Date: Saturday, April 08, 2023
Mir Semon HaiderLecturer, School of BusinessNorth South UniversityDhaka
Subject: Submission of a business plan on Handicraft Export to North America and Europe
Dear Mr. Haider,
This project is a part of the course international business at undergraduate level. The project is a business analysis based on the current situation of Aristopharma in the export business. This project evaluates the prospect of exploring a new country to export the product and examines the scope of operating a business profitably. We thank you for the opportunity to prepare such a analysis and we believe you will enjoy going through our work.
Thanking You,
Shahriar M Osman
041 309 030
Mohd Fahad Ifaz
061 409 030
| 1
ARISTOPHARMA LTD.
| 2
Year of Establishment 1986
Commercial Production 1986
Status Private Limited Company
Type of BusinessManufacturing and marketing of finished pharmaceutical formulations
Product CategoriesAntihistamines, Antiulcerants, Antacids, Gastroprokinetics, Laxatives, Bronchodilators, Decongestants, Antiemetics, Antibiotics, Anxiolytics, Antidepressants, Antidiabetics, NSAIDs, Vitamins & Supplements, Antiseptics, Antieczematous, Antifungals, Cardiovasculars, Antiepileptics, Steroids, Antiglaucoma and Eye care products.
Dosage Forms
Tablet, Capsule, Syrup, Suspension, Powder for Suspension, Lotion, Cream, Ointment, Gel, Mouth Wash, Nasal Drops, Injection & Ophthalmic Products
Number of Employees Around 2600
Export ActivitiesSingapore, Hong Kong, Sri Lanka, Vietnam, Myanmar, Bhutan, Macau, Ukraine & Mauritius
Principal Office 7, Purana Paltan LineDhaka-1000Phone- 88-02-9351691-3Fax- 88-02-8317005E-mail:[email protected]
Factory Plot # 21, Road # 11Shampur-Kadamtali I/ADhaka- 1204Phone: 88-02-7415284 88-02-7415287E-mail: [email protected]
http://www.aristopharma.com/
| 3
VISION, MISSION & OBJECTIVE
| 4
VISION
We see business as a means to the wellbeing of the investors, employees and the society
at large, leading to accretion of wealth through financial and moral gains as a part of the
process of the human civilization.
MISSION
Our mission is to provide quality & innovative healthcare relief for people, maintain
stringently ethical standard in business operation also ensuring benefit to the shareholders
and other stakeholders.
OBJECTIVE
Our objectives are to conduct transparent business operations within the legal & social
frame work with aims to attain the mission reflected by our vision.
| 5
THE JOURNEY
| 6
1986
The journey started through the formation of a proprietorship firm under the dynamic guidance of Mr. M.
A. Hassan, present Chairman & Managing Director of the company. It was a modest start with the
introduction of a few products in oral liquid & tablet form. The journey continued through pains &
pleasures, through shines & showers.
1990
The new manufacturing unit was commissioned at Shampur-Kadamtali with highly sophisticated and
advanced facilities.
1998
Production line was diversified with the addition of cream and ointment in the portfolio.
2000
Company starts its international operation – Vietnam being the first country to export.
2001
Export starts to Sri Lanka
2002
Sterile Products Block is commissioned & Ophthalmic Products are introduced in the market.
As the first Pharmaceutical Company in Bangladesh, ARISTOPHARMA exports to Hong Kong – one of
the most developed markets of Asia.
| 7
2003
The diversification rolls on - parenteral dosage form is introduced.
2004
Company touches another landmark in international operation - export starts to Singapore.
Export of highly sophisticated Ophthalmic Products starts to Hong Kong. Export also strarts to another
country - Macau.
2005
Company crosses the continental boundary export start to Ukraine of East Europe.
2006
Export starts to Mauritius of Africa.
And the journey continue ... ..
| 8
.
QUALITY POLICY
| 9
MANUFACTURING FACILITY
The state-of-the-art-manufacturing facility of ARISTOPHARMA is located at Shampur-
Kadamtali, 10 km south-east from central Dhaka. The facility is planned and designed
with fine tuned future orientation to meet the local as well as international demand both
qualitatively & quantitatively. World class machineries sourced from USA, Germany,
England & Japan have been employed in various steps of production to ensure
manufacturing of world class products.
The ophthalmic and parenteral products are manufactured in the newly commissioned
sterile product block. This block, built on a turn-key basis by RETAN LTD. of Belgium
brings in world class facilities for manufacturing sterile ophthalmic & parenteral dosage
forms. This facility equipped with HEPA filter, laminar air flow and class 100 clean room
is believed to be the most modern in the country.
But apart from all these facilities, the men behind the machines get the major priority in
building our success blocks. Because we believe that the measure of our success is not
the power of technology but the power it unleashes in people. Hence highest care is taken
in selecting, developing & retaining quality people to run the quality machineries. A good
blend of Pharmacists, Chemists, Microbiologists & Engineers led by the Director,
Production pay their relentless efforts to bring in the highest quality products from the
best quality machineries.
| 10
In ARISTOPHARMA quality comes first, profit comes to its sequence & that is reflected
in its motto: ‘Quality – the unit we count’. Strict quality control procedures are
maintained at every step starting from sourcing of raw materials to dispatch of finished
products. The latest WHO approved current Good Manufacturing Practices (cGMP) &
current Good Laboratory Practices (cGLP) are followed in every step of operation.
Written Standard Operating Procedures (SOPs) are maintained for every process, which
are being closely monitored to ensure that all concerned personnel are complying with
these procedures.
ARISTOPHARMA’s Quality Control (QC) lab is well equipped with the most modern &
sophisticated equipments like High Performance Liquid Chromatography (HPLC),
Ultraviolet (UV) Spectrophotometer, Fourier Transform Infrared Spectrophotometer
(FTIR), Atomic Absorption Spectrophotometer, Antibiotic Zone Reader, Colony
Counter, Polarimeter, Refractrometer, Disintegrator, Dissolution Tester & many other
latest computer aided instruments & accessories to ensure the highest quality products.
The total Quality Assurance activities are accomplished by two departments – Quality
Compliance & Quality Control, which are comprised of competent Pharmacists,
Chemists, Biochemists & Microbiologists.
R & D
The motto of ARISTOPHARMA's R & D is to invent a healthier tomorrow. Their thrash
is to support the valued customers with advanced & latest medicines at an affordable
price. Every year around 20-30 new products are added to its portfolio, which is one of
the many reasons that ARISTOPHARMA stands as one of the fastest growing
pharmaceutical companies in the country.
| 11
HUMAN RESOURCE
| 12
Skilled human resources are the key driving force of ARISTOPHARMA. Our success is
based on attracting, developing & retaining talented & motivated human resource. They
share both our desire to excel & our commitment to improve the lives of the people.
The employees of ARISTOPHARMA believe in collaborative spirit. They appreciate that
working as a team multiplies the strength of the individuals involved as well as the
impact of the results.
Skill acquisition & development of all staff is key to a company’s growth, we believe. In
this regard, we are always on the look out to identify training needs of our employees in
order to enable them to carry out the entrusted responsibilities. Training programs
undertaken, not only address skills relating to the specialty of the individuals concerned,
but also improving leadership & management skills.
The total no. of employees in ARISTOPHARMA is around 2600, around 60% of which
are white-collar employees. Among them are-
Pharmacists
Chemists
Biochemists
Microbiologists
Engineers
CMAs
CAs
MBAs
Doctors
| 13
Others (Graduates)
It is our people who make us different from our competitors. The secret of our success
story lies in our people.
MARKETING
The theme of ARISTOPHARMA’s Marketing is to care for its customers and this
responsibility doesn’t lie only on the shoulder of Marketing Department rather all the
company’s departments work together to serve the customers’ interests. And by the
customers we don’t mean only the external customers, but also the internal customers i.e.
our employees. Thus we always thrive to build and maintain an integrated marketing
environment within the organization. However, the core marketing job is accomplished
by six departments- Product Management, Sales, Distribution, Medical Services, Sales
Training and Market Research.
PRODUCT MANAGEMENT DEPARTMENT (PMD)
Product Management Department lies in the center of all marketing activities. A
dedicated team with solid professional background comprising Pharmacists, MBAs,
Biochemists and Medical Graduates work in this department. They formulate the
strategies to uphold the market share of company’s products, select and introduce new
| 14
products to keep the company growing and develop promotional materials for sales
people to win in the market.
SALES DEPARTMENT
The sales department lies as an important part of marketing as they do the
implementation part of all strategies. A large team of around 1200 highly skilled sales
people work throughout the country to bring in success for the company. Team spirit
remains as the key to success of the sales department in ARISTOPHARMA.
DISTRIBUTION DEPARTMENT
To make its quality products available at every corner of the country, ARISTOPHARMA
has a strong distribution network comprising of 14 depots throughout the country. A
dedicated team of around 450 people and a fleet of vehicles comprising delivery vans,
three wheelers etc. are engaged in the timely distribution of products throughout the
country.
MEDICAL SERVICES DEPARTMENT (MSD)
In ARISTOPHARMA, we believe that
our responsibility does not end only in
manufacturing and marketing quality
| 15
medicines but also extends to the total improvement of the healthcare sector of the
country. To do this, ARISTOPHARMA has established an independent Clinical Research
and Medical Services Department (CRMSD) for the first time in Bangladesh. CRMSD
comprised of medical graduates, assists in conducting Clinical Researches with our own
medicines on our local people upon collaboration with different medical institutions. It
also arranges seminars & symposia, publishes news letters & articles and provides other
professional services to the doctors.
