SYMBIOSIS SCHOOL OF BANKING AND FINANCE

A. L. Labs, Inc
Strategic Management Evaluation

By:

Siddhika Ananthanarayanan
17020942016

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This report will throw some light on the product and geographic area strategy adopted by A. L. Labs
and the positioning of the company with respect to the generic pharmaceuticals.

Evolution of A. L. Lab’s product and geographic area strategy

To start with, A. L. Labs started operations by selling animal feed additives. The first situation that
they turned into their favour was the development of BMD. Based on the case given, it can be
inferred that this step was taken when the patent protection expired. What again worked out in
their favour and helped them eventually increase the production was the adherence to the safety
standards by US Food and Drug Administration (USFDA). The constant research and test conducted
between the product and the impact on the animals further helped convince the farmers that the
product in adequate doses is good. This, coupled with the new processes helped reduce costs.

Moving forward, the company introduced more products one of which was ColorGuard Vitamin D3
which was a premium brand. The reason behind this product was the need for Vitamin D3 by the
animals which they were not receiving on account of the commercial farming being done indoors.
The other product was Solutracin which was introduced as a means to treat poultry diseases. Lastly,
it is to be noted that use of BMD will be extended to the cattle market.

The entry into Liquid Pharmaceuticals and Human Nutrition was again done because of the
opportunities that were present. The former had very high sales during the winter months. The
Human Nutrition got A. L. Labs profits in spite of the increased competition because Dumex already
had an established brand name.

The bottom-line with respect to the product strategies is that A. L. Labs has improvised on the
product and introduced more products where there was a need that was yet to be fulfilled. Also, it
can also be said that the success of the products can be attributed to the success of the preceding
products that were introduced. The success of the products is inferred based on the gradual
increase in the sales numbers.

The next strategy that was followed by the company was the geographic area strategy.

The first observation made is that while then sales have been constantly increasing, the sales in the
US have always been higher than the foreign sales in the recent years. One probable reason for this
could be that the product was in accordance with the standards set by the US FDA. Another
probable reason why the sales was considerably high in the US could be that the appreciation of
the Danish kroner against the US Dollar resulting in increased production costs and eventually
resulting in importing BMD expensive.

When the assets held by the company at the home country and the foreign country is compared, it
can be observed that the former still remains higher than the latter. Also, as mentioned in the case,
BMD was accepted much rapidly in the US on account of the various studies conducted. This
coupled with the fact that the new processes resulted in lower production costs might have been
one of the key reasons for the company to consider a “geographic strategy” of selling more in the

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home country. This can also be seen when the company’s manufacturing plants are based in the
US.

So, to conclude, it can be inferred that the company’s geographic strategy involved tapping the full
potential at the home country while at the same time not letting go of the foreign sales.

Positioning of A. L. Labs resulting in the generic pharmaceuticals becoming its largest product line

Before figuring out the reason behind the positioning some of the facts have to be considered first.
It is known from the case that the company started focusing on the distribution of generic
pharmaceuticals thereby increasing its presence in the US in the year 1985. This was purely on
account of satisfactory results from a company named Dumex Ltd based in Copenhagen which was
acquired by the given company. Dumex obtained a grant for working on development of drug for
skin disorders where the end result was a new drug capturing a dominant market share. At this
juncture, A. L. Labs recognized that there are opportunities for “cross-fertilization of new drug
discoveries between Europe and US.” It was for this reason that A. L. Labs acquired ParMed in 1986
who was a distributor of generic pharmaceuticals.

Now, it is crucial to note that generic pharmaceuticals are those drugs or medicines that are sold
once the patent of the original drugs expires. In such cases the chemical substance of the drug is
more or less the same.

Based on some of these facts, it can be surmised that the main reason behind the positioning in this
segment was the sheer opportunities present here. Further, the law passed an act where it was
mandatory that the pharmacies dispense the generic drugs first unless a physician prescribes
otherwise. This ensured that the generic pharmaceuticals market shall never die thus resulting in A.
L. Labs spotting an opportunity.

Like any normal business minded company, the main reason why A. L. Labs tapped on this
opportunity was the profits associated with it. As per the data given, the company managed to
ensure sales growth without compromising on the profits.

Conclusion

It can be said that the decisions taken by A. L. Labs has always been very carefully thought through
thus ensuring the maximum benefits to the company.

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