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Identification of Porter’s diamond on the basis of SQUARE Pharmaceuticals Ltd.

1

Assignment On :

Identification of Porter‟s diamond on the basis of

SQUARE Pharmaceuticals Limited

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Assignment

Submitted to:-

Gouranga Chandra Debnath

Department of Business Administration

Faculty of Business & Economics

DIU

Submitted by:-

Ifteer Hossain 091-11-719 (A)

Tonmoy Kumar Saha 091-11-841 (A)

MD. Zahidul Islam 091-11-825 (A)

Nazmin Naher 091-11-842 (A)

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Date of submission: 1st March, 2012

Letter of Transmittal

Date: 1st March, 2012

Gouranga Chandra Debnath

Lecturer,

Department of Business Administration

Faculty of Business & Economics

Daffodil International University.

4/2, Sobhanbag, Mirpur Road, Dhanmondi.

Dhaka-1207.

Subject: Application for submitting the project report.

Dear sir,

We are very glad to submit the report on main subject of the topic of this report is Identification

of Porter’s diamond on the basis of SQUARE Pharmaceuticals Ltd. We also so grateful to

you for giving us the opportunity to prepare this report. We have tried our best to prepare this

report properly according to the rules and regulation.

We hope you would be kind enough to consider for any of our mistakes in preparing this project

report.

Thanking you,

Sincerely yours

Ifteer Hossain

091-11-719

_____________

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Acknowledgement

We wish to express our indebtedness to our course instructor, Gouranga Chandra Debnath,

Lecturer, BBA program, Department of Business Administration, Faculty of Business &

Economics, DIU, for his valuable suggestions, continued encouragement and unfailing

enthusiasm throughout the process of completing this report.

Objectives of the study

The objectives of this study are-

•To f i nd ou t whe t he r a l l t he e l emen t of Por t e r ‟ s d i amond a r e ava i l ab l e i n

our company,

•To find out our company‟s current condition in the market and also SPL‟s future potential,

•To analyze the current situation of our rivals BPL in particular,

•To discuss the demand condition & customer base.

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Michael Porter's Diamond Model?

Porter's diamond model suggests that there are inherent reasons why some nations, and industrieswithin nations, are more competitive than others on a global scale. The argument is that thenational home base of an organization provides organizations with specific factors, which willpotentially create competitive advantages on a global scale.

Porter's model includes 4 determinants of national advantage, which are shortly described

below:

Factor Conditions

Factor conditions include those factors that can be exploited by companies in a given nation.Factor conditions can be seen as advantageous factors found within a country that aresubsequently build upon by companies to more advanced factors of competition. Factors notnormally seen as advantageous, such as workforce shortage, can also be seen as a factorpotentially strengthening competitiveness, because this factor may heighten companies' focus on

automation and zero defects.

Some examples of factor conditions:

Highly skilled workforce Linguistic abilities of workforce

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Rich amount of raw materials Workforce shortage

Demand conditions

If the local market for a product is larger and more demanding at home than in foreign markets,local firms potentially put more emphasis on improvements than foreign companies. This willpotentially increase the global competitiveness of local exporting companies. A more demandinghome market can thus be seen as a driver of growth, innovation and quality improvements. Forinstance, Japanese consumers have historically been more demanding of electrical and electronicequipment than western consumers. This has partly founded the success of Japanesemanufacturers within this sector.

Related and Supporting Industries

When local supporting industries and suppliers are competitive, home country companies willpotentially get more cost efficient and receive more innovative parts and products. This willpotentially lead to greater competitiveness for national firms. For instance, the Italian shoeindustry benefits from a highly competent pool of related businesses and industries, which hasstrengthened the competitiveness of the Italian shoe industry world-wide.

