Zuellig Pharma Corporation

• Main Author: Ang, Elizabeth Yu
• Format: text
• Language: English
• Published: Animo Repository 2000
• Subjects: Pharmaceutical industry > Philippines; Zuellig Pharma Corp
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/3959
• Institution: De La Salle University

Industry The pharmaceutical industry is composed of manufacturers, traders, distributors and drug outlets. We are going to focus more on the distributors of which Zuellig Pharma Corporation (ZPC) is included. Noted as one of the general economic characteristics in the local arena is the prevalence of toll manufacturing. Multinational corporations get 70% market share and local manufacturers, the largest of which is Interphil (The Sister Company of ZPC), do most of their productions. Another characteristic is the expensive prices of drugs sold in the Philippines as compared to the prices of other Asian countries. Within the country, government outlets provide cheaper sources of drugs than their private counterparts. Principals or suppliers of ZPC for drugs have been merging to create larger entities (e.g. Glaxowellcome and Smithkline). The major competitors arranged according to their gross revenue in the Philippines are Marsman Consumer Products Distribution Services, Inc., Avon Cosmetics, Zuellig Pharma and others. Generic drugs are cheaper than branded drugs and therefore, represent a large threat to the industry especially with the Generic Act of 1988. Generic Act of 1988 requires doctors to prescribe medicine in generic names. Entry barriers exist in the form of extensive government regulations. A new entrant also has to contend with the distribution network, economies of scale, and learning curve enjoyed by established competitors. The opportunities that can be tapped by ZPC are: (1) Demand for cheaper raw materials (2) Retailing directly to end consumers with the use of Internet (3) No pricing policy established. The threats however, are: (1) Availability of generic drugs which are cheaper than the branded ones sold by ZPC (2) Retailers can go directly to principals with the use of Internet (3) Internal struggle within Zuellig Group as the minority owners of Interphil (Government Service Insurance System and Necisto Sytengco) are contesting the hold of ZPC over Interphil (4) The government is mulling about establishing a price control on basic drugs. It is thinking about the possibility of parallel importation wherein the government can distribute the drugs to end consumers at a cheaper price. The industry, however, has no substitutes. Manufacturers are plenty, in fact, ZPC alone has more than 70 principals of which it serve as the marketing arm. The retailers are also numerous so as not to create any large bargaining power for any of them. Company ZPC is engaged in the distribution of pharmaceutical drugs and healthcare products. Its strengths are extensive marketing experience, strong relationship with suppliers and customers, cost leadership strategy, MIS systems, dynamic international team, and international support. One of its weak points is the relaxed credit standard that lengthened from 60 to 90 day receivable terms. ZPC ranks fourth in asset size and revenue which means that it is not as strong as its competitors. ZPC lacks a control division that would check if policies and strategies of the company were being implemented effectively and efficiently. The strategies covered by ZPC are providing an elite force, giving specialized services of wide range, fully computerized systems, state of the art distribution centers, responsive customer units, first in first out inventory principle, delivery by own vehicles and contract freight forwarders, continuous training and development for the personnel. ZPC is also concerned with a one stop shop image and allows principals to coordinate the operational matters of its own lines. The issues that ZPC has to face are: (1) Should it deviate from distribution of finished products to include distribution of raw materials, either by buying it wholesale for all local manufacturers or by looking for locally source raw materials or appropriate substitutes? (2) How will ZPC address the threat presented by generic drugs especially in the scenario of no price control? (3) How can it maximize the use of incoming technology such as Internet to promote its customer and principal relationship? The second half of the problem is how to minimize negative technology impact such as the possibility of retailers going directly to suppliers via Internet. (4) How would ZPC address the ongoing internal conflict with the minority owners of Interphil from which it gains a lot of income purportedly? Strategy ZPC is committed to the upliftment of health care services, recognizes people as most important resources, and adhere to strict standards in conducting business activities. The strategies proposed are: (1) Keep the minority owners of Interphil at arm's length during the time ZPC cleans up its act. ZPC has to cut back on excessive management contracts (2) Focus MIS efforts towards business development. Internet can be turned into an advantage by providing more services like daily inventory information from retailer to ZPC and ZPC to the manufacturer. A webpage can be created to give doctors and other medical people a chance to look at the possible drugs, their origins, their contents, their benefits and if any, their side effects (3) Research on cheaper procurement of raw materials has to be started. This can mean that not only will ZPC distribute the manufacturer's goods to retailers but also provide the manufacturers with the necessary materials for their production (4) Relationship management has to be enhanced. The best way to lose a customer is to be complement about the service to them. This is also a way to minimize the possibility that the principals or the retailers take an action via technology to create a new body to serve as their medium of distribution. Implementation The organizational structure has to revolve around consumer and principals. A highly skilled team of personnel whose main focus is to serve the manufacturers and its consumers will require constant attention, training, competitive compensation and job motivation. Systems will need to be set up to allow both ZPC to monitor the inventory of its customers, thus ensuring sales information for future projections of production that it can pass on to its principals. The superordinate goals of ZPC are to be able to anticipate the needs of its clients by following up for feedback and continuous communication.