Strategic Management for the Case Study Of Biocon India Group

Question: Describe about the Strategic Management for the Case Study Of Biocon India Group. Answer: Introduction Strategic management avails a business organisation opportunity to form and achieve specific goals through logical and steps. Indian pharmaceutical sector has grown over past few years to become one of the best-organised sectors. The industry is responsible for the development and sustenance of global medicine industry. Biocon Limited is a major part of this industry, and in this study, strategic opportunities of this organisation in the above-mentioned market have been evaluated and development strategies have been suggested based on the evaluation. Biocon Limited is a biopharmaceutical company from India. This company has brought bio-revolution in India. The founder of this company was Kiran Mazumdar Shaw. This company evolved with time from the field of enzyme manufacturing to bio-pharmaceutical. Biocon limited was established in the year 1978. It was a joint venture of Biocon India with Ireland. In the year 1998, Biocon India took over Unilever's part of the company (Bioconfoundation.org, 2016). Biocon Limited produces generic active ingredients and sells them in developed European market. Current revenue of this company is 22.40 billion INR. Mission, vision and Objectives of Biocon Limited: Vision: The organisation's main vision is to increase global healthcare to innovate and affordable biopharmaceuticals for all. Mission: The organisation wants to create intellectual asset through the process of discovery, development and research. The organisation wants to provide internationally benchmarked quality products. Biocon wants to focus on customer relationship with outstanding products. Training, empowering and monitoring are some of the techniques that the company wants to make for developing human resource development within the organisation. Objectives: The main objective of this company is to decrease the vulnerability to health associated problems to malnourished and poor people. It intends to raise aware in making the significance of the preventive health. In assistance of communities for providing health, measures are another important mission of Biocon Limited. In India, providing sanitation and public health is another vital objective of this organisation. The organisation wants in initiating education and screening for infectious diseases for preventing the diseases. In order to optimise the management of diseases, the organisation has been trying to manifest significant measures. Biocon Limited believes in the expansion of repertoire of the social protection, such as Arogya Raksha Yojana, Health micro-insurance for the most unprivileged section. Resources and Core-Capabilities of company: Resources and capabilities can be treated as the competitive advantage of the company. An organisation can have physical resources, legal resources, informational resources, relational resources and human resources. Biocon Limited has a well-managed human resource team. Current revenue of this company is 22.40 billion INR. Net income of the company at present is 3.61 billion INR (Bioconfoundation.org, 2016). This company is present in stock market. The organisation has been securing well growth with sustainable financial performance. Capabilities of the company depend on product management, pricing management, channel management and customer relation management. This company has been working in the field since 1978 with good reputation. Biocon Limited tries to improve the unmet needs of the patients. This company is the largest company in insulin making. This organisation is fully integrated company in biopharmaceutical focusing to reduce the costs in therapy. It is one of the leading companies in oncology department. This organisation has leading scientists for developing the affordable and efficacious products for all. They are working on development of the new solution in small molecules. This organisation engages scientists for technical and knowledge creation. Environmental Analysis- Pros and Cons SWOT The Indian pharmaceutical market is considered almost US $10.76 billion (Berman and Evans, 2013, p.1). The annual growth is almost 9.9% and is fast developing and creating new positions in the field of medicine through research and innovation. Strength Weakness   Cheap labour in Indian labour market   Comparatively less production cost   Availability skilled labour   Patients are treatment naive   Growing GDP, which helps common people spend more on medicine   Proper infrastructure underdeveloped   Unable to purchase expensive equipment   Separate education and research work Opportunities Threats   Great exposure to global market   Tax reduction by government   The success of new ventures   Demand in global sphere increasing   Skilled people moving out of country   Highly competitive market with new investments   The success of subsidiary unit than parent unit   Inflation of wage   Regulatory acts of government   Foreign groups are introduced in Indian market Table 1: SWOT Analysis (Source: Jayakumar, 2010, p.12) The cost of production is low and hence gets enough boosts to enhance its growth. The GDP is increasing giving more liquid money in hands of common people (Grundy et al. 2011, p.214). They are able to invest in the healthcare sector and to indirectly help the company. People are becoming more aware of their physical illness and they are heading towards treatment. New improved techniques are required to compete with the quality of products of the international market (Kor and Mesko, 2013, p.233). The equipment and machinery