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FACTORS INFLUENCING PHARMACEUTICAL INDUSTRY


OF PAKISTAN AND STRATEGIC ANALYSIS OF HIGHNOON
LABORATORIES LIMITED

Group Members:

Abrar Ashraf, MBA (Banking & Finance), GIFT University, Gujranwala, Pakistan.

M. Awais Rafique , MBA (Banking & Finance), GIFT University, Gujranwala, Pakistan.

Salma Mehmood, MBA (Banking & Finance), GIFT University, Gujranwala, Pakistan.

Sitara Arif, MBA (Banking & Finance), GIFT University, Gujranwala, Pakistan.

EXECTIVE SUMMARY

This project is prepared to analyze the factors influencing pharmaceutical industry of Pakistan

and impacts of this industry on the economy of Pakistan. We have chosen Highnoon

Laboratories Ltd with a view to evaluate strategy making practices in this industry. Industrial

data was collected from Chamber of Commerce and Ministry of health .This project is a part of

our course Business Strategy & Policy. We visited Highnoon Laboratory Ltd with a view to

launch an internal audit of this company. We conducted unstructured interviews of the different

departmental heads after a little bit discussion we presented our questionnaire to respondents and

allowed them to complete it by themselves. The purpose of this structured questionnaire was to

gather information about environment and behavior of employees.

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We have completed this project successfully. Main thing that we learn from this project is

experience of different strategy making practices involved in pharmaceutical industry of

Pakistan. We have been familiar with working environment as well as security and control

system of Highnoon laboratories. Their internal control system is not up to that esteem which is

required for such a big organization. They have safe guarded their profit margins by diversified

portfolio of their products and operational efficiency. We have taken information from the

website of ministry of health and chamber of commerce as well. The visit of Highnoon

Laboratory was also fruitful for getting information in this perspective. This project will open a

new horizon for further researches in this area. This report will be useful for Highnoon

Laboratories for the betterment in decisions regarding the road map in order to achieve the

quantified goals resulting in progressive march towards its strategic intent.

This project report indicates an insight of strategy making practices related to pharmaceutical

industry of Pakistan and also gives an informative view of strategy making practices involved in

Highnoon Laboratories Ltd.

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PHARMACUETICAL INDUSTRYOF PAKISTAN

Pharmaceuticals are the substances that are aimed to treat, cure, prevent or recognize diseases

and relieve pains through their applications.

Research and discovery are the essence of pharmaceutical industry, and its success has played a

vital role in maintaining pre-eminent position of the pharmaceutical industry in the world today.

Such activities demand a sustain rate of huge investment over a long period. Pharmaceutical

Industry devotes huge resources to R&D more than any industry.

HISTORICAL BACKGROUND

At the time of independence there were only two small units which were enabled to meet the

local demand. The rest of the medicines were imported. The decision taken in 1972 to abolish

brand names, restrict availability of essential drugs to 850, fix maximum retail prices across the

board and freely allow local manufacturer of all the essential drugs was in fact the life line for

the national segment of the industry. Due to several reasons, especially inaccessibility of new

researched medications this policy was ultimately reversed in 1976.

Since 1999 the Govt. has invested US$ 133 million in the pharmaceutical industry. The last 10

years was eventful for the Pakistan Pharmaceutical Industry because they have developed a large

number of domestic manufacturers. In 2006 there were 400 licensed pharmaceutical companies

in Pakistan, including 30 multinationals who had over 53% of market share. Today the industry

has developed technology, production and an infrastructure of imports. It is a well regulated

industry. It has domestic companies which are quite confident of doing good business.

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PAKISTAN PHARMACUETICAL INDUSTRY

Although Pakistan’s pharmaceutical and healthcare sectors are expanding and evolving rapidly,

about half the population has no access to modern medicines. Clearly this presents an

opportunity, but much more work needs to be done by the government and industry's

stakeholders. The value of pharmaceuticals sold in 2007 exceeded US$1.4bn, which equates to

per capita consumption of less than US$ 10 per year and value of medicines sold is expected to

exceed US$2.3 B by 2012.

Pakistan is a developing pharmaceutical market, with a large population and economic progress

evident, but per capita drug spending was rather low at around US$9.30 in 2007. Private

spending accounts for 65% of total healthcare expenditure sourced through out-of pocket

payments, international aid and religious or charitable institutions. Pharmaceutical spending

accounts for less than 1% of the country's GDP, comparable to levels in some neighboring

countries but above that in some of the South Asian countries.

MAJOR PLAYERS IN INDUSTRY

NAMES MARKET SHARE

GSK 11.6%

ABBOTT LAB 7.9%

HIGHNOON LABS 6.3%

GETZ PHARMA 3.9%

SANOFI AVENTIS 3.8%

ROCHE 3.1%

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COUNTRY DEMAND

Pakistan meets 80% of its domestic demand of medicines from local production and 20%

through imports. The pharmaceuticals market size is Rs. 70 Billion (US $ 1.2 Billion),

approximately. The market for pharmaceuticals in Pakistan has been expanding at a rate of

around 10 to15% since last few years.

EXPORTS AND IMPORTS

Pakistan is also exporting its surplus drugs to a large number of countries particularly to the

Asian and African regions with an expanding trade in the newly emerged Central Asian States.

About a hundred million strong populations of the Central Asian States, with almost no local

manufacture of medicines, offers an attractive market for industries located in Pakistan. The

share of pharmaceutical industry in exports has been reached to 4.04% that was 3.28% in 2008.

So far as imports are concerned Pakistan imports nearly 95%of the basic raw-material used for

manufacturing from countries such as China, India, Japan, U.K, Germany, and others and major

importers are in Islamabad, Karachi, Lahore, Peshawar and Quetta.

BMI'S BUSINESS ENVIRONMENT RATINGS

Pakistan slipped from 13th to 15th and last place, out of the key markets assessed in the Asia

Pacific region. In addition to the challenging economic environment, the country's

pharmaceutical expenditure will also be shaped by the volatile political and security situation.

Overall, it is expected that pharmaceutical market value to increase at a compound annual

growth rate (CAGR) of 9.39% in local currency terms, reaching PKR206.9bn (US$2.3bn) in

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2014. Growth over our longer, 10-year, forecast is likely to be somewhat more subdued, at a

CAGR of 8.75% in local currency, as the operating environment stabilizes.

MAJOR SUPPLIERS

Major suppliers include United States, U.K., Germany, Switzerland, Japan, Holland and France.

BASIC MANUFACTURES

There are five units operating in Pakistan for the Semi Basic Manufacturing of pharmaceutical

raw material and still Pakistan has the capacity to absorb the significant investment in this field.

MULTI NATIONAL MANUFACTURERS

At present 30 multinational pharmaceutical organizations are producing their products in

Pakistan.

LOCAL MANUFACTURERS

411 units are involved in local pharmaceutical manufacturing.

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SOME KEY STATISTICS OF THE INDUSTRY

REGISTERED DRUGS 47000

REGISTERED MOLECULES 1100

R&D EXPENDITURES 1% of the profit

AVERAGE GROWTH RATE 11%

MARKET SHARE OF 45%

MULTINATIONAL COMPANIES

MARKET SHARE OF LOCAL 55%

COMPANIES

MARKET LEADERS Glaxosmithkline

DRUG ACT 1976

The Pharmaceutical manufacture and trade in Pakistan is regulated through the Drug Act 1976,

And the rules framed there under. This is a fairly comprehensive law. Pakistan was the first

amongst the developing countries in the world to have introduced Good Manufacturing Practices

as a mandatory requirement. Registrations are granted by the Central Licensing and Registration

Boards. The Quality Control system at the federal and provincial levels is supported by the

professionally competent drug inspectorates and laboratory services.

OPPORTUNITIES FOR INVESTMENT

Pharmaceutical industry in Pakistan is producing all the major pharmaceutical dosage forms.

Similarly, there are some special products e.g. immunological, anti-cancer drugs, certain anti-

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diabetics, antidotes and products manufactured from biotechnology, which are still being

imported, in the finished form. These specific areas provide excellent opportunities for

investment. Only few bulk pharmaceutical raw materials are being manufactured locally and

most of the pharmaceutical raw materials are being imported in large quantities from different

countries of the world. This sector also gives challenge to explore and avail the opportunities.

The Pakistan Pharmaceutical Industry is a success story, providing high quality essential drugs at

affordable prices to Millions. Technologically, strong and self reliant National Pharmaceutical

Industry is not only playing a key role in promoting and sustaining development in the vital field

of medicine within the country, but is also well set to take on the international markets.

PAKISTAN PHARMACUETICAL MANUFACTURE’S


ASSOCIATION

The Pharmaceutical Industry is a human Industry which caters to the health of public and is

therefore of significant importance. As such, the Pakistan Pharmaceutical Manufacturers'

Association came into existence on January 26, 1961 and the Government of Pakistan through

the Ministry of Commerce registered PPMA as the only Representative body of the

Pharmaceutical Industry in the Country. The Government issued a License to this effect under

Section 26 of the Companies Act, 1913 on July 18, 1961. The Association was formally

incorporated under the Companies Act, 1913 by the Registrar of Joint Stock Companies.

