Products Strong Portfolio Products Distribution Network Provided Strategic Advantages Inte Q35962481

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We were unable to transcribe this imageproducts. Its strong portfolio of products and its distribution network provided strategic advantages of integration that allowed Parkin to perform well in an increasingly competitive market (see Exhibit 3) Parkin faced strong competition from large industry players such as Ranbaxy, Cipla, Novartis, Lupin and Mankind. Many of these competitors had been extremely successful because of their research capabilities and distribution network. The company had a comprehensive network of 35 carrying and forwarding agents, and 2,500 stockists, who distributed its products to customers in different parts of the country THE INDIAN PHARMACEUTICAL INDUSTRY The Indian pharmaceutical industry had done well in the past two decades and had consistently been growing at a compound annual growth rate of more than 15 per cent over the past five years. This growth was driven by such factors as low drug penetration, a rising middle class, increased spending on the health care infrastructure, increasing acceptance of medical insurance, changing demographic patterns and the rise in chronic lifestyle-related diseases.1 Multinational pharmaceutical companies had been introducing generic and low-priced versions of popular medicines. Multinational corporations had also lowered the prices of their existing products to gain more market share in the growing Indian pharmaceutical industry. The business model of Indian pharmaceutical companies was built on selling large volumes of low-priced medicines to take advantage of both affordability and popularity The Indian pharmaceutical market was expected to grow faster than the global pharmaceutical market. It was estimated to reach US$15.5 billion by 2014. The Indian pharmaceutical industry was now the third largest in the world by volume (accounting for approximately 10 per cent of the world’s production) and the fourteenth largest by value (accounting for around 2 per cent) The Indian pharmaceutical market was expected to touch US$74 billion sales by 2020 from its current annual sales of USS11 billion’ (see Exhibit 4) SALES MANAGEMENT AT PARKIN B. P. Chaudhary, chief executive officer of Parkin Laboratories, had always believed that a strong sales process produced both solid sales growth and more accurate sales forecasting. He further emphasized that sales resources needed to be used effectively with quality and quantity in mind. According to Chaudhary Kumar needed to work with each sales team to discover the pattern for successful sales strategies in their respective zones. Further, he was also required to design a sales and sales management process that was compatible with company policy and its product line Sales Organization The sales force had continued to be the biggest promotional investment for Parkin Laboratories. It had evolved over a period of time and had adopted innovative commercial models according to its needs 1 “Indian Pharma Industry-An Overview,” India Biznews, April 13, 2012, www.indiabíznews.com/?q=node/2873, accessec February 11, 2013. “Top 10 Pharmaceutical Companies in India,” www.pharmaceutical-drug-manufacturers.com/articles/top-10- pharmaceutical-companies-in-india.html, accessed January 19, 2013. Pharma World Expo, 2013 brochure, www.chemtech-online.com/events/chemtech/pdf/Pharma_brochure_2013.pdf, accessed March 19, 2012. “India Pharma Inc.: Gearing up for the Next Level of Growth,” PWC Report published October, 2012, www.pwc.in/en_IN/in/assets/pdfs/pharma/pharma-summit-report-31-10-12.pdf, accessed December 19, 2012 from the sales and marketing model to the strategic business unit model of specialized task forces. The key reason for all models remained the same: to provide better customer focus and targeting, enhance call efficiencies, develop newer business areas and increase the accountability of resources. Parkin’s sales team had 600 medical representatives (MRs). Its sales force was widely regarded as being among the best in the pharmaceutical industry. Sales and product training were extensive: each new MR underwent a one-month training course held twice a year at the company facility in New Delhi. All MRs were also exposed to a one-week refresher course in the same facility each year. Moreover, district sales managers (DSMs) worked with each medical representative for three days each month for field-training and performance reviews. Seven MRs were grouped geographically with a DSM, who in turn reported to a regional sales manager (RSM). Parkin had five RSMs representing North, East, West, South and Central zones of India. These RSMs reported to the general manager of sales (see Exhibit 5) Sales Process Pharmaceutical selling was distinct from general selling. Pharmaceutical selling required MRs to have both sound product knowledge and good selling skills, as they were required to sell the product to medical practitioners. MRs from different companies tried to woo customers with the similar “me too products that had different brand names Missionary selling was the main sales style used in pharmaceutical selling. Thus, an MR’s role was to convince doctors about the effectiveness of a product they could prescribe for their patients. Missionary salespersons were also referred to as detailing salespersons. Detailing involved discussing the features and benefits of products with doctors and chemists and was a platform for doctors to learn about indications, dosages, side effects and the prices of different products. Parkin used Sales Force Automation (SFA) software by Oracle CRM to monitor different sales activities in the field. The MRs recorded their discussions with customers, both in their daily reports and by using SFA software. The MRs needed to meet with retail chemists to ensure product availability. MRs worked independently and preferred to self- manage their territories. They needed to follow a disciplined and planned calling system for regular visits to doctors, chemists, stockists and hospitals. MRs were responsible for sales and marketing