CIPLA (UNIT - I)

I. Evolution of Cipla – Caring for life:

 Cipla has over 8 decades of caring for life (1935 – present).
 1935 – Operations commence from a rented bungalow at Bellasis Road, Bombay
Central. The Chemical Industries & Pharmaceutical Laboratories (CIPLA)
registers as a public limited company on Aug 17, 1935.
 1939 – Mahatma Gandhi visited Cipla, inspiring the founder Dr. K.A. Hamied to
produce life-saving medicines for India.
 1951 – Foundation block is laid for Cipla R&D block at Mumbai Central.
 1960 – Cipla commercialises the technology to extract diosgenin from Dioscorea
tubers, for the 1st time in India.
 1961 – Construction of new laboratories & manufacturing plants commences at
Vikroli. Dr. Yusuf Khwaja Hamied formally joins Cipla as a R&D officer (May 15,
1961).
 1968 – Cipla’s turnover crosses 1 crore mark.
 1972 – The Founder & Chairman of Cipla (Dr. K.A. Hamied) passes away in Tehran
(June 23, 1972).
 1984 – The industry officially re-christened as “Cipla Ltd.” Inauguration of
Patalganga manufacturing plant.
 1985 – Cipla receives its 1st USFDA approval for 4 bulk drugs. 50 years of Cipla –
Golden Jubilee Celebrations.
 1991 – Cipla turnover crossed Rs. 100 crores.
 1997 – Cipla Palliative Care and Training Centre was set up in Pune for cancer
patients.
 2000 – Cipla proves its supremacy in Anti-asthmatics by developing a range of CFC-
free metered dose inhalers (world’s first Budesonide inhaler).
 2001 – Cipla offers a triple Anti-Retroviral cocktail to Medicine Sans Frontiers
(MSF) for $350/patient/year to battle HIV/AIDS.
 2013 – Cipla acquires 100% of the share capital of Cipla Medpro (South Africa).
 2016 – Acquisition of InvaGen Pharmaceuticals Inc. and Exelan Pharmaceuticals
Inc. (USA).
 2017 – Launch of Cipla SAGA (Sub-Saharan Africa & Global Access).
II. Cipla’s Mission:
To provide excellent quality healthcare facilities at a reasonable cost.

III. Cipla’s Vision:

To build a healthier and hence better world.

IV. Cipla’s Business Definition:

Cipla has a diverse portfolio of drugs spread across therapies and is thus the result of
uncompromising commitment to research, quality and manufacturing.
1. Generic and Branded
Generics business in India has contributed 19% of the domestic pharmaceutical revenues
with 4,000+ partners covering the entire country. The business operates within an
extremely competitive environment in a highly fragmented market with 5,000+
pharmaceutical players. The focus lies in strengthening position in Tier 3 and Tier 4
towns along with expanding the product portfolio to cater to the needs of our patients.
2. Speciality
Cipla has been focusing towards establishing its Engine 2.0 of growth based on the
foundation of Innovation and Specialty medicine. The Company has committed
significant capital towards acquiring and in-licensing assets which address unmet clinical
needs of patients. The focus has been to establish a franchise of specialty medicines in the
areas of Respiratory, CNS and Critical Care with a focus to build Institutional Specialty
business.
3. Consumer Health
With a vision of becoming the most preferred consumer healthcare company in India,
Cipla Health Limited (CHL) (a Cipla subsidiary) has focused on driving innovation and
simplifying healthcare by creating solutions which address unmet consumer needs and
seamlessly mesh in their lifestyle.

Cipla Business Strategy

Cipla is back to old strategy with a twist, as a part of the new strategy, Cipla intends to have
front-end presence in “key markets” including India, the US and South Africa. In other
markets, it intends to return to the old model of partnership. Leveraging the front-end in the
US market, the company plans to launch 10-15 products. It has a target of filing 20-25
ANDAs (Abbreviated New Drug Applications) in the current financial year for drugs going
off-patent.
The company has huge proven capabilities in respiratory and HIV drugs where it sees
opportunity with drugs going off-patent in the US. Oncology is the third area where the
company claims to be well-versed with to capitalise on the coming opportunity in the world’s
largest market for pharmaceutical products.

