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BUSINESS & MARKETING

OVERVIEW ANALYSIS
PHARMANIAGA MOHD RIZAL KISMATH BATCHA (2007)

Part A: Pre-trip preparation

1. Preparation for the interview session

Before our group decided to go for a two days trip to Kuala Lumpur, our group had

collected much information about the company through Internet, magazines, papers and

from peers.

The information that we had collected from

Wikipedia (http://en.wikipedia.org/wiki/UEMGroup) and the

official website of the company (http://www.pharmaniaga.com.my:/) are as follow:

1. Pharmaniaga is one of UEM subsidiary company and a public listing company in the

Main Board Bursa Malaysia Securities (BMS) with the vision to be Malaysia's

foremost integrated healthcare solutions provider, contributing significantly to

improving wellness of people by providing high quality products and services.

2. Pharmaniaga vision is to be the preferred brand in healthcare in the market we choose

to serve and the Pharmaniaga mission is to deliver maximum value to our customer

through superior quality products and services by committed professional and caring

employees.

3. Its core business is manufacturing generic pharmaceutical, logistics and distribution,

sales and marketing, supply medical product and services, hospital equipment.

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Before the trip to Kuala Lumpur, our group had prepared few questions as below:

a) What is Pharmaniaga core business?

b) What is Pharnaniaga strengths, weaknesses, opportunity, treats (SWOT)?

c) Pharmaniaga emphasizes more on revenue oriented or service oriented?

d) How Pharmaniaga control the quality of pharmaceutical product?

e) What is the challenges face by Pharmaniaga?

f) What is Pharmaniaga marketing mix?

g) How Pharmaniaga run their operation?

h) What is Pharmaniaga target market?

i) How many employees in Pharmaniaga?

j) What is Pharmaniaga employees’ welfare?

k) Pharmaniaga is under government or private?

l) Is there any government subsidiary to Pharmaniaga?

m) Is it Pharmaniaga is market leader in the pharmaceutical industry?

n) What is the marketing strategy applied by Pharmaniaga? E.g.: Marketing mix

o) What are future plans by Pharmaniaga?

p) Who are the competitors of Pharmaniaga?

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2. Pharmaniaga Overview

In pharmaceutical industry, there are two main pharmaceutical companies in Malaysia:

a) Pharmaniaga Berhad

Pharmaniaga is the largest integrated local healthcare public listed company in the Main

Board of Bursa Malaysia. Its core business is manufacturing generic pharmaceutical,

logistics and distribution, sales and marketing, supply medical product and services,

hospital equipment. The Pharmaniaga Berhad subsidiaries companies are:

i) Pharmaniaga Logistics Sdn Bhd

ii) Pharmaniaga Marketing Sdn Bhd

iii) Pharmaniaga Manufacturing Berhad

iv) Pharmaniaga Diagnostics

v) Pharmaniaga Research Centre Sdn Bhd

vi) Safire Pharmaceuticals (M) Sdn Bhd

vii) Pharmaniaga LifeScience Sdn Bhd

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viii) Pharmaniaga Diagnostics Sdn Bhd

ix) Pharmaniaga Intermational Corporation

x) PT Millennium Pharmacon International Tbk (Indonesia)

xi) Pharmaniaga Pegasus (Seychelles) Co. Ltd

Pharmaniaga’s range of products can be divided into generic pharmaceuticals product (27

types of bio-equivalent products) and non-prescription product (vitamin, herbal, tropicals

and Pharmaceuticals). Pharmaniaga had been awarded by IMS Healthcare 2007 with:

No.1 Anti-Infectives (Various)

No. 1 Cholesterol Drug (Simvastatin)

No. 2 Antiplatelet (Ticlopidin)

No. 2 Diabetes (Metformin)

No. 2 Dry Cough (Russedyl)

b) APEX Berhad

APEX is one of listed pharmaceutical company on the Main Board of Bursa

Malaysia. Its core businesses are manufacturing, wholesaling, distribution and

marketing of pharmaceutical and consumer healthcare products. The APEX Group's

major wholly-owned subsidiaries are

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i) Xepa-Soul Pattinson (M) Sdn Bhd

ii) Apex Pharmacy Marketing Sdn Bhd

iii) Apex Pharma Marketing Pte Ltd,

iv) ABio Marketing Sdn Bhd,

v) Apex Pharmacy Corporate Sdn Bhd

vi) Apex Pharmacy International Sdn Bhd.

