Introduction Square.doc

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1Introduction:Pharmaceutical industry is one of the largest industries in our country. Every year a hugeamount foreign currency comes from this sector. Square Pharmaceuticals Ltd., the flagshipcompany, is holding the strong leadership position in the pharmaceutical industry of

Bangladesh since 1985 and is now on its way to becoming a high performance global player.It was established in 1958 and converted into a public limited company in 1991. The salesturnover ofSPL was more than Taka 5 Billion (US$ 90 million) with about 15% marketshare (April 2003 March 2004) having a growth rate of about 16%.Besides fulfilling domestic demand it exports a huge amount of drugs in abroad. It is nowexporting medicine in 20 countries. It has achieved the trust of the domestic and foreignpeople.

SQUAREs Mission is to produce and provide quality &innovative healthcare relief forpeople, maintain stringently ethical standard in business operation also ensuring benefit to theshareholders, stakeholders and the society at large.As a very large and formal company Square uses different management practices in theircorporate world. It does the works of planning, organizing, leading and controlling.Square Pharmaceuticals Ltd. follows a systemic way to take a particular decision. Based onthe present & previous available data and information the decision is made, focusing &predicting the future consequences.The Planning mechanism ofSquare involves focusing on the goal and developing the overallstrategy for achieving the goal. Strategy involves long term decision making to get a longterm benefit.We did SOWT analysis of the Square. Square Pharmaceuticals Ltd. has many things to itscredit as strengths while like any other company in the same industry has some weakness.Square is always abreast of the market trend and proactive to adopt any market changes andexplore opportunities.Square divides works to be done into specific jobs and departments, assign tasks andresponsibilities associated with individual jobs, coordinate diverse organizational tasks,11clusters jobs into units, establish relationship, formal lines authority, allocates and deploysorganizational resources.

Human Resource department plays an important role to develop the most efficient manpowerfor the Square. Skilled, efficient, dynamic manpower is one of the most desirable features ofthis organization.Every organization takes different initiatives so that the employees can perform their jobsefficiently and effectively. Organizations motivate its employees and influence them so thatthey can do their best working in full swing.Leadership is the process of influencing a group toward the achievement of goals. As asuccessful company, Square Pharmaceuticals Ltd. practices leadership in its organization formoving the whole organization towards its goals.As controlling is a continuous process, Square follows a three step process for controlling:measuring actual performance, comparing actual performance against a standard, and takingmanagerial action to correct deviations or inadequate standards.


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23.2 Market Expansion Strategy of SPL

MARKETING MIXBefore going into deeper, we should define the present marketing mix of SPL which isfiguredout in the following model:a) Market Segments:The main basis of segmenting market in Bangladesh is therapeutic drug i.e. NASALDROPS, ANTIBIOTIC etc. Presently SPL has the largest product portfolio to serve asmany segments as possible. It consistently strives to make it larger. Its present segmentsare identified in the product table.b) Target Customers:

Rather than the consumer of the medicine, the key customers for SPL have been the

physician. Physicians are considered here as opinion leader. The major innovative drugscan not be purchased without a prescription provided by a doctor. SPLs main sellingtask has been directed therefore, not at the user, but at physicians. Doctors and physiciansare segmented on the basis of its therapeutic drug segment. As for example, NASALDROPS products are communicated at E.N.T specialists. Therefore, if SPL has NASALDROPS product line, then E.N.T specialists are treated its target customers. Besides this,general physicians are also its target customers.Product

(Medicine)Price

(All most

regulated)Promotion(Personal Sellingthroughrelationship)Place

(Domestic &foreign)Target

Customer

(Doctors &

Physicians)10c) Value Proposition:

SPL has presently been offering its products to its market segment with the valueproposition Utmost quality, excellent efficacy.d) Product:

SPL develops, produces, and markets drugs of different therapeutic groups licensed foruse


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as medications.The Bangladeshi Pharmaceutical Market is primarily a generic market producing bothpatented and off-patented products. This is popularly known as Branded Generic Marketsince any manufacturer can produce the same molecule (either patented or off-patented)and market it in different brand names. SPL is not beyond this scenario. It produces

offpatentedmolecule and market it in its own brand.The product list according to generic segment can be found in appendix part.e) Price:

Drug pricing is heavily dependent on the National Drug Policy adopted by directorate ofDrug Administration of Bangladesh Govt. agencies act as a countervailing power inpricingpharmaceuticals.As per the NDA 2005, regulatory authority pursuing Rational pricing of drugs toensureessential drugs available to the end-users at affordable prices. On the basis of that policy,

SPL has been pursuing two different kinds of pricing policya.For OTC product, all most similar price as the competitorsb. For POM product, competitive pricing.There are also few exceptions. If SPL introduces a product first in the market, it chargeslittlebit higher price than its competitors, but within the rules and regulations of DrugAdministration.f) Place:

SPL has the strongest domestic distribution network for smoothing distribution ofmedicinesto all parts of the country. Currently it has 15 depots all over the country. Those aresituatedat Dhaka, Pabna, Bogra, Rangpur, Khulna, Barisal, Comilla, Mymensingh, Chittagong,Noakhali, Sylhet, Tangail, Rajshahi, Faridpur and Naryanganj. It uses own transportsystemto deliver its product to the stockist and retailer.11SPL also exports its products to 31 countries:

Present export market covers

Myanmar Papua NewGuineaComoros Island BhutanTanzania Nepal Gambia Niger TajikistanAfghanistan Mauritius Sierra Leone Macau countries RwandaLibya Malawi Kosovo KenyaIraq Sri Lanka Somalia YemenCambodia Ukraine Uzbekistan VietnamMozambique Benin Botswana Ghanag) Promotion:


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Public advertisement for medicine, especially POM drug is strictly prohibited inBangladesh.But it may be done for OTC medicine to some extent. However, no pharmacy companyinBangladesh is engaged in such advertisement.

