sm finaltooba iqbal
TRANSCRIPT
INSTITUTE OF BUSINESS MANAGEMENT
Researching ‘Firm level Strategy and Competitiveness’ for Sanofi Aventis Pakistan 2012
4/18/2012
Enterprise:Sanofi-Aventis Pakistan Ltd.Plot 23, Sector-22, Korangi Industrial Area,Karachi-74900, Pakistan
Research Partners:Syed Adnan Ali (Senior Product Manager)0321-2162306Omair Siddiqui (Assistant Product Manager)0333-2169734
Name of IoBM researchers:Ayena Maqbool (9098)Humaira Akhter (8970)Tuba Iqbal (8725)Naureen Ansari (8696)Nashaf Hashimi (9442)Mashal Balani (9824)
This research instrument is used for researching the Business Strategy of Sanofi Aventis Pakistan: its external and internal researched environment, its competitors and its strategic implementation framework.
LETTER OF TRANSMITTAL
April 18, 2012
Mr. Javaid Ahmed
Institute of Business Management, Karachi.
Respected Sir,
This is the term report on “Researching firm level strategy and competitiveness for Sanofi
Aventis 2012”.
The objective of the report was to research the business strategy of Sanofi Aventis Pvt. Ltd, its
vision and mission, its current strategies, its external and internal researched environment, blue
ocean strategy and evaluation of its strategic options.
The report has been completed after the perpetual hard work and determination of past 2 months.
If you have any additional questions, we would be pleased to answer them.
Thanking you.
Sincerely,
Ayena Maqbool (9098)
Humaira Akhter (8970)
Tuba Iqbal (8725)
Naureen Ansari (8696)
Mashal Balani (8924)
Nashaf Hashimi (9442)
LETTER OF AUTHORIZATION
April 18, 2012
Dear Reader,
As students of IoBM, we have been authorized by Mr. Javaid Ahmed to prepare a term report on
“Researching firm level strategy and competitiveness for Sanofi Aventis 2012”, for the course of
Strategic Management to be submitted on April 18, 2012
The preparation of this term report required us to perform a thorough analysis of the
pharmaceutical industry of Pakistan and formulate new strategies for Sanofi Aventis Pvt. Ltd. by
carrying out internal company and external environment analysis, along with the issues involving
strategic leadership and implementation in the company.
We would like to thank our course instructor; Mr. Javaid Ahmed for all the informative sessions
that he delivered through-out the semester which greatly enhanced our practical management
skills. We are extremely grateful for his guidance on this term report.
We would also like to thank Mr. Adnan Ali (Senior Product Manager) and Mr. Omair Siddiqui
(Assistant Product Manager) at Sanofi Aventis Pakistan Pvt. Ltd. for their co-operation in this
research project.
Sincerely,
Ayena Maqbool (9098)
Humaira Akhter (8970)
Tuba Iqbal (8725)
Naureen Ansari (8696)
Mashal Balani (8924)
Nashaf Hashimi (9442)
Contents
LITERATURE REVIEW.........................................................................6
CHAPTER # 1....................................................................................17
INDUSTRY STRUCTURE & MACRO-ENVIRONMENTAL ANALYSIS
........................................................................................................17
OVERVIEW OF PHARMACEUTICAL INDUSTRY IN PAKISTAN............18
PORTER’S 5 FORCES & PEST ANALYSIS FOR PAKISTAN
PHARMACEUTICAL INDUSTRY.............................................................22
INTRODUCTION OF COMPANY.............................................................31
MISSION STATEMENT...........................................................................36
ANALYSIS OF SANOFI’S MISSION STATEMENT..................................36
RECOMMENDED MISSION STATEMENT FOR SANOFI AVENTIS.......37
VISION STATEMENT..............................................................................37
EXTERNAL FACTOR EVALUATION MATRIX.........................................38
COMPANY AND COMPETITOR ANALYSIS............................................40
CHAPTER # 2....................................................................................41
INTERNAL COMPANY VALUE CHAIN ANALYSIS............................41
INTERNAL VALUE CHAIN ANALYSIS....................................................42
CORE COMPETENCIES OF SANOFI AVENTIS......................................48
STRATEGIC COST MANAGEMENT PROCESSES OF SANOFI AVENTIS
.................................................................................................................49
FINANCIAL RATIO TRENDS OF SANOFI AVENTIS..............................50
INTERNAL FACTOR EVALUATION MATRIX..........................................52
CHAPTER # 3....................................................................................54
STRATEGY ANALYSIS AND RECOMMENDATIONS.........................54
GENERIC STRATEGY FOR SANOFI AVENTIS.......................................55
TOWS MATRIX OF SANOFI AVENTIS....................................................56
INTERNAL EXTERNAL MATRIX OF SANOFI AVENTIS........................58
SPACE MATRIX FOR SANOFI AVENTIS................................................60
GRAND STRATEGY MATRIX FOR SANOFI AVENTIS:...........................63
BCG MATRIX FOR SANOFI AVENTIS....................................................65
MATRIX ANALYSIS & TOWS SUMMARY...............................................66
QUANTITATIVE STRATEGIC PLANNING MATRIX FOR SANOFI
AVENTIS..................................................................................................67
SELECTED STRATEGY FOR SANOFI AVENTIS.....................................70
CHAPTER # 4....................................................................................71
BLUE OCEAN STRATEGY................................................................71
BLUE OCEAN STRATEGY FOR SANOFI AVENTIS................................72
CHAPTER # 5....................................................................................74
STRATEGIC LEADERSHIP & IMPLEMENTATION..........................74
STRATEGIC LEADERSHIP MODEL FOR SANOFI AVENTIS..................75
THE FOUR INTERNAL HURDLES TO STRATEGY IMPLEMENTATION77
BIBLIOGRAPHY.................................................................................79
Strategy
Strategy is the direction and scope of an organization over the long-term which
achieves advantage for the organization through its configuration of resources within a
challenging environment, to meet the needs of markets and to fulfill stakeholder expectations.
Strategic Management
Strategic management is a field that deals with the major intended and emergent
initiatives taken by general managers on behalf of owners, involving utilization of resources, to
enhance the performance of firms in their external environments. It entails specifying the
organization's mission, vision and objectives, developing policies and plans, often in terms of
projects and programs, which are designed to achieve these objectives, and then allocating
resources to implement the policies and plans, projects and programs. A balanced scorecard is
often used to evaluate the overall performance of the business and its progress towards
objectives. Recent studies and leading management theorists have advocated that strategy needs
to start with stakeholders expectations and use a modified balanced scorecard which includes all
stakeholders.
Strategic Management Steps
a) Formulation
The stage of the strategic management process that involves planning and decision
making that leads to the establishment of the organization’s goals and of a specific
strategic plan.
b) Implementation
This stage of strategic management involves the use of managerial and organizational
tools to direct resources towards achieving strategic outcomes.
c) Evaluation
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The final stage in strategic management is strategy evaluation and control. All strategies
are subject to future modification because internal and external factors are constantly
changing. In the strategy evaluation and control process managers determine whether the
chosen strategy is achieving the organization's objectives.
S trategic Management Framework
Certain strategic tools have
been used for analyzing the company
in focus throughout our research. For
external analysis, porter’s five forces
followed by PEST analysis have
been done which followed the
external factor evaluation (EFE) and
competitor profile matrix (CPM) for
relative positioning of the firm. Then
we have performed an Internal Audit
of the firm by examining the Value Chain Activities and determining the strengths and
weaknesses with respect to the company’s performance internally. This has been supported by an
Internal Factor Evaluation Matrix (IFE). Then with the help of all these we have tried to locate
the company in Porters Generic map and defined where the company is and where it should be to
gain a sustainable competitive advantage. This section of the report emphasises on defining each
and every tool that we have used in our report, along with relevant examples and figures chosen
from various sources.
Vision Statement
A vision statement is sometimes called a picture of your company in the future but it’s so
much more than that. Your vision statement is your inspiration, the framework for all your
strategic planning. In other words, a vision is a statement about what an organization wants to
become.
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Mission Statement
A mission statement is a brief description of a company's fundamental purpose. A
mission statement answers the question, "Why do we exist?" A Mission Statement defines the
purpose of the organizations existence and its primary objectives. Its prime function is internal –
to define the key measure or measures of the organization's success – and its prime audience is
the leadership team and stockholders.
Porter’s Five Forces
Porter's five forces analysis is a framework for industry analysis and business strategy
development formed by Michael E. Porter of Harvard Business School in 1979. The most
influential analytical model for assessing the nature of competition in an industry is Michael
Porter's Five Forces Model, which is described below:
Porter explains that there are five forces that determine industry attractiveness and long-
run industry profitability. These five "competitive forces" are
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i. Threat of New Entrants
New entrants to an industry can raise the level of competition, thereby reducing its
attractiveness. The threat of new entrants largely depends on the barriers to entry. High entry
barriers exist in some industries (e.g. shipbuilding) whereas other industries are very easy to
enter (e.g. estate agency, restaurants). Key barriers to entry include
• Economies of scale
• Capital / investment requirements
• Customer switching costs
• Access to industry distribution channels
• The likelihood of retaliation from existing industry players.
ii. Threat of Substitutes
The presence of substitute products can lower industry attractiveness and profitability
because they limit price levels. The threat of substitute products depends on:
• Buyers' willingness to substitute
• The relative price and performance of substitutes
• The costs of switching to substitutes
When the threat of substitutes is high, industry profitability suffers. Substitute products or
services limit an industry’s profit potential by placing a ceiling on prices. If an industry does not
distance itself from substitutes through product performance, marketing, or other means, it will
suffer in terms of profitability—and often growth potential.
iii. Bargaining Power of Suppliers
Suppliers are the businesses that supply materials & other products into the industry.
