Sample Management Article Review Paper on Biocon India: Case Study Assessment

Case Study Assessment

Section 1: Biocon India Mission and Vision Statements

Company vision and mission statements provide a blue print for the company’s objectives as well as for strategic planning. In order to have clear cut objectives, Biocon India works with the vision of providing innovative biopharmaceuticals to patients, partners and healthcare systems across the globe at affordable costs. The mission for the company on the other hand is to be distinguished globally in the provision of biotechnological integration (Biocon 2016). The statement of the company vision and mission can guide Biocon to put in place strategies for sustainable competitiveness. At Biocon, one of the strategies currently under application is enhancement of research practice. This enables the company to realize higher competitiveness through constant innovation. Moreover, Ellentuck (2011) reports that innovation helps to realize customer needs hence achieving greater competitiveness. The company’s mission enables it to develop exceptionality in services as well as in products and to provide first rate capabilities in partnership management, human resources management and business research.

Competitive advantage can be achieved through the specific strategies used by the company. Improved manufacturing strategies result in the production of unique products which satisfy customer needs. In addition to this, better control of product qualities as is achieved through innovative practices enables the company to ensure that the product attractiveness is maintained due to the resulting high product qualities. The company also manufactures unique and irreplaceable products because they conduct disease specific research. This has not only placed the company on a high pedestal across the globe but has led to the development of positive perceptions by the patient users and other medical practitioners. Because of this, Biocon still maintains a positive image in the healthcare sector. Moreover, the ability to focus their resources on specific diseases has enabled Biocon to be recognized in terms of efficiency as well as identified with inclusion of informed and efficient scientists.

Biocon India has put in place conditioned practices aimed towards the achievement of the company vision. For instance, establishment of effective fermentation platforms and building technologies that are strong enough, using leveraged technologies to enhance differentiation of products, creation of long term value through innovation and quality assurance and the application of a charted pathway to produce proprietary products are all ways through which the company strives to accomplish its vision (Biocon 2004). Through technological and fermentation enhancement, the company can gain increased competitive edge as it carries out manufacturing practices using methods that cannot be sustained by competitors. The company has therefore become the biopharmaceutical manufacturer of preference among global pharmaceutical companies which seek alliances and partnerships with others. On the other hand, differentiation of products allows the company to foster a strong product line which helps to address flow sequence in generic manufacturing and further increases capacity to access proprietary molecules.

Innovation, through charted pathways in collaboration with integrated production model is also used by Biocon in order to accomplish the mission and vision statements in the organization. Each of these strategies performs a specific purpose in the achievement of the company’s objectives. For instance, the use of production integration techniques enables the company to conduct collaboration in manufacturing and thus address the production goals of specific diseases. Integrated production model also enables the company to enhance speed and effectiveness in production. The capacities of Biocon are higher than those of other pharmaceutical companies which make it difficult for other companies to produce at the same rate as Biocon. It can therefore be argued that Biocon Company satisfactorily applies differentiation to achieve competitive advantage. If this is maintained, the company is bound to reap benefits in its mission and vision statements. A strong competitive advantage will be inevitable for the company as it steers its short term and long term aims to achievement.

Question 2: Pharmaceutical industry – Five forces analysis

            With more than $1.3 trillion in turnover as at 2008, the pharmaceutical is considered to be one of the fastest growing industries in the globe today. Some of the products that are most demanded for result in profits as high as $ 1 billion annually. The invention of each new drug comes with various challenges, least of which is the need for the Food and Drug Administration approval. As such, pharmaceutical companies have to engage in in-depth research and development practices to ensure that their inventions are fool proof and in accordance with the specifications provided by the FDA. Despite the intensive input into research and development, individual companies still find it difficult to fully analyze and comprehend the prospects for new drug development and the potential that can be generated by the already existing drugs. This can be attributed to the unpredictable nature of sickness trends. Apart from other market analysis tools, the pharmaceutical industry players such as Biocon can use Porter’s five forces analysis to understand the dynamics of the pharmaceutical industry.