SPL heavily depends on personal selling through rapport building and maintaining. Ateamof sales representatives, called MPC have been employed to meet with physicians toexplainthe merits, demerits, indication, contraindications, etc. of the medicine with the help ofliterature, brochure, pad, booklet, leaflet, gift item etc. That is, the Medical PromotionOfficers promote the companies product to doctors front with the help of differentpromotional materials. If a new drug is to be more expensive, then it needs todemonstratethat its superior performance is worth it.3.3 Marketing Problems of SPL

After analyzing its present market expansion strategies the following problems have beenfound in it:1) It seems that SPL pursuing prescription for profit strategy for market penetration.It ispartially good, but may not be perfect as the completion is very hard. There are someotherparties who have the scope and ability to act as opinion leader and to motivate thebuyer.These potential opinion leaders are remaining unexploited. SPL has enough resourcesto letthem add value to the company.2) I didnt find SPL adopting any strategy to create brand loyalty. But client is moreprofitable than customer in terms of both transaction as well as positive word-of-mouth12communication. He himself can be an opinion leader.3) At present, SPL gets only 20% raw materials from its API plant and the rest are to beimported. It increases product cost.4) Market should not be segmented only on the therapeutic drug basis.5) Holding the heaviest product portfolio should not be the ultimate goal at all. Emphasismust be given on how early a new product can be launched in the market place than thecompetitor.3.4 PRESENT MARKET POSITION

3.5 FINANCIAL RESULTS

[The operating financial results of the Company for the year 2008-2009 as compared toprev iousyear are summarized hereunder:PRESENT FINANCIAL POSITION

Capital Resources

ASSETS 31-03-2009 31-03-2008

Non-Current Assets: 8,291,290,984 6,804,429,292


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Property, Plant andEquipment-Carrying Value4,008,432,171 3,531,003,509Capital Work-in-Process 591,114,649 481,239,419Investment Long term(at

cost)3,611,744,164 2,792,186,364Current Assets: 4,411,836,436 3,682,510,712

Inventories 2,026,736,322 1,544,191,798Trade Debtors 360,245,646 322,864,637Advances, Deposits &Repayments288,806,440 236,455,395Investment in MarketableSecurities(at cost)20,250,000 20,250,000

Short Term Loan 1,510,502,334 1,418,893,703Cash & Cash Equivalents 205,295,694 139,855,179Total Assets 12,703,127,420 10,486,940,004

BUSINESS PORTFOLIO

Subsidiary Operation Long-term investment Investment In Marketable

Securities

Square Spinning Ltd. Square Textiles Ltd. Shares Pioneer InsuranceCompanySquare Cephalosporins Ltd. United Hospital Ltd.Square Biotechs Ltd. National Housing Financeand Investment Ltd.Central DepositoryBangladesh Ltd.Square Hospitals Ltd.Square Knit Fabrics Ltd.Square Fashions Ltd.Square Informatics Ltd.BALANCE SHEET

As at 31 March 2009 31-03-09 31-03-08ASSETS:

Non-Current Assets: 9,407,730,001 8,291,290,984Property, Plant and Equipment-Carrying Value 4,899,679,832 4,088,432,171Capital Work-in-Progress --- 591,114,649Investment - Long Term (at Cost) 4,508,050,169 3,611,744,164Current Assets: 3,843,512,855 4,411,836,436Inventories 2,098,755,231 2,026,736,322Trade Debtors 477,562,002 360,245,646Advances, Deposits and Prepayments 260,330,162 288,806,440Investment in Marketable Securities (at Cost) 20,250,000 20,250,000Short Term Loan 693,157,720 1,510,502,334


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Cash and Cash Equivalents 293,457,740 205,295,694TOTAL ASSETS (TK.) 13,251,242,856

12,703,127,420

SHAREHOLDERS' EQUITY AND LIABILITIES:

Shareholders' Equity: 9,949,397,634 8,417,040,705

Share Capital 1,207,224,000 894,240,000Share Premium 2,035,465,000 2,035,465,000General Reserve 105,878,200 105,878,20015Tax Holiday Reserve 1,101,935,237 1,101,935,237Retained Earnings 5,498,895,197 4,279,522,268Non-Current Liabilities: 660,976,668 785,241,612Long Term Loans Secured 449,757,608 602,584,615Deferred Tax Liability 211,219,060 182,656,997Current Liabilities: 2,640,868,554 3,500,845,103Short Term Bank Loans 1,534,345,782 2,669,693,184

Long Term Loans - Current Portion 295,590,601 297,002,646Trade Creditors 124,222,699 100,953,258Liabilities for Expenses 69,573,702 32,290,235Liabilities for Other Finance 617,135,770 400,905,780TOTAL SHAREHOLDERS EQUITY AND LIABILITIES1 3(T,2k5) 1,242,856

12,703,127,420

INCOME STATEMENT

For the Year Ended 31 March 20092008-2009 2007-2008GROSS TURNOVER 11,363,597,928 9,565,715,902Less: Value Added Tax 1,545,801,360 1,307,872,163____________ ____________NET TURNOVER9,820,796,568 8,257,843,739COST OF GOODS SOLD (5,672,565,973) (4,856,061,933)_____________ ____________