Supplier power is a mirror image of the buyer power. As a result, the analysis of supplier power
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typically focuses first on the relative size and concentration of suppliers relative to industry
participants and second on the degree of differentiation in the inputs supplied. If suppliers have
high bargaining power over a company, then in theory the company's industry is less attractive.
The bargaining power of suppliers will be high when:
• There are many buyers and few dominant suppliers
• There are undifferentiated, highly valued products
• Suppliers threaten to integrate forward into the industry
• Buyers do not threaten to integrate backwards into supply
• The industry is not a key customer group to the suppliers
iv. Bargaining Power of Buyers
The bargaining power of buyers is greater when:
• There are few dominant buyers and many sellers in the industry
• Products are standardized
• Buyers threaten to integrate backward into the industry
• Suppliers do not threaten to integrate forward into the buyer's industry
• The industry is not a key supplying group for buyers
Buyer power is one of the two horizontal forces that influence the appropriation of the
value created by an industry. The most important determinants of buyer power are the size and
the concentration of customers. Other factors are the extent to which the buyers are informed and
the concentration or differentiation of the competitors. Kippenberger (1998) states that it is often
useful to distinguish potential buyer power from the buyer's willingness or incentive to use that
power, willingness that derives mainly from the “risk of failure” associated with a product's use.
v. Intensity of Rivalry
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The intensity of rivalry, is the most obvious of the five forces in an industry, helps
determine the extent to which the value created by an industry will be dissipated through head-
to-head competition. High rivalry limits the profitability of an industry. The degree to which
rivalry drives down an industry’s profit potential depends, first, on the intensity with which
companies compete and, second, on the basis on which they compete. The intensity of rivalry is
greatest if competitors are numerous or are roughly equal in size and power. In such situations,
rivals find it hard to avoid poaching business. Industry growth is slow, Exit barriers are high, and
rivals are highly committed to the business and have aspirations for leadership.
Pest Analysis
PEST analysis stands for "Political, Economic, Social, and Technological analysis" and
describes a framework of macro-environmental factors used in the environmental
scanning component of strategic management.
The Pest Model
PEST is the acronym for Political, Economic, Social and Technological factors.
The internal environment is composed of the internal customers, which are the employees of the
organization, the internal policies, mission and vision. However, the external environment is a
broad category which has been divided into micro environment and macro environment. The
micro environment is made of factors such as the customers, suppliers, distributors, competitors
etc whereas; factors making up the macro environment include political, economic, social and
technological forces.
i. Political Factors
Political factors include government regulations such as employment laws, environmental
regulations and tax policy. Other political factors are trade restrictions and political stability.
They refer to the degree of intervention of government in the economy. There are certain formal
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and informal rules laid down by the government which every organization has to abide by in
order to sustain its operations in a particular country. Important political factors include:
ii. Economic Factors
These affect the cost of capital and purchasing power of an organization. Economic
factors include economic growth, interest rates, inflation and currency exchange rates.
Economic factors are those which have a direct impact on the capital loss of organizations and
purchasing power of customers.
iii. Social Factors
Social factors are cultural aspects and demographic variables which are closely linked to
the market potential and customers’ needs. These include age distribution, attitude towards
health and environment, education, leisure activities, attitude towards career, changing lifestyle,
gender role etc.
iv. Technological Factors
Technology is what drives the phenomena of globalization. It provides competitive
advantage to firms. Major technological factors include rate of technological innovation, rate of
obsolesce of technology, technological development, new technological platforms, diffusion of
technology etc. Technology reduces costs, improves quality and leads to innovation. It can
benefit consumers as well as the organizations providing the products.
External Factor Evaluation
External Factor Evaluation (EFE) matrix method is a strategic-management tool often
used for assessment of current business conditions. The EFE matrix is a good tool to visualize
and prioritize the opportunities and threats that a business is facing. External factors assessed in
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the EFE matrix are the ones that are subjected to the will of social, economic, political, legal, and
other external forces.
Internal Factor Evaluation
Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing or
evaluating major strengths and weaknesses in functional areas of a business. IFE matrix also
provides a basis for identifying and evaluating relationships among those areas. The Internal
Factor Evaluation matrix or short IFE matrix is used in strategy formulation. Internal factors
include management, manpower, machine, material and money.
Competitive Profile Matrix
Competitive profile matrix is essential tool used in strategic management process, it
contain all the important critical success factors of industry. Success factor can vary from
industry to industry, every industry consider different success factor, all the companies in CPM
are measured on same scale by considering the same success factor.
Critical success factors are extracted after deep analysis of external and internal
environment of the firm. Obviously there are some good and some bad for the company in the
external environment and internal environment. The higher rating show that firm strategy is
doing well to support this critical success factors and lower rating means firm strategy is lacking
to support the factor.
Michael Porter’s Generic Strategies
i. Cost Leadership Strategy
Cost leadership is perhaps the clearest of the three generic strategies. In it, a firm sets out
to become the low-cost producer in its industry. The firm has a broad scope and serves many
industry segments, and may even operate in related industries -- the firm's breadth is often
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important to its cost advantage. The sources of cost advantage are varied and depend on the
structure of the industry
ii. Differentiation
In a differentiation strategy a firm seeks to be unique in its industry along some
dimensions that are widely valued by buyers. It selects one or more attributes that many buyers
in an industry perceive as important, and uniquely positions itself to meet those needs. It is
rewarded for its uniqueness with a premium price.
iii. Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an
industry. The focuser selects a segment or group of segments in the industry and tailors its
strategy to serving them to the exclusion of others.
Value Chain Process
The idea of the value chain is based on
the process view of organizations, the idea of
seeing a manufacturing (or service) organization
as a system, made up of subsystems each with
inputs, transformation processes and outputs.
Most organizations engage in hundreds, even
thousands, of activities in the process of
converting inputs to outputs. These activities can
be classified generally as either primary or support activities that all businesses must undertake
in some form.
According to Porter (1985), the primary activities are:
• Inbound Logistics - involve relationships with suppliers and include all the activities
required to receive, store, and disseminate inputs.
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• Operations - are all the activities required to transform inputs into outputs (products
and services).
• Outbound Logistics - include all the activities required to collect, store, and
distribute the output.
• Marketing and Sales - activities inform buyers about products and services, induce
buyers to purchase them, and facilitate their purchase.
• Service - includes all the activities required to keep the product or service working
effectively for the buyer after it is sold and delivered.
Secondary activities are:
• Procurement - is the acquisition of inputs, or resources, for the firm.
• Human Resource management - consists of all activities involved in recruiting,
hiring, training, developing, compensating and (if necessary) dismissing or laying
off personnel.
• Technological Development - pertains to the equipment, hardware, software,
procedures and technical knowledge brought to bear in the firm's transformation of
inputs into outputs.
• Infrastructure - serves the company's needs and ties its various parts together, it
consists of functions or departments such as accounting, legal, finance, planning,
public affairs, government relations, quality assurance and general management.
Core Competencies
A core competence is the result of a specific unique set of skills or production techniques
that deliver value to the customer. Such competences empower an organization to access a wide
variety of markets. Executives should estimate the future challenges and opportunities of the
business in order to stay on top of the game in varying situations. . A core competence should be
"competitively unique"
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Strategic Cost Management
Strategic cost management can be defined as" scrutinizing every process within your
organization, knocking down departmental barriers, understanding your suppliers' business, and
helping improve their processes"
TOWS Matrix
TOWS Analysis is a variant of
the classic business tool, SWOT
Analysis. TOWS and SWOT are
acronyms for different arrangements of
the words Strengths, Weaknesses,
Opportunities and Threats. By analyzing
the external environment (threats and
opportunities), and your internal
environment (weaknesses and strengths),
you can use these techniques to think
about the strategy of your whole organization, a department or a team. You can also use them to
think about a process, a marketing campaign, or even your own skills and experience.
BCG Matrix
This helps the company allocate resources and is used as an analytical tool in brand
marketing, product management, strategic management, and portfolio analysis.
These groups are explained below:
Dogs: Low Market Share / Low Market Growth
In these areas, your market presence is weak,
so it's going to take a lot of hard work to get noticed.
You won't enjoy the scale economies of the larger
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players, so it's going to be difficult to make a profit. And because market growth is low, it's
going to take a lot of hard work to improve the situation.
Cash Cows: High Market Share / Low Market Growth
Here, you're well-established, so it's easier to get attention and exploit new opportunities.
It's only worth expending a certain amount of effort, because the market isn't growing, and your
opportunities are limited.
Stars: High Market Share / High Market Growth
Here you're well-established, and growth is exciting! There should be some strong
opportunities here, and you should work hard to realize them.
Question Marks (Problem Child): Low Market Share / High Market Growth
These are the opportunities no one knows what to do with. They aren't generating much
revenue right now because you don't have a large market share. But, they are in high growth
markets so the potential to make money is there.
Internal External (IE) Matrix
IE stands for Internal external as the name suggest that it’s based upon internal and
external factors of the organization. The IE is an important strategic tool which comes under
the portfolio management considered much similar to BCG Matrix. The IE matrix used to plot
the organization divisions in nine cell diagram, each cell has some meaning associated which
suggests strategies. The IE matrix is a continuation of the EFE matrix and IFE matrix models. In
summarize way it can be defined as the strategic management tool which is used to analyze the
current position of the divisions and suggest the strategies for the future for the better results.
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The IE matrix can be divided into three
major regions that have different strategy
implications.
Cells I, II, and III suggest the “grow and
build” strategy. This means intensive and
aggressive tactical strategies. Your strategies
should focus on market penetration, market
development, and product development.