Firm Strategy, Structure, and Rivalry

The structure and management systems of firms in different countries can potentially affectcompetitiveness. German firms are oftentimes very hierarchical, which has resulted in

advantages within industries such as engineering. In comparison, Danish firms are oftentimesmore flat and organic, which leads to advantages within industries such as biochemistry anddesign.Likewise, if rivalry in the domestic market is very fierce, companies may build up capabilitiesthat can act as competitive advantages on a global scale. Home markets with less rivalry maytherefore be counterproductive, and act as a barrier in the generating of global competitiveadvantages such as innovation and development.

By using Porter's diamond, business leaders may analyze which competitive factors may residein their company's home country, and which of these factors may be exploited to gain globalcompetitive advantages. Business leaders can also use the Porter's diamond model during a phase

of internationalization, in which leaders may use the model to analyze whether or not the homemarket factors support the process of internationalization, and whether or not the conditionsfound in the home country are able to create competitive advantages on a global scale.

Finally, business leaders may use this model to asses in which counties to invest, and to assesswhich countries are most likely to be able to sustain growth and development.

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Chapter: 1

1. Introduction

1.1 Background:

Pharmaceutical Industry has grown in Bangladesh in the last two decades at a significant rate and

some companies have already attained international standards for the production of drugs

Complying with international quality parameters. Among LDC‟s only Bangladeshi

pharmaceutical sector have achieved its ability to meet almost 97% medicament needed for it s

by local manufacturing and Bangladeshi pharmaceuticals companies can produce the

wide range of products in huge quantities that can be exported to the other countries after meet

local demand and meet our company Square Pharmaceutical Limited (SPL)is one of the leading

Pharmaceutical companies Bangladesh that can meet both local and international demand.

1.2 Purpose:

The purpose of our report is to show how SPL is maintaining its success as alead ing company in Bangladesh and reaching for the international market.

1.3 Scope:

We have tried to analyze our company on the basis of Porter‟s diamond modelwhich suggests that there are inherent reasons why some nations, and industries within nations,are more competitive than others on a global scale. The argument is that thenational home base of an organization provides organizations with specific factors,which wi ll potentially create competitive advantages on a global scale.

1.4 mission:

As a leading pharmaceutical company our mission is to provide quality healthcare in Bangladesh

as well in the international market also maintain the standard in business operation.

1.5 vision:

In order to meet increasing demand in the domestic as well as foreign markets, SPLhas undertaken an ambitious expansion program. We made an assumption that the new plantwill operate with 85% efficiency and after the year of completion.

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Chapter: 2

SQUARE Pharmaceuticals Limited (SPL)

2.1 Introduction

SQUARE Pharmaceuticals Limited (SPL) is the largest pharmaceuticals company in

Bangladesh. Founded in 1958 and headquartered in Dhaka, Bangladesh, SPL

develops manufacture and market drugs. The company owns and operation modern

pharmaceutical factories mainly in Bangladesh and also has a separate division to operatemodern chemical factory which produces and sells basic chemical products. It also has divisions

to produce and sell agro vet and pesticide products. As we said before we studied our company

based on Porter‟s diamond which include four internal factors which are-

1. Firm Strategy, Structure, and Rivalry2. Demand conditions3. Factor Conditions (both basic and advance4. Related and Supporting Industries And two external factors which influence the factors

Mentioned above are-1. Chance2. Government

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2.2.1 Firm Structure, Strategy, and Rivalry

The Position in Bangladesh:

I n Bang l adesh t he r e a r e cu r r en t l y a t o t a l o f 245 compan i es ou t o f wh i ch

200 have operations in the country. The market is totally dominated by the localcompanies and there are only 5 multi-nationals currently operating. The 245companies together have5300 brands registered in Bangladesh. Among thiscompan ies SQUARE is the leader with almost 20% of the market share.

2.2(a) Company structure:

SQUARE gives highest importance to the principles of Corporate Governance andits implementation within the organization. In SPL we follow some rules like:

1.All new recruits at SQUARE undergo a mandatory training on Company‟s Code of Conduct.