GROSS PROFIT 4,148,230,595 3,401,781,806Operating Expenses: (1,779,793,368) (1,692,475,988)Selling and Distribution Expenses (1,319,362,317) (1,220,979,268)Administrative Expenses (460,431,051) (471,496,720)PROFIT FROM OPERATIONS 2,368,437,227 1,709,305,818Other Income 665,520,915 604,628,504Financial Expenses (397,135,963) (351,868,423)NET PROFIT BEFORE WPPF 2,636,822,179 1,962,065,899Allocation for WPPF (125,562,961) (93,431,709)NET PROFIT BEFORE TAX 2,511,259,218 1,868,634,190Provision for Income Tax (592,644,226) (409,660,827)Provision for Deferred Income Tax (28,562,063) (77,110,270)NET PROFIT AFTER TAX (TK) 1,890,052,929 1,381,863,093(Transferred to the Statement of Changes in Equity)Earnings per Share (EP S(T) K) 156.56 114.47


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CASH FLOW STATEMENT

For the Year Ended 31 March 20092008-2009 2007-2008

Cash Flows from Operating Activities:

RECEIPTS:

Collection from Sale s 9,706,402,257 8,231,097,52 5Others 466,326,850 449,727,66110,172,729,107 8,680,825,186PAYMENTS:Purchase of Raw and Packing Materials 4,595,248,761 4,434,614,344Manufacturing and Operating Expenses 2,152,581,352 2,075,086,488Bank Interest 397,135,963 351,868,423Income Tax 475,997,448 458,227,366Workers Profit Participation Fund 60,192,228 58,051,027Others 7,684,822,669 7,379,996,482Net cash provided by operating activities 2,487,906,438 1,300,828,704

Cash Flows from Investing Activities:Purchase of Fixed Assets (877,960,724) (1,106,201,471)Disposal of Fixed Assets 8,806,250 8,985,055Investment in Square Hospitals Ltd. (500,000,000) (500,000,000)Investment in National Housing Finance & Investment Ltd. ---- (3,157,800)Investment in Square Biotechs Ltd. (150,000,000) (316,400,000)Investment in Square Multi Fabrics Ltd. (249,500 , 0 0 0 ) ----Capital Work-in-Progress ---- (109,875,230)Sale of Marketable Securities 67,289,225 ----Interest Received 89,551,011 112,595,980Dividend Received 42,007,687 40,197,168Net cash used in investing activities (1,569,806,551) (1,873,856,298)Cash Flows from Financing Activities:

Long Term Loan Received 151,162,607 414,288,000Long Term Loan Repaid (305,401,660) (237,046,566)Short Term Bank Loan Increase/Decrease (1,135,347,402) 850,915,306Short Term Loan Increase/Decrease 817,344,614 (91,608,631)Dividend Paid (357,696,000) (298,080,000)Net cash (used)/provided by financing activities (829,937,841) 638,468,109Increase in Cash and Cash Equivalents 88,162,046 65,440,515Cash and Cash Equivalents at the Openi n g 205,295,694 139,855,179Cash and Cash Equivalents at the Closing (TK) 2 9 3 , 457,740 2 05,295,694SWOT ANALYSIS

The SWOT Analysis comprises of the organizations internal strengths, weaknesses,external opportunities, and others. SWOT analysis is an important tool for evaluatingthe companys strengths, weaknesses, opportunities, and others. It gives anorganization an insight of what they can do in future and how they can compete withtheir existing competitors. This tool is very important to identify the current positionand performance of the organization relative to others, who are playing in the samefield and used in the strategic analysis of the organization.


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SWOT ANALYSIS

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

4.1 STRENGTHS:

Square is the largest private sector industrial conglomerate in Bangladesh. Square is more

efficient and leading company in pharmaceutical industry for their strengths. Theirstrengthsare given below:

The well qualified employees are strength of Square. Huge experience in the pharmaceutical market Used modern and sophisticated technology Strong research and development division Highly Skilled workforce, efficient management Strong brand recognition, outstanding service Price of Cephalosporin is very competitiveWorld class manufacturing facilities.

4.2 WEAKNESSES:The chain of command of Square is elongated, which takes long time to take anydecision. In reality Square has insignificant weakness in strategy

Need more smooth distribution channel Less prescription share compared to the competitors. ,t Ineffective and inefficient

detailing of FPs In case of product launching Square is follower rather than to become pioneer. Some of the Cephalosporins are showing negative growth

4.3 OPPORTUNITIES:

The pharmaceutical market of Bangladesh is booming rapidly, so Square has a hugescope todo better.

Today technology is more advanced and sophisticated which opens the door of thenew generation of medicine.

More and more health care centers and hospital are being established Square hasscope to penetrate in those.

Globalization opens the door of new era for Square. Established & Growing market segment. Can be penetrated easily in the market

4.4 THREATS:

There are lots of big pharmaceutical companies established in market in the country,whichcreate more competition .So that is a threat for Square.