Porter provides a description of key forces that influence any industry operations. These forces include threats of substitutes, new entrants, the supplier power, bargaining power of buyers and competitive forces. One of the forces as given by Porter (2008) is the power of suppliers. According to Porter, the power possessed by suppliers affects industry operations immensely in that suppliers determine the prices of raw materials, production costs and subsequently the cost of final products. As such, an industry with monopolistic suppliers tends to have higher power. In the pharmaceutical industry, suppliers provide products such as raw materials and also offer various services and labor for the companies involved. Supplier power can also be raised when they operate in low or no substitute markets. This is unlike the pharmaceutical industry where raw materials originate from commodity products that are readily accessible from chemical industries (Whiteside 2016). The raw materials for the pharmaceutical industry can thus be considered to have several substitutes since each supplier also provides many raw materials hence fostering the application of economy of scale. The same lack of power is also present among the buyers in the pharmaceutical industry.

In the pharmaceutical industry, the conditions are also contrary to those that foster buyer power. In most other industries where the buyer’s power is reduced, there is the potential for using various methods such as loyalty programs to ensure the customers come. In the pharmaceutical industry, demand for products is determined by sickness. The buyers therefore have no bargaining power as their lives depend on the products. While this may indicate the possibility of making great profits through the sector, manufacturers in the pharmaceutical industry are prohibited from unethically hiking product prices beyond the limits provided for. Prescribing firms and other providers of healthcare however hold a different position in terms of power as they can engage in bargains across the industry. With the present of insurance companies which indicate their willingness to pay for products, the sellers and prescribers have no alternative but to comply with the demands of insurance companies (Whiteside 2016). The limits set by insurance companies act as the limits for price setting in the pharmaceutical industry. The industry thus controls the product prices inevitably through collaboration among different stakeholders. The patient in this case as the buyer, may not have strong bargaining powers but is protected by ethical considerations as well as limitations placed by other players.

Porter (2008) describes the force of new entrants into any market to be one of the factors that contribute to price variations in any market. Profitability in a business attracts more investors to the business and has the potential to influence the possibility of success in the business. According to a study conducted by Rachapila and Jansirisak (2013), the presence of market barriers can prevent potential entrants from joining the markets. Government regulations offer the greatest challenges to market entry in the pharmaceutical industry. Compliance with regulations provided by the Food and Drug administration can sometimes be a challenge to new companies intending to begin with the production of new products. The FDA scrutinizes potential entrants in consideration of their motivation to market entry and their capacity to produce genuine pharmaceuticals. High profitability in the pharmaceutical industry has led to the attraction of many potential entrants, who come into the market as small scale producing companies. As such, they do not pose significant threat to the bigger and already operational companies such as Biocon. Entrants are also expected to acquire patents for their drug ideas before manufacturing and placing them in the market for sale (Whiteside 2016).

The availability of substitutes also plays an essential role in the determination of market positions in the pharmaceutical industry. In markets where substitutes are available, the power of sellers is greatly reduced while the power of buyers is increased. Through production of generic products and easy substitution, the pharmaceutical industry companies are influenced. The increase in generic products which is prevalent in the pharmaceutical industry increases competitions due to price fluctuations. This explains why patents are a prerequisite for those intending to enter the pharmaceutical industry. Major health conditions with specific drugs lead to realization of bigger profits prior to the production of alternative low quality products. Maintaining patents is crucial in this regard since loss of patent can give way to manufacturers of generics who gain from their substandard products while selling at lower prices than the original more authentic products. Competition also poses a threat to the players in the pharmaceutical industry.

