Square pharmaceutical is the leading pharmaceuticals company with a powerful combination of skills and resources to provide a platform for delivering strong growth in today’s rapidly changing health care environment.
The pharmaceuticals company in Bangladesh is accountable for the health of the people; since the products are the fundamental right of all human being. The pharmaceutical industry is different from other industries related to consumer centered businesses.
The industry has a fundamental social responsibility towards the society and their users. The pharmaceutical industry depends on their target market- the society of Doctors who decide which medicine to prescribe.
Objective of the study:
This study titled as “Square Pharmaceutical company leading market by follow cost leadership strategy” is aimed to know the business level and functional level strategy.
The specific objective of the report is mainly focused on business level strategy of Square Pharma. There are mainly some functional level strategies of business level strategy. To findings the business level strategy, following are required:
- Finding out the marketing and market expansion strategy.
- Finding selling strategy.
- Finding HRM policy.
- Finding strength, weakness, opportunity and threats.
What is Business level strategy?
Business level strategy is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product market. This means that business level strategy indicates the choices the firm has made about how it intends to compete in individual product markets. The choices are important as there is an established link between a firms strategies and its long term performance. We believe those are absolutely necessary to improve our competitive position. Every firm form and use a business level strategy.
A firm competing in a single product market area in a single geographic location does not need a corporate level strategy to deal with product diversity or an international strategy to deal with geographic diversity. A diversified firm will used one of the corporate level strategies as well as choose a separate business level strategy for each product market area in which the company competes. This means that business level strategy is the core strategy the strategy that the firm forms to describe how it intends to compete in a product market.
Customers are the foundation of successful business level strategies and should never be taken for granted. Information about customer that is relevant to choosing a business level strategy. In terms of customers when selecting a business level strategy the firm determines the following terms,
- Who will be served?
- What needs those target customers have that it will satisfy.
- How those needs will be satisfied?
Selecting customers and deciding which of their needs the firm will try to satisfy as well as how it will do so, are challenging tasks. Global competition, which has created many attractive options for customers, is one reason for this. In the current competitive environment effective global competitor have became adept at identifying the needs of customers in different cultures and geographic regions as well as learning how to quickly and successfully adapt the functionality of the firms good or service to meet those needs.
Descriptions of the purpose of business level strategies and of the five business level strategies follow the discussion of customers. The five Generic strategies are as follows,
- Cost leadership.
- Focus cost leadership.
- Focus differentiation.
- Integrated cost leadership/differentiation.
- Spin price
Square pharmaceuticals follows cost leadership strategies:
Above of these strategies we find that square pharmaceuticals follows cost leadership strategies. Because cost leadership strategy is an integrated set of actions taken to produce goods or services with features that are acceptable to customer at the lowest cost, relative to that of competitors. Firms using the cost leadership strategy sell no-frills, standardized goods or services to the industry’s most typical customers. Cost leaders goods and services must have competitive levels of differentiation in term of features that create value for customers. Indeed emphasizing cost reductions while ignoring competitive levels of differentiation is ineffective. At the extreme, concentrating only on reducing costs could find the firm very efficiently producing products that no customer wants to purchase.
Cost leaders also carefully examine all support activities to find additional sources of potential cost reductions. Developing new systems for finding the optimal combination of low cost and acceptable quality in the raw materials required to produce the firm’s goods.
Square pharmaceutical follows Business- Level Strategies:
The main concepts of Business-Level Strategies are based on three (3) criteria and these are:
Cost leadership: Cost leadership based attaining, then using the lowest total cost basis as a competitive advantage. On the above, we are discussing how square pharmaceuticals using their cost leadership strategy.
Differentiation: Differentiation refers to the using product features or services to distinguish the firms offering from its competitors. In this regard square pharmaceutical follows these rules properly. Square pharmaceuticals maintains their performance on every side such as,
- Packaging label with price
- Equal Quantity
- Comfortable Price
- Product Advertising
- High qualified product etc
Market niche focus: Market niche focuses Concentrating competitively on a specific market segment. In this regard square pharmaceuticals achieve a good reputation on this sector such as medicine sector. It is achieving their goal and customer reputation by their medicine together.
