Executive summary :Square Pharmaceuticals Ltd.

was established as a partnership firm in

1958. In 1991 it was converted into a public limited company. Square Pharmaceuticals Limited is
the largest pharmaceutical company in Bangladesh and it has been continuously in the 1st
position among all national and multinational companies since 1985. Since 1987 Square has
taken aggressive measures to explore new countries as potential export market. More & more
countries are getting confidence in Squares product every year. But its true that in the
competitive global environment Square is still struggling to ensure firm footings in global
market. Square is the flagship Pharma Company in Bangladesh, wants to be a global player. As
recognition to its export contribution to national economy, Square received the National Export
Trophy in 1997. To strengthen its global operation further, Square is planning to enter in Russian
Pharma market considering market potentiality. Our project is focused on to decide entry mode
of Square for Russia.
Russia is having a huge potential pharma market for a foreign company that is having
competitive advantage. Domestic pharmaceutical producers of Russia supply only 35 percent of
the total market and foreign companies control remaining 65% market. Imported
pharmaceuticals have increased their presence in the Russian market in the last several years and
continuously having positive growth in each year. In 2001 the imported pharma market growth
was 36%. Due to high-unsatisfied demand for pharmaceuticals, decreased production capacity of
Russian pharmaceuticals, increased prices of the domestic producers, drastically making them
less competitive in comparison to imported ones.
However considering the potential and opportunity, definitely Square can think to keep step in
Russian Pharma market. The question is what will be the right entry mode & how to implement
the business structure. I also analyzed all these issues in this project report. I made a thorough
analysis of country profile, Russian market, target market, marketing mix and competitors
profile. At last i have suggested the entry mode of Exporting through distributor & office setup
for marketing integration.
I hope this project will help Square to find its own track in Russian Pharma market.
Part one: the organization Background
Square Pharmaceuticals Ltd. (SPL), the pharmaceutical giant in the country, is a trusted name in
the industry of manufacturing quality medicines for more than four decade.
SQUARE today symbolizes a name a state of mind. From the inception in 1958, it has today
burgeoned into one of the top line conglomerates in Bangladesh. SQUARE Pharmaceuticals Ltd.,
the flagship company, is holding the strong leadership position in the pharmaceutical industry of
Bangladesh since 1985 and is now on its way to becoming a high performance global player.
q

FIRST to export antibiotics and other ethical drugs overseas.

q
FIRST to manufacture and market Metronidazole, Ampicillin and Cotrimoxazole after the
expiry of patents.

FIRST to develop sustained release technology locally.

FIRST to achieve an all time industry high record sales turnover of US$ 25 million.

FIRST to locally produce high tech Metered dose Inhalation (MDI) formulations.

FIRST to locally produce diclofenac sodium in the chemical division.

In addition to these FIRSTs, SQUARE Pharmaceuticals Limited (SPL) was always ahead in
introducing new products in the market.
1.1

Profile of Square Pharmaceuticals Ltd.

Corporate Headquarters

SQUARE CENTRE

48, Mohakhali Commercial Area

Dhaka 1212, Bangladesh
Factory

Shalgaria, PabnaTown, Pabna

Established

1958

Constitution

Public Limited Company

Chairman

Mr. Samson H. Chowdhury

Managing Director

Details of Business
Products
Authorized Capital

Mr. Tapan Chowdhury

:

Pharmaceutical Products/ Bulk Chemicals/ AgroVet

Tk. 1000 million

Paid-up Capital

Tk. 496.8 million

No. of Employees

2703

ProductRange
Chemical Division

Pharma

91 products in 185 dosage forms

7 products

AgroVet Division 7 products

Name of the Banker

Janata Bank, 1, Dilkusha, Dhaka

CitiBank N.A., 122-124, Motijheel, Dhaka

Standard Chartered Bank, 18-20, Motijheel, Dhaka
Credit Agricole Indosuez, 47, Motijheel, Dhaka
Bank Asia Ltd., 113-116,Tejgaon, Dhaka
Manufacturing Units

1. Pharmaceutical Division

2. AgroVet Division
3. Chemical Division
Square Pharmaceuticals Ltd. (SPL), the pharmaceutical giant in the country, is a trusted name in
the industry of manufacturing quality medicines for more than four decade.
With a capital of Tk. 55,000, a floor space of 3000 sft, and a team of 12 persons, SPL made its
humble debut as a partnership firm in 1958.
Within a span of only six years, under the farsighted vision of the management, and the
dedicated efforts of the company, its turnover reached the mark of Taka one million. With the
growth of turnover came the increase in number of employees, which in 1964stood to 50. At this
point of time the partnership firm was transformed into Private Limited Company. In 1964, PLs
Authorized Capital was Tk. 5,00,000 and the Paid up Capital was 4,00,000.
During the mid-seventies (1975) SPL entered into a technical collaboration agreement with
Janssen Pharmaceuticals, Belgium, which is a subsidiary of Johnson and Johnson International,
USA. Since its inception SPL practices Good Manufacturing Practices (GMP), as recommended
by the World Health Organization (WHO).
Another technical collaboration came under way, this time with F Hoffmann-La Roche Ltd.,
Switzerland, in 1982. But the fruits of this agreement could not be reaped on the account of the
Drug Ordinance of 1982. Nevertheless, SPLs growth was not being stunted. In 1982, turnover
reached over Tk. 240 million, and the payroll increased 400 heads, and by 1988 SPLs turnover
exceeded half a billion taka., and the number of employees to 750.
A new factory built in 1987, with all the modern machinery, extensive development of the
domestic market, and infiltration into foreign ones like UK and Singapore. Led to this
phenomenal growth SPL is the first company in the country ever to export pharmaceuticals
finished goods abroad. At present SPL is exporting its products to Nepal, Myanmar, Pakistan,
Sri-Lanka, Combodia, and Russia.
With its finished goods already dominating markets at home and abroad, SPL started production
of pharmaceutical raw materials groom its new unit, christened as Square Chemical Division, in