According to Whiteside (2016), the pharmaceutical industry is dependent on great technology use and innovativeness in production. Competition in the industry extends beyond that which originates from the new entrants into the market. Due to the strong dependence of innovation, companies in the pharmaceutical industry also compete for high level workers and efficient researchers who can add value to the companies. There is also need for those workers who can uphold strong ethical principles by practices such as signing non- disclosure agreements. This is crucial since manufacture of second generation products depends on the availability of information from the first rate product manufacturers. Each drug added to the industry has to be analyzed in terms of industry information to avoid substitute production. Due to the prevalence of information need, the pharmaceutical industry is also characterized with high rates of acquisitions and mergers which help smaller companies to beat competition.

When analyzing the pharmaceutical industry, it is clear that there is high attractiveness due to low threats of entrants, and low power of suppliers and buyers. However, companies that operate within that industry such as Biocon have to put in extra work to ensure that they are not overcome through competitiveness and the threat of substitutes. Some of the practices that reduce the impacts of these factors include focus on maintenance of patents and upholding of ethical operations within the manufacturing companies. Failure to adhere to such practices can result in potential reduction in competitive advantage due to the prevalence of generic products. The companies also have to put in place strong recruitment requirements to ensure that only the best researchers and lead employees are brought on board as only these can foster innovation and effective use of technology, both of which are crucial for sustainable operations in the pharmaceutical industry.

Question 3: Resource based analysis of Biocon

The resource based analysis recommended by Kozlenkova et al (2014) helps to understand how an organization can take advantage of its key competencies and minimize its key limitations in order to improve its competitive advantage in the market within which it operates. This model of analysis considered the value, rarity, product inimitability and non- substitutability of products in an organization (VRIN). Barney (1991) asserts that for a firm to be considered as having resources, those resources must be capable of raising the firm’s competitive advantage and to also reduce the firm’s weaknesses. For Biocon, the product value can help the company to realize greater competitive advantage due to the firm’s resource input into maintaining the product values. For instance, through the use of technology and innovation in the operations of the company, it has been able to achieve greater capacity and effectiveness above those of the competitors.

Technologies such as production integration have helped the company to reduce its production costs through economies of scale and higher efficiency and subsequently to expand the profit margins associated with the company. One way through which Biocon has managed to do this successfully is by using the production integration model which raises profit margins by reducing production costs. At the same time, this model results in the production of higher quality goods which are attractive to the customers. Apart from this, the company has managed to use differentiation as a value addition strategy for incremental competitive advantage. The input that Biocon places on the production process thus relies on innovation and technology and is carried out with the objective of leading in the pharmaceuticals market. The products can then be provided in the market at favorable costs to attract more customers (Biocon 2004). This has the potential of increasing company shares immensely since the pharmaceuticals industry is characterized by great preference for products that are first movers into the market and which are innovatively created.

Apart from product values, Biocon is also determined to produce unique products that are inimitable in the industry. Previously, Biocon employed a growth model which relied on product differentiation as well as on production specialization (Kalegaonkar et al 2008). In the present day however, the growth model that previously seemed perfect has become obsolete and hence is no longer sustainable. Biocon has to chase for inimitability through the use of dynamic market growth models which go together with innovation. Moreover, inimitability is also presently pursued by Biocon through disease specific research and specialization in conditions. To achieve this, manufacturing integration is used by the company to enhance the competitive edge possessed by the company. By sustainable competitive advantage, it is inevitable that the company will continue to grow in the pharmaceutical industry. Reforms in the healthcare sector also require sustainable inimitability which can only be achieved by applying dynamic processes in manufacturing. Product differentiation thus helps Biocon to achieve product inimitability by dynamic patent protection practices and product differentiation.

