Strategic Management Analysis of ACME Laboratories Limited

Main purpose of this report is to analysis Strategic Management Analysis Report of ACME Laboratories Limited. In this report, efforts have been designed to analyze Acme’s strategy to keep up its leading position out there and the difficulties it can be facing while operating in the industry. This report starts using a company background and then proceeds by having an analysis of the outside and internal environment of the industry and the company, followed by its strategic practices at different amounts, understanding the company vision, vision and objectives.

Dominant Economic Features of the Industry

Market Size & Growth Rate:

Bangladesh Pharmaceuticals market comprises with more than 150 companies. Top 30 companies are present in all over the country and among them 5-6 companies are big with foreign collaboration or international exposure.  The approximate size of the Pharmaceuticals market in Bangladesh is around Taka 20 Billion as annual turnovers with average growth of 15%.

The pharmaceuticals industry in Bangladesh is characterized with high growth rate with the entry of new companies and the expansion of existing companies. The average growth of the industry is around 15% annually for the last three years.

Scope of Competitive Rivalry:

Strong competition exists in the pharmaceuticals market in Bangladesh because the market is composed of substantial number of rival companies. The competitive rivalry primary exists among the local companies only. Due to protective rules of the government, multinational companies are not allowed in the market without the local ownership. Despite of that a number of multinational companies are competing with the local companies. Because of this  strong compaction, the local companies have made significant improvement in their products and quality to survive in the competition. International rivalry present in a limited extent.

Number of Rivals and their Relative size :

More than 150 companies are operating in the pharmaceuticals business in Bangladesh. The top 30 companies are controlling 90% of the market share. Square Pharmaceuticals is the market leader with more than 15% of market share. Other strong players are Beximco Pharmaceutical with 8.25% and Aventis Pharma 6.5% and Acme laboratories with 5.5%.

Stages in the business life cycle :

The pharmaceutical industry in Bangladesh is in high and rapid growth stage in the business life cycle.

Type of Distribution Channels :

Different types of distribution channels are used by different companies. The most common channels are company nominated distributors and wholesales.  Sales centers operated by the company people are the most effective distribution channels used by the companies. Apart form that retail chemist and institutional sales team are also used by the company to sale and distribute its products.

Product Innovation :

The pharmaceuticals industry in Bangladesh is characterized by the very low product innovation and the life cycle of the product is long. Top pharmaceuticals companies are not putting enough effort and attention in R&D activities. There are several reasons behind that. The most important reason is the weak regulatory law regarding the patent rights. Most of the companies depend on the leading global multinational companies for the formula of new products. The market size is another reason for the company to employ huge money in their R&D activities.

Product differentiation:

Products of the rival companies are almost identical in the local market. Almost all the firms are producing the same category of drug with the own brand name. But the products are only differ in quality from brand to brand.

Degree of Vertical Integration :

Backward integration are present in the market as some manufactures have integrated themselves in supplying raw materials for their own use. As the dependence on key suppliers for raw materials has become risky for the manufactures, backward integration is most appropriate for the companies in the pharmaceuticals in Bangladesh.

Capital Requirement :

High capital is required to set up manufacturing facility in the pharmaceuticals industry. As the economic of scale is present in the industry, high investment is required to start minimum production for keeping the price low and make the product competitive. Products are also required to fulfill the standard prescribed and controlled the regulatory authority, so high investment is required to maintain the standard of the facility. High cost is also required because of the high cost of machinery and equipment.

Economies of scales:

The economies of scale exist in manufacturing & purchasing of pharmaceuticals products in the market. As large quantities of raw materials are used for the production and as higher production is required to keep the price low and competitive. So, the higher the productions are done, the lower cost of the per unit of medicine.

Industry Profitability

The profitability in the pharmaceutical industry is above average. The profitability is mainly depend on the scale of operation, utilization of capacity, realizing the economics of scale and learning curve effect. So, only the volume sale of the product can maintain profitability for the company.

