Strategic Management MGT8002 Assignment Help

Strategic Management MGT8002 Assignment Help

1.    Introduction

Strategic Management MGT8002 Assignment HelpModern Pharmaceutical industry is known as one of the big revenue generation and profitable  businesses in the world with an expected  annual growth of 7.5% between 2014 to 2019.In 2014 pharmaceutical income of the world has reached up to one trillion U.S dollars for the first time of the history. Majority of this income has mainly generated from ten  leading pharmaceutical companies located in North America, South America and Europe. (Global Pharmaceutical Industry – Statistics & Facts).They represent about 85% of the market share while United States remains as the leading market over 45% of the market share and GDP of 3%.(WHO 2015)
Asia Pacific region is becoming a major player in the market having China as largest GDP contributor. While Japan and Australia competing with China as second and third largest, Malaysia is struggling to increase the market share because of large young population of about 32.2% out of 63.4% of age group between 15 and 64.Accordinly there is less need for medication compared to countries with large aged population such as Australia and Japan.

There are four different pharmaceuticals product lines in Malaysia: prescription medicines, over the counter products(OTC), traditional medicines and food/health supplements .Home Pharmaceutical (HP) is concentrate about three strategic business units (SBUs) namely over the counter products, hearing devices and health food supplements unit.OTC products line continue to grow because it generates a lot of savings for the health care systems in many countries specially in developing countries. Research has found out that in 2015,OTC line of  business has generated about US$ seventy billion worldwide .(PharmExec.com)

There are some opportunities available in the Malaysian market with an expected growth of 13% p.a. Accordingly  HP should be able to take advantages of the situation being 6 major local companies in the industry. However it will not be easy for HP to stay competitive and enter in to export markets  because of the establishment of multinational pharmaceutical firms in the country. This has become one of the main reasons for capitalization need of US$70 million in 2016 alone in order to remain competitive.

2.    Industry Analysis-PESTEL Analysis

 PESTEL analysis helps to understand market growth or decline, and as such the position, potential and direction for a business (Miller; Vendome;McBrewster,2011) application of this analysis is as follows,

Political

1.      Government polices to encourage foreign investments.

2.      Low government expenditure on health care sector compared to developed countries

 

Economical

1.      Health care sector as one of ten Key National Economic Areas (NKEAs)

2.      Medical tourism has become another key factor

 

 

Technological

 

1.       Online opportunities and marketing

2.       Tax incentives for innovation

Legal

 

1.      Off-Take agreement scheme under EPP 3

2.      amendments to the  ASEAN China frame work agreement

3.      European Free Trade agreement

 

Social

1.      Growing elderly population

2.      Suitable environment to do business

3.      Eco system to grow clinical research

 

Environmental

 

1.      Corporate social responsibility

2.      Health conscious population

PESTEL Narratives

Political

Political environment of Malaysia likely to have favorable situation for the foreign investments by encouraging  the access of foreign product in local market. Malaysian Ministry of Health  has introduced  entry point projects, and international harmonization of the regulation under Drug Control Authority to promote multinational pharmaceutical companies by setting up licensing arrangements with local incorporated companies. Also government have recently introduced a procedure to inspect foreign manufacturing facilities compared with  regular inspection of local firms. Local doctors chemist chains and hospitals are starting to favor medicines coming from global multinational international firms. Accordingly it doesn’t seems that government is taking initiatives to impose barriers for the entry of imported generic drugs to local market. These factors will  certainly bring competition to HP.

On the other hand government does not  budget same level of expenditure on public health compared to developed countries in the Asia Pacific region such as Australia. In Malaysia 55% of health care facilities is funded by government and 45% have fund by the patient.60% to 70% of patients go to public hospitals. If the drug is not listed in the hospital patient does not get access the innovative drugs. (PharmExec.com)

Legal

Malaysian government has entered in to  several agreements with other countries in order to support and enhance trading activities of the country. Introduction of Off-Take agreement scheme under EPP 3 has created a lot opportunities to local pharmaceutical companies to export their products. (PharmExec.com)

Also amendments to the  ASEAN China frame work agreement has enhanced economic corporation and  free trade activities between Malaysia and China .This facilitates exports and imports of pharmaceutical products from and  in to China without any duty. Similarly new European Free Trade agreement should reduce or remove the barriers of exports and imports of pharmaceutical products between countries. Accordingly this will lead HP to look at exporting opportunities seriously.