that Biocon India requires are quite costly and they are unable to avail all machinery (for further details refer to appendix 1). PESTLE The success of a company is very much dependent on internal and external macro and microenvironments. Both the internal and the external factors should be taken into consideration when the estimation of profit is done on the part of the management of the company. Political   Strategies of the government concerning the safety of the product made by the organisation influences its operations in a considerable manner   The internationalisation of the operations of the business organisation would be hugely influenced by the foreign policies of the government and the international relations of the Indian government with that of the target country   Indian Patent Act restricts the business organisation to secure the rights of using their innovation in term of manufacturing of the medicines which restricts the organisations capability of generating competitive advantage via research and development activities Economic   Value of money changes, which reduced the value of the seats of the company   Levy of taxes assigned by government increases the expenses of the pharmaceutical company Social   A major part of the target market believe more in homoeopathic than allopathic treatment, which restricts the business prospect of the company   Not all have the capability to buy the same amount of medicine. Technological   India is not technologically highly developed   Huge cost might be incurred in importing the machinery Legal   Drug Price Control Order 1970 has taken over the price making decision on the medicines Environmental   Regulations on noise pollution have been established   Regulations on environmental pollution have been established   Regulations on waste disposal have been introduced. Table 2: PESTLE for the external environment of Biocon India Group (Source: Lavie et al. 2012, p.1479) The Indian Patent Act, which has been introduced by the Indian government, has created a great problem (Grace, 2014, p.55) (refer to appendix 2). As opined by Casadesus-Masanell and Zhu (2013, p.466), technological advancement should be taken into consideration as it is one of the most crucial factors, which help in development of this sector. The legal procedure of the land, has taken control over the price making decision on the medicine produced by the company. The Drug Price Control Order 1970, has taken control on the pricing capability of the company. According to the law, the government has set a price for the medicines and the companies cannot cross the limit. This has created a negative impact as they have to control the price by cutting the coast in the other sections of the functioning of the organisation. Environment has been greatly affected by the industries. Hence, there are different regulations laid down by government so that the environment can be protected. The company Biocon has to limit its production and restrict its waste products. For this purpose, they had to take certain precautions like recycling the waste products and filtering the air. Competitive Life Cycle Analysis: There are four stages in the life cycle of the product. At first, the product is introduced in the market. Then the growth of the product takes place (Darroch, 2014, p.44). Then the growth level transform to the maturity level (Chen et al. 2016, p.2145). After the maturity level comes the decline stage. When at first, Biocon introduced their enzymes in the market, it was well accepted by the population and revenues started to roll in. Slowly, the enzymes were recognised in the market and it led to the popularity of the enzyme. With the popularity of the enzymes, the product reached its maximum point where it was earning huge profit. This profit led to the formation of Syngene another organisation under Biocon. Over the years, it has been seen that the popularity of enzymes fell from heights and paved for the other innovative products. Competitor analysis With the help of the competitor analysis, Biocon has been able to identify the marketing strategy with which it would evaluate the uniqueness of the product and attract the market where they want to enter or increase their sales. Currently Biocon is facing competition from companies like Alkem Lab, Ajanta Pharma, Ranbaxy Labs and many others from the size of their market and their competition. There are other small companies like Surya pharma and Ortin Labs that pose threat to Biocon. Though they are small in size, yet they are innovative in their products, they are slowly capturing the market. Market attractiveness evaluation Market insight observes that Contract Research Organisation in India has various challenges as well as it is an emerging market in India. The market of CRO did not observe boom as this slow growth in this sector took the business in present time to the emerging markets, like Indonesia and China (Cheng et al. 2014, p.22). The market values cannot be denied for the large population, attractive investment and cost-effective market. Five force analysis In recent time, the business environment has gone to extremely competitive. Each market has perfect competition. In perfect competition, no company can be price-taker (Henisz et al. 2014, p.1728). The companies are trying to create competitive advantage. Porters Five Forces model analyses the competitive advantages of a market. Contract research organisations are the pharmaceutical services providers that generally receive outsourcing from the large pharmaceutical as well as biotechs to conduct clinical trials and some of the other related services. Industry competition: In generic