Report on Square Pharmaceuticals Limited

Bangladesh
Prepared for:
Dr. Jashim Uddin Ahmed
School of Business, North South University

MGT 489 STRATEGIC MANAGEMENT

Section: 05
Date: 07/01/2014
Prepared By:
Group - 08
Name

ID

Rifatul Ahsan Yasdany

102 0273 030

Azmal Hossain Rafi

111 0430 030

Ahammad Ishtiaque

073 115 030

Ahnaf Tahmed Faiz

111 0174 530

Farjana Hossain

092 0753 030

Table of Contents
Abstract ...........................................................................................................................................1
Industry Overview .........................................................................................................................1
Historical Background....................................................................................................1
Present Situation .............................................................................................................2
Key market players .........................................................................................................2
Key factors behind Market Growth ..............................................................................3
Company Overview .......................................................................................................................4
Mission .............................................................................................................................5
Vision................................................................................................................................5
Objective ..........................................................................................................................5
Product Portfolio ............................................................................................................................5
Organizational Structure ..............................................................................................................7
Corporate Social Responsibility ...................................................................................................9
The Basic Business Process of Square Pharmaceuticals Ltd. (SPL) .....................................11
The Functional Departments of Square Pharmaceuticals Ltd. (SPL) ....................................11
Manufacturing Plants ..................................................................................................................13
Strategies Developed by Square Pharmaceuticals Ltd. ............................................................14
Target Market ..............................................................................................................14
Core Competencies .....................................................................................................15
Marketing Strategy .....................................................................................................16
Investment Strategy .....................................................................................................17
Setbacks ........................................................................................................................................18
Conclusion ....................................................................................................................................19
Recommendations ........................................................................................................................19
References .....................................................................................................................................21

Abstract
Square Pharmaceutical Limited is the largest pharmaceutical company in Bangladesh. The
company has expanded its target market way beyond the border of Bangladesh by exporting to
38 countries; which include export to developed countries such as United Kingdom. The
company grossed turnover of BDT 20.742 billion in the fiscal year 2012-13. The company owns
18.7% of the market share in a high growth industry and is the market leader in terms of market
share. Square Pharmaceuticals limited have 700 product approvals for export markets and 900
product approvals for Bangladesh market. The company has diversified its product portfolio into
different categories from generic products to herbal medicines. Their strategy includes not only a
diversified target market and product portfolio, they have also broadened their investment
horizon with investments in several related industries; thus safeguarding their interests. The
company does not only concentrate of profitability and growth of the organization; but it also
believes in its social responsibilities through its welfare activities. In spite of the various setbacks
it faces from an adverse business condition, it follows an ethical standard in doing business and
tries to overcome those challenges by upholding those values.
Keywords:
Square, Bangladesh, Pharmaceutical Industry, growth, diversification, strategy, responsibilities,
challenges

Industry Overview
Historical Background
The existence of Pharmaceutical industry in Bangladesh dates back to 1950s, but it was primarily
dominated by the multi-national companies till early 1980s. The Pharmaceutical industry of
Bangladesh flourished after the Drug Ordinance 1982 was passed (Habib & Alam, 2011). The
Ordinance defined a set of guidelines which aided the local pharmaceutical companies to
prosper. Before the ordinance, the market was dominated by the Multi-national Corporations
with 75% of the market share (Afzal, 2011). The Ordinance curbed the dominance of the MNCs,
as approximately 4,200 brands of foreign medicine were banned from importing (Business Asia,

2013). This provided an opportunity for the local companies to survive and eventually dominate
the domestic market (Hossain, 2013).
Present Situation
The sector generated $1.2 Billion in sales in 2012 and is responsible for meeting 98% of the local
demand (Ahmed, 2013). The industry contributes to 1% of the GDP and is ranked third in terms
of the contribution to Government revenue (Saad, 2012). The sector currently exports medicine
to 87 countries. The Export Promotion Bureau statistics indicates that Bangladesh exported
around BDT 4.63 billion worth of medicine in the fiscal year 2012-13 (Saha, 2013). The
pharmaceutical industry of Bangladesh is technologically most advanced industry in the
country.
Key market players
There are 267 local pharmaceutical companies in Bangladesh, out of which 191 are operational
(Business Asia, 2013). Among them, 20 companies are listed in the stock exchange (Ahmed,
2013). According to the 2011 statistics, the top ten companies hold 67.7% of the market share
and top 20 companies hold 84.9% of the market share. The market leader is Square
Pharmaceuticals with a market share of 18.7%. They have been the market leader since 1985.
They are followed by Incepta (9.3%), Beximco Pharmaceuticals (8.8%), Opsonin Pharma (5.1%)
and Renata (4.9%) (Saad, 2012). Other significant players making up the top ten in the industry
are Eskayef, ACI, Aristopharma, Acme and Drug International. The top ten Multi-national
companies only holds about 10% of the market share (Saad, 2012). Among them the key firms
are GlaxoSmithKline, Novo Nordisk and Novartis. The market standings of the top companies in
the industry are shown in the figure in the next page.