Strategic Management MGT8002 Assignment Help

Economical

Pharmaceutical market in Malaysia is registering a  compound annual growth of 9.5% according to research and consulting firm global data (Cphl south East Asia).Malaysian government has identified health care sector as one of ten Key National Economic Areas (NKEAs) with the aim that health care sector would assist move forward Malaysia in to high income nation by 2020 (AIM2016).Medical tourism has become another key factor in Malaysian pharmaceutical and health care sector by increasing revenue  in the sector by 51%.Accordinly by 2020 healthcare NKEA intend to generate US$ 10.15 billion Gross National Income and create 180,000 new employments. (PharmExec.com)

Social

Malaysia healthcare market  has a huge potential for growth because of increasing elderly population in the country. Country is aiming an increase of aged population 65 and above at a rate of 7% in 2020.(Department of Statics 2013).Also according to world bank ranking country has ranked as 23th best country in the world to do business. Also Malaysia has ranked third largest recipient of foreign direct investment in the ASEAN nations. Malaysia government is considering an Entry Point Project (EPP 2) to support eco system by introducing 1000 clinical trials per year .

Environmental

Growing environment agenda in Malaysian business has become a key factor. There is also requirement for companies to comply with corporate social responsibility. Accordingly Pharmaceutical companies should work together with professional bodies and regulatory authorities to comply with those procedures in developing and marketing a new product  to the market. Also people in Malaysia have started to become health conscious and this has contributed to increase the demand for  OTC and food/health supplements which is a good sign of growth in HP’s business in future.

 Technological

Online opportunities are available for people in Malaysia for channeling doctors, ordering OTC and food supplements ,healthcare programmers to name a few. Also government is encouraging companies for bio technology, technology acquisition and new drug discoveries by introducing investment tax allowance incentives which HP can work with government to get benefit out of it easily because of their established name for research and  new product development .

3.    Industry Analysis-Porter’s Five Forces

Bargaining power of suppliers

High

·         High switching cost

·         High production cost of medicines and medical equipment

·         Ability to integrate forward

 Strategic Management MGT8002 Assignment Help

Competitive rivalry

High

·         There are about 234 players in the market

·         Expansion in the industry

·         Government incentives flexible investment and exchange policies.

 

Threat of substitution

High

·         Increase cost of medicine of MNEs

·         Cheap medicines imported from China and Europe

·         Physical herbal treatments

Threats of new entrants

Low

·         Low entry barriers

·         Government incentives

·         Constant growth

 

              Strategic Management MGT8002 Assignment Help

Bargaining power of customers

Low to medium

·         High prices of branded medicines

·         Easy to switch to substitutes

Porter’s Five Forces Narratives

According to Michael E Porter ,five forces analysis is a framework for analysis of industry structure and competitiveness of the companies. He identifies four other competitive forces apart from industry rival to analyse the competiveness which will support to achieve medium and long run profitability of a company .Accordingly five forces are; rivalry among existing competitors, bargaining power of  customers, bargaining power of  suppliers ,the treat of substitute, threat of new entrants.

The pharmaceutical industry in Malaysia is highly competitive because of  existence of many local and overseas pharmaceutical companies .There about 234 companies registered under Drug Control Authority in Malaysia as traditional and modern medicine firms. The lack of entry barriers  such as government incentives and tax savings ,liberal investment and exchange control policies quality of life, developed infrastructure, exemption from duty on raw materials, skilled workforce, vibrant business environment are inviting factors of foreign investors and low entry barriers in the industry (MIDA 2013)

This has caused  to import or manufacture cheap medicine in the country and increase in  the rivalry between companies. Further pharmaceutical industry has recorded a constant growth over the years and there is a high potential for industry expansion.

The threat of substitutes appear to be high because of increasing cost of medicine produced by multinational companies. This has led to higher demand of locally produced generic medicines which do not have high cost connected with  research and development and superior marketing such as packaging. Also amendments to the ASEAN China framework agreement and new European Free Trade Agreement has lead to import cheap medicine in to the country to replace some generic and OTC medicines. Also Malaysia is well-known for message and spa treatments. Spending money on physical herbal treatments will act as a substitute for food/health medicine produced in the country.

 Bargaining power of suppliers appears to be high because of high production  cost of medicine and high switching cost due to cost of technology and long term investment . Generally MNC are powerful and they have become the main suppliers of medical equipments and technology of producing medicines and medical equipment because they are the only one able to incorporate high cost of production in to their economic of scales.(Linda Ge, 2011)

On the other hand bargaining power of customers appear to be low for generic products due to high prices of branded medicine. However with the increase of substitute displaying in the market doctors ,chemist chains and hospital are starting to  favour global generic and  getting more powerful in bargaining. 

.    Industry Analysis -Key Success Factors (KSFs) 

Key Success FactorCurrent achievements’Future achievements
 

Growth in population and health care sector

 

 

·         1.2billion worth of Pharmaceutical market

 

·         585million worth of medical device market

 

·         Healthcare expense represent 4.75% in GDP

·         3.7billion worth of Pharmaceutical market by 2020

 

·         Medical device market will constitute 25% of health care market by 2020

 

·         Healthcare expense represent 10% in GDP by 2020

·          

 

Medical tourism

 

 

·         The sector has represented USD 200milion in 2016

 

·         Healthcare tourism market has increased by 63% in terms of patients in 2016

 

·         The sector will represent USD 530milion in 2016

 

·         Healthcare tourism market expect to increase by 80% in terms of patients by 2020

 

 

Government Coverage for health care

 

 

·         Government covers about 55% of public medical expenditure

 

·         Government is planning to implement universal healthcare coverage by 2020.