MAIN OBJECTIVE

The main objective of Pakistan Pharmaceutical Manufactures’ Association is not political. It is to

unit members in their common approach. Such as to encourage unity and mutual understanding,

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improve the working conditions of pharmaceutical industries, promotion of the interest of trade,

industry, and services in Pakistan or outside Pakistan, adopt a unified approach in matters of

policy, resolve controversies and conciliate differences of opinion among members of the

Association, establish just and equitable principles in trade and commerce etc.

MEMBERS

At the time of establishment of PPMA there were only ten members throughout the country who

are the founder members of the PPMA and it was through their efforts that this Association came

into being. Now, today the Membership of the Association is 210 (Approximately), who possess

the license for manufacturing drugs granted by the Ministry of Health, Government of Pakistan

against a total number of 350 units approximately.

We are proud of the hi-tech, essential and high quality National Pharmaceutical Industry which

has significance for the country in term of self-reliance to a great extent. The Pharmaceutical

industry Comprises around 411 manufacturing units including over 350 national or Pakistani

owned and licensed manufacturing unites and 25 licensed International subsidiaries of well

known worldwide based Pharmaceutical Corporations. However, we treat all such units as our

national because all the people who work in this industry are all Pakistanis. PPMA feels strongly

about the fact that all its members possess all requisite facilities necessary for the production of

pharmaceuticals of quality and should comply with CGMP standards.

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HEAD OFFICE

PPMA has its head office located at KARACHI with two Regional offices in Punjab & NWFP.

ROLE OF GOVERNMENT

Government of Pakistan is taking important initiatives with a view to support pharmaceutical

Industry. In this perspective the Government has setup an independent drug registration and

pricing authority. In Pakistan the Ministry of Industries decides about the drug pricing. In

the Biotechnology sector, Pakistan has initiated many programs. It is planned to setup

Biotechnology plant worth Rs400 million to meet the growing needs of quality medicines in the

country.

Substantial increase in public sector spending shows the involvement of Government to enhance

the standing of Pharmaceutical Industry with to ensure public welfare. Some major public sectors

programs have been initiated to address the health care needs of the population such as:

• The National Program for Family Planning and Primary Health Care.

• The Expanded Immunization Program

• National Program for Hepatitis Prevention and Control

• National Tuberculosis Control Program

• National Malaria Control Program

• National HIV/AIDS control Program

• Women’s Health Program

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The public sector health development expenditure increased from Rs.4.3BN in 2003-04 to Rs.6

BN in 2004-05, and Rs.9.5 BN in 2005-06. Ministry of commerce has given 50% subsidy to

pharmaceutical companies for registration of their exported products in foreign countries for

export from 1998-2003. The government has also formed a policy recently allowing companies

to produce raw-materials locally. Companies in Pakistan rely heavily on China, India, Germany,

UK and Japan for raw-material imports.

FACT: Health care spending in Pakistan in 2009 is Rs.226.5 BN. GDP has been allocated for the

health sector in 2009 was only 0.7%.

LICENSING REGISTERING AND ADVERTISING RULES


1976

Following are the formalities under Rule 16 of the Drugs.

1. LOCATION AND SURROUNDINGS

1.1. LOCATION

The premises shall be located preferably in an industrial area and in any case not in any

residential or commercial area.

1.2. SURROUNDINGS

Premises shall be situated in an environment that, when considered together with measures to

protect the manufacturing processes, presents minimum risk of causing any contamination of

materials or products. It shall be away from filthy surroundings and shall not be adjacent to an

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open sewerage, drain public lavatory or any factory which produces a disagreeable or obnoxious

odor or fumes or large quantities of soot, dust or smoke which may contaminate the drugs being

manufactured or adversely affect their quality. Existing units shall keep the surroundings under

their control to be clean.

1.3. - The size of the plot shall not be less than 2000 square yards.

2. BUILDING LAYOUT AND ITS PRE-APPROVAL.

The building shall be of adequate size and suitable design and construction in view of the need

for drugs to be manufactured and to suit the operations to be carried out. The site and layout plan

of building shall be got approved from the Central Licensing Board or person authorized by it in

this behalf before starting construction of the building and any minor subsequent changes in the

layout plan will be communicated as and when made with a revised updated layout plan at the

time of renewal of Drug Manufacturing License.

The following information/documents are required for the establishment of a

pharmaceutical unit:-

(i) A detailed layout plan in duplicate, for approval in terms of paragraph 2 of section 1 of

Schedule-B, under the Drugs (Licensing, Registering and Advertising) Rules, 1976. the layout

plan may be drawn to comply with the Good Manufacturing Practices as laid down under the

aforesaid rules.

(ii) Give Schedule of Section wise covered areas.

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(iii) Expected investment.

(iv) Fee @ of Rs. 1000/- per section as may be proposed in the layout plan to be

deposited under the following head of account and submit original Chelan

C-Non Tax Revenue

C02-Receipts from Civil Administration and other Functions.

C028-Social Services.

C02841-Health-Other Receipts.

(v) A list of the drugs intended to be manufactured, indicating the dosage forms and the generic

names of the drugs.

(vi) Partnership deed.

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FLOW CHART OF PROCEDURE FOR LICENSING OF


PHARMACEUTICAL UNIT

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Procedure of Drug Registration

Registration of a drug is granted by the Registration Board, set up by the Federal Government

under the Drugs Act, 1976. This Board, which comprises 21 experts in the field, before

registering a drug, satisfies itself of its safety, efficacy, quality and economy. The Board also

takes into consideration the public interest. In addition, in respect of registration of a drug for

local manufacture, it is ascertained that the manufacturer possesses matching facilities.

1. An application for registration of a drug to be manufactured locally is made in a prescribed

Form-5 under the Drugs (Licensing, Registering and Advertising) Rules, 1976. An application

for registration of a drug to be imported is made in a prescribed Form-5 (A) under the said rules.

For import purpose a sole agent in Pakistan is required to be nominated by the principal /

manufacturer abroad.

2. The respective offices evaluate the application. It takes 3-6 months to process the

applications for branded generic drugs and 6-12 months in respect of new molecules.

3. Once the application is complete and has been evaluated it is placed before the Registration

Board for its orders.

4. For every potency/strength of a drug a separate application is required.

5. A registration is issued for a period of five years at a time, after which it is renewable on an

application. Once an application for renewal has been made in time, the registration continues to

be in force till the decision on the application.

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6. A registration may be suspended or cancelled or renewal denied if the holder of the

registration fails to comply with the conditions of registration.

The Federal Government has set up Expert Committees including a committee on Biological and

a committee on Veterinary Drugs for furnishing opinion after drug's evaluation. The Registration

Board also considers these opinions.

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FLOW CHART OF DRUG REGISTRATION

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HIGHNOON LABORATORIES

HISTORICAL BACKGROUND

We have selected Highnoon Laboratories from pharmaceutical industry in order to conduct

strategic analysis of this distinctive company and to compare its strategic march with industry

trend. Highnoon was incorporated in 1984 in the historical and culturally rich city of Lahore

called the heart of Pakistan. It took initiative with a culture of commitment, competitiveness and

distinction in every area of its operations. So far as its strategic alliance is concerned it is trend

setter and leading company in the industry right from its initiation up till now. The organizational

structure allows the employees the freedom, which is necessary to further initiative and

creativity. Employees can take appropriate decisions and implement these with conviction. This

approach has enabled highnoon to bring forth world-class capabilities in marketing, sales,

research & development and production. Highnoon continues on its path to discovery, scaling

new heights and seeking new and higher challenges which are essence of pharmaceutical

industry.

STRATEGIC INTENT

We at Highnoon laboratories limited understand the duties of being responsible corporate citizen

and stand true to our conviction and promise to work for the betterment and prosperity of our

people.

“Highnoon for a healthier nation”

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MISSION STATEMENT

We strive to maintain excellence in our business practices with the objective to benefit the

medical community, consumers, stakeholders and employees and to improve quality of life by

providing quality products.

OBJECTIVES

• These objectives are the hallmarks of Highnoon’s journey towards a healthier nation.

• Excel in meeting customer needs.

• Maintain leadership in national pharmaceutical industry

• Gain confidence of Doctors, Pharmacists and Consumer who use their products.

• Seek employee involvement, continuous improvement and enhanced performance goals.

• Encourage export business.

Pharmaceuticals are the substances that are aimed to treat, cure, prevent or recognize diseases

and relieve pains through their applications. Research and discovery are the essence of

pharmaceutical industry, and its success has played a vital role in maintaining pre-eminent

position of the pharmaceutical industry in the world today. Such activities demand a sustain rate

of huge investment over a long period. Pharmaceutical industry devotes huge resources to R&D

more then any industry.