SALES TRAINING DEPARTMENT
They organize training for sales people. Training is organized both in the entry level as
well as for existing people to keep them updated with product knowledge, selling skills
etc.
MARKET RESEARCH TEAM (MRT)
The Market Research Team conducts prescription audit throughout the country to find
out the prescription behavior of the doctors, which acts as the major input for formulating
marketing strategies.
| 16
COMPETITIVENESS
| 17
4 FACTORS DRIVE THE PRICE AND QUALITY COMPETITIVENESS OF
PHARMACEUTICALS.
1. Manufacturing Cost. Bangladesh has a clear advantage due to low labor costs, while it
is at a disadvantage with regards to the largest cost drivers for the pharmaceutical sector,
i.e. Active Pharmaceutical Ingredients (APIs) and scale.
2. Workforce Skills. Although Bangladesh’s pharmaceutical labor costs are
approximately 30% less than India’s, the industry faces challenges in the technical
training required because Bangladesh’s educational system lags behind global levels.
3. Government and Regulatory Environment. The current regulatory environment is
protected and under-regulated. Importing drugs is difficult, allowing domestic firms to
dominate the market. Due to the power of these firms and the government regulatory
agencies’ weakness, quality control laws are not strictly enforced.
4. Macro Factors. Countries tend to have stronger domestic industries when the
following characteristics are present: high levels of secondary and tertiary educational
enrollment; GDPs greater than $100 billion; populations greater than 100 million; a high
manufacturing value added score by the United Nations Industrial Development
Organization (UNIDO); and a net positive pharmaceutical balance of trade.
| 18
| 19
5 POTENTIAL MECHANISMS HAVE BEEN IDENTIFIED TO IMPROVE THE
QUALITY OF DRUGS AVAILABLE IN BANGLADESH.
1. Export-led improvement. Firms tend to improve the quality of drugs that are
made for export but not to the drugs made for domestic consumption. This has
implications for the domestic market. But because firms tend to segment
production for the different markets, with higher quality drugs going to export
markets and lower quality drugs remaining in the less-regulated domestic market,
the domestic industry only benefits indirectly.
| 20
2. Regulatory-led quality improvement. A strict regulatory environment does result in
higher drug quality but significant political will is required to enforce the regulations.
Currently, the domestic regulatory institutions are not able to effectively manage
quality issues and so, the public becomes at risk.
3. Competition-led improvement. There is widespread agreement that firms in
economies with liberal trade policies and greater openness show stronger economic
growth and overall development performance in the long run. Bangladeshi
pharmaceutical firms operate in a closed protected market. Moves to open the
economy and increase competition will most likely lead to cost and quality
improvement but such changes will also cause some hardship for Bangladeshi firms,
primarily those operating at a sub-competitive level.
4. Private sector-led improvement. In many industries and countries, the private sector
has played a role in maintaining and monitoring quality. Leaders in Bangladesh’s
domestic pharmaceutical industry are interested in raising product quality levels and
could play a role in this regard.
5. Knowledge-transfer-led improvement. Most firms in Bangladesh want to provide the
highest quality drugs possible. Government and donors should work with firms
producing at less than Good Manufacturing Practices (GMP) levels to raise their
standards to a minimum acceptable level. For firms striving toward higher levels of
quality improvement, working with the global industry through some form of joint
venture, licensing agreement, or contract manufacturing situation is the best
mechanism.
| 21
HIGHLIGHTS OF THE EXPORT
OPERATIONS
| 22
Today, at the age of globalization, it is a world without boundaries. With the aim to cope
up with the challenges of globalization, ARISTOPHARMA started its export operation in
2000, Vietnam being the first destination. Today ARISTOPHARMA export to 9
countries of three continents namely Singapore, Sri Lanka, Myanmar, Vietnam, Bhutan,
& Macau of Asia; Ukraine of East Europe & Mauritius of Africa. Apart from usual tablet,
capsule, syrup, suspension or cream/ointment, it also exports sophisticated ophthalmic
dosage forms to Hong Kong and Myanmar. It is the 1st pharmaceutical company in
Bangladesh to export to a developed country like Hong Kong & 2nd company to export
to Singapore.
Now ARISTOPHARMA is moving aggressively to increase its market share in the
operating countries as well as to invade new countries. Some other African countries &
countries of Middle East are under active search.
Countries where ARISTOPHARMA products are exported
Singapore
Hong Kong
Sri Lanka
Vietnam
Myanmar
Bhutan
Macau
Ukraine
Mauritius
| 23
PHARMACEUTICALS IN
BANGLADESH
| 24
Pharmaceutical Industry has grown in Bangladesh in the last two decades at a
considerable rate. The national companies account for more than 65% of the
pharmaceutical business in Bangladesh. However, among the top 20 companies of
Bangladesh 6 are multinationals. Multinational and large national companies generally
follow current good manufacturing practices including rigorous quality control of their
products.
The pharmaceutical industry, however, like all other sectors in Bangladesh, was much
neglected during Pakistan regime. Most multinational companies had their production
facilities in West Pakistan. With the emergence of Bangladesh in 1971, the country
inherited a poor base of pharmaceutical industry. For several years after liberation, the
government could not increase budgetary allocations for the health sector. Millions of
people had little access to essential life saving medicines. With the promulgation of the
Drug (Control) Ordinance of 1982 many medicinal products considered harmful, useless
or unnecessary got removed from the market allowing availability of essential drugs to
increase at all levels of the healthcare system. Increased competition helped maintain
prices of selected essential drugs at the minimum and affordable level.
In 1981, there were 166 licensed pharmaceutical manufacturers in the country, but local
production was dominated by eight multinational companies (MNCs) which
manufactured about 75% of the products. There were 25 medium sized local companies
which manufactured 15% of the products and the remaining 10% were produced by other
133 small local companies. All these companies were mainly engaged in formulation out
of imported raw materials involving an expenditure of Tk 600 million in foreign
| 25
exchange. In spite of having 166 local pharmaceutical production units, the country had
to spend nearly Tk 300 million on importing finished medicinal products.
A positive impact of the Drug (Control) Ordinance of 1982 was that the limited available
foreign currency was exclusively utilized for import of pharmaceutical raw materials and
finished drugs, which are not produced in the country. The value of locally produced
medicines rose from Tk 1.1 billion in 1981 to Tk 16.9 billion in 1999. At present, 95% of
the total demand of medicinal products is met by local production. Local companies
increased their share from 25% to 70% on total annual production between 1981 and
2000.
In 2000, there were 210 licensed allopathic drug-manufacturing units in the country, out
of which only 173 were on active production; others were either closed down on their
own or suspended by the licensing authority for drugs due to non compliance to GMP or
drug laws. They manufactured about 5,600 brands of medicines in different dosage.
Other significant therapeutic classes include non-steroidal anti-inflammatory drug
(NSAID), vitamins, central nervous system (CNS) and respiratory products.
There are three public sector drug manufacturing units. Two of them are the Dhaka and
Bogra units of Essential Drug Company Ltd. (EDCL), which is functioning as a public
limited company under the Ministry of Health and Family Welfare. EDCL produced
medicines worth Tk 964 million in 2000. There are separate vaccines and large volume
IV fluids production units under the Institute of Public Health (IPH). The productions of
both EDCL and IPH are mostly used in government hospitals and institutions. In 2000,
there were 261 unani, 161 ayurvedic, 76 homeopathic and biochemic licensed
manufacturing units. They produced medicines worth Tk 1.2 billion in 2000.
| 26
THERE TWO EXTERNAL FORCES CURRENTLY IMPACTING
BANGLADESH’S PHARMACEUTICAL SECTOR WHICH CAN
PROVIDE OPPORTUNITIES FOR CHANGE. THE FIRST IS
WTO’S TRADE RELATED ASPECTS OF INTELLECTUAL
PROPERTY (TRIPS), WHICH GRANTS BANGLADESH
DOMESTIC MANUFACTURING OPPORTUNITIES AND
LIMITED EXPORT ADVANTAGES. PURSUING TRIPS’
OPPORTUNITIES MUST BE CAREFULLY CONSIDERED FOR
THE FOLLOWING REASONS: THEY ARE TIME SENSITIVE,
REQUIRE UP-FRONT INVESTMENTS, ARE LIKELY
INFLUENCED BY INTERNATIONAL POLITICAL PRESSURES,
PROVIDE UNCLEAR BENEFITS, AND CHINA AND INDIA,
THE WORLD LEADERS IN LOW-COST PHARMACEUTICAL
MANUFACTURING, ARE STILL EXTREMELY COMPETITIVE.
IF BANGLADESH DECIDES TO INVEST IN
PHARMACEUTICAL MANUFACTURING TO TAKE
ADVANTAGE OF TRIPS, IT SHOULD STRIVE TO CREATE A
SUSTAINABLE AND GROWING INDUSTRY AFTER 2016,
WHEN THE TRIPS’ FLEXIBILITIES ARE SCHEDULED TO
END.
THE SECOND FORCE AFFECTING THE INDUSTRY IS THE
RAPIDLY CHANGING INTERNATIONAL MARKETPLACE.
GLOBALIZATION HAS RESULTED IN AN EXTREMELY
COMPETITIVE INTERNATIONAL MARKET WITH FIRMS
SEEKING LOW-COST MANUFACTURING SOURCES.