2 .F r om t he ve r y i ncep t i on , SPL l i ke t he o t he r S t r a t eg i c Bus i ness Un i t s( S BU) o f the Group maintains and upholds HR policies that are consistent with theLabor Laws of the country.

3.SQUARE Pharmaceuticals Ltd leads the Group in encouraging workers‟ freedomof association and their right for collective bargaining.

4 .The compan t f o l l ows l aws and encour ages a wor k env i r onmen t t ha t

welcomes diversity and fair treatment in the recruiting process and the workplace.

5 . SPL encour ages d i ve r s i t y and equa l empl oymen t oppor t un i t y i n t herecruiting process and the workplace.

6 . t h e c o m p a n y p u r s u e s p o l i c i e s t h a t p r o a c t i v e l ya d d r e s s a l l f o r m s o f discriminations in terms of minority, gender and culturalissues.

2.2(b) Company strategy:

For years our company‟s strategy is to capture the maximum share through

customer satisfaction by quality product. In words we put our strategies in this way:

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1.In SQUARE we value, above all, for top quality health care products at the leastcost reaching the lowest rungs of the economic class of people in the country.

2 .W e a r e ob l i ged t o ou r sha r eho l de r s and s t r i ve f o r p r o t ec t i on o f t he i rc ap i t a l a s well as ensure highest return and growth of their assets.

3. We try hard for best compensation to all the employees who constitute the back -bone of the management and operational strength of the Company

4. SOUARE endeavor for best co-operation of the creditors & debtors the banks&financial institutions , the suppliers of raw material, the providers of utilities-power, gas & water etc. and the customers

5. SPL fulfill her responsibility to the Government through payment of entire rangeof due taxes, duties, and claim to various public agencies.

6 . W e s t r i ve , a s r e spons i b i l i t i e s c i t i zen , f o r a soc i a l o r de r devo i d o f m al p ra c t i ces , anti-environmental behaviors, unethical and corruptive dealings.

2.2.b(1) Long term corporate vision:

In order to meet increasing demand in the domestic as well as foreign markets, SPLhas undertaken an ambitious expansion program to be completed in two phases.

•The first phase, which is already under way, is expected to be completed by 2012at a totalcost of BDT 3.6 billion. We anticipate a 25% cost overrun for a final cost of BDT

4.5 billion. The first phase is expected to nea rly double the current capacity.

•The second phase will start in 2014, completing in 2017 for a total cost of BDT2.0billion (including an estimated cost overrun of 25%).We expect the expansion programscontributing to revenue growth after 2012. We made an assumption that the new plants willoperate with an 85% efficiency and after the yearof completion, 25% of the capacity will come on line in each of the following four years. Secondphase will also do the same.

2.2.b(2) Financial condition:

SQUARE Pharmaceuticals Ltd (SPL) is one of the two Public Limited Companies of the Group

that is listed at the two stock exchanges of Bangladesh. And company‟s share is

considered as „Blue Chip‟ at both the stock exchanges. SQUARE Pharmaceuticals is the stand

out market leader with a market share of 19.3%and domestic revenues of BDT 11.2 billion in the

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four quarters from April 2009 to March 2010.Because of its dominating presence throughout the

country, SPL has enjoyed steady growth in sales volume. Cost of sales as percentage of

sales has also been declining gradually over the year, improving gross margin

2.2(c) Domestic Rivals:

As we said before SQUARE Pharmaceuticals is the stand out market leader with a market shareof 19.3% and domestic revenues of BDT 11.2 billion in the four quarters from April 2009 toMarch 2010.SPL‟s nearest competitors are Incept Pharmaceuticals and Beximco Pharmaceuticalswith market shares of 8.5% and 7.6% respectively. Incept and Beximco had BDT 4.9 billion andBDT 4.4 billion in domestic sales for the last four quarters. Although a number of MNCs areoperational in Bangladesh, no MNC is among the top ten in terms of domestic sales. Betweentwo top rivals we consider Beximco to be our arch rival though their market share isalmost half compared to ours but here we have tried to find out there position in the market.