vii) Apex Healthcare Berhad

The Xepa range of products includes antibiotics, anti-ulcerants, anti-hypertensives,

neuromuscular agents, corticosteroids, cough mixtures and antihistamines in the form of

tablets, capsules, oral liquid and suspension, creams and sterile eyedrops. Best selling

products developed in the last few years include the antihistamines ezede® and Adezio®,

CovastinTM, a lipid lowering drug and AvexusTM a new macrolide antibiotic, while the

range of cough preparations including Sedilix®-DM continue to be the market leader.

From the information above, our group had defined Apex (M) Berhad as the main

competitor to Pharmaniaga. However, Pharmaniaga has been defined as the market leader

in the pharmaceuticals industry with positive growth trend which will enable

Pharmaniaga to take advantage of the opportunities available and enhance their status as

the leading player in this industry. In addition, due to Pharmaniaga new product launched

(7 new products registered, 4 new products launced, 3 new bio-equivalent products

approved, 50 products registered in international markets in 2005) which are already in

the pipeline, thus marketing team of Pharmaniaga has been strengthen. As a result,

Pharmaniaga is able to gain market share in the coming year.

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Part B: Detailed trip log book

1. Perception and Expectation before the Trip

Well, before we went for the trip, we were tried to relate Pharmaniaga with the 8P that we

have studied in Service Marketing which are price, promotion, place and time, products,

process, physical environment, productivity and quality as well as people. We were

thinking if Pharmaniaga could be explained by these 8P. Moreover, we would like to seek

answers if there is any advantage to embed those elements in developing a strategy. In

our perceptions, we may interpret that Pharmaniaga is a monopoly company in Malaysia

in which there are no competitors for them. Under our perceptions, Pharmaniaga may be

one of the company in which high profitability is generated since it is interpreted as a

government’s subsidiary company. This is due to the fact that more than fifty percents of

the medicines and equipments are supplied to the government institutions by them.

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2. Information Obtained

Basically, we were invited to the Biomedical Department which only represents one of

the departments of this company. We realized that most of the equipments that we can see

in hospitals are actually made by them. We were exposed to the external environment

such as the appearance of buildings, interior furnishing, equipment and other visible cues

that provide tangible evidence regarding their service quality.

Moreover, this is surprising where a superior system which is Automated

Storage and Retrieval System (ASRS) is allocated in their warehouse. ASRS is successful

in optimizing space utilization at central warehouse which aids to store and remove

inventory automatically from their warehouse. Thus, works could be done efficiently and

effectively since Pharmaniaga is able to optimize their usage.

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3. Evaluation and Perception

Basically, we would like to say that it is an awesome company. Through the detail

analysis by the hosts, we can actually understand their products and services more deeply.

We have a good feedback for Pharmaniaga since it still able to maintain good

performances although they have to control every department thoroughly.

Besides, systematic storage which is ASRS has opened our eyes to

the excellent performances with less effort and less human energy to achieve it. We

would like to say that Pharmaniaga is an advance and successful company with

continuous improvement and expansion throughout worldwide.

In addition, strong and motivate marketing team that has been formed is crucial in

promoting and advertising their products and services. Pharmaniaga’s has the largest

sales team among local generic healthcare companies which is beneficial and relevance in

persuading and urging customers to make an order.

4. Critical Analysis

Our group has defined few problems for Pharmaniaga Company before the trip which is:

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a) Advance technology in pharmaceuticals field

As we know, now is the age of technology, thus it is necessary for Pharmaniaga

Company to follow the trend and fulfill the customer’s expectation. However,

advance technology involving high cost to fulfill customer’s expectation to get the

cheap yet high quality pharmaceutical products.

b) Control inventory in pharmaceutical product

With increasing availability of generic products in the Malaysian market, it is

imperative to ensure that these generic products are of high level of quality, efficacy

and safety of pharmaceuticals products to safeguard the public. Drugs have the expiry

date thus it is imperative for Pharmaniaga to avoid the expiry date. Therefore

providing pharmaceuticals product just in time will be one of most important issue to

fulfill the customer need.

