As a
discipline strategic management has evolved in response to changes in organization
structure and corporate culture. With greater empowerment, strategy has become the
concern not just of directors but also of employees at all levels of the organization.

(BNET, 2008)

The concept of strategy is not a straightforward one. There are many different theories about what
it is and how it works. Henry Mintzberg (1994) suggests that strategy can have a number of
meanings, namely:

1. Strategy is a plan, a "how," a means of getting from here to there.

2. Strategy is a pattern in actions over time; for example, a company that regularly markets
very expensive products is using a "high end" strategy.

3. Strategy is position; that is, it reflects decisions to offer particular products or services
in particular markets.

4. Strategy is perspective, that is, vision and direction.

(Cited in Nickols, 2006 p. 2)

Strategy has also been defined by Johnson et al. (2005 p. 9) as: "The direction and scope of an
organization over the longer term, which ideally matches its resources to its changing environment,
and in particular, to its markets, customers and clients to meet stakeholder expectations."

Strategic Management (Theory : 2000 2010)

Strategic Management can be defined as (1) the art and science of formulating, (2)
implementing, and (3) evaluating cross-functional decisions that enable an organization to
achieve its objectives.
Strategic Management focuses on integrating management, marketing, finance/accounting,
production/operation, research and development (R&D) and computer information
systems to achieve organizational success.

Strategic Management (Theory : 2011 2015 )

Strategic management involves strategy development, which is comprised of five stages:

1. discovery,
2. strategic thinking,
3. strategic planning,
4. strategy roll-out,
5. Strategy tune-up/adjustment.
PEST- Analysis

The PEST analysis is a useful tool for understanding the organizations external environment and
its affecting factors (Armstrong, 2006).

POLITICAL
FACTORS

TECHNOLOGIC THE ECONOMICAL

AL FACTORS
ENVIRONMENT
FACTORS

SOCIAL &
DEMOGRAPHIC
FACTORS

Figure 4 PEST- Analysis Framework, Own Illustration (Campell & Craig, 2005)

Political factors are actions of political institutions which have a profound effect on the way
organizations operate. Organizations must act within legal and regulatory conditions set by the
political institutions. The effects of political institutions come from different levels. These levels
are international (for example EU laws), national and regional (county and municipality)
(Campbell & Craig, 2005).

Economical factors are components of the economic environment that affects the organization.
Economic indicators such as inflation, interest rates, value of the currency and the level of
unemployment are affecting factors which are important to take into consideration when doing
business (Campbell & Craig, 2005).

Social and Demographic factors importance are linked both to the demand and supply side of the
organization. On the demand side, social and demographic factors inform the organization how it
should organize its location. The most essential input on the supply side, is the supply of labor. All
organizations must be aware of this in their search of appropriate labor and location. Additional
important factors included are trends in the labor market, the population skills and education, the
age of the working population etc. (Camp- bell & Craig, 2005).

Technological factors change the organizations circumstances. The growth and expansion of
technology has helped organizations to reduce costs, increase quality and productivity. It is
therefore crucial for organizations to be updated about the impact of technology and its future
changes (Campbell & Craig, 2005).

SWOT- Analysis

The SWOT-analysis brings together the result of the internal analysis and the external analysis.
The aim of the analysis is to provide information that is helpful in matching the organizations
capabilities to the external and competitive environment in which the organization operates (Friend
& Zehle, 2004).

According to Friend & Zehle (2004), an organization achieves an optimal match and gains a
competitive advantage by:

Building on its strengths

Reducing weaknesses
Exploiting opportunities by using its strengths
Reducing exposure of threats

SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats, where strengths
and weaknesses are internal factors and opportunities and threats are external factors, which the
following matrix model shows.