Square pharmaceutical follows functional-level strategies:
Functional strategy concerns the managerial game plan for running a major functional activity or process within a business- Research and development, production, marketing, customer service, distribution, finance, Human resources, and so on; a business needs as many functional strategies as it has major activities. In this regard square pharmaceutical maintains fully their performance such as square pharmaceuticals products are fully high qualified without any doubt. Their marketing strategy is so nice. They collect their raw materials from U.S.A, India, and Germany and so on. Those are highly qualified. Every product of square pharmaceuticals is examined by the expert researcher and trying to make better qualified product.
Square pharmaceutical follows Global-level Strategies:
Global-level strategies focus Multidomestic, International, Global and Transnational activities. In this regard Square pharmaceuticals are not maintained above features.
Square pharmaceutical follows Corporate-level Strategies:
Corporate strategy is the overall managerial game plan for a diversified company; it extends company wide- an umbrella overall a diversified company’s business. Corporate strategy consists of the moves made to establish business positions in different industries and the approaches used to manage the company’s group of business- such as Vertical integration, Diversification, Strategic alliances, Acquisitions, New ventures, Business portfolio and restructuring. In this regard Square pharmaceuticals maintain some of the features and these are Diversification, strategic alliance and business portfolio- Now square diversified their product consecutively such as square Radhuni masala, square soap, and square jhal chanachur
As well as square already entered stock market and lastly square creates a big hospital to give the service to the people. So overall we can say that square pharmaceutical follows above features.
Square pharmaceutical follows multinational strategies:
On the above discussion we can say that square pharmaceuticals properly maintain multinational strategies. Square pharma diversified various products in the market; They are exporting their products from one country to another country. Now they are trying to enter in the foreign marker with their product.
Square pharmaceutical follows Information technology Strategies:
Square pharma always give priority on this strategy. They are always trying to provide good (product& service) to their customers. If any well information helps to make good product or service, than they are achieving it. For this reason they are accept well information from domestic and abroad expert peoples.
Corporate History of Square Pharma
The company was founded in 1958 by Samson H. Chowdhury along with three of his friends as a private firm. It went public in 1991 and is currently listed on the Dhaka Stock Exchange. Square Pharmaceuticals Ltd., the flagship company, is holding the strong leadership position in the pharmaceutical industry of Bangladesh since 1985 and it has been continuously in the 1st position among all national and multinational companies since 1985. Square Pharmaceuticals Ltd. is now on its way to becoming a high performance global player.
As per vision, mission and objectives; they are to emphasize on the quality of product, process and services leading to growth of the company imbibed with good governance.
Chronology since Inception
- 1958: Debut of Square Pharma as a Partnership Firm.
- 1964: Converted into a Private Limited Company.
- 1974: Technical Collaboration with Janssen Pharmaceutical, Belgium, a subsidiary of Johnson and Johnson International, USA.
- 1982: Licensing Agreement signed with F. Hoffmann-La Roche Ltd., Switzerland.
- 1985: Achieved first position in the Pharmaceutical Market of Bangladesh among all national and multinational companies.
- 1987: Pioneer in pharmaceutical export from Bangladesh.
- 1991: Converted in to a Public Limited Company.
- 1994: Initial Public Offering of Square Pharmaceutical Shares.
- 1995: Chemical Division of Square Pharmaceuticals Ltd. starts production of pharmaceutical bulk products (API).
- 1997: Won the National Export trophy for exporting pharmaceuticals.
- 1998: Agro-chemicals & Veterinary Products Division of Square Pharma starts its operation.
- 2001: US FDA/UK MCA standard new Pharmaceutical factory goes into operation built under the supervision of Bovis Lend Lease, UK.
- 2004: Signing of agreement with ROVIPHARM, Vietnam to manufacture and market Square products under license in Vietnam.
- 2004: Secured the top position for the best published accounts and report for 2003 in the manufacturing category for transparency and excellence in corporate reporting.
- 2005: New State-of- the-Art Square Cephlosporins Ltd. goes into operation; built under the supervision of TELSTAR S.A. of Spain as per US FDA/ UK MHRA requirements.
- 2007: Square Pharmaceuticals Ltd., Dhaka Unit gets the UK MHRA approval.