c) Government policies

Malaysia is an Islamic country; therefore it is vital to make sure all edible products in

Malaysia are halal. That serves as one of the challenges for Pharmaniaga to make sure

that all pharmaceutical products in Malaysia are Halal. Some of pharmaceutical

product may need the “non-halal” ingredients to product it; it is one of the challenges

for Pharmaniaga to modify them into halal products.

d) Meet the Malaysian customer demand

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Pharmaceutical products are not like other normal products which have standard and

average demand. Therefore our group have defined balancing Malaysian customers’

demand may be one of the problems to Pharmanniaga. Furthermore Pharmaniaga

company holds national emergency such as bird flu, therefore it is important for

Pharmaniaga to prepare them in order to meet customer’s expectation.

5.Problem Statement

a) Barriers in patent

Pharmaniaga Company manufactures division and produces high-quality off-patent

pharmaceuticals for domestic and export markets. Barriers in patent pharmaceutical

product will be one of the problems to Pharmaniaga. Pharmaniaga need to wait for

the pharmaceutical product off-patent to be released before producing and selling

them in domestic and export markets.

b) Formulate new product

To compete with other international Pharmaceutical company, Pharmaniaga need to

be involved in the R&D to formulate the new product in order to fulfill customers’

expectation. To be the first to launch new product enables them to capture market

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share, but high costs and time consuming are involved to formulate a new product.

Thus, it will cause the pharmaceutical products to be more expensive. As a result, it

fails to fulfill Malaysian expectation in getting cheap and high quality pharmaceutical

products.

c) Capacity Limitations

Pharmaniaga is one of the fast growing corporations in Malaysia with 24.3% growth

per year. But with broad range of product and the capacity limitations in

Pharmaniaga, it is difficult to expand their business in pharmaceutical industry.

6. SWOT analysis

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Strength Weakness
Integration of different field
helps to run the production and
services more smoothly. High operation and
Outstanding quality maintenance costs
Innovative thinking which
enhance their market leader
status

Opportunity Threat

Research and Development Competitors

Seek opportunities for Challenges in maintaining

geographical and strategic profitability

expansion

a) Strength

Integration of different field helps to run the production and services more

smoothly.

Integration of manufacturing, marketing, logistics, medical planning, equipping and

distribution, information technology as well as research and development aid in meeting

customers’ expectancy or exceed their expectation. Better quality of life is emphasized

yet affordable products and services are provided. Because of the integration,

Pharmaniaga is able to control their own productions thus demands from different level

of customers can be fulfilled thus shortage of the products are reduced. As a result,

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different field is responsible to achieve their mission and vision as well as objectives of

the company.

Innovative thinking which enhance their market leader status

Studies regarding human behaviour are well designed to understand their potential

customer thoroughly. This is due to the fact that different people tend to hold different

perception and belief in decision making. Thus, innovation and creativity are greatly

applied into marketing strategy which enables them to become a potential market leader.

As a consequence, Pharmaniaga is growing rapidly in domestic as well as international

market in which it has been internationally recognised as a healthcare solutions provider.

Outstanding quality

Pharmaniaga is emphasizing in delivering value to their customer through superior

quality products and services which is stated as the mission of their company. Therefore,

efforts and guidelines have been made or complied to achieve their desire mission.

Hence, Quality Management System is maintaining at the excellent level without any

deviation in production of quality products. Their Quality Management System is

certified to the ISO1990 standards, which is the essence of effective quality management.

b) Weaknesses

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 High operation and maintenance costs

Next weakness is related to the high costs that Pharmaniaga has to cover such as

maintenance and operation costs. Therefore, relevant strategies have to be planned and

launched to make sure that maximum capacities can be operated without wasting their

resources. Moreover, budget for the maintenance costs have to be planned carefully since

profitability is affected if maintenance costs are not spent accordingly.

c) Opportunity

Research and Development

Pharmaniaga invest a lot of efforts in research and development field in which an amount

of money spent to investigate and plan for the best strategy for advance development. As

a result, successful scale-ups of products and speedier product development can be

developed and new products can be promoted in the market faster in cost-effective

manner as compared to their competitors.

