Biocon Case Study 

Business Club  

11/03/2019 

 
 
Srivatsa Thumurikota  
Karan Jagadeesh Uppin 

 
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  Table of Contents 
 
Introduction 2 
Case Write-up Question 2 
Answer 1 3 
Answer 2 20 
Answer 3 + Case Study 34 
Final Conclusion 72 
 

 
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Introduction 
 
The following document is a case study on the b ​ iopharmaceutical ​company, 
Biocon India. Different strategies for the expansion of the company are being 
discussed in detail and a final solution is being proposed.  

Study Questions  
1. What are the advantages and disadvantages of starting and operating a 
pharmaceutical firm in India?  
2. Is the Indian CRO market attractive?  
3. What is the best way for Biocon India Group to expand? 

Case Write-up Question  

What is the best way for Biocon India Group to expand, and what factors should it 
consider?  

 
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Answer 1 
What we already know from the paper-  
 
Clinical research in India was beginning to take off, and was forecast to explode 
during the next decade. Contract research organizations (CROs) were emerging as 
the key players in this market.Lotus Labs, for instance, was growing at a rate of 
100% per year, and one study predicted that Indian CROs would grow from 0.7% of 
the global market in 2002 to 20% in 2010. Within India, CROs based in Bangalore 
accounted for 2% to 3% of the total CRO activity in India, which was estimated at 
Rs. 250 crores in 2000, and were expected to continue to grow over the next few 
years. 
 
The Indian pharmaceutical industry had been shaped to a great extent by 
economic policies since independence in 1947. Initially, pharmaceutical 
multinational corporations (MNCs) from Europe and the United States dominated 
the local market. In the 1960s, India’s government established local bulk drug 
manufacturers Hindustan Antibiotics Ltd. and India Drug and Pharmaceuticals 
Ltd. to compete with the MNCs’ overseas bulk-drug operations for supplying local 
formulation plants. In 1970, the government passed two regulations that affected 
the pharmaceuticals industry: the India Patent Act (IPA) and the Drug Price 
Control Order (DPCO). The India Patent Act prohibited “product patents for any 
invention intended for use or capable of being used as a food, medicine, or drug or 
relating to substances prepared or produced by chemical processes.” As a result, 
any drug on the market could be reproduced without retribution. The Drug Price 
Control Order gave the Indian government the authority to set prices for drugs 
sold on the local market.  
 
Starting in its earliest days, the industry experienced phenomenal growth. A 
combined bulk drug and formulations output of 168 Rs. (crore) in 1965 grew to 
19,737 Rs. crore 35 years later, an annual growth rate of 15%. Roughly two-thirds of 
the output stayed in the domestic market, which by the year 2001 was also 
growing at 15% annually. The remaining one-third – 6,631 Rs. crore – went to the 
export market, which had a 21% growth rate. By the beginning of the 21st century, 
over 20,000 pharmaceutical companies were operating in India. 
 
What we found through various sources that helped us answer this 
question: 

 
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Generics Drug Industry in the U.S. - 
 
What is a generic drug? 
 
A generic drug is a prescription drug which is not manufactured by the originator 
of the product; the molecule is off patent and available from multiple sources, and 
the product is known by the chemical name, not a trade name. 
 
According to a recent Bank of America report, pharmaceuticals are the 
fastest-growing component of health care costs. The U.S. currently spends 
approximately $150 billion on prescription drugs and some industry sources 
project this number will reach $300 billion by 2010, equivalent to annual growth of 
approximately 9%. Due to this increase in cost, managed care and other insurance 
providers are seeking to control pharmaceutical expenses through generic 
substitution. With continued pressure on cost, the aging demographics of the U.S. 
and the continuing rise in co-pay hurdles, the generic drug industry is expected 
to grow in coming years. 
 
Indian Pharmaceutical Industries- 
 
Many leading Indian pharmaceutical companies relied heavily on the domestic 
market until the mid-1990s. Most recently many Indian pharmaceutical 
companies have taken advantage of the lucrative global generics market. 
Within this market, one of the stronger forces is the economically competitive 
generic drug companies from China and India. India especially is well positioned 
in this industry with their product development skills through advance chemistry 
capabilities and low-cost manufacturing.   
 
In order for the smaller, new Indian Pharmaceutical companies to take advantage 
of this giant market, there are various ways of entering and capturing the market 
share. This market is highly competitive as these Indian companies are not only 
fighting with the domestic giants who are currently active in the generic drugs 
industry, but also with the multinational corporations and many American and 
European specialty pharmaceutical companies and generics drug companies in 
this space. In order for the smaller Indian Pharmaceutical companies to survive, 
it is vital to look for longer term gain instead of focusing on shorter term outlook.   
 

 
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Some steps are- 
 
1) Long term planning- s ​ maller drug companies may be wise to invest in 
having a longer time horizon rather than focusing on the earlier patent 
expirations. They need to focus its resources in one or two top priority 
drugs rather than broadening their scope with their limited resources 
2) Partner up with larger Indian Companies​ - The larger Indian drug 
companies, i.e. Ranbaxy, Dr. Reddy, Cipla, can help the smaller companies 
by offering their distribution channels and the smaller pharmaceutical 
companies can offer their technology, their current research, etc. Of course, 
this is under the assumption that Ranbaxy and Dr. Reddy and likes are 
willing to partner up with the smaller Indian companies. If the smaller 
companies have a special product to offer, this might be more feasible. 
3) Partner with larger U.S. or European drug companies​ – If the partnerships 
with the domestic companies are difficult due to reluctance of the larger 
Indian companies, it might be an attractive option to seek international 
partnership. Many U.S. and European drug companies, especially mid-size 
companies, would welcome the opportunity to gain exposure to and partner 
with Indian pharmaceutical companies.   
 
 
Let’s get down to numbers,facts and models -  
 
India stands among the top 5 pharmaceutical markets in the world. For the past 
few years, the awareness regarding health and hygiene has increased, which has 
led to increase in the sale of pharmaceutical products in India. The total revenue 
generated through exports by pharmaceutical companies in India in the last 
financial year was more than $20 Billion and Table 1 captures the region wise 
exports done in 2015 and 2016. Indian pharmaceutical industry comprises of 250 
to 300 large companies which account for 70% of products in the market with 
representation of top 10 firm’s contribution of 30%. 
 
According to IBEF, the domestic Indian pharmaceutical industry is estimated to 
be $ 26 billion in 2014 growing at nearly 20% and is expected to reach nearly $50 
billion in 2020. It is evident that a lot of internal factors are responsible for the 
growing Indian pharmaceutical industry. There are more than 200 companies 

 
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medicines for the largest population in the world which adds to the prevailing 
competition on the domestic front. To explore further opportunities of growth, the 
Indian pharma players, particularly the large ones have set up their subsidiary 
companies, regional offices or taken over local companies in other geographies 
and many have even set up their manufacturing plants in developed nations too. 
Indian government has rolled out many industry friendly policies to encourage 
the innovation and manufacturing to make pharma one of the most sustainable 
industry which can help in building country’s economy. 
 