Here‟s market study of BPL :If we analyze the present market condition of BPL we canclearly see that we are in agood position then our rival. We are almost two times bigger thenour local competitor in market share and company size and from our steady growth rate we cansay we are going to hold the number one position in the local market for long time.2.3 Demand conditionIn Bangladesh we have huge demand for our products. The demand of local markethas helped us to build a strong customer base and gave us the strength to go for internationalmarket. The huge deman d of our m arket l eade d us to p roduce l a rge volumeo f p rod uc t . T he medicines we are producing now are given bellow:

2.3(a) Products Category:

SPL offers a range of pharmaceutical products (594 types of medicine), which include:

1. Tablets2. Capsules3. Suppositories4. Injections5. Liquids6. Spray, Drops, Ointment, Cream and Powder

7. Oral Dry Powders :8. Dry Powder Inhalers9. Metered Dose Inhalers

2.3(b) Types of Customer:

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By mai n t a i n i ng t he qua l i t y we se t ou r p r i ce conven i en t l y f o r t he masspopulation of Bangladesh. We never compromise about our drugs quality thus we acquirethe thrust of our customer.

2.3(c) Present Market status:

Besides Bangladesh demand of international market driven us to supply our productin these markets

• Europe: UK;

• Asi a : Af ghan i s t an , Bhu t an , Cambod i a , Hong Kong , I r aq , M acau ,Malaysia, Myanmar, Nepal, Papua New Guinea, Sri Lanka, Tajikistan, ThePhi lippines, Vietnam, Yemen;

• Af r i ca : Comor os I s l ands , E r i t r ea , Gambi a , Ghana , Kenya , L i bya , M al a wi ,M aur i t an i a , M aur i t i u s , M ozambi que , N i ge r , Rwanda , S i e r r a Leone ,S omal i a , Sudan, Tanzania;

• South America : Belize, Costa Rica, Guatemala And these are the market under thereexploration:

• Asi a : I r an , I r aq , Kuwai t , Laos , M al d i ves , M ongo l i a , Qa t a r , Saud i Ar ab i a ,Thailand, UAE;

• Af r i ca : A l ge r i a , Bo t swana , Cen t r a l Af r i can Repub l i c , Chad , E t h i op i a ,Iv o r y Coast, Nigeria, Rwanda, South Africa;

• South America: Jamaica, Chili

2.3(d) CSR activities:

S q u a r e P h a r m a c e u t i c a l s L t d . i s o n e o f t h e s i g n a t o r y o f U N

G l o b a l C o m p a c t i n Bangladesh. Our CSR activities helped us to increase our demand.

Some examples of our activities are:

•SQUARE supports global business community to uphold social issues in business operationsand being convinced of the benefits which will accrue out of voluntary adherence to universallyrecognized social values in transaction of businesses.

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•SQUARE regularly interacts with the underprivileged segment of the societydirectly or through different NGOs.

•The Company assists the HIV positive/AIDS patients in gaining better access tomedicine through donation of AIDS medicine to local NGOs.

•SPL has donated two ambulances to Pabna Municipal Corporation & IshwardiMunicipal Corporation for public use.

2.4 Factor Conditions (both basic and advance)

2.4(a) Basic factors:

Basic factors like natural resources, climate geography demography everything is in our favor inBangladesh to produce and provide quality health care.

2.4 (b) Advance factors condition:

I n t he d i scuss i on be l l ow we t r i ed t o desc r i be t he advance f ac t o r s

condition of our company at present.

2.4.b.(1) R and D department:

With strong reverse engineering capability, we focus principally on developing highquality generic formulations, matching the profile of innovator products.