Seek opportunities for geographical and strategic expansion

Since Pharmaniaga has operating warehouses in 36 sites across 4 countries which is

Malaysia, Indonesia, Vietnam and China. With the rapid growth and development, they

have the opportunity to expand their businesses into other Asian countries and USA.

Therefore, efforts to increase their productivities and improving profitability must be

realized since this is a golden opportunity for Pharmaniaga to expand their strategies and

businesses worldwide.

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d) Threat

Competitors

Although Pharmaniaga has become a potential market leader in Malaysia but they still

have to compete with other competitors in order to strive and attain their goal. This is a

challenging as well as threatening task for Pharmaniaga since customers are more likely

to compare the similar products with respect to the different price and quality offered.

However, Pharmaniaga may view this as a challenge to improve their company’s

performances.

 Challenges in maintaining profitability

There is always a balancing state in the demand and supply of a product. Companies tried

to reach the break-even point in order to gain profit when sufficient products are supplied

to meet the customers’ demand for a particular product. This is due to the fact that excess

demand or excess supply may affect the profitability of a company. However, it is a

challenge for Pharmaniaga in maintaining profitability associated with a fluctuating rate

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7. Critical Success Factor

In our group’s opinion, critical success factor of Pharmaniaga is the effectiveness in the

implementation and integration of strategies. This is a unique strategy in where

competitors cannot compete easily since Pharmaniaga is sustaining their efforts from

manufacturing their own products until they are successfully delivered to the customers.

Therefore, products can be produced in low cost as intermediate expenses could be

reduced under this circumstance. Moreover, customers are glad that they are actually

paying less thus this would be the crucial success factor for Pharmaniaga.

However, Pharmaniaga does have weaknesses like other companies

too. For instance, demand and supply is always in a fluctuation rate thus it is a big

challenge for many types of capacity-constrained service organization to balance the

demand and supply level. Pharmaniaga may face this trouble in balancing the demand

and supply in order to obtain an optimum level.

Moreover, this is not an easy task to formulate a recipe. A long period of

time may be taken to reach a desired end. Expert advices or opinions should be inquired

to increase the likelihood that a particular formula can be launched successfully.

However, it is a costly yet difficult task in which company have to pay an amount of

money constantly even though there is still no result generated especially for the demand

of products.

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8. Applied Theory

8Ps of Service Marketing

Place and time

Since Pharmaniaga have their own logistic department thus methods and channels to

deliver have to be well decided. As we know, customers can actually place their order

through electrical channel since there is a stable network to support and manage the order

from customers. Moreover, an alternative network has been designed to avoid network

being jammed thus customers can make an order either through physical channels or

electrical channels since both channels are reliable and easy to use.

Price

Pharmaniaga maintains a good price strategy since the reduced prices are reaching the

final customer and not being absorbed by resellers in the marketing channel. In fact, this

will enable Pharmaniga to gain more profits as intermediate costs could be eliminated.

On the other hand, customers can keep away from bearing the higher prices as they are

paying wholesaler prices instead of retailer prices. As a result, customers pay less but

qualities of the products are assured and customer’s satisfaction can be increased.

Product elements

Pharmaniaga is a medicine provider in which medicine is a core product while other

supplementary services like logistic, marketing or information technology are offering

value added to fulfill customers’ needs. This is due to the fact that customers are used to

judge a performance based on the whole value of the core product instead of merely

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concentrating on a sole product. Thus, Pharmaniaga has successfully implemented their

product strategy by adding value through welcomed enhancements.

Physical environment

Customers were first exposed to the physical appearance of a company once they step in.

Visible cues such as equipment, employee’s uniform or decoration of the building may

influence customers’ perception. For example, customers would likely to have a good

feedback if the building of the company is indeed dazzling and beautiful. Hence, efforts

have to be made in order to enhance the supplementary services which will absolutely

add value to the core product.

Promotion and Education

No marketing programme can be successful without effective communication. Therefore

promotion and education play important roles to provide related health information and

advice, and develop strong relationship with customer through effective communication

channels. Pharmaniaga have organized several campaigns such as ‘Mesti Ambil

Tahu!’(MAT) and Skuad Operasi Sihat (S.O.S) to provide related health information and

advices to public. At the same time Pharmaniaga also placed importance on corporate

social responsibility besides promotion and education.