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LANDMARKS

1985: Highnoon Laboratory started marketing of its first brand ULSANIC 500 mg tablets, a

product of Chugai-Japan.

1986: Launch of world’s latest research molecules for anti-hypertensive, HERBESSER tablets, a

product of Tanabe-Japan.

1986: Construction of a new modern manufacturing facility on a 202, 500 sq. ft. Area started at

17.5km Multan Road, Lahore. Total covered area of new facility is 108,064 sq. ft.

1990: new facility at present place started functioning and first batch of TRESS ORIX FORTE

was produced and filled on automatic filing and sealing line.

1993: Local manufacturing of HERBESSER also started.

1994: Highnoon laboratory adopted multi dimensional approach and embarked on exports with

first order to Turkmenistan.

1996: Highnoon laboratory launch world’s latest ACE inhibitor brand TANATRIL tablets of

Tanabe-Japan.

1996: Highnoon laboratory announced gratuity schemes along with already provided staff

provident fund for the welfare and benefit of the employees.

1998: Highnoon Laboratory earned ISO 9002 certificate.

2000: Staying true to its vision of a healthier nation, highnoon introduce HEPROVAC-B

recombinant vaccine for hepatitis-B.

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2002: Highnoon inaugurated a separate anti biotic facility on 7500 sq. ft. covered area.

2002: Highnoon formulized arrangements with ALLIANZE, EFU to provide hospitalization

insurance plans for its employees and there immediate family members.

2002: Highnoon started manufacturing and marketing of RHEUOSXIB, first CELECOXIB ever

launched in Pakistan and that reached to unprecedented sales volumes in a very short span of

time.

2003: ICAP and ICMAP awarded highnoon’s annual report-2002 the fifth best corporate report

in related sectors.

2004: Highnoon successfully negotiated acquisition of brand titled TRES ONIX FORTE.

2004: DYNALOG Service (Pvt) Ltd, wholly owned subsidiary of highnoon laboratories Ltd

established and start working with the paid up capital of Rs. 20million for the distribution and

marketing of highnoon as well as for the other local and international companies products.

2008: Asthma and COPD portfolio that includes ROTACAPS and ROTAHALER, launched.

2009: ZOTTER 250 mg capsule for upper respiratory tract infections, launched.

2010: COMBIVAIR 100, 200, and 400 for asthma and COPD launched.

QUALITY POLICY

Highnoon is being seen as one of the most innovative aggressive and professional marketing

outfits in the industry. This has been achieved through consistent toil and sweat for quality that

has become a second name for them in the market.

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SOCIAL RSPONSIBILITY

Social responsibilities of highnoon stem from the founder’s vision of a healthier nation. In the

role of a good corporate citizen, highnoon is fully committed to its social obligations. This

encompasses fine areas like promoting art and culture, valuing in sports, supporting education

and social causes for the well being of the society.

With the passion to serve the nation highnoon has been supporting Fatimid Foundation, Care

foundation, Government College University (GCU) welfare society, University College of

Pharmacy, Old Ravian Union, Khoj Society Dispensary and Zoological Gardens of Lahore.

Apart from serving the nation management of highnoon has establish a trust for employees by

the name of Highnoon Employees Welfare Trust (HEWT).

BUSINESS PARTNERS

• Chugai Pharmaceutical Company Limited, Tokyo, Japan.

• Mitsubishi Tanabe Pharma, Osaka, Japan.

• Solvay Pharmaceuticals, Hannover, Germany.

• Almirall Laboratories, Barcelona, Spain.

• Choongwae Pharma Corporation, Seoul, Korea.

• TRB Chemedica International, Geneva, Switzerland.

• Bouchara Recordati, Levallois-Perret, France.

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FINANCIAL HEALTH

Their financial profile leaves them well positioned to pursue their corporate strategy while

maintaining disciplined approach and continuous evaluation of their product portfolio to better

focus on core strengths and overall profitability. Diversity of their product range enabled them to

fortify their position and the company generated sales revenue of Rs. 2.33 BN in 2009. This was

the highest in the company’s history growing at CAGR of 21%. The company demonstrated

resilience in the economically difficult times and maintained overall margins, despite increase in

raw material and other cost due to weakness of our currency and inflationary trends, by

maintaining higher volumes and lower operating cost. Their total assets of the company have

risen to Rs. 1746 MN and the shareholders equity rose to 498 MN. The company maintain

adequate capital base so as to maintain invertors, creditors and market confidence and to sustain

future development of the business.

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THEARPEUTIC FOCUS BRANDS


Persistent emphasis on rapid growth of sales enabled Highnoon to improve its market share to

6.3%. Significantly, this growth was as much an outcome of effective life cycle management of

the older product portfolio, as it was aggressive marketing of the newer brands. The major

business segments for the company are alimentary tract & metabolism followed by cardiology.

The rest includes systemic anti- infective, G.U system & sex Hormones, Nervous systems,

Respiratory system and muscular- skeletal system.

PRODUCTION

Production of any medicine in the best form and quality is a very demanding process it is their

mission to ensure that the equipment and machinery employed in the production process are of

the top most quality. They are keeping this in mind that their manufacturing facility is equipped

to cater the needs of the 21st century.

Production plant comprises of the most modern equipment from UK, USA, Germany, France,

and Italy. Their qualified and highly skilled staff is fully cognizant with recent developments in

pharmaceutical technology. All manufacturing operations are strictly adhered to specific

procedures that assure highest standard of quality and manufacturing. In the field of medicines

that is competitive yet challenging, the company keeps on introducing novel and innovative

manufacturing techniques to stay abreast with the changes and competition.

While maintaining current the good manufacturing practices (CGMP) of producing quality

medicines, the company constantly improves its system.

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PRODUCTION CAPACITY PER ANUM


OPERATION UNIT OUTPUT * Units In Million

Encapsulation Capsules 274

Compression Tablets 671

Oral Liquid Bottles 8

Oral Drops Droppers 6

Blistering Strips 77

Cartonating Cartons 90

*Based on single shift.

RESEARCH & DEVELOPMENT

Their success depends on competent and productive R&D function. Being a leading local

pharmaceutical company, highnoon has established an innovative R&D structure that encourages

creativity and facilitates the accelerated development of new medicines to meet the customer

needs their scientist are working hard to discover new ways of trading and preventing diseases.

By this they are dedicated to bring diversified medicines for patients.

They are one of the largest collaborators in the local pharmaceutical industry and work with

academic institutions, Government and other pharmaceutical bio-technology companies.

CONTRACT MANUFACTURING

A number of companies turn to highnoon for contract manufacturing. Highnoon manages its

capacity efficiently and caters well to the manufacturing needs of these marketing concerns. In

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2007 a toll manufacturing agreement was sign with OBS health care for contract manufacturing

of one their products. This, no doubt, is yet another indicator of the esteem at which the industry

places highnoon’s manufacturing capability. Such as Ovafin, Prolifen, Esgerd, Angiocard-SR

etc.

EXPORT BUSINESS

With an aim to reach out to the world and provide the quality pharmaceutical products at

affordable prices. Highnoon started its export activities in 1994.

To strengthen the export business they are planning to tab other potential regions of the world. In

line with the company objectives, the export business will have significant share in the overall

business of the company in the future.

They export their products to the following countries

Hong Kong

Afghanistan

MACAU

UAE

Philippines

Sri Lanka

Saudi Arabia and some others.

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ORGANIZATIONAL WHEEL

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Strategy-Formulation Analytical Framework

Stage 1
The Input Stage

• Porter’s Five Forces Model

• Pest Analysis

• SWOT

• Internal Factor Evaluation Matrix (IFE)

• External Factor Evaluation Matrix (EFE)

• Strategic factor Analysis Summary Matrix (SFAS)

• Strategic Group Mapping

• Perceptual Mapping

• Competitive Profile Matrix (CPM)

Stage 2
The Matching Stage

• TOWS Matrix

• Strategic position and Action Evaluation (SPACE) Matrix

• Boston Consulting Group (BCG) Matrix

• Internal-External (IE) Matrix

• Grand Strategy Matrix

Stage 3
The Decision Stage

Quantitative Strategic Planning Matrix (QSPM)

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THE INPUT STAGE

PORTERS FIVE FORCES MODEL

Porters five Forces Model is used for industry analysis and it implies that risk adjusted rates of

return should be constant across firms and industries. According to numerous economic studies it

has affirmed that different industries can sustain different levels of profitability, part of this

difference is explained by industry structure. External threats and profits move into opposite

direction.

COMPETITIVE INTENSITY

So far as industry analysis is concerned it implies that rivalry among existing firms in

pharmaceutical industry is almost at moderate level. Pharmaceutical companies are competing on

the basis of quality, cost, product range and research and development.

BARGAINING POWER OF SUPPLIERS

Suppliers of pharmaceutical industry of Pakistan are the originators and large research based

companies located in developed countries. They are a few in numbers as compared with

pharmaceutical companies in Pakistan. Therefore they have strong bargaining power with them.