Internal

Strengths Weaknesses

Threats Opportunities

External Analysis

Figure 6 SWOT-Matrix, Own Illustration (Friend & Zehle, 2008)

Chapter-Four
Methodology of the Study

The methodology of the study required data to be collected at first. The sample size have been
chosen accordingly in order to understand what most of the employees think about Strategic
management is dynamic. When adequate data was collected, was sorted and displayed. The sample
has been chosen from the Corporate Office of the ACI pharmaceuticals which has been chosen as
a case study. At last when all the required results have come, recommendations have been made
for the Department of the company.

4.1: Research Design

This is a descriptive type of research that has undertaken insights and understanding about the
strategic management system of the company. The study area mainly ACI pharmaceuticals
Limited. This report will pay an especial attraction to express strategic management system of ACI
pharmaceuticals Limited.

4.2: Sampling design

For making easy to do study I had made a sample unit for entire employee of ACI. In this analysis
ACIcollect data from In-depth interviews include both individual interviews (e.g., one-on-one) as
well as "group" interviews. ACIhave mainly focused on one-on-one face-to-face interviews. The
major advantages of face-to-face interviews allow for the researcher to adapt questions, make
clarifications and repeat or rephrasing questions if necessary. Here ACItried to obtain factual and
relevant information.

4.2.1: Sampling Frame

ACI Pharmaceuticals Ltd. which is established in 89 Gulshan Avenue, Dhaka-1212 would be the
sampling unit for the study.
4.2.2: Sampling Technique

Random sampling is used for the purpose of the study.

4.2.3: Sample Size

There is no exact sample size for our study, those were randomly taken among the respondent.

4.3 Data Collection

Basically to prepare this report two types of sources are used, one is the primary source and another
one is secondary source.

4.3.1 Primary sources

Basically to prepare this report two types of sources are used, one is the primary source and another
one is secondary source.

Verbal Interview
Discussion
Expert Opinion

4.3.2 Secondary sources

Secondary data are those which have been already published and these data are collected from the
ACI Limited. Secondary source of data used as below-

Newspaper
Magazine
Internet
Annual report of ACI Limited
 On the website of ACI Limited

4.3.3: Data Analysis

Quantitative and qualitative data were collected and analyzed according to acceptable standards of
practice. Different tables and graphs were used to make the data meaningful and comparable.
Qualitative data were analyzed rationally and in comparison with current market condition.
Chapter-Five
Data Analysis

5.1 PESTEL analysis

PESTEL analysis stands for "Political, Economic, Social, and Technological, Environmental and
Legal analysis" and describes a framework of macro-environmental factors used in
the environmental scanning component of strategic management.

PESTEL ANALYSIS

POLITICAL ECONOMICAL

ACI Pharma has a long-standing ACI Pharma common stock is listed on

commitment to comply with the law
wherever they operate and to conduct all
business activities with the highest ethical
standards which is critical for their
continued success in the global
marketplace.
The ACI Pharma governance body
ensures the company serves the interests
of shareowners and other key stakeholders
with the highest standards of
responsibility, integrity and compliance
with all laws.
the Dhaka Stock Exchange (DSE).
The Board places a premium on aligning
the interests of executives with those of
the Companys stockholders. The Human
Resources and Compensation Committee
shall adopt , and annually monitor
compliance with, stock ownership
guidelines applicable to directors and
senior executives
Global economic crisis

Reduction in individual disposable

Customers, community groups, political
organizations and others regularly
approach ACI Pharma to support civic
and political activities.
Government interest in ensuring
healthcare for all and solicit savings.
income
Increased number of buying groups
putting pressure on price
Reluctant of consumers to spend in
healthcare

Harmonization of healthcare across the

industry Increased pressure from shareholders
 SOCIAL/SOCIO-CULTURAL TECNOLOGICAL

Patient awareness and changing They continue applying new

expectations. technology and fresh medical
knowledge to both enhance existing
Increasing age of population and resource.
growth in obesity.
Customized treatment

Market likely to grow with increasing

health concerns. Direct to patient advertising

Patient public and social media Direct patient communications

activism is also increasing through
networking technologies.
More responsive service facilities

Increased need of customer service Developing and applying innovative

and price transparency.
They consider their people are their
most important asset and the key to
their success. Thats why they respect
one another, and consistently
demonstrate honesty and commitment
in their words and actions.
technology is a key component of
their future success and social license
to operate. They focus on applying the
most leveraging technologies where
they can create the most value,
anticipating change and responding
with creative solutions.