 
 
 

 
 
Ministry of commerce and industry, Govt. of India has set up P
​ harmexcil 
(Pharmaceuticals export promotion council of India) to promote and support 
small, medium and large Indian pharma companies focusing on exports. 
Pharmexcil supports in terms of organizing the buyer seller meetings in India and 
overseas, financial support to set up exhibitions to showcase the products and 
technologies, reimbursement of part of the regulatory related expenses. 

 
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Pharmexcil also maintains excellent global data of traders, agents, distributors, 
marketers, manufacturers, regulators in pharma industry 
 
Having known for knowledge driven sector, it has also contributed to Indian 
economy by generating hugs employment in all levels and contributing to Indian 
economy. Due to the global presence, pharma sector has helped to strengthen 
brand India along with Information technology sector. This is a recipe for young 
pharma entrepreneurs. 
 
 
Economies of scale in Indian Pharma business - 
 
Economies of scale capture the effect of increased production on the average cost 
of production of a firm. To get an idea about the extent of the scale economies , An 
Overview of the Indian Pharmaceutical Sector Indian pharmaceutical industry the 
average cost of production is plotted against the sales volume for a sample of 280 
firms for the year 2002. In the presence of scale economies, the average cost of 
production exhibits a non linear relationship with the level of output. Ideally, it 
initially falls and then rises exhibiting a U–shaped relationship.​ FG 2.1 
 
 

 
The vertical axis measures the average cost of production and the horizontal axis 
the total revenue of the firms. The diagram indicates the presence of scale 
economies for the industry within a range of about Rs. 10 crore of sales volume, 

 
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beyond which the average cost curve takes a flat shape. This indicates the 
industry cost curve to be L shaped which implies that there are no significant 
diseconomies of scale for large sized firms. To get a clear idea about the 
approximate size of the Minimum Efficient Scale (MES) in the industry the loess 
fit is also done separately for firm size up to the sales volume of Rs. 30 crore. This 
is illustrated in ​FG. 2.2. F
​ igure 2.2 indicates the presence of scale economies at a 
Minimum Efficient Scale size (M.E.S) of Rs. 8 crore. 
 
 

  
 
 
Capital Intensity of the Indian Pharmaceutical Sector- 
 
To understand the extent of capital intensity in the Indian pharmaceutical 
industry a cross comparison of capital intensity of pharmaceutical firms reported 
in the CMIE database is made with the total manufacturing and chemical firms. 
Table 2.4​ summarizes the mean capital intensity of the pharmaceutical, chemical 
and manufacturing sectors. Table 2.4 suggests that the trend in capital intensity 
is rising after 1995. On an average, the capital to sales ratio is around 55 % for the 
pharmaceutical sector. This implies that as the market size of the pharmaceutical 
industry is increasing due to growth in this sector by about 16 % in recent years, 
the capital investment is also rising over the years. However, on the whole the 
sector is less capital intensive compared to the manufacturing sector. 
   

 
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Labor Intensity in the Pharmaceutical Sector - 
 
After measuring capital intensity, the labor intensity in the Indian 
pharmaceutical sector is also computed and compared with the chemical and the 
manufacturing sector to get an idea about the employment potential of the sector. 
Table 2.5 ​summarizes the mean labor intensity for the pharmaceutical, chemical 
and manufacturing sectors 
 

 
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It is observed from the figures in ​Table 2.6​( below) that the pharmaceutical sector 
(on an average) spends more on wages and salaries compared to the chemical and 
manufacturing sectors. However, there has been a marginal fall in the potential to 
absorb labor in the pharmaceutical sector in the early 1990s though it again 
picked up from 1997. Since the industry is growing at an annual rate of 16%, it can 
be inferred that the potential to absorb labor and generate employment in the 
pharmaceutical sector is also rising over the years.  
 
 

 
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Do you need a R/D department? - 
 
The performance of firms on the basis of their R&D, marketing and export related 
activities as well as size are compared. Thus, firms that jointly capture 75% of the 
sales volume of the industry are classified as large sized firms and the rest as 
small-sized firms.(​Table 2.6​). 
 
It is evident from the figures in the Table that large sized firms have earned 
higher profit and also have higher productivity compared to small firms. In the 
pharmaceutical industry, the benefits of higher profitability accrue to large sized 
firms not because of economies of scale in production but because of other 
factors like ability to undertake R&D or do more of marketing activity at large 
scale 
 
It is noticed from T​ able 2.7​ that, on an average, firms with R&D units have earned 
higher profit compared to firms without any R&D unit. The productivity difference 
also reveals similar trends. This indicates that investment in R&D is an effective 
action for firms to perform better. 
 

 
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​Real R&D expenditure (Crores and dollars) in the Indian pharmaceutical sector 
(Source: Computed from the Bulk Drug Association of India) ​ :- 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
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Certain other numbers that help you set up your pharma industry​- 
 

 
 

 
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SWOT Analysis - 
 
There are many influential factors that could impact the pharma industry in 
future. Some of them are intrinsic in nature and some are extrinsic. 
 
In spite of pharma industry’s success and growth, Indian pharma industry 
continues to face challenges globally in the area innovation, quality issues, supply 
delays, marketing challenges, adoption of latest digital technologies and many 
more. 
 

 
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Area of digital opportunity - for optimization of resources​- 
 
There are four main areas where digital developments will drive value for pharma 
companies, building on what we see as the key components of digital success—an 
ability to deliver more personalized patient care, engage more fully with 
physicians and patients, use data to drive superior insight and decision making, 
and transform business processes to provide real-time responsiveness. 
Companies do not have to become leaders in all four areas across the 
enterprise—some will deliver more value than others in relation to any given 
disease, depending on market dynamics and their portfolio. 
 