Competition Analysis

As we know, Michael Porter’s analysis of five primary competitive forces are the key to analyze the  state of competition in the industry. Following are the brief of the competitive forces that contribute to shape pharmaceutical business in Bangladesh.

Rivalry among competing sellers

The competition among companies in this industry ranges from moderate to high. There are more than 150 product categories where price limit is set and controlled by the government. So the competition between firms in pharmaceutical industry is based mostly on non-price factors like brand preference and customer loyalty, product quality etc. The nature of rivalry among pharmaceutical industry can be explained in terms of following factors:

• Rivalry in the industry is intense as significant numbers of companies are operating in this industry. There are around more than 150 companies inthis industry among which the top 30 companies control more than 90% of the market, which makes the industry consolidated in nature.
• As the government is controlling and setting the price for the product class of around 150 products, the competition is mainly based on other marketing activities instead of price. Only top 10-15 companies are marketing all these product categories and rivalry is mainly exist in these products class and among these 10-15 companies.
• Competition is not that intense in those product classes for which the government is not controlling and setting up the prices. Moderately expensive molecules where demand is coming usually from the affluent and urban classes, competition is getting high these days as increasing number of companies are coming up to cover these segments of the market.
• Rivalry is strong in the market as the demand for the product is growing slowly. There are many companies who are offering in the same markets for their products. Rivalry is also strong because the customers’ cost of switching the brands is low. Doctors are flexible to prescribe different products for their availability in the market.
• Rivalry tends to be vigorous as the exit barriers are very high due to requirement of huge capital and other investments. Rivalry increases because strong companies of the other business are acquiring weak firms in the industry and aggressively launching the pharmaceutical business.
• Competitive firms are using price cuts and other competitive weapons to boost unit volume and to realize the economic of scale which is also causing intensive rivalry.

Potential Entry of new competitors

Entry barriers in pharmaceutical industry is high for foreign companies as the govt. rules does not permit foreign companies to enter the market without joint venture with a Bangladeshi firm owning at least 50% share of the company. Initial capital requirement, brand preference and customer loyalty, strict government rules and regulations to match with and qualify for entering this market etc. are also playing as high entry barriers for the potential competitors. Even though there are high entry barriers in the industry, threats from potential new entrants in this industry is also significant because of the industry profitability and the rapid growth of the market. Following are the factors that can be considered as entry barriers of this industry

Economics of Scale :

As the scale economies deter entry in this industry and cannot be achieved at the beginning of operation, potential new entrants have to start on a large scale which is a costly and perhaps a risky move. Sustainable profitability certainly depends on the scale of the operation and production of large volume. Potential entrants has to encounter scale-related barriers in this industry not just in production but in advertising, marketing and distribution and raw material purchasing as well.

Brand preference and customer loyalty:

As mass media advertising is not allowed in the pharmaceutical industry, Promotional and advertisement activities are done through physicians, chemists or retailers. In case of physicians it’s done through direct contact, providing free samples, arranging seminars, providing necessary information etc. In case of chemists or retailers it’s done through discounts, commissions etc. Usually the end user of the products must follow the physicians prescription, so they don’t have any choice in brands. So brand preference and loyalty of the consultant class is playing a  vital role in establishing relative market share in this industry. It’s very hard for any new entrant to build preference and loyalty to these special segments within a short period of time.

Distribution channel:

The distribution channel in the industry is not that much organized and therefore all the big companies have to develop their own channel by their own work force, which is very difficult and time consuming for new entrants.

Capital requirement:

High capital is required to set up manufacturing facility in the pharmaceuticals industry. As the economic of scale is present in the industry, high investment is required to start minimum production for keeping the price low and make the product competitive. Products are also required to fulfill the standard prescribed and controlled the regulatory authority, so high investment is required to maintain the standard of the facility. High cost is also required because of the high cost of machinery and equipment.