- 2008: New SVPO (Small Volume Parenteral and Ophthalmics) plant starts operation in Dhaka Unit.
Corporate Governance involves decision making processes for any corporate body as a going concern for The benefit of all concerned, present and future. These decisions may be categorized as policy & strategic, operational and executing, performance & evaluation and sharing of the accretion assets between present & future cohorts. The involvement of the entrepreneur in all these areas invokes decision making governance on a continuous basis, the degree of involvement being variable with the extent of delegation of authority top down and reporting for accountability bottom up of the Management echelon. These aspects of governance are shared by the Board of Directors, Executive Management, operational participants and workers and others in fulfillment of the common goals that converge in increasing the benefits of all stakeholders. To this end entire corporate governance efforts are blended with “good governance practices” as ethically and morally acceptable standards under a given socio politico environmental phenomenon of our society in which we work, live and exist.
The organisms through which the corporate governance functions are carried out are:
BOARD OF DIRECTORS:
The Board of Directors, the top Management echelon, consisting of the founding entrepreneurs/ successors and an Independent Director, provides the policy and strategic support and direction for the entire range of the corporate activities. The Board of Directors consist of nine (9) members including the Independent Director with varied education and experience which provides a balancing character in decision making process. The Board is re-constituted every year at each Annual General Meeting when one-third of the members retires and seeks re-election. A director is liable to be removed if the conditions of the Articles of Association and the provisions of the Companies Act 1994 are not fulfilled.
(b)Role & Responsibilities:
The main role of the Board of Directors, which is the highest level of authority, is to provide general superintendence, oversee the operations and control the affairs of the company through appropriate delegation and accountability processes via the lines of command. However the Board of Directors hold the ultimate responsibility & accountability with due diligence for conducting the activities of the company as per provisions of law in the interest of the shareholders, the stakeholders, the state and the society. The Board of Directors, in fulfillment of its responsibility hold periodic meetings, at least once a quarter and provide appropriate decisions/directions to the Executive Management. Such meetings usually consider operational performance, financial results, review of budgets, capital expenditure proposals for BMRE or new projects/divisions/product lines, procurement of funds by issue of shares or borrowing, procurement of raw materials, plant & machinery, pricing of products/discounts, recruitment, training and promotion of officers, approval of audited accounts and distribution of dividends and other interest of the stakeholders including the employees and workers. The Board of Directors take special care in designing and articulating productivity and compensation plans of employees and workers and rewarding them appropriately on the basis of quality and quantity of performance as an incentive. Board also remains responsible for removal of operational hazards to life and health of workers, friendly environmental work condition and social relationship as demanded of good citizen in a country.
(c) Relationship with Shareholders & Public:
The shareholders as owners, are required to be provided with material information on the company’s operation half-yearly and annually, the latter at the AGM. They are also provided routine services by the Company Secretary in matters of transfer of shares, replacement in case of loss or damage of shares, payment of dividends etc. The Board is however responsible to the public for publication of any price
Sensitive information as per SEC regulation. A qualified Chartered Secretary is in charge for all these responsibilities as Company Secretary.
(d) Relationship with Government:
In its role on accountability to the government, the Board of Directors ensure payment of all dues to government in the form of import duty, custom duty and port charges, VAT, Corporate Taxes and other levies as and when they become due on the basis of actual operations and make sure to avoid corruption.
This has enabled the company to enhance its contribution to the National Exchequer on a progressive rate year after year.
(e) Relationship with Financers/Bankers:
The Board oversees the financial transactions and ensures to meet company’s commitments to the lenders without default. This has resulted in securing lower interest rates from them.
(f) Relationship with Suppliers:
As the company has to import plant and machinery and almost all the raw materials from abroad, it maintains cordial and mutually beneficial interest with its international as well as local suppliers. This has enabled the company to avoid any legal disputes in international/local courts and enhanced the company’s image as a good customer.
(g) Corporate Social Responsibilities (CSR):
The Board of Directors is also awoken of the Corporate Social Responsibilities (CSR) especially in the areas of gender equality, race-religion-regional equality, non-employment of child labor, human rights, environmental pollution, social-marketing, social activities (promotion of sports & culture, health care and population control Programs, elimination of corruption programs, participation in charitable activities etc. In non-partisan manner) right to form and participate in Union under ILO convention, employment of disabled etc.