By demonstrating visible and active

leadership in communities where they
operate, ACI Pharma creates and
maintains inclusive, honest, and
mutually-beneficial relationships with
those who are impacted by their
business or who have the ability to
impact their business.
ECOLOGICAL/ ENVIRONMENTAL LEGAL/ REGULATORY

ACI Pharma implement high Change to advertising law

environmental standards in order to
ensure that their actions today will not Increased litigations
only provide the energy needed to
drive economic growth and social
well-being, but also secure a stable Quality become the key
and healthy environment for
tomorrow. Key ACI Pharma operating policies
include:
Growing environmental agenda and
community awareness. Code of Business Ethics and Conduct
Health, Safety and Environmental
Policy
Identify eco opportunities in the Political Support Policy and
market. Procedures
Political Contributions
Market demand of herbal products. Substance Abuse Policy
5.2 Five Forces Model

Porters Five Forces Analysis

As we know, Michael Porters analysis of five primary competitive forces is the key to analyze
the state of competition in the industry. Following are the brief of the competitive forces that
contribute to shape pharmaceutical business in Bangladesh.

5.2.1 Rivalry among competing sellers

The competition among companies in this industry ranges from moderate to high. There are
more than 150 product categories where price limit is set and controlled by the government. So
the competition between firms in pharmaceutical industry is based mostly on non-price factors
like brand preference and customer loyalty, product quality etc. The nature of rivalry among
pharmaceutical industry can be explained in terms of following factors:

Rivalry in the industry is intense as significant numbers of companies are operating in this
industry. There are around more than 150 companies in this industry among which the top 30
companies control more than 90% of the market, which makes the industry consolidated in
nature.

As the government is controlling and setting the price for the product class of around
150 products, the competition is mainly based on other marketing activities instead of price.
Only top 10-15 companies are marketing all these product categories and rivalry is mainly exist
in these products class and among these 10-15 companies.

Competition is not that intense in those product classes for which the government is not
controlling and setting up the prices. Moderately expensive molecules where demand is coming
usually from the affluent and urban classes, competition is getting high these days as increasing
number of companies are coming up to cover these segments of the market.

Rivalry is strong in the market as the demand for the product is growing slowly. There are many
companies who are offering in the same markets for their products. Rivalry is also strong
because the customers cost of switching the brands is low. Doctors are flexible to prescribe
different products for their availability in the market. Rivalry tends to be vigorous as the exit
barriers are very high due to requirement of huge capital and other investments. Rivalry
increases because strong companies of the other business are acquiring weak firms in the
industry and aggressively launching the pharmaceutical business.

Competitive firms are using price cuts and other competitive weapons to boost unit volume and
to realize the economies of scale which is also causing intensive rivalry.
5.2.2 Potential Entry of new competitors

Entry barriers in pharmaceutical industry is high for foreign companies as the govt. rules does
not permit foreign companies to enter the market without joint venture with a Bangladeshi firm
owning at least 50% share of the company. Initial capital requirement, brand preference and
customer loyalty, strict government rules and regulations to match with and qualify for entering
this market etc. are also playing as high entry barriers for the potential competitors. Even though
there are high entry barriers in the industry, threats from potential new entrants in this industry
are also significant because of the industry profitability and the rapid growth of the market.
Following are the factors that can be considered as entry barriers of this industry:

5.2.3 Economies of Scale

As the scale economies deter entry in this industry and cannot be achieved at the beginning of
operation, potential new entrants have to start on a large scale which is a costly and perhaps a
risky move. Sustainable profitability certainly depends on the scale of the operation and
production of large volume. Potential entrants have to encounter scale-related barriers in this
industry not just in production but in advertising, marketing and distribution and raw material
purchasing as well.

