CIPLA & Pharma Detail Analysis
CIPLA & Pharma Detail Analysis
CIPLA & Pharma Detail Analysis
BUSINESS STRATEGY-I
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TABLE OF CONTENTS
2. CIPLA LIMITED 3
3. COMPETITOR’S ANALYSIS 4
4. PESTLE ANALYSIS 5
6. CIPLA’s SWOT 9
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7. PRODUCTS 0
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8. BCG MATRIX 1
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9. STARTEGIES PROPOSED 2
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10. REFERENCES 3
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1. INTRODUCTION TO INDIAN PHARMA INDUSTRY
Indian Pharmaceutical Industry today is in the front rank of India’s science-based industries with wide
ranging capabilities in the complex field of drug manufacture and technology. A highly organized sector,
the Indian Pharma Industry is estimated to be worth $ 4.5 billion, growing at about 8 to 9 percent
annually. It ranks very high in the third world, in terms of technology, quality and range of medicines
manufactured. From simple headache pills to sophisticated antibiotics and complex cardiac compounds,
almost every type of medicine is now made indigenously.
Accounting for two percent of the world's pharmaceutical market, the Indian pharmaceutical sector has
an estimated market value of about US $8 billion. It's at 4th rank in terms of total pharmaceutical
production and 13th in terms of value. It is growing at an average rate of 7.2 % and is expected to grow
to US $ 14 billion by 2015.
The new patent regime has led many multinational pharmaceutical companies to look at India as an
attractive destination not only for R&D but also for contract manufacturing, conduct of clinical trials
and generic drug research. The Indian companies are using the revenue generated from generic drug
sales to promote drug discovery.
As there is a cheap availability of high skilled knowledgeable workers and with the increasing help
provided from the government for the development of the pharmaceutical industry, the companies have
started investing heavily on R&D. Leading players such as Cipla and Ranbaxy will remain at forefront of
research for new formulations and molecules. Here are certain point about the industry:
• Capital Investment in Technology: Owing to the availability of advanced technology at low costs,
the companies can produce drugs at lower costs.
• Cost Effective: The filing cost of ANDAS and DMFs is comparatively low for the Indian companies.
• Contract Research & Contract Manufacturing: There is a good scope for contract research and
contract manufacturing.
• Generic Drugs: In the last few years, the generic drug-manufacturing segment has received huge
investments, in the process making it more competitive and efficient
2. CIPLA LIMITED
Cipla Limited is a prominent Indian pharmaceutical company, which is best-known in the world for
manufacturing low-cost anti-AIDS drugs for HIV-positive patients in developing countries. It was
founded by Khwaja Abdul Hamied as The Chemical, Industrial & Pharmaceutical Laboratories in 1935.
Cipla makes drugs to treat cardiovascular disease, arthritis, diabetes, weight control, depression and
many other health conditions, and its products are distributed in more than 180 countries worldwide i.e.
has a global presence. The Board of directors consists of Founder Dr. K.A. Hamied (1898-1972),
Chairman & Managing Director Dr. Y.K. Hamied, Joint Managing Director Mr. M.K. Hamied, Whole-
time Director Mr. S. Radhakrishnan and the Non-Executive Directors.
Cipla is the world's largest manufacturer of antiretroviral drugs (ARVs) to fight HIV/AIDS, as measured
by units produced and distributed (multinational brand-name drugs are much more expensive, so in
money terms Cipla medicines are probably somewhere down the list). Roughly 40 percent of HIV/AIDS
patients undergoing antiretroviral therapy worldwide take Cipla drugs.
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As of 2010 data,
• Cipla maintained its top position in the domestic market for with a market share of 5.38 per cent
— up 18 per cent over the year and ahead of Ranbaxy Laboratories and GlaxoSmithKline (GSK).
• The total domestic drug market is valued at Rs 40,051.74 crore, an increase of 17 per cent,
according to data from drug sales tracking agency, ORG-IMS. The agency tracks drug sales
among more than 500,000 traders in the country, through stockist data.