 
 

 
 
 
 
 

 
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From the above research we can conclude the following​ -​  
 
There are advantages which are​ - 
 
● Opportunity for foreign companies​ : Foreign companies heavily rely 
on indian CRO’S to invest in due to it’s very low cost activities. 
● Ease of conducting clinical trials​ : Clinical trials services, in 
particular, were emerging as prime targets for outsourcing to India. 
Clinical trials represented the most expensive part of the drug 
development chain. India has a huge population and the ability to 
conduct clinical trials is easier due to people emerging from diverse 
backgrounds etc. The trial subject is also mostly always willing to 
take part. 
● Advent of patents ​: In the 1970s, the Indian government implemented 
the acts Drug Price Control Order (DPCO) and India Patent Act (IPA). 
These provided a huge boost to the manufacturing of generic drugs 
in India, to the extent that India holds 20% of the global market share 
in generic drugs. 
● Large established Pharmaceutical market in India​: Starting in its 
earliest days, the industry experienced phenomenal growth. A 
combined bulk drug and formulations output of 168 Rs. (crores) in 
1965 grew to 19,737 Rs. crore 35 years later, an annual growth rate of 
15%. Roughly two-thirds of the output stayed in the domestic market, 
which by the year 2001 was also growing at 15% annually. The 
remaining one-third – 6,631 Rs. crore – went to the export market, 
which had a 21% growth rate. It now has over 20,000 companies 
operating and to set one up and not succeed with the already trial 
and tested methodology is not possible. 
● Very well Educated workers​ : India had a large pool of 
English-speaking scientists and professionals who were 
well-educated and well-trained. They were also cheap: a Ph.D.’s 
salary in India averaged approximately $15,000, while the equivalent 
in the United States was closer to $100,000. So higher chance of job 
creation in the pharma sector. 
 
 
 
 

 
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T
​ he disadvantages on the other side which are​: 
 
● ​Market instability​ : Due to the existence of more than 20,000 pharma based 
companies in the country it is difficult to particularly stand out on top. 
● Effect of Foreign companies ​: Many MNC’s entering India due large 
availability of workforce, labour and lower investment costs for them 
decreases the chance of the company to expand or advance as it is often 
taken over by the larger MNC’s  
● Effect of patent laws​: According to DPCO , the price of the drugs sold 
domestically was given by the indian government and this affects the 
production company as even though it incurrs losses it cannot change the 
price of the drug to breakeven or gain profits. 
● Effect of conducting clinical trials​ : Significant proportion of the population 
is uneducated, holding clinical trials on such people may lead to many 
ethical questions. Any trial subject can falsely accuse the company and its 
motives behind the tests.They can create an ugly image and threaten to sue 
the company. In the highly competitive Indian pharmaceutical industry 
and the effects of social media, image tarnishing can lead the company to 
incur significant losses. 
 
P.S Some actual procedures to set up your pharma business are here :​  
http://www.fossilremedies.com/start-pharmaceutical-manufacturing-unit-india/ 

 
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Answer 2  
A  contract  research  organization  (CRO)  provides  support  to  the  pharmaceutical, 
biotechnology,  and  medical  device  industries  for  specific  services  on  a  contract 
basis.  The  services  may  be  clinical  research,  product  development  such  as  drug 
development  or  process  development  such  as  bio  analytical  assay  development. 
The  sector  for  CRO  in  India  is  estimated  to  generate  revenues  worth  $1973.82 
million  as  compared  to  $1000  million  in  2016,  the  industry  is  also  expected  to 
attain a CAGR of 12.00 per cent in the forecast period.  
India  is  emerging  as  a  top  destination  for  contract  research  organizations  for the 
following reasons: 

1) Low operational cost due to cheap human resource- 

For  example,  a  Ph.D.’s  salary  in  India  averaged  approximately  $15,000,  while  the 
equivalent in the United States was closer to $100,000 
 

 
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2) Work produced is of high quality- 

India  had  a  large  pool  of  English-speaking  scientists  and  professionals who were 
well-educated and well-trained. 

 
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3) Workers spoke fluent English- 

This makes communication much easier compared to other countries like China. 
 

 
 
 

 
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4)  Increased  investment  from  foreign  entities  as  well  as  local  players 
either individually or in collaboration- 
Increasingly  the  country  of  choice  for  outsourcing  of  pharmaceutical  products, 
whether finished or intermediate, is India. 
 
   

 
   

 
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5) Availability of largest pool of patients and large hospitals- 

The  Indian  healthcare  sector  is  expected  to  reach  US$  280  billion  by 2020. Rising 
income level, greater health awareness, increased precedence of lifestyle diseases 
and  improved  access  to  insurance  would  be  the  key  contributors  to  growth.  The 
sector is expected to generate 40 million jobs in India by 2030. 

 
  
 
 

 
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6) Presence of diverse ethnic pool - 

India  has  more  than  two  thousand  ethnic  groups,  and  every  major  religion  is 
represented,  as  are  four  major  families  of  languages  (Indo-European,  Dravidian, 
Austroasiatic  and  Sino-Tibetan  languages).  This  enables  diverse  sample  for 
clinical trials​. 

 
 
  

 
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7) Presence of diverse types of climatic conditions-    

For  example,  during  summers,  temperature  may  reach  up  to  50C  in some parts of 
Rajasthan  and  western  Gujarat,  while  at  the  same  time  the  temperature  may  be 
just  around  20C  in  Jammu  and  Kashmir.  Thus  allowing  stability  studies  to  be 
performed with ease in one destination. 
  

 
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8) Efforts by the regulatory authorities- 

Director  Controller  General  of  India  (DCGI),  Indian  Council  of  Medical  Research 
(ICMR),  Directorate  General  of  Foreign  Trade  (DGFT)  and  Department  of 
Biotechnology  (DBT)  have  helped  in  creating  an  amenable climate for research in 
India. 

Due  to  the  above  stated  reasons,  the  CRO  sector  in  the  Indian  market  is 
flourishing.  

 
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For example, Lotus labs was growing at a rate of 100% per year. 
   

 
  

 
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The Challenges faced by CROs: 

1)  Indian  CROs  were  focused  primarily  on  serving  the  need  for  BE/BA  studies  in 
the market, which constituted the low-to-medium segment of the value chain. 

 
  
   
2)  Meanwhile foreign CROs, such as Quintiles, and the in-house data management 
centers  of  big  pharmaceutical  companies,  such  as  GlaxoSmithKline  and  Pfizer, 
were  focusing  their  efforts  on  serving  higher-value  needs  of  the  market, 
particularly data management and Phase III clinical trials. 

 
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As  observed  from  the  Pie  Chart  given  below,  Phase  lll  counts  for  35%  of  the  CRO 
market share. 

 
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2)  The  market  is  small,  the  players  have  increased  with  similar  and  relatively 
similar  services.  As  the  market  gets  more  competitive,  the  share  of  each  player 
comes down. Below are some of the key players in the Indian CRO market. 

 
   
3)  The  market  constraints  are  growing  concern  for  security  especially  data 
security  and  patient  security,  lack  of  collaboration  between  universities  and 
industry  etc.  The  compromises  done  by  some  Indian  CROs  on  ethical  and 
technical  standards  are  the  greatest  market  threat.  Pharmaceutical  and biologics 
firms  need  to  select  reliable  partners  who  will  add  value  to  their  medical 
research.  