Key factors behind Market Growth

The pharmaceutical industry of Bangladesh has improved in the ratings in the report published
by Business Monitor International, occupying the 14th position among 17 regional markets
surveyed by them (Rahman, 2013). Although, the industry was growing at the rate of
approximately 24% in the years 2010 and 2011, the growth rate had fallen to 12% in 2012
mainly due to rise in price of raw materials (Ahmed, 2013). However, there are several factors
that are acting as drivers for the growth; such as increased life expectancy, greater public
awareness about health, emergence of private healthcare services and increased income of the
people as indicated by the rise in per capita income (Saad, 2012).
One important factor which is going to play a significant role in the future growth of
pharmaceutical industry is the construction of Active Pharmaceutical Ingredients (API) industrial
park. Its construction is already underway in Gojaria (Munshiganj) and is expected to be
completed by 2015. The API park will reduce the over reliance of pharmaceutical companies on
imported raw materials from India and China. At the same time the local Pharmaceutical firms
will be able to receive more export orders and maintain a steady price in the local market.
Presently the raw material imports amount to 90%, which is expected to go down to 30% once
the API Park is set up (Saha, 2013). The cost of APIs will also go down by approximately 20% if

the industrial park is set up. The pharmaceutical industry is expected to grow at the rate of 15.4%
annually in the next 5 years (Saad, 2012).
The trade-related aspects of intellectual property rights (TRIPS), the World Trade Organization
allowed developing and poor nations to produce generic drugs without compulsory licenses or
paying the patent holders for a certain time frame in 2001 (Afzal, 2011). For developing
countries like India and China, the timeline was up to 2005. For Least developed countries,
including Bangladesh, the time line was up to 2016. In this period, pharmaceutical industries are
legally allowed to reverse engineer, manufacture and sell generic versions of on-patent
pharmaceutical products for domestic consumption as well as for export to other LDCs.
Anticancer producers will have lower input cost. There is Tax Holiday reducing tax expense of
producers. Due to TRIPS relaxation, LDCs can produce drugs without patent or license cost up
to 2016 and as 2005 passed, developing countries like India and China had to stop
exporting to other LDCs due to TRIPS implementation. This opened a wide export opportunity
for Bangladesh, since it is the only country among the 49 LDCs having a strong
manufacturing base in Pharmaceuticals. TRIPS provide Bangladesh pharmaceutical firms with
patent-free production rights domestically until 2016 and limited exporting advantage. TRIPS
also allow Bangladesh to export drugs patent free. Until 2016, Bangladesh may enjoy benefits
such as exporting to countries where the drug is not under patent, exporting to other LDC or nonWTO country which does not have patent protection laws and be the first country to market
when a patented drug goes off market (The World Bank, 2008). Since then, Bangladeshi firms
have been experiencing a significant increase in its export volume.

Company Overview
Square Pharmaceuticals Ltd. is a public limited pharmaceutical company based in Bangladesh.
It is part of the SQUARE Group of Companies. The company was founded in 1958 by Samson
H. Chowdhury (who recently passed away in the year 2012) along with three of his friends as a
private firm. It went public in 1991 & is currently enlisted on the Dhaka Stock Exchange. It is
holding a strong leadership position in the pharmaceutical industry of Bangladesh since 1985 and
it has been continuously in the 1st position among all national & multinational companies since

1985. Square Pharmaceuticals Ltd. is now on its way to becoming a high performance global
player (as cited in Square Pharmaceuticals website).
SQUARE today symbolizes a name a state of mind (Square Pharmaceuticals website). But its
journey to the growth and prosperity has been no bed of roses. From the inception in 1958, it has
today multiplied into one of the top line conglomerates in Bangladesh. The sales turnover of SPL
was more than Taka 11.46 Billion (US$ 163.71 million) with about 16.43% market share (April
2009 March 2010) having a growth rate of about 16.72%. As mentioned above, the company
has extended its range of services towards the highway of global market. It pioneered exports of
medicines from Bangladesh in 1987 and has been exporting antibiotics & other pharmaceutical
products. This extension in business and services has enhanced the credibility of Square
Pharmaceuticals Limited. The mission, vision & objective of the company are as follows:

Mission
SPLs mission is to produce and provide quality & innovative healthcare relief for people,
maintain stringently ethical standard in business operation also ensuring benefit to the
shareholders, stakeholders and the society at large.