HUMAN RESOURCES DEVELOPMENT:
In order to improve productivity of human input, the company continuously provide formal and informal training to the employees at every echelon of operation and management. During the year under review 2,358 persons received in-house/in operation/on the job training at home and abroad which will ultimately make great contribution to the company’s profitability as well their own remuneration in due course.
Human Resources are following these activities:
– Looking after Corporate HR activities of SQUARE Group.
– Conducting Recruitment and selection Process.
– Looking after Management Development Training.
– Conduct Training Need Assessment in different area within the organization.
– Formulate, Edit and Implement HR Policies.
– Overall talent and resource Management
– Analyzing organizational need linking with employee development.
– Managing employee relations and Communication.
– Conducting Orientation Program for Newly joined Employees.
SPL has the strongest domestic distribution network for smoothing distribution of medicines to all parts of the country. Currently it has 15 depots all over the country. Those are situated at Dhaka, Pabna, Bogra, Rangpur, Khulna, Barisal, Comilla, Mymensingh, Chittagong, Noakhali, Sylhet, Tangail, Rajshahi, Faridpur and Naryanganj. It uses own transport system to deliver its product to the stockist and retailer.
SPL also exports its products to 31 countries.
Present export market covers:
- Sri Lanka
- Papua New
- Sierra Leone
- Macau countries
Selling strategy and promotion:
Public advertisement for medicine, especially POM drug is strictly prohibited in Bangladesh. But it may be done for OTC medicine to some extent. However, no pharma company in Bangladesh is engaged in such advertisement.
SPL heavily depends on personal selling through rapport building and maintaining. A team of sales representatives, called MPO have been employed to meet with physicians to explain the merits, demerits, indication, contraindications, etc. of the medicine with the help of literature, brochure, pad, booklet, leaflet, gift item etc. That is, the Medical Promotion Officers promote the companies product to doctors front with the help of different
The company first has to decide what it wants to accomplish with its particular product offer. If the company has selected its target market and positioning carefully, then its marketing-mix strategy, including price, will be fairly straightforward.
The clearer a company’s objectives, the easier it is to set price. A company may seek additional objectives. Common objectives include survival, maximum current profit, maximum current revenue, maximum sales growth, maximum market skimming, product-quality leadership.
Companies pursue survival as their major objective if they are plagued with overcapacity, intense competition, or changing consumer wants. To keep the plant operating and the inventories turning over, they will cut prices. Profits are less important than survival. As long as prices cover variable costs and some fixed costs, the companies stay in business. However, survival is only a short-run objective. In the long run, the firm must learn how to add value or face extinction.
- Maximum current profits:
Many companies try to set the prices that will maximum current profits. They estimate the demand and costs associated with alternative prices and choose the price that produces Maximum current profits, cash flow, or rate of return on investment.
There are problems associated with current profit maximization. This strategy assumes that the firm has knowledge of its demand and cost functions; in reality, these are difficult to estimate. Also, by emphasizing current financial performance the company may sacrifice long-run performance, ignoring the effects of other marketing-mix variables, competitors’ reactions, and legal restraints on price.
Factors that affecting pricing strategy:
The company has to consider many factors in setting its price. A company’s pricing decisions are affected by both internal company factors and external environmental factors.
Square Pharmaceuticals has retained the top position with its local sales figure reaching Tk 10.70 billion in 2009 in the country’s Tk 55.0 billion pharmaceutical market followed by Incepta Pharma, according to IMS data released a few days back.
IMS is a US-based and the world’s number one market research organization, which has been providing pharma market intelligence to more than 100 countries over the past 50 years.