From the operational perspective, a
backward integration, forward integration, and horizontal integration should also be
considered.
Cells IV, V, and VI suggest the “hold and maintain” strategy. In this case, your tactical
strategies should focus on market penetration and product development.
Cells VII, VIII, and IX are characterized with the harvest or exit strategy. If costs for
rejuvenating the business are low, then it should be attempted to revitalize the business.
In other cases, aggressive cost management is a way to play the end game.
GRAND STRATEGY MATRIX
Based on four important elements of rapid
market growth, slow market growth, strong
competitive position, and weak competitive
position, Grand Strategy Matrix has been emerged
into a dominant tool in formulating cross-functional
strategies. To simplify the job of identification and
selection of best fitting strategy the elements of the
Grand Strategy Matrix actually form a four quadrant
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Matrix where relevant organizations in the analysis are positioned. Instead of different
organizations a firm with many divisions can plot its divisions across Grand Strategy Matrix for
the sake of devising best suited strategy for each division.
SPACE MATRIX
The SPACE matrix is a management tool used to analyze a company. It is used to
determine what type of a strategy a company should undertake. It focuses on strategy
formulation especially as related to the competitive position of an organization. The
SPACE matrix is constructed by plotting calculated values for the competitive advantage
(CA) and industry strength (IS) dimensions on the X axis. The Y axis is based on the
environmental stability (ES) and financial strength (FS) dimensions.
QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)
Quantitative Strategic Planning Matrix (QSPM) is a high-level strategic
management approach for evaluating possible strategies. Quantitative Strategic Planning
Matrix or a QSPM provides an analytical method for comparing feasible alternative
actions. The QSPM method falls within so-called stage 3 of the strategy formulation
analytical framework. When company executives think about what to do, and which way
to go, they usually have a prioritized list of strategies. If they like one strategy over another one,
they move it up on the list. This process is very much intuitive and subjective. The QSPM
method introduces some numbers into this approach making it a little more "expert" technique.
Blue Ocean Strategy:
Blue oceans denote all the
industries not in existence today—the
unknown market space, untainted by
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competition. In blue oceans, demand is created rather than fought over. There is ample
opportunity for growth that is both profitable and rapid. There are two ways to create blue
oceans. In a few cases, companies can give rise to completely new industries, as eBay did with
the online auction industry. But in most cases, a blue ocean is created from within a red ocean
when a company alters the boundaries of an existing industry. As will become evident later, this
is what Cirque did. In breaking through the boundary traditionally separating circus and theater,
it made a new and profitable blue ocean from within the red ocean of the circus industry. The
main factor of blue ocean strategy is to create value (value innovation).
Tipping Point Leadership
The theory of tipping points, which has its roots in epidemiology, is well known; it
hinges on the insight that in any organization, once the beliefs and energies of a critical mass of
people are engaged, conversion to a new idea will spread like an epidemic, bringing about
fundamental change very quickly. The theory suggests that such a movement can be unleashed
only by agents who make unforgettable and unarguable calls for change, who concentrate their
resources on what really matters, who mobilize the commitment of the organization’s key
players, and who succeed in silencing the most vocal naysayers.
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OVERVIEW OF PHARMACEUTICAL INDUSTRY IN PAKISTAN
Pakistan’s Pharmaceutical industry is a rapidly growing industry which is highly
competitive and challenging as well, thus contributes significantly to the national economy. At
the time of independence in 1947, there were hardly any pharmaceutical companies in Pakistan.
The foundation of the pharmaceutical industry of Pakistan was formally laid in 1950 with the
establishment of local subsidiaries of foreign firms and formulation of imported raw material
based medicines by local entrepreneurs.
The pharmaceutical sector is also one of the most organized and regulated sectors of
Pakistan; the companies are fully documented and the prices of the medicines are set by the
government by giving an upper cap. There are 2 associations of the pharmaceutical
manufacturers:
• Pakistan Pharmaceutical Manufacturers Association (PPMA)
• Pharma Bureau (PB)
As of today there are about 600 Pharmaceutical companies operating in Pakistan out of
which 386 are operating units and among them, 30 are MNCs producing the drugs (Aamir and
Zaman, 2011). National companies comprise of the majority 55% of the companies in the
industry and the fact is that this has risen over the years depicting an encouraging sign for the
local investors. The top 50 companies have 82% of the market share. The Pakistani
Pharmaceutical industry is growing at an annual growth rate of 11%, which is more than the
annual global growth rate of 8%. 80% of the local demand is met domestically while 20% is met
through imports.
. As of 2012, the total export value of Pakistani-manufactured medicines around the
world stood at $400 million. The pharmaceutical industry is focusing to an Export Vision of USD
500 Million by 2013. In the meantime, exports are also likely to be boosted by new regional and
global opportunities.
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Major Players in Industry
Name Market Share
Gsk 11.6%
Abbott Lab 7.9%
Highnoon Labs 6.3%
Getz Pharma 3.9%
Sanofi Aventis 3.8%
Roche 3.1%
Source: (Aamir and Zaman, 2011)
RESEARCH IN PHARMACEUTICAL SECTOR:
Pakistan’s contribution to pharmaceutical research is very limited despite the fact that we
are the world’s sixth largest country in terms of population. In Pakistan, most research is being
done in oncology, hepatitis, cardiovascular diseases, infectious diseases, respiratory diseases,
diabetes and thrombocytopenia.
The major chunk of the research work is done by the MNCs in Pakistan, whereas in
India, the national pharmaceutical companies have the majority contribution in the Research and
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Some Key Statistics Of The Industry
Registered drugs 47000
Registered molecules 1100
R&d expenditures 1% of profit
Average growth rate 11%
Market share of multinational
companies
45%
Market share of local companies 55%
Market leader Glaxosmithkline
development. Most of the companies only allocate about 1% - 2% of the total budget for the
research and development. The major hurdle in research in local pharmaceutical companies was
the lack of government interest. Without government support, the private sector cannot use even
its available expertise to develop new products
Key Trends & Developments
Leaders of Pakistan's pharmaceutical industry have condemned the cabinet's recent
unanimous decision to grant Most Favoured Nation (MFN) trading status to India. While the
decision will benefit Indian trade to Pakistan, including the export of medicines to Pakistan -
ultimately enforcing competitive pressure on the local pharmaceutical industry, BMI (Business
Monitor International) believes the agreement will be of significant benefit to patients,
improving their access to affordable medicines.
According to BMI the creation of six Drug Regulatory Authorities and the replication of
operations by the authorities will create inefficiencies in the drug approvals process in Pakistan,
which will not sit well with local or multinational drug makers. Furthermore, the shift from one
regulatory authority to six will lead to more bureaucracy, increasing drug maker’s operational
costs. (Pakistan Pharmaceuticals and Healthcare Report Q2 2012)
Challenges Faced By the Pharmaceutical Industry Of Pakistan
No doubt that the Pakistan pharmaceutical market is growing at a steady rate but there are certain
challenges which pose a great threat to the industry.
The first major challenge which the pharmaceutical industry faces is the total government
control on the prices of all the enlisted products
Import of raw material which costs a lot of precious foreign exchange
Rapid devaluation of the rupee against the major currencies, due to which the profit
margins are shrinking
Increasing cost of manpower and energy
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Low R&D expenditure, which can lead to the suffering of the masses for not conducting
sufficient research on the newly emerging diseases in the Pakistani environment
Political instability is another major factor which is emerging as the major challenge to
the pharmaceutical industry, because of discontinuation of the policies
Last but not the least, the deteriorating law and order situation, due to which most of
companies have suffered in terms of sales and also lack of reach to the customers in the
affected areas
Market access is challenging and operational risks are high
Although Pakistan’s pharmaceutical and healthcare sectors are expanding and evolving
rapidly, about half the population has no access to modern medicines like in Baluchistan and
Khyber Pakhtunkhwua. Clearly this presents an opportunity, but much more work needs to be
done by the government and industry's stakeholders. The value of pharmaceuticals sold in 2007
exceeded US$1.4bn, which equates to per capita consumption of less than US$ 10 per year and
value of medicines sold is expected to exceed US$2.3 B by 2012.
20
PORTER’S 5 FORCES & PEST ANALYSIS FOR PAKISTAN PHARMACEUTICAL INDUSTRY
THE THREAT OF NEW ENTRANT Yes (+) No (-)
1. Do large firms have a cost or performance advantage in your segment of the industry?
2. Are there any proprietary product differences in your
industry?
3. Are there any established brand identities in your industry?
4. Do your customers incur any significant costs in
switching suppliers?
5. Is a lot of capital needed to enter your industry? 6. Is serviceable used equipment expensive? 7. Does the newcomer to your industry face difficulty in
accessing distribution channels?
8. Does experience help you to continuously lower costs? 9. Does the newcomer have any problems in obtaining the
necessary skilled people, materials or supplies? 10. Does your product or service have any proprietary
features that give you lower costs?
11. Are there any licenses, insurance or qualifications that are difficult to obtain?
12. Can the newcomer expect strong retaliation on entering
the market?
The table above suggests that the barriers to entry in the pharmaceutical industry of
Pakistan are quite high in case of setting up a totally new pharmaceutical company. This is
because the existing firms in the industry have achieved economies of scale through increasing
their capital intensity while the setup costs would be very high for the new entrants as expensive
state-of-the-art machinery is required for operations in the pharmaceutical industry. Also, new
firms find it very difficult to acquire licenses and other qualifications from the regulatory bodies.
Moreover, the major portion of the market share is held by a few firms. These well
established firms make it tough for new firms to enter into the industry, because of the strong
21
brand image that these firms have in the market. Thus this low threat of new entrants makes it a
favorable point for the industry.