Vision
The company views business as a means to the material and social wellbeing of the investors,
employees and the society at large, leading to accretion of wealth through financial and moral
gains as a part of the process of the human civilization.

Objective
The objectives for SPL are to conduct transparent business operation based on market
mechanism within the legal & social framework with aims to attain the mission reflected by our
vision.

Product Portfolio
SQUARE Pharmaceuticals Limited, the flagship company of SQUARE Group, is holding the
strong leadership position in the pharmaceutical industry of Bangladesh since 1985 and is now
5

on its way to becoming a high performance global player with their wider range of products. SPL
has differentiated their product portfolio by 5 factors:
1) Product by trade name: As the name suggests, the products are according to its trade name.
Most of the products associated here are registered & includes renowned paracetamols that is
used in daily life such as Ace, Alatrol, Nebanol etc.
2) Products by therapeutic class: The different therapeutic classes include penicillin, hair care
product, antiseptic mouthwash etc.
3) Products by generic name: Different medicines such as Cardipro, Entacyd etc. are included
in this category.
4) Herbal & Nutraceuticals: SQUARE Herbal & Nutraceuticals Ltd. is the first healthcare
entity with a healthy oath to create a new era in the field of medication in Bangladesh. Where
herbal medicine has created a revolution with its popularity and practice in the developed
countries, being a developing country it is an excellence to explore this trend in line with the
global competition, to have world-class herbal products available both for domestic and
international use. The therapeutic classes this category is covering are: Anti-tussive &
Expectorant, Hepato-protective, CNS & antidepressant, Adaptogen & Immunomodulator,
Vitamin & mineral supplement, Hematinic, Gastrointestinal, Hormonal etc. Along with natural
medicine therere inaugurated traditional ayurvedic medicines under the ayurvedic division of
SQUARE Herbal & Nutraceuticals Ltd. The ayurvedic range covers energy tonic, digestive
health products, liquid vitamins etc. Some of the products included here are Adovas, Inacea,
Kamomil etc.
5) AgroVet & Pesticide: With only three locally manufactured products, AgroVet division
started its operation in 1998. At present there are 73 locally manufactured & imported poultry &
livestock products successfully present in the market. Additionally, Pesticide Unit is a newly
formed unit dedicated to the diversification of agro business through agricultural chemicals and
public health insecticides. The unit was established with the initial prospect of becoming the
market leader in agrochemicals sector in Bangladesh. Some of the products associated under this
heading are Potent, Becevit-Vet Powder etc. The entire product portfolio of the Square
Pharmaceuticals can be viewed in the table below:
6

Source: Square Pharmaceuticals Limited Annual Report (2012-2013)

Organizational Structure

Source: Square Pharmaceuticals Limited Annual Report (2012-2013)

7

The chairman of Square Pharmaceuticals Limited is Samuel S. Chowdhury, who was appointed
in 2012. Hes the son of late Samson H. Chowdhury, the founding chairman of SPL. Mr.
Chowdhury is also also Chairman in 33 other private Limited Companies such as Square
Hospitals Limited, Square Fashions Ltd., and Square Consumers Products Ltd. among others.
Next up in the top management section is the Vice-Chairman, a role that is currently held by
Mrs. Ratna Patra. She currently possesses 6.77% of the total shares in the company and is
gravely responsible to ensure proper corporate governance among the company. Tapan
Chowdhury acts as the managing director of SPL. Under his directorship, the company has
managed to conquer progressive growth rates over the last year or so both in the national and
international markets. It was highlighted within the organization that it was made possible
because of his efforts to lower costs of production and working expenses at every level of
operation. He is currently holding 7.22% of shares of SPL, the second highest among the
directors or the top management (Annual report, 2013).
The 3 executive directors currently employed by SPL are Dr. Kazi Harunar Rashid, Anjan
Chowdhury and Kazi Iqbal Harun. Theyre said to be very important links during the
communication of middle and top management. Dr. Kazi Harunar Rashid is one of the founders
of the company and is a physician by trait. He obtained the MBBS degree back in 1954 from
Dhaka Medical College. The other two directors, Mr. Harun and Mr. Chowdhury, are integral
members of the Audit Committee too and are committed to oversee operations and control the
affairs of the company through suitable accountability processes (Annual report, 2013).
The remaining persons in the top management are the two independent directors, M. Sekander
Ali and Mrs. Nihad Kabir. The independent director posts are included to comply with the BSEC
regulations on good governance. Mr. Ali is one of the senior development/investment bankers of
Bangladesh and a senior adviser of BSEC, whereas Mrs. Kabir is a Barrister-at-Law by
profession and also an advocate of the Supreme Court in Bangladesh. SPL certainly expect that
their presence along with their vast experience would help the company contribute to the further
disclosure and protect the interest of all investors in general.
The Operational Management team consists of Parvez Hashim (Head of Operations), Md. Kabir
Reza (Head of Accounts and Finance), Muhammadul Haque (Head of Marketing), M Ashiqul
8