MULTINATIONAL CORPORATIONS (MNCS) ARE CLOSING
EXPENSIVE EXCESS CAPACITY AND SEARCHING FOR NEW,
LESS EXPENSIVE SUPPLIERS OF ACTIVE
PHARMACEUTICAL INGREDIENTS (APIS) OR FOR
DEVELOPING COUNTRIES IN WHICH TO UNDERTAKE THE
ENTIRE MANUFACTURING PROCESS. DUE TO COST
CONSTRAINTS IN THE EUROPEAN AND US HEALTH
MARKETS AND A NARROW PRODUCT PIPELINE FROM
INNOVATIVE FIRMS, GENERIC DRUG COMPANIES ARE
GROWING FASTER THAN INNOVATIVE RESEARCH
COMPANIES.
One of the major positive impacts of
Drug (Control) Ordinance is the rapid
development of local manufacturing
capability. Almost all types of
possible dosage forms include tablets,
capsules, oral and external liquids
(solutions, suspensions, emulsions),
ointments, creams, injections (small
volume ampoules/dryfill
vials/suspensions and large volume IV
fluids), and aerosol inhalers are now
produced in the country. In recent
years, the country has achieved self-
sufficiency in large volume
parenterals, some quantities of which
are also exported to other countries.
Physical distribution of
pharmaceuticals in Bangladesh has
evolved in a unique way. Unlike other
countries Bangladesh pharmaceutical
industry is more retail oriented and
bulk of distribution is done by the
companies themselves.
Pharmaceutical companies distribute
their products from their own
| 27
warehouses located in different parts of the country, as no professional distribution house
is available.
Wholesalers play a limited role in this regard since companies supply goods to both
retailers and wholesalers. Export of pharmaceutical products is still in an infant stage,
although a number of private pharmaceutical companies have already entered the export
market with their basic
materials and finished
products. They export
their products to
Vietnam, Singapore,
Myanmar, Bhutan,
Nepal, Sri Lanka,
Pakistan, Yemen,
Oman, Thailand, and
some countries of
Central Asia and
Africa.
The annual per capita drug consumption in Bangladesh is one of the lowest in the world.
However, the industry has been a key contributor to the Bangladesh economy since
independence. With the development of healthcare infrastructure and increase of health
awareness and the purchasing capacity of people, this industry is expected to grow at a
higher rate in future. Healthy growth is likely to encourage the pharmaceutical companies
to introduce newer drugs and newer research products, while at the same time
maintaining a healthy competitiveness in respect of the most essential drugs.
| 28
WHY EXPORT PHARMACEUTICAL PRODUCTS?
| 29
The pharmaceutical industry is the country's second largest taxpayer. The annual per
capita drug consumption in Bangladesh is one of the lowest in the world. However, the
industry has been a key contributor to the Bangladesh economy since independence. With
the development of healthcare infrastructure and increase of health awareness and the
purchasing capacity of people, this industry is expected to grow at a higher rate in future.
Avenues are being created in this sector to emerge as a specially promising one to
increase export of the country after RMG. Bangladesh is the only least developed country
(LDC) among 50 LDCs of the world, which is self sufficient in pharmaceuticals industry,
with the present market for pharmaceuticals rising to about Tk 2500 crore annually,
compared to merely Tk 243 crore in 1982. Bangladesh as a LDC country is eligible to
export and produce pharmaceuticals without patent up to 2016. Currently leading
pharmaceutical companies such as Square pharmaceuticals, Beximco Pharmaceuticals are
already exporting pharmaceutical products to 62 countries, including countries like
Libya, North Africa. Bangladeshi manufacturers are now trying to export their
pharmaceutical products to 57 other countries of the world and established
pharmaceutical plants in Nepal, Pakistan and Vietnam.
Pharmaceutical firms in Bangladesh export approximately $27.54 million in products to
68 countries.16 Bangladeshi firms can export to the following markets:
Regulated: Aristopharma, the only Bangladeshi pharmaceutical firm accredited in a
regulated market, received the UK’s regulatory approval in May 2007. The largest
| 30
barriers to regulated markets are manufacturing facilities which come at a cost of at least
$50 million and know-how.
Moderately Regulated: Some markets, such as Tanzania and Malaysia, are moderately
regulated. While countries do not always require stringent certification, a certification
from a regulated market signifies quality and provides a firm with a competitive
advantage.
Unregulated: Most Bangladeshi pharmaceuticals are exported to less than fully regulated
markets such as Bhutan, Pakistan, Sri Lanka, Nepal, Vietnam and Myanmar.
| 31
The majority of Bangladesh’s pharmaceutical exports are from Novartis/Sandoz, as
shown in the Table. Novartis/Sandoz, an MNC operating in Bangladesh, has
approximately 25 manufacturing sites globally (Bangladesh Association of
Pharmaceutical Industries 2009). Bangladesh is one of its smaller sites. The Bangladeshi
manufacturing site is an EU certified plant which produces about 500 million tablets a
year and generates about $35-$40 million in sales. It has been growing rapidly—15-18%
per year—and is responsible for a significant portion of Bangladesh’s pharmaceutical
export growth. It imports APIs, acquires packaging domestically, and manufactures final
formulations in Bangladesh for export of $12 million or for sale to the domestic market
ranging from $23-$28 million.
Exporting a pharmaceutical product is challenging. Each country has its own product
regulations, registration requirements, language requirements, cultural preferences,
national packaging requirements, and industry protection mechanisms. Sales on the
global market are quite competitive with firms from around the world vying for business.
Furthermore, initiating exports requires a significant investment in money, time and
paperwork to register the product in the target country. As generic products are branded
in less regulated markets, pharmaceutical firms also need to make significant investments
in sales and marketing to create product demand. All these investments are made without
a guarantee of future sales.
| 32
Company Export (USD)
Novartis / Sandoz 12,820,162
Beximco Pharmaceuticals 1,400,000
Square Pharmaceuticals 1,200,000
Aristopharma 733,721
Jams Pharmaceuticals 726,546
Jayson Pharmaceuticals 600,000
The Acme Laboratory Co 331,876
Eskayef Bangladesh 305,648
Renata 281,788
Navana Pharmaceuticals 240,175
Aventis 223,999
ACI 156,392
Essential Drug Co 124,687
Globe Pharmaceuticals 68,410
Opsonin Pharmaceuticals 34,109
| 33
Table 2: Recent Exports by Some Bangladeshi Pharmaceutical Firms
Source: Bangladesh Association of Pharmaceutical Industries (2009)
Most pharmaceutical firms are family owned. While many have the capacity to export,
some do not have the in-house expertise.18 As a result, approximately only sixteen firms
export products. There are no “majority exporters,” e.g., companies that sell more than
50% of their output in export markets (Fernandes 2006). Beximco, for example, is one of
the leading exporters. Its 2005 exports were $1.3 million or 2.7% of total sales (Beximco
Pharmaceuticals 2005).19 A brief profile of Beximco is provided in Box 1. However,
| 34
many companies initiated the process of product registration in international markets only
in the last two to three years. The export situation is evolving. For example,
Aristopharma increased exports by 24% from 2006-07 to 2007-08.
Bangladeshi firms that export are 9-10% more productive than non-exporting firms
(World Bank 2006). Some possible reasons for this advantage may be due to:
1. Technological lessons learned from foreign buyers.
2. Exporters improved their own technological capabilities to exploit profitable
opportunities in export markets. For example, exporters need to adopt stringent technical
standards to satisfy more sophisticated consumers, and/or they are under more pressure to
fill orders in a timely fashion and to ensure product quality for export markets which are
more competitive than domestic market.
3. Better firms self-selected to enter export markets rather than the effects of exporting
necessarily improving the firms.
Firms have several potential sources for new investment capital. In 2004, 35% of new
pharmaceutical investment financing came from the sale of stock and there were twelve
firms listed on the stock exchanges in Dhaka and Chittagong; 33% came from domestic
commercial banks; 14% was from the firm’s own internally retained earnings; and 2.5%
was from international commercial banks. Incepta, profiled in Box 2, has primarily used
retained earnings for its impressive growth.
| 35
SECTORS OF IMPROVEMENT
| 36
Heating, ventilation and air-conditioning (HVAC) systems to ensure no
crosscontamination.
Most Bangladeshi firms use bag-filters (97% efficiency), whereas many international
standards require hepa filters (98-99% efficiency). To install these, a facility would have
to shut down for approximately six months.
Warehouse. International standards dictate that warehouses must maintain the
environmental standards stated on the product insert. If the insert indicates that the
item must be stored “at less than 25 degrees Celsius,” the warehouse must also maintain
the required temperature. Bangladesh’s warehouses are not air-conditioned and
temperatures from May through July can reach 30 degrees Celsius, and higher.
Validation documentation. While the Government of Bangladesh does not require
validation documentation, international certifications demand extensive documentation of
procedures. The cleaning validation is the most important and challenging validation to
achieve. It documents equipment and factory cleaning procedures before changing the
drug being produced on the production line to prevent any cross-contamination. Building
a new facility may be easier than attempting to upgrade an existing facility to meet GMP
or other international standards. To build a new high-quality facility requires at least $50
million, two years, and available land. In 2000, Square Pharmaceuticals spent $50 million
on its new plant designed to meet UK certification. To construct this plant, Square hired a
British firm to design the plans, and then a 250-member team from Thailand worked
onsite to interpret the plans and build the appropriate facilities. Skilled workers were
imported because these skills did not exist in Bangladesh. Building an equivalent plant
would be much more expensive today due to the Taka’s decreasing value.
| 37
Is Russia a favorable destination?