International trade restrictions: 

International trade restrictions and government regulation played a major role to impose high barriers for foreign companies in Bangladesh market. Under the existing related law, foreign companies can only export or sell medicine in the local market without affiliation with a local company, but for manufacturing it mist go for fulfilling the local law. This has increased the entry barriers for foreign companies but reduced the same for local companies.

Threat from substitute products:

Three factors play vital role in strengthening the competitive pressure from substitute products which are whether attractively priced substitute products are available, how satisfactory the substitute products are in terms of quality, performance and other relevant attributes, and the ease with which buyers can switch to substitutes. Although there are no direct substitute for pharmaceuticals products,  there are some cases where limited substitutes are available. The substitute for general antibiotic is Ayurvedic and Homeopathic and Herbal medicine. In Bangladesh the rural people who constitute large share of population highly depend on Ayurvedic and Homeopathic medicine. In urban areas the trend is more toward medicines with herbal ingredients rather than chemical. So, in rural areas affluent people pay good money for Ayurvedic and Homeopathic medicine. They are also very cheap, as they are not scientifically produced. The rural people being ignorant and uneducated are unaware about the consequences of taking these medicines. They buy them as they offer cheaper price. Some times fake village doctors use religious believes as a backdrop for selling false medicine and reject the medicines produced by pharmaceutical companies. As long as the people of our country don’t educate themselves these false medicine will be playing significant role as substitute products.

Bargaining power of suppliers:

Bargaining power of suppliers in this industry is moderately low. Most of the manufacturers in this industry import raw materials directly from abroad which constitute low dependency on the raw materials suppliers. Also the number of suppliers are very high in the industry and the purchase volume is big, which are  plying positive role for the buyers to bargain over suppliers. Therefore, the dependency on suppliers and the switching cost to other suppliers are relatively low in this industry.

Bargaining power of buyers:

As the end-consumers are not the decision maker here, the  buyer characteristics in pharmaceutical industry are somewhat different from other consumer products.  The decision makers are mainly physicians and chemist or retailers. There are around 120,000 physicians around the country to whom the competitors visit regularly to promote their products. Almost all promotional expenditures of the firms, a very big portion of any firm’s yearly sales revenue, is utilized to convince these segments. Also as most of the products in this industry are nearly identical and there are significant numbers of brands existing in this market, the bargaining power of buyers is very high. The unique power of physicians to make any band establishment and in some case, unethical practices of sharing mutual benefits among physicians and firms have increased this bargaining power even higher.

The driving forces of the industry

Driving forces of the industry are those which have the biggest influence on what kinds of changes will take place in the industry’s structure and competitive environment. The driving forces in an industry are the major underlying causes of changing industry and competitive conditions. The following driving forces are causing the pharmaceutical industry to change:

Technological change:

Significant change in technology is working as a major driving force in our pharmaceutical industry. These technological changes are causing the pressure to invest more capital to upgrade the production facilities and improve the production process. The major companies are now maintaining the cutting edge of technology in order to be competitive in the market by producing competitively significant changes in working capital requirements, minimum efficient plant sizes, distribution channels and distribution logistics, and learning and experience curve effects.

Changes in the long-term industry growth rate:

Shifts in industry growth up or down are a driving force for industry change – affecting the balance between industry supply and buyer demand, entry and exit, and the character and strength of competition. The pharmaceutical business in Bangladesh is indicating a long-term demand that has triggered a race for growth among established firms and newcomers to capture growth opportunities and win a place among the market leaders.

Marketing Innovation:

As the active buyers and decision makers (physicians) in pharmaceutical industry is unique, major firms are introducing new ways to market their brands to spark a burst of these sorts of buyer interest, widen industry demand, increase product differentiation and lower unit costs. Now a day, the marketing representatives are using laptop computers to demonstrate their products to the buyers, offering different complementary guidebooks regarding health issues, using cell phones and Internet as a vehicle for a newer kind of marketing innovations and so on.