Hoque Chawdhury (Head of Admin and Supply Chain), Mahbubur Rahman (Head of
Engineering), Anjan Kumar Paul (Head of Human Resources), Imtiaz Ahmed Khilji (Head of
Quality Operations) and Md. Majibur Rahman Bhuiyan (Head of Internal Audit). Additionally,
Jiban Kumar Ghosh and Amalesh Chandra Shome act as the Head of Production of the Pabna
and Dhaka Unit respectively. The team is responsible for preparation of budgetary segment and
sub-segment plans for every cost or profit center and is held accountable for performance
therefore. The team is also helped out by several DGMs, AGMs, committees and the like to
carry out the necessary functions.
Moreover, to receive the best legal services during emergency periods and to ensure a proper
contingency plan, the company has selected the panel of Rafiqul-ul-Haq, Rokonuddin Mahmud
and Nazia Kabir (all Bar-at-Law). The expertise of the three mentioned professionals has had
long run essential support to the companys good governance efforts and helped achieved quite a
few significant milestones (Annual report, 2013).
To conclude, the company has approved an organogram (also known as the organizational
hierarchy) with modern features ensuring clear lines of delegation of authority and reporting for
accountability for effective decision making evaluation of performance on merit for both
rewarding and disciplinary action(Square Pharmaceuticals Limited, 2013).

Corporate Social Responsibility

The company follows being good by doing well approach as a motivation & to conduct
transparent business operations within the legal, ethical & social framework while trying to attain
their mission reflected by its vision. Theyve set up their CSR activities to consider the interests
of their stakeholders like customers, employees, vendors, shareholders, society, government etc.
and ecological & ethical considerations in all aspects of operations. SQUARE is one of the
pioneer signatories of United Nations Global Compact (UNGC) in Bangladesh. Thus the UNGC
principles are embedded with companys culture from the very beginning of the companys
inception.
SQUARE recognizes that progressive labor policies are good business practices; especially for a
company that has global ambition. The company follows laws and encourage work environment
that welcomes diversity and also follow non-discrimination & fair treatment policy both in the
9

recruitment & selection process and performance management system. SPL has trade union &
the HR policies have been continuously up-to-dated as per existing labor law of the country.
They do not allow any female employees during night shift operations & strictly prohibit any
form of forced labor. The policy of no child labor in SQUARE Pharmaceuticals Ltd. is actively
pursued.
The central value of SQUARE Pharmaceuticals Ltd. is transparency and business ethics. It is
strictly followed at every step of the business processes. Every business in SPL is modeled in a
way that enables the management to ensure highest degree of both financial and behavioral
accountability. Theres also a zero tolerance policy in Square Pharmaceuticals Ltd. against all
kinds of corruption. The companys activity goes well beyond the sphere of business. As socially
conscious and responsible corporate body SPL is committed to the improvement of the society as
a whole. Meril-Prothom Alo festival sponsored by SQUARE, has become a national calendar
event. SQUARE helps many NGO's in their effort to make available healthcare to the
disadvantage population of the country. It sponsors programs to build awareness on the
healthcare need. SQUARE is also a major sponsor of sporting events in the country.
SQUARE is proud to be a Bangladeshi Company actively involved in various field of CSR
(Corporate Social Responsibility).
Lastly, therere several sister concerns associated with Square Pharmaceuticals Ltd. Square
Hospitals Ltd., a concern of SQUARE Group, is a 300 bed tertiary care hospital. The hospital is
an affiliate partner of Methodist Healthcare, Memphis, Tennessee, USA; Christian Medical
College-Vellore, India; and Care IVF (In-vitro fertility centre) Centre, Singapore.
SQUARE Hospitals' vision is to become the location of choice for Bangladeshis and people of
South and South East Asia for quality healthcare, as well as an integrated centre for clinical
services, medical and nursing education and research. At present it comprises two buildings on
either side of Panthapath connected by an over-bridge. The main hospital building is 18 storied
tall and is approximately 450,000 sq.ft. The second building (ASTRAS) is located across the
street and is 16 storied with 136,000 sq.ft. Both facilities are constructed in accordance with the
US Fire and Building safety standards.