5.2.4 Brand preference and customer loyalty

As mass media advertising is not allowed in the pharmaceutical industry, Promotional and
advertisement activities are done through physicians, chemists or retailers. In case of physicians
its done through direct contact, providing free samples, arranging seminars, providing
necessary information etc. In case of chemists or retailers its done through discounts,
commissions etc. Usually the end user of the products must follow the physicians prescription,
so they dont have any choice in brands. So brand preference and loyalty of the consultant class
is playing avital role in establishing relative market share in this industry. Its very hard for any
new entrant to build preference and loyalty to these special segments within a short period of
time.
5.2.5 Distribution channel

The distribution channel in the industry is not that much organized and therefore all the big
companies have to develop their own channel by their own work force, which is very difficult
and time consuming for new entrants.

5.2.6 Capital requirement

High capital is required to set up manufacturing facility in the pharmaceuticals industry. As the
economies of scale is present in the industry, high investment is required to start minimum
production for keeping the price low and make the product competitive. Products are also
required to fulfill the standard prescribed and controlled the regulatory authority, so high
investment is required to maintain the standard of the facility. High cost is also required because
of the high cost of machinery and equipment.

5.2.7 International trade restrictions

International trade restrictions and government regulation played a major role to impose high
barriers for foreign companies in Bangladesh market. Under the existing related law, foreign
companies can only export or sell medicine in the local market without affiliation with a local
company, but for manufacturing it must go for fulfilling the local law. This has increased the
entry barriers for foreign companies but reduced the same for local companies.

5.2.8 Threat from substitute products

Three factors play vital role in strengthening the competitive pressure from substitute products
which are whether attractively priced substitute products are available, how satisfactory the
substitute products are in terms of quality, performance and other relevant attributes, and the
ease with which buyers can switch to substitutes. Although there is no direct substitute for
pharmaceuticals products, there are some cases where limited substitutes are available. The
substitute for general antibiotic is Ayurvedic and Homeopathic and Herbal medicine. In
Bangladesh the rural people who constitute large share of population highly depend on
Ayurvedic and Homeopathic medicine. In urban areas the trend is more toward medicines with
herbal ingredients rather than chemical. So, in rural areas affluent people pay good money for
Ayurvedic and Homeopathic medicine. They are also very cheap, as they are not scientifically
produced. The rural people being ignorant and uneducated are unaware about the consequences
of taking these medicines. They buy them as they offer cheaper price. Sometimes fake village
doctors use religious believes as a backdrop for selling false medicine and reject the medicines
produced by pharmaceutical companies. As long as the people of our country dont educate
themselves these false medicine will be playing significant role as substitute products.

5.2.9 Bargaining power of suppliers

Bargaining power of suppliers in this industry is moderately low. Most of the manufacturers in
this industry import raw materials directly from abroad which constitute low dependency on the
raw materials suppliers. Also the number of suppliers is very high in the industry and the
purchase volume is big, which are playing positive role for the buyers to bargain over suppliers.
Therefore, the dependency on suppliers and the switching cost to other suppliers are relatively
low in this industry.

5.2.10 Bargaining power of buyers

As the end-consumers are not the decision maker here, the buyer characteristics in
pharmaceutical industry are somewhat different from other consumer products. The decision
makers are mainly physicians and chemist or retailers. There are around 120,000 physicians
around the country to whom the competitors visit regularly to promote their products. Almost
all promotional expenditures of the firms, a very big portion of any firms yearly sales revenue,
is utilized to convince these segments. Also as most of the products in this industry are nearly
identical and there are significant numbers of brands existing in this market, the bargaining
power of buyers is very high. The unique power of physicians to make any band establishment
 and in some case, unethical practices of sharing mutual benefits among physicians and firms
have increased this bargaining power even higher.