Changes in cost and efficiency:

A difference in the costs and efficiency among key competitors tends to dramatically alter the state of competition in pharmaceutical industry during the recent years. The dynamic improvement in cell phone communication system, use of modern inventory management software, online demonstration facilities to physicians, use of skilled labor and sophisticated equipments have dramatically changed the industry efficiency and cost structure.

Regulatory influences and government policy:

The drug policy of Bangladesh is forcing significant changes in the pharmaceuticals industry practices and strategic approaches.  Government efforts to reform medicine and health insurance during the recent years have become potent driving forces in this industry. Political and legal factors created opportunity as well as threat for pharmaceutical industry. The government prohibits import of new product in the segment where a national company is producing product even at a higher cost. The government rules regarding price restriction on 117 products forced the companies to compete on the ground of non-price factors like brand loyalty and product quality. Changes in government policies like increase in taxes, import tariff, Value Added Tax, etc is also forcing significant changes in the pharmaceutical industry practices and strategic approaches.

The Internet and e-commerce technologies:

The internet has changed the information system in all over the world. Using the internet, the manufactures as well as consumers are updating themselves with advance medical technology and health care information. Internet has significantly helped the manufacturers with the up dated information regarding new drugs, manufacturing process, quality control process. The use of e-commerce has also developed the marketing procedure of the industry products.

Socio-cultural:

Society’s traditions, values, attitudes, beliefs, tastes, and patterns of behavior, and how they are changing affect the operation of any business. As more and more people are getting educated and are becoming conscious in quality medicine, the future of quality conscious firms like ACME Laboratories  and other pharmaceutical industries certainly looks to be brighter in the near future.

What strategic moves are rivals likely to make next?

ACI has already started operating their new state-of-art facility. Beximco has also started manufacturing in their world class MDI plant and is going for certification in the regulated markets. Beximco has also made a US$ 50 M investment on a new plant confronting to USFDA standard. They are now crafting all their strategies towards year 2009, when the global market will be open for Bangladesh due to WTO agreement. The rules in this agreement will make the current biggest pharmaceutical exporters China and India to fall in very hard situation where as Bangladesh and other underdeveloped countries (LDCs) will enjoy exemption from these rules up to 2016.

Key success factors for competitive success

An industry’s key success factors are those competitive factors that most affect industry members’ ability to prosper in the marketplace- the particular strategy elements, product attributes, resources, competencies, competitive capabilities, and market achievement that spell the differences between being a strong competitor and a weak competitor.

Following are the key success factors in the pharmaceutical industry:

Technology Related KSFs

•  Technological superiority in manufacturing process.
•   Research expertise in introducing new products
•  Advance technology in marketing, distribution and production system
•  Capability to utilize the internet technology in product research, marketing and distribution
• Advanced systems and telecommunications infrastructure to support all kinds of manufacturing and distribution process.

Manufacturing related KSF’s

•  Low production cost by achieving scale economies, learning and experience curve effects.
•  Maximum utilization of fixed assets because of the nature of high fixed-cost industry.
•  Availability of skilled labor.
•  Low cost product design and engineering

Distribution related KSF’s

•  Broad network of wholesales and distributors.
•  Short delivery time.
•  Low distribution costs.
•  Having company owned retail outlets.

Marketing Related KSF’s are

•  Efficiency of marketing department.
•  Superior customer service.
•  Wide product line.
•  Attractive styling of packaging

Skills-related KSF’s:

•  Superior workforce in manufacturing and quality control department
•  Quality control know how

Other KSFs

•  Convenient locations and overall low cost
•  Favorable reputation and image with buyers
•  Pleasant and courtesies employees
•  Providing safe and healthy workplace.

Industry prospects and overall attractiveness

While evaluating the industry and competitive environment, the preceding analysis has been used to decide whether the outlook for the industry presents the company with sufficiently attractive prospects for profitability and growth.