10

The Basic Business Process of Square Pharmaceuticals Ltd. (SPL)

The total business process of Square Pharmaceuticals can be divided into several stages. The first
stage is planning, where the top level management gathers data (information) from all the
departments to forecast demand and decide on how much to produce in the coming period. The
second stage involves sourcing and suppliers. SPL follows a cost leadership strategy and
procure its raw materials from both foreign and local suppliers. Due to a healthy relationship
with suppliers it gets high quality supplies at low cost. The third stage is manufacturing. Here,
the raw materials are converted into quality medical products for sales in both domestic and
foreign market at the two manufacturing plants of SPL located in Pabna and Gazipur. The fourth
stage is distribution. The distribution department of SPL delivers the finished products to
various retail outlets across the country. The final stage is services. With the help of product
management, sales and medical service department SPL provide all sorts of services related to
their products such as handling of complains, answering inquiries, educating physicians about
the benefits of their products, etc (Ishika, 2010).

The Functional Departments of Square Pharmaceuticals Ltd. (SPL)

There are over 20 functional departments in Square Pharmaceuticals limited. They are
Information Technology (IT) Department, Medical Services Department (MSD), Product
Management Department (PMD), Sales Department, Distribution Department, International
Marketing Department, Market Research and Planning Cell, Quality Management and Audit
Department, Production Planning and Inventory Cell, Engineering Department, Production
Department, Commercial Department, Personnel and Administration Department, Technical
Services Department, Human Resource Training and Development Department, Quality Control
Department, Quality Assurance Department, AgroVet Department, Accounts and Finance
Department and Accounts (New Venture) Department. We will be emphasizing only on some of
the departments significant to the business operation.
Product Management Department (PMD) PMD is responsible for handling all the marketing
activities of the company. It plans and implements all the marketing efforts of the company. The
main objectives of PMD are to introduce new products in the market and manage the existing
portfolio of products to achieve the marketing objectives (Ishika, 2010).
11

Sales Department The sales department plays a crucial role in providing a competitive edge to
the company. The employees from this department handle product related queries from doctors
and product complaints from the market. They pay regular visit to the doctors to show the
benefits of new and existing products, monitor the competitors activities and receive sales order
from retailers (drug stores). This department shows the benefits of new existing products with
the help of promotional tools, monitor the competitors activities, handles initial product queries
from doctors and product complain from the market, receive sales order from the retailers /drug
stores, coordinates among different markets Market rearrangement, handling different problems
of field forces, exploration of new markets all over the world, and operation of export business in
the different countries. They also provide training to field forces overseas and provide all types
of documents for registration of SPLs products overseas.
Distribution Department The distribution department ensures smooth distribution of products
all over the country. The departments primary activities involve collection of payments from
customers, activities related to product storage (warehousing) and maintenance of vehicles and
depots.
Market Research and Planning Cell This department performs market survey on the
Bangladesh Pharmaceutical Market. Its main task is to do various market research works on
various issues and provide all kinds of support to PMD to improve effective planning in the
market level.
Medical Services Department (MSD) The main tasks of MSD are to provide answers to
various queries of the physicians through mail or telephone, arrange education programs for the
rural medical practitioners, publish medical journals and arrange special promotional campaigns
of different products (Ishika, 2010).
Research and Development is devoted to improve the health care facility of people. Square
Pharmaceuticals Ltd. has brought in advanced technology for its Research and Development
works. Research & Development includes the bibliographic search aided by a resourceful library,
design and selection of process that maximizes efficiency and minimizes the environmental
impact, accelerated and long term stability testing, product quality optimization and translation

12

of new scientific insights into the products. R&D Department is also devoted to extensive
research and development work in synthesizing bulk chemicals for Chemicals Division.
Quality Management System (QMS) is integral part of all of SPL operations. People at all
levels are committed to adopt advanced technology for continuous development. Being confident
with the sophisticated manufacturing and quality assurance technology of SQUARE,
multinationals from industrialized countries now have agreements with Square for having their
products manufactured in Bangladesh. SQUARE has adopted the latest quality philosophy by
organizing a well-equipped Quality Assurance Department in the plant in addition to Quality
Control Department (Annual Report, 2013).