The reason why Russia seems like a good market to take advantage of is, around 74% of
the Russian Federation pharmaceutical market is supplied by imports. Healthcare in
Russia remains in a poor state. Public hospitals and polyclinics face severe funding
shortages, although some facilities have been upgraded under the national ‘health’
project; so far, R16 billion (US$0.6 billion) has been spent on the procurement of medical
devices and pharmaceuticals. Relying heavily on imports, the 1998 economic crisis left
Russia with severe drugs shortages. Prices doubled and imports fell. The pharmaceutical
market is estimated to have lost more than half its value since 1997. There are, however,
signs of improvement. Both domestic production and imports have increased since 2000
and the government finally imposed VAT on imported pharmaceuticals in December
2001. Despite continual funding difficulties, the federal drug supply system (DLO)
introduced in January 2005 has made the industry more competitive and has acted a
gateway for foreign companies to enter the market.
Russia: Country Profile
Founded in the 12th century, the Principality of Muscovy, was able to emerge from over
200 years of Mongol domination (13th-15th centuries) and to gradually conquer and
absorb surrounding principalities. In the early 17th century, a new Romanov Dynasty
continued this policy of expansion across Siberia to the Pacific. Under PETER I (ruled
1682-1725), hegemony was extended to the Baltic Sea and the country was renamed the
Russian Empire. During the 19th century, more territorial acquisitions were made in
Europe and Asia. Defeat in the Russo-Japanese War of 1904-05 contributed to the
Revolution of 1905, which resulted in the formation of a parliament and other reforms.
| 38
Repeated devastating defeats of the Russian army in World War I led to widespread
rioting in the major cities of the Russian Empire and to the overthrow in 1917 of the
imperial household.
The Communists under Vladimir LENIN seized power soon after and formed the USSR.
The brutal rule of Iosif STALIN (1928-53) strengthened Communist rule and Russian
dominance of the Soviet Union at a cost of tens of millions of lives. The Soviet economy
and society stagnated in the following decades until General Secretary Mikhail
GORBACHEV (1985-91) introduced glasnost (openness) and perestroika (restructuring)
in an attempt to modernize Communism, but his initiatives inadvertently released forces
that by December 1991 splintered the USSR into Russia and 14 other independent
republics. Since then, Russia has struggled in its efforts to build a democratic political
system and market economy to replace the social, political, and economic controls of the
Communist period. In tandem with its prudent management of Russia’s windfall energy
wealth, which has helped the country rebound from the economic collapse of the 1990?s,
the Kremlin in recent years has overseen a recentralization of power that has undermined
democratic institutions. Russia has severely disabled the Chechen rebel movement,
although violence still occurs throughout the North Caucasus.
Location:
Northern Asia (the area west of the Urals is considered part of Europe), bordering the
Arctic Ocean, between Europe and the North Pacific Ocean (Geographic coordinates 60
00 N, 100 00 E). It is bordered by Azerbaijan, Belarus, China (southeast), China (south),
Estonia, Finland, Georgia, Kazakhstan, North Korea, Latvia, Lithuania (Kaliningrad
Oblast), Mongolia, Norway, Poland (Kaliningrad Oblast) and Ukraine. The Russian
Federation stretches across much of the north of the super-continent of Eurasia. Because
of its size, Russia displays both monotony and diversity. As with its topography, its
| 39
climates, vegetation, and soils span vast distances. From north to south the East European
Plain is clad sequentially in tundra, coniferous forest (taiga), mixed and broad-leaf
forests, grassland (steppe), and semi-desert (fringing the Caspian Sea) as the changes in
vegetation reflect the changes in climate. Siberia supports a similar sequence but is taiga.
The country contains 23 World Heritage Sites and 40 UNESCO Biosphere reserves.
Climate :
| 40
The climate of the Russian Federation formed under the influence of several determining
factors. The enormous size of the country and the remoteness of many areas from the sea
result in the dominance of the continental climate, which is prevalent in European and
Asian Russia except for the tundra and the extreme southeast. Mountains in the south
obstructing the flow of warm air masses from the Indian Ocean and the plain of the west
and north makes the country open to Arctic and Atlantic influences.
Throughout much of the territory there are only two distinct seasons — winter and
summer; spring and autumn are usually brief periods of change between extremely low
temperatures and extremely high. The coldest month is January (on the shores of the sea
—February), the warmest usually is July. Great ranges of temperature are typical. In
winter, temperatures get colder both from south to north and from west to east. Summers
can be quite hot and humid, even in Siberia. A small part of Black Sea coast around
Sochi is considered in Russia to have subtropical climate. The continental interiors are
the driest area.
Natural Resources and Industries:
Russia got wide natural resource base including major deposits of oil, natural gas, coal,
and many strategic minerals and timber. The main industries of Russia are mining,
machine building, defense, shipbuilding, agricultural machinery, construction equipment,
consumer durables, textiles, foodstuffs and handicrafts; suggesting it is not dependent on
only few industries.
Economy
| 41
Russia ended 2007 with its ninth straight year of growth, averaging 7% annually since the
financial crisis of 1998. Although high oil prices and a relatively cheap ruble initially
drove this growth, since 2003 consumer demand and, more recently, investment have
played a significant role. Over the last six years, fixed capital investments have averaged
real gains greater than 10% per year and personal incomes have achieved real gains more
than 12% per year. During this time, poverty has declined steadily and the middle class
has continued to expand. Russia has also improved its international financial position
since the 1998 financial crisis. The federal budget has run surpluses since 2001 and ended
2007 with a surplus of about 3% of GDP. Over the past several years, Russia has used its
stabilization fund based on oil taxes to prepay all Soviet-era sovereign debt to Paris Club
creditors and the IMF. Foreign debt is approximately one-third of GDP. The state
component of foreign debt has declined, but commercial debt to foreigners has risen
strongly. Oil export earnings have allowed Russia to increase its foreign reserves from
$12 billion in 1999 to some $470 billion at yearend 2007, the third largest reserves in the
world. During PUTIN's first administration, a number of important reforms were
implemented in the areas of tax, banking, labor, and land codes.
These achievements have raised business and investor confidence in Russia's economic
prospects, with foreign direct investment rising from $14.6 billion in 2005 to
approximately $45 billion in 2007. In 2007, Russia's GDP grew 7.6%, led by non-
tradable services and goods for the domestic market, as opposed to oil or mineral
extraction and exports. Rising inflation returned in the second half of 2007, driven largely
by unspecialized capital inflows and by rising food costs, and approached 12% by year-
end. In 2006, Russia signed a bilateral market access agreement with the US as a prelude
to possible WTO entry, and its companies are involved in global merger and acquisition
activity in the oil and gas, metals, and telecom sectors. Despite Russia's recent success,
serious problems persist. Oil, natural gas, metals, and timber account for more than 80%
| 42
of exports and 30% of government revenues, leaving the country vulnerable to swings in
world commodity prices. Russia's manufacturing base is dilapidated and must be replaced
or modernized if the country is to achieve broad-based economic growth. The banking
system, while increasing consumer lending and growing at a high rate, is still small
relative to the banking sectors of Russia's emerging market peers. Political uncertainties
associated with this year's power transition, corruption, and lack of trust in institutions
continues to dampen domestic and foreign investor sentiment. President PUTIN has
granted more influence to forces within his government that desire to reassert state
control over the economy. Russia has made little progress in building the rule of law, the
bedrock of a modern market economy. The government has promised additional
legislative amendments to make its intellectual property protection WTO-consistent, but
enforcement remains problematic.
The economic development of the country though has been uneven geographically with
the Moscow region contributing a disproportionately high amount of the country's GDP.
Much of Russia, especially indigenous and rural communities in Siberia, lags
significantly behind. Nevertheless, the middle class has grown from just 8 million
persons in 2000 to 55 million persons in 2006. Russia is home to the second largest
number of billionaires in the world after the United States, gaining 40 billionaires in 2007
for a total of 101.
Government and Politics:
| 43
Russia is a federation and a presidential republic, wherein the President is the head of
state and the Prime Minister is the head of government. The Russian Federation is
fundamentally structured as a representative democracy. Executive power is exercised by
the government. Legislative power is vested in both the government and the two
chambers of the Federal Assembly. The government is regulated by a system of checks
and balances defined by the Constitution of the Russian Federation, which serves as the
country's supreme legal document and as a social contract for the people of the Russian
Federation. The president is elected by popular vote for a four-year term (eligible for a
second term but constitutionally barred for a third consecutive term); election last held 2
March 2008. Ministries of the government are composed of the premier and his deputies,
ministers, and selected other individuals; all are appointed by the president. The national
legislature is the Federal Assembly, which consists of two chambers; the 450-member
State Duma and the 176-member Federation Council. Leading political parties in Russia
include United Russia, the Communist Party, the Liberal Democratic Party of Russia and
Fair Russia.