The important factors on which to base such conclusions are given below:

• The industry’s growth potential is high. The overall pharmaceutical industry for the last 5 years was growing at an average rate of 15 percent annually.
• The current competitive environment permits the major firms to enjoy average to above par profitability
• Competitive forces will become stronger in the future as more firms are being paying attention to this industry.
• Industry profitability will be favorably affected by the prevailing driving forces.

Considering the above factors it can be concluded that the pharmaceutical industry of Bangladesh has a prospective future. SQUARE is aware of it and preparing to enjoy above average profitability through taking some strategic moves in the near future.

Company situating analysis

How well is the company’s present strategy working?

Continued successful application of Square’s business model and solid sales increases in all market segments led the company to gain high revenue and considerable amount of market share and towards long term sustainable growth. Acme laboratories has tightly fit together their metrics, their unique operating model, their business strategy and their highly-crafted tailored business practices.

Acme laboratories present strategy is to keep the growing trend in sales. The company is also emphasizing considerable attention to improve its market share.

The pharmaceuticals sector attained a lower growth of 8.6% only during the year 2004 as against 5.90% during the previous year. The lower growth rate of national pharma market may be attributed to various factors such as lower public expenditure on health care, natural calamities including floods, cyclones, epidemical diseases & lower agro-corp harvest. The national pharma market growth and that of the company during past few years are given below:

The above statistics prove that the company has been performing at a higher rate than that of the national growth rate of pharmaceuticals market ensuring continued leading position in the market.

Acme laboratories sales are growth faster than its competitors. Company’s profit margin is well matched with the company objectives and its overall financial strength is strong enough to extend more product line.  The shareholders of the company are getting more earning per share every year and the images of the company is getting stronger year after year. Exporting to other countries has enabled the company to extend its market and pursue its continues growth.

Although the company is suffering from some strategic and internal problems, the above factors say that Square’s growth strategy is working well but the other are not. If those problems are not solved quickly, this growth rate will not be sustainable in the future.

Acme’s principle competitors and market share in 2008

 Company’s resource strengths and weaknesses and its external opportunities and threats – SWOT Analysis

SWOT Analysis

Sizing up a firm’s resource strengths and weaknesses and its external opportunities and threats, commonly known as SWOT analysis, provides a good overview of whether a firm’s business position is fundamentally healthy or unhealthy. SWOT analysis is grounded in the basic principle that strategy-making efforts must aim at producing a good fit between a company’s resource capability and its external situation. In light of the above fact, the SWOT analysis of Acme laboratories is given below:

Strength

The Key Strengths are

• High company image and widely recognition as the pioneer of the industry
• Decentralized decision-making structure where decision-making inputs are coming from all levels of the organization.
• Strong corporate culture with emphasis on quality, customer responsiveness and environmental policy
• A long tradition of participative management and employee retention.
• A strong financial condition; ample financial resources to grow the business.
• Efficient and well equipped R&D department to carry out up to date research and product improvement
• Trained and efficient marketing and sales team.
• An attractive loyal customer base.
• Collaborative support from some foreign companies that provide access to valuable technological know-how.
• Manufacturing plant with flexible manufacturing capacity and batch processing

Weakness

Key weaknesses

• Underutilized plant capacity in Pabna & inability to meet current demand condition due to under production capacity.
• Dependency on traditional distribution channel
• Centralized controlled on manufacturing plants
• Dependence on Volume products
• Lack of proper integration between functional units and divisions; thus benefit from cross-functional collaboration is not fully realized.
• High cost of manufacturing and distribution
• Absence of backward integration causing absolute dependency on input supplier and external environment;
• Inability to estimate current and future market demand and upgrade production capacity accordingly.