Manufacturing Plants
Square Pharmaceuticals Ltd. (SPL) has three GMP compliant production sites; a chemical plant
located in Pabna and the other two production plant in Kaliakoir. All the plants at Kaliakoir site
are built according to the GMP requirements of US-FDA. UNICEF, Copenhagen has approved
the Solid Dosage plant of Kaliakoir Site in 2002 for its Global Supply. The Facility is UKMHRA approved since 2007 and TGA certified from 2012. The Cephalosporin plant at Kaliakoir
site is a standalone, state-of-the-art manufacturing facility and is TGA certified from 2012.
According to the annual report 2013, the firm maintains its superior operational efficiency by
continuously improving its technological process, research and training. SPL makes substantive
investments in this regard every year as shown below:
Table A: Yearly Investment in Manufacturing Plants
2011-12
2012-13
158,077,734
Land
144,166,293
587,648,991
Building
317,683,212
1,048,222,382
Plant and Machinery
634,991,127
125,828,200
Laboratory Equipment
158,386,302
522,132,262
Other Equipment/Assets
138,111,956
2,441,909,569
1,393,338,890
Total Tk.
Source: Square Pharmaceuticals Limited Annual Report (2012-2013)

13

The major part of the investment is funded with retained earnings which indicate a sustainable
long term expansion of the firms production capacity. These continuous upgrades to maintain
operational efficiency using independent funding is one of the key competitive advantages that
SPL enjoys over its competitors. However, it seems that the current rate of growth is not enough
to meet the market demand of capsules as the firms recent capacity utilization is 102 percent
(Table B) in terms of producing capsules which is unsustainable in the long run.

Product
Tablets
Capsules

Table B: Capacity Utilization of SPL

Capacity
Actual Output
Capacity Utilization
2011-12
2012-13
2011-12
2011-13
7347542
4090900
4862000
56%
66%
1150922
1170856
1176601
125%
102%

Source: Square Pharmaceuticals Limited Annual Report (2012-2013)

Strategies Developed by Square Pharmaceuticals Ltd.

Target Market
Square Pharmaceuticals (SPL) being one of the major players in the pharmaceuticals industry of
Bangladesh targets both the domestic and international market. According to the 2013 annual
report of SPL, the foreign buyers of the firms products are Myanmar, Nepal, Hong Kong,
Malaysia, etc. The complete list of foreign buyers is provided in. Although SPL operates in the
global market, the lions share of the companys revenue is earned from the domestic market as
shown in. The firm earns only around 3 percent of its total revenue from its exports and the rest
of 97 percent is earned from local sales.

From the point of view of the domestic market, SPL targets the mass market of Bangladesh. It
divides the overall market according to its therapeutic drugs, such as Anti asthma, Antibiotics,
14

etc. and target each segment accordingly. However, instead of following the traditional approach
of targeting the end consumers the firm targets doctors and physicians. This is because most of
the major innovative drugs cannot be purchased by the end consumers without a doctors
prescription. Thus, doctors and physicians are considered to be the opinion leader of the products
and SPL directs all its selling efforts towards them.

Core Competencies
Square Pharmaceuticals Ltd. (SPL) attained the status of market leader by continuously
outperforming its rivals which is clearly reflected in its enormous revenue and its annual growth
relative to its competitors. The firm was able to do this because of its core competencies.
SPL provides its customers with the widest portfolio of products. The top 20 medicine of the
domestic market represents 14 percent of the total market, out of which nine products are offered
by the firm. Moreover, out of the top ten brands of medicine in the local market, six belongs to
SPL. This is possible due to the firms drive to improve the quality of its products and
continuous innovations of new medicine through successful R&D activities.
SPL can produce its products at a much lower cost compared with its competitors. According to
BRAC EPL company analysis report, the firm has been continuously reducing its cost of goods
sold from 2006 till the present day. The firm did this by going for vertical integration to reduce
costs at different stages of production. Along with this the firm continuously upgraded its plants
and equipment, as shown by its annual capital expenditures in the companys cash flow
statement, to increase efficiency and in the process reduces cost of production. Finally, one of the
significant reasons for the reduction in cost was economies of scale. The firm being one of the
oldest companies of the industry and a number of times larger than its closest competitors enjoys
various economies of sales such as technical, managerial and financial advantages.
The wide menu of high quality and low priced products offered by SPL; acts as the main
competitive advantage of the firm. The rival firms can neither imitate nor overcome this
combination of core competencies which has enabled the firm to retain its market leader status
for this long.