Increase the price of raw material Lack of availability of raw material Huge import tax Competitor increase day by day

5.1 Conclusion:

The purpose of this paper has been to analyze the market expansion activities of Square


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Pharmaceuticals Ltd. SPL is a very big business organization. Therefore, its verydifficult onmy part to analyze its each and every strategy precisely in this small study.There can be various ways through which a business organization can achieve success inthe

market, after scanning its external & internal environment and considering allalternatives, Ihave tried my level best to sort out the best way as per my thinking ability for SPL to runahead.But finally I can say this much that it has a large potential both in the short and long rundueto its sound distinctive competencies.5.2 Recommendations:

New Category Opinion Leader

Doctors are the only opinion leader in SPLs present strategy. It may be partially good,but

can not be perfect as the completion becomes more intense day by day. There are someotherparties who have the scope and ability to act as opinion leader and to motivate thebuyer.These potential opinion leaders are remaining unexploited. SPL has enough resourcesto letthem add value to the company.Customer Once, Client for ever

Client is more profitable than customer in terms of both transaction as well as positivewordof-mouth communication. He himself can be an opinion leader. So, I am suggestingadoptingsome programs that will let its customers be transformed into clients. The followingmodelwould better describe this concept:SPL has a strong brand image in pharmaceutical industry. It will facilitate this strategy. Iamciting some instances here which may be useful for this strategy:a. Mobile Hospital service with free treatment and medicine.b. Health awareness program in rural area.c. Modernization of educational institute or public hospital etc.Keep Pace with the Race

Todays world is changing very rapidly, in every sphere. Therefore, updating productionplant alone is not enough to cope with the new environment. SPL has to have a keen eyeifthere is any change in HR development, transport, information technology, consumerrelationmanagement, medical science and so on.22Integrate Greatly


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SPL imports 80% raw materials of its total requirements. This is a weakness if it wants toconsistently expand its market. So it requires either more API plants or increase inpresentproduction capacity.Discover the undiscovered

Pharmaceutical value chain is a bit different from traditional value as it includes anadditional step Discovery. In the start this step is a vital strength of any pharmaceuticalcompany. SPL lacks this component in its value chainInnovation is the Destination

Pharmacy is on the brink of a scientific and technological revolution that will ultimatelytransform both the nature of the medicines it makes and how it makes them. In future,then,Pharmacy will not only make the white powders, creams and tablets it has traditionallyproduced, it will manufacture a complete mix of biopharmaceuticals, parenterals anddiagnostics. Making targeted treatment solutions will generate greater revenues thanconventional drugs and offset the increasing competition from generic producers. But it

willalso require the restructuring of the entire pharmaceutical value chain, including the fixedasset base and downstream distribution.Segment the Current Market Segment

SPL is in need of more segmentation tools in an ongoing effort to establish close andsustainable relationships with customers.


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3Current Market Overview:In Bangladesh Pharmaceutical Market, Antiulcer is one of thefastest growing portfolios. It is because of our unhealthy foodhabits, lifestyles, activities & overall situation says that themajority of our population suffers from Hyperacidities. Thatswhy this market is expanding day by day with the time passes& there are huge potential factors to introduce a new Antiulcerproduct in the market. And because of its potential market webecome interested & planned to work in it. Thats the main

background for choosing omeplizor injection preparation.Competition:Competitors are divided into two parts. The Companies whichare offering the Omeprazole Injection preparation with exactlysame molecules are considered direct competitors. And thecompanies which are offering the preparation with not exactlysame molecules but somewhat similar molecules which worksfor sameThe major Competitors:Incepta, ACI, Popular

Keys to Success:The keys to success are:1. Holding the position of market leader in thePharmaceutical Industry2. Already Enjoying Excellent market reputation.3. Superior quality products.Critical Issues

The most challenging job in marketing Omeprazole Injectionwill be establishing our brand of Omeprazole Injection in amarket where many other Omeprazole Injections alreadyestablished & accepted by all. People used to stick with a

product that works well for them. And they used to showresistance in adapting a new preparation of OmeprazoleInjection. We need to show & convince that our preparation ismore safe & effective to encounter competitors OmeprazoleInjection.SWOT Analysis:Strength: It has Company Strength & product strength, Company


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strengths effects positively on the product, & productsstrength also effects positively on the Company. Square has highly skilled sales forces & very efficient &wide distribution channels. Square ranked & held the First position in Pharmaceuticals

Industry since 1985, which means it is in the top for last28 years, Being in the top for this long time resulted in a verypositive impression for all our products in the minds of thedoctors & patients already, it occupies a good position ittheir minds. The built in positive impression on our products which is inthe minds of the doctors & patients helps us to get a verygood response from the market for any product weintroduce in the market. We can say very confidently that the number of sales

force of the company, their capability, Training & sellingskills are in better condition & position then any othercompany in the industry. Square follows very transparent marketing activities; thereis no misleading or fraud, thats why it enjoys a goodreputation in the market. Square maintains high quality standards for its products,that why it enjoys a good position in the market In production of Squares Omeprazole Injection & DMPquality issues are followed & maintained properly. The desired AC TC level are ensured 100%Weakness:

Square has introduced the Omeprazole Injection late inthe market Omeprazole Injection has introduced already by Incepta &popular before Square Square has lost the opportunity to be the be the firstintroducer & cant enjoy the benefits of it. Square needs to consider the loss of late introduction &work on market considering this disadvantage.Opportunity:

In the market, the number of Antiulcer patients isincreasing, when the number of patients increases thepossibility of a good return from the required drugincreases. On that perspective we are seeing a good opportunity forour Omeprazole Injection since the market is growing.Threat:

Some other companies are planning or in process tointroduce Omeprazole Injection in the market.