V. Ansoff Matrix:
How Cipla applies a market penetration strategy?

Adoption of this strategy requires Cipla to lower the prices and use different marketing and
promotional strategies to push the sales in the existing customer market. The organization
offers various price discounts and deals, frequently runs the promotional campaigns and
offers the product in new attractive packages to achieve sales growth target while staying in
the same market. Aggressive marketing tactics are required when using this strategy in a
competitive consumer market.

Cipla’s strategic objective associated with market penetration strategy is to increase sales by
lowering the prices through cost leadership. A correlation between low cost and low price
leadership is assumed in this case. Another way to achieve this growth objective is to
integrate the innovation for setting clear differentiation basis. It helps Cipla in expanding the
customer base despite the market becomes saturated. However, it is also important to note
that market penetration becomes increasingly costly when a market reaches its saturation
point. In that case, investment in different marketing and promotional activities brings a low
return, which encourages the company to consider other intensive growth strategies.

The adoption of market penetration as a primary intensive growth strategy is linked with
Cipla’s ability to differentiate its offerings besides attaining the cost leadership. The
combination of cost and differentiation of generic strategies supports this intensive growth
strategy. During the initial growth time period, market penetration strategy played an
important role in making the Cipla successful in its home market. Later, recognition at the
national level was used to target new markets all over the world. The brand awareness gained
through high market penetration was also used as a tool to offer new products to existing and
new consumer markets.
Although Cipla is among the biggest global industry players, market penetration is still the
primary intensive growth strategy as the company is currently present in numerous consumer
markets with further growth potential.

How Cipla applies product development strategy?

Since its introduction, Cipla has considerably extended its product line, and its product array
has become too broad. It allows the company to hedge the risks as it can compensate the
losses incurred from one product line with the gains received from others. Currently, the
organization has more than Competitor product brands being served all over the world.
Product development is an important tool to attract more customers.

The strategic objective linked with using this intensive growth strategy is to increase the
research and development investments for innovation and new product development. Cipla’s
ability to use the differentiation generic growth strategy supports the product development
process and enhances an organization's ability to offer novel or new products to achieve
growth in existing consumer markets.

Cost leadership strategy used by Cipla also supports this intensive growth strategy as it
allows the organization to minimize the costs and use existing infrastructure to launch new
products. Although the company can use the same resources to extend the product lines,
successful new product development requires Cipla to emphasize research and development
and use new technologies required to pursue this strategy.

In terms of new product development, three main approaches are available to Cipla.

First is to offer new products that share a close association with current product lines.

Second, to offer new products that resonate the purchase behavior of current customers.

The third strategy is to develop new products that refresh or reinvent current products. Cipla
manages to successfully introduce new products through on-going assessment of customers'
needs.

How Cipla applies market development strategy?

Cipla uses market development as a growth strategy that supports market penetration and
product development. The organization has extensively applied this strategy, and as a result,
it is currently present in more than Competitor countries. The successful entry in new
consumer markets has played a key role in making Cipla a global brand. Main reasons behind
the worldwide presence are- affordable prices, strong brand name and flavor. Besides these
factors, the successful marketing and celebrity endorsed promotional campaigns have also
helped Cipla in capturing new customers and becoming the market leader in many countries.

Through on-going investment in research and development, the company continuously

expands the distribution network to reach every corner of the world, particularly in
developing countries where the presence is currently weak. However, a company is already
entered in most of the markets all over the world; market development now only acts as a
supporting strategy and has secondary importance.

The Cipla’s strategic objective of applying this strategy is to expand the value chain so that it
could support the distribution network growth. Cipla's ability to minimize the costs and attain
the cost leadership position allows the organization to apply this intensive growth strategy
successfully. The cost minimization supports the additional investment made by the Cipla to
enter in new consumer markets.

