Assessment Questions
Question 1: Vision and Mission Statements for Biocon
Biocon India works with a mission of being an enterprise of integrated biotechnology and to achieve global distinction (Biocon, 2016). The vision statement on the other hand is to enhance the healthcare of the globe through provision of affordable and innovative biopharmaceuticals for partners, patients and global health care systems (Biocon, 2016). The mission and vision statements can help the company in achieving sustainable competitive advantage through practices that help the company to accomplish its mission and vision. For one, the company has to enhance its research practices in order to achieve this mission and vision. Enhanced practices in research results in greater competitive advantage through innovation (Ellentuck, 2011). Apart from this, the mission statement drives the company to strive towards state of the art capabilities in manufacturing, effective quality control procedures, disease specific research, exceptional products and services to customers, management of partnerships in business research and effective management of human resources.
Through these practices, the company can gain and maintain competitive advantage over its customers. For instance, improved manufacturing capabilities and better product qualities draws customers based on the needs of the customers. Similarly, better quality control procedures help the company to maintain high product qualities and subsequently realize high customer attractiveness. Disease specific research implies that the company produces products that are tailored to diseases hence can address the needs of a specific patient group. As such, patients and healthcare systems whose conditions are addressed by the company can directly come to Biocon for their needs. As such, Biocon maintains a positive image in the perception of tailored solutions to diseases. Through exceptional and irreplaceable products and services, Biocon can hold customers more sustainably in comparison to the competitors.
The company’s vision statement on the other hand drives it towards such as building strong technology and fermentation platforms, enhancing product differentiation through leveraged technology, using innovation and quality to create long term value, production of proprietary products through a charted pathway. In each of these practices, the company steers itself towards sustainability in competitive advantage through various ways. For instance, Biocon (2004) describes how it maintains a competitive edge by pursuing each of the outlined practices in the company vision achievement. Enhanced technology and fermentation platforms give the company better competitive advantage through technology as it can carry out production processes that cannot be handled by the competitors (Ellentuck, 2011). As such, it becomes the manufacturer of choice for companies seeking alliances with global pharmaceutical manufacturers. Similarly, product differentiation enables the company to develop a strong product line, which addresses sequence in flow in terms of generic manufacturing and also enhances its access to proprietary molecules.
Biocon also uses innovation, charted pathways and an integrated model of production. Each of these has a specific role to play in maintaining the company’s competitive advantage. The integrated model for example enables the company to carry out collaborative manufacturing practices while also addressing particular disease specific production goals. The model also enables the company to achieve cost effectiveness and speed in production which gives the company higher capacities than other pharmaceutical companies (Biocon, 2004). From this, it can be argued that the company maintains its competitive edge satisfactorily through the use of differentiation strategies. If the company maintains the use of these mission and vision statements to steer the short term and long terms goals fully, it is inevitable that a strong competitive edge will be developed by the company.
Question 2: Porter’s Five Forces Analysis of the Pharmaceutical Industry
The Pharmaceutical industry is one of the fastest growing sectors in the world today. The sector has projected sales of more than $ 1.3 trillion in 2018. The industry is dynamic with high profit potentials. The most demanded products obtain profits of more than $ 1 billion dollars per year. However, each new drug requires intensive input in research and development and has to be approved by the food and drug administration. Individual companies in the pharmaceutical industry face a difficulty in completing analyses for new drug prospects as well as the potential for already existing drugs. One of the tools that they can use satisfactorily is Porter’s five forces analysis procedure for the pharmaceutical industry.
According to Porter (2008), the first force that influences trade in any industry is the threat of new entrants. Any profitable business will attract potential entrants. However, various barriers to entry can exist to prevent new entrants from infiltrating the market (Rachapila & Jansirisak, 2013). In the pharmaceutical industry, one of the most challenging barriers to entry is government legislation. Each new drug developed has to be tested and approved by the Food and Drug Administration. Similarly, the entrants to the market have to be scrutinized in various capacities to ensure that their objective of entry is genuine with regards to the enhancement of the pharmaceutical sector. Whiteside posits that the high profitability associated with the pharmaceutical industry attract many potential players to the industry (2016). These players, since they enter as smaller companies, pose no significant threats to the existing and bigger pharma companies. The requisition for patents before venturing into the business also creates a barrier to entry, even though those who manage to patent their hotter and newer ideas easily get funds for entry into the pharmaceutical market.
The second force that influences the pharmaceutical sector is the power of suppliers. In the pharmaceutical industry, the key supplies include raw materials, services and labor. The power of suppliers is raised in markets where there are fewer substitutes and in which the degree of differentiation is low (Ireland et al., 2008). In such cases, the suppliers know that the manufacturer has no alternative but to purchase from them. In the pharmaceutical industry, the suppliers have very limited power because the raw materials are obtained from commodity products that are available from many sources in the chemical industry (Whiteside, 2016). Similarly, the equipment for use in the pharmaceutical industry are also accessible from many sources. Every supplier provides several raw materials and/ or equipment to the manufacturer hence reducing costs of access based on the economies of scale. Similarly, the buyers in the pharmaceutical industry have no significant power.