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When they will introduce, they will through a competitionin the market as well. Square needs to consider thecompetition in planning of their marketing strategies torespond to this threat & fight back.Marketing Strategy:

Mission:To launch the most safe & effective Omeprazole Injectionin the market & provide assistance to thegastroenterologists & Surgeons in treating people in anefficient way.Marketing Objectives:

Qualitative: We have to establish in the OmeprazoleInjection market that Squares Omeprazole Injectionpreparation is the best in terms of quality & effectivenessamong all competitorsQuantitative: To grab 30% of market share within first

year of product launch.Target Market (Segmentation): 85% of target market will be Hospitals & clinicsdoctors Remaining 15 % will consist of other doctors whichwill be gastroenterologists, Surgeons, General practices.Positioning:Ideal Omeprazole Injection in the medical AssociationStrategies:

The marketing strategy will seek to first create awarenessregarding our Omeprazole Injection, develop the customerbase, and work toward building doctors loyalty andpreference. Extensive Champaign & direct marketing willbe used to communicate the message. Initial samples &gifts will be provided depending on the target segmentthat we are trying to reach.Product Strategy:

Square Pharmaceuticals prepares Omeprazole Injectionfrom the highest quality raw materials available in themarket. It ensures strict compliance with WHO cGMPstandards and local regulatory norms in every phase ofsourcing & procuring quality materials, manufacturing,quality assurance and delivery of Omeprazole Injection. Italso ensures that all activities passes through documentedQuality Management System (QMS) complyingInternational Standard requirements of ISO 9001 throughcontinuously developing Human Resources by regulartraining and participation. Square Pharma is committed toundertake appropriate review, evaluation andperformance measurement of processes, business


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activities and Quality Management System for continualimprovement to ensure highest standard and customersatisfaction.Pricing Strategy:

Since we know that we are introducing Omeprazole

Injection late in the market, already some othercompanies introduced it before we do, thats why there isno chance of innovation in setting the price, the pricestructure would be the competitors following price. Wehave to consider the competitors pricing who launchedtheir products in the market already & set our price similarto theirs, we do not have the scope to increase ordecrease the price, the logic behind it is that, sinceOmeprazole Injection is relatively expensive, and thecompetitors have established a price in the marketalready, so if we set the price according to their first

introducing price than no controversy exists. And we arenot in the ideal scenario for setting the price as someother companies have already fixed the price & thedoctors accepted that price. So our price must be liketheirs. This price structure is the best for this kind ofscenario.Placing Strategy (Distribution):Squares own distribution channel & system will be utilizedbut focusing more on Hospitals & Clinics. Square has avery wide network of distribution system. It ensures tosupply the right product in the right place in the righttime. Distribution starts from the factory where is it isprepared, then it goes to DPG for calculating & clearinggovernment taxes. From DPG the products are distributedto all the Depots in the country. Finally the products aredistributed to the final destination which mainly consists ofHospitals & clinics. Square Pharma is equipped with highquality logistical & human support to maintain highestlevel of efficiency in distribution among all the companiesin the industry.Promotion Strategy:

The main promotion activities will be carried out by themedical representatives & they will be covering Hospitals& Clinics, as because a new product will be launched inthe market, the management can think of a launchingprogram or an introductory program. All leadinggastroenterologists, Surgeons, General practice doctorswho are practicing in Hospitals, clinics in Dhaka will beinvited in that campaign to make the product familiar tothem. In this way the message of our product can be


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spread among the doctors. Since, it is not practical ordifficult to go for nationwide campaign for a single productat once, so we will focus on the doctors based in Dhakafirst but we will be ready to use mechanisms proceduresto ensure that the message spreads to other doctors

through their colleagues to all over Bangladesh. Alldoctors will be provided with initial samples & otherpromotional items.Marketing ResearchDuring the initial phases of the marketing plan completion,several medical representatives will be held to gainingsight into the targeted customer's mind and the processesof their decision making. They will provide the departmentwith a wealth of information.Action Plans:

1st Month

All leading gastroenterologists, Surgeons, General doctorswill be invited in the launching programs in differentimportant locations in Dhaka, to make them familiar withSeclo 40 mg. Initial samples & attractive gifts will be givento all participates.2nd MonthAll Hospital based doctors will be invited in introductoryprograms & they will be given initial samples as well. Giftswill be distributed among the participating doctors, whereour Seclo 40 mg will be highlighted on.3rd monthAll intern doctors will be invited in a separate program &will be given initial samples & attractive gifts as well.Intern doctors play a vital role in selection of the type orbrand of the medicines for the patients.4th MonthAnother program will be arranged for all nurses & sistersworking in different hospitals & clinics, it is very importantto make this product familiar to them as well, becausethey are practically involved more than others in givingtreatment to the patientsFor the remaining 8 months, we will implement theprevious 4 months actions in alternate ways so that eachcategory (Senior Doctors, Intern doctors, Nurses & sisters)are dealt with in campaigns trice during the first year ofintroducing the Seclo 40 mg brand of OmeprazoleInjection.Budget:

Sales Forecast:Month Number of


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units(Per unit = TK70)SalesJanuary 3000 units 2,10,000 TK

February 3500 2,45,000March 3000 2,10,000April 4000 2,80,000May 5000 3,50,000June 4500 3,15,000July 5500 3,85,000August 5000 3,50,000September 6000 4,20,000October 7500 5,25,000November 8000 5,60,000December 8500 5,95,000

Total 63,500 units 44,45,000 TKPromotional Expenses Forecast:Month PPM No. ofSamplesGifts in TKJanuary 57250 TK 315 boxes 23800 TKFebruary 15000 260 14000March 15000 260 14000April 15000 260 14000May 15000 260 14000June 15000 260 14000July 15000 260 14000August 15000 260 14000September 15000 260 14000October 15000 260 14000November 15000 260 14000December 15000 260 14000Total 222250 TK 3175 boxes(222250 TK)177800 TKExpected Revenue:

Revenue (Tk.) 44,45,000Less: COG (15%) 6,66,750Gross margin (Tk.) 37,78,250Less: Marketing expenses:Physician's sample (5%) 2,22,250PPM Cost (5%) 2,22,250Gift (4%) 1,77,800Fixed admin.cost & sell & dist. Incl discount (7%) 3,11.150Total expense 9,33,450


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Net profit before tax (Tk.) 38,44,800Total expense of net revenue (%) 21%Controls & Evaluation:The purpose of the marketing plan is to serve as a guideto the organization. The following areas will be monitored

to measure performance:1. Revenue: monthly and annual.2. Expenses: monthly and annual.3. Number of Repeated orders.4. Customer satisfaction level.5. Changes in the market shareSquare Pharmaceuticals evaluate & control the actionsthrough a continuous process. Supervisors check theactions implemented & measure their effectivenesscomparing with standards set by the organization. Medicalrepresentatives who work in the market field collect the

feedback, responses, suggestions, opinions from thedoctors, nurses, patients & other experts of the marketand provide the collected information to the head office.The head office passes the information to the relatedrespective departments. Control & evaluation committeeanalyzes the data & take correction measures & makerecommendations to the related departments about thenew actions to be implemented considering the responses& changes in the market.Bibliography/ Reference:1. Ahmed Qamrul Alam,Assistant Marketing ManagerSquare Pharmaceuticals Ltd2. Mr. JahangirMedical Representative,Square Pharmaceuticals Ltd3. Internethttp://www.squarepharma.com.bd


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0.00%5.00%10.00%15.00%

20.00%25.00%30.00%35.00%20062007200820092010Companys Growth RateNational Market Growth Rate


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4

Industry AnalysisWith a USD 600mn industry and an average annual growth rate of 12%,the Bangladeshi Pharmaceutical industry is the biggest (in volume)amongst all the LDCs. Primarily a generics industry producing about 8,000different brands which meet 97% of the domestic demand. Localcompanies enjoy 86% market share. Of the 245 registeredpharmaceuticals, the top ten players account for 65% market share.According to the WTO TRIPS agreement, LDCs are exempted from Patent

Protection until 2016 allowing legal reverse engineering and sale ofpatented products. This provides a unique opportunity for Bangladeshover India and China, who are under the patent regime. Bangladesh hasmade significant progress in the export market. Between 2003 and 2006pharmaceutical exports increased to about 61 countries from 51 andquadrupled in value from USD 7.9mn to USD 36.5mn. Since manycompanies have acquired international certifications like USFDA, UKMHRAand TGA, Bangladesh can penetrate into regulated and unregulatedmarkets. The pharmaceutical sector attained a growth of 6.91% duringthe year 2008 as against 15.80% during the previous year. The nationalpharma market growth and that of the company during the past few years

are given below: Firm Valuation Square Pharmaceuticals Ltd. 7


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Background of SquarePharmaceuticals Ltd. In the Bangladeshipharmaceutical industry we have focused on Square Pharmaceuticals inour report. Square pharmaceuticals ltd. maintains a vast array of

partnerships with virtually every major company chain and mostindependent properties both domestically and internationally. Thecompany was founded in 1958 by Samson H. Chowdhury along with threeof his friends as a private firm. It went public in 1991 and is currentlylisted on the Dhaka Stock Exchange. Square Pharmaceuticals Ltd., theflagship company, is holding the strong leadership position in thepharmaceutical industry of Bangladesh since 1985 and it has beencontinuously in the 1st position among all national and multinationalcompanies since 1985. Square Pharmaceuticals Ltd. is now on its way tobecoming a high performance global player Square PharmaceuticalsLimited is an organization with equal emphasis on Leadership,

Technology, Quality and Passion. Square Pharmaceuticals Ltd. is theleading branded generic pharmaceutical manufacturer in Bangladeshproducing quality essential and other ethical drugs and medicines. It wasestablished in 1958 and has been continuously in the 1st position amongall national and multinational companies since 1985. And now SQUAREPharmaceuticals is set on becoming a high performance global player inthe field. SQUARE Pharmaceuticals Limited is the largest pharmaceuticalcompany in Bangladesh and it has been continuously in the 1st positionamong all national and multinational companies since 1985. It wasestablished in 1958 and converted into a public limited company in 1991.The sales turnover of SPL was more than Taka 7.5 Billion (US$ 107.91million) with about 16.92% market share (April 2006 March 2007) having

a growth rate of about 23.17%. Firm Valuation Square

Pharmaceuticals Ltd. 8


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Company analysisPorters 5-Forces Model: The 5 forces approach can be used ininitial diagnosis and as an aid to strategy development. Its main value isas a thought provoking aid to help arrive at a shared understanding of thethreats and opportunities facing the firm. Whilst it is a powerful andsimple tool for analysis, it doesn't look in great detail about the choices orthe ease or difficulty in following a particular course of action. Over thepast few decades, the pharmaceutical industry has been struck by manychallenges. There have also been opportunities such as: revolutionarydevelopments in information technology and the emergence of marketinstitutions. The pharmaceutical industry includes all companies thatdevelop drugs to consumers. Now we will analyze how Michael Portersfive external environmental forces affect the profitability of apharmaceutical industry as a whole.