in their respective territories. Their sales results were monitored by a sophisticated “sales audit” system. SALES TARGETS Sales targets at Parkin were decided each November for the following year. These targets were usually based on industry growth, segment growth and the previous year’s sales. Factors such as additional sales force, launch of new products and promotional plans were also considered when deciding on the annual targets. At the same time, Kumar would meet each of his RSMs individually to review their performance for the current year and their forecast for the coming year. Based on these discussions, Kumar would divide his target among the RSMs, who, in turn, followed the same process in deciding the targets for DSMs and MRs. Parkin Laboratories followed the QTQ (Quality-Target-Quantity) technique, whereby all RSMs, DSMs and MRs needed to achieve both qualitative and quantitative targets. For example, MRs needed to meet 10 doctors and four chemists each day. They also needed to target 50 per cent of their time to “A” class customers, 30 per cent to “B” class and 20 per cent to “C” class customers. Each MR was mandated to complete a minimum of 220 calls to doctors and 88 calls to retailers per month. Similarly, MRs needed to achieve the required growth of value and volume targets on a monthly and yearly basis. DSMs and RSMs worked closely with the MRs to guide them in achieving their targets. Parkin offered handsome performance-linked incentives to MRs, DSMs and RSMs. Distribution Structure The typical pharmaceutical supply chain in India started with inbound logistics, wherein the manufacturer procured raw materials from the suppliers and converted them into the final product. Finished medicines from the production department would go to the organizations’ central warehouses. From there, the products moved to the carrying and forwarding agents (CFAs). CFAs supplied the goods to various stockists, distributors or wholesalers, as per their orders. The products were then distributed to millions of retailers countrywide. At Parkin Laboratories, its products were delivered to customers through a network of 35 CFAs, who were primarily responsible for maintaining stocks of the company’s products and forwarding different stock keeping units to the stockists. Parkin’s 2,500 stockists then acted as the distributors in the designated territories to supply medicines to the retailers in that area (see Exhibit 6) THE DILEMMA The general economic outlook was good, and the segment represented by Parkin Laboratories had shown handsome growth of 16 per cent in 2012. However, competition was intensifying as every player fought hard to capture more market share with higher growth rates. Parkin’s main competitor, Mankind Pharma, was targeting 28 to 30 per cent growth in the current financial year.3 Parkin Laboratories was also planning to launch a new anti-diabetic drug in December 2012. Kumar was indecisive about launching a new product when the sales team was striving hard to achieve its current sales targets Kumar felt that it was time to make his team accountable for the targets and the required growth. He believed that to improve the performance of the different zones, he would need to re-evaluate his strategies for setting revised targets for the last and critical quarter of 2012. Kumar also wondered about the possibility of all RSMs meeting the targets with the required growth of 20 per cent. He was also considering the different strategies that needed to be adopted to help the MRs and DSMs to achieve their targets. As he began to outline his plan to refine the targets, he found he was in a dilemma whether to revise the sales targets for the last quarter or to support the team with a marketing blitz and sales promotion to achieve the targets for 2012. He thought about the response of different stakeholders toward this change in strategy and contemplated whether this was the right time to launch a new product EXHIBIT 1: SALES PERFORMANCE AT PARKIN LABORATORIES, 2012 2011 -ment Jan-Sep 2012 | % Achieve- | Growth ment( Jan- | % (Jan- 2012 Jan-SepJan-Sep Achieve Target Target 2011 2012 Zone (US $ Growth Achieve Target (USAchieve- Se p) (US $Million)over ment (US Million Million ment (US $ 2011 $Million 24.2 Million North East South West Central Team 88.5 76.5 85.5 73.5 54 378 69 64 76 87.0 84 102 90.2 114 16.3 25.6 10.8 20.0 88.4 14.0 72 92.6 420 10.6 Note: Figures have been changed to maintain confidentiality Source: Provided by the company. EXHIBIT 2: SELECTED FINANCIALS FOR PARKIN LABORATORIES, 2007-2011 (IN MILLIONS OF US$) 2010 340 105 2011 420 132 2007 2008 2009 Net Revenue Cost of Sales Operating Expenses Other Income (Loss)* Net Income 180 225 270 5 4 146 168 218 265 Notes: Includes gain (loss) on equity investments, settlement income, benefit (provision) for income taxes, cumulative effect of changes in accounting principles and other income. Figures have been changed to maintain confidentiality Source: Provided by the company. EXHIBIT 3: PARKIN LABORATORIES’ TOP 10 PRODUCTS, BY SALES S.No Product Category 1 Dicoron 2 Zincotone 3 Cetakin 4 Coldex 5 Diclozox-F 6 Zymvit Forte Analgesic and anti-inflammatory Multivitamin with zinc Anti-allergic Anticold Muscle relaxant Digestive enzyme Antibiotic Antacid Antibiotic Cough syrup 7 Cefokin 8 Ope-20 9 Norakin 10 Ambrokin Plus Source: Provided by the company. EXHIBIT 4: TOP 10 PHARMACEUTICAL COMPANIES IN INDIA Rank 1 2 Comparn MAT Oct’12 (in Billions 506.4 353.0 303.5 301.5 300.0 284.0 242.4 236.7 228.6 201.9 Abbott Cipla Ranbaxy Glaxosmithkline Zydus Cadila Mankind 4 6 7 8 Pfizer 10 Sanofi Note: MAT moving annual total. Source: ACNielsen ORG-MARG Research Report, November 2012 EXHIBIT 5: ORGANIZATIONAL STRUCTURE OF PARKIN LABORATORIES CEO GM (Sales) GM (Marketing) GM (Operations) GM (HR) GM (Finance) RSM (North) RSM (East) RSM (West) RSM (South) RSM (Central) DSM-1 DSM-2 DSM-3 DSM-4 DSM-5 DSM-6 MR-1 MR -2 MR-3 MR-4 MR-5 MR-6 MR-7 Source: Provided by the company. EXHIBIT 6: DISTRIBUTION STRUCTURE OF PARKIN LABORATORIES Manufacturing Unit Central Warehouse Carrying and Forwarding agents Stockists Retailers Customers Show transcribed image text