Case Study Analysis of Home Pharmaceuticals-Myassignmenthelp.com

Question: Discuss about the Case Study Analysis of Home Pharmaceuticals. Answer: Industry and market information Home Pharmaceuticals is a private pharmaceutical company operating in Malaysia. From starting, the company established strong background of examine with the tactic of creating over-the-counter medicines. During the past years, the company has done the research into new products like bio-medical and health food supplements (HFS) along with the essential developments. The pharmaceutical industry is the technology concentrated along with the research and development activities (AHK, 2012). Current market state In Malaysia, government is supportive for the new improvements and involvement to national health. The pharmaceutical industry is conquered by over-the-counter medicines and innovative drugs with the industry growth of 7.5% per annum expected till 2020. Further, majority of the income of the country is basically generated from the leading pharmaceutical companies of the country. There are four diverse pharmaceuticals products in Malaysia i.e. over-the-counter (OTC) medicines, prescription medicines, food or health supplement and traditional medicines. So, there are various existing chances in the Malaysian market as it is predictable to grow by 13% per annum. So, Home Pharmaceuticals can take advantage of this market situation. Although it is not easy to stay competitive in the market but company has to adopt some innovative strategies to target the market (Onn, 2015). Competitors In the pharmaceutical industry, there are many strong competitors and leading companies which are giving tough competition to Home Pharmaceuticals. They are referred to as Big Pharma and generating more than 50% of the industrys sales. Majority of these companies are from US, UK, Switzerland, France, Australia and Germany. In the list of Pharmaceuticals leaders, there are diversified companies i.e. Johnson and Johnson, Beyer, GlaxoSmithKline along with non-diversified companies such as Merck, Pfizer, Novartis, and Sanofi etc. Along with this, the industry is full of various specialty and small bio-tech companies that are focused on the specific products. Industry analysis: PESTEL Analysis Introduction PESTEL analysis is one of the most effective and popular tool in order to analyze the external market environment of any business. In case of healthcare industry of Malaysia, PESTEL analysis will be helpful in determining the challenges and issues that are impacting the business operations of Home Pharmaceuticals in the country. The analysis basically includes political, economic, social, technological, environmental and legal factors of the company (Hoskisson, 2009). Figure 1: PESTEL analysis In the given figure, the environmental factors of Home Pharmaceuticals are described. There are political, legal economic, social, technological, and environmental factors including critical issues which are affecting the business practices of the company in Malaysian healthcare industry (Luffman Kenny, 2009). Element narrative Based on the described figure, it is observed that there are some issues in the Malaysian healthcare industry which is affecting the business operations of Home Pharmaceuticals. Among the six identified issues, three key issues are selected which impact on the suppliers, competitors and customers of the Company Home Pharmaceuticals. Those issues are political issue, economic issues, and technological issues. Political issue- Low expenditure From the above discussion, it is observed the government of Malaysia is not focusing on expending the money in the pharmaceutical sector. Government does not focus on same level of expenditure on the public healthcare companies as compared to developed countries in the Asia Pacific region like Australia. In Malaysia, only government is funding only 55% of healthcare facilities and patients fund 45% to the industry. It is observed that 60% to 70% of patients are going to the public hospitals. This issue will impact on the customers of the Home pharmaceutical company as the medicine is not listed in the hospitals then they are getting access the new and innovative drugs. In this case, it is important for the company to retain the customers by providing them innovative drugs at the affordable rates. Home Pharmaceuticals need to adopt effective strategic planning in order to retain the patients. For this manner, company must adopt 7-S model which is useful in fulfilling the organizationa l needs in various aspects if required. This includes soft and hard elements of the business (Wheelen Hunger, 2011). Economic issues: Economic crisis Malaysia has to face economic crisis and it has impact on the disposable income of the customers and their purchasing power has decreased. This will impact on the profit of the Home Pharmaceuticals in the country. To deal with this, realization or retrenchment strategy will be effective for the company. This