 
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As  observed  from  the  above  Pie  chart,  the  selection  criteria  for  Pharmaceutical 
companies  while  selecting  CROs  is  the  reputation  and  the  quality  of  the  service 
they  provide.  Hence  some  pharmaceutical  MNCs  are  wary  of  outsourcing  such 
critical and sensitive tasks to a largely unproven Indian industry. 
  
 
 

 
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Answer 3 + Case Study  

 
➔ “The Biocon India Group already possessed or was developing the 
capabilities for conducting research and development, manufacturing 
pharmaceuticals, and marketing its products. Besides animal testing, 
Biocon’s missing link in the traditional pharmaceutical value chain was the 
ability to run clinical trials​” 
 
It’s safe to assume that Biocon India Group is no way near its full utilization & 
productivity limit. Like any other company in the Indian pharma business,they 
have their shortcomings too. 
 
Drug manufacturers based in the US or Europe , at least the companies with a 
huge market value all are well off and pretty much can invest in and achieve the 
impossible. Hence they are global leaders in this market sector. They sure do have 
facilities that the indian counterparts lack. One of them is the process of animal 
testing.  
 
It is the use of non-humans in experiments that seek to control the variables that 
affect the behavior or biological system under study. This approach can be 
contrasted with field studies in which animals are observed in their natural 
environments or habitats. 
 
This saves the chance for the human population from being deceived/cheated in 
taking part in these tests. According to EXHIBIT 2, the number of subjects 
increases with the increase in the complexity of testing the drug and so does the 
duration of being tested. All of this can lead to resource depletion of the 
company/CRO or wrongly being accused by the test subjects which can lead to a 
bad name for the company/CRO. Furthermore it can lead to issues on the test 
victim side, where they are falsely inducted into the program and not paid the 
right amount or become a subject of physical/mental scrutiny. 
 
Another aspect in which Biocon lags is in the idea & implementation of clinical 
trials. Biocon’s newest subsidiary, Clinigene, seemed an ideal way to capitalize on 
the company’s technical strengths by offering services in clinical trials. Biocon is 
a company that exclusively picks people in the field who have an eye for the 
subject and are nurtured under the company’s ideologies and culture.  

 
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Clinigene’s main aim was to offer a broad range of clinical trial services, 
recognizing that drug development could span two different areas that 
consequently required different types of clinical studies. Generally, generic drugs 
required bio-equivalence and bio-availability (BE/BA) clinical studies to prove 
that the generic drug worked as well as the off-patent original drug. But for new 
drugs, much more elaborate clinical trials had to be conducted.  
 
In the few years since its launch, Clinigene had focused not on organizing trials 
but on clinical lab services, BE/BA studies, and partnership coordination with 
hospitals. This lead to a dilemma on how it’s capabilities would work for Biocon 
as a whole in the long run. 
 
➔ There are a couple of solutions to this problem that we would like to share 
by putting ourselves in Kiran’s shoes. The problem diverges into three 
‘paths’ as we would like to call it each with its own fortunes and 
misfortunes. 
 
As of events in the paper, Biocon India was still several years away from 
developing its own drug molecules. So till it develops its own drug formulation, it 
could lend its hand in helping various organizations (as a CRO)in conducting 
studies and setting up their game in clinical trials. This would in turn help Biocon 
for when it does develop that drug molecule and still keep making profits which 
are small. 
 
 

 
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➔ Any company which enters into the market with its new product or just 
expands in general has to perform market analysis which is a crucial 
element in determining A-Z about the market conditions, customers, 
competitors, suppliers etc. 
● SWOT analysis​ is done every year to analyse the company’s growth.  
● PEST analysis​ can be done to find out the surrounding environment which 
govern the market 
● Igor Ansoff’s growth matrix​ can be used to determine the growth of the 
product via penetration and development. 
● BCG matrix​ can also be used to evaluate the strategic position of the 
business brand portfolio and its potential. 
● Porter’s five forces model. 
 
➔ There are also certain growth strategies a company considers while 
expanding (determined by the above analyses). These are :- 
 
1) Vertical Integration 
2) Concentration 
3) Diversification   
 
 
 
 
 
 
 

 
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Path 1: The Vertical Integration approach  
 
➔ Vertical integration is when a company controls more than one stage of the 
supply chain​. That's the process businesses use to turn raw material into a 
product and get it to the consumer. There are four phases of the supply 
chain: c
​ ommodities​, manufacturing, distribution, and ​retail​. A company 
vertically integrates when it controls two or more of these stages​. 
Backward integration is when customer enters into your domain and 
Forward Integration is when supplier enters your domain. 
 
Now back to the case study,  
 
Clinigene being a part of Biocon India Group can step it’s domain of activities and 
can match up the demands in the global markets by providing complete clinical 
trials. 
 
This further leads to investment of capital and resources like time to make sure 
that Clinigene reaches that stage. 
 
“Clinigene’s current capabilities positioned it in the low- to medium-value 
segment of the value chain. Moving up the value chain might be more profitable 
in the long run but would entail significant costs, both financial and cultural.​”  
 
The pharmaceutical industry is moving at a fast rate and Clinigene has still been 
doing small studies and finding out developmental procedures rather than 
stepping out of its shadow to bring in real value to the company. 
 
This transition however could affect the core values and cultures of the company 
and how they run things. But at the same time sabotaging those ethics so that 
Clinigene can make heavy profits in this rapid growing sector feels like the 
correct thing for them to do. 
 
Clinigene was already set up and was not adhering to its aim. What Biocon should 
do is shift focus from conducting BE/BA studies to tasks and activities that focus 
mainly on clinical trials. If clinigene does succeed in fulfilling its aim, then it does 
truly add value to the company as it will be ready for phase 3 and phase 4 trials 
and these are the opportunities that have to be capitalized upon. With that said, 
Biocon will then be a fully vertical integrated company with having its own R/D 

 
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unit, its own clinical trials unit and its own manufacturing unit. Competitors like 
GSK who lead the market in data management and phase 3 trials are threats to 
the growth of Clinigene and they have to be looked out for.  
 
Cinigene’s success is the only thing preventing Biocon from being vertically 
integrated. To tackle that, they could take expertise from senior staff of other 
companies on how they have gone about establishing their ground in clinical 
trials. The new recruits need to be introduced to clinical trials and animal testing 
techniques(if they have the tools for that) as part of their training. This could help 
benefit the whole team as they would discuss amongst themselves ,since the 
trials being something they haven’t ventured into & the subject is new to them. So 
their open culture isn’t completely fading away. 
 
Moreover, in the process of converting from a subsidiary stuck in its shell to a 
leader in clinical trials, it can invent/ develop technologies that can make Biocon 
a sustainable company in the market ( by launching their own drug formula). It 
can merge with big companies and entrepreneurs to work towards a common 
goal(more chance for learning). It can also set up factories across India and not 
just in Karnataka. It can carry out different marketing activities to improve its 
brand name and value.(sponsoring any event in a biotechnological institutes or 
any bio-based event in the country ,hiring graduates in campus selections etc.) 
 