• Cipla’s domestic market share grew 18 per cent, due to its product basket of 924 products, which
is way ahead of Ranbaxy’s 565 and GSK’s 177 products.
• During the period, Cipla had sales of Rs 2,155.29 crore in the domestic market, ahead of
Ranbaxy’s Rs 1,968.24 crore and GSK’s Rs 1,743.15 crore.
• Cipla had overtaken Ranbaxy and GSK India to become the largest pharmaceutical company in
the domestic market.
• Cipla offers services like consulting, commissioning, engineering, project appraisal, quality
control, know-how transfer, support, and plant supply. Cipla is also considerably well-known for
its technological innovation and processes, and has been approved by regulatory bodies.
3. COMPETITOR’S ANALYSIS
To analyze and look at the various opportunities of growth for Cipla we need to look how close
competitors are to it, which will also help us to anticipate possible threats. For the competitor’s analysis,
we have chosen the 4 closest competitors of Cipla in the Indian Pharma sector. They are:
• Sun Pharmaceuticals
• Ranbaxy
• Market share
• Sales
• Profits
MARKET SHARE
• The percentage of an industry or market's total sales that is earned by a particular company over
a specified time period is known as market share. Market share is calculated by taking the
company's sales over the period and dividing it by the total sales of the industry over the same
period. The following graph shows us the market share of the 5 companies.
• Cipla has a market share of 5.40% which is second only to GlaxoSmithKline which has a market
share of 5.90%. But there relative positions keep on changing as there is very close competition in
the Pharma sector today. If we look at the competitors they are somewhere close to each other.
The major portion of 70.50% is either catered by other small player or by unorganized sector.
Through this we can clearly say that if Cipla try then can surely expand the market share.’
SALES
Sales are defined as the total amount of revenue collected from sale of goods and services. The
following table shows the sale pattern of the five competitive companies in the year (2008-09).
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SALES
S.NO. COMPANY PATTERN
1. Cipla 5295.33
2. GSK 1724.84
3. Dr.Reddy’s Lab 3999.5
4. Ranbaxy 4676.21
5. Sun Pharma 2833.65
As indicated in the table, CIPLA achieved the highest level of sales as compared to other competitive
companies included in the analysis. In spite of having less market share in comparison to Glaxo Smith
Kline, Cipla is having larger sale this can be probably because of those products whose sales would be
less but revenue generated because of it is more.
PROFIT
A financial benefit that is realized when the amount of revenue gained from a business activity exceeds
the expenses, costs and taxes needed to sustain the activity. The following table shows the profit after tax
of the five competitive companies in the year (2008-09).
1. Cipla 776.81
2. GSK 188.33
4. Ranbaxy -1044.8
Sun Pharmaceutical Company has managed to maximize its profits in the year 2008-09 and second rank
is held by CIPLA. The reason is that CIPLA has been following a pricing strategy considering consumers
and therefore charges a lesser price and on the other hand Sun Pharmaceutical would be charging high
prices. This can also be validated if we look at the sales and the profit of Cipla and Sun Pharmaceutical
despite of having fewer sales the profit contribution is more in case of Sun Pharmaceuticals.
4. PESTLE ANALYSIS
POLITICAL
Political Instability:
With DPCO (Drug Price Control Order) being implemented since 1995 for the purpose of
controlling price of drugs, the price of a drug is determined by the Govt. on the basis of
approved cost rather than actual cost.
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IPR (Intellectual Property Rights)- Pharmaceutical Sector worst hit
In the past the Indian manufacturers had exploited the law by doing reverse engineering and
manufacturing the drug using a different chemical composition and in the process saved money.
With IPR enforced in India in January 2005, only the inventor or licentiates are allowed to
manufacture a patented product.
• Surplus generated by efficient units is subsidized by putting them into price equalization
account of inefficient units.
• Charging cost of manufacturing to MRP rather than excise duty (as was earlier) has made
many life savings drugs unaffordable to poor.