Business challenges prevalent in the pharmaceutical industry call for the application of non-substitution capacities by Biocon. Makadok (2001) claims that the inability of a company’s products to be substituted easily; prevents others from producing similar products hence protecting the original manufacturers from unwarranted competition. Through collaboration among key stakeholders, scientists and leading employees (Kalegaonkar et al 2008), Biocon can recognize loop holes in manufacturing practices and thus address them effectively. The company can therefore develop their products at lower costs. Furthermore, Biocon’s capacity for research and development enables the company to foster creativity and hence produce higher quality products that are not easily substituted. Through focusing on serious conditions and diseases that depend on intensive research and which are also cost intensive, the company ensures that its products are difficult to substitute especially by smaller second generation companies that can only afford low production costs. Although technological advancement has made it possible for product substitution to be achieved, Biocon has realized that this can be prevented through technological efficiency and through collaboration with others. Practices such as this not only allow the company to grow their work force but also to learn from other companies in areas that they may not be self sufficient.

Question 4: Recommendations for Biocon Group

The conducted study indicates that Biocon group has some essential characteristics that can ensure its growth and maintenance of competitive advantage. However, the company may increase its competitive advantage even further through implementation of various recommendations that are advanced henceforth. First, the company should be able to set long term and short term goals to go with the company mission and vision statements. Although the company has put down certain practices that would help in the achievement of the company vision and mission, England (1967) recommends organizational goal setting for the improvement of profitability and enhancement of operational effectiveness. The theory of goal setting also defines goals in terms of measures such as specificity, measurability, achievability, realistic capacity and timeliness. What is provided by Biocon (2016) and Biocon (2004) are statements of strategic actions. These actions need to be accompanied by definite timelines and achievement measures in order to be more realistic and to fine tune the individual objectives of the employees to the organizational objectives of the company. Outlining objectives can also help the company to evaluate performance based on the previously outlined goals. Departments in the company can compare their progress to the overall organizational expectations and thus determine whether their performance is satisfactory or not.

Increasing product inimitability can also help the company to advance its competitive advantage greatly. The present position of Biocon indicates progress towards achieving product inimitability. However, reliance on differentiation and application of production integration alone may not be the most sufficient model for accomplishing effective inimitability in a company. Cardeal and Antonio (2012) recommend other measures like reduction of product prices and increase in the limits of product differentiation for higher inimitability. Increased differentiation can be achieved through more intensive product marketing practices and provision of incentives for product promotion purposes. When additional services are accorded to the customers, they can set the company above its competition. With the integrated manufacturing model used at Biocon, the company can reduce the prices of its products without significantly affecting the profit margins in comparison to those of other companies. At the same time, this may result in higher profitability as more customers would be willing to purchase the company products in comparison to other companies’ products. Another recommendation that would help the company to increase product inimitability is to employ the services of specialized personnel. In an industry where there is intensive competition for lead researchers and employees, provision of attractive remuneration packages can help the company to lower employee turn-over and subsequently increase employee motivation at whatever they do.

Effective marketing can also help the company to attain higher competitive advantage. In the pharmaceutical industry, it is crucial to not only market the organizational products but to also promote the company itself. In this way, the company gets to create brand name and strong brand recognition among the customers. Strong brand recognition improves the chances of product purchase. Individual products cannot be marketed as brands as this will result in high costs of advertisement. However, if the company is marketed as a brand, all the products are marketed within the brand umbrella, which can increase the potential product sales. The highly competitive pharmaceutical market requires that companies needing greater recognition have to go the extra mile in making themselves known. Failure to this, a company may possibly apply differentiation, add value to the products and even ensure that their products are inimitable yet still remain unknown in the market and be overcome by competitors. The dynamic nature of the industry also indicates that one cannot simply stay low with the belief that other companies are smaller or yet unknown.

Biocon may also expand its distribution networks to gain access to the international markets. Hansson (2007) posits that a company can improve competitive advantage through product differentiation or through internationalization. Biocon has already performed effectively in differentiation. It would therefore be recommended for the company to internationalize in order to grow even further. This could be achieved through practices such as franchising and through export of operations. Either way, the company has a guarantee of profitability growth. From the analysis conducted, it can be concluded that Biocon has done a lot to enhance its competitive advantage yet still has great potential for future growth. The recommendations given should thus be considered by the company in case there are any intentions to continue growing. With Biocon’s prospects, the intention to grow is inevitable.

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