is basically a cost cutting program along with careful thought and analysis. Some departments may need additional funding and some needs drastic cuts. By this strategic implementation, Home Pharmaceuticals can use the fund in the research and development department to generate more innovative medicines for the patients (Dess Lumpkin, 2009). Technological issues: Lack of awareness This issue directly impact on the suppliers and distribution system of the medicines. Due to the lack of technological awareness, the infrastructure of pharmaceutical industry is not so much developed. Sometimes, suppliers are not able to supply the medicines on time. So, there is the need to implement technological systems in order to provide the products on time (Drummond, Ensor Ashford, 2012). Industry Analysis: Porters five forces Introduction Porters five forces analysis is an effective method in order to analyze the competition in the industry. This theory is based on the fact that there are five forces that are helpful in analyzing the competitive intensity and the attractiveness of the industry. The five forces analysis of pharmaceutical industry is helpful in analyzing the market conditions for Home Pharmaceuticals. Figure 2: Porters five forces framework Forces Narrative Based on the analysis of five forces of pharmaceutical industry, it is analyzed that these five forces are affecting the business of Home Pharmaceuticals in the country. The three significant issues are taken for the discussion: Competitive rivalry- Strong Competition The pharmaceutical industry is highly competitive due to the existence of various local and international companies. There are around 230 companies which are registered under Drug Control Authority in Malaysia because there are traditional and modern medicine companies. This is the issue for Home Pharmaceuticals while operating the business as company has to deal with the strong competition due to established pharmaceutical companies. In order to deal with the competition, Home Pharmaceuticals can use Ansoff matrix model so that products can be differentiated for the customers (Healy, 2011). Threats of substitute- Increased Cost The threats of substitute products are high in the pharmaceutical industry as there is the increased cost of medicines by the multinational companies. These factors impact on the bargaining power of the customers as sometimes they are not able to buy those medicines. They switch towards locally produced medicines. Home Pharmaceuticals has to face issues due to the availability of the substitute products. Bargaining power of suppliers-High switching cost The bargaining power of the suppliers in the pharmaceutical industry is high due to high production of cost of drugs and high switching cost. The suppliers have high level of switching cost because of long term investment and cost of technology. Generally, multinational companies are becoming key suppliers of technologies if producing medicines. Suppliers can switch easily on other company so; this is the big issue for Home Pharmaceuticals in the Malaysian Pharmaceutical industry (Keller, Parameswaran Jacob, 2011). Industry analysis: Key Success factors Table 1: Key Success Factors Key success factors Current attainments Future Goals Growth in populace and healthcare segment 585 million of medical device market, Healthcare expenses including 4.75% GDP, 1.2 billion for the pharmaceutical market Medical apparatus will include 25% of healthcare market by 2020, Healthcare expenses of 10% in GDP by 2020, 3.7 billion for pharmaceutical market by 2020 Government Coverage for healthcare sector 55% of public medical expenditure by government Universal healthcare coverage is planned by government by 2020 Trained workforce Trained personnel having low wages structure High income country by 2020 Government incentives Exemptions on inventories and raw material, Tax incentives, Moderate trade and venture policies Objective is to be pharmaceutical center in Asia region by 2020 Medical tourism Sector includes 200 million in 2017, 63% growth in terms of patients by healthcare tourism Expected growth by 80% from healthcare tourism market by 2020 KSF Narrative Increased life expectancy, low morality and high birth rate are the reason of growth in the population and healthcare revenue. It is recorded that in 2015, there was constant growth of 31 million in Malaysia and it is expected to grow in the future. Further, it is estimated that the pharmaceutical industry will grow to 3.7 billion by 2020. The medical device market will grow and create opportunities for Home Pharmaceuticals for the innovation of new medicine and exportation. Another key success factor in the pharmaceutical industry is medical tourism. In 2016, medical tourism has improved by 63% in case of revenue and foreign patients (Sarwar, 2013). This growth is due to government policies for the medical tourism and tax exemptions for the hospitals. Developed infrastructure, low costs structure, and skilled