P - Factors like deteriorated law and order situation and approval from Ministry of Health
increases barriers to entry. Prices of medicines are dictated and regulated by MoH so it is also
lowering down the threat of new entrants. MFN status to India will increase the threats of new
entrants as in the form of importers and Indian Pharmaceutical industry will likely to pose great
threat on the existent pharmaceutical industry of Pakistan.
E - The industry is growing rapidly but the prices of raw materials which are usually imported
from foreign countries are increasing because of rupee depreciation. It is unlikely for the
pharmaceutical companies to put the burden on consumers in the form of higher prices as the
prices are being controlled by MoH. The high rate of inflation is also decreasing the threat of
new entrants.
S - No significant effect
T - High technology is required to manufacture drugs and that requires large amount of capital
investment which is again an obstacle for new entrants. Moreover, the technical equipments are
also very expensive which increase the barriers to entry.
Low Moderate High
22
P
E
T
BARGAINING POWER OF BUYERS Yes (+) No (-)
1. Are there a large number of buyers relative to the number of firms in the business?
2. Do you have a large number of customers, each with
relatively small purchases?
3. Does the customer face any significant costs in switching suppliers?
4. Does the buyer need a lot of important information? 5. Is the buyer aware of the need for additional information? 6. Is there anything that prevents your customer from taking
your function in-house?
7. Your customers are not highly sensitive to price. 8. Your product is unique to some degree or has accepted
branding.
9. Your customers’ businesses are profitable 10. You provide incentives to the decision makers.
The primary customers of pharmaceutical companies are the doctors of the country, who
then help to increase the general consumption of that medicinal drug by prescribing it to their
patients i.e. the general public. If the pharmaceutical industry of Pakistan is growing at a rate of
12.9% annually, then naturally the demand is coming from the grass root level. So, there is large
number of buyers relative to the number of existing firms in the business. There is not much cost
associated with customers switching suppliers, however, there is an enormous amount of
information that the customers need about the products; also these customers are aware of the
additional information needed.
The customers are price sensitive for certain brands but ready to buy some brands at any
price because of their life-saving characteristic. Also, the existing products are unique to some
degree and have accepted branding. Overall, the bargaining power of buyers is low, making the
industry structure attractive.
P - No significant effect.
23
EST
E - Government of Pakistan has only provided Rs 40 billion for both health and education
sectors in the fiscal budget and also the minimum wage rate is also considerably low in the
country. These factors tend to increase the bargaining power of buyers as they are forced to opt
for low performing, cheap substitutes available in the form of homoeopathic drugs etc.
.
S – Because of increase in awareness of health related issues, people are becoming more health
conscious. They are getting more concerned about the medicines that are being prescribed to
them. As a result, doctors prescribe medicines of only those companies whose products are
superior in quality and have a good history. This factor tends to increase the bargaining power of
buyers.
T - With the advancement of information and technology, more and more researches about new
diseases and their cures are being conducted. All this information is being provided to the
doctors, who are keeping themselves updated through various seminars, journals, etc, and are
becoming more concerned about the quality of the products. This factor is also increasing the
bargaining power of buyers.
24
Low Moderate High
THREAT OF SUBSTITUTES Yes (+) No (-)
1. Substitutes have performance limitations that do not completely offset their lowest price. Or, their performance is not justified by their higher price.
2. The customer will incur costs in switching to a substitute. 3. Your customer has no real substitute. 4. Your customer is not likely to substitute.
The threat of substitutes is low in this industry as there are no real substitutes of the
products in the pharmaceutical industry. Availability of the herbal and homeopathic medicines,
does affect the products a bit but these medicines have significant performance limitation. Due to
the threat of different new diseases people are less willing to take chances with homeopathic and
herbal medicines and follow the instructions of their doctors.
P - No significant effect.
E – Availability of substitutes such as homeopathic, herbal products and home remedies at
cheaper prices, gives rise to threat of substitutes. In Pakistan there are a large number of people
who are not economically strong and cannot afford the medicines so they tend to move towards
the homeopathic and herbal medicines that are much cheaper. This factor increases threat of
substitutes.
S – The low literacy rate and lack of awareness sometimes make people move towards
homeopathic medicines. This factor also increases threat of substitutes.
T - No significant effect.
Low Moderate High
25
E
S
BARGAINING POWER OF SUPPLIERS Yes (+) No (-)
1. My inputs are standard rather than unique or differentiated.
2. I can switch between suppliers quickly and cheaply. 3. My suppliers would find it difficult to enter my business
or my customers would find it difficult to perform my function in-house.
4. I can substitute inputs readily. 5. I have many potential suppliers. 6. My business is important to my suppliers. 7. My cost of Purchases has no significant influence on my
overall costs.
In order to remain competitive in the pharmaceutical industry, the inputs used by each
company, such as various chemicals are mostly unique & differentiated and therefore cannot be
easily substituted. The company goes through a complicated process of selecting its suppliers in
order to make sure the quality of inputs match the company’s specific criteria so this is a costly
process for companies, and therefore they do not switch between suppliers and intend to stick to
limited amount of suppliers who pass their selection criteria. Thus, all these factors contribute to
moderately high bargaining power of suppliers.
P - No effect
E - The major inputs are imported from foreign countries like at Sanofi, raw materials are
majorly imported from France and Germany. So the rupee depreciation and rise in inflation
would increase the cost of raw materials in the industry and hence adversely affecting the
industry structure and due to the price control by Ministry of Health, it is not possible for
companies to shift the burden of cost on consumers. This factor increase the bargaining power of
suppliers.
S - No significant effect
26
T - In order to come up with innovative, differentiated, and superior quality products,
pharmaceutical companies demand for superior quality and state-of-the-art supplies. This factor
tends to reduce the bargaining power of suppliers.
E
T
Low Moderate High
THREAT OF RIVALRY Yes (+) No (-)
1. The industry is growing rapidly. 2. The industry is not cyclical with intermittent overcapacity. 3. The fixed costs of the business are relatively low portion
of total costs.
4. There are significant product differences and brand identities between the competitors.
5. The competitors are diversified rather than specialized. 6. It would not be hard to get out of this business because
there are no specialized skills and facilities or long-term contract commitments etc.
7. My customers would incur significant costs in switching to a competitor.
8. My product is complex and requires a detailed
understanding on the part of my customer.
9. My competitors are all of approximately the same size as I am.
The pharmaceutical industry is growing at a rate of 12.9% annually and is highly
competitive. The ratio of MNC and national companies is 54% and 46% respectively. There are
noteworthy product differences and brand identities in the pharmaceutical industry. Also it is not
easy to exit in the industry since there are long-term commitments and specialized needed. The
consumers (general public) do not incur any significant costs in switching to competitors
products but usually the decision is influenced by the doctor’s prescription. The products are
27
PES
complex and require total compliance to international standards. This analysis shows that the
rivalry among existing competitors in the industry is moderate.
P - Due to the decision of MFN status to India, the pharmaceutical companies are threatened to
lose their market share and thus this factor can bring rivalry among competitors.
E - Since companies can’t pass the burden on the consumers and the cost of producing drugs is
also increasing so they try to get the market shares by aggressive marketing practices which in
resultant is increasing the rivalry among competitors.
S - The changing trend towards higher consumer awareness about health issues, diseases, and
drugs require the companies to come up with innovative products and market them extensively.
This factor tends to increase the rivalry in the industry.
T - With the advanced technology available to companies they are devising new mechanisms to
operate and enhance their capacity to produce on the basis of modernized technology so this
factor tends to decrease the rivalry.
T
Low Moderate High
28
Overall industry rating Favorable Moderate Unfavorable Implications
The threat of new entrants. 7 4 1 Favorable
Bargaining power of buyers. 7 2 1 Favorable
Threat of substitutes. 2 1 1 ModeratelyFavorable
Bargaining power of suppliers.
2 1 4 Unfavorable
Intensity of rivalry among competitors.
3 2 4 Moderately favorable
Total 21 10 11 Favorable
29
INTRODUCTION OF COMPANY
Group Profile
Sanofi is a diversified global healthcare leader, focused on patients’ needs, researching
and developing medicines and vaccines to help improve the lives of the greatest possible number
of people. The company’s growth is attributable to a regional approach to business operations,
backed by a comprehensive portfolio of innovative products, mature prescription medicines,
consumer health products, generics, vaccines as well as animal health. By virtue of its
commitments, Sanofi constantly adapts its development model to the world’s emerging human
and economic problems.
Corporate Profile
The company was incorporated on December 8, 1967 as Hoechst Pakistan Limited.
Manufacturing of pharmaceuticals and specialty chemicals started in 1973. In 1977 the company
went public and was listed on the Karachi Stock Exchange. Agrochemical formulation started in
1985. In 1996, the Agriculture business was spun off into a separate legal entity called AgrEvo
Pakistan (Private) Limited, and the following year, Specialty Chemicals business was sold to
Clariant Pakistan Limited. Hoechst Pakistan Limited changed its name to Hoechst Marion
Roussel (Pakistan) Limited in June 1996, and the core business was then restricted to
pharmaceutical activities. In December 1999, Hoechst AG & Rhone Poulenc S.A. globally
merged their life sciences business into a new company known as Aventis S.A. The name of the
company in Pakistan was changed to Aventis Pharma (Pakistan) Limited in November 2000. In
line with the amalgamation globally, Aventis Pharma (Pakistan) Limited was merged locally
with Rhone Poulenc Rorer Pakistan (Private) Limited and the company changed it’s name to
Aventis Limited from April 2003. During 2004 Aventis S.A. was acquired by sanofi synthelabo
to form a company called sanofi-aventis S.A. Consequently in September 2005 the name of the
company was changed to sanofi-aventis Pakistan limited. In 2011, sanofi-aventis changed its
identity to Sanofi. However, the legal entity continues to remain the same i.e sanofi-aventis
30
Pakistan limited. Today, Sanofi is the 6th largest pharmaceutical company in Pakistan with a
market share and growth rate of 4.1% (2010: 4.5%) and 16% (2010: 19.3%) respectively. Today,
Sanofi S.A. France, is one of the world’s leading diversified healthcare companies offering
medicines, consumer healthcare products, generics and animal health products.