Figure: Porters Five Forces Model for Industry Analysis. Firm

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Threat of New Entrants:

Threat of new entrants in the pharmaceuticals industry is very lowbecause of the high cost of R&D and patent limitations required to enter

the industry. Even though, the economies of scale for production may notbe very significant, other barriers to entry are high. To develop new drugsis a very costly and timely process that requires a lot of research anddevelopment. Along with high R&D costs, the heavy regulation of thepharmaceutical industry is another barrier to entry. All drugs andchemicals used need to be approved and when the drugs are notapproved, the time and money used to develop them is lost by the firm.The standards are very strict. The established firms have large budgets tospend on marketing to uphold their brand, just another cost necessary fora new entrant.Industry Rivalry:

The pharmaceuticals industry is a highly competitive and aggressivemarket. With strict govt. regulations, high costs with research and highlycompetitive products in the market place, companies are left franticallytrying to release the next best miracle product to stay ahead. Advantagesare gained by first mover advantage (patents).Bargaining Power of Suppliers:

It is essential to identify the suppliers for the pharmaceuticals industry.The suppliers could be wide variety of the providers such as the rawmaterials and intermediates, the manufacturing and production plants,the overseas head offices who supply finished products, the local co-

marketing partners who supply products or third party suppliers anywherealong the supply chain. Also labor can be considered as a supplier toindustry. All suppliers provide different levels of threat. It is not easy forthe pharmaceuticals industry to change suppliers even when theythreaten to withhold supply. Labor can also be the significant supplierbecause labor holds immense power when enquiring for morecompensation or reducing quality by working fewer hours. In thepharmaceuticals industry, each supplier holds a certain level of power tobe a threat, but it is not too high. The threat from suppliers in thepharmaceuticals industry is not considered significantly bigger than thatin other industries as long as there is no considerable threat from the raw

material suppliers. Thus, supplier power is low in the pharmaceuticalsindustry. Firm Valuation Square Pharmaceuticals Ltd. 10


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Bargaining Power of Buyers:

Major consumers in pharmaceuticals industry include doctors, patients,hospitals, drug stores and pharmacists. There are several significant

indicators of the threat of buyers in the pharmaceutical industry; theyinclude the number of buyers, product differentiation, and productsignificance of a buyers final cost. Buyers do not pose a big threat topharmaceuticals industry, because firms spend most of their research anddevelopment on new patent drugs. Since the industry has many buyers,and given that competition normally occurs among consumers, (e.g.competition among hospitals and drug stores); the power of the buyers interms of the number of buyers in the industry is relatively small. Althoughbig retail stores possess some bargaining power in the industry, they donot pose a big threat in the pharmaceuticals industry as they do to theother industries.

Threat of Substitutes:

Threat of substitutes is low (with patents) and medium (after patentexpiry). Overall, the pharmaceutical industry shows an upward trend in itscore markets. The industry remains highly valued has a favorable marketposition with strong financial make-up and strong earnings growth. Itsfuture potential demand trend is positive and despite increasedcompetition the industry still shows a continuing upward growth

momentum. Firm Valuation Square Pharmaceuticals Ltd. 11


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SWOT analysis: The following SWOT analysis captures the mainstrengths and weaknesses within the company, and describes theopportunities and threats of the company. Strengths:Highly experienced Senior Executives some of whom has local and

International significant pharmaceutical literature.

Good reputation with high image.Efficient, skilled, experienced and dedicated staff members

Large customer Base and product development capabilities andoutstanding

Professional services.Resources are available in Bangladesh

Square pharmaceutical Ltd is able to make benchmarking medicines

Increasing presence in the market

Regulatory performance is strong and positive

Employee mobility is lower than that of its rival.

Weakness:Non-availability of high technology

Everything is not organized.

Time consuming decision making process

Incorrect method for collecting resources and inventory management

Lack of asset management and debt.

Minimum profit in comparison with others.

Opportunities:Government Support

Banking and information technologyCredit line with well known foreign bank can gear up its foreign exchangebusiness.

Entering in new arena product helps to grow customers' confidence.

Opportunity to take market share away from rivals by offering new

Innovative product or services.Opportunity to enter into the global market.

Threats:Hiking price of raw materials: More and more factories, especially small

ones, are

Facing closure due to price hike of raw materials. As we are just entered

in the market it will be a great threat for us. Firm Valuation Square



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Inadequate Power supply: The industry sources also blamed lack ofadequate power

Supply for making the industry more vulnerable. We have to face the

same problem Here and for this many industries are shutting down nowdays.Mergers and Acquisition

Frequent Currency Devaluation

Competitors are much in pharmaceutical industries.

Competitors are offering innovative new product and services regularly.Matching them is really hard.

Compliance with Accounting Principles: The financialstatement, prepared in accordance with the International AccountingStandards (IAS) as adopted by The Institute of Chartered Accountants of

Bangladesh (ICAB) as Bangladesh Accounting Standards (BAS), give a trueand fair view of the state of affairs of the company and its subsidiariesand of the results of its operations and its cash flow and comply with theCompanies Act 1994, the Securities and Exchange Rules 1987 and otherapplicable laws and regulations. The elements of financial statementshave been measured on "Historical Cost" convention in a going concernconcept and on accrual basis in accordance with generally acceptedaccounting principle (GAAP) and practice in Bangladesh in compliancewith the Companies Act 1994, the Securities and Exchange Rules 1987,listing regulations of Dhaka Stock Exchange Ltd. (DSE) & Chittagong StockExchange Ltd. (CSE) and International Accounting Standards (IAS) as

adopted by The Institute of Chartered Accountants of Bangladesh (ICAB),as Bangladesh Accounting Standard (BAS). Specific accounting policieswere selected and applied by the company's management for significanttransactions and events that have a material effect within the frameworkof BAS-1 ''Presentation of Financial Statements'' in preparation andpresentation financial statements. The previous years' figures werepresented according to the same accounting principles. Compared to theprevious year, there were no significant changes in the accounting andvaluation principles affecting the financial position and performance of thecompany. However, changes made to the presentation are explained inthe note for each respective item. Accounting and valuation methods aredisclosed for reasons of clarity. The company classified the expenses