5.3 SWOT Analysis

SWOT Analysis of ACI Pharmaceuticals

5.3.1 Strengths

i) High Quality Product: ACI is the first company in Bangladesh to obtain

certification of ISO 9001 Quality Management System in 1995.

ii) Environmental Policy: ACI is the first Company in Bangladesh to get certification
of ISO 14001 Environmental Management System in 2000. The company is
committed to maintain the harmonious balance of our eco-system and therefore
constantly seeks ways to manufacture and produce products in an eco-friendly
manner so that the balance of nature remains undisturbed and the environment
remains sustainable.

iii) Product Development: This creative team of professionals is engaged in developing

new formulations and dosage forms with competitive advantages and strong
product differentiation. ACI is actively engaged in introducing newer molecules
and Novel Drug Delivery Systems (NDDS) to meet the needs of the future.

5.3.2 Weaknesses

i) Extreme reliance on imports: Around 80% of Bangladesh's total need of API is

being met through imports. The company can earn more revenue if it uses the
locally produced API for production.
 ii) Unethical Competitors: Although quality assurance is one of the major aspects of
Pharmaceutical industry, only the top 15 to 20 percent producers follow the
guidelines. Unethical competitors may produce at cheaper price. Price sensitive
customers may be attracted to these low quality products.

iii) World Economic Recession: Since the company eyes more on export market, it
becomes more prone to be hit negatively by world economic events.

5.3.3 Opportunities

i) Extension of Patent Provision: Least developed countries have an extension until

2016 to implement the pharmaceutical patent provisions of the TRIPS Agreement
under the Doha Declaration on TRIPS and Public Health.

ii) Potential domestic and international market: Apart from domestic market, ACI is
exporting to nine different international markets, namely Sri Lanka, Myanmar,
Vietnam, Yemen, Somalia, Afghanistan, Guatemala, Hong Kong, Bhutan. The
company is also developing markets in another five countries, namely Nepal,
Kenya, Sudan, Cambodia, Macau.

iii) Establishment of API: Bangladesh government established Active Pharma

Ingredient (API) Park in Munshiganj in May 2008 to promote production of API.
This backward integrated API or raw material industry will make pharmaceuticals
companies of the country competitive in export markets.

5.3.4 Threat:

i) Maximum Retail Price: Under the Drug Control Ordinance of 1982, the
government fixes the maximum retail prices (MRP) of 117 essential drug chemical
substances while the non-essential drugs are priced through an indicative price
system.
 ii) Environmental Regulation: The Corporation will develop the infrastructure with
state of-the-art facilities including a central effluent treatment plant (ETP) and
incinerator for solid and liquid waste-management.

iii) Capital Intensive Research and Development: After the expiry of patent provision
in 2016, pharmaceuticals companies may face difficult time to deal with capital
intensive research and development for drug discovery. This may greatly affect
their export and may restrict their growth.

5.4 Value chain Analysis

Value chain analysis (VCA) is a process where a firm identifies its primary and support activities
that add value to its final product and then analyze these activities to reduce costs or increase
differentiation.

Value chain represents the internal activities a firm engages in when transforming inputs into
outputs.

Ensuring that patients receive the correct medicine, at the appropriate time and from a convenient
location, ACI Pharma is involved in a complex value chain involving three major components:

5.4.1. Manufacturing of the medicine: In order in produce a medicine, a number of steps are
involved, from the initial research and development phase, to gaining regulatory approval which
allows a medicine to be sold in a market to the final commercialization phase. The specific steps
and requirements will differ between types of medicine, manufacturers and countries.

5.4.2. Distribution to the dispensing point: This step includes the transportation and handling of
the medicine from the manufacturer to the end user, whether this is a retail pharmacy (retailer),
hospital or dispensing doctor. The complexity of this journey will differ depending on
manufacturer location, the need for importation of the medicine, the nature of special handling
requirements, and the geographic location of the end user which will vary between large urban
centers and remote rural villages.