Opportunities

• Growing consciousness about ethical standards and expectations from customers
• Growing demand in domestic market
• Existing demand in the neighboring country’s pharmaceutical market
• Globalization allows square to enter global market by diversifying its business by utilizing the company image

Threats

Key threats

• Aggressive promotional activity by the rivals.
• Exchange rate fluctuation causing input price high.
• Infiltration of low price smuggled products
• Likely entry of potent new competitors due to attractive industry profitability.
• Growing bargaining power of customers and suppliers.
• Modern technology are coming to obsolete the existing technology. This will cause huge capital loss for the production process.

Strategic cost analysis and value chain

Are the company’s prices and costs competitive?

Acme laboratories prices are competitive because in this industry, due to its nature of competitiveness, identical attributes of product, high buyer bargaining power and low brand switching costs, no one can afford to charge high price. In terms of economics point of view, this market is positively elastic, thus a slight increase in price might cause a heavy fall in sales. As Acme laboratories sales are increasing in this positively elastic market, we can conclude that their prices are competitive.

Acme laboratories has a long experience and by utilizing its experience curve effect it has much cost advantage over its rivals. Square is consistently producing quality products under clearly defined Standard Operating Procedures (SOP) in compliance with the procedures and instructions of quality system. The plant is well designed and well equipped with all latest facilities and state-of-the-art technologies. To maintain this high quality standard, Square has to import finest quality raw materials taking almost 70% of its  total turnover including duties and taxes paid to government exchequer. To maintain quality production, their operating expenditure is also very high.

Acme laboratories believes that it is hard to compete against a firm with low costs while maintaining appropriate quality. That’s why Acme laboratories strategy is not to compromise the quality rather, they are willing to realize lower profit margin in the short-run. Acme laboratories believes that their high quality brand reputation will enable them to grab an increased portion of market share in the long run and thus enjoy economy of scale ensuring higher profit and sustainable growth.

Material Management:

The materials management function controls the transmission of physical materials through the value chain, from procurement through production and into distribution. The efficiency in this process can significantly lower cost and create value.

Acme laboratories is only integrated downstream with its own distribution network. Most of the raw materials are directly imported. The cost of production is minimized, as efficiency is high in production because of Quality Management System. But the process of communication between the manufacturing and distribution network requires various levels of inspection and approval mechanisms, pushing the bureaucratic cost upward. The raw material used for production purpose is fully imported, this also causes problem when exchange rate fluctuates, exporters fail to ship raw materials timely, they suddenly increase their price, when materials are disrupted by port congestion, political strikes, abrupt changes in world demand and supply situation.

Purchase of supplies and Inbound Logistics

Acme laboratories purchase large volume of raw materials for the company and thus utilize the opportunities to minimize the cost in their inbound logistics. They have an opportunity to purchase bulk amount so that they can minimize the cost in their inbound logistics. Their purchases are relatively large volume compared to that of other pharmaceutical companies and get a most favorable rate for the company.

Distribution and outbound logistics

When the operation units complete their production, the finished products are then stored and sent to the respective department through their own delivery units. Then they distribute their products throughout the country. They have district medical officer and send medicines to the needed areas at the minimum time with their own delivery van. They also export their products to Europe, Asia and African nations to fulfill the demand and create markets.

Distribution Channel

Distribution Department at A Glance

Objective

Supply Right products in Right place in Right time

Maintain the repuirement of drugs.

Resources

 Location of main plant:

Dhamrai, Gazipur.

Research and Development:

In Bangladesh there is no patent law for medicine so any company can copy the medicine of another company and market it, that’s the primary reason that the companies in pharmaceutical industry don’t have extensive R&D facilities.

Acme laboratories has a dedicated research and development team to upgrade the product and find new products. The product development has added value for the company. Finding new products and successfully introduction in the market will create more profit for the company. They always watch what competitors are doing and find better and new products for the consumers. Product development department also search information on the internet and add value for the existing products to gain more market share. Their leadership in this area has given them a competitive advantage by allowing them to develop new products and build image in this industry.