Therapeutic Areas
The company focuses on 7 major therapeutic areas to address the health needs of the greatest number
Cardiovascular
Vaccines
Thrombosis
Internal medicine
Metabolic disorders
Central nervous system
Oncology
Corporate Structure
31
Top products
Business Development
Sanofi Pakistan has set a vision to reach Rs. 15 billion mark by the year 2015. The
Business Development function will play a pivotal role in making this vision a reality by
preparing to build a strong inorganic growth platform in the form of pre-launch planning for new
product launches and new business additions to existing and new markets. Additionally,
diversification of portfolio; identification of new channels and geographies for business
expansion and external alliances and partnerships are all strategies which will help move towards
this vision.
Corporate Social Responsibility
32
Sanofi’s approach to Corporate Social Responsibility (CSR) inspires all its activities
while focusing on four main dimensions: Addressing patients’ needs - Patient Ensuring ethical
integrity in business and research - Ethics Promoting social commitments - People Limiting the
Group’s impact on the environment – Planet
Ethics & Compliance
Ethics is an integral part of the culture at sanofi-aventis Pakistan & guides the behavior
and conduct of all employees enabling them to meet objectives efficiently, transparently and
fairly. To keep in line with the changing industry dynamics, a new Code of Ethics was launched
during the year. Employees were given extensive training on the new code, which was launched
both in english and urdu languages.
33
Core Business Values
At sanofi-aventis, values define their ethics and serve as the moral compass of the
company. They are the DNA of the company and distinguish us from other companies. Values
are how they all think, act and feel. It is the values they hold that make them the people and the
company they are. Therefore, values define what they do and how they behave. These are the
values that every member of sanofi-aventis, in every continent, in every country, in every part of
the organisation, lives day to day.
34
InnovationForward-ThinkingWe encourage our people and partners to embrace creative solutions and excel through entrepreneurship.
Confidence
Standing OutWe are confident; standing up for what we believe in and pursuing our goals passionately. Always resilient, we dare to challenge the norm.
Respect
Embracing DifferenceWe recognise and respect the diversity and needs of our people, patients and partners, ensuring transparent and constructive interactions through mutual trust.
Solidarity
Socially ResponsibleWe are united in shared responsibility for our actions, our people, the wellbeing of our patients and in achieving a sustainable impact on the environment.
IntegrityActing EthicallyWe commit to maintain the highest ethical and quality standards without compromise.
MISSION STATEMENT
Sanofi’s mission includes:
• Create value by rapidly launching and successfully marketing innovative pharmaceuticals
that satisfy unmet medical needs in large patient populations.
• Focus commercial resources on strategic brands to drive sales growth and maximize the
value of existing and new global brands.
• Aggressively recruit and retain top talent, enhancing our capabilities in drug innovation
and commercialization.
ANALYSIS OF SANOFI’S MISSION STATEMENT
Determining the essential components in the company’s mission statement
Customer Yes
Product and Services Yes
Market Yes
Technology No
Survival, Growth, Profit Yes
Philosophy No
Self concept Yes
Concern for public Yes
Concern for employees Yes
35
Recommended statements for missing components:
1. Technology
Sanofi aims to utilize state of the art technology to make the organization technologically
efficient and for effective business operations.
2. Philosophy
Sanofi aims to provide best of them to customers and create values for themselves.
RECOMMENDED MISSION STATEMENT FOR SANOFI AVENTIS
“Create value by rapidly launching and successfully marketing innovative pharmaceuticals that
satisfy unmet medical needs in large patient populations. Focus commercial resources on
strategic brands to drive sales growth and maximize the value of existing and new global brands.
Aggressively recruit and retain top talent, enhancing our capabilities in drug innovation and
commercialization. It aims to utilize best of their resources to make the organization
technologically efficient and for effective business operation and provide best of them to
customers and create values for themselves.”
VISION STATEMENT
To become a diversified healthcare leader, focused on patients’ needs
Valued by patients & healthcare providers
Sought-after as an employer
Respected by the scientific community & our competitors
36
EXTERNAL FACTOR EVALUATION MATRIX
Critical Success Factors Weight Rating
Weighted
Score
Opportunities
Increasing research work in field of oncology- product
pipeline is dry 0.08 2 0.16
Pakistan pharmaceutical is US $2billion industry with
growth rate of 12.9% per annum. 0.05 4 0.20
Pakistan's high population growth rate 0.04 3 0.12
Emergence of new diseases 0.05 3 0.15
Some affected markets are not completely catered 0.05 2 0.10
Growing market of blood and blood forming organs 0.06 2 0.12
Growth in generic sector 0.1 3 0.30
Threats
Rising cost of production due to high inflation (10.8%)
and devaluation of local currency 0.09 3 0.27
Aggressive competition by local companies due to their
ability to launch new products in short time. 0.08 2 0.16
40-50% fake and Counterfeit drugs available in market 0.06 2 0.12
MFN status to India opens up avenues for Indian
pharmaceutical companies to Pakistan 0.04 1 0.04
Scientist not coming to Pakistan due to deteriorated law
and order situation- increasing R&D cost 0.07 2 0.14
Complete freezing of pharmaceutical product prices by
MoH since 2011- threat to profitability 0.07 2 0.14
Increasing cost of manpower and energy 0.06 3 0.18
Ministry of Health dissolved in October 2011 due to
which approvals for new products are pending. 0.1 1 0.10
TOTAL 1.00 2.30
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The Total Weighted Score of 2.34 in the External Factor Evaluation (EFE) Matrix
denotes that Sanofi is responding well to the existing opportunities and threats in Pharmaceutical
Industry. Sanofi Aventis is taking advantage of the existing opportunities and minimizing the
potential adverse effect of external threats in an appropriate manner by the strategies they are
implementing.
Sanofi should take advantage of growth in relatively new (emerging segments) segments
of the industry like generic sector. For this Sanofi should introduce generic medicines to capture
high market share in this growing segment.
Moreover Sanofi should guard against the threat of the rising costs due to high inflation
(10.8% - as reported in March 2012) and devaluation of local currency. In the face of rising
economic instability and exchange rate fluctuation, Sanofi should try to build partnerships with
low cost suppliers particularly within Asia in order to reduce the cost of imports of raw
materials.
38
COMPANY AND COMPETITOR ANALYSIS
Key players in Pakistan’s pharmaceutical industry include Glaxo Smith Kline, Sanofi
Aventis, Abbott and Getz Pharma.
Sanofi Aventis GSK Abbott Getz
Critical Weighte
d Weighte
d Weighte
d Weighte
d
Success Factors Weigh
t Rating Score Rating Score Rating ScoreRatin
g Score Product Quality 0.20 3 0.60 4 0.80 4 0.80 4 0.80Investment in R&D 0.15 4 0.60 4 0.60 3 0.45 3 0.45Financial Position 0.15 2 0.30 4 0.60 3 0.45 4 0.60Global Expansion 0.20 4 0.80 4 0.80 4 0.80 3 0.60Market share 0.10 2 0.20 4 0.40 3 0.30 2 0.20Distribution 0.10 3 0.30 4 0.40 4 0.40 3 0.30Positive brand image 0.05 4 0.20 4 0.20 4 0.20 4 0.20Promotion 0.05 3 0.15 3 0.15 3 0.15 2 0.10
Total 1.00 3.15 3.95 3.55 3.25
The overall position of Sanofi is fine. However, it needs to improve its financial position.
The profit margins are considerably lower than the industry average. Sanofi needs to introduce
new products and diversify its product line by capturing untapped markets in order to increase
and improve their overall financial position. Also, Sanofi should not compromise on its quality
as this would make them lose their customer base. The pharmaceutical companies do not have
any other option to increase their market share except for building a strong customer base which
can be achieved b providing the customers good quality products.
39
INTERNAL VALUE CHAIN ANALYSIS
Support activities:
i. Firm Infrastructure:
For meeting global standards, Sanofi realizes the importance of a good infrastructure. Its
plants that are based in Karachi and Wah Cantt provide highest standard of quality and
innovative pharmaceutical products.
Haemaccel Plant, which is the first blood plasma substitute manufacturing facility
in Pakistan has a capacity of over 2 million bottles per year. This plant is a result
of transfer of state-of-the-art German technology to Pakistan.
Claforan Plant is considered as one most modern facility in the entire Asia Pacific
region equipped with online filling and packaging operation and has a dedicated
quality control laboratory meeting international standards. In order to avoid cross
contamination, the technical area of the plant is installed with air handling units
separately.
Oral Liquid Plant is a highly sophisticated, state of the art facility complying with
the latest GMP and HSE standards. All manufacturing and cleaning activities are
handled here. The packaging suite is integrated and has steaming manufacturing
suite and comprising high-speed compact line installed by Marchesisni from Italy.