pharmaceuticals, it is a highly competitive market. It is important to innovate every moment to be in the field. Manty overseas companies have been doing great works in generic pharmaceuticals (Dezso and Ross, 2012, p.1078). At first, the drugs need to test and then, it can be produced in bulk. In order to be in the market, the price of the products needs to be competitive. Clinical research in India is to begin to take off and it could flourish in next few years. Figure 1: Porters Five Forces (Source: Grundy, 2011, p.2014) The threat of new entrants: For an entrepreneur, biopharmaceutical can be an option. Capital requirement of this industry is low. It is easy to create a network for distribution is easy. The government has put hindrance in the entry of this market. Having new patent is not easy (Ronda Pupo et al. 2012, p.162). The market for the generics is potential and huge. The pharmaceutical environment is dynamic. Development and new drugs play a significant role. Pharmaceuticals companies can take to direct to consumers approach to selling their products. The threat of substitutes: When the industry thrives, the demand for the specific drugs goes high. Pharmaceuticals industry has bright future, the threat of subsidiaries and biotechnology are high for the advancement of technology and researchers. Competitiveness is high and threats too (Peteraf et al. 2013, p.1389). The presence of strong multinational competitors in the market and the government's restrictions on the patent concerning the edible goods that require chemical for manufacture has increased the threat of substitute product in the market (Fjeldstad et al. 2012, p.735)(Refer to appendix 3). Identification of key success factors Value chain analysis Major factors in the value chain analysis are presented in the following figure. Figure 2: Value Chain analysis (Source: Bowersox et al. 2012, p.55) The activities of the business organisations concerning all the above-mentioned aspects determine the factors that might lead to success for the organisation. For example, the operational factors such as quality of the product and the expectations of the market determine if the company would be able to generate preference among the consumers concerning the products of the organisation. The research and development activities that Biocon India Group undertakes, distinct it from the other organisations that compete to acquire the preferences of consumers in the same market. (For further details, refer to appendix 4). In the following section the manner in which Biocon India Group generates competitive advantage for itself concerning, the above-mentioned factors have been discussed: Value analysis The voluminous target molecular reagents and customised molecules of Syngene paved the way for the early development and creation of the skills and infrastructural discovery of molecules (Kalegaonkar et al. 2012, p.65). The creation and initiation of Clingene, resulted in the loss of power and control by Biocon India Group, along with the entrapment of the central organisational culture. In the process of this creation, collaborative attempts were made to take into consideration safe and lower value business services for Clinigene, until it is capable of self-testing of the molecules and running free clinical (Walls et al. 2012, p.913). The distraction and deviation exposed by Clinigene regarding its consideration of the firm, that is, Biocon India Group, acted as a loss for the company, compelling the management to initiate the process of creation and development of the business all over again (Neffke and Henning, 2013, p.300). Planning and evaluation In order to achieve an overall growth, Biocon India Group certainly needs to expand its market share. In order to alleviate this situation, a simple yet expensive approach could be the initiation of a prospective Clinical Research Organisation (CRO). This will result in the escalation of the expertise and maintenance of stability within the relationship between the company its clients within the organisational culture (Easterbrook et al. 2011, p.869). The assistance and assurance from the Quality Assurance Company, regarding the quality of the Biocon products, encouraged and motivated the company to start their business a fresh, in spite of the deviation from Clingene. This is owing to the sharing of corporate values and trust among the employees and the other staffs (Kapferer, 2012, p.89). The high potential growth of the CRO might prove to be beneficial for Biocon, providing the scope and opportunity to Clingene regarding the careful and conscious reading and positioning within the CRO market. Strategic choice development Ansoff Matrix Ansoff matrix provides a business attempts for tracking the dependency of new and existing products in the market. In case of the existing market, the organisation needs to analyse the market penetration and product development. In new market, the organisation needs to analyse, market development and diversification (Darroch, 2014, p.35). Market penetration Market development The company wants to enhance the market share of the present products and intends to enter the markets of neighbouring countries (Gulati et al. 2012, p.576). While the first can be achieved through personal selling for the second the organisation needs to undertake outsourcing or franchising. The company needs to increase the existing customers. Biocon Limited tries to innovate in emerging market of biotechnology, research service and molecules. Restructuring can be helpful for overshadowing the competitors. The company needs to develop the geographical market through entering new markets. Pricing