BARGAINING POWER OF CUSTOMERS

It is very sensitive to switch from one product to another because it is a life concern so customers

cannot switch easily from one reliable product to the other. On the other hand there are many

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pharmaceutical companies offering a wide range of products. So, the bargaining power of

customers is at moderate level.

THREAT OF NEW ENTRANT

Pharmaceutical industry of Pakistan is growing rapidly and there is still significant potential for

growth. There are chances of some new entrants but this threat is at moderate level. It is not easy

to establish a new pharmaceutical company in Pakistan due to requirement of huge investment.

THREAT OF SUBSTITUTES

Research and development are the essence of pharmaceutical industry. Every pharmaceutical

company in Pakistan is making efforts for the betterment of their research and development

department. Still there is a significant threat of substitute products because of rising discoveries

and pacing research and development in the whole world.

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IMPACT OF PROFITABILITY

Threat/Power

High Moderate Low


Competitive
Intensity

Bargaining power
of suppliers

Bargaining power
of costumers

Threat of new
Entrants

Threats from
substitutes

Moderate High
Low

Profits

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PORTER’S FIVE FORCES AND GENERIC STRATEGIES

COST LEADERSHIP

Cost leadership describes a way to establish the competitive advantage. Cost leadership, in basic

words, means the lowest cost of operation in the industry. The cost leadership is often driven by

company efficiency, size, scale, scope and cumulative experience. A cost leadership strategy

aims to exploit scale of production, well defined scope and other economies, producing highly

standardized products, using high technology.

COMPETITIVE INTENSITY

Highnoon laboratory is better able to compete due to highly committed and sophisticated

employees.

BARGAINING POWER OF SUPPLIERS

Highnoon laboratory has three to four suppliers at a same time. So they have better insulation

from employees.

BARGAINING POWER OF CUSTOMERS

Due to high quality and reliable products highnoon laboratory is better positioned and

continuously adding efforts to the best of their capabilities.

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THREAT OF NEW ENTRANT

Highnoon laboratory is involved in the betterment and prosperity of the nation by health caring

in efficient manner that’s why they are in a better position to deter new entrants in the market.

THREATS FROM SUBSTITUTE

Highnoon laboratory has intensive research and development department to accomplish the

varying needs and interests of the customers on competitive and affordable prices. Therefore

they can defend against substitutes on competitive grounds.

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PEST ANALYSIS
PEST analysis is a useful tool for understanding the big picture of the environment in which we

are operating, and the opportunities and threats that lie within it. By understanding the

environment in which we operate (external to your company or department), we can take

advantage of the opportunities and minimize the threats.

Specifically the PEST or PESTLE analysis is a useful tool for understanding risks associated

with market growth or decline, and as such the position, potential and direction for a business or

organization.

POLITICAL CHANGE

Political factors include government regulations and legal issues and define both formal and

informal rules under which the firm must operate. Some examples include:

• Tax policy

• Employment laws

• Environmental regulations

• Trade restrictions and tariffs

• Political stability

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NATURE OF CHANGE

In pharmaceutical industry prices are fixed by ministry of health. It exposes a significant risk on

pharmaceutical industry.

IMPACT OF CHANGE

Profit margin of pharmaceutical industry will be reduced due to price fixation policy.

THREAT

Price fixation is a long term threat for pharmaceutical industry.

STRATEGIC RESPONSE

Highnoon laboratory is involved in efficient portfolio management of its products resulting in

sophisticated profit margins.

ECONOMIC CHANGE

Economic factors affect the purchasing power of potential customers and the firm's cost of

capital. The following are examples of factors in the macro economy:

• Economic growth

• Interest rates

• Exchange rates

• Inflation rate

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NATURE OF CHANGE

Inflation and exchange rate fluctuations are important factors influencing pharmaceutical

industry of Pakistan because raw material such as molecules and supporting material is imported.

IMPACT OF CHANGE

Inflation and exchange rate fluctuations expose a risk of increase in cost because main cost

involved in pharmaceuticals is import of raw material.

THREAT

This change will increase pressure on cost control functions.

STRATEGIC RESPONSE

Highnoon laboratory have to consider operational efficiency in order to reduce the impact of this

threat.

SOCIAL CHANGE

Social factors include the demographic and cultural aspects of the external macro environment.

These factors affect customer needs and the size of potential markets. Some social factors

include:

• Health consciousness

• Population growth rate

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• Age distribution

• Career attitudes

• Emphasis on safety

NATURE OF CHANGE

Population is increasing day by day resulting in increased demand of pharmaceutical products.

Cross border relationships have also strong influence on pharmaceutical industry of Pakistan.

Supporting material is imported from India and China. So, cross border situations of India and

Pakistan do matter. Terrorism and global alliance are also important factors stimulating the

standing of pharmaceutical industry of Pakistan.

IMPACT OF CHANGE

Diseases are increasing day by day due to increase in population. Sales will be reduced due to

cross border relationship and terrorism activities. Due to global alliance market share increases.

THREAT

Unfavorable cross border relationships and terrorism will have a threat on pharmaceutical

industry of Pakistan.

OPPORTUNITIES

Increase in population and global alliance are growth opportunity for pharmaceutical industry to

explore further markets.

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STRATEGIC RESPONSE

Increase in population creates demand for pharmaceutical industry which can be explore through

strong research and product development. Unfavorable cross border relationships and terrorism

activities can cause reduction in profits which can be control through building strong business

relationships with business partners. Global alliance is a growth opportunity which can be

achieved by focusing on market capitalization strategies.

TECHNOLOGICAL CHANGE

Technological factors can lower barriers to entry, reduce minimum efficient production levels,

and influence outsourcing decisions. Some technological factors include:

• R&D activity

• Automation

• Technology incentives

• Rate of technological change

NATURE OF CHANGE

Technology is changing day by day. Pharmaceutical industry should acquire new and advanced

technologies to compete in the market.

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IMPACT OF CHANGE

Massive production is possible through advanced technologies by which they can achieve

economies of scale.

OPPORTUNITY

Economies of scale will strengthen the standing of highnoon laboratory because it would be a

competitive advantage.

STRATEGIC RESPONSE

Whenever new technology is evolved need for trained and skilled employees arise. Either

training of existing employees or hiring of new employees is required. Huge funds allocation is

needed in this perspective.

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PEST IMPACT MATRIX

Highnoon Laboratories Ltd

Nature Impact Strategic


Opportunities Threats
of change of Change response

Efficient Portfolio
Low profit Long Term
Price Fixation Management
Political Change margins

Inflation & Exchange Increase Pressure Focus on


Rates Fluctuation operational efficiency
Economic Change in cost on cost

Increase Increase in Growth Research & Product


in population Diseases opportunities Development

Cross border
Relationship Decrease in Reduction in Strong Business
Social change relationship
sales profits
Terrorism

Increase in Growth Focus on market


Global Alliances
market share opportunities capitalization

Technological Change Human


Advanced Economies of Competitive resource &
Technology scale Advantage
Funds allocation

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SWOT MATRIX

The concept of determining strengths, weaknesses, threats, and opportunities is the fundamental

idea behind the SWOT model. To present the model in a more understandable way, scholars

came up with so-called SWOT matrix. SWOT matrix is only a graphical representation of the

SWOT framework.

Strengths Weaknesses

• Providing high quality products • Distributional channel


• Efficient capacity management
• Shortage of space
• Patent & copy rights
• Human resource • Utilization of funds
• Continuous improvement • Lack of variety of products
• Financial stability • Internal control system

Opportunities Threats

• Molecule development opportunity • Government policies


• Market potential for veterinary • Exchange rate fluctuations
products • Inflation risk
• Market growth opportunities • Cross border relationship
• Global alliances • Terrorism
• Related products

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EXTERNAL FACTOR EVALUATION (EFE) MATRIX

EFE Matrix method is a strategic-management tool often used for assessment of current business

conditions. The EFE matrix is a good tool to visualize and prioritize the opportunities and

threats that a business is facing. The EFE matrix is very similar to the IFE matrix. The major

difference between the EFE matrix and the IFE matrix is the type of factors that are included in

the model. While the IFE matrix deals with internal factors, the EFE matrix is concerned solely

with external factors. As far as the highnoon laboratory is concern the opportunities and threats

are given below

OPPORTUNITIES

MOLECULE DEVELOPMENT OPPORTUNITY

A molecule itself is the smallest particle of a substance that retains the chemical and physical

properties of the substance and is composed of two or more atoms, a group of like or different

atoms held together by chemical forces. In other words molecule is basically an actual drug such

as in LOPRIN the drug present is ASPARIN which is basically a molecule mostly used as a pain

killer. In HILIN the drug is PREGABALIN which is a molecule used for Neuropathic pain etc.

Development of a molecule is a big challenge and normally it is not developed by the third world

countries because it requires a lot of funds and research. Therefore the pharmaceutical companies

take the patents and copy rights of that molecule for a certain time periods as Highnoon

Laboratory is doing now. They have franchises of their business partner at international level.