Pharma Manufacturing Plant has an extensive granulation, compression and
blistering operations allowing production of more than 1.5 billion tablets and
capsules per year.
ii. Human Resource Management:
Sanofi takes pride in the excellence of their human assets and teams who are committed
towards the organizational success. The employees are professionally trained, motivated
workforce, working as a team in an environment, which recognizes and rewards performance,
41
innovation and creativity. The human resource policies, developmental programs and
promotion/incentive activities all revolve around creating an exemplary team. At Sanofi the
following concerns pertains to HR:
Sanofi not only recruits experienced talent but also provides opportunities to
potential talent, young university graduates. The company also takes part in job
fairs in the leading business schools of the country. The new recruits also undergo
a comprehensive orientation program which helps in enhancing and improving
their understanding of the company, business and future outlook.
Sanofi invests heavily in the training and developments of its employees. The
year 2011 saw a number of programs dedicated to human talent recognition,
development and career progression. The company imparted total training of 3394
days to 2022 employees focusing on improving managerial, personal and
functional effectiveness. Some of the training programs included:
• Licensed 2 Sell – a global initiative rolled out to all sales team (150
employees).
• Extensive training on technical aspects and sales certification process.
• Business Management Certification Program to 45 employees.
• New Product Training to around 200 employees.
• District Managers’ training for new/promoted DMs to develop their
capabilities.
• Participation of Sanofi Pakistan’s employees as facilitators in ‘Evolve’
(a regional program to coach young High Potentials from different
affiliates)
• Mapping for Leadership, an advanced leadership program for all
supervisors including the Management Committee.
• W2E, (Way to Excellence) a customized, technical program for
enhancing in-clinic performance of the sales force.
42
iii. Technology:
Sanofi-Aventis continues with its policy to invest more and more in IT and keeps on
upgrading their machinery and related infrastructure, thereby enhancing management decision
making. Some of their innovations include:
Genzyme: Applying the most advanced technology to treat rare diseases. The
recent acquisition of Genzyme, a global leader in biotechnology, brings access to
the most advanced technologies in life science, strengthening Sanofi’s reputation
as a global center for excellence in rare diseases.
A tetravalent vaccine to prevent dengue fever - Dengue fever is the second most
widespread endemic tropical diseases after malaria. No specific treatment exists
for this disease, and developing a vaccine is extremely challenging. Based on an
innovative biotechnology approach, Sanofi is working on an advanced tetravalent
vaccine for dengue. From 2010-2011 the under-developed vaccine has progressed
to the next phase of development.
iBGStar - The iBGStar is the first blood glucose meter that connects to a
Smartphone. This compact device allows independent diabetes management for
people with diabetes. With its innovative features and ease of use, the iBGStar
won the prestigious red dot design award 2011 in the category of life science and
medicine.
The organization has managed to eliminate manual work as much as possible. Some of
their business process projects have been very successful which include:
eTMS system - It manages sales force monitoring, performance, incentives,
primary and secondary sales consolidation had several enhancements such as:
ePR (Electronic Purchase Requisition system) - It is used to automate and
simplify approval process, improve documentation and internal controls. The
system integrates with SAP to ensure budget controlling as well.
43
eAED (Electronic Approval) - Used for projects of higher financial values.
Projects can be transparently reviewed and approved by regional management and
corporate teams.
cGate - A portal for their sales force with communication highlights, email, and
electronic daily call reporting that automates field expenses re-imbursement and
KPI calculation. Results of electronic daily calls are cross referenced with our
secondary sales and as a result steers our marketing and sales planning process.
GIMc - A global change management system, which is a paperless change
management system for industrial processes. The system is GMP compliant and
improves control and documentation. It also saves time in accessing change
requests or to check status.
iv. Procurement:
Sanofi ensures procurement of high quality inputs that comply with the highest social,
ethical and environmental standards. By 2011, around 1880 suppliers were evaluated.
Primary activities:
i. Inbound Logistics:
Before choosing the suppliers, a thorough and extensive evaluation of suppliers is done in
order to select the most experienced and competent suppliers who provide high quality raw
material as per the quality requirement of the company. A major portion of the raw material
purchased, comes from Germany and France. Sanofi also manages its process of movement of
raw materials from suppliers to warehouse effectively.
ii. Operation:
All the developmental activities carried out at Sanofi are managed and conducted
intelligently, scientifically and methodically and are in full compliance with the cGMP
44
guidelines. Its ongoing strategy is to increase investment in technology. Sanofi has a better
managed quality control department which ensures that all products meet the quality standards
and certifications. It has warehouses where products are properly stocked and maintained with
due diligence.
iii. Outbound Logistics:
Sanofi has a world-class, state-of-the-art pharmaceutical warehouses situated in Wah
Cantt and Karachi. Sanofi distributes its stocks directly to different institutions like doctors,
government and private hospitals, dispensaries by experienced distributors. It receives stocks
from WAH Warehouse and KARACHI Warehouse and sell that to Retailers and Wholesalers in
local market through their 16 Regional Distributors. Sale is done to all Institutions including
Government and Private Hospitals all over the country. It is done directly by the company but
supplied through 12 Institutional Agents.
Goods flows chart
iv. Marketing &
45
Sales:
Information regarding the proper use of medicine is provided by Sanofi through its well
marketed channels and promotional marketing strategies. The changing customer needs are well
understood by the marketing department of Sanofi which is well equipped with expert marketers.
Marketing of medicine is usually through seminars and conferences which introduces and
explains the benefits of medicine and their importance with changing consumer needs. This is
done through marketing representatives with strong mission to achieve the objectives. Since
there are large numbers of products, each product requires a different marketing strategy. This
ultimately requires huge investment and promotion budget on marketing which Sanofi is already
doing.
v. Services:
Sanofi provides after sales service by asking their customers for any help regarding
detailed description of a particular product or helping their consumers gather sufficient number
of consumers so that they can deliver their message to them and thus can create profits for them
by catering to the greater number of people.
46
CORE COMPETENCIES OF SANOFI AVENTIS
1. Highly innovative Research & Development
Sanofi has built a revitalized R&D organization which is focused on meeting unmet
needs of the patients and delivering truly innovative solutions. The R&D team of Sanofi is
composed of highly qualified and trained scientists, pharmacists, chemists and engineers who not
only identify novel mechanism of actions but they also transform innovative concepts into
effective treatments. The products made by this team comply to the internationally accepted
standards of quality, purity, efficacy and safety.
2. Specialized knowledge and know how in key sectors i.e. in Diabetes and Antibiotics
Sanofi is a very well established French multinational company in the market of diabetes
and anti-biotic. They are very strong in these sectors and also have a first mover advantage. They
have led the field in insulin manufacturing as well as in diabetes research and development for
88 years: from the first manufacture of insulin through to the development of Lantus which they
launched a little over a decade ago.
47
STRATEGIC COST MANAGEMENT PROCESS ES OF SANOFI AVENTIS
Sanofi Aventis does not use Activity Based accounting system. Costing is done
departmental wise by a team of accountants that are hired by the company. It includes the
following costs:
i. Operational Costs (warehousing, manufacturing & workforce)
Sanofi has a state of the art plant which is continuously improved and upgraded; the cost
incurred for advancement and maintenance is high. The corporation is continuously transforming
the business to meet the challenges that lie ahead. Sanofi also has a large pool of highly skilled
labor force which has to be looked after.
ii. Raw Material Cost
Sanofi outsources the raw materials for production out of which majority of raw materials
are imported from abroad mainly Germany and France. This increases the transportation
expenses of 3rd party contractors, and eventually increases overall costs for Sanofi. They can do
backward integration with their suppliers and increase partnership locally as well as
internationally which can also reduce cost of raw material as the price hike of raw material is
increasing globally.
iii. Distribution and marketing Cost
Sanofi distributes its products all over Pakistan which is done through different channels,
of distribution. The organization’s marketing department is active and launches new campaigns
to create awareness. It also conducts seminars and workshops. Sanofi controls the transportation,
distribution and marketing costs effectively. Distribution and marketing expenses have increased
as a % of net sales from 17.8% to 18.4% this year. The increase is attributable to the
pharmaceuticals business activities with increased spending on advertising and promotional
activities coupled with higher utility, traveling & conveyance, handling, freight & transportation
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costs, adverse exchange parity impact relating to imported items, depreciation charge and the
impact on account of general inflation. The increase was offset by reduced selling expenses
especially commission expenses pertaining to the vaccines tender business.
FINANCIAL RATIO TRENDS OF SANOFI AVENTIS
Financial Ratio Trend Analysis
The growth rate of Sanofi for 2011 was 16% (Business Recorder, 2011) where as average
growth rate of industry was 11%. This shows that Sanofi is growing at a much better rate
than the market.
Total sales including both pharmaceutical and vaccine sales of the company grew by
23.7%. This was mainly driven by volume growth of key pharmaceutical brand and
exploration and materialization of growth opportunities (which included licenses
acquired for certain pharmaceutical products as well as new line extension for Amaryl,
Falgyl and Taxotere family.
The major concern uncovered by the ratios is that the operating and net profitability of
this company is very low when compared with the industry average, indicating that other
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INDICATOR SANOFI AVENTIS INDUSTRY AVERAGE
Inventory Turnover 3.9 Times 5.29 Times
Current Ratio 1.1 Times 1.9 Times
Net Profit Margin 3.0% 6.62%
Return On Assets 5.2% 10.16%
Operating Margin 7% 12.25%
Growth 16% 11%
companies are making a better return on their investment and earning more profits due to
more sales & lesser cost structures. Sanofi has to increase its profitability as it seems
there is still untapped potential in the market which the company is forgoing. The data
suggest that the company has to curtail it expenses, in order to compete aggressively in
the Pharmaceutical industry and increase their profit share.
Inventory Turnover is lower than the industry average indicating that it is taking more
days to sell the inventory so an action needs to be taken here.