•Our g r owi ng i nnova t i on i s ev i den t f r om suc cess f u l l aunch i ng o f a numberof advanced formulations like multi-layer tablets, sustained release formulations,dispersible tablets, melt-in mouth tablets, chewable vitamins etc.

•In addition, we are also developing a number of APIs to ensure availability of rawmaterials across the range of therapeutic classes.

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•Our capabilities to produce hi-tech, specialized niche products as well as drugdelivery systems have been our core strength to transform SPL into an innovation-driven genericdrug company.

•Advanc i ng Resea r ch & Deve l opmen t P r ogr ams : SPL i n co l l abor a t i on w i t h

ICDDR,B (International Center for Diarrheal Disease Research,Bangladesh ) produced 1.8 milli on zinc tablets fo r the center. This was under aproject namedSUZY (“Scaling up Zinc Treatment for Young) aimed at advancing research on zinctherapy on Children with Diarrhea and Pneumonia.

2.4.b(2) Human recourse:

Strategic Human Resource Development Programs are the energy sources for SQUAREH R

f o r r u n n i n g t o w a r d s t h e p e a k o f s u c c e s s . T h e r e a r e c u r r e n t l y 4 1 9 7employees working in SQUARE. We believe in company growth by increasingefficiency level of e m p l o y e e s a n d f o r t h a t o f f e r i n g e x c e l l e n te n v i r o n m e n t a n d s u p p o r t f o r s k i l l a n d knowledge up gradation. Our HRdepartment-- ensures the strong supporting role to develop & implement HR policy guidelinesfor ensuring uninterrupted operation and spontaneous participation to achieveorganizational objective as well as fulfillment of employee needs.- maintain an effective wayto deal with l abor union and st ill no un rest has been recorded as dispute.

2.4.b(3) Raw materials:

W e a r e p r o u d t o s a y t h a t w e a r e c a p a b l e o f p r o d u c i n g r a wm a t e r i a l s f o r o u r o wn medicines. Some info about our firm‟s capability of productionis given bellow:

(a) API unit

Established in 1992 and commercial production started in 1995. It is presently thel a r ges t qua l i t y - bu l k d r ugs manuf ac t u r e r i n t he coun t r y p r oduc i ng

i n t e r n a t i o n a l s t a n d a r d b u l k p h a r m a c e u t i c a l s t o s a t i s f y m o r e t h a nh u n d r e d p h a r m a c e u t i c a l companies throughout the country.

b) Factory plants:

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SQUARE Pharmaceuticals has invested in state of the art formulation plants alignedto r e g u l a t e d m a r k e t s t a n d a r d s . F o u r p l a n t s b a s e d o n t h eD h a k a s i t e c a n p r o d u c e pharmaceutical products to the highest GMP specifications.These four plants are:

• General plant (approved by MHRA)

• Cephalosporin plant (quality systems aligned to MHRA requirements, plant being prepared forEU regulatory agencies and FDA inspections)

• BFS plant (quality systems aligned to MHRA requirements, plant being preparedfor EUregulatory agencies and FDA inspections)

• Biotech (insulin) plant under construction These plants have been designed byinternat ional ly recognized f i rms and equipped wi th the best machines thatc a n c u r r e n t l y b e f o u n d o n t h e E u r o p e a n a n d U S m a r k e t s . SQUARE

Pharmaceuticals has also created quality systems and SOPs according to FDA and EU regulatoryagencies specifications.

2.4.b(4) Distribution system:

One of SPL‟s major strengths lies with its sales and marketing team. We got one thecountry‟s best distribution system that helped us to reach our customer baseeffectively a n d e f f i c i e n t l y . T h e s a l e s f o r c e o f S P L , l e d b ya l a r g e n u m b e r o f “ m e d i c a l representatives”, is one of the most forceful

among all local manufacturers. In the table we can see SQUARE‟s distribution system

2.4.b (5) Technology:

Square Pharma has always been a leader in adopting ground-breaking technologiesthat introduced both skill and scale in the business processes. Our company focusedon the quality of the product so that its product can compete with the top levelpharmaceut i ca l company in the wor ld . SPL i s the p ioneer company f romBangladesh in introducing technology driven (specialty) products in local andinternational markets. Such specialty products include: Suppositories; Inhalationae ro so ls , in cl ud in g Oz on e -b en ig n HF AMDIs ; Nasal sprays etc

2.5 Related and supporting industry:

R e l a t e d a n d s u p p o r t i n g i n d u s t r i e s l i k e H o s p i t a l s a n d h e a l t hc e n t e r s H e a l t h c a r e professionals Insurance and public health bodies Retail pharmaciesand stores diagnostic cen te rs etc ar e a va ila bl e t o s up po rt ou r b us ine ss f ir m. Tosupport our firm further SQUARE Group established a state of the art hospital

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named SQUARE Hospitals Ltd that went in to operation on December 2006. This is a 300-bed hospital built at the cost of $ 50 million aimed to provide global standard healthcareservices at an affordable cost. SQUARE hopes that this will bring changes in people‟s

attitude to seek better healthcare services from countries like Thailand,S i n g a p o r e , I n d i a e t c a n d i n t h e p r o c e s s s a v e i n v a l u a b l e f o r e i g n

c u r r e n c i e s f o r t h e c o u n t r y . A m o n g o t h e r s , S P L a l s o p r o v i d e sinstitutional helps to build healthcare infrastructure.

2.6 The condition of two external factors:

Chance and Government: W e have enough chance and gover nmen t suppor tth rou gho ut ou r co mp an y l i fe . Th e prove of i t is the rate of our market share andgrowth in our country. Though we have some restriction from government about theadvertising of our medicine in the media but except that we have our governments‟ full suppor t

where we need it.

2.7 Overall analysis of the company position based on porter’s diamond:

Why Bangladesh is doing well in pharmaceuticals industry? The answer lies in the Porter‟s diamond as we can see from our report the entire element that make a successful industries arethere in the market. We have strong supporting industries that help us to stay firmly in our feet.We have got all the factors endowment both basic and advance. We got a study demand andcustomer base. And last but not the list our firms strategies structure is strong enough to face outrivals bluntly. Though we know SPL got strong competition in the market but the pace we are

moving we know we are strong enough tony kind threat no matter from where it‟s coming from.

Chapter: 3

3.1Conclusion

Square Pharmaceutical s Ltd, as part of a progressive business group, believe the advancement

of good health occurs not only though the innovation, production and distribution of its products,

but also though the creation and preservation Of a healthy environment Transparency is a

core value of square pharmaceutical Ltd and other SUBs of the group and strictly followed atevery step of the business process .Square Pharmaceutical Limited has extended her range of

services towards the highway of global market. We believe the way we are leading towards our

goal soon we will be known as one of the top leading pharmaceutical company on the world

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3.2 Recommendations

After analyze the whole report we can recommend that –

• We have to give more emphasis on the technological support to compete in global market.

• Should pursue the government to established export cell to promote exportof pharmaceuticals to grab and capitalized the huge export opportunity in LDCs.

• R&D activities of the company have to be improved if it wants to compete withglobal players.

• Patent Law which is valid up to 2016 least development countries like Bangladesh. After 2016

the advantage enjoyed by Bangladesh will evaporate so to face that condition we have to prepare

ourselves.

• Though we have our own API plant still we have to import the API equipments but

We should try to produce our own API requirement.

3.3 References:We used these references to prepare our study:

International Business by Charles W.L. Hill

International Business by Charles W.L. Hill

•www.squarepharma.com.bd

•www.beximco-pharma.com http://www.businessmate.org/Article.php?ArtikelId=49 1

http://www.squarepharma.com.bd/


http://www.beximco-pharma.com/


http://www.businessmate.org/Article.php?ArtikelId=49

http://www.businessmate.org/Article.php?ArtikelId=49




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