IMPACT ON BUSINESS:
• Many companies have resorted to lobbying official bodies, which has promoted unfair and
unhealthy competition on the sector.
• Political pressure has pressurized companies on pricing and cut-backs
ECONOMIC
• With average per capita income of Rs. 12890, spending on healthcare is takes low priority.
Poor Infrastructure
Cost element
• Numerous kinds of taxes such as Excise Tax, Custom Duty, Service tax, License tax, etc add to
cost to the tune of 40-45%.
With only 5 million shops the reach of the sector is reduced and the cost of distribution hikes.
IMPACT ON BUSINESS:
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SOCIAL
• Household treatments handed down for generations are preferred for common ailments.
• Early marriage and early child bearing adversely affects the health of child and mother.
• Inability to eradicate diseases like polio, chicken-pox, measles etc due to ignorance towards
vaccination.
• Superstitious beliefs of considering ailments as the curse of god for the sins committed.
• Poor sanitation and water pollution is one of the major causes of death among children.
• Poverty leads to malnutrition which in turn leads to problems like malaria, TB, etc
Unhygienic habits
IMPACT ON BUSINESS:
TECNOLOGICAL
• Advancement in stem-cell research and Bio-technology has also added to the growth of
Pharma sector in India.
• Innovation with regard to newer drug delivery system has also led to Pharma growth in the country.
Advancement - a Bane
• With huge unemployment spread nation wide automation reduces the level of employment.
• As a result both Government and Labor unions complain against such establishments
IMPACT ON BUSINESS:
• New information and communication technology has led to development of new e-models.
ENVIROMENTAL
Conservation of environment
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Pharma sector companies need to see how their business and marketing plans are linked with
the environment issues.
Impact On Business:
With growing concern about environment, the need is to identify eco opportu nities in the market
LEGAL
Increased Regulation
With advancement in technology and evolution of internet legislative bound aries have
stretched with patients demanding more rig hts in their healthcare programs.
With IPR Act prevalent in the country since 2005, the restrictions and regulations have increased in
Pharma sector.
IMPACT ON BUSINESS:
Michael Porter’s 5 forces framework helps in identifying the sources of competition a nd the profit
potential in an industry or sector. The following table gives the five forces of an Indian pharmace utical
industry. The five forces have an important effect on ho w profitable the pharmaceutical industry will be:
Suppliers do affect the profitability of companies in the pharmaceutical industry, but because they
are an element of the market they affe ct everyone and are not a significant force. Many firms now
own their own manufacturing plants, so the ir profits are not influenced very much by sup pliers.
Threat of Substitutes
Competitive Rivalry
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• When buyers have a high bargaining power they are able to put pressure on firms to lower prices,
but buyer’s power for pharmaceutical firms, especially ones that have patented drugs, is relatively
low. This also goes along with the affects of substitutes, because buyers switching from expensive
brand names to generic brands are significantly lowering prices and profitability, but a firm with
a patent on its new drug is not affected by generic drugs.
• The threat of alternative medicine substitutes is also low and does not seem to affect profitability.
• Since the barriers to entry make it hard for new firms to enter the market, this force also does not
affect profitability.
• Industry rivalry is intense in this industry and has a large effect on profitability. Firms in the
pharmaceutical market need to be aware of all five forces in order to be profitable and keep a
competitive advantage
6. CIPLA’s SWOT
The SWOT analysis provides an internal and external picture of the situation to a company, so that it can
harness on its strengths to overcome its weakness in order to capitalize on the opportunities in the long
run while tackling the threats in an efficient manner.
utilizes its own R&D.
STRENGTH
OPPORTUNITY
• More than 75 years of existence has given
CIPLA a phenomenal experience in the
Pharmacy sector.
• With global competition increasing, global
tie-ups and mergers would bring about
• Huge product portfolio of over 200 brands.
greater level of efficiency.
• Excellent R&D expertise which are • Banking of Brand equity for diversification.
considered to be the best in the country.
THREAT