With time and experience in the area of clinical trials, they would be able to take 
on any major client. 
 
And once the market knows Biocon is vertically integrated, this would 
automatically attract more clients even those overseas and it then has a shot of 
competing with big pharma giants like GSK 
 
With this they can shoot up from low-medium segment to a high value segment. 
It does pertain certain risks but at the same time to keep up with the global world, 
it’s demands and trends, one needs to take such risks to expand further.  
 
 
 
 
 
 
 
 

 
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Supporting Material - APPLE INC.- 
 
Apple was the first company to reach a trillion-dollar evaluation, showcasing its 
dominance in the electronics industry. Apple is also one of the most significant 
vertical integration​ examples. Apple not only sells computers, iPhones and iPads, 
but it also designs the software that powers these products. 
 

 
 
The company manufactures its custom A-series chips for its iPhones and iPads. It 
also manufactures its custom touch ID fingerprint sensor. Apple opened up a 
laboratory in Taiwan for developing LCD and OLED screen technologies in 2015. It 
also paid $18.2 million for a 70,000-square-foot manufacturing facility in North 
San Jose in 2015. These investments allow Apple to move along the supply chain 
in a backward integration, giving it flexibility and freedom in its manufacturing 
capabilities. 
The company has also integrated forward as much as backward. The Apple retail 
model, one where the company's products are almost exclusively sold at 
company-owned locations, excluding Best Buy and other carefully selected 
retailers, allows the business to control its distribution and sale to the end 
consumer. 
  
  
  

 
 39 
 
  
  
Supply Chain Planning at Apple Inc 

 
 
Supply Chain Map of Apple Inc 

 
 
 

 
 40 
 
Apple’s sales revenue has annually increased through the years and the cost of 
manufacturing has been reduced since the company itself manufactures its own 
raw materials instead of a third party supplier providing them to the company. it 
produces everything in China because of the low manufacturing cost and labour 
cost. 
 

 
 41 
 

 
  
  
From the above graph it is clear that since the release of the iPhone, Apple’s sales 
revenue has skyrocketed. The whole process of production of the iPhones, right 
from the manufacturing of raw materials to the assembling of parts to the 
distribution of the iPhones to the consumers, has been done by the company. 
Through this methodology, Apple has successfully vertically integrated itself. 
Another byproduct of vertical integration is customer satisfaction and increased 
brand value. 
 
Biocon can use a similar strategy to expand their growth in the pharmaceutical 
industry as mentioned in the solution given above. 
 
 
 
 
 
 
 

 
 42 
 
 
Factors to consider: 
 
1) Outsourcing choice: 
 
Increasingly the country of choice for outsourcing of pharmaceutical products, 
whether finished or intermediate, is India. Clinical trials services, in particular, 
were emerging as prime targets for outsourcing to India. Clinical trials 
represented the most expensive part of the drug development chain: nearly 60% of 
total development costs, of which nearly 70% went to patient recruitment and 
medical personnel. This high growth potential could represent significant 
opportunity for Clinigene to reap revenues as a CRO player. The choice for 
outsourcing would change in a couple of years to other countries which provide 
cheaper labour. Hence the best time to utilize the foreign investment is the 
present.  
 

 
 

 
 43 
 

 
 
2) Environmental: 
 
The laws towards the disposal of pharmaceutical waste could become more 
stringent in the future which would lead to more problems for disposal such as 
increased cost and measure taken for the safe disposal of waste. 
 

 
 
 

 
 44 
 
3) Workforce: 
  
The minimum wages in India is cheaper than most countries. This trend could 
change in the future. The government could implement laws to increase the 
minimum wages of labourers and provide more facilities and benefits to the 
workers. Hence the present is the best time to utilize the cheap Indian workforce.  
 

 
 
4) Public image and ethical issues: 
 
In the media, Biocon India Group had enjoyed coverage ranging from quiet 
approval to fawning praise. Pharma by its inherent nature raises quite a few 
moral and ethical questions in its operations. Through careful positioning in the 
public eye by targeted image enhancing campaigns, highlighting the Indian-ness 
of the company and its focus on sustainable value, and corporate social 
responsibility initiatives, Biocon should strength its public perception and hence 
provide a cushion in case Clinigene bombed. Biocon should also take care of its 
positioning as a drug producer, and not a service provider, through strategic 
public marketing. There is a risk of failure or embarrassment if Clinigene were to 
collaborate with a Pharma company which uses unethical methods of working.  
 
5) Organizational culture: 
Expansion of Clinigene poses questions on whether Biocon’s carefully nurtured 
work culture faces any threats. A large influx of new employees and little time to 

 
 45 
 
inculcate the Biocon culture would lead to the company losing its prided culture 
of openness, trust, and collaboration. 
 
6) Financial factor :  
A major company like Biocon has to be considerate about where it is putting its 
money in. It has to carry out financial analysis to better analyse its risks and 
returns.   
Putting more money into something that might not yield anything is considered a 
waste. But investing can be a boon if it yields a secure future. In this case, a large 
amount of money would be required for a rapid growth of Clinigene. 
 
7) Clinigene’s big success : 
 
it could end up dwarfing the rest of the company and sapping the core culture. 
The growth could even sidetrack Mazumdar-Shaw and Biocon’s directors into 
pursuing a possibly futile dream of creating one of the only fully integrated drug 
discovery and development companies in India. 
 
  
8) Availability of largest pool of patients and large hospitals: 
The Indian healthcare sector is expected to reach US$ 280 billion by 2020. Rising 
income level, greater health awareness, increased precedence of lifestyle diseases 
and improved access to insurance would be the key contributors to growth. The 
sector is expected to generate 40 million jobs in India by 2030. 
 
 
 
 
 
 
 

 
 46 
 

 
 

 
 
 
 
 
 
 
 

 
 47 
 
 
 
9) Presence of diverse ethnic pool- 
 
India has more than two thousand ethnic groups, and every major religion is 
represented, as are four major families of languages (Indo-European, Dravidian, 
Austroasiatic and Sino-Tibetan languages). This enables diverse sample for 
clinical trials 

 
 
 
 
 
 
 
 
 
 
 

 
 48 
 
10) Presence of diverse types of climatic conditions -   
   
For example, during summers, temperature may reach up to 50​0​C in some parts of 
Rajasthan and western Gujarat, while at the same time the temperature may be 
just around 20​0​C in Jammu and Kashmir. Thus allowing stability studies to be 
performed with ease in one destination. 