The market share of Square Pharmaceuticals, established in 1958 in the country’s pharma market, was 19.48 per cent in 2009, the data prepared by IMS said. Industry insiders said Square Pharmaceuticals has retained the number one position in local sales thanks to its better market penetration and good product basket. Sales of Incepta Pharma, established in 1999, stood at Tk 4.52 billion in 2009 and it grabbed a market share of 8.24 per cent during the period. Leading local pharma players are clients of the market research organization IMS. Meanwhile, the growth of Beximco Pharma, which suffered much during the immediate-past caretaker government’s tenure, was much better in 2009 than that of the 2008 and 2007.The Company has grown by 27.15 per cent in 2009 taking a market share of 7.72 per cent. Beximco Pharma’s position in the country’s top 10 pharmaceutical companies was the third in terms of sales. Its total sales were Tk 4.2 billion in 2009.Pharma experts said that both Beximco Pharma and Incepta are now in neck-and-neck position as both the companies have attained around 27 per cent growth in the country’s pharma market. An insider working for Incepta said: “The business growth of local pharmas has remained worse during the second and the third quarters, but it regained during the fourth quarter.”Acme Laboratories took the fourth position in ranking. Its sales were Tk 2.64 billion in 2009. Opsonin Pharma Ltd., established in 1956, ranked the fifth by local sales worth Tk 2.61 billion in 2009 and its market share of 4.76 per cent. Opsonin’s growth during the period was 29.34 per cent. Eskayef took the sixth position with sales of worth Tk 2.52 billion and it grabbed a market share of 4.59 per cent. The sales of pharmaceutical products of Reneta Pharma were nearly Tk 2.50 billion in 2009 and its market share was 4.54 per cent. The pharma company has grown 25.63 per cent in 2009. Advance Chemical Industries (ACI) ranked the eighth in the country’s pharma market with local sales worth Tk 2.46 billion taking a market share of 4.48 per cent. Aristopharma and Drug International took the ninth and the tenth positions respectively in the country’s pharma market, the data added. The sales of Aristopharma products were Tk 2.23 billion and Drug International’s were Tk 2.13 billion. Industry insiders said: “The individual market shares of local pharma companies including Acme, Opsonin, Eskayef, Renata, ACI, Aristopharma and Drug International remained almost the same during the 2009 period. “They also said: “The market shares of the seven companies fluctuate frequently, but ironically they remained almost the same at the end of the year.” However, the growth and sales of multinational pharmaceutical companies remained steady during 2009. Sanofi-Aventis (market share 2.97 per cent) ranked the top among the multinational pharmaceutical companies followed by GlaxoSmithKline (2.24 per cent). Sandoz (1.65 per cent) took the third position. The market size of Bangladesh, with nearly 250 pharmaceutical companies, has grown by 16.83 per cent in 2009 to Tk 54.93 billion coming above the same period in 2008. The pharma market was Tk 47.02 billion in 2008, and during the period the market growth was 6.68 per cent.
Major competitors of Square pharmaceutical are given below,
- ACI Pharmaceuticals
- Aristopharma Ltd
- Amico Laboratories
- The ACME Laboratories Ltd
- Beximco Pharmaceuticals Ltd
- Eskayef Bangladesh Limited
- Gaco Pharmaceuticals
- Ganashastha Pharmaceuticals
- Ibn Sina Pharmaceuticals
- Incepta Pharmaceuticals Limited
- Navana Pharmaceuticals
- Orion Pharmaceuticals
SWOT Analysis of Square pharmaceuticals
- Most important strength is product quality.
- No compromise with quality of raw materials.
- Machineries and technologies come from Germany, U.S.A, and India.
- Very skilled and efficient pharmacists.
- Competitive price with the one of the bests product quality.
- Competitors are aggressive.
- Insufficient suppliers for their raw materials.
- Most of the theory of medicine is imported from abroad.
- Some products prices are very high.
- Problems faced while importing raw materials from abroad like U.S.A, Germany, and India.
- Still Square is the no. one pharmaceuticals company in our country.
- Square already has a goodwill and a large market in home and abroad.
- Square can develop their market value by cutting down product price.
- Competitors are main threat for Square.
- Pharmaceuticals firms are growing largely.
- Competitors come with new technology.
At the end of our study we find that square pharmaceuticals is the leading pharmaceuticals in Bangladesh.
Square has a huge brand image but due to some reasons it is threat for square to keep their position.
So Square pharmaceutical should more effective to continue its leading position. Though due to government regulation pharmaceutical products can not be advertised in mass media. So square should do this on other means.