Capacity Constraints and Relationship Improvement Strategies for Biocon Limited

The assignment content highlights the importance of effective labor relations management for Biocon Limited, a company facing capacity constraints due to labor disruptions. The report emphasizes the need to improve relationships with labor unions and suppliers to ensure efficient production and cost management. It suggests establishing a labor relations management committee, conducting periodic employee assessments, and improving relationships with suppliers to achieve these goals.

Strategic Management Analysis
Biocon India Group

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Table of Contents
Introduction......................................................................................................................................1
Question 1........................................................................................................................................2
Mission and Vision Analysis.......................................................................................................2
Question 2........................................................................................................................................7
Scenarios and Industry Analysis..................................................................................................7
Question 3......................................................................................................................................11
Resources and Capabilities of Biocon India Group...................................................................11
Question 4......................................................................................................................................13
Conclusion.....................................................................................................................................15
References......................................................................................................................................16
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Introduction
Background
Biocon Limited is considered as a popular biopharmaceutical organization which is based in
Bangalore in India. It is having a great experience in manufacturing generic active
pharmaceutical ingredients. In this report, we will study about the strategic framework of the
organization on the basis of which it gains huge popularity in the market of India. It helps us in
knowing the resources, competencies, and competitive advantages of the organization. The main
objective behind the establishment of the Biocon Limited was that it wants to ensure a global
right to healthcare by identifying the global need for effective, safe, and affordable bio
therapeutics. It utilizes advanced technology to produce its product with high quality which
makes it different from others. The organization operates in the global market of Europe and the
United States. Apart from active genetic ingredients, it also produces insulin which is sold in
India in bulk quantity. During 2009, it acquired the ingredients of the Active Pharma which
enhance the size and product line of the organization. Biocon established in 1978 with the initial
capital of $150. It is because the founder of the organization failed to find any financial
institution for made investment in their proposal. Global scale manufacturing capacity with high-
quality products makes it different from the other existing pharmaceutical organizations. It is
recognized for safe, innovative, and high-quality pharmaceutical products.
Purpose of Study
The important objective of the organization behind conducting the strategic analysis of the
Biocon Limited is to introduce the role of strategic management in promoting the sale of its
products and establishing its brand value in its potential markets through which it is able to
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market itself as an experienced manufacturer. Apart of it, different strategic paths of the
organization are also discussed which exposed in the front of the organization. Furthermore, it
can be said that the report is prepared to be a strategic pathfinder of the organization by
identifying its mission, vision, and values and different strategic initiatives of the organization
(Calcaterra, 2013). Identify the strategic path helps us in measuring its current position in the
market. In addition, we also suggest some recommendations and better approaches in the light of
its weaknesses, opportunities, threats, weaknesses, and strengths which evolve around the whole
organization.
Question 1
Mission and Vision Analysis
Biocon Limited mainly believes in providing differentiated product portfolio with a focus or
more affordability and accessibility (Annual Report, 2015). The innovation strategy of the
organization is highly linked with its current trends of global healthcare biologics. The below
mentioned are the vision and mission statement of the organization:
Vision
The main vision due to which the organization comes into enforcement is to increase the global
healthcare by offering affordable or innovative biopharmaceuticals for partners, patient, and
healthcare systems across the different countries.
Mission
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The mission is considered the important statement of the organization which defines the
organization completely. The mission of which the company comes in existence is to be an
integrated Biotech organization of global distinction (Annual Report, 2010). Furthermore, the
organization formulates some essentials for accomplishing the mission. The mission is bringing
excellence in following:
 State-of-art production capabilities
 Development of human resources with the help of training, empowering and mentoring
 Introduction of innovative medical insight through conducting disease specific medical
research
 Creation of intellectual asset through development, research, and discovery.
 Efficient regulatory system with internationally benchmarked quality
 Efficient relationship with its potential customers through providing outstanding services
and products.
 Management of business partnership and research.
SWOT Analysis of Biocon Limited
Positive Negative
Internal
List of Strengths
1. Broad portfolio of
high-quality
biopharmaceutical
products.
2. Usage of advanced
ERYPTRO
List of Weaknesses
1. High capacity
constraints due to
labor disruption or
construction delays
(Annual Report, 2015)
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technology such as
composite or utility
transmission line.
3. Core competency in
developing
differentiated products
with chemical and
physical properties
such as POM, LFRT,
and PBT, ERYPRO,
RENODAPT, etc.
4. High-class technology
for production of
products, such as anti-
counterfeiting
technology for
producing original
equipment.
5. Global Presence in
countries like the US,
Europe, etc.
6. Expansion of portfolio
to include products
2. Poor relationship with
supplier due to
inability of a supplier
to meet delivery
orders on timely basis
(Annual Report, 2015)