 
 

 
 49 
 
 
 
Path 2: The concentration approach - 
 
➔ A concentrated growth strategy involves focusing on increasing market 
share in existing markets. This strategy is also sometimes called a 
concentration or market dominance strategy. In a stable environment 
where demand is growing, concentrated growth is a low risk strategy. 
Concentration may involve increasing the rate of use of a product by 
current customers; attracting competitor's customers; and/or attracting 
nonusers/ new customers. 
 
According to EXHIBIT 3, we can see that Clinigene is leading in the department of 
lab services and it is in the top six in the BE/BA studies department. The high 
value segments like data management and phase three type trials are dominated 
more or less by the foreign markets. So it is safe to assume that they will be the 
leaders in this game for a long time to come. Knowing this, it is worth it to really 
spend ‘x’ units of capital , labour, time and venture into a segment that Biocon 
itself is new to? 
 
This could be one way of seeing the situation. We know Syngene as a subsidiary 
is doing exceptional in its field of serving international clients via a R/D 
approach. But Clinigene being it’s other subsidiary isn’t serving its intended 
function. We may think its a con but at the same time its leading in it’s prevailing 
studies & lab services. 
 
So we could very well say that there is nothing wrong for Clinigene to continue 
doing what it is and do less value work for companies. It still earns this way and 
exponentially contributes to the revenue margins of Biocon.  
 
They can continue to hire young talents , take them under their wing and nurture 
them so they grow into the Biocon family. They can be educated with new 
advents in the company and can be exposed to the Biocon culture and practices. 
In the coming years, they can develop expertise in low-medium segments of the 
value chain (BE/BA testing, animal testing, legal expertise in approval and 
launch) by taking on as many projects as possible without compromising on 
quality.  
 
As it’s continuing to do so , it can follow the highly acclaimed “earn as you learn” 
mantra. When there comes a time when Clinigene takes its own time to create a 

 
 50 
 
breakthrough in it’s studies , it can be ready for more high value work from the 
long term client organization who trust Biocon to do their work. 
 
Due to this approach a lot of capital investments that may or may not result in 
fruit can be avoided in the first place(low risk) . And due to this approach, the 
company’s long yearned for core competencies and values can survive , providing 
the company with a sense of satisfaction. 
 
But at the same time, the global pharmaceutical market is rapidly expanding and 
growing and the opportunity for Biocon to expand further decreases. The market 
can be exploited via Clinigene and this is their chance. So that is the con here. 
 
In addition to this, while still being a small scale subsidiary, they can still plan for 
the future by creating a plan of action on how to expand and preparing all the 
necessary documentation required to carry it out. Also with continuous work they 
can even lead the low-medium segment and show that they are ready for the next 
challenges. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 51 
 
 
 
 
 
Supporting material​ - Starbucks - 
 
Starbucks has relied heavily on​ concentration strategies​ to become dominant 
player in the coffeehouse sector. 
The benefits of the strategy is to build a strong reputation within a market and 
generate loyalty among the customers. But it has disadvantages because of the 
nature of shift of the demand of customers due to innovations in technology. This 
may led to the product becoming obsolete, and also a sudden economic turndown 
could lead to its failure. 
  
Four concentration strategy options: 

      Products 
  
Current  New 
Customers 

Current  Product-Market  Product 

Exploration  Development 

New  Market  Product/Market 

Development  Diversification 

  

 
 52 
 

 
  

 
 53 
 
  
As observed from the above statistics, Starbucks spends a large amount of their 
capital on the raw materials and finished goods. This implies that there is not 
much innovation occurring in the supply chain, that is, there is no backward 
integration with the suppliers, instead the innovation happens with the final 
products. This shows that their main focus is on the distribution of the finished 
products which is their concentration strategy. 
 
 

 
 
  
The same products are being sold under the same brand name in various stores. 
These stores stick to a template design which is followed by Starbucks all around 
the world. This indicates the risk factor in this company is low to none. Hence 
there is no fear of losing revenue and the growth is consistent since the demand 
is ubiquitous. 

 
 54 
 
  
  
  
  
  
  
  
 

 
  
  
  
  
  
  

 
 55 
 
  
Starbucks is a low risk company. It is a mature company which pays dividends to 
its shareholders and it is a slow growing company looking for long term goals and 
profits rather than quick and short term gains. Over the years Starbucks has 
grown a lot in terms of market capitalization and this growth can be attributed to 
the concentration strategy of growth.​ At the time of its i​ nitial public offering​ (IPO) 
on the stock market in June 1992, Starbucks had 140 outlets, with a revenue of 
US$​73.5 million, up from US$1.3 million in 1987. The company's market value was 
US$271 million by this time. The 12% portion of the company that was sold raised 
around US$25 million for the company, which facilitated a doubling of the 
number of stores over the next two years.​ ​By September 1992, Starbucks' share 
price had risen by 70% to over 100 times the e​ arnings per share​ of the previous 
year 
In July 2013, over 10% of in-store purchases were made on customer's mobile 
devices using the S​ tarbucks app. 
  
 

 
 56 
 

 
  
  

Compa Forwa Operating  Qtrly Revenue  Qtrly Earnings  Return On 

ny  rd P/E  Margins  Growth (yoy)  Growth (yoy)  Assets (ROA) 
Starbuc 22.85  13.66%  10.60%  13.1%  14.29% 
ks 
  
  
  
Biocon can utilize this concentration strategy to help in its slow growth.  
 
 
 
 
 
 
 
 
 

 
 57 
 
Factors to consider:  
 
1) Outsourcing choice: 
 
Increasingly the country of choice for outsourcing of pharmaceutical products, 
whether finished or intermediate, is India. Clinical trials services, in particular, 
were emerging as prime targets for outsourcing to India. Clinical trials 
represented the most expensive part of the drug development chain: nearly 60% of 
total development costs, of which nearly 70% went to patient recruitment and 
medical personnel. This high growth potential could represent significant 
opportunity for Clinigene to reap revenues as a CRO player. The choice for 
outsourcing would change in a couple of years to other countries which provide 
cheaper labour. Hence the best time to utilize the foreign investment is the 
present. If Biocon were to take low risks and not push Clinigene to get all the 
business it could, they might end up missing up on a big opportunity to utilize the 
outsourcing being done by big pharmaceutical companies. 

 
 58 
 

 
 
2) Environmental: 
 
The laws towards the disposal of pharmaceutical waste could become more 
stringent in the future which would lead to more problems such as increased cost 
and measure taken for the safe disposal of waste. Hence delaying the progress of 
Clinigene could lead to increased costs and lesser profits.  

 
 
 

 
 59 
 
3) Workforce: 
  
The minimum wages in India is cheaper than most countries. This trend could 
change in the future. The government could implement laws to increase the 
minimum wages of labourers and provide more facilities and benefits to the 
workers. Hence the cost of hiring labourers would increase in the future. 