Multinational firms like Cipla have four ways available to apply this intensive growth
strategy- developing new distribution channels, creating new market segments by charging
varying prices, developing new product dimensions or considering new geographic areas.
The geographic expansion requires substantial resource commitment, and it is also necessary
for an organization to evaluate whether current distribution network and other resources
support the decision to enter in that particular geographic region. Entry in culturally distant
markets is riskier as it requires an organization to be culturally intelligent and built effective
knowledge management mechanisms.

Cipla understands the importance of understanding culture and integrating local norms and
values in marketing campaigns when entering new geographic regions. High cultural
intelligence has helped Cipla gain acceptance in culturally diversified consumer markets. The
effective application of this strategy also requires companies to conduct detailed competitor
and market intelligence. Well researched operational, financial and market data is needed to
make right market entry decisions. However, applying this strategy involves the risk of
alienating existing customers.

How Cipla uses diversification strategy?

The Cipla's portfolio diversification is supported by its cost leadership generic growth
strategy as cost minimization ability, and existing infrastructure makes it possible for the
organization to explore new product opportunities in new markets.

The strategic objective linked with diversification intensive growth strategy is to expand the
portfolio through effective acquisition strategies. Due to risk factors, the company focuses on
the related diversification and avoids risky experiences into unknown regions. Rather, the
company utilizes the brand awareness and strength to launch related products in the global
drink industry. However, some examples of Cipla’s unrelated diversification are offering
merchandise from fridges, shirts, glasses to pens.

The related diversification strategy is applied by acquiring profitable businesses after

analyzing market trends and changing customer expectations. For example, in response to the
growing criticism by environment protection groups, the company attempted to offset the loss
from declining sales by investing in green business practices and making business partners
with the positive brand image.

Strategically wise application of the related diversification growth strategy enhances business
sustainability and helps the organization achieve long-term growth objectives despite high
market turbulence. A well-managed product portfolio with related diversification also offers
risk hedging ability as declining trends in some product areas can be balanced by emerging
trends in related product areas.

VI. Application of Michael Porters Generic Strategies to Cipla:

Cipla Company is a multinational firm with high recognition in targeted market segments.

Cipla competitive advantage strategies can be understood in light of Michael Porter’s generic
growth model.

1. Three main Streams for Porter’s generic strategies that are used by Cipla:

1.1. Cost leadership- This strategy allows Cipla to expand the market share by targeting the
middle class, which makes the largest proportion of overall consumer market mix in most of
the countries.
Cipla focuses on affordability and easy accessibility of its products across the globe, which
leads towards high brand awareness and high sales growth and provides a strong competitive
advantage basis.

1.2. Differentiation strategy- Cipla has extended its product line after studying the
consumers’ changing interests to differentiate itself from competitors and expand the scope of
opportunities within the industry. The combination of the differentiation and cost leadership
has helped Cipla build a strong and loyal customer base.

Through differentiation generic strategy, Cipla positions its product offerings in a way to
stand out and be different from the available alternatives. Being the experienced brand with
strong foothold, the company uses differentiation as a tool to reduce the pressure by other
brands. Heavy investment in marketing, advertisement and celebrity endorsement is made
just to differentiate the Cipla from other brands.

1.3. Focus strategy- Cipla adopts the focus strategy both in terms of low cost and offering
the best value. The low-cost focus strategy is adopted by serving the needs of a niche market
segment at the lowest possible price. While, best value focus strategy is adopted by
emphasizing over the taste, size and design of the product that could best match the
customers’ needs and requirements.

By focusing on product attributes, Cipla revises its branding strategies and brings continuous
changes in the product designing and packaging to satisfy the customers’ psychological
expectations and maximize value for money.

VII. Contributions of C.K. Prahalad and Gary Hamel:

Core Competence Model

Summary of the model

They both carried out scientific and empirical research in the area of Core Competence Model. The
results of this research formed the basis for the emergence of outsourcing. His research was mainly
focused on the best ‘next practices, corporate strategies and the role of top management in
multinational organizations.

C.K.Prahalad and Gary Hamel defined core competence as:

“A core competence is a bundle of skills and technologies that enables a company to provide a
particular benefit to the customers”.

Also,

“A core competency is the combination of resources and skills that distinguish a firm in the
marketplace”.