The bargaining power of buyers increases significantly when there are no many alternative products. In cases where substitute products exist, the buyers have strong bargaining power and place pressure on manufacturing companies. As such, companies engage in the establishment of loyalty programs to reduce the potential for bargaining by the customers. Some of the factors that influence buyer bargaining power include switching costs, information availability and drug dependency. In the pharmaceutical industry, the buyer has absolutely no bargaining power due to the dependence of life on those drugs. On the other hand, the sellers are not allowed to make unethical profits out of their sales. The insurance companies which pay for the drugs and other forms of treatment give an indication of what they would be willing to pay and use that as a measure of drug costs. The pharmacies and medical institutions which fill prescriptions however have bargaining power (Whiteside, 2016).
The fourth factor that influences the pharmaceutical industry is availability of substitutes. Porter asserts that the availability of substitutes reduces the power of the sellers over their sales. The ease of substitution and substandard products are the major influencing factors for drugs in the pharmaceutical industry. As such, the threat of substitutes is prevalent in the pharmaceutical industry hence the need for active patents. In cases where new drugs exist to treat major health conditions, such drugs have the power to gather billions in profits. On the other hand, subsequent drugs treating the same ailment may not gain as much profitability as the first developed drugs. In essence, the loss of patent by any major drug gives way to the producers of generics to gain from the production of substandard products which sell at cheaper prices (Whiteside, 2016).
The competitive rivalry in the pharmaceutical industry is characterized by the need for innovativeness and technology use efficiently. The competition is not limited to entrants due to the strong need for patents. This need drives the industry to experience stiff competition for leading researchers and high level workers. According to Whiteside (2016), the competition in the industry requires for strong ethical values in upholding non- disclosure agreements and non- compete clauses. Each new drug has to be analyzed in terms of industry information to prevent substitutes from being manufactured. Because of this, the industry is characterized by high potential for mergers and acquisitions.
The analysis of the pharmaceutical industry shows that while the industry may be attractive in considering the threat of new entrants, power of suppliers and power of buyers, the role played by the threat of substitutes and the competitive landscape is significant. As such, the industry can be attractive to those with a strong sense of innovation, who can steer the development of worldwide recognized products with the objective of maintaining sustainable competitive advantage. In this essence, innovation is inevitable.
Question 3: Biocon India VRIN Analysis
The analysis of a company on the basis of its value, rarity, Inimitability and Organization can help to determine how it uses its key competencies to add value to its processes. The resource based outlook into company analysis helps to determine how an organization can use its key resources to maintain competitive advantage in the long run (Kozlenkova et al., 2014). At Biocon for instance, the value associated with the company products is such that it helps the company to achieve competitive advantage. According to Barney (1991), a firm’s resources must be capable of helping the firm to maintain competitive advantage while at the same time minimizing its own weaknesses. At Biocon, focus on technology and strength in various operational processes has enabled the company to maintain a competitive edge over its competitors. One of the ways through which this has been achieved inadvertently is through the use of an integrated manufacturing model that heightens profit margins through cost reduction while also results in the production of high quality products. Similarly, product differentiation has enabled the company to works towards achieving its competitive advantage.
In terms of rarity, Barney (1991) suggests that a product has to be rare in order for it to accomplish the desirable competitive advantage. In lieu of this, the rarity can come through product differentiation and focus on the products role to the consumer. To achieve this rarity, Biocon focuses on disease specific clinical research in the process of drug discovery and manufacture. From the perspective presented in the 2004 AGM report, Biocon chases this capacity through concentration on fermentation as well as on other products such as statins, which are associated solely with the company (Biocon, 2004). Furthermore, the company also focuses on a vision that is dependent on innovation, which places it ahead of the competitors at all times. In the pharmaceutical industry, it has been demonstrated that the first product to enter the market at a favorable cost captures the buyers’ interests and attracts huge profit margins. Biocon aims at being the market leader in every innovation in the market at current times. As such, the products associated with the company fetch profits that are above average.
Additionally, Biocon directs its competencies in Inimitability. From the report given by Kalegaonkar et al (2008), Biocon previously used a growth model that focused on differentiation and specialization. The recognition of the fact that the used growth model may have surpassed its usability is tantamount to recognizing the fact that it is no longer sustainable. The company can therefore be said to pursue inimitability through the application of a dynamic growth model that goes hand in hand with an innovative culture. In addition to this, the company also pursues inimitability through specialization in diseases and conditions as well as through the use of an integrated manufacturing model. Based on these practices, the competitive edge held by the company is undeniable and can only be associated with continued growth in the pharmaceutical industry. The healthcare sector is undergoing changes every year and inimitability can only be achieved through focusing on dynamic processes. Besides helping the company to maintain specialization, product differentiation will also help the company to maintain inimitability through dynamic patent conditions.