MAT is the campaign that inculcates consumers’ awareness on the importance of proper

medicine management. In its effort to make it easily accessible to the general public,

Pharmaniaga has compiled “Mesti Ambil Tahu!” booklets and made them available in

health clinics. Several activities have be organized under MAT such as:

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 Kempen Kenali Ubat Anda, Melaka (29 Jun 2007)

Activities included distribution of MAT Health Education Brochures, MAT Quiz

and prizes for participants.

 Karnival Sihat Sepanjang Hayat, University Utara Malaysia

Program “ Jom Tak Nak” di IPTA - Kubang Pasu (28 Julai 2007) Activities included

distribution of MAT Health Education Brochures, Quiz and prizes for participants and the

hand over of bicycle to the bicycle club.

For the S.O.S campaign, mobile clinics act to provide health screening services and

resources as well as building awareness for rural populations in promoting healthy

lifestyle. Several activities have be organized under S.O.S.

 SOS Mission at Agensi Antidadah Kebangsaan in collaboration with

MERCY Malaysia Kuala Lumpur on 13 Feb 2008.

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Activities included, counseling by AADK, medical care by MERCY Doctors, medicine,

clinic and administration staff by Pharmaniaga.

People

People is one of the valuable assets to company and that they can make a significant

impact on business. Despite technology advances, many services will always require

direct interaction between customer and service personnel. The nature of these

interactions strongly influences how customers perceive service quality. In Pharmaniaga

there are about 1900 employees and in 2005 Pharmaniaga have invested about RM 40000

per year in training, educating and learning the employee.

Process

Creating and delivering product elements requires effective design and implementation of

the processes. In Pharmaniaga logistics, customer can make their order through

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Pharma*Net that is Pharmaniaga had subscribe the Pharma*Net to Telecom Malaysia and

Time Telecom. When customer service order management (CSOM) had received the

customer order through the e-ordering they will send the order to the warehouse in

picking out the product through Automated Storage Retrieval System (ASRS). After the

products have been picked up, the product will be put at staging area for shipping to the

destinations.

Delivery
Order

Customers
Shipping
Staging area

Pharma*
Net
C
SOM Automated
e- RF
Storage
Orderin Picking Retrieval System
g (ASRS)

SC RF
M Put
away

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Productivity and Quality

Improving productivity is an essential strategy for reducing costs, and improving the

quality should be defined from a customer perspective for building customer satisfaction

and loyalty. In order to control the Pharmaniaga product, Pharmaniaga have their own

R&D and corporate R&D. Pharmaniaga Quality Control and Research & Development

Laboratories are accredited to the ISO/IEC 17025 Laboratory Accreditation Scheme.

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Infor Co
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mati tat
ul
nt e on n
io
ym
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CORE:
Billing Order
PHARMANIAGA Taking

Ex
ep c y
tio ing lit
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keep sp
Safe Ho

9. The Flower of Service

Figure: The Flower of Service: Core and Supplementary Elements

The above Flower of Service features a core product which is surrounded by a cluster of

supplementary services. Eight clusters are displayed as petals in which they were used to

support and enhance as well as aid the use of core product.

Information

Customers are likely to seek information regarding to the products and services before

making a decision. Thus, Pharmaniaga has been developing a marketing team to aid in

promoting and providing relevant information for their favor customers. Moreover,

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customers can easily gain information through their website as well as words from

mouth. This is due to the fact that customers especially new customers are information-

hungry thus precious advices are necessary to avoid misunderstanding regarding to the

service provided.

Consultation

Consultation has a strong influence in enhancing supplementary services. Customers are

more likely to get responses from the service provider especially when there is variety of

products or services which tend to confuse them. Therefore, Pharmaniaga has been

applying effective consultation scheme to guide their customers in improving their

relationship with the company. When customers have a better understanding towards the

products, they will be loyal to such assurance.

Order taking

Order taking took place when customers decided to buy a product or service.

Pharmaniaga is successful in handling this element since the process is fast, accurate and

timely. For example, ASRS aids to store and remove inventory automatically thus there is

a low probability for Pharmaniaga to make a mistake or delay customer’s order.