1995. The items in production under this unit are Diclofennac Sodium, Amoxycillin, Cloxacillin
and Paracetamol.
To sustain the changing environment SPL made convert itself into Public Limited Company in
1991. With a brilliant track record SPL became the first company in Bangladesh to cross the
Billion Taka mark turnover in 1992. In 1994 SPL got its share listed in the Dhaka and Chittagong
Stock Exchanges. Authorized Capital towered to billion taka and paid up capital by now is taka
250 million. Presently Square is family of 1321 members.
In 1996 an agreement was signed with M/s Tanvec, UK for the establishment of the second
formulation unit (Pharma II) at Kaliakoir, Gazipur. This factory, which built with a view to get
the approval of USFDA/MCA, is completed in the year 2000, and without doubt, help SPL
continue to command its leadership through the next millennium as well.
1.2

Chronology since inception

Year

Events

Debut of Square Pharma as a Partnership Firm.

1958 :
Converted into a Private Limited Company.
1964 :
Technical Collaboration with Janssen Pharmaceutica, Belgium, a subsidiary of
1974 :Johnson and Johnson International, USA.
Licensing Agreement signed with F. Hoffmann-La Roche Ltd., Switzerland.
1982 :
Achieved first position in the Pharmaceutical Market of Bangladesh among all
1985 :national and multinational companies.
Pioneer in pharmaceutical export from Bangladesh.
1987 :
Converted in to a Public Limited Company
1991 :
Initial Public Offering of Square Pharmaceutical Shares.
1994 :
Chemical Division of Square Pharmaceuticals Ltd. starts production of
1995 :pharmaceutical bulk products (API).

Won the National Export trophy for exporting pharmaceuticals.

1997 :
Agro-chemicals & Veterinary Products Division of Square Pharma starts its
1998 :operation.
US FDA/UK MCA standard new Pharmaceutical factory goes into operation built
2001 :under the supervision of Bovis Lend Lease, UK.
Signing of agreement with ROVIPHARM, Vietnam to manufacture and market
2004 :SQUARE products under license in Vietnam.
Secured the top position for the best published accounts and report for 2003 in the
manufacturing category for transparency and excellence in corporate reporting.
2005
1.3

New State-of- the-Art Square Cephlosporins Ltd. goes into operation; built under the
supervision of TELSTAR S.A. of Spain as per US FDA/ UK MHRA requirements.

Global Operations of SPL

SQUARE has extended its range of services towards the highway of global market. It pioneered
exports of medicines from Bangladesh in 1987. Through its extended marketing operations,
SQUARE is now selling its finished goods in many countries of Asia and Europe including:

Cambodia

Myanmar

Nepal

Pakistan
o Russia
o Sri Lanka
o Ukraine
o Yemen

In addition, registration of many of SQUAREs finished goods in other countries of Asia,

Europe, and Africa is now under process.
1.3.1

Partnership and agreement with different world players

1974
: Technical Collaboration with Janssen Pharmaceutical, Belgium, a subsidiary of
Johnson &
Johnson International, USA
1982

: Agreement signed with F. Hoffmann-La Roche Ltd., Switzerland

1999

: Agreement with Bayer AG, Germany

1999

: Agreement with Eisai Co. Ltd., Japan

1999

: Technical know-how transfer to foreign pharmaceutical company

2000

: Establishment of Square Spinnings Limited.

2001
: Operation of new factory with a view to get USFDA/MCA approval and production
support for
expanding export operations.
2002

: Establishment of Square Fashions Limited and Square Knit fabrics Limited.

2003

: Turnover crosses Four Billion Taka mark.

Overview of Square Pharmaceuticals Ltd.

2.1

Manufacturing Facilities

SQUARE is committed to ensure strict compliance with CGMP norms and regulatory
requirements in every phase of manufacturing, quality assurance, and distribution of medicines.
To comply with CGMP SQUARE has state-of-the-art technology in production and quality
control. In addition, USFDA/MCA standard new plant is now at the completion stage.
Documented Quality Management System (QMS) is integral part of all of SPL operations.
People at all levels are committed to adopt advanced technology for continuous development.
Being confident with the sophisticated manufacturing and quality assurance technology of
SQUARE, multinationals from industrialized countries now have agreements with Square for
having their products manufactured in Bangladesh.
2.2 Product Mix
SQUARE has latest technologies for production of a wide varieties of dosage forms including
Tablet, Sustained Release formulation, Capsule, Metered Dose Inhaler (MDI), Injectable, Syrup
(liquid and dry), Suspension (liquid and dry), Pediatric Drops, Nasal & Ophthalmic formulations,
Topical Gel/Ointment/Cream, and oral care formulations.