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They make research products for them. But they have opportunity to develop a molecule so that

it may reduce their cost.

MARKET POTENTIAL FOR VETERINARY PRODUCTS

Highnoon Laboratory is only focusing on Allopathic products they have opportunity to create

market for Veterinary products also. It needs a separate plant for production therefore it requires

a huge investment.

MARKET GROWTH OPPORTUNITIES

Population is growing day by day and increase in population is automatically increase diseases.

For pharmaceutical industry it is a market growth opportunity.

GLOBAL ALLIANCE

Highnoon laboratory is having enough capacity for the production of medicines. They are also

doing outsourcing for other companies such as for Solvay Pharmaceuticals in Germany. They

provide the raw material to them. Highnoon only produce those products for them. They have

opportunity to explore for more market share globally through export opportunities.

RELATED PRODUCTS

Another opportunity foe Highnoon Laboratory is the production of related products such as

surgical items, gloves, masks and other equipments related to pharmaceutical industry. By doing

this they can acquire a huge market share.

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THREATS

GOVERNMENT POLICIES

Ministry of health has the sole authority to manage the pharmaceutical industry in Pakistan. They

are responsible to control the prices, drug registration, and company registration; in short they

are controlling all the activities of pharmaceutical industry. They fix the prices of products and

companies are not allowed to sell those products on above prices as prescribed by the ministry of

health. They have to sell those products on that price even if the cost of that product is more then

the price prescribe by the ministry of health. Highnoon Laboratory is also suffering from loss in

some products due to price fixation by ministry of health. But due to their efficient portfolio they

cover their loss from other products. It’s an ultimate threat for them for a long time.

EXCHANGE RATE FLUCTUATION & INFLATION RISK

Exchange rate fluctuation & inflation risk is also a long term threat for pharmaceutical industry

in Pakistan it is because they import 95% of the raw material for their products and if the prices

increase their cost increases. As far as Highnoon Laboratory is concern they are also importing a

huge amount of raw material for the production of their products.

CROSS BORDER RELATIONSHIP & TERRORISM

Cross border relationship and terrorism is also long term threat. They import huge amount of raw

material from abroad if the Government ban on the trade from that particular country due to any

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reason they may suffer loss. Terrorism activities are also increasing day by day which

deteriorates the image of Pakistan in front of international investors.

EFE MATRIX

Opportunities Weight Ratings Weighted


Score
1. Molecule development opportunity 0.05 2 0.1
2. Market potential for veterinary products 0.05 2 0.1
3. Market growth opportunities 0.2 4 0.8
4. Global alliances 0.1 4 0.4
5. Related products 0.05 2 0.1
Threats
1. Government policies 0.2 4 0.8
2. Exchange rate fluctuations 0.1 4 0.4
3. Inflation risk 0.1 3 0.3
4. Cross border relationship 0.05 2 0.1
5. Terrorism 0.1 4 0.4
Total Weighted Score 1 3.5
(1) Poor, (2) Below Average, (3) Above Average,
(4) Superior.

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INTERNAL FACTOR EVALUATION (IFE) MATRIX

IFE matrix is a strategic management tool for auditing or evaluating major strengths and

weaknesses in functional areas of a business. IFE matrix also provides a basis for identifying and

evaluating relationships among those areas. The Internal Factor Evaluation matrix or short IFE

matrix is used in strategy formulation. The IFE Matrix together with the EFE matrix is a

strategy-formulation tool that can be utilized to evaluate how a company is performing in regards

to identified internal strengths and weaknesses of a company.

STRENGTHS

HIGH QUALITY PRODUCTS

In pharmaceutical industry the quality of products matters a lot because they are directly related

to health of a human. As far as highnoon labs are concern they are maintaining that quality of

product according to the ISO standard and also they are maintaining their standard according to

international requirements. By doing this they obtain the license of research based products.

Their 50% revenue comes from research based products.

EFFICIENT CAPACITY MANAGEMENT

A number of companies turn to highnoon laboratories for contract manufacturing. Highnoon

manages its capacity efficiently and caters well to the manufacturing needs of these marketing

concerns. In 2007 another toll manufacturing agreement was signed with OBS health care

(formerly Organon) for contract manufacturing of one of their products. This, no doubt, is yet

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another indicator of the esteem at which the industry places highnoon’s manufacturing

capability. Such as Ovafin, Prolifen, Esgerd, Angiocard-SR etc.

PATENTS & COPY RIGHTS

The 50% of revenue of highnoon labs comes from research based products. They have taken the

patent and copy rights of highly advanced products from international business partners to

capture market share for that particular product which cannot be produce by other companies.

HUMAN RESOURCE

Efficient and skilled employees are a huge source for any organization and the main factor which

contributes a lot is the loyalty of employees. In the case of highnoon labs the employees are well

efficient, skilled and loyal towards their work which is the major strength of highnoon

laboratories.

CONTINUOUS IMPROVEMENT

Highnoon Laboratory is improving day by day due to all the strengths illustrated above. Their

revenue margin is increasing every year which shows their continuous improvement.

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WEAKNESSES

DISTRIBUTION CHANNEL

Highnoon laboratory has its own distribution channel but it is not as strong as other companies

having. Highnoon should improve its distribution channel globally. So it can compete with the

other pharmaceutical laboratories.

SHORTAGE OF SPACE

There is no doubt that highnoon laboratory is managing their operations very well but still there

is lack of space for departments and production area too.

UTILIZATION OF FUNDS

Highnoon laboratory is generating profits every year so they have enough potential to explore

further markets instead of only utilizing those funds to acquire the patents and copy rights of

research based products.

LACK OF VARIETY OF PRODUCTS

Highnoon laboratory is producing so many products but still they need to produce more products

such as they are already producing capsules, tablets, bottles, droppers, strips, cartoons but they

are not producing creams, inject able powder etc.

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INTERNAL CONTROL SYSTEM

Basically highnoon laboratory has all the departments and its integration and coordination among

different setups of highnoon play a vital role to keep the wheel of businees rolling. But still they

lack one department of Internal Control who possess a control over the working of all the

departments.

IFE MATRIX

Internal Strengths Weight Ratings Weighted


Score
1. Providing high quality products 0.2 4 0.8
2. Efficient capacity management 0.1 4 0.4
3. Patent & copy rights 0.1 3 0.3
4. Human resource 0.1 4 0.4
5. Continuous improvement 0.1 4 0.4
Internal Weaknesses
1. Distributional channel 0.1 2 0.2
2. Shortage of space 0.05 2 0.1
3. Utilization of funds 0.05 2 0.1
4. Lack of variety of products 0.05 2 0.1
5. Internal control system 0.15 2 0.3
Total Weighted Score 1 3.1
(1) Major Weakness, (2) Minor weakness, (3)
Minor Strength, (4) Major Strength.

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STRATEGIC FACTORS ANALYSIS SUMMARY


MATRIX
SFAS Matrix is a list of comapny’s external and internal strategic factors in one table and SFAS

matrix includes only the most important factors gathered from environmental scanning and thus

provides the information essential for strategy formulation.

Strategic Weight Rating Weighted Duration


Factors Score
Short Intermediate Long

Human 0.075 4 0.3 ü


Resource (S)

Product Quality 0.2 4 0.8 ü


(S)

Distribution 0.075 2 0.15 ü


Channels (W)

Internal Control 0.1 2 0.2 ü


System (W)

Market Growth 0.2 4 0.8 ü


Opportunities
(O)

Global Alliance 0.075 4 0.3 ü


(O)

Government 0.2 4 0.8 ü


Policies (T)

Exchange Rate 0.075 4 0.3 ü


Fluctuations
(T)

Total 1 3.65

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STRATEGIC GROUP MAPPING

Strategic group mapping categorizes industry competitors into meaningful groups based on at

least two strategic variables. The size of circle shows the market share of companies lying in that

circle. Close competitors fall in same circle. Circles which are close to each other are also close

competitors. These companies have the following characteristics

• Profit potential is same for all the companies lying in the same circle and those who

belongs to the close circle.

• Driving forces are also almost the same for these companies.

• They are also close competitors.

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PRODUCT RANGE & PRODUCT QUALITY

Highnoon laboratory is providing high quality products and moderate product range that’s why it

is close to CCL and SPL. CCL is offering high quality with low product range while CCL is

offering high product quality with high product range.

GROUP MAP

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BRAND IMAGE & DISTRIBUTION CHANNEL

Highnoon laboratory has moderate distribution channel along with high brand image. CCL and

SPL are its close competitors having moderate and low distribution channel respectively. Both

CCL and SPL have high brand image as of highnoon laboratory.

GROUP MAP

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GLOBAL EXPANSION & MARKET PENETRATION

Highnoon Laboratory and CCL highly focusing on market penetration along with moderate focus

on global expansion. SPL has moderate focus on market penetration and global expansion.

GROUP MAP

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PERCEPTUAL MAPPING/POSITIONING MAP

Perpetual Mapping/Positioning Map is used to develop a market positioning strategy for product

or service, this map often used to help the organization to identify a positioning strategy.