Ex: Sony’s competence in miniaturization (a very small model); Philip’s optical- media expertise;
Honda’s competence in engines, giving it an advantage in diverse products like two-wheelers, three-
wheelers, generators, etc.

C.K.Prahalad quoted:

“The essence of strategy lies in creating tomorrow’s competitive advantages faster than competitors
can mimic the ones you possess today.”

For further information:

http://www.yourarticlelibrary.com/management/contribution/contribution-of-prominent-scholars-towards-
management/69719

https://hbr.org/1993/03/strategy-as-stretch-and-leverage

Cipla

 Cipla focuses more on the generic drug business.

Cipla’s business model is largely based on the production of generic drugs; it is one of the world’s
largest generic drug producers.
Cipla is currently one of the world’s largest generic pharmaceutical companies with products sold
in more than 180 countries.
Cipla also provided the foundation for the generic drugs business to the Indian pharmaceutical
industry by gathering the momentum for the Patent Act of 1970 (this legislation allowed patenting
of the production process until recently when it was replaced by the New Patent Act of 2005).
The company has given many generic solutions to India and to the world.
In 2012, Cipla made a breakthrough in reducing the prices of an off- patent cancer drug, making
world- class medicines affordable, while in 2005, during the outbreak of avian influenza, they
produced an anti-flu drug within 3 months, compared with the normal development time of 3
years. Against the general notion of cost and quality trade- off, Cipla is known for maintaining
quality standards in its production worldwide.
 In 2001, the company produced an antiretroviral, a drug for HIV-positive patients, called
‘Triomune’ by combining three generic medicines.
The drug was priced at US$300 per year, compared with the price of US$12,000 charged for the
same medicines by western multinationals. This innovation made the medicine accessible to
millions of HIV patients in poor African countries. Cipla was heavily criticized for producing
Triomune because it breached three exisiting patents.

 Cipla has core competency in adopting and cross- pollinating diverse technologies to provide new
solutions. The company offers more than 2,000 products.
Cipla has an annual turnover of about US$1.35 billion and employs 20,000 people, which makes
it India’s leading pharmaceutical company.
Cipla has a long contribution in laying the foundation of the Indian pharmaceutical industry. In
the 1960s, Cipla laid the basis for the bulk drug industry in India by becoming expert in the area
of pharmaceutical ingredient manufacturing.

 Cipla’s approach for international business is mainly based to societal care for all by making
affordable world- class medicines available.
The caring manifest has also provided a basis for Cipla’s organization culture, which values
safety and equal opportunity in the workplace and fosters innovation for a healthier world. It also
brings the confidence of supplying world- class quality drugs at competitive prices to its business
partners.

 Cipla has core competencies in product development skills and manufacturing capabilities.
Notably, the company has its entire manufacturing base in India. It has about 40 states- of –the art
manufacturing facilities all of which are approved by major international regulatory agencies
including WHO, USFDA and MHRA, UK.
Cipla has technically competent human resources that follow the highest standards of medical
research and environmentally green and clean processes.
The company engages in R&D and offers technical consultancy services.
Cipla’s R&D focuses on innovation, both product and process, that results in cost and time
saving. Cipla has gained expertise in producing generics of very complex molecules.

 However, the company aims to build marketing capabilities that are associated with its future
expansion plans; they understand the need to iron out issues before undertaking any further
expansion abroad.
 Cipla provides consulting, commissioning, plant engineering, technical know- how transfer and
support to many developing countries. Cipla also has partnerships and alliances for product
development, technical support and marketing, especially with firms from countries that have a
quest for self- reliance.
So far, the main mode of international business is exports of formulations, pharmaceutical
ingredients, prescription and over- the- counter drugs and veterinary products. However, going
forward, Cipla is looking to make a shift in its business model.

Conclusion
 Low labour costs, cheap organic raw materials, and mass- scale of operations were the core
weapons that enabled Cipla to grow and dominate other competitors.
 Additional core competency comes from the company’s broad market extension (21
worldwide sales offices and 5 Indian factories).The real advantage of those factories is the
approval that they got by the US food and drug administration as well as the WHO.
 Generic version