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INTERNAL FACTOR EVALUATION MATRIX
Critical Success Factors Weight RatingWeighted
ScoreStrengths Highly innovative R&D 0.13 4 0.52Specialized knowledge and know how in diabetes and antibiotics 0.15 4 0.60Strong medical marketing team 0.02 3 0.06State of the art plants 0.1 3 0.30Robust training program 0.05 3 0.15Extensive distribution network through 16 regional distributors 0.07 3 0.21Strong diversified product portfolio 0.14 4 0.56World leader in vaccines 0.1 4 0.40Strong and recognized brand name in most of therapeutic segments 0.06 3 0.18Effective monitoring and control system through new technology (ePR, eTMS, GIMc, cGATE) 0.05 3 0.15Weaknesses Low profit margin as compared to industry average 0.06 1 0.06Strict credit policy 0.02 2 0.04
New launches are not much as compared to the competitors 0.05 2 0.10TOTAL 1.00 3.33
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The Total Weighted Score of 3.33 in the Internal Factor Evaluation (IFE) Matrix denotes
that Sanofi is honing its strengths and overcoming weaknesses effectively. Sanofi is pioneer in
insulin and also has specialized knowledge in the filed of diabetes. Sanofi should make use of
this knowledge to come up with more innovative medicines for diabetic patients in order to
maintain its position in the diabetic market. Sanofi should also continue to develop its highly
innovative R&D facilities so that it’s able to maintain this advantage and further strengthen and
improve its diversified portfolio. Sanofi should improve its profit margins that are comparatively
lower than the industry average.
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B e s t - c o s t p r o v i d e r s t r a t e g y
Low Cost DifferentiationMarket T
arget
Narrow
buyer segment
Broad range of buyers
GENERIC STRATEGY FOR SANOFI AVENTIS
Sanofi Aventis has the 5th highest market share in Pakistan pharmaceutical industry and
its growth rate is considerably higher than the growth rate of the entire pharmaceutical market. It
is the pioneers in insulin and has specialized knowledge and know how in diabetic and antibiotic
market. The company’s aim is to provide superior quality products to the mass market while
complying to the cGMP standards. It has a diversified and strong product range targeted towards
the mass market. It manufactures its products using state of the art mechanical plants, world-
class R&D research. Therefore, considering all this information, we find that Sanofi is following
the generic strategy of broad differentiation. Sanofi should not change this strategy as its
mission is to launch and successfully market innovative pharmaceuticals for large patient
population. The strategy of broad differentiation is in line with that objective i.e. to provide
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better health to the general public. In addition to this, pharmaceutical companies, particularly the
ones in the generic drugs business cannot sustain without catering to a broad market. They need
high revenues for R&D and process improvements in order to remain competitive in the market.
TOWS MATRIX OF SANOFI AVENTIS
INTERNAL FACTORS (IFAS)
EXTERNAL FACTORS(IFAS)
STRENGTHS
1. Highly innovative R&D2. Specialized knowledge and
know how in diabetes and antibiotics
3. Strong medical marketing team
4. State of the art plants5. Robust training program6. Extensive distribution
network through 16 regional distributors
7. Strong diversified product portfolio
8. World leader in vaccines9. Strong and recognized
brand name in most of therapeutic segments
10. Effective monitoring and control system through new technology (ePR, eTMS, GIMc, cGATE)
WEAKNESSES
1. Low profit margin as compared to industry average
2. Strict credit policy3. New launches are
not much as compared to the competitors
OPPORTUNITIES
1. Increasing research work in field of oncology- product pipeline is dry
2. Pakistan pharmaceutical is US $2billion industry with growth rate of 12.9% per annum.
3. Pakistan's high population growth rate
4. Emergence of new diseases5. Some affected markets are not
completely catered6. Growing market of blood and
blood forming organs7. Growth in generic sector
S-O strategies
- Use R&D to develop drugs in the field of oncology. (S1-O1)
-Further diversify its product portfolio by entering into the generic medicine sector (S7-O7)
-Enter the blood & blood forming organs market through medical marketing team and highly innovative R&D. (S1,S3- O6)
-Use strong distribution network and come up with generic drugs for markets of Baluchistan and Khyber Pakhtunkwua that are not
W-O strategies
-Increase profit margin by capturing generic medicine market. (W1-O7)
-Launch new products particularly vaccines for malaria and medicine for dengue in order to get ahead of the competitors. (W3-O4)
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completely catered (S6-O5,O7)THREATS
1. Rising cost of production due to high inflation (10.8%) and devaluation of local currency
2. Aggressive competition by local companies due to their ability to launch new products in short time.
3. 40-50% fake and Counterfeit drugs available in market
4. MFN status to India opens up avenues for Indian pharmaceutical companies to Pakistan
5. Scientist not coming to Pakistan due to deteriorated law and order situation- increasing R&D cost
6. Complete freezing of pharmaceutical product prices by MoH since 2011- threat to profitability
7. Increasing cost of manpower and energy
8. Ministry of Health dissolved in October 2011 due to which approvals for new products are pending.
S-T strategies
- Conduct seminars and other health awareness programs in different Institutions to educate people about the harmful effects of counterfeit medicines (S3-T3)
-Reduce costs by using effective monitoring and control system through new technologies. (S10-T7)
-Partnership with Indian companies for diabetes and antibiotics market to overcome competition with local companies (S2-T2,T4)
W-T strategies
-Profit margin can be increased by partnering with the Indian pharmaceutical companies. (W1-T4)
- Attract potential customers by giving easier credit terms to distributors. (W2-T5)
-Upgrade the production process in order to launch standardized products faster than the competition. (W3-T2)
INTERNAL EXTERNAL MATRIX OF SANOFI AVENTIS
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The weighted score of IFE and EFE for SANOFI make it fall in box IV. The recommendation for
the firm is to grow and build.
The firm may go for the following strategies:
Backward/Forward Integration: To overcome high cost of raw materials, Sanofi can
implement the strategy of Backward Integration and be its own supplier.
Horizontal Integration: Sanofi may form consolidation with other firms in order to
strengthen its processes like improve its production process.
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Market Penetration: Sanofi may build strong marketing strategies and conduct market
penetration by coming up with new marketing techniques for the current markets that
also include using social media as one of the marketing tools like facebook, online
competitions, incentives etc
Product Development: Coming up with new and better vaccines for diseases like
dengue. Enter into ‘Blood & Blood Forming Organ’ market by conducting strong R&D.
Use R&D to develop drugs in the field of oncology that can cure cancer related diseases.
Market Development: Use strong distribution network and come up with generic drugs
for markets of Baluchistan and Khyber Pakhtunkwua that are not completely catered by
pharmaceutical companies
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INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
Financial Strength (FS) Rating
Environmental Stability (ES) Rating
- Firm’s Inventory Turnover is 3.9 times which is lower than industry average of 5.29 times
+2 -High Inflation -3
-Current Ratio is 1.1 times whereas industry is at 1.9 times
+3 -Substitute prescriptions by
physicians -4
-ROA is 5.2% where as industry is at 10.16% +2
-Price freeze on pharmaceutical sector has made profits tight -3
-Operating margin is 7% and industry average is 12.25% +2 -Difficult to acquiring license -2
TOTAL +9 TOTAL -12
FS Average +2.25 ES Average -3
Competitive Advantage (CA) Rating
Industry Strength (IS) Rating
-Product quality is high -2
-Bargaining power of consumers is low as there is no compromise on health
+4
-Sanofi operates in with a differentiation strategy. -2
-Ranked 4th in the pharmaceutical sector +4
-Innovation -2
-Price regulations decreased freedom and competition +2
-Specialized in key sectors of diabetes and Antibiotics -1
-Rivalry among firms is moderate as switching depends on doctor’s prescription
+3
TOTAL -7 TOTAL +13
CA Average -1.75 IS Average +3.25
SPACE MATRIX FOR SANOFI AVENTIS
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X-Axis Y-AxisIndustry Strength = 3.25 Financial Strength = 2.25Competitive Advantage = -1.75 Environmental Stability = -33.25-1.75 = 1.5 2.25-3 = - 0.75
Recommended Strategies
Under SPACE matrix Sanofi falls in the Competitive region. Competitive strategies include
backward, forward and horizontal integration, market penetration, market development, product
development and joint venture. Sanofi may suitably pursue the following Competitive Strategies:
60
Backward/Forward Integration: To overcome high cost of raw materials, Sanofi can
implement the strategy of Backward Integration and be its own supplier.
Horizontal Integration: Sanofi may form consolidation with other firms in order to
strengthen its processes like the production process.
Market Penetration: Sanofi may build strong marketing strategies and conduct market
penetration by coming up with new marketing techniques for the current markets that
also include using social media as one of the marketing tools like facebook, online
competitions, incentives etc
Product Development: Coming up with new and better vaccines for diseases like
dengue. Enter into ‘Blood & Blood Forming Organ’ market by conducting strong R&D.
Use R&D to develop drugs in the field of oncology that can cure cancer related diseases.
Market Development: Use strong distribution network and come up with generic drugs
for markets of Baluchistan and Khyber Pakhtunkwua that are not completely catered by
pharmaceutical companies
Joint Venture: Sanofi may form partnerships with Indian companies that will not only
drive out the unnecessary costs out of the business but also strengthen the competitive
edge of the company.
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GRAND STRATEGY MATRIX FOR SANOFI AVENTIS:
Sanofi has a strong competitive position and is in an industry that is characterized by rapid
market growth.
RAPID MARKET GROWTH
Quadrant II Quadrant I
WEAK COMPETITIVE STRONG
POSITION COMPETITIVE
POSITION
Quadrant III Quadrant IV
SLOW MARKET GROWTH
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Recommended Strategies:
According to GRAND matrix Sanofi lies in the first quadrant which suggests that the company
may go for the following strategies;
Market Development: Use strong distribution network and come up with generic drugs
for markets of Baluchistan and Khyber Pakhtunkwua that are not completely catered by
pharmaceutical companies.