5.4.3. Dispensing to the end user: Providing the correct medicine dosage and form, to the right
patient, in a convenient and timely manner is the final step in the value chain. This step can also
involve a number of additional activities, including checking for potential interactions, providing
advice, and processing reimbursement claims, each of which is intended to ensure the patient
receives the full benefit and value from the medicines they receive.

Figure: Value Chain of ACI Pharmaceutical

 5.5 The BCG Matrix

THE BCG MATRIX

BCG STARS ( ) BCG QUESTION MARKES (?)

(high growth, high market (high growth, low market

share) share)

High
Business Growth Rate (Market Growth)

ACI

BCG CASH COWS ($) BCG DOGS

(low growth, high market (low growth, low market
share) share)

Low

High Low
Relative Position (Market Share)
BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to portray
firms brand portfolio or SBUs on a quadrant along relative market share axis (horizontal axis)
and speed of market growth (vertical axis) axis.

5.5.1 Interpretation

Domestically, Bangladeshi firms generate 82% of the market in pharmaceuticals; locally based
MNCs account for 13%, and the final 5% is imported. Although 235 pharmaceutical
companies are registered in Bangladesh, only about 85 are actively producing drugs. The
top 30 to 40 companies dominate almost the entire market; the top 10 hold 70% of domestic
market share; and the top two, Beximco and Square, capture over 25% of the market.
ACI has 8.69% market share in the pharmaceutical industry. The industry structure is relatively
concentrated.

5.5.2 Market growth

CUSTOMERS CHOICE OF BRAND NAME Brand Name Respondent (in %)

Square 38
Beximco 24
Incepta 16
ACI 8.69
Acme 6
SK-F 4
Others 4

5.5.3 Market analysis including market segmentation

The Bangladesh pharmaceutical marketplace is predominantly a branded generic marketplace.

Pharmaceutical firms in Bangladesh can either sell to the private sector pharmacies, to the
government and its public health care facilities, or to international organizations operating in
Bangladesh (e.g. UNICEF).

Bangladesh pharmaceutical industry is mainly dominated by domestic manufacturers. Of the total

pharmaceutical market of Bangladesh, the local companies are enjoying a market share reaching
around 97%, while the MNCs are having a poor market share. Out of the top ten pharmaceutical
companies in Bangladesh, all are local pharmaceutical companies. The top two domestic
manufacturers, namely Square and Incepta Pharma are having a combined market share of more
than 30% of the total pharmaceutical market of the country.

Sales of Square Pharmaceuticals, the market leader, were Tk 1,270 crore in 2010,Beximco grew
faster than other companies at a staggering 33 percent in 2010 with Tk 523 crore sales. Incepta's
sales and growth rate were Tk 665 crore and 31 percent respectively, followed by ACI's Tk 600
crore and 17 percent. Eskayef logged Tk 426 crore in sales and the growth rate was 27 percent, the
third highest pace in the 2010. Zenith Pharmaceuticals, established in 1952, Zenith
Pharmaceuticals Ltd is one of the sturdiest growing Pharmaceutical Company committed to
produce medicine strictly under GMP compliance and extended its services to all the valued
Customers. The company complies with GMP at its plant, where validation and documentation
ensures the position in accordance to international standard.
Top Ten Pharmaceuticals and market share

Market segmentation of ACI

ACI operates in a multiple industry segment, it has its own manufacturing facilities, the principal
activities of the company are formulation, manufacturing and sales drugs in home and aboard.
Apart from domestic market, ACI is exporting to nine different international markets, namely Sri
Lanka, Myanmar, Vietnam, Yemen, Somalia, Afghanistan, Guatemala, Hong Kong, Bhutan. The
company is also developing markets in another five countries, namely Nepal, Kenya, Sudan,
Cambodia, Macau.