medical practitioners are the factors to attract more global patients in the country (Proudlove Boaden, 2005). Another factor behind success of the industry is the coverage of government for the healthcare sector. In current time, government of Malaysia is covering about 55% of medical cost in the public healthcare. Most of the countries have worldwide health exposure where government takes responsibility complete medical expenditure. Malaysian government is expecting to implement universal health coverage by 2020 under the cooperation of legislature. With the experienced team of Home Pharmaceuticals, company would be able to cover private and public hospital to provide medical equipments and medicines on regular basis (Jansson, 2011). Value of the rational models Home Pharmaceuticals is using the strategies of innovations and proactive with the objective of expanding itself in all over the world. The company is developing by the research and development process in the new and innovative products including health food supplements and bio-medical products. For the strategic planning, there are rational models and strategies used by Home Pharmaceuticals. Home Pharmaceuticals is using Porter generic strategies in order to deal with the above identified issues. To deal with competition in the pharmaceutical industry, Home Pharmaceuticals has used various strategic models. Factors in Porter Generic strategies are as follows: Cost leadership strategy- By this strategy, Home Pharmaceuticals is able to be low cost producer of the high quality drugs in the pharmaceutical industry. The basic objective of using this model is to achieve market by keeping the prices of the products low as compared to the competitors. Another way of using this strategy is to sell the products at average prices to gain high level of profit (Freeman, 2010). Differentiation Strategy- This strategy will work for Home Pharmaceuticals with the phenomena of providing different products to the customers along with the unique features. Because of the unique features in the medicines and drugs, Home Pharmaceuticals will charge premium prices with the consumers so that the customers feel that the products provided by Home Pharmaceuticals is better as compared to other pharmaceutical companies. By this method, Home Pharmaceuticals can cover extra costs included in the manufacturing process of the products based on the unique features. Focus strategy- With this strategy, the objective of generic model is to focus on the small fraction of the large target market. Home Pharmaceuticals will be doing so in order provide innovative healthcare products to the customers. This strategy will be adopted by the company to gain high level of loyalty of the customers and to deal with the threat of substitute products in the market. By this strategy, the success can be achieved by making products with the high level of development and qualities. Home Pharmaceuticals is having strong position in the pharmaceutical market of Malaysia as the company is providing services to the customers for many years. Based on the above identified issues in PESTEL and five forces analysis in the Malaysian healthcare market, it is crucial for the company to adopt generic model and strategies to stay competitive in the market. References AHK, (2012), The Healthcare Sector in Malaysia, accessed on 17th December 2017 from https://www.malaysia.ahk.de/fileadmin/ahk_malaysia/Market_reports_2012/Market_Watch_2012_-_Healthcare.pdf Dess, G., Lumpkin, G., (2009), Strategic Management: Creating Competitive Advantages, (6th), London: McGraw-Hill Education Drummond, G., Ensor, J. Ashford, R. (2012), Strategic Marketing: Planning and Control, (4th), London: Palgrave Macmillan Freeman, R. E., (2010), Strategic management: A stakeholder approach, Cambridge University Press Healy, J., (2011), Improving health care safety and quality: reluctant regulators, (3rd), England: Ashgate Publishing Hoskisson, R. (2009), Business strategy: theory and cases, (6th), UK: John Murray Jansson, H., (2011), International Business Strategy in Emerging Country Markets, (5th), London: Routledge. Keller, K. L., Parameswaran, M. G., Jacob, I. (2011), Strategic brand management: Building, measuring, and managing brand equity, IND: Pearson Education Luffman, G. Kenny, B., (2009), Strategic Management: An Analytical Introduction. (6th), Oxford: Blackwell Publishing. Onn, L. P., (2015), What Lies Ahead for Malaysian Healthcare, accessed on 17th December 2017 from https://www.iseas.edu.sg/images/pdf/ISEAS_Economics_Working_Paper_2015-04-01.pdf Proudlove, C. N. Boaden, R., (2005), Using operational information and information systems to improve in-patient flow in hospitals: Journal of Health Organization and Management, 19(6), pp.466 477 Sarwar, A., (2013), Medical Tourism in Malaysia: Prospect and Challenges: Iran Journal Public Health, 42(8) Wheelen, T. L., Hunger, J. D., (2011), Concepts in strategic management and business policy, IND: Pearson Educatio