 
 
4) Public image and ethical issues: 
 
In the media, Biocon India Group had enjoyed coverage ranging from quiet 
approval to fawning praise. Pharma by its inherent nature raises quite a few 
moral and ethical questions in its operations. Through careful positioning in the 
public eye by targeted image enhancing campaigns, highlighting the Indian-ness 
of the company and its focus on sustainable value, and corporate social 
responsibility initiatives, Biocon should strength its public perception and hence 
provide a cushion in case Clinigene bombed. If Clinigene only took business for 
services that were relatively safe, the image of the company would be at safe 
hands too. 
 
5) Organizational culture: 
 
Expansion of Clinigene poses questions on whether Biocon’s carefully nurtured 
work culture faces any threats. A large influx of new employees and little time to 
inculcate the Biocon culture would lead to the company losing its prided culture 
of openness, trust, and collaboration. Hence Clinigene could first s​ tart with 

 
 60 
 
recruitment of people who fit in the work culture, with a goal of 2 years to allow 
the new recruits to acclimatize. This provides enough time for the employees to 
inculcate Biocon’s work culture. 
 
6) Financial factor :  
 
A major company like Biocon has to be considerate about where it is putting its 
money in. It has to carry out financial analysis to better analyse its risks and 
returns.   
Putting more money into a venture that might not yield desirable profits is 
considered a waste. But investing can be a boon if it yields a secure future. In this 
case, since it is a low risk strategy, the money involved in the initial growth of 
Clinigene is minimal. 
 
7) Expertise divergence to Clinigene : 
 
If the expansion is done at a steady pace, the other operations of Biocon would not 
be overshadowed by Clinigene. Instead of the diverging the focus of Biocon’s 
directors and experts into Clinigene, a small team of executives should be 
assigned exclusively to Clinigene. Clinigene would continue working for safe 
businesses in the low-medium segments of the value chain, that is, Phase I and 
Phase II, while an expansion plan is drafted and required manpower and projects 
were scouted. Within 2 years, Clinigene operations would be sustainable enough 
and organically growing to run on their own without significant attention of the 
senior executives being diverted from other major operations.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 61 
 
 
8) Availability of largest pool of patients and large hospitals- 
 
The Indian healthcare sector is expected to reach US$ 280 billion by 2020. Rising 
income level, greater health awareness, increased precedence of lifestyle diseases 
and improved access to insurance would be the key contributors to growth. The 
sector is expected to generate 40 million jobs in India by 2030. 
 

 
   
  
  
 
 

 
 62 
 
 
 
9) Presence of diverse ethnic pool- 
 
India has more than two thousand ethnic groups, and every major religion is 
represented, as are four major families of languages (Indo-European, Dravidian, 
Austroasiatic and Sino-Tibetan languages). This enables diverse sample for 
clinical trials. 
  
  
  
  
 

 
 
 
  
 
 

 
 63 
 
 
10) Presence of diverse types of climatic conditions-    
   
For example, during summers, temperature may reach up to 50​0​C in some parts of 
Rajasthan and western Gujarat, while at the same time the temperature may be 
just around 20​0​C in Jammu and Kashmir. Thus allowing stability studies to be 
performed with ease in one destination. 
 

 
 64 
 

 
 
 
Path 3: The Diversification approach - 
 
➔ Diversification is a corporate strategy to enter into a new market or 
industry in which the business doesn't currently operate, while also 

 
 65 
 
creating a new product for that new market. Apart from this they can also 
gain huge chunks of revenues adding to their growth. 
 
Over the years we have seen many companies who have taken this approach and 
turned themselves into global leaders.  
 
To name a few there is​ ITC​ which transitioned from manufacturing & selling 
tobacco to selling confectionaires and notebooks & stationery etc. 
 
There is G
​ SK ​itself, a pharma giant ,which apart from manufacturing drugs have 
diversified into consumer goods like Horlicks, ENO, Iodex etc. 
 
We also have ​IKEA w ​ hich follows a different diversifying approach. IKEA 
identifies itself with a mission to provide well-designed products at a lower price 
than anyone else can offer. And now it’s selling televisions. Is this the typical 
adjacencies thinking? “Hey, if our customers are buying furniture, they might also 
be in the market for TVs. Why not capture that business while they’re already in 
our stores?” Well, no, I​ KEA does not see itself as entering the TV market at all​. 
Instead, the company aims to solve a furniture challenge that many of its 
customers complain about: how to fit the TV—and all the components, gadgets, 
and tangles of wires that come with it—more seamlessly into the living room. So 
IKEA has integrated the television into a furniture solution. IKEA is not trying to 
enter a new business (retailing electronics); rather, it’s enhancing the value 
proposition of its current business (functional home furnishings). 
 
Biocon ​can also be expected to diversify into nearby biological and chemical 
sectors of manufacturing since they possess the technical know hows.They can 
produce anything that is related to modifying their plant processes,parameters, 
equipments into a combination that produces another product or gives the initial 
molecule for those products.  
With this said , they can diversify into nutritional products for different age 
groups in the society. 
They can indulge into making protein powders for the youth or milk powder for 
newly born babies. They could also make energy drinks for the sports industry.  
They could diversify into making pesticides and fertilizers to help the farming 
sector of the country. Insect control sprays could be used in household as well. 
They could move into the beauty products industry providing high values 
cosmetics and low valued products like face creams, sanitizers, face washes, 
soaps and even detergents. 
 

 
 66 
 
Supporting Material- ITC LTD - 
 
ITC was established by UK-based tobacco major BAT( British American Tobacco). 
It initially set up the Peninsular Tobacco Company (Peninsular), a cigarette 
manufacturing, tobacco procurement and processing unit. In 1910, it set up a 
full-fledged sales organization named the Imperial Tobacco Company of India 
Limited (Imperial). To cope with increasing demand, BAT set up another cigarette 
manufacturing unit (in Bangalore) in 1912. 
 

 
 
   
 
  ITC  has  been  constantly  making  efforts to de-emphasize its tobacco business. Its 
corporate  strategy  aimed  at  creating multiple avenues of growth based on its core 
competencies.  In  line  with  this  strategy,  ITC's  diverse  strengths  were  being 
leveraged  across  three  product  groups  -  Lifestyle  Retailing, Greeting Cards & Gifts 
and  Branded  Packaged  Foods.  The  company aimed at generating 40 percent of its 
total  revenues  from  such  diversified  businesses.  To  achieve  this,  it  planned  to 
invest  around  Rs.  26  billion  to  Rs.  28  billion in various ventures by 2006. Analysts 

 
 67 
 
felt  that  ITC's  diversification,  especially  into  areas  such  as  branded  garments, 
aimed  at  improving  its  brand  image,  which,  in  turn,  may  help  it  grow  its  core 
business.  
 