5.5.4 Competitor Analysis

Motivating high performance in pharmaceutical sales teams is a growing issue in the

pharmaceutical industry. There are many Pharmaceuticals in our country. ACI Pharmaceuticals is
one of them. The challenges facing the pharmaceutical industry in motivating sales teams are
compounded by a variety of factors that many other industries do not face including: government
regulation of sales practices, non-direct tracking of sales results, and the impact of managed care
on sales performance.

The companies deal in both up upstream and downstream operations. Upstream operations involve
exploration and production while downstream operations include refining and marketing About
80% of the drugs sold in Bangladesh are generics and 20% 5 registered brands which have 8,300
different forms of dosages and strengths. The top 30 to 40 companies dominate almost the entire
market; the top 10 hold 70% of domestic market share; and the top three, Beximco Square,
ACI capture over 25% of the market.

ACI pharmaceutical products on the market are of world-class Standards, others are less so.
Medical professionals and pharmacists interviewed voiced strong opinions on the quality levels of
different brands. Although further comprehensive and systematic analysis is required to assess
ACI pharmaceutical quality, some anecdotal reports exist of lower quality drugs. Bangladesh's
drug distribution marketplace is composed of small independent pharmacies. This
structure combined with an under-regulated industry, few firms manufacturing
pharmaceuticals, and companies competing to sell branded generics based on brand names
provides ample opportunity for the sale of low-quality drugs at higher 11 significantly in
Bangladesh. ACI Pharmaceuticals has 1,100 representatives and
ACI Pharmaceuticals has 950 representatives visiting pharmacies. None of the pharmacies visited
restock any medicine that does not sell well. The small pharmacies report only keeping a
medicine for a maximum of six months. As its first move towards internationalization, Bangladesh
entered a few overseas markets exporting a wide range of pharmaceutical products covering all
major therapeutic classes and dosage forms including some developed markets. High-tech
specialized products like inhalers, suppositories, nasal sprays, indictable and infusions are also
being exported.

The following are the export manufacturers: Square, Novartis, Opsonin, Acme, Beximco,
Aristropharma, Eskayef, ACI, Renata, Orion, Jayson and Hudson. Overseas retail buyers apart,
these companies are also supplying pharmaceutical products to some world-renowned hospitals
and institutions like Raffles Hospital of Singapore, Jinnah Hospital of Pakistan, MEDs of Kenya,
SPC of Sri Lanka and KK Women & Children Hospital of Singapore according to BAPI. Another
diversification strategy is to focus on a comparatively large number of niche market drugs rather
than blockbusters. Whether by accident or design a number of European companies appear to have
followed this strategy. While their total sales of pharmaceuticals place them in the first rank of
pharma companies they have perhaps only one or two drugs of blockbuster status. Selling a broad
range of drugs clearly lessens dependence on the discovery of new blockbusters, but development
and marketing costs need to be watched for the smaller markets to be economic.

The price of products under the controlled category is determined by the Government. At present
the list of essential drugs contains around 209 items, which are in controlled category. While the
manufacturing companies are allowed to fix prices of their products that are under decontrolled
category. According to the Government regulation, the pharmacies/chemists are entitled to get
16% retail margins on top of the trade prices of products. Most of the leading pharmaceutical
manufacturers have their own distribution network and ensure supply of products up to retail level.
Companies that do not have their own distribution networks have to distribute their products
through distributors/wholesalers. In that case they usually fix the distributors margin as mutually
agreed.
5.6 Break Even Analysis

The break-even point is the sales level at which revenue equals total costs. This means that at the
break-even level of sales, there is neither a profit nor a loss.

To illustrate markup pricing we consider the following cost and expected sales of unit produced
by ACI Pharmaceuticals Ltd.
The figure shows break-even chart of ACI pharmaceuticals Ltd. fixed costs are Tk. 1000,000
regardless of sales volume. Variable costs are added to fixed cost to form total costs, which rise
with volume. The total revenue curve starts at zero and rises with each unit sold. The slope of the
total revenue curve reflects the price of Tk. 14 per unit.The total revenue and total cost curves
cross at 357,143 units. This break-even volume means at Tk. 14 ACI must sell at least 208,333
units to break-even.