Hospitality

Under hospitality element, service provider has to provide an ideal environment and

procedure to attract new customers yet to retain old ones. In our opinion, Pharmaniaga

managed to provide such an environment since their employees are well trained and the

systems that they are using are in advance. Moreover, well managed logistic systems may

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aid in increasing customers satisfaction as they save times and efforts in order to deal

with Pharmaniaga.

Safekeeping

Safekeeping service has been provided by Pharmaniaga to enhance their core product.

For example, their products are well taken care of in terms of packaging, products are

reliable and have been certificated, efficiency of the logistics system to deliver the core

product and so on. Through safekeeping services, customer’s satisfaction may be

increased since Pharmaniaga is paying attention closely to their safety and security

aspects.

Exception

Exception is a supplementary service that falls outside the normal routine. Pharmaniaga

have to design guidelines in advance to avoid unanticipated circumstances. For instances,

special requests from the customers have to be taken care, problem or complaint

regarding to the services provided have to be handled as soon as possible. Besides, the

company should be held reliable for any mistake and should compensate for any loss,

damage or injury in serious cases.

Billing

Pharmaniaga has to make their billing timely and effectively since convenient and easy

billing methods are requested by customers nowadays. Pharmaniga is supplying their

products either to government or private hospital in large amount. Therefore, bills have to

be clear with completing information on how the total was calculated.

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Payment

Customers are expected to take action once they have received the billing notices. Credit card and

debit card as well as transfer of cash or checks are accepted as long as the payment method is

convenient and easy for customers. Pharmaniaga have to control their account receivable and

account payable in order to reduce overload debt. Thus, customers have a variety of choices in

deciding the way to make their payment.

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10. Solutions and Recommendations

There have few recommendations we would like to suggest for Pharmaniaga Company.

i) Improve and maintain research

Pharmaniaga is one of strong growing company in Malaysia with the 24.3% growth

per year, therefore maintaining and improving the research procedures to produce

new product is needed to maintain Pharmaniaga market share in Pharmaceutical

industry. Moreover, customers’ expectation and demand should be examined in order

to understand their customer thoroughly to achieve higher profits.

ii) Use Western Country as the guidance

To expand the Pharmaniaga business to penetrate new and untapped markets in other

regions of the world, it is imperative for Pharmaniaga to absorb western style as the

guidance to improve quality and performance. As we know, most of Pharmaniaga

export partners are developing country and undeveloped country. Therefore,

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Pharmaniaga can use other pharmaceutical company in developed western country as

the guidance to expand the export partner.

iii) Aim to become Asian market leader

Since Pharmaniaga is the market leader in Malaysia, thus Pharmaniaga should aim to

achieve the status as Asian market leader. Therefore, Pharmaniaga should expand

their businesses in other regions of the world, not only focusing in domestic markets

Conclusion :

Pharmaniaga, a market leader and it has been internationally recognised as a healthcare

solutions provider. “Quality is our virtue” is the company’s vision in which Pharmaniaga

is emphasizing in quality management. Though there are problems occurring such as

customers would like to pay less but higher quality is expected but, Pharmaniaga is able

to enhance their concepts with successful handling in those kinds of problems. This is

pretty true since Pharmaniaga aims to provide the greatest quality of their products to

their favour customers. Next, SWOT analysis of Pharmaniaga has been defined in which

strength and opportunities are favourable situations and are likely to increase company’s

profitability while weaknesses and threat are unfavourable situations in which it might

harm the company’s profitability. In our group’s opinion, integration of different fields is

critical in meeting customers’ demands and needs other than the strengths of the

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company. The solutions and recommendations that have been mentioned above are

realistic because Pharmaniaga’s vision and mission have stated that quality is their virtue.

Since this is the first time we were exposed to a company which have different

department to handle and promote those particular products, thus we would like to

conclude that Pharmaniaga is indeed a successful company. This is due to the fact that

innovative yet creative thinking may help them to differentiate their company with other

competitors. Moreover, it is easier for them to maintain customer’s loyalty compare to

competitors since they have their unique strategies. Therefore performances may be

enhanced and granted directly. In addition, continuously improvement is emphasized to

achieve the company’s vision and mission as well as customer’s expectation.

Pharmaniaga logistics and distribution warehouse

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