Foreign Relations:
China and Russia have demarcated the once disputed islands at the Amur and Ussuri
confluence and in the Argun River in accordance with the 2004 Agreement, ending their
centuries-long border disputes; the sovereignty dispute over the islands of Etorofu,
Kunashiri, Shikotan, and the Habomai group, known in Japan as the "Northern
Territories" and in Russia as the "Southern Kurils," occupied by the Soviet Union in
1945, now administered by Russia, and claimed by Japan, remains the primary sticking
point to signing a peace treaty formally ending World War II hostilities. Russia and
Norway dispute their maritime limits in the Barents Sea and Russia's fishing rights
beyond Svalbard's territorial limits within the Svalbard Treaty zone. The dispute over the
| 44
boundary between Russia and Ukraine through the Kerch Strait and Sea of Azov remains
unresolved despite a December 2003 framework agreement and on-going expert-level
discussions. Kazakhstan and Russia boundary delimitation was ratified on November
2005 and field demarcation should commence in 2007. Russian Duma has not yet ratified
1990 Bering Sea Maritime Boundary Agreement with the US .
Russia has a multifaceted foreign policy. It maintains diplomatic relations with 178
countries and has 140 embassies.
Transportation :
As of 2007 there are 1,260 airports in Russia. Railways total 87,157 km and roadways
871,000 km in total across Russia. Waterways are 102,000 km (including 33,000 km with
guaranteed depth), out of this 72,000 km system in European Russia links Baltic Sea,
White Sea, Caspian Sea, Sea of Azov, and Black Sea.
Population
According to preliminary estimates, the resident population of the Russian Federation on
1 January 2008 was 142 million people. The Russian Federation is a diverse, multiethnic
society, home to as many as 160 different ethnic groups and indigenous peoples.
73% of the population lives in urban areas. As of the 2002 Census, the two largest cities
in Russia are Moscow (10,126,424 inhabitants) and Saint Petersburg (4,661,219). Eleven
other cities have between one and two million inhabitants: Chelyabinsk, Kazan,
Novosibirsk, Nizhny Novgorod, Omsk, Perm, Rostov-on-Don, Samara, Ufa, Volgograd,
and Yekaterinburg. In 2006, 186,380 migrants arrived to the Russian Federation of which
95% came from CIS countries. There are also an estimated 10 million illegal immigrants
from the ex-Soviet states in Russia.
| 45
The mortality rate in Russia declined 4% in 2007 compared to 2006, reaching some 2
million deaths, while the birth rate grew 8.3% year-on-year to an estimated 1.6 million
live births. The primary causes of Russia's population decrease are a high death rate and
low birth rate. While Russia's birth-rate is comparable to that of other European countries
(Russia's birth rate in 2007 was 11.3 per 1000 people compared to the European Union
average of 10.00 per 1000) its population declines at much greater rate due to a
substantially higher death rate (In 2007, Russia's death rate was 14.7 per 1000 people
compared to the European.
Education:
Russia has a literacy rate of 99.4%. As a result of great emphasis on science and
technology in education, Russian medical, mathematical, scientific, and space and
aviation research is generally of a high order.
Health:
While Russia has more physicians, hospitals, and health care workers than almost any
other country in the world, since the collapse of the Soviet Union the health of the
Russian population has declined considerably as a result of social, economic, and lifestyle
changes. In 2006, the average life expectancy in Russia was 59.12 years for males and
73.03 years for females. Heart diseases account for 56.7% of total deaths, with about 30%
involving people still of working age. About 16 million Russians suffer from
cardiovascular diseases, placing Russia second in the world, after Ukraine, in this respect.
More than 260,000 lives are lost each year as a result of tobacco use. HIV/AIDS, virtually
non-existent in the Soviet era, rapidly spread following the collapse, mainly through the
| 46
explosive growth of intravenous drug use. Officially there are currently more than
364,000 people in Russia registered with HIV. Russia's 160 ethnic groups speak some
100 languages.
Religion:
Christianity, Islam, Buddhism, and Judaism are Russia’s traditional religions. In 2006 it
was estimated that Russian Orthodox was major religious group then 15-20%, Muslim
10-15%, other Christian 2%. These estimates are of practicing worshipers; Russia has
large populations of non-practicing believers and non-believers, a legacy of over seven
decades of Soviet rule.
Ethnic Groups:
Russians are the dominating ethnic group with 79.8% followed by Tatar 3.8%, Ukrainian
2%, Bashkir 1.2%, Chuvash 1.1%, other or unspecified 12.1%.
Culture:
Russian culture is one that is rich and colorful. Russians have a rich cuisine. Russian art
is considered by some to be very interesting and unique. Russians are also known for
their sense of humor. Russian literature was greatly influential to world literature.
| 47
S.W.O.T.
| 48
It will be divided in two parts, internal and external. Strength and weaknesses will be
considered as the internal part of the analyses. On the contrary opportunity and threats
will be considered as external factors affecting the process.
Strength
Quality: Bangladesh pharmaceuticals industry is well known for its products. Moreover
Aristopharma pharmaceutical is a well reputed organization. Bangladesh is exporting
these pharmaceuticals products to many parts of the world. So it is really a positive sign
for this industry, as they are already well known for its high quality products. Also
Square is already exporting pharmaceuticals products to some countries so they are
known with the exporting criterion. It will help us to enter into a new market with regard
to the international quality standards.
Low Price: Lower production cost one of the other strengths our several industries have.
As a LDC Bangladesh can manufacture and export pharmaceutical products without
patent until 2016. This gives us a great advantage over other exporting countries. This
actually pulls down the cost. This absence of the patent costs ultimately lowers the price
of the products that gives our pharmaceuticals industry a huge benefit over others
competitors. Moreover Bangladesh is still known for low wages of labor. That generally
brings down the labor cost, thus reducing the cost of production. Since the cost of
production is lower than many other foreign competitors AristoPharma can afford to
charge lower price even after the costs involved with exporting.
Human Resource: AristoPharma has a total of 2600 employees at its disposal. This
proved to be sufficient for its successful production and distribution of products across
| 49
the country and also exporting them. Perhaps few more personnel will be needed to
handle the export to Russia, but it does seem sufficient enough.
Facilities:
The state-of-the-art-manufacturing facility of ARISTOPHARMA is located at Shampur-
Kadamtali, 10 km south-east from central Dhaka. The facility is planned and designed
with fine tuned future orientation to meet the local as well as international demand both
qualitatively & quantitatively. World class machineries sourced from USA, Germany,
England & Japan have been employed in various steps of production to ensure
manufacturing of world class products.
The ophthalmic and parenteral products are manufactured in the newly commissioned
sterile product block. This block, built on a turn-key basis by RETAN LTD. of Belgium
brings in world class facilities for manufacturing sterile ophthalmic & parenteral dosage
forms. This facility equipped with HEPA filter, laminar air flow and class 100 clean room
is believed to be the most modern in the country.
But apart from all these facilities, the men behind the machines get the major priority in
building our success blocks. Because we believe that the measure of our success is not
the power of technology but the power it unleashes in people. Hence highest care is taken
in selecting, developing & retaining quality people to run the quality machineries. A good
blend of Pharmacists, Chemists, Microbiologists & Engineers led by the Director,
Production pay their relentless efforts to bring in the highest quality products from the
best quality machineries. These facilities proved to be efficient and effective in producing
high quality products at lower costs.
| 50
Weaknesses
Lack of skilled workforce: The pharmaceutical industry of Bangladesh is still in a
growing phase. There is shortage of trained and skilled professionals which are essential
for maintaining the standard in production. It is essential that education level of the
country is increased and social infrastructure for growing industries like RMG,
pharmaceuticals is created. This should deliver workers specific for this industries, thus
increasing efficiency.
Corruption: Corruption has been the curse for our country for ages. Corruption is
indirectly affecting our exporting sector of pharmaceutical industry. The inefficiency and
corruption of government officials could slow down the process of exporting. That will
only frustrate the involved parties and be too much of a burden for many corporations.
Political Condition: The political instability of our country can also hamper the
performance and image of the pharmaceutical industry. Riots, hartals, and political unrest
will only hamper the production and exporting process. A deadline could be missed
because of such incidents. Although under caretaker government the condition is quite
stable at the moment, but political condition in Bangladesh is like a ticking time bomb, it
could explode any time.
| 51
Port: Corruption, inefficiency, conflicts and strikes have also engulfed the most
important port of Bangladesh, Chittagong Port. It takes 9 to 10 days to load and unload a
ship as opposed to international standard of 2 to 3 days.
Opportunity
Demand for Imported Pharmaceutical Products: Around 74% of the Russian Federation
pharmaceutical market is supplied by imports. The global pharmaceutical market will
more than double in value to $1.3 trillion by 2020, according to a new
PricewaterhouseCoopers report. Russia is among the countries where consumption of
medicines is expected to grow dramatically. By 2020, Brazil, China, India, Indonesia,
Mexico, Russia and Turkey could account for one fifth of global pharmaceutical sales,
according to PwC report. Growth of the markets in those countries is driven by soaring
demand for medicines and preventative treatments as the population grows, ages and
becomes more prosperous. GDP in those seven countries is expected to triple during the
next 13 years – from $5.1 trillion in 2004 to $15.7 trillion in 2020. According to the data
of the DSM Group research company, the total volume of this market amounted to $9.01
bln (about 2% of the world’s market) in 2005, registering a 35% increase from the 2004
indicator. Among other world markets, only the pharmaceutical markets of Brazil and
China grow nearly as fast as that (37% and 28%, respectively).
Cost of Production: There are some countries that are exporting medicines to Russia.