HIGH PRODUCT
QUALITY
Abbott
Highnoon CCL
SPL

Feroz
&
son

LOW FINANCIAL HA CEBOSH HIGH FINANCIAL


MI
HEALTH LT
ON
HEALTH

LOW PRODUCT
QUALITY

Highnoon laboratory have good repo in eyes of customer and investors because of its high

quality and stable financial health.

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COMPETITIVE PROFILE MATRIX (CPM)

Competitive profile matrix is an essential strategic management tool to compare the firm with the

major players of the industry. Competitive profile matrix shows the clear picture to the firm

about their strong points and weak points relative to their competitors. The CPM score is

measured on basis of critical success factors, each factor is measured in same scale mean the

weight remain same for every firm only rating varies. The best thing about CPM that it includes

your firm and also facilitates to add other competitors make easier the comparative analysis.

CPM includes both internal and external factors to evaluate overall position of the firm with

respective to their major competitors. We have taken Searle Pakistan Ltd and CCL as a

competitor of highnoon laboratories on the basis of strategic group mapping.

VERTICAL ANALYSIS

This figure shows that CCL is responding more to the mentioned critical success factors as

compare to Highnoon Laboratories and Searle Pakistan Ltd. So far as highnoon laboratory is

responding more to these success factors as compare with Searle Pakistan Ltd. So, highnoon

laboratories avail a strong position in its competitors.

HORIZONTAL ANALYSIS

So far as each critical success factor is concern the response and position of these three

companies is as follows

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PRODUCT AVAILABILITY

Weighted Score of highnoon laboratories and CCL are 0.45 which is more than the weighted

score of Searle Pakistan Ltd. So, the distribution channel of highnoon laboratory and SPL is

more competitive than SPL resulting in better product availability.

PRODUCT QUALITY & BRAND IMAGE

CCL, Highnoon Laboratories, and SPL are maintaining product quality in same passion. As they

are close competitors of each other they have same brand image.

PRODUCT RANGE

With reference to product range CCL bears strong position as compare with highnoon laboratory

and highnoon laboratory is having strong position as compare with SPL.

PRODUCT DEVELOPMENT

Highnoon laboratories and CCL are more competitive and insuring effeceint product

development

GLOBAL EXPANSION

CCL and SPL are more competitive than Highnoon laboratories in global expansion. Highnoon

is a local company involved in exports on moderate level.

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CUSTOMER LOYALTY

All of these three companies have equally loyal customers according to our analysis.

MARKET PENETRATION

CCL has the ability to penetrate into the market where as highnoon laboratory and SPL is still

trying to penetrate into the market.

CPM MATRIX

Highnoon Searle Pakistan Ltd CCL


Laboratories
Critical Weights Rating Weighted Rating Weighted Rating Weighted
Success Score Score Score
Factors
Product 0.15 3 0.45 2 0.3 3 0.45
availability
Product 0.2 4 0.8 4 0.8 4 0.8
Quality
Brand image 0.05 4 0.2 4 0.2 4 0.2
Product range 0.1 3 0.3 2 0.2 4 0.4
Product 0.15 3 0.45 2 0.3 3 0.45
development
Global 0.1 2 0.2 3 0.3 3 0.3
expansion
Customer 0.15 4 0.6 4 0.6 4 0.6
loyalty
Market 0.1 3 0.3 2 0.2 4 0.4
penetration
Total 1 3.3 2.9 3.6
(1) Poor, (2) Below Average, (3) Above Average, (4) Superior.

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THE MATCHING STAGE

TOWS MATRIX

The TOWS Matrix indicates four conceptually distinct alternative strategies, tactics and actions.

It is proposed as a conceptual framework for a systematic analysis that facilities matching the

external threats and opportunities with the internal weaknesses and strengths of the organization.

SO STRATEGY

Use strengths to take the advantage of opportunities.

ST STRATEGY

Use strengths to avoid threats.

WO STRATEGY

Overcome weakness by taking advantage of opportunities.

WT STRATEGY

Minimize weakness and avoid threats.

As for as Tows matrix is concerned Highnoon laboratories is using the efficient capacity

management and provide the high quality products to take the high market potential for

veterinary and related products due to avail these opportunities obviously more increase in sales.

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Due to the efficient human recourse department of Highnonn increase the market growth

opportunities.

By using the strengths like provide high quality products continuous increase in sales and use the

patents and copy rights is to avoid the threats and Highnoon penetrate into other markets and also

improve the cross border relationships. And overcome the weaknesses like to increase the verity

of products and fair utilization of funds and develop the forward integration like increase the

distribution channels and improve the shortage of space to create the different SBU’s. Finally

minimize the weakness and avoid the threats to focus the government policies and develop the

effective control system which helps to avoid the unfair transactions in Highnoon laboratories.

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TWOS MATRIX

IF Strengths Weakness
E 1.Providing high quality products 1.Distribution Channel
EF 2.Efficient capacity management
3.Patent & copy rights
2.Shortage of space

E 4.Human Resource
5.Continuos Improvement
3.Utilization of funds
4.Lack of variety of products
5.Internal control system

Opportunities SO Strategies WO Strategies


Increase in sales (S1,
1.Molecule development opportunity S2, O2, O5)
2.Market potential for veterinary products Develop forward integration &
3.Market growth opportunity Expand business in globally SBU’s (W1, W2, W3, W4, O1,
4.Global alliance O2, O3, O4, O5 )
5.Related Products
(S3, S5, O4)
Efficient Human Resource
department S4, O1, O3

Threats ST Strategies WT Strategies


Penetrate in other Markets Focus the government policies
1.Government policies and develop the internal control
2.Exchange rate fluctuation (S1, S2, S4, S5, T2, T3, T4)
system (W5, T1)
3.Inflation risk
4.Cross border relationship
5.Terrorism

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SPACE MATRIX
The SPACE matrix is a management tool used to analyze a company. It is used to determine

what type of a strategy a company should undertake. The Strategic Position & Action Evaluation

matrix or short a SPACE matrix is a strategic management tool that focuses on strategy

formulation especially as related to the competitive position of an organization.

Space Matrix Strategic Management Method

The SPACE matrix is broken down to four quadrants where each quadrant suggests a different

type or a nature of a strategy:

• Aggressive

• Conservative

• Defensive

• Competitive

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SPACE MATRIX

FS
Conservative +6 Aggressive
+5

+4

+3

+2

+1

CA IS
0
-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6
-1

-2

-3

-4

-5

-6 Competitive
Defensive

ES

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This particular SPACE matrix tells us that our company should pursue an aggressive strategy.

Our company has a strong competitive position in the market with rapid growth. It needs to use

its internal strengths to develop a market penetration and market development strategy. This can

include product development, integration with other companies, acquisition of competitors, and

concentric diversification.

The SPACE Matrix analysis functions upon two internal and two external strategic dimensions

in order to determine the organization's strategic posture in the industry. The SPACE matrix is

based on four areas of analysis.

Internal Strategic Dimensions

• Financial strength (FS)

• Competitive advantage (CA)

External Strategic Dimensions

• Environmental stability (ES)

• Industry strength (IS)

There are many SPACE matrix factors under the internal strategic dimension. These factors

analyze a business internal strategic position. The financial strength factors often come from

company accounting. We used SPACE matrix factors such as shareholders’ equity, ease of exit

and risk involved in business. We have used the following competitive advantage factors market

share, product quality, capacity utilization and technological know how.

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Every business is also affected by the environment in which it operates. SPACE matrix factors

related to business external strategic dimension that we have used in environmental stability are

rate of inflation, price range, competitive pressure and demand variability. In external strategic

dimensions factors related to industrial strength are growth potential, profit potential,

technological know how and ease of entry.

The SPACE matrix calculates the importance of each of these dimensions and places them on a

graph with X and Y axis.

The following are a few model technical assumptions:

• By definition, the CA and IS values in the SPACE matrix are plotted on the X axis.

• CA values can range from -1 to -6.

• IS values can take +1 to +6.

• The FS and ES dimensions of the model are plotted on the Y axis.

• ES values can be between -1 and -6.

• FS values range from +1 to +6.

The SPACE matrix is constructed by plotting calculated values for the competitive advantage

(CA) and industry strength (IS) dimensions on the X axis. The Y axis is based on the

environmental stability (ES) and financial strength (FS) dimensions.

The following figure shows what values were used to create the SPACE matrix displayed above.

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SPACE MATRIX

Internal Strategic Position External Strategic Position


X Competitive (CA) Industry (IS)

(-6 Worst, -1 Best) (+1 Worst, +6 Best)


A -3 Market share 5 Growth Potential
X -2 Product Quality 4 Profit Potential
I -2 Capacity Utilization 5 Technological Know How
S -3 Technological Know How 4 Ease of entry

Average: -2.5 Average: 4.5

Total axis X score: 2

Financial (FS) Environmental (ES)

Y (+1 Worst, +6 Best) (-6 Worst, -1 Best)

4 Shareholders’ Equity -2 Rate of Inflation

A 2 Ease of Exit -4 Price Range

X 5 Risk Involved in Business -2 Competitive Pressure

I -5 Demand variability

Average: 3.67 Average: -3.25

Total axis Y score: 0.46

Each factor within each strategic dimension is rated using appropriate rating scale. Then

averages are calculated. Adding individual strategic dimension averages provide values that are

plotted on the axis X and Y.

