While deciding the growth strategy, risks, barriers, resources, capabilities and capacities of organisation play a very critical role. It needs to be ensured that a company has the requisite capabilities to match the risks it intends to undertake in developing the strategy. Organisations need to also consider the bets match between two approaches. Both the approaches have certain advantages and limitations.
Opportunistic approach focuses on entrepreneurial management style of the strategy. The blend of both the approaches, entrepreneurial in terms of identifying the opportunity and managerial in terms of relating strategic capability to the opportunity, will fetch good returns. The following figure well illustrates as to how strategic initiatives can be incorporated into the corporate agenda of a business unit.
When we integrate these approaches, we recognise the opportunity, develop strategic positioning and willingness to change the position. Entre-preneurial management always looks at opportunities and market growth drivers.
OPPORTUNITIES ARE OFFERED BY DYNAMIC SHIFTS OF MARKET:
We can identify three types of shifts in market dynamics.
INDUSTRY SHIFT
Big Pharma companies like Novartis and Aventis are moving ahead to compete in Generics markets. Large generic companies like Teva are working out alliances to share markets.
Every pharma company wants not only to increase the scale of the market but also to climb up the value chain as fast as possible.
There are some companies which are not that large but have dominance in specific therapeutic groups or countries.
They get together and become Super Net companies. This is happening in both generics and branded business.
PATENT SHIFT
Patents are shifting technology to biotech, preferring inlicensing and outlicensing routes. Brands tend to become commodities and gene-rics emerge.
GEOGRAPHICAL SHIFT
In case of geographical shifts companies are outsourcing their requirements to a large extent for cost effectivity. Governments are playing major role in building healthcare infrastructure and improving delivery systems.
Parallel trade is increasing as patients are keen to gain the price advantage, ignoring geographical boundaries of the market. As the economies are becoming borderless, the issue of localisation vis-à-vis internationalisation of business becomes a major factor in deciding the geographical shift.
MARKET GROWTH DRIVERS:
One third of the global population belongs to Asia Pacific region with varied demographics and psychographics. A number of growth drivers govern the Asia Pacific market:
1. Economies are growing
2 Liberalization is moving faster
3. Regulatory environment is improving
4. Governments are increasing their healthcare expenditure
5. Healthcare services and infrastructure in each country is improving
6. Lifestyles are changing giving rise to new medical needs
Over and above, human capital is improving through education and information technology (IT) skills. Patients are shifting to self-medication. As a result, OTC market will be on the rise. Voluntary efforts are being made by companies to make self-medication more responsible through patient education. All these are growth drivers for developing markets.
From an organizatio-nal perspective companies are interested in increasing R&D spend, using advanced technologies and develop patents to protect intellectual property rights.
Strategic Management considers following aspects, while developing strategic initiatives:
- Market share drivers
- Growth barriers and competitive framework
There on organisation decides on the course of strategic limitations.
There are two basic market share drivers:
1. Is the penetration of the market through developing more usages or more users of a given product portfolio? A better market penetration can also be achieved through mergers and acquisitions of brands or companies. Besides allopathic brands, companies can opt for alternate therapies for the same indications and extend their penetration. As generics are moving beyond prescriptions, those companies who have edge over generics in pricing and corporate image can substitute and compete with other generics to improve penetration levels. While looking at these options inlicensing of few brands can be another option.
One more alternative to gain a larger market share is to introduce semi blockbusters, involving much lesser cost of R&D into a specific geographical location in direct need for such a drug. These are different methods by which organizations can improve their market share, through a larger share of prescriptions and make an impactful influence on the particular market.
2. The second aspect of market share improvement is to improve coverage. The driver to improve coverage could be migrating from prescription to DTC and OTC. Similarly, the shift can be from one country to another country for better coverage.
GROWTH BARRIERS
The roadblocks in the development of pharmaceutical market can be classified into several groups:
i). Health related factors like health infrastructure, regulatory policy
ii). Economic factors like purchasing power, pricing, R&D funding
iii) Market related factors like competition, parallel trade
All these factors operate concurrently and influence significantly the size and growth of the pharmaceutical market.
EVOLVING COMPETITIVE FRAMEWORK
In Asia Pacific region, the competitive framework for pharmaceutical business is evolving. Interplay of the following forces is shaping this competitive framework:
- New technology: (e.g. biotech, generics, proteomics, stemcell research)
- Emerging diseases: (Continuation of age-old infectious diseases, reemergence of TB and malaria due to drug resistance and new diseases like HIV AIDS, diabetes, Alzheimer's etc)
- Demanding stakeholders: While investors and shareholders want higher returns, governments, consumers and NGO's are pressing for lower prices.
- Governance laws: While trade is being liberalised and stock markets may be booming, competition laws and stock exchange will be strengthened.
STRATEGIC CHALLENGES OF ASIA PACIFIC REGION
This Asia Pacific potential market, which is growing at a minimum 15% per annum, can be captured by building regional as well as national strategies.
There are certain strategic challenges that need to be assessed before we design regional strategies.
1). There is a lack of harmonization of regulatory practices such as pro-duct registration and labeling requirements.
2). Tariffs such as import duties and other levies require to be rationalized.
3). Perceptions of customers are highly fragmented and hence while developing a strategy for a region, this poses a formidable challenge.
4). Most crucial aspect in this region is pricing. Contiguity of geographical locations of each country in the entire region complicates pricing.
MARKETING Challenges
Defining value: All marketing strategies have to be customer-centric. In pharmaceutical business there are three types of customers - the physician (Prescriber/Specifier), the pharmacist/retailer (facilitation) and the patient (user). Each has a distinct role and specific expectations in terms of value.
The physician looks for scientific evidence of therapeutic benefits. The patient expects good returns in relation to price, convenience of drug design and delivery and quicker health benefit. The pharmacist is more concerned about availability from distribution and packaging in terms of safety and presentation as well as return on his investment.
All these perspectives have to be built in the product and a brand image has to be developed.
Market intelligence surveys and feedback from medical representatives provide the mapping of customer's expectations. This is usually linked with management information systems and identifies core competencies of a company for incorporating the defined value.
Customer insight studies for a product in a segment/specifiers unveils the specific value propositions which company has to define and redefine.
DEVELOPING VALUE
Having defined the value, continuous efforts have to be undertaken to scale up the value. Upgrading clinical trials and packaging to international standards should from a core of value development process. Consequently an appropriate message to reflect value addition will have to design in various promotional materials. The product needs to be positioned so as if represents its crucial competitive value in the marketing strategy.
DELIVERING VALUE
In delivery of the product to reflect and retain value perception, the logistics of distribution and after sale service play an instrumental role. Issues relating to credit processing, trade discounts, replacements of returned goods and other trade related issues should be smoothened. In the final analysis customer relationship management forms the main plank of an effective marketing strategy.
Moreover, when the market becomes mature, value will have to be rediscovered and redefined so that the products and the customer continue to buy the product.
WAY FORWARD
In a global setting, markets are volatile and fast changing. On the one hand competition is becoming more intensive. On the other hand, collaboration through alliances adds to a competitive edge. Ultimately entrepreneurial and strategic management will score over traditional resource based management. In fact, marketing and management models will have to be customized in relation to a region or a nation. For the purpose, marketing and transformation models will have to be developed.
(This article is based on the presentation by Dr R B Smarta, managing director of Interlink Marketing Consultancy Pvt. Ltd., at Asia Pacific Pharma Business Management Summit at Singapore on 8th and 9th September 2005. He is a consultant of the pharma and healthcare industry.)