15

Marketing Strategy
Square Pharmaceuticals strategize and make plans to improve and sustain in the business in
all the generics based on the market trends. As they are the leader in the market, it is very much
important for the company to retain that position by properly planning and guiding the workforce
accordingly.
The strategy to venture into related businesses have helped the SPL to market its products as
well. The doctors in Square Hospital are opinion leaders who prescribe medicines which are
made by Square Pharmaceuticals only, thus increasing the sales of the medicine. This strategy
saves costs of marketing products to doctors through medical representatives, samples, gifts and
inducements or hospitality (DGDA, 1994).
Its product development strategy includes increasing its investment on the generics
Levofloxacin, Calcium+Vitamin D and Esomeprazole and launching brand under the
generic

Tenoxicam

under

the Antirheumatic non-steroid class. Improved

compliant

management is one significant part of SPL planning and they continuously tries to
improve the medicine quality. They changed chewable tablet to traditional ones for CalboD. Again they are trying to change the melting temperature for the Ciprocin suppository
tablet.
They have also developed a branding strategy to differentiate their products in the customers
mind. SPL usually use brand names that are easy to pronounce or remember or which
are more likely to be recalled by doctors promptly. For example, easy to remember brand name
has influenced the high growth of Fexo (Ishika, 2010).
Focusing on brands one after another is one significant plan for the companies strategies. As
same filed force is giving attention to all the brands under one class, after ensuring sustained
performance of one brand they would focus on another one. For example, SPL has started
focusing on the brand Calbo-D after ensuring the position of Calbo. Again they have
planned to give emphasize on Calbo-D for another one year and after ensuring its position SPL
will focus on Calboplex.

16

SPL use lucrative gifts, price reduction offer as tools for their promotional strategy. But unlike
other companies they do not use bonus offer i.e. with 10 packs one is free; as they feels it is not a
suitable option for their business and also there is chance for hampering relationships with their
distributors. SPL wants to achieve OTC potentiality for the Clindamycin generic and
wants to be the leader in this molecule by 2013 (Ishika, 2010).

Investment Strategy
As the largest pharmaceutical company in Bangladesh, Square plans to further enhance their
market domination with a massive expansion project which will increase their production
capacity significantly. They have formulated strategy to transform themselves into a large
exporting company by focusing on attaining certification and accreditations from the regulators
of developed markets (Chowdhury, 2010). They have recently renewed the UK MHRA
accreditations for three years.
In order to meet increasing demand in the domestic as well as foreign markets, SPL has
undertaken an ambitious expansion program to be completed in two phases. The first phase,
which is already under way, is expected to be completed by 2012 at a total cost of BDT
3.6 billion. The first phase of their expansion is expected to nearly double the current capacity of
SPL (Chowdhury, 2010). The second phase will start in 2014, completing in 2017 for a
total cost of BDT 2.0 billion. According to Brac-Epl research, it is expected that the
expansion programs will be contributing to revenue growth after 2012.
Square also developed strategy to expand their business in related fields as they have significant
ownership of Square Hospitals, Square Cephalosporins and Square Biotechs. They have also
established Square Nursing College. Their approach indicates that they are willing to dominate
the market share of entire health-care industry as well.
Square Pharmaceuticals have diversified their business into multiple industries. They have
diversified their business portfolio by creating several Strategic Business Units across various
industries. The company turned several subsidiaries such as Square Textile, Square Hospitals to
legalize their investments (Saad, 2011). Their major investments include investment in Square
Cephalosporins. SPL holds 99.48% of Square Cephalosporins Ltd. (SCL). The subsidiary has