policies need to be adjusted as per the standards of the target market. Distribution channels such as online sites can provide assistance. The company has taken global manufacturing with cost effective way. Biocon Limited started to expand in Malaysia. Product Development Diversification The company needs to develop and research about the innovation of products with detailed analysis. They need to be the first in the market. Biocon Limited tries to innovate in insulin and molecules. They are working on oncology and next generation biotechnology. Research services, biosimilars and novel molecules are some of the products they are currently working on. It is related to growth of market to the new products. The company needs to analyse the risk strategy (Hill and Jones, 2013, p.45). The company first tries to grow the products in lab then take it to market and Biocon Limited is no exception to this. The company takes the strategy of risk assessment and able to procure reward for that. Table 3: Application of Ansoff Matrix (Source: Created by author) Deliberate Strategy: Plan for market expansion The management of Biocon India Groups can organise for a meeting to develop and create appropriate strategies for the expansion of the market share through the product and services (Refer to appendix 5). Specific The organisation might expand its sphere further through entering the neighbouring markets for which the organisation would need to outsource some of its activities in the target market Yet the policies of manufacturing and research and development would be same as the home country for ensuring that the values of the company remain the same in the target market as well Measurable This might be measured through the performance of the company in the international market Achievable The organisation has enough financial base to achieve this target Realistic Due to the current competition level of the industry and the existence of MNCs in the market the organisation has faced the need for increasing its sphere or operation hence it needs to undertake the internationalisation. This would increase the appeal of the organisation in the home market as well Time base This needs the time span of 2 years Table 3: SMART Analysis (Source: Created by Author) Emergent strategy: Hiring of qualified workers for international market expansion In order to hire qualified workers for the market expansion, the management authorities of Biocon can organise meetings regarding the recruitment of qualified workers (Ward and Peppard, 2016, p.65). Consequently, an effective organisational culture will be established where there is an existence of coordination, cooperation, stability and trust among the employees and the managerial staffs. Specific Hiring the skilled employees for the research and development process is essential for ensuring that the organisational current or future ventures are completed in a successful manner Measurable Success of this particular strategy might be evaluated based on the increased productivity of the organisation and its improved service quality For this, the organisation might use Achievable As the organisation operates in a market that has ample number of skilled employees that agree to serve in considerably low wages hence the recommendation is achievable Realistic As the strategy does not emphasise on any large expense of the company yet has the potential to improve the service and production level hence the strategy can be considered realistic Time base This strategy might be implemented in the time span of 3 months Table 4: SMART Analysis (Source: Created by Author) Choice of best-fit strategy and implementation Some strategies will emerge upon the implementation of the proposed strategies by the employees. In the process of this implementation, the creativity and productivity of the employees will be enhanced. They will gain much experience from the exposure of their skills, expertise and knowledge on a regular basis. As a consideration of the internal and the external factors, strategies for the expansion of Biocon market will enhance the reflex capability of the employees. This will provide the scope for the undertaking of actions according to the emergence of the business situations (Zhou and Li, 2012, p.1090). Evaluation of the strategic options presented above has enabled the researcher to identify that the internationalisation of the company might be essential yet it needs long-term stratification. For the immediate improvement of the organisational position in the market, the organisation needs to acquire employees that are more skilled and improve its product and service quality (Zhu and Iansiti, 2012, p.88). Conclusion After concluding the assignment, it can be clearly stated that the management of Biocon should take into consideration the Indian market. With the help of the SWOT analysis and the Pest analysis, the potential disadvantages and advantages of operating in the Indian market can be analysed. To judge the competitive advantage of the market, PORTER's theory has been used. There is huge competition in the international and national market. The recommendation is provided so that the company can improve their present condition and achieve their targets with huge success. References Books Berman, B.R. and Evans, J.R., (2013). Retail management: a strategic approach. United Kingdom:Pearson Higher Ed Darroch, J., (2014). Ansoffs Growth MatrixIn Detail. In Why Marketing to Women Doesnt Work. UK: Palgrave Macmillan Hill, C.W. and Jones, G.R., (2013). Strategic management theory. South-Western/Cengage Learning Kapferer, J.N., (2012). 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