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with higher stiffness,
and impact, improved
wear and enhanced
the appearance or low
emissions (Annual
Report, 2015).
External
List of Opportunities
1. Growing demand for
RENODAPT, and
ERYPRO ("ERYPRO
Market Size Projected
to reach $2.60 Billion
by 2022", n.d.)
2. Growing demand for
biopharmaceutical
products such as
insulin,
List of Threats
1. High competition
between industry
competitors (Annual
Report, 2014)
2. Increasing volatility in
prices and availability
of raw materials has a
significant negative
impact on the
financial margins.
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mycophenolate
mofetil and BIOMAb.
(Annual Report, 2015)
3. Fluctuations in
environmental
regulations
concerning climate
change influence the
profitability level
(Annual Report, 2015)
4. Presence of various
unanticipated
operational or
commercialization
difficulties such as the
development of
competing
technologies (Annual
Report, 2015)
These statements support the competitive advantage of the organization in a larger context. Due
to the high strength in research and development, the organization able to gain its competitive
advantage in the production of oncology and Diabetology products. With the help of these
products, the organization is able to gain more than 50% share in its existing market (Swayne,
2012). Its innovativeness and high quality make it enable to offer large customer products and
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services with high quality. Its mission is to State-of-art production capabilities. It utilized this
concept in an efficient manner. On the basis of this basis of excellence, the organization is able
to introduce new proprietary fermentation technology for production of rh-insulin. With the help
of this technology, it can help millions people or patients across the different countries.
Question 2
Scenarios and Industry Analysis
Porter Five Forces Analysis
It can be said that the business environment of the recent time is extremely competitive. As per
the economic parlance, it can be said that where perfect competition exists, the profits of the
organizations working in that industry will become null in long run (Zhou, 2016). However, it
can be said that there is a no perfect competition in the industry and no any organization is a
passive price taker. In the pharmaceutical industry, they strive to establish their competitive
advantage to thrive in the scenario of the competitive environment. The below mentioned are the
five forces which influence the pharmaceutical industry:
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1. Industry competition: Industry of Pharma is considered the most competitive industry in
the whole country. It is because more than 11,000 different players are fighting for the
similar pie. The existence level of rivalry can judge on the basis of the fact that the top
player in the Pharma industry has only 6% market share. On the other hand, the top 5
players in the industry only have 18% market share
(https://www.equitymaster.com/detail.asp?date=08/27/2004&story=5&title=Pharma-Through-
Porters-eyes). On the basis of this, it can be said that concentration ratio for the industry is
very poor than the other existing industries such as food and beverages, etc. All these
facts influence the presence and differentiation capacity of the organization to a larger
extent. It is because the high growth practice in the industry attracts a large number of
competitors. Due to this, it becomes very tough for the organization to perform its
operations.
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(Source: https://www.equitymaster.com/detail.asp?date=08/27/2004&story=5&title=Pharma-
Through-Porters-eyes)
2. Bargaining power of buyers: The key characteristic of the industry is that the end user of
the product and service is different from the Doctor or influence. Here, the customers
have no choice to prefer other products because they need to purchase the same product
as recommended by their concerned doctor. Therefore, when we look the power of
buyers, we look at the effect they have on the prices of different products. In this
industry, the power of buyers are very low (Fitzgerald, 2013). On the other hand, it can
be said that government is engaged in regulating the policies of this industry. It was done
with the help of National Pharmaceutical Pricing Authority.
3. Barriers to entry: It is an industry which is easy to access by the different entrepreneurs.
It requires a low capital as an initial investment. Due to the sales restriction, it is easy for
the new entrants to establish their regional distribution network. On the other hand, the
creation of franchise and brand awareness amongst doctors is the important key to getting
success for long time survival (Blackwell 2014). But the hurdles of quality regulations
may prevent the different entrants to enter the industry. Due to this, there is less
competition and the organization need not fear from the competition.
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4. Bargaining Power of Supplier: The industry mainly depends on certain organic
chemicals. The products utilized in the industry are a commodity. In the industry,
supplier has very low bargaining power than the other industries. Due to the low supplier
bargaining power, the organization can easily switch from its suppliers to another without
bearing the large cost.
5. The threat of Substitutes: It is considered the great advantage of the industry because the
demand for the medical products continues and the industry works regularly. The
important reason behind the large competition is that it is a going concern, and the
organizations have infinite future. So, it can be said that advancement made in
biotechnology can prove a big challenge for the industry.
After studying all this, it can be said that overall attractiveness of the industry is high due to
which the organization has the potential of earning huge money (McGrath, 2013). It may be
possible that the organization may face large competition in future but the form of competition
will be different from other industries competition. The impact of these forces on organization
functions can see by the following figure:
Porter Forces Likely Impact
Industry Attractiveness High
Bargaining power of suppliers Low
Bargaining power of customers Low
Threat of substitutes High
Threat from new market entrants Low
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Question 3
Resources and Capabilities of Biocon India Group
VRIO Framework
VRIO framework is considered a strong framework of business analysis that forms a large part
of strategic organization scheme (Pesic, 2013). It is mainly based on the framework of four
questions which help an organization in establishing its competitive advantage in its potential
market. The organization gain a competitive advantage on the basis of its high-quality products
and the available resources. The below-mentioned figure showed the resources and capabilities
of the Biocon Limited:
Resource/Capability V R I O
Brand    
Experience    
Physical location    
Equipment    
Product
development
technology