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BOSTON CONSULTING GROUP MATRIX

The BCG Matrix is based on the product life cycle theory that can be used to determine what

priorities should be given in the product portfolio of a business unit. To ensure a long term value

creation, a company should have a portfolio of products. But as far as highnoon laboratory is

concern the scenario is little bit different. Highnoon laboratory is itself a business unit. BCG

matrix has two dimensions Relative market share and Industry growth rate. It means the bigger a

firm has its relative market share or the faster the products market share grows the better it is for

the company. Scales defined on relative market share is from 0.0 to 1.0in which high indicates

1.0 medium is for 0.5 low is for 0.0 whereas scale define on industry growth rate is from-20 to

+20 in which -20 indicates low 0 is for medium and high is for +20.

SUPPORTING CALCULATIONS

SBU Revenues Revenue Profits Profits Industry Relative


Contribution Contribution Sales Market
Growth Share
Rate

H.L 2.33 BN 100% 846 MN 36.31% 12% 0.7

Highnoon laboratory is a single SBU. It is a well known pharmaceutical company with revenues

of 2.33BN. Gross Profits are 846MN which is 36.31% of its total revenues. Industry sales growth

rate is 12%. Market share of highnoon laboratory is 6.3% while market leader Glexosmith has

market share of 11.6%. Therefore relative market share of highnoon laboratory is 0.7. It implies

that highnoon laboratory lies in stars quadrant. They are using huge funds in order to earn profits

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there must be large cash flows in order to get market share otherwise the results will be in cash

cow and then ultimately becomes a dog which is a worst situation for a company.

BCG MATRIX

Relative Market Share Position

High Medium Low


1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0
In d u s t r y S a l e s G r o w t h R a t e

High +20
+15
Pr o
fi t

+10
+5
Stars Question Marks
Medium 0
-5
-10
-15
Cows Dogs
Low -20

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INTERNAL –EXTERNAL (IE) MATRIX

The Internal-External (IE) Matrix is another strategic management tool used to analyze working

conditions and strategic position of a business. The Internal External Matrix or short IE matrix is

based on an analysis of internal and external business factors which are combined into one

suggestive model. The IE matrix is a continuation of the EFE matrix and IFE matrix models.

The IE matrix is based on the following two criteria:

1. Score from the EFE matrix this score is plotted on the y-axis

2. Score from the IFE matrix plotted on the x-axis

We calculated IFE matrix for highnoon laboratory. The total weighted score is 3.1 which point

the company with an above average internal strength. We have also calculated the EFE matrix

for the same company. The total weighted score EFE matrix is 3.5 which indicates high ability to

respond to external factors. These values are plotted on IE matrix. This IE matrix tells us that our

company should grow and build its position.

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Internal and external matrix

Weak IFE
Strong Average
4.0 3.0 2.0 1.0

High

3.0
Medium
2.0
Low
1.0
EFE

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GRAND STRATEGYMATRIX

The model defines the situation of a company through the market growth and their competitive

position in the market. There are four quadrants that the company can be categorized such as:

QUADRANT 1

Quadrant I indicates that the company is in rapid market growth and strong competitive position.

Company can continue concentrating on their current business. However, a company with excess

resources may consider vertical integration.

• Market development

• Market penetration

• Product development

• Forward integration

• Backward integration

• Horizontal integration

• Concentric diversification

QUADRANT 2

Quadrant II indicates that the company is in rapid market growth and weak competitive position. F

Company needs to evaluate their present approach to the market and identify why the current strategy

is not effective. The company will then adopt the grand strategy options accordingly.

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• Market development

• Market penetration

• Product development

• Horizontal integration

• Divestiture

• Liquidation

QUADRANT 3

Quadrant III indicates that the company is in slow market growth and weak competitive position.

Company should decrease resources used by the particular business. Another way is that company

should diversify resources by investing in other businesses in order to expand.

• Retrenchment

• Concentric diversification

• Horizontal diversification

• Conglomerate diversification

• Liquidation

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QUADRANT 4

Quadrant IV indicates that the company is in slow market growth and strong competitive

position. Company has excellent position and can choose to diversify into more highly profitable

areas.

• Concentric diversification

• Horizontal diversification

• Conglomerate diversification

• Joint ventures

The model allows better implementation of strategy because of the intensified focus and

objectivity. It conveys a lot of information about corporate plans in a simplified format.

However, it may not be as simple as it seems, upon application to real life due to the unforeseen

factors and also complications in the business world. In addition, the relationship between

market share and profitability differs in different industries.

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GRAND MATRIX

RAPID MARKET GROWTH

Quadrant - 2 Quadrant - 1
1. Market development 1. Market development
2. Market penetration 2. Market penetration
3. Product development
3. Product development
4. Horizontal integration 4. Forward integration
5. Backward integration
5. Divestiture 6. Horizontal integration
6. Liquidation
WEAK 7. Concentric diversification STRONG
COMPETITIVE COMPETITIVE
POSITION Quadrant - 4 POSITION
Quadrant - 3

1. Conglomerate diversification 1. Conglomerate diversification


2. Concentric diversification 2. Concentric diversification
3. Horizontal diversification 3. Horizontal diversification

4. Divestiture 4. Joint ventures


5. Liquidation
6. Retrenchment

SLOW MARKET GROWTH

As far as the highnoon laboratory is concerned it lies in the quadrant 1 of GRAND strategy

matrix due to rapid market growth and strong competitive position.

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The DECISION STAGE

QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)

Quantitative Strategic Planning Matrix (QSPM) is a high-level strategic management

approach for evaluating possible strategies. Quantitative Strategic Planning Matrix or a QSPM

provides an analytical method for comparing feasible alternative actions. The QSPM

method falls within so-called stage 3 of the strategy formulation analytical framework.

When company executives think about what to do, and which way to go, they usually have a

prioritized list of strategies. If they like one strategy over another one, they move it up on the list.

This process is very much intuitive and subjective. The QSPM method introduces some numbers

into this approach making it a little more expert technique.

The Quantitative Strategic Planning Matrix or a QSPM approach attempts to objectively select

the best strategy using input from other management techniques and some easy computations. In

other words, the QSPM method uses inputs from stage 1 analyses, matches them with results

from stage 2 analyses, and then decides objectively among alternative strategies.

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QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM) FOR

HIGHNOON LABORATORY

BLOCK 1

Firstly we have taken key success factors from EFE & IFE matrices and gave them same weights

as in EFE & IFE matrix. This QSPM compares three alternative strategies such as market

development, market penetration and product development. These three strategies belong to

same block. So far as our analysis is concerned we suggest that product development is most

feasible strategy for highnoon laboratory because total attractiveness score of this strategy is 5.5

which is individually greater than total attractiveness scores of market penetration and market

development strategies.

KSF of IFE Weights Strategic Alternatives


& EFE
Market Market Product
Development Penetration Development

AS TAS AS TAS AS TAS

Strengths

Quality 0.2 2 0.4 2 0.4 4 0.8

Capacity 0.1 4 0.4 3 0.3 3 0.3


Management

Patent & copy 0.1 4 0.4 3 0.3 4 0.4


rights

Human 0.1 4 0.4 4 0.4 4 0.4


Resource

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improvement 0.1 3 0.3 2 0.2 4 0.4

Weaknesses

Distributional 0.1 1 0.1 1 0.1 3 0.3


channel

Shortage of 0.05 2 0.1 2 0.1 2 0.1


space

Utilization of 0.05 1 0.05 3 0.15 3 0.15


funds

Lack of variety 0.05 2 0.1 1 0.05 2 0.1


of products

Internal control 0.15 2 0.3 2 0.3 1 0.15


system

Opportunities

Molecule 0.05 2 0.1 3 0.15 2 0.1


development

Market 0.05 3 0.15 2 0.1 3 0.15


potential for
veterinary
products

Market growth 0.2 2 0.4 2 0.4 3 0.6

Global alliances 0.1 2 0.2 3 0.3 3 0.3

Related 0.05 2 0.1 2 0.1 1 0.05


products

Threats

Government 0.2 2 0.4 1 0.1 3 0.6


policies

Exchange rate 0.1 2 0.2 2 0.2 2 0.2


fluctuations

Inflation risk 0.1 2 0.2 3 0.6 1 0.1

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Cross border 0.05 2 0.1 2 0.1 2 0.1


relationship

Terrorism 0.1 1 0.1 2 0.2 2 0.2

4.5 4.6 5.5

BLOCK 2

This QSPM compares three alternative strategies such as forward integration, backward

integration and horizontal integration. These three strategies belong to same block. According to

the QSPM backward integration is most feasible strategy for highnoon laboratory because its

total attractiveness score is 3.6, which is individually greater than of forward and horizontal

integration.