Germany, India, U.S.A and France are the main exporter of medicines to Russia. There
are also some other European countries that are exporting medicines to Russia. But the
main problem of these European countries is that their cost of production is significantly
| 52
higher then that of Bangladesh. In addition to that they have to consider the cost of
patent. Bangladesh and other LDC’s are at a better competitive position in these terms.
Threats
Competitors: Competitors can be also threats to our new export. Indian pharmaceuticals
are our main competitor since cost of production will be quite similar to ours and their
facilities are better. European companies might have higher cost of production but their
companies are still major players in Russian pharmaceutical industry. Sanofi-Aventis and
Berlin-Chemie/Menarini Group the two European corporations, are the market leaders in
Russia. The Pharmstandart holding, which is the best of the Russian producers, is among
the five leading companies, and Dr. Reddy’s Laboratories Ltd., the Indian pharmaceutical
company leading in the volume of sales, is among the 20 leading companies on the
Russian market.
New possible policies: Russian government has intent to tighten the regulations regarding
pharmaceutical imports. However, Vladimir Putin opposed this movement in past since
Russia is looking to enter WTO, so trade liberalization policies are needed to be adopt.
Hopefully new president, Medvedev will continue with this vision.
Corruption: Russian political leaders and bureaucrats are getting known for higher level
of corruption. This will affect the trades in that country adversely. The process involved
| 53
with imports will be delayed. This red tape needs to be removed in order to achieve
smooth and efficient trades.
Nationalists Views: Although Russians have been carrying nationalists views since the
Soviet times it took an extreme turn within new generation. The young extremists in
Russia are known to exercise force and other violent means on foreigners, especially with
darker skins. Although it does not have any effect at the moment, it is not wise to ignore
the impact of this in future.
Counterfeit medicines: In addition to competitors, illegal competitors also need to be
faced. The official statistics say there are 7-12% of counterfeited medicines consumed in
Russia. Before the major part of counterfeit were simple medicines, now enormous
number of expensive strong medicine: immuno-modulators, antibiotics, cardiologic,
antifungal, hormone containing and gastroenterological medicines are being
counterfeited.
| 54
PRELIMINARY MARKETING PLAN
| 55
Marketing Objectives: AristoPharma shall extend its current objective of transparent
business operation based on market mechanism within the legal & social frame work
with aims to attain the mission reflected by their vision. In addition to that AristoPharma
shall have some specific objectives keeping the market in mind.
Target Market: AristoPharma shall target the markets where import liberalization
policies are being adopted. Since Bangladesh, especially AristoPharma is known for high
quality products in comparatively cheaper prices. Therefore the countries looking for
those criterions shall be target market. Obviously the population with growing and stable
but lower income per capita (as compared to other developed) countries will be target.
Equal income distribution is also needed, as it will increase the size of the consumer
market. In this case it is Russia as the county already dependent on large number of
imported medical goods, as final products and as raw materials. Eventually neighboring
Eastern European blocks shall also be target market once established in Russia. Countries
like Ukraine, Belarus, Moldova, Romania, Czech Republic, Bulgaria, Slovakia, Slovenia,
Hungary and other Eastern European countries have got similar if not same economic and
cultural characteristics as Russia. So, through Russia AristoPharma shall expand to these
regions.
Expected Sales: AristoPharma is expecting to sell large volume of their products, using
lower price as their advantage. Most probably a reasonable expectation will be $4 million
on final goods and around $1 million on strategic exports (raw materials).
Profit Expectations: AristoPharma’s expected profit could be approximately 15%-20%
return on their investment (capital).
| 56
Market Penetration and coverage: AristoPharma will produce and export their existing
products. But in time depending on demand and requirements AristoPharma can produce
new products specific to the market of Russia.
Product adaptation or modification
AristoPharma can ensure strict compliance with WHO GMP standards and local
regulatory norms in every phase of sourcing & procuring quality materials,
manufacturing, quality assurance and delivery of medicines. Using product component
model, three crucial parts have been identified. Those are
a) Core Component
b) Packaging Component
c) Support Service Component.
Core Component: The core components consist of the physical products –platform that
contains the essential technology –and all its design and functional features. Alterations
in design, functional features, flavors, color, and other aspects can be made to adapt the
product to cultural variations. It will not be needed to change the core component of
AristoPharma, since it maintains the standard by WHO; unless of course some specific
medicine or raw materials are illegal for a certain country. But in case of Russia, none of
the products are needed to be altered in terms of core component.
Packaging Component: The packaging component includes style features, packaging,
labeling, trademark, quality, price and all other aspects of a products package.
Packaging: of the product does not need to be altered, as AristoPharma already have
experience in successfully exporting products without any complain of damage.
| 57
Labeling: On the other hand has to be altered when products are exported to Russia.
Although AristoPharma already has its labeling in English, large segment of Russia do
not know English or prefer Russian language. Therefore, besides English the labeling
needs to be done in Ruski for the convenience of Russia consumers. Instructions,
components and expiry dates will be clearly written.
Price: is not written on the package, although later a price tag is sealed separately, as it
could vary from country to country.
Quality: In terms of quality it maintains the standard by WHO and is ISO certified.
Trademark: AristoPharma will continue using its company logo to protect consumers
from counterfeit products.
Support Service Component: This is required to maintain the after sell relationship with
the customer and goodwill of the company. It includes repair and maintenance,
instruction, installation, warranty, deliveries, and the availability of the spare parts. But
none of these services apply to a pharmaceutical company. Therefore as support service
component, official web address shall be given on the package to help consumers with
any queries. Consumers can get contact address, contact number and mailing address
from the website. But to reduce the cost of a call and speeding up the process, local
distributor will also be given this responsibility. Thus, while labeling the name of the
distributor will be given, along with web address of the distributor.
| 58
Promotion Mix
Advertising : Any paid form of non-personal presentation and promotion of ideas, goods,
or services by an identified sponsor. Examples: Print ads, radio, television, billboard,
direct mail, brochures and catalogs, signs, in-store displays, posters, motion pictures,
Web pages, banner ads, and emails. Since the product is mainly exported the main
objective will be to sell the products to the distributor in that location. Therefore
expensive TV and radion ads will not be needed in primary stages. However, it is
suggested to distributors to take initiative to increases the awareness of the product at leas
through print ads, billboards, brochures, posters and banners. But should they require any
assistance AristoPharma shall provide it.
AristoPharma will provide with existing TV, radio or any other commercial to their
dealer for assistance. Dealers can either dub or translate those samples into Russian or
take some ideas and make a promotion of their own. Besides, it shall be helpful in future
if a step of direct investment is taken. But for initial stages all AristoPharma will do is
promoting their product to their business partner through brochures, posters and personal
selling.
Sales promotion: For sales promotion AristoPharma can suggest their distributors or
dealer to organize few conferences about a particular wide spread and dangerous diseases
and then distribute free samples there.
| 59
Personal selling : AristoPharma shall be involved in personal selling with their
distributor and dealer; however they will suggest their dealers to promote their products
in different public and private hospitals and to doctors in order to robust their sales.
Distribution
A smooth and efficient distribution channel will help the products to reach the consumers
in every part of the country and in time. Distribution could take place from producers,
through distributors/dealers, wholesalers, retailers to the consumers. There could be
numerous middlemen involved or just a few. It all depends on the country a product is
being sold. A distribution channel is the vital part behind a successful sale of a product.
Russia is a large country, so it will be wise to choose more than one port and mode for
distributing the products in different parts Russia.
Port selection
Origin Port: despite a number of problems Chittagong port is still the better option for
export purposes. Zia International Airport will also be considered as the means of
exporting for aerial transfer of the products. AristoPharma already exporting to Ukraine
and Ukraine have got means of land communication with Russia; thus additional products
can be exported to Ukraine and from there those products can be exported to Russia. In
this case Ukraine is used as transit point.
| 60
Destination Port: There could be a number of destination ports for the purpose of
covering the large area of Russia. Port of Saint Petersburg, Port of Arkhangelsk, Port of
Onega etc. can be used as the destination for sea/ocean carriers. From there the products
can be distributed in the nearby areas. Moscow airport will also be a destination port, for
distributing products in Moscow and areas near her. Products exported through
Kazakhstan can reach the Novorossiysk or any other port area near the Central Asian part
of Russia.
Mode Selection
Due to diverse selection of ports different modes can be selected to serve the purpose of
distribution.
Railroads and Motor carrier: these are the means of carrying products through land. Since
Kazakhstan has got both railroads and roads connected to Russia from Soviet time, both
of these methods can be adopted. It is a lengthy process but a cheap one.
Air Carrier: Moscow airport will be the chosen destination for such mode. This is the
fastest way of distribution but also the most costly one.
Ocean Carriers: several ports have been chosen for this purpose. This is the lengthiest
process but also a cheaper one.
Packing
Marking and labeling regulations: Regulations like declaring ingredients of the
medicines, in descending order and classified by quantity in case of products for home
use shall be strictly followed. And regulations for raw materials for a particular
distributor or corporation shall also be declared and labeled.
| 61
Containers: the products are packed in boxes then put into crates which are compiled in
the containers.
Costs: the cost of packing could range from 2-3% of total export cost.
Documentation Required
All of these documents will be required in order to complete a successful and legal
export.