Research and
Development
technology
   
From the above-mentioned framework, it can understand that the product development
technology does not fit into the framework. It is because the environment is dynamic and
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changes occurred continuously in the technology of product development (Nakayasu, 2014). So,
the management of the organization should follow the recent trends and develop the products as
per current requirement instead of depending on a single technology. The technology should be
advanced and innovative so that the organization can meet the current requirements efficiently
without facing any problem. The below mentioned are the suggested capabilities that can help
the organization in getting a competitive advantage:
 Global scale manufacturing: The organization should adopt such technologies which
enable them in conducting production on a large scale. It is necessary for the organization
to produce products in bulk quantity (Andjelkovic Pesic, 2013). With the help of global
scale manufacturing capability the organization able to produce products in bulk quantity
which provides the facilities of satisfying the growing demands of products in an efficient
manner.
 Human Resource Development: Development of human resources will prove an
important capability for the success of Biocon in its existing market. Human resources
can be the strongest success factor for the organization. Due to the development of its
human resources, the organization can utilize its raw material in an efficient manner and
can produce the high-quality products which cannot produce by the other competitive
organizations. Human resource development can be a capability by providing training
and various learning practices to its employees.
 Global Strategies: It is the foremost important capability which helps the organization in
gaining more and more competitive advantages in the potential market. On the basis of its
global strategies, it can expand its business and also can promote its brand in the different
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countries (Seo, 2016). This will enhance the value of the organization by enhancing its
opportunities and foreign investment.
Thus, it can be said that by following suggested capabilities the organization can easily place
itself in the eyes of its customers and can also establish its significant competitive advantage on
its potential competitors.
Question 4
After studying the strengths, weaknesses, threats, opportunities, resources and its competencies
various necessary strategies can be suggested to the organization. On the basis of suggested
strategies, it can successfully position itself in the market and can also gain competitive
advantage (Gassmann, 2013). On the basis of its strengths, weaknesses, and competencies the
two main strategies are recommended to the organization. They are:
i. Reducing the capacity constraints on the production side
As identified in the assessment of the weak areas of the company, the company faces capacity
constraints due to the labor disruption. The failure to manage the labor relation effectively may
result in the reduced production efficiency. The relationship improvement steps with the labor
unions can be the appropriate initial step towards building the relationship. The company can
consider the below given points to manage the relationship:
- Establishing labor relations management committee which will have labor relations
specialists and the individuals from different management specialities. These people will
negotiate with the labor unions so that the situations can be improved further (Guler,
2012).
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- Periodic employee assessment to continuously stay in the loop about the current situation
of the employees. This can be done through individual interviews or collective survey
through questionnaires.
As identified in the opportunities that the demand for chemical products is expected to rise.
Moreover, the demand of RENODAPT is expected to rise which is produced majorly by the
company. Therefore, considering this fact, it is important that the company should improve the
labor relations so that the production level can continue meeting the expected rise in the demand
for the products (Kapferer, 2012). The two major threats, namely, high competition and
increasing volatility in the prices of raw materials is likely to challenge the company on the cost
aspect. Therefore, effective management of the labor can expectedly keep the cost at a suitable
level.
ii. Improving relationship with the suppliers
The other recommendation that is being given to the company is an improvement of the
relationship with the suppliers. The expected increase in the chemical demand in the coming
days and not so good management of the labor relations, it is imperative that the company keep
the relationship with the suppliers at a good level to ensure effective cost management (de
Magalhães, 2013). The improved relationship will ensure that the company gets long-term raw
material supply at a competitive rate. Due to the global presence of the company, the
organization can engage in the procurement of the raw materials from the country that provides
at competitively lower cost and requires minimum freight charges.
Implementation of all suggested strategies helps the organization in the position itself in an
efficient manner. It is expected that the application of this recommendation within the company
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is likely to improve the cost management capability of the company which in turn can convert
into low-cost products that can be sold in the market at the competitive rates (Harrison, 2013).
Researchers have identified that the improved relationship with the labor and suppliers usually
converts to good cost management. The same consideration plays here based on the strengths
and weaknesses of the company and the opportunities that are present in the market along with
the threats. Thus, it can be said that the organization should follow the suggested strategies with
which it can easily enhance its brand reputation and competitive position in its potential market.
Conclusion
After studying all this, it can be concluded that that Biocon has an efficient composite business
structure with decentralized branches and the abundant brands. If the organization want to
position itself in its existing market, the above-mentioned recommendation strategies help the
organization in doing so. This will be done through removing its weaknesses and strengthening
the existing capabilities. It could formulate market penetration strategies for expanding the size
of its potential market in different areas. It can be said that Biocon Limited has a significant
reputation in the market which can be fluently utilized in exploiting the existing business
opportunities. Furthermore, the company can also apply a market segmentation strategy for niche
markets in established economies (Hage, 2012). With the help of all these initiatives, it can
efficiently utilize its existing technologies and resources which further proves beneficial in
predetermined goals of the organization.
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