 

Skilled work force

 

 

 

 

 

·         Skilled workforce with low wage structure

 

·         Become a high income country by 2020.

 

Government Incentives

 

 

·         Tax incentives,

·         Duty exemptions on raw materials,

·         Liberal exchange and investment policies

·         Malaysia to become Pharmaceutical hub in Southeast Asia region by 2020.

Key Success Factors Narrative

 High birth rate,  low mortality rate  and increased life expectancy has caused growth in population and health care revenue in Malaysia. In 2015 recorded population in Malaysia was about 31million with a constant growth over last 5 years, which is expected to continue in future. Pharmaceutical market of Malaysia was estimated at 1.2billion in 2008 however this is projected to increase up to 3.7billion by 2020.Also medical device market was estimated at $585million in 2010 however this has estimated to constitute 25% of healthcare expenditure by 2020 while health care expenses represent 10% of GDP compared to 4.75% in 2014.(AIM 2016).Accordingly this growth will certainly create an opportunity for HP for innovation of new drugs and exportation.

Another key success factor in the industry is medical tourism. In 2016,healthcare tourism market has increased by 51% and 63% in terms of revenue and foreign patients

Strategic Management MGT8002 Assignment Help

respectively.(MHTC

Press release 2016).This growth has mainly supported by government policies towards  medical tourism and tax exemptions for hospitals. The sector has represented USD 200milion in 2016 and it is expected to increase up to USD 530miilion by 2020.Developed infrastructure, skilled medical practitioners and low cost structure on medical treatments have contributed to attract more overseas patients in the country. Growth in medical tourism creates an opportunity  for marketing HPs medicine and medical equipments to the market and build up export market among tourist patients.

The third key success factor in the industry is government coverage for health care .Currently Malaysian government cover about 55% of medical cost on public healthcare leaving 45% for the patient. However most of the OECD countries except Mexico and the USA have universal health care coverage where government take care of all the medical expenditure of nation. Universal cover assist nation to be healthy and happy .It improves public health that will indirectly support many development factors in the country. It also helps corporate to stay stable .Malaysian government expect to implement universal health coverage by 2020 which is under negotiation in parliament. (AIM 2016).Accordingly with the expertise and experience of sales team of HP ,company will be able to approach public and private hospital to distribute their medicine and medical equipment on regular basis.

Another key success factor of the pharmaceutical industry is availability of skilled workforce in the country. Malaysia fortunate to have English speaking highly educated competent workforce .Most of the medical clinics are operated by highly knowledgeable medical assistants rather than doctors. However due to low wage structure of the country Malaysia is losing a lot of skilled workers to highly paid countries like Australia, New Zealand, USA and Singapore. Government is now planning to adjust the wage level of the country to retain skilled workers. If HP is not satisfied with existing sales team this creates an opportunity for them to approach people from health sector with extensive experience and contact in the industry to join them to increase the sale.

lastly government incentives such as tax holidays ,liberal investment exchange policies for pharmaceutical industry is inviting many local and multinational companies to invest in the industry. Also Malaysia is located in the heart of Southeast Asia with a regional market over 636million people. Accordingly Malaysia is targeting to become pharmaceutical hub in the region by 2020.This situation creates a vast opportunity for HP to enter in to export market in the region.

.    Value of the rational models in contemporary Strategic Planning

 6.    References

AIM 2016,Malaysia Healthcare ,regulatory and reimbursement landscape report 99assignmenthelp.com.businesswire.com/news/home/20170118006154/en/Malaysia-Healthcare-Regulatory-Reimbursement-Landscape-Report-2016-2020

Frederic P Miller, Agnes F Vandome, John McBrewster,2011,Pest Analysis,

Cphl south East Asia- freeassignmenthelp.com/sea/visit/news-and-updates/malaysian-pharmaceutical-market-forecast-see-impressive-growth

Global Pharmaceutical Industry – Statistics & Facts-https://www.statista.com/topics/1764/global-pharmaceutical-industry/

World Health Organization Statics 2013-99assignmenthelp.com.who.int/gho/publications/world_health

PharmExe.com-99assignmenthelp.com.pharmexec.com/country-report-malaysia

Linda Ge 2011 Porters Five Forces-99assignmenthelp.com.docstoc.com/docs/26731619/Porters-Five-Forces-%E2%80%93-Healthcare-Industry-Industry-Overview-The

MIDA 2013,Guide on Pharmaceutical industry in Malaysia freeassignmenthelp.commida.gov.my/home/administrator/system_files/modules/photo/uploads/20140214143120_Pharmacuetical_2013.pdf

Malaysia Healthcare, Regulatory and Reimbursement: New market research published in 2014. freeassignmenthelp.com/app/document/2533510;jsessionid=blBsXP3ljf0g1EM1cZh3OFeT.undefine

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