17

become profitable very quickly after it went into operation in 2007. SCL owns a modern
pharmaceuticals factory and produces and sells pharmaceuticals, drugs and medicines.
The other major investment includes Square Biotechs. SPL holds 99.25% of Square Biotechs
Ltd. (SBL). SBL was established to carry on the business of inter alia manufacturing,
sales and distribution of all kinds of biotechnological medicines or drugs. The company has
not yet become profitable, however since they are in the same industry; they will be able to aid
each other in dominating the market share for the health care industry as a whole, not just the
pharmaceutical industry. SPL have significant investment on totally non-related industry such as
textile as well. SPL holds 99.50% of Square Multi Fabrics Ltd. (SMFL). SMFL was established
to carry on the business of manufacturing and marketing all types of knit fabrics, yarn, garments
for gents, ladies and children. They also have minority investments in multiple companies such
as Square Textiles, Square Knit Fabrics, Square Fashions, Square Hospitals, United Hospitals,
National Housing and Finance, Pioneer Insurance, Central Depository Bangladesh Limited
(CDBL), Square Informatix. This strategy can be justified as diversifying their investment
portfolio to ensure the financial stability of the organization. They also hold BDT 589 million
worth of marketable securities which is also a source of income for the organization
(Chowdhury, 2010).

Setbacks
Although we have seen an exceptional growth rate in the pharmaceuticals industry till 2012, the
growth has since then significantly slowed down from 24% to current rate of 12%. There are
various reasons behind this slowdown. Inadequate infrastructure, such as lack of electricity and
gas supply is hurting the industry. The companies need to generate power on their own, resulting
in higher cost for them (New Age, March 19th 2013). Another problem is the pricing structure of
Bangladeshi Pharmaceutical products. As pharmaceutical products are essentials, there are two
types of pricing system for it: one is controlled pricing and another is indicative pricing. The
State-owned firms follow the controlled pricing system as they produce mostly essential drugs
while the private firms follow both the pricing systems depending on the category of the product.
Since they are not updated regularly, they may not be realistic in application (New Age, March
19th 2013). The other problem is the cost of importing raw materials which makes up for the

18

majority of the Pharmaceutical companies cost. International factors such as inflation in the
global market for raw materials are a reason for the cost of purchasing raw materials going up.
Finally the current political instability in Bangladesh is also hampering production as raw
materials are often delayed due oborodh and hartals. The supply chain management of the
entire pharmaceutical industry is disrupted. It is estimated the monetary loss incurred by the
entire industry totaled to BDT. 10 billion in two months alone (October and November 2013)
(Hye, 2013). Square is one of the leading exporters of pharmaceutical products from
Bangladesh. However, the contribution of export to the total sales is still very small. The
company exported BDT 364.5 million worth of pharmaceutical products in FY10 compared
to BDT 336.3 million in FY09 (Chowdhury, 2010).

Conclusion
Square Pharmaceuticals Limited is the number one in the country because of a variety of reasons.
Their Business practice and corporate strategy are synchronized with their vision of doing
business at the same time being socially responsible. Their CSR activities further reinforce this
point. Although they are currently facing difficulty in business due to the political instability in
the country, but the growth indicators and initiatives taken by the top management put them in a
prime position to expand globally farther in the future.

Recommendations
If the square pharmaceuticals can go through with their strategy to build API, then the problems
with the cost of raw materials will be negated as it will cut down the cost by a significant
percentage. It will negate any adverse impact on price due to fluctuations in exchange rate or
otherwise since the raw materials now would be produced by SPL. The pricing structure of
Bangladesh pharmaceutical industry needs to be periodically revised to match with the current
cost of manufacturing products (New Age, March 19th 2013). Most of the top pharmaceutical
companies are gearing up for the export market as most of them have been establishing GMP
(Good

Manufacturing Practice) compliance plants. Square have already acquired the UK

MHRA approval, and was the first Bangladeshi country to do so in 2007. We would recommend
them to also go for US FDA (Food and Drug Administrations) approval, which will make their
19

products more trustworthy among the foreign consumers especially in the developed market.
Their expansion strategy, which is already in motion, now; will facilitate them to capture a larger
share in the global market as it will increase their capacity. We would recommend them to
increase export volumes to developed countries where the price of medicine is very high. Since
SPL can provide the same medicine at a lower cost, we think they would be able to attract a large
group of customers who are in low income group in countries like USA. At the same time SPL
should concentrate on exporting more to under developed countries, especially in African
countries like Sierra Leone, where the Bangladesh is well liked by the people in general due to
the peacekeeping effort by Bangladesh Army (Alam, 2002). SPL can use this to their advantage
and sell quality products in these markets to dominate their market share. Similar strategy can be
applied to countries like Sudan, Liberia, and Democratic Republic of Congo etc. where
Bangladesh has a positive image due to the effort of Bangladeshi UN peacekeepers. We would
also recommend them to set up plants off shore in a country where there is low cost of operation
and as well as better political stability to protect their operation from the domestic disputes in
Bangladesh.

20

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