Lastly, Biocon also uses non-substitution capability to address the pharmaceutical business challenges. Based on the findings of Makadok (2001) inability to substitute a company’s products makes it possible to prevent the production of cheaper substitutes to the product in question. The company’s culture of collaboration between the people such as key scientists, stakeholders and other employees, the limitations in product manufacturing processes can be recognized and addressed effectively (Kalegaonkar et al., 2008). As such, any loop holes that may give generic product manufacturers an opportunity to develop lower cost products are eliminated as soon as they eliminated in the early stages. In addition to this, the company’s research and innovative capabilities makes it possible to enhance creativity and thus produce more superior, disease specific products that cannot be substituted easily. Focus on serious diseases which require intensive research and which are sufficiently cost intensive also makes it difficult for the company products to be substituted easily. Some of the more common manufacturing technologies can result in ease of substitution but the company has found a potential solution to this through collaboration and technological advancements.
Question 4: Suggestions to Biocon India Group
The analysis of Biocon groups with respect to various organizational features aids in the formulation of company suggestions. In light of this, the first suggestion directed at the company senior directors is to clearly articulate the organizational goals in terms of workable timelines, procedures and evaluation strategies. Creation of a company strategic plan cannot be complete without a clear communication of both short term and long term goals. While the company’s vision and mission statements clearly communicate their business intentions, the two do not sufficiently describe the aims that the company has in achieving its vision and missions. This leaves many questions unanswered and may sway the employees despite their awareness of the organizational mission and vision. According to a study by England, organizational goal setting is crucial for maintaining acceptable organizational behavior, increasing productivity and subsequently improving the organizational profitability (1967). Biocon can thus gain even greater competitiveness with a well highlighted goal statement than it can with only the vision and mission statements. It is therefore suggested that in addition to the statements that provide the strategic action, the company should put in place goal statements that resonate with the company purpose and mission statements. It is only in this way that sustainable competitive advantage can be maintained.
Apart from setting goals to go with the mission and vision of the company, it is also suggested that Biocon should concentrate more on creating inimitable products. As previously described, inimitability is crucial in enhancing competitive advantage. Although the company has done well to some extent, the level reached by the company is still low considering that the company operates within a highly competitive industry. Product differentiation and use of an integrated production model alone are not sufficient for the achievement of organizational inimitability (Cardeal & Antonio, 2012). The company needs to put in place other measures such as increasing differentiation and decreasing the product prices. Increased differentiation cannot do much considering the extent to which the company has gone to achieve differentiation. The company can still pursue differentiation through focusing on product marketing and promotion practices. Additional services to the customers can also go a long way in setting the company apart from the competition. Since Biocon uses an integrated manufacturing procedure, it is expected that the manufacturing strategy results in lower production costs. This in effect implies that the company can reduce its product costs without incurring any losses and still maintain competitiveness in the pharmaceutical market.
The company senior directors are also advised to invest more in organizational and product promotion practices. Organizational promotion can help the potential customers to recognize the company and its market shares (Davies, 1992). Similarly, the product marketing can be done using customer testimonials to give value to the company products. Evidence of curative properties of those products can attract more customers to the company products. The objective of doing this would be to maintain the company’s competitive advantage over its competitors. The pharmaceutical market, as previously described is highly competitive. This means that a company may practice differentiation and other forms of product exceptionality efforts yet still face the threat of competition. Through advertisement, the company will not only improve awareness of the company products but will also set itself apart for the benefit of the customers.
Another suggestion is that the company should improve its distribution network to access several parts of the world. India is currently recognized as a hub of pharmaceutical advantage in the world. This means that the company considered the largest in the pharmaceutical industry in India has high capacity in the global network. As such, internationalization can help the company to access even deeper markets and thus make greater profits in its operations (Hansson, 2007). Although the capital input to this may be high, internationalization comes with improved profit margins and Biocon can manage this since it has effective production procedures that enhance cost effectiveness and speed. The key ways through which the company can internationalize include through carrying out export operations and through partnership with global distributors and franchising. Through franchising, the company can manufacture their products either in India and export or use franchisees’ outlets. Through any of these processes, the company is guaranteed sustainable profitability. The pharmaceutical industry is dynamic and thus requires dynamic organizational processes to keep at par with the industry changes.
It can therefore be concluded that despite the efforts to be the best in the industry, Biocon still has sufficient room for improvement. The company should therefore take into consideration the suggestions given and thus find ways of incorporating them into its strategic plan. Constant innovation and research into both practice and product qualities can also help the company to effectively address the suggestions given. In this way, sustainable growth into the pharmaceutical industry will be achieved.
References
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