Bill of Lading: It is a document issued by a carrier, e.g. a ship's master or by a company's
shipping department, acknowledging that specified goods have been received on board as
cargo for conveyance to a named place for delivery to the consignee who is usually
identified. It is a contract between shipper and carrier, receipt from the carrier and
declaration of ownership of goods
Dock Receipt: Document issued by a shipping company to acknowledge that goods have
been received for shipment. Dock receipt transfers the accountability for the safe custody
of the cargo from the shipper to the carrier, and serves as the basis for preparing the bill
of lading.
Commercial Invoice: Document required by customs to determine true value of the
imported goods, for assessment of duties and taxes. A commercial invoice (in addition to
other information), must identify the buyer and seller, and clearly indicate the (1) date
and terms of sale, (2) quantity, weight and/or volume of the shipment, (3) type of
packaging, (4) complete description of goods, (5) unit value and total value, and (6)
insurance, shipping and other charges
| 62
Pro forma invoice: Abridged or estimated invoice sent by a seller to a buyer in advance of
a shipment or delivery of goods. It notes the kind and quantity of goods, their value, and
other important information such as weight and transportation charges.
Shipper’s Export declaration: given to importer by shipper after reaching the destination.
Statement of Origin: Dhaka chamber of commerce will give a document declaring the
exporting country.
Insurance Claim
Since the products are exported, insurance claim will not be needed by AristoPharma.
Freight Forwarder
It is a firm specializing in arranging storage and shipping of merchandise on behalf of its
shippers. It usually provides a full range of services including: tracking inland
transportation, preparation of shipping and export documents, warehousing, booking
cargo space, negotiating freight charges, freight consolidation, cargo insurance, and filing
of insurance claims. Freight forwarders usually ship under their own bills of lading or air
waybills and their agents or associates at the destination (overseas freight forwarders)
provide document delivery, deconsolidation, and freight collection services.
AristoPharma could use it, since it does not have a transportation department for such
long distances.
| 63
Distributor
Drugstores Drugstores
Public & Private Health Sectors
Retailer/pharmacy chains
Consumers
Public & Private Health Sectors
CHANNELS OF DISTRIBUTION According to the latest rating of the Pharmexpert Marketing Research Center, the leading
national distributors are TsB Protech, SIA International, ROSTA, the Shrea Corporation,
Biotech, NPK Katren and Apteka-Holding. AristoPharma shall negotiate with one of
these leading distributors e.g. Apteka-Holding. From the distributors the products can be
distributed to retail buyers/stores or pharmacy chains who will further distribute the
product to final consumers. Few pharmacy chains which are quite effective and efficient
in Russia are Apteka 36’6, Pharmakor, Implosia, 03, Doctor Stoletov, Vita, Rigla, Natur
Produkt, Pervaya Pomoshch(First Aid) and Stary Lekar (Old Doctor). The products can
also sell their products to drugstores who in turn will sell them to retailers and, private
and public hospitals. Distributing products to private and public health sectors can also be
done directly.
Figure: Distribution channel
| 64
PRICE DETERMINATION
The price of the products exported will depend largely on the cost of export. Since the
cost of production is already lower than the competitors AristoPharma can charge lower
for their products given cost of exporting allows doing so. The reason behind choosing
different ports and mediums for export is to reduce overall cost and also to increase the
area covered, so higher volume can be sold. Cost of exporting through aerially is higher
than cost of exporting by ocean or land; but distribution in vast areas, larger volume of
sales and lower costs through ocean and land will minimize average cost of of shipment
of goods. Therefore an expensive medium will not affect overall price by big margin.
Transportation Costs: cost of transportation via air will cost higher than that of water or
land.
Handling Expenses: This will depend with the charges imposed by Chittagong port. This
includes pier charges, wharfage fees, loading and unloading charges.
Insurance Costs: Since AristoPharma are exporters, they need not to provide any
insurance. Once the products are exported it is duty of importer to have insurance.
Customs duties: This will only apply in case of Chittagong port not ports of Russia for
AristoPharma.
| 65
TERMS OF SALE
Terms that set out the rights and obligations of buyers and sellers as applicable in the
transportation of goods. Thirteen major terms of sale (called Incoterms) have been
standardized by the International Chamber Of Commerce (ICC) for world-wide use.
These terms are (1) C&F (Cost And Freight), (2) CIF (Cost, insurance, And Freight), (3)
Delivered At Frontier, (4) Delivered Duty Paid, (5) Ex quay, (6) Ex ship, (7) Ex works,
(8) FAS (Free Alongside Ship), (9) FOB (Free On Board), (10) FOB Airport, (11)
FOR/FOT (Free On Rail/Free On Truck), (12) Free carrier, (13) Free Carriage Paid To
and Free Carriage Paid To And insurance.
Ex Works: Term of sale signifying that the price invoiced or quoted by a seller includes
charges only up to the seller's factory or premises. All charges from there on are to be
borne by the buyer. This would transfer all the obligations to the buyer after the products
reaches the destination. No further obligation is there but this would certainly reduce
control over the products inside the country.
FOB: Term of sale under which the price invoiced or quoted by a seller includes all
charges up to placing the goods on board a ship at the port of departure specified by the
buyer. No risk of insurance is required over the products once they are exported. But this
could help in reducing the cost of exporting.
| 66
FAS: signifies that the price invoiced or quoted by a seller includes all charges only up to
the ship at the port of departure. The buyer is responsible for loading and all subsequent
charges.
C&F: Term of sale signifying that the price invoiced or quoted by a seller for a shipment
does not include insurance charges, but includes all expenses up to a named port of
destination. In comparison, carriage paid to (CPT) terms include all transport charges (but
not insurance) up to a named place (usually the buyer's warehouse) of destination.
CIF: Term of sale signifying that the price invoiced or quoted by a seller includes
insurance and all other charges up to the named port of destination. In comparison,
carriage and insurance paid to (CIP) terms include insurance and all charges up to a
named place in the country of destination (usually the buyer's warehouse).
It is recommended that AristoPharma either chooses FOB or C&F on initial stages. If on
later stages they would want to increase their export and tighten the relationship with
distributors they can embrace CIF.
| 67
METHODS OF PAYMENT
Cash in Advance: Payment method in which an order is not processed until full payment
is received in advance.
Open Accounts: It will be much easier to trade if an open account is created with the
buyer. It reduces the fear of default or fraud by the buyer.
Consignment Sales: Trading arrangement in which a seller sends goods to a buyer or
reseller who pays the seller only as and when the goods are sold. The seller remains the
owner (title holder) of the goods until they are paid for in full and, after a certain period,
takes back the unsold goods. It is a risky approach as buyer may default or delay paying.
Sight Draft: Bill of exchange payable on the day it is presented to the named entity
Time Draft: Bill of exchange payable at a fixed future date or a determinable future time
such as 30 days after presentation (after sight). The purpose of a time draft is to allow the
buyer some time to pay for goods bought. In contrast, a sight draft becomes payable at
the time it is presented to the buyer.
Date Draft: Bill of exchange that becomes payable (matures) on a fixed date, irrespective
of the date it was accepted by the payer.
Letter of Credit: Written commitment to pay, by a buyer's or importer's bank (called the
issuing bank) to the seller's or exporter's bank (called the accepting bank, negotiating
| 68
bank, or paying bank). A L/C guarantees payment of a specified sum in a specified
currency, provided the seller meets precisely-defined conditions and submits the
prescribed documents within a fixed timeframe. These documents almost always include
a clean bill of lading or air waybill, commercial invoice, and certificate of origin.
It is recommended that Aristopharma either accepts cash in advance, open account or
letter of credit through negotiation as method of payment.
Pro forma financial statements and budgets
It is a projected or estimated financial statement that attempts to present a reasonably
accurate idea of what a firm's financial situation would be if the present trends continue
or certain assumptions hold true. Pro forma statements are used routinely in preparing
'what if' scenarios, formulating business plans, estimating cash requirements, or when
submitting financing proposals.
Marketing budget: AristoPharma should have enough budget to bear the cost of
exporting. If selling expense goes over $1.2 million (80 million taka) then they can
allocate enough money (10 million taka approximately) in distribution expense since
there is not much or none advertising expense involved initially.
| 69
RECOMMENDATION
| 70
IMPROVING PRICE AND QUALITY ON THE DOMESTIC MARKET
1. Increase competition. Bangladeshi pharmaceutical firms are operating in a
domestically protected environment. They should excel in price and quality of products
manufactured, not as a result of import restrictions. In this study, we do not explore if
Bangladeshi firms lag behind global standards. But if the firms do lag behind in global
standards for quality then that would be damaging to the health of the overall population
as they are provided with lower quality drugs. The other issue that needs consideration is
how to open up the domestic pharmaceutical market to global competition in case the
Government wants to do so. The 1982 DCO, which resulted in the protection of the
Bangladesh market, is supported by significant national sentiments. Considerable
political tact would be required to modify or alter it. Before opening the market, however,
the drug regulatory institutions need to be strengthened to prevent dumping of low-
quality products from abroad. Issues of safety nets and transition costs also need to be
addressed to ensure that increased competition from global providers does not destroy the
domestic industry without giving it a fair chance to compete. Clearly, increased domestic
competition would cause difficulties for some pharmaceutical manufacturers, especially
those with lower quality / higher prices, and open markets would be resisted. But
competition will also improve the overall cost and quality of drugs available in the
| 71
domestic market, the overall competitiveness of the domestic industry, and the overall
competitiveness of exporting firms.
2. Improve the government’s regulatory function. Strict regulatory environments are
associated with higher quality drugs. The Government of Bangladesh should investigate
the financing and structure of the institutions used to regulate drugs in Bangladesh.
