Pharmaceutical Industry in India - Porter's

Five Forces Strategy Analysis

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 Introduction of the Industry
þ A highly organized sector.
þ Estimated to be worth $ 4.5 billion, growing at about 8
to 9 percent annually.
þ Highly fragmented with more than 20,000 registered
units.
þ Meets around 70% of the country's demand for bulk
drugs, drug intermediates, pharmaceutical
formulations, chemicals, tablets, capsules, orals and
injectables.

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 Aurrent Scenario
þ third largest in the world in terms of volume and
14th in terms of value
þ total turnover of industry between Sept.08 and
Sept.09 was US$ 21.04 billion.
þ Of this the domestic market was worth US$ 12.26
billion.
þ market is expected to reach between US$ 55 to
US$70 billion in 2020 from US$ 12.6 billion in
2009

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 INDUSTRY SEGMENTATION

Vith respect to product

 



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 External Analysis of the industry based on
Porter¶s Five Forces Model

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 Industry Aompetition
þ most competitive industries in the country with as many as
20,000 different players.
þ top player in the country has only 6% market share and top
five have 18%.
þ high growth prospects.
þ High entry barriers.
þ fixed cost requirement is low and need for working capital
is high.
þ entry barriers to pharmaceutical industry are very low.


 ¢argaining Power of Austomers
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 ¢argaining Power of Suppliers
þ Pharma industry depends upon several organic
chemicals.
þ †

! & # very competitive and
fragmented industry.
þ Ahemicals are largely a commodity.
þ Suppliers have very low bargaining power.
þ Pharma industry can switch from their suppliers
without incurring a very high cost.


 Threats of New Entrants (¢arriers to
Entry)
þ Most easily accessible industries for an entrepreneur in
India.
þ Aapital requirement for the industry is very low, creating a
regional distribution network is easy.
Difficulties in Implementing:
þ Areating brand awareness and franchisee amongst doctors
is the key for long-term survival.
þ Quality regulations by the government may put some
hindrance for establishing new manufacturing operations.
þ Impending new patent regime will raise the barriers to
entry.

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 Threat of Substitutes
þ Demand for pharma products continues and the
industry thrives.
þ Key reasons for high competitiveness in the industry is
that as an on going concern.
þ ¢ut the advances made in the field of biotechnology,
can prove to be a threat to the synthetic pharmaceutical
industry.

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 eading Indian players by sales (US$
million)(TO ¢E deleted)
In 2009

1. Aipla
2. Ranbaxy ab
3. Dr Reddy's abs
4. Sun Pharma
5. upin td
6. Aurobindo Pharma
7. Piramal Health
8. Aadila Health
9. Matrix abs
10. Vockhardt

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 eading Indian players by sales (US$ million)

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