According  to  a  report  in  2010,  though  cigarettes  continue  to contribute more than 
70%  of  total  net  revenues,  the  operating  profit  earned  from  this  business  has 
sequentially  dropped  from 83% of the total profit in the quarter ended June 2010 to 
77.5%  in  the  September  quarter this fiscal. The cigarette business contributed 62% 
of revenues and 88% of the operating profits.  
 
In  the  latest  September  quarter(  2009)  ,  the  y-on-y  growth  in  net  sales  stood  at 
16.3%  with  all  the  businesses  giving  a  handsome growth while the net profit grew 
by  23.5%.  Logging  a  growth  of  22%,  the non-cigarette FMCG business has been the 
fastest  growing  business  revenue-wise.  This  was  closely  followed  by  the 
agri-business that grew by 21.5%.  
 
Comparison  of  earnings  across  segments  showed  that  paper  &  packaging 
business  had  achieved  the  highest  growth  of  32%  followed  by  the  hotel  business 
which had been dented due to recessionary pressures, is now on its path of steady 
recovery.  The  only  loss-making  business  in  ITC’s  portfolio  continues  to  be  the 
non-cigarette  FMCG  business.  It  includes  packaged  foods,  garments,  stationary 
products and personal care products.  
 
The  earnings  still  remain  negative  because  of  the  high  costs  involved  in  the 
business  development,  brand  building  and  gestation  costs  of  other  packaged 
foods  and  personal  care  products.  However,  the  good  news  for  investors  is  that 
this  fast-growing  segment  has  been  steadily  reporting  declining  losses  quarter 
after quarter.  
 
Though  ITC  continues  to  invest  and  grow  in  its  traditional  business  of cigarettes, 
it  is  well-equipped  to  beat  the  intense competition in the non-cigarette consumer 
and  agri  space  due  to  its  large  distribution  network  and  the  vast  experience  in 
handling  cigarette  brands.  Investors  shall  continue  to  benefit  as  the  company’s 
strategy of de-risking its portfolio is executed successfully.  
 
According to a report in 2016, the growth pattern is shown as below-  

 
 68 
 
 

 
 
 
 

 
 
 

 
 69 
 
 
Also  ITC  monitors  its  risk  vs  returns  as  in  diversification  there  are  a  lot  of  risks 
involved upto and they should make sure they don’t run into losses. 
Diversifying  is  very  ticky.  But  ITC  proved  to  be  a  strong  company  taking 
leadership  by  investing  in  the  required  resources.  Diversifying  isn’t  a  short  term 
process.  It  is  in  fact  time  consuming  and  your  new  products  might  not  succeed 
immediately.  Over time as they are recognized by more and more people, they will 
be  remembered  as  a  brand  that  is  there  in  many  sectors  compelling  people  to 
think it is a successful brand. 
 

 
 70 
 

 
 
Biocon  can  follow  close  patterns  followed  by  ITC  in  becoming who they are today 
but  it  is  a  time  consuming  process  of  patience  and  slow  growth.  In  a  few  years  , 
Biocon may pick up the brand value  
But  for that it has to direct a lot of resources into diversification and its expansion 
in that direction. 
 
Factors to consider:  
 
1) Financial factor: 
 
A major company like Biocon has to be considerate about where it is putting its 
money in. It has to carry out financial analysis to better analyse its risks and 
returns.   
Putting more money into a venture that might not yield desirable profits is 
considered a waste. But investing can be a boon if it yields a secure future. In this 
case, manufacturing and distribution of chosen product/service should be 
financially viable for Biocon.  
 
 
2) Product Identification: 
  

 
 71 
 
When choosing a product to diversify into, which products yields the most 
revenue for Biocon should be considered.  
 
3) Location factor: 
 
There should be a demand for the product in India.  
 
4) Technical Feasibility: 
 
The product must be technology feasible by Biocon. 
 
5) Profitability: 
 
How well is the product going to do in the market and if the product is able to 
make a substantial profit for Biocon 
 
6) Raw materials: 
 
Are the required raw materials available at an economic price to Biocon?  
 
7) Availability of Experts​: 
Personnel who have prior experience on working with the product should be 
available. These experts should be hired and should help develop the product.

Final Conclusion
Now that we have seen the three solutions to our case study problem, we’re at a 
stage where we have to go with one of the solutions as its growth strategy. The 
company obviously cannot expand via all the 3 strategies given above. It has to 
pick the right one considering all the factors mentioned above. 
 
We have gone through each of them and decided that Biocon India Group should 
take the Path 1 mentioned. It is the best way for them to expand given the 
advantages and disadvantages :  
 
➔ The Vertical Integration approach does have risks associated with it, but 
given the current market situation where pharma industries are growing at 
a rapid pace, it seems like the most viable option. The Concentration 
method leaves them behind in this race and the company’s future would be 

 
 72 
 
affected as clients or media might target & question their innovative 
abilities and their their boldness to take on challenges. Losing their so 
called ‘’cultural values’’ is in no way comparable to the leap they would take 
in the market being vertically integrated. So it is logical for them to lose 
their ‘culture’ to secure good future prospects. But the risks are high. It is 
advisable for Biocon to visit a consultant and plan the steps needed to 
move forward in this direction. 
 
➔ The third path which is diversification can also be used but in the case of 
Biocon it is not advisable. Biocon is pharmaceutical company which deals 
primarily in generic drugs. They have the knowledge of the biological or 
biochemical processes happening in their sector. Expanding into new 
territories and products in which they have little knowledge about seems 
pointless. It is highly time consuming and they still have a long ladder to 
climb if their products are not in niche markets. They have to invent new 
techniques , learn new techniques and spend money on all of this.They 
would have to spend a lot on external agents to help with the market 
survey, to know the competitors etc.  
 
➔ There is also no guarantee that once Biocon launches its new products , 
they will succeed. They could very well lead to losses. To be on the safe 
side, the vertical integration approach implements what they are 
knowledgeable about making it easier for them to tackle problems here. 
 
➔ To gain more insight we will take a look at the following models of 
Pharmaceutical industries which can be used or applied to Biocon India 
Group for its products or for picking a suitable growth strategy for 
long/short term (based on the market conditions) - 
 
1) SWOT Analysis model : 

 
 73 
 
 

 
 
 
 
 
 
 
 
 
 
 
2) PESTLE Analysis model :  
 

 
 74 
 
 

 
 
 
 
 
 
 
 
 
 
 
3) BCG MATRIX model for various products : 

 
 75 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 76 
 
 
4) Porter’s five forces model : 
 

  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5) Igor Ansoff growth matrix model :  

 
 77 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 78