Production/Operations:

Production is concerned with the creation of a good or service, which generally has to do with manufacturing for physical products. Production can create value by performing its activities in a way that is consistent with high product quality, which leads to differentiation and to lower cost, both of which increases the value created by the company.

Acme laboratories is committed to quality products and maintain their standards of the industry products. They always try to their best to benchmark for high productivity and lowest cost per unit. They use state of the art technology to their production unit and get higher production at the minimum time. This is done to utilize their production facilities that will have cost advantage over the rivals.

The manufacturing process of different type of products depends on demand for certain type of product. Here cyclical or seasonal needs of different products are considered. Usually the flow of medicine is consistent other than few exceptions through out the year. New entrants, aggressive marketing and sales promotion of existing firms are mainly the factors that drive down the demand.

The quality of raw materials is not compromised in any situation though they are imported from outside. Acme laboratories follows International Standards on Quality Management System to ensure consistent quality of product keeping in mind customer satisfaction.

Sales and Marketing:

Marketing and sales function of an organization can create value when consumer’s perception of the value of the product increases. This can be done through brand positioning and advertising. As these activities create a favorable impression of the company’s production the minds of the consumer, they increase value of Acme laboratories.

The marketing and sales department always try to find the new ways to compete the local market as well as international market. In the highly competitive marketplace, Acme laboratories has been very successful in creating a strong brand name and achieving significant market share. Their marketing techniques, including PR activities and special offer to the doctors is clearly a source of differentiation. Their staff and medical promotion officer seems to truly understand what is most important to the value customers and doctors and how to deliver the proper information of the products’ that can benefit the end consumers.

The marketing and sales department of Acme laboratories pharmaceutical includes following activities:

• Management of sales representatives and medical promotion officer.
• National Sales manager along with marketing manger under the supervision of executive director undertakes planning, organizing, directing and controlling of the sales performance at different regional areas.
• Sales target are set with regard to past performance and forecasting.
• Identification of consumer needs
• Sales forecasting based on previous information and recent changes
• Identifying different market segment and their demand pattern.
• Monitoring the sales performance of the sales representative, area sales manager and regional sales manager on a regular basis to achieve target without failing.
• Determine the marketing objectives.
• Positioning the company as a producer and importer of quality product.
• Formulate market strategies including trade promotion, distribution etc. to boost to the sales force and all the sales activities.

Human Resource:

The human resource function of a company ensures that the company has the right mix of skilled people to perform its value creation activities effectively. The job of human resource department of Square ensures that people at functional level and business level are adequately trained, motivated and compensated to perform their value creation tasks. Human resource is the core resource or competency that is very hard for competitors to imitate. So, special focus in always on the employees of Square and their pros and cons of human resource management are identified.

The department of marketing and sales has lot of reward and incentives for exceptional performance in individual level, team level and department level. They have a performance appraisal system that continuously monitors the performance of employees at different level. They have bonus system for over time or extra work hours. They have immediate reward system for exciting new ideas that can help the growth of the company in any sector. They have cash reward system where the team receives a cash amount based on their performance of meeting targets and going beyond it.

Contingency Plan

Even sometimes the best plans do not work. If the above recommended strategies fail to achieve the objectives and incur financial losses due to unforeseeable events Acme should give up the above strategies and adopt a focused differentiation strategy. It should be noted that the pharmaceuticals business can’t take an absolute low-cost provider strategy, because a minimum quality and utility should be ensured in the medicine product to be marketed that takes cost. So a focused differentiation strategy is suggested in the contingency plan, where Acme will concentrate in producing the best product of the industry and sell it to a group of sophisticated and conscious customers. This will enable Acme to charge a premium price in the market and also export in the quality conscious western countries to certain extent. Acme should also reduce its operating cost by cutting down the distribution network and withdrawing the backward integration activities. This strategy will reduce Acme’s overall sales revenue, but it also will increase the profit margin on the other hand.