If ACI wants to make a target profit, it must sell more than 208,333 at Tk. 14 each. If ACI
invested Tk. 40,00,000 and wants to set price to earn a 20 percent return or Tk. 8,00,000 then
they must sell at least 3,42,857 units at Tk. 14 each.
Chapter-Six
Recommendation & Conclusion

6.1 Recommendations

To achieve the objectives of keeping the status of market leader and the high growth trend by
further increasing the market share and to expand the export to more geographic regions by
entering to more foreign countries, a complete package of a number of alternative strategies
developed in the previous section has been recommended as follows:

i) Strategic alliance and cooperative partnership: Helping to get world recognition. To

make the way smooth while entering more world market, ACI Pharmaceuticals Ltd
should take initiative for strategic alliance with big foreign reputed companies. This is
more easier for ACI Pharmaceuticals Ltd for developing cooperative partnership, as it
has already some connections and associations with some major foreign companies.
This strategic move will enable ACI Pharmaceuticals Ltd to understand cross-cultural
boundaries, which is a vital competitive advantage for international business.
On the other hand, ACI Pharmaceuticals Ltd can utilize the strategy of strategic alliance
by getting direct entry in valuable skills, technology and management quality of their
foreign partners. Implementing this strategy effectively can significantly change ACI
Pharmaceuticals Ltd to become the one of the renowned players in the global
pharmaceuticals.
To provide more value for the money, ACI Pharmaceuticals Ltd has two options
reduce the price maintaining the same quality or maintain the price increasing the
quality. As ACI Pharmaceuticals Ltd must maintain the current quality, it has to reduce
the price slightly to make its products more competitive in the market. Even if this step
reduces the profitability of the firm, ACI Pharmaceuticals Ltd has to consider it and
implement this strategy for the short-term. To maintain its leadership position stronger
and long lasting, ACI Pharmaceuticals Ltd has to be prepared for strengthen the position
in local market and aggressively expand geographic coverage by increasing the export.
In order to do that ACI has to reduce its dependency over raw materials and gain control
by finding ways to produce some category of raw materials locally. It should also
 enhance the current distribution network, both local and foreign to enlarge the market
coverage. ACI must take these initiatives. Moreover, a backward integration will
increase its ability to reduce the cost and increase their control over price, which is
necessary for ACI to maintain its leadership position in a business.

ii) Focused Differentiation: In a focused differentiation strategy ACI will concentrate on

producing the best quality product in the industry and sell it to a group of sophisticated
and conscious customers.

iii) Technology and Innovation: They have invested in technology to develop efficient,
economical and environmentally sound ways to find, produce and market medicine.

iv) Health, Safety and Environment: Increase emphasis on process safety, risk
management, emergency preparedness and environmental performance while retaining
intense focus on occupational safety.

v) Sustainable Development: Update their strategies and action plans for these important
issues and focused on goals such as reducing waste and emissions.

6.2 Conclusions

If the above recommended strategies fail to achieve desired objectives and incur financial losses
due to unforeseeable events ACI should dump the above strategies and adopt a focused
differentiation strategy. In a focused differentiation strategy ACI will concentrate in producing
the best quality product of the industry and sell it to a group of sophisticated and conscious
customers. This will enable ACI to charge a premium price in the market and also export to the
quality conscious western countries to a certain extent.

And ACI should also reduce its operating cost by cutting down the distribution network and
withdrawing the backward integration activities. This strategy will reduce ACIs overall sales
revenue, but it also will increase the profit margin.
References

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http://www.aci-bd.com/our-businesses/pharmaceuticals.html
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12. Value Chain Analysis from

https://www.strategicmanagementinsight.com/tools/value-chain-analysis.html
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14 BCG growth-share matrix from

https://www.strategicmanagementinsight.com/tools/bcg-matrix-growth-share.html