Financing. Resources for the DDA and DTL institutions need to be significantly
increased to support the responsibilities required of them. Small incremental increases are
insufficient for the task. Options to increase their resources include:
o Increased regular budget. The DDA requested an upgrade from a directorate to a
directorate-general, which would result in a corresponding increase in resources. The
government is considering this request.
o Increased fee revenue. The self-financing of drug regulatory agencies through higher
fees used to exist only among industrialized countries such as France, Sweden, the United
Kingdom, and United States. Many countries are now following their example, such as
Zimbabwe’s autonomous Drug Control Council (DCC), which is entirely self-sustaining.
For testing, DCC charges $300 for imported drugs and less for drugs repacked or
manufactured in Zimbabwe. As a result of its self-sufficiency, the DCC acts as an
independent agency, although the Ministry of Health still appoints DCC staff (Bennett
1997).
o Donations. International organizations and financing institutions or bilaterals could
fill the gap through donations to the regulator agencies. The WHO, for example, has
supported and trained regulatory institutions.
| 72
o Collaboration with the domestic pharmaceutical industry. The domestic
pharmaceutical industry has a vested interest in better quality drugs, is proactive, and
willing to pay for improvements. However, the pharmaceutical industry is also reputed to
have significant influence over the DDA. The government has hesitated to give industry
more control because the government would like to maintain control over the regulatory
function.
Structure. The current regulatory system is not delivering adequate services,
considering the amount of resources the institutions do have. Staff morale, accountability,
transparency and quality of services delivered are all low. Corruption is allegedly
rampant. Further investigation into the regulatory processes and agencies is necessary to
determine how best to improve them.
Some areas to consider are as follows:
o Reviewing regulatory procedures and incentives. Institutional measures should be
investigated to increase transparency and provide inspectors with incentives to find,
report, and fine low-quality manufacturers. Of the 235 registered pharmaceutical firms,
approximately only 85 are active. Most problems are reportedly with the smaller, less
active firms. The criteria to approve an operating license and the monitoring to continue
the license should be investigated.
o A reorganization of the regulatory authority. Many governments have satisfactorily
appointed a semi-autonomous regulatory authority. The authority’s independence
promotes a professional discharge of responsibilities.
| 73
o Cracking down on corruption. The current government is targeting corruption and
drug safety. Improving the drug inspection process is an important issue for the
population’s health. In the interim, international inspectors could train staff and complete
inspections for a limited time period.
o Making strategic personnel choices. The DDA’s director should be selected
transparently based on technical skills and proven managerial abilities.
o Increasing public involvement. Public awareness campaigns have been very
successful in improving drug quality in many countries. Bangladesh could investigate the
possibility of undertaking such a campaign combined with providing consumers with a
toll-free number to report bad drugs. The government would have to commit to
responding to the public and taking action if such an initiative were enacted.
3. Level the playing field. Firms that make investments in quality are in a sense penalized
as long as firms that produce substandard drugs are allowed to sell their drugs on the
marketplace, and the consumer is unable to differentiate between the drugs before
purchasing them. Box 5 describes Medicines Transparency Alliance (MeTa), which is
working with countries to address issues of transparency and accountability.
The Government of Bangladesh could address this issue through a variety of
mechanisms:
Regulatory Approach. Use the regulatory function to remove low-quality drugs.
| 74
Transparency Approach. Knowledge is power and if consumers and doctors knew
which drugs were better, they would migrate to quality. If, for example, all the producers
of one drug each month were tested and the results released to the pubic, this would
increase drug quality transparency. The 2005 Drug Law already sets up a provision for
such a measure by stating, “…any information on substandard, spurious, and counterfeit
drugs should be made freely available to all concerns by wide publicity in both print and
electronic media (Ministry of Health and Family Welfare 2005).” A sample testing
program would have to be designed to be as impervious to corruption as possible.
4. Involving the private sector in quality control. As a “police function,” the regulation
of an industry has traditionally remained a government function. While efforts to enhance
enforcement (the stick) should be made, the industry may have incentives to have better
regulation (the carrot). Because government regulatory agencies lack capacity and the
pharmaceutical sector has a sincere interest in improving quality, mechanisms to include
the private sector in some sort of quality control mechanisms should be explored.
However, a duplicate system should not be created nor a system as susceptible to
corruption as the current system. Further analysis is needed of private sector examples
from other countries and an examination of the success rates of its involvement in quality
improvement programs. BAPI would be interested in the following types of private sector
involvement:
| 75
IMPROVING PRICE AND QUALITY ON THE EXPORT MARKET
Several possible mechanisms are available to raise the international competitiveness of
Bangladesh firms, including:
1. Encourage contract manufacturing. As production of both patented and non-patented
drugs moves to low-cost manufacturing areas, Bangladesh firms could build export
experience in finished dosage manufacturing through contract manufacturing with
foreign firms. Contract manufacturing is a good business opportunity, and if done well, it
can also enable technology transfers to domestic firms.
2. Technical Assistance. One barrier to exporting that many firms face is a lack of
knowledge. The government and the international community can help to bridge this
information gap. Government training, however, can be slow and bureaucratic, and it
often requires training itself. Other potential trainings could involve international
organizations, exchanges with China and India and other mechanisms. Bangladeshi firms
want information on the following specific topics.
| 76
Inspections and GMP certification. Both the government and firms need training in
the necessary requirements to pass inspections, including what is required for the HVAC
system, how the inspection process works, and what needs to be done to pass inspection.
Exporting pharmaceutical products. Firms want information on how to get USFDA,
UKMHRA, or TGA approval, the regulation requirements of other countries, and how to
manage the approval process. Also, firms need training in international marketing, sales
and negotiations.
Investment and Strategy. Mid- and small-level firms need training and assistance on
manufacturing and selecting products, investments, and export markets. Not all
pharmaceutical production is the same. Some therapeutic areas are more niche; whereas
others depend more on low-cost bulk APIs. All markets are not the same either. Markets
vary in levels of regulation, product sophistication, drug quality on the market, and the
size of market potential. Bangladeshi pharmaceutical firms need to analyze which
markets would provide the maximum competitive advantage based on their current
capabilities and cost structures.
TRIPS. The Government and the firms need more information on TRIPS so that they
are able to understand how they can make use of the opportunity that exists till 2015.
3. Government support for firms that export. Box 6 and 7 include examples of how
the Governments of China and India support their domestic pharmaceutical industries.
Although the market, and not government subsidies, should drive competitiveness for
Bangladeshi firms, current government support levels should be analyzed to determine if
they put Bangladeshi firms at a disadvantage vis-à-vis firms from India and China.
| 77
4. Investigation into the feasibility of a bioequivalence laboratory. In order to export a
drug to a regulated market and to some moderately regulated markets, Bangladeshi
products must undergo bioequivalence testing. No bioequivalence laboratories exist in
Bangladesh currently. Additional analysis of laboratory construction and operational
costs is required to determine if a domestic laboratory could offer financially comparable
services If analysis supports a local laboratory, regional or private-sector alternatives
should be considered as well, because a bioequivalence laboratory requires a significant
investment.
5. Investigation of API production. Because API production requires scale economies,
Bangladesh will find it difficult to compete internationally. Nevertheless, Bangladeshi
pharmaceutical firms may need to acquire API skills if they are going to effectively
compete in the global market for final formulations as API costs are a major determinant
of final cost and profit. Further analysis is needed to determine which APIs Bangladesh
could produce on a scale relevant to the Bangladesh environment and still be price
competitive.The following areas should be fully supported if API production is pursued.
The API park. The government has promised the construction of an API park for many
years, but little action has been taken. The potential value of the park declines each day
that its creation is not realized and the TRIPS’ 2016 deadline nears. Prioritizing the API
park and starting construction is vital if Bangladesh chooses to manufacture APIs.
API skill. Skills in reverse engineering and chemical synthesis should begin to be
locally developed in collaboration with local universities and other countries.
Backward integration. To develop the entire supply chain for pharmaceuticals,
| 78
backward integration from the raw solvents should be considered.
CONCLUSION:AristoPharma have got all the capacity to handle the exporting to Russia in terms of
capital, finance and human resource. Russia is a promising market for pharmaceutical
industry as trade liberalization reforms are taking place. And Bangladesh have got
competitive advantage over lower cost of production and high quality Therefore it is
strongly suggested to explore this potential market and contribute further to the economic
growth of Bangladesh by earning foreign currency.
| 79
Bibliography
1) Banglapedia
http://banglapedia.search.com.bd/HT/P_0154.htm
2) Bangladesh Pharma Industries
http://www.pharmadu.net/bps/pharmaindustries.htm
3) Business Dictionary
http://www.businessdictionary.com/definition/at-sight.html
4) CIA Factbook
https://www.cia.gov/library/publications/the-world-factbook/geos/rs.html
5) Research Market
http://www.researchandmarkets.com/reports/461359/russia_pharmaceuticals_and_healthcare_rep
ort.pdf
6) Russian Economy and Industry Newsletter
http://newsletters.cii.in/newsletters/russian_newsletter/pharmaceutical_in_russia.htm
7) AristoPharma
http://aristopharma.com
8) The Saint Petersburg Times
http://www.sptimes.ru/index.php?action_id=2&story_id=22036
| 80
9) Wikipedia
http://en.wikipedia.org/wiki/People%27s_Russia
| 81