using the function of expenses method as per BAS-1. Firm Valuation

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Application of Bangladesh Accounting Standards (BAS):Thefollowing BASs are applicable for the financial statements for the yearunder review: BAS - 1 Presentation of Financial Statements BAS - 2Inventories BAS - 7 Cash Flow Statements BAS - 8 Accounting Policies,Changes in Accounting Estimates and Errors BAS - 10 Events after theBalance Sheet Date BAS - 12 Income Taxes BAS - 14 Segment ReportingBAS - 16 Properties, Plant and Equipment BAS - 17 Leases BAS - 18Revenue BAS - 19 Employee Benefits BAS - 21 the effects of Changes inForeign Exchange Rates BAS - 23 Borrowing Costs BAS - 24 Related PartyDisclosures BAS - 26 Accounting and Reporting by Retirement BenefitPlans BAS - 27 Consolidated Financial Statements and Accounting forInvestment in Subsidiary BAS - 28 Accounting for Investment in AssociatesBAS - 33 Earnings per Share BAS - 37 Provisions, Contingent Liabilities and

Contingent Assets BAS - 38 Intangible Assets Firm Valuation Square



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ValuationValuation is about how to create shareholder value, which is what makescompanies thrive. It shows executives and corporate finance practitionershow to value companies using the discounted cash flow (DCF) approachand apply that information to make wiser business and investment

decisions, such as corporate portfolio strategy, acquisitions, orperformance management.In finance, valuation is the process of estimating the potential marketvalue of a financial asset or liability. Valuations can be done on assets oron liabilities. Valuations are required in many contexts includinginvestment analysis, capital budgeting, merger and acquisitiontransactions, financial reporting, taxable events to determine the propertax liability, and in litigation. Executives must not only have a theoreticalunderstanding of value creation, but must be able to create tangible linksbetween their strategies and value creation. This means, focusing less onrecent financial performance and more on what they are doing to nurture

a "healthy" company that can create value over the longer term.Valuation Methods: Business Valuation has become an intrinsicpart of the corporate landscape. The corporate landscape has witnesseddynamic changes in the recent years as mergers and acquisitions,corporate restructurings, and share repurchases are happening in recordnumbers, both in the United States and abroad. At the core of thedynamics of all these activities stands some notion of valuation. Thevaluation methods are not only necessary for accounting purposes butthey also serve as roadmaps for the angel investors, venture capitalistsand corporate acquirers in order to know the true value of a companysassets. Although there are numerous individual valuation techniques,

these are categorized into four standard business valuation approachesapplying standard formulas:1. Discounted dividends: this approach expresses the value of thefirms equity as the present value of forecasted future dividends.

2. Discounted abnormal earnings: under this approach the value ofthe firms equity is expressed as the sum of its book value and discountedforecasts of abnormal earnings.

3. Valuation based on price multiples: under this approach a currentmeasure of performance or single forecast of performance is convertedinto a value through application of some price multiple for other

presumably comparable firms.

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4. Discounted cash flow analysis: this approach involves theproduction of detailed, multiple-year forecasts of cash flows. The forecastsare then discounted at the firms estimated cost of capital to arrive at anestimated present value.

Discounted Cash Flow DCF: A valuation method used to estimate theattractiveness of an investment opportunity. Discounted cash flow (DCF)analysis uses future free cash flow projections and discounts them (usingthe weighted average cost of capital) to arrive at a present value, which isused to evaluate the potential for investment. If the value arrived atthrough DCF analysis is higher than the current cost of the investment,the opportunity may be a good. Calculated as:This valuation method based on free cash flow is considered a strong toolbecause it concentrates on cash generation potential of a business. Thisvaluation method uses the future free cash flow of the company (meeting

all the liabilities) discounted by the firm's weighted average cost of capital(the average cost of all the capital used in the business, including debtand equity), plus a risk factor measured by beta. Since risks are notalways easy to determine precisely, Beta uses historic data to measurethe sensitivity of the company's cash flow, for example, through businesscycles.This method estimates the value of an asset based on its expected futurecash flows, which are discounted to the present. This concept ofdiscounting future monies is commonly known as the time value ofmoney. For instance, an asset that matures and pays $1 in one year isworth less than $1 today. The size of the discount is based on anopportunity cost of capital and it is expressed as a percentage. Some

people call this percentage a discount rate. In finance theory, the amountof the opportunity cost is based on a relation between the risk and returnof some sort of investment. Classic economic theory maintains thatpeople are rational and averse to risk. They, therefore, need an incentiveto accept risk. The incentive in finance comes in the form of higherexpected returns after buying a risky asset. In other words, the more riskythe investment, the more return investors want from that investment.

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20052006200720082009Company Growth

13.08%14.30%22.94%9.81%18.83%0.00%5.00%10.00%15.00%20.00%25.00%

For a valuation using thediscounted cash flow method,

one first estimates the futurecash flows from the investmentand then estimates a reasonablediscount rate after consideringthe riskiness of those cash flowsand interest rates in the capitalmarkets. Next, one makes acalculation to compute thepresent value of the future cashflows. Here, Cost of equity, Ke =Rf + B ( Rm - Rf ) = 0.12Cost of debt = 0.105Interest rate on bond = 15%Debt % of Capital = 25%Equity % of Capital = 75%WACC = 0.11625

Documents

Introduction Square.doc