Strategic Management Practices and Organizational Performance of the Listed Pharmaceutical Companies in Bangladesh

Abstract

Strategic management helps the organizations to undertake appropriate policy or strategy which will best fit its resources and capabilities. It mainly focuses on the question of why some organizations succeed and others fail. Research in the field of strategic management is rare in developing and less developed countries, though this field is increasing rapidly in developed countries. This research attempts to study strategic management practices with special reference to Pharmaceutical industry in Bangladesh. Pharmaceutical sector is one of the most developed hi-tech manufacturing industries in Bangladesh. Although, Bangladesh has achieved remarkable success in pharmaceutical industry in the last several years, this sector has been facing many internal and external challenges. The huge size of the companies, generic drug manufacturers, health-care organizations, the cost of Active Pharmaceutical Ingredients (API), Research and Developments (R&D), aggressive marketing of competitors, quality issues and compliance with the national and international regulations present many organizational and managerial challenges. To successfully proceed in this competitive market, every organization must take proper policy and strategy among the alternatives which ultimately best impact the organizational performance. Therefore, this study aims at exploring how strategic management is being practiced in pharmaceutical companies and to what extent such practices influence the organizational performance. The specific objectives of this research are to assess the growth and development of Pharmaceutical Industries in Bangladesh; to explore the major characteristics of formulation of strategies at different levels of the listed pharmaceutical companies in Bangladesh; to identify the nature of internal factors like strengths and weaknesses and external factors like threats and opportunities that influence the strategic management practices; to identify the nature and extent of implementing the strategies followed by pharmaceutical companies in Bangladesh; and to analyze the impact of strategic management practices on the organ Total five companies have been selected for this study among the ten listed companies. Both quantitative and qualitative data have been used for this study. Required data have been collected from both the primary and secondary sources. Primary data were collected through questionnaire survey method and secondary data were gathered from the annual reports and Dhaka Stock Exchange (DSE), Bangladesh Association of Pharmaceutical Industry (BAPI) and Directorate of Drug Authority (DDA). This research found that growth rate of pharmaceutical industry was 14.6% in last ten years. The Growth of this sector accelerates employment creation, government revenue and helps to provide a better standard of living to the local people. Pharmaceutical market was dominated by MNCs. - now it shifted to local companies which enjoy about 90% of market share. The country is now almost a self-sufficient in its pharmaceuticals products as 97% of the total drug demand is met by local manufacturers. All the sample companies have formal corporate, business and functional level plans. It is revealed that Board of Directors is involved in formulation of vision and mission statement of all the sample companies. Besides this, corporate level management, Business level manager, corporate planning department and Functional level manager also are involved in different extent to make the organizational strategy. It is found that all types of plan update yearly. Among the analytical tools/techniques, this research found that PEST and SWOT analysis had higher influence on the formulation of company strategies. The strength factors which influence the formulation of company strategies are brand name, good manufacturing process, delivery system, working environment and use of up-to-date technology, total quality management, product innovations, corporate leadership, professional skill of the employee and research and development. Among the weakness factors, it revealed that the lack of Active Pharmaceutical Ingredients (API) facilities is highly significant for the pharmaceutical companies. Increase of income of people, health awareness of people, modern technology, increasing of private hospital, current economic growth, increase of literacy of people, member of LDC and Current WTO-TRIPS Agreement, govt. drug rules and policy, present export/import policy and govt. industrial policy were most reported opportunities factors for sample companies. The threat factors which influence the pharmaceutical activities are unethical marketing of competitor, political instability, high rate of interest, lack of power supply, high corporate tax, price of raw materials, govt. drug rules and policy, WTOTRIPS agreement after 2015, lack of API park, local competitors, lack of modern technology and new entrants. No company has been merged with another company and has made turnarounds, divestiture or elimination of any important operation during last ten years. Only one company has made joint venture business and another company had made acquisitions during last ten years. All the companies considered management of quality as a strategic issue to a great extent. The business and functional level strategies such as product/market growth strategies, R & D strategies, marketing strategies, Human Resource Strategies have been assessed in this study. Among the product/market growth strategies, introducing existing products in new markets was found as the highest level of consideration followed by new products in existing markets, existing products in current markets and new products in new markets. Health awareness programs, free sample distribution to doctors, ethical marketing, regular contact with the doctor, corporate social responsibility and special reward for employee were identified important marketing strategies for the sample companies. The Human Resource Strategies which were found as important factor in this study were- appropriately sized workforce, skilled employee, formal job duties, closely monitoring system, attractive wage system, using performance appraisals, training programmed and the promotion system of the company. This study focuses on organizational performance of the pharmaceutical companies which includes the liquidity determinants, activity focus, profitability indicators, leverage and growth output. Overall, all the financial performance ratios of the sample companies are satisfactory but statistically significant variations were found in all the ratios over the years. This research examined the correlation between the strategic management factors and organizational performance of the sample companies. The result found that the strength factors, opportunity factors, product/market growth strategies, R & D strategies, marketing strategies, human resource strategies are positively correlated with organizational performance. On the other hand, quality management strategies, weakness factors and threat factors are negatively correlated with organizational performance. This study has several implications to the strategic management practices. Firstly, this study has discussed the overall strategic management characteristics of the pharmaceutical industry in Bangladesh and will allow all level managers (corporate, business and functional) to compare their strategic management characteristics with other organization. Secondly, this study examined the internal and external factors environmental factors which may impact on the strategic management practices and performances of the organization. Finally, this study finding can be useful for professionals others who want to expand their business into pharmaceutical industry by helping them understand different aspects of this industry.