KSF of IFE Weights Strategic Alternatives


& EFE
Forward Backward Horizontal
Integration Integration Integration

AS TAS AS TAS AS TAS

Strengths

Quality 0.2 3 0.6 3 0.6 2 0.4

Capacity 0.1 2 0.2 2 0.2 3 0.3


Management

Patent & copy 0.1 2 0.2 1 0.1 3 0.3


rights

Human 0.1 2 0.2 3 0.3 2 0.2


Resource

improvement 0.1 2 0.2 1 0.1 2 0.2

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Weaknesses

Distributional 0.1 1 0.1 1 0.1 1 0.1


channel

Shortage of 0.05 1 0.05 1 0.05 1 0.05


space

Utilization of 0.05 2 0.1 1 0.05 2 0.1


funds

Lack of variety 0.05 2 0.1 1 0.05 1 0.05


of products

Internal control 0.15 1 0.15 1 0.15 2 0.3


system

Opportunities

Molecule 0.05 1 0.05 1 0.05 1 0.05


development

Market 0.05 1 0.05 1 0.05 2 0.1


potential for
veterinary
products

Market growth 0.2 2 0.4 3 0.6 1 0.2

Global alliances 0.1 1 0.1 2 0.2 1 0.1

Related 0.05 1 0.05 1 0.05 1 0.05


products

Threats

Government 0.2 2 0.4 3 0.6 1 0.2


policies

Exchange rate 0.1 1 0.1 2 0.2 2 0.2


fluctuations

Inflation risk 0.1 2 0.2 1 0.1 2 0.2

Cross border 0.05 2 0.1 1 0.05 2 0.1

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relationship

Terrorism 0.1 1 0.1 1 0.1 1 0.1

3.45 3.6 3.3

FINDININGS AND RECOMMENDATIONS

We have chosen product development from block one and backward integration from block 2.

While we have another option of concentric diversification but it is not feasible because of

potential growth in pharmaceutical industry and consequently Highnoon laboratory is not

focusing on a single product. So, with the help of analytical procedure and experience of the

market we have developed intuition and prioritized the product development strategy. So we

suggest them to adopt product development strategy for further enhancement and betterment in

existing products or developing new ones resulting in increased sales. They are using resource

based model by focusing on core competencies that are considerably valuable, rare, costly to

imitate and well organized. Highnoon is a sign of well organized and formal organization.

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APPENDIX

Anti dotes

An antidote is a substance which can counteract a form of poisoning.

Anti diabetic

Anti-diabetic drugs treat diabetes mellitus by lowering glucose levels in the blood.

Backward integration

Acquisition by a firm of its suppliers.

Biotechnology

Biotechnology is a field of applied biology that involves the use of living things in engineering,

technology, medicine, and other useful applications.

CAGR

Compound Annual Growth Rate means the year-over-year growth rate of an investment over a

specified period of time.

CGMP

Current Good Manufacturing Practices.

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CCL

Computational chemistry laboratory

Competitive profile matrix

Competitive profile matrix is an essential strategic management tool to compare the firm with the

major players of the industry. Competitive profile matrix shows the clear picture to the firm

about their strong points and weak points relative to their competitors. The CPM score is

measured on basis of critical success factors, each factor is measured in same scale mean the

weight remain same for every firm only rating varies. The best thing about CPM that it includes

your firm and also facilitates to add other competitors make easier the comparative analysis.

Concentric Diversification

A growth strategy in which a company seeks to develop by adding new products, also called

convergent diversification, to its existing product lines to attract new customers.

External Factor Evaluation (EFE) matrix

External Factor Evaluation (EFE) matrix method is a strategic-management tool often used for

assessment of current business conditions. The EFE matrix is a good tool to visualize and

prioritize the opportunities and threats that a business is facing.

Encapsulation

Molecular encapsulation, in chemistry, the confinement of an individual molecule within a larger

molecule.

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Forward integration

Acquisition by a firm of a larger part of its distribution chain, moving it closer to selling directly

to its ultimate customers

Five Forces model of Michael Porter

Five Forces model of Michael Porter is a very elaborate concept for evaluating company's

competitive position. Michael Porter provided a framework that models an industry and therefore

implicitly also businesses as being influenced by five forces. Michael Porter's Five Forces model

is often used in strategic planning.

Grand Strategy Matrix

This is also an important matrix of strategy formulation frame work. Grand strategy matrix it is

popular tool for formulating alternative strategies. In this matrix all organization divides into four

quadrants. Any organization should be placed in any one of four quadrants. Appropriate

strategies for an organization to consider are listed in sequential order of attractiveness in each

quadrant of the matrix.

Horizontal integration

Absorption into a single firm of several firms involved in the same level of production and

sharing resources at that level.

Internal Factor Evaluation (IFE) matrix

Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing or evaluating

major strengths and weaknesses in functional areas of a business. IFE matrix also provides a

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basis for identifying and evaluating relationships among those areas. The Internal Factor

Evaluation matrix or short IFE matrix is used in strategy formulation.

Immunological

Immunology is a broad branch of biomedical science that covers the study of all aspects of the

immune system in all organisms.

Landmarks

Landmarks mean achievements.

Molecule

A molecule is defined as an electrically neutral group of at least two atoms in a definite

arrangement held together by very strong (covalent) chemical bonds.

Market development

The process of finding new markets for products a company is already making.

Market penetration

Trying to increase sales of a firm's present products in its present markets, usually through a

more aggressive marketing mix.

Product development

Offering new or improved products for current markets.

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Perceptual mapping

Perceptual mapping is a graphics technique used by asset marketers that attempts to visually

display the perceptions of customers or potential customers.

PEST analysis

PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes

a framework of macro-environmental factors used in the environmental scanning component of

strategic management.

Quantitative Strategic Planning Matrix (QSPM)

Quantitative Strategic Planning Matrix (QSPM) is a high-level strategic management

approach for evaluating possible strategies. Quantitative Strategic Planning Matrix or a QSPM

provides an analytical method for comparing feasible alternative actions. The QSPM

method falls within so-called stage 3 of the strategy formulation analytical framework.

SWOT analysis

SWOT analysis, method, or model is a way to analyze competitive position of your company.

SWOT analysis uses so-called SWOT matrix to assess both internal and external aspects of

doing your business. The SWOT framework is a tool for auditing an organization and its

environment.

Strategic intent

Strategic intent is a high-level statement of the means by which your organization will achieve

its vision.

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Stockholders

Normally stockholders are within the company and may include internal clients, management ,

employees, administrators, etc.

Substitute products

Two goods are substitutes in demand if, when the market price of the first good raises, the price

of the second good also rises, and vice-versa.

SFAS Matrix

SFAS Matrix is a list of company’s external and internal strategic factors in one table and SFAS

matrix includes only the most important factors gathered from environmental scanning and thus

provides the information essential for strategy formulation.

Strategic Group Mapping

Strategic group mapping categorizes industry competitors into meaningful groups based on at

least two strategic variables.

The Internal-External (IE) matrix

The Internal-External (IE) matrix is another strategic management tool used to analyze working

conditions and strategic position of a business. The Internal External Matrix or short IE matrix is

based on an analysis of internal and external business factors which are combined into one

suggestive model.

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The SPACE matrix

The SPACE matrix is a management tool used to analyze a company. It is used to determine

what type of a strategy a company should undertake. The Strategic Position & ACtion

Evaluation matrix or short a SPACE matrix is a strategic management tool that focuses on

strategy formulation especially as related to the competitive position of an organization.

The BCG matrix

The BCG matrix or also called BCG model relates to marketing. The BCG model is a well-

known portfolio management tool used in product life cycle theory. BCG matrix is often used to

prioritize which products within company product mix get more funding and attention.

PPMA

Pakistan Pharmaceutical Medical Association.

Quantitative Strategic Planning Matrix (QSPM)

Quantitative Strategic Planning Matrix (QSPM) is a high-level strategic management

approach for evaluating possible strategies. Quantitative Strategic Planning Matrix or a QSPM

provides an analytical method for comparing feasible alternative actions. The QSPM

method falls within so-called stage 3 of the strategy formulation analytical framework.

Therapeutics

Branch of medicine concerned with the treatment of disease.

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TOWS matrix

TOWS matrix: Uses a SWOT analysis to develop strategies by matching strengths with

opportunities, using opportunities to reduce weaknesses, using strengths to overcome threats, and

reducing weaknesses and avoiding threats.

Veterinary products

These products used to cure animal diseases.

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REFERENCES

Mr. Jawad Naeem , “Marketing manager: Highnoon laboratories limited Lahore ”, 2010

Miss. Iram naila, “Chief Executive of Regulatory authorities: Highnoon laboratories limited

Lahore ” 2010

Dr. Arif, “President : Ministry of health Lahore division ”, 2010

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