Market Penetration: Sanofi may build strong marketing strategies and conduct market
penetration by coming up with new marketing techniques for the current markets that
also include using social media as one of the marketing tools like facebook, online
competitions, incentives etc
Product Development: Coming up with new and better vaccines for diseases like
dengue. Enter into ‘Blood & Blood Forming Organ’ market by conducting strong R&D.
Use R&D to develop drugs in the field of oncology that can cure cancer related diseases.
Backward/Forward Integration: To overcome high cost of raw materials, Sanofi can
implement the strategy of Backward Integration and be its own supplier.
Horizontal Integration: Sanofi may form consolidation with other firms in order to
strengthen its processes like the production process.
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BCG MATRIX FOR SANOFI AVENTIS
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FLAGYLPLAVIXTARIVIDTELFASTNO-SPA
LANTUSAPPROVELTAXOTERE
CLEXANEAMARYL
DAONIL
Q UANTITATIVE STRATEGIC PLANNING MATRIX FOR SANOFI AVENTIS
Strategic Alternatives
Critical Success Factors Weight
Use R&D to develop
drugs in the field of
oncology
Use strong distribution network and come up with generic drugs for markets
of Baluchistan and Khyber
Pakhtunkwua Strengths AS TAS AS TASHighly innovative R&D 0.13 4.00 0.52 3.00 0.39
Specialized knowledge and know how in diabetes and antibiotics 0.15 1.00 0.15 2.00 0.30Strong medical marketin team 0.02 4.00 0.08 3.00 0.06State of the art plants 0.10 4.00 0.40 2.00 0.20Robust training program 0.05 ---- ---- ---- ----
Extensive distribution network through 16 regional distributors 0.07 2.00 0.14 4.00 0.28Strong diversified product portfolio 0.14 2.00 0.28 1.00 0.14World leader in vaccines 0.10 ---- ---- ---- ----
Strong and recognized brand name in most of therapeutic segments 0.06 1.00 0.06 ---- ----
Effective monitoring and control system through new technology (ePR, eTMS, GIMc, cGATE) 0.05 2.00 0.10 1.00 0.05
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Weaknesses
Low profit margin as compared to industry average 0.06 ---- ---- 1.00 0.06Strict credit policy 0.02 ---- ---- ---- ----
New launches are not much as compared to the competitors 0.05 ---- ---- ---- ----SUBTOTAL 1.00 1.73 1.48
Critical Success Factors Weight
Use R&D to develop
drugs in the field of
oncology
Use strong distribution network and come up with generic drugs for markets
of Baluchistan and Khyber
Pakhtunkwua Opportunities AS TAS AS TAS
Increasing research work in field of oncology- product pipeline is dry 0.08 4.00 0.32 ---- ----
Pakistan pharmaceutical is US $2billion industry with growth rate of 12.9% per annum. 0.05 1.00 0.05 ---- ----Pakistan's high population growth rate 0.04 1.00 0.04 1.00 0.04Emergence of new diseases 0.05 1.00 0.05 1.00 0.05
Some affected markets are not completely catered 0.05 ---- ---- 4.00 0.20
Growing market of blood and blood forming organs 0.06 ---- ---- ---- ----Growth in generic sector 0.10 ---- ---- 4.00 0.40
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Threats
Rising cost of production due to high inflation (10.8%) and devaluation of local currency 0.09 3.00 0.27 1.00 0.09
Aggressive competition by local companies due to their ability to launch new products in short time. 0.08 2.00 0.16 2.00 0.16
40-50% fake and Counterfeit drugs available in market 0.06 1.00 0.06 1.00 0.06
MFN status to India opens up avenues for Indian pharmaceutical companies to Pakistan 0.04 ---- ---- ---- ----
Scientist not coming to Pakistan due to deteriorated law and order situation- increasing R&D cost 0.07 1.00 0.07 ---- ----
Complete freezing of pharmaceutical product prices by MoH since 2011- threat to profitability 0.07 ---- ---- 1.00 0.07 Increasing cost of manpower and energy 0.06 1.00 0.06 1.00 0.06
Ministry of Health dissolved in October 2011 due to which approvals for new products are pending. 0.10 2.00 0.20 2.00 0.20 0.00 ---- ---- ---- ---- 0.00 ---- ---- ---- ----SUBTOTAL 1.00 1.28 1.33
SUM TOTAL ATTRACTIVENESS SCORE 3.01 2.81
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SELECTED STRATEGY FOR SANOFI AVENTIS
“Use R&D to develop drug in the field of oncology”
The QSPM results clearly indicate new product development in the field of oncology as
highly lucrative business opportunity for Sanofi Aventis. Oncology is one of the seven major
therapeutic segments on which Sanofi focuses. According to Mr. Adnan Ali, extensive research
has been done in the field of oncology but product pipeline is still dry. Only some of the few
major players worked on oncology but currently there are no upcoming products in this field.
Therefore, Sanofi should invest heavily in R&D for the development of products in this field and
make use of the extensive research that has been already done.
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BLUE OCEAN STRATEGY FOR SANOFI AVENTIS
“Develop a new tablet or capsule for insulin”
The number of diabetes patients in Pakistan is increasing. International Organization for Diabetes’ statistics experts said that there are approximately 300 million people affected by this disease and if effective measures are not immediately taken, the figure can increase to 450 million by 2030. The experts of the same organization said that if this were to happen, Pakistan would be fourth with 13.8 million diabetic patients (Daily times, 2010). Presently, the only way to take in insulin is through injections, which is not very much liked by many patients. There is argument among experts whether or not insulin can be taken into the body in the form of capsule or tablets without causing any limitations in performance or adverse side-effects. So if Sanofi develops this new drug, it will create a blue ocean for itself by making the competition irrelevant. Sanofi also has an edge because they are the pioneers in insulin and according to Mr. Adnan Ali, Sanofi has specialized knowledge and know how in diabetes market.
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STRATEGY CANVAS FOR SANOFI AVENTIS
ERRC Model for Blue Ocean Strategy of Sanofi Aventis
Eliminate
• Insulin injections---- it would be eliminated because of the hassle it gives to diabetic
patients.
• Process complexities---- the process of creating syringes, its needles of different sizes etc
Reduce
• Inconvenience------ inconvenience of using injections will be reduced and patients would
easily be able to take insulin in the form of capsules rather than using injections
• Focus on doctors----- more focus on patients rather than doctors; provide ease to patients
Raise
• R&D---- heavy investment in R&D will be required for the development f this new drug
Create:
• Insulin tablets---- after eliminating the insulin syringes, the better replaced product would
be tablets as it is convenient for consumers to use
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STRATEGIC LEADERSHIP MODEL FOR SANOFI AVENTIS
RESOURCES STRUCTURE CULTURE
Highly sophisticated, state of the art facilities complying with the latest GMP and HSE standards
Sanofi has a divisional structure in order to support strategic initiatives.
Sanofi’s culture encourages learning and enhances individual and team effort that can bring out creative synergies.
Claforan Plant is considered as one most modern facility in the entire Asia Pacific region equipped with online filling and packaging operation
Each division is further segmented according to the socio-demographics and socio-economic factors of the customers (doctors and patients), product characteristics and therapeutic areas.
Highly innovative Research and development team composed of highly qualified and trained scientists, pharmacists, chemists and engineers
Organizational goals are clearly communicated across the organization, with clarity of responsibility and authority
Highly skilled, professionally trained and motivated workforce.
IMS subscription for easy access to highly valuable research data for further developments.
Sanofi is equipped with innovative technology and IT.Acquisition of Genzyme, brings access to the most advanced technologies in life science
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Sophisticated process management tools to eliminate manual work like eTMS , ePR, eAED, cGate and GIMc systems.
Well established marketing and distribution network
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THE FOUR INTERNAL HURDLES TO STRATEGY IMPLEMENTATION
1. Resource hurdle
Sanofi’s resources comprise of professionally trained and motivated workforce as well as
state of the art plants complying with the latest GMP and HSE standards. They also keep
upgrading their machinery and installing new IT solutions for their problems. So when it comes
to strategy implementation, availability of resources is not a problem but the problem lies with
allocation of resources. Therefore resources must be wisely allocated by Sanofi by directing
them to productive segments from unproductive ones.
2. Cognitive hurdle
Sanofi’s employees are well committed to its core values and they are considered as the
important part in strategy making and implementation process. According to Mr. Adnan Ali
when any new strategy is made, proper sessions are held with employees before strategy
implementation. Also, cross functional teams are made in this regard to take the feedback of the
employees as well as to make them understand the need for a strategic shift. As a result, there is
no cognitive hurdle, when it comes to implementation of strategies at Sanofi Aventis.
3. Motivational hurdle
Employees at Sanofi are committed to the vision and mission of the company and it is
ensured that the workforce work under the standards of quality. Sanofi keeps its employees
motivated by providing them training and setting their goals aligned with the organizational over
all objectives of provide the best solution to the patients and also reward the employees by
providing them compensation packages which fulfills their needs. Therefore at Sanofi, there is
no motivational hurdle in strategy implementation.
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4. Political hurdle
Due to the change in strategy, power shift in Sanofi will also occur and that would lead to
obstruction in the pathway of strategy implementation, because the people will be fearful to lose
their position and stature. Because the expansion in the company will hire more employees and
new technologies can also put the jobs of some positions in jeopardy. So in order to overcome
this hurdle, kingpins need to be given the target of designing their own teams and communicate
the strategy with them.
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