Current product mix of Square Pharmaceuticals Ltd. comprised of products from the following
types of Drug Delivery Systems:

Tablets
o Non-coated (Vaginal, Dispersible, Chewable, Plain)
o Coated (Sugar coated, Film coated, Enteric coated)
o Sustained released (coated/non-coated)
o Capsules
o Injectables

Vials containing dry powder for injections

Small volume parenterals

Liquids

Oral (suspension, syrup, drops, and stomatologicals)

Topical solutions

Nasal drops

Dry powders

Oral (for reconstitution to make suspension, syrup and drops)

Topical

Semisolids (creams, ointments and gels)

Solid suppository formulations

Metered Dose Inhalers (MDIs)

Dry Powder Inhalers (DPIs)

Sterile Ophthalmic Formulations (drops)

Therapeutic Range (Formulation)

Analgesics/AntipyreticsAnthelmintics

AntiviralsBone resorption preparations

Antiallergics

Dermatologicals

Antidepressants

Enzymes

Antidiabetics

Expectorants/Antitussives

Antidiarrheals

Hematinics

Antiemetics/Gastroprokinetics

Lipid modifiers/Antiobesity

Antifungal Systemic

Nootropics

Antigout

NSAIDs

Antihistaminics

Ophthalmic preparations

Antihypertensive / Antianginal

Sedatives/Tranquilizers/Muscle Relaxants

Antiinfectives/Antibacterial

Bronchodilators/Antiasthmatic

Antimalarial

Vitamin and mineral preparations

Antiprotozoals

Androgen suppressants

Antiseptics/Disinfectants

Anti-migraine

Antispasmodics

Laxatives

Antiulcerants

Neurological

2.3

Quality

SQUARE is committed to ensure better life through quality medicine. SPL has defined its
Quality Policy to fulfill this commitment. To achieve and maintain a steady quality, a range of
sophisticated state-of-the-art technology is engaged in operation. SQUARE has adopted the latest
quality philosophy by organizing a well-equipped Quality Assurance Department in the plant in
addition to Quality Control Department. Above all highly qualified, well-trained, experienced
and dedicated professionals are most valuable assets of Square Pharmaceuticals Ltd.
2.4

Research and Development

SPLs Research and Development is devoted to improve the health care facility of people. Square
Pharmaceuticals Ltd. has brought in advanced technology for its Research and Development
works. Research & Development includes the bibliographic search aided by a resourceful library,
design and selection of process that maximizes efficiency and minimizes the environmental
impact, accelerated and long term stability testing, product quality optimization and translation
of new scientific insights into the products. R&D Department is also devoted to extensive
research and development work in synthesizing bulk chemicals for Chemicals Division. Having
started as an importer of technology, R&D Dept. from 1999 has started to export technology to
SQUAREs global customers. To support Research and Development work latest Information
Technology (IT) is available with us and SQUARE is now fully prepared to meet the challenge
of twenty-first century.
2.5

Chemicals Division for Bulk Drug Manufacturing

In 1995, SQUARE has established a separate division for the manufacturing of bulk drugs.
Currently this division is producing the following bulk chemicals for the domestic
pharmaceutical companies:
v Paracetamol BP/USP
v Diclofenac sodium BP
v Diclofenac free acid INN
v Diclofenac diethylamine
v Diclofenac potassium INN

v Flucloxacillin sodium BP
v Amoxicillin trihydrate BP/USP (compacted and micronized)
v Cloxacillin sodium BP/USP (compacted and micronized)
v Ampicillin trihydrate BP/USP (compacted and micronized)
v Cephalexin monohydrate BP/USP (compacted and micronized)
2.6

Distribution Network

SQUARE is committed to ensure better life through quality medicine. The ultimate motto is to
ensure customer satisfaction by exceeding their level of expectations. SPL has 14 Sales and
Distribution offices in the following places in Bangladesh:

Depot

Address

Phone

Dhaka

355-356, Tejgaon Industrial Area, Dhaka1208.

(880-2) 8828775

Pabna

Hospital Road, Salgaria, Pabna.

(880-731) 66580

Bogra

877/A, MS Road, Bakshi Bazar, Malati Nagar,

(880-051) 64747
Bogra

Rangpur

House # 36, Road # 2, R K Road, Islambag ,

Rangpur.

(880-0521) 63588

Khulna

Alhamdulillah, 25 Usufe Road, Mirzapur,

Khulna-9100

(880-041) 732330,
724654

Barisal

502/532 South Alekanda, 1 No. C & B Pool, C (880-0531) 53661,

& B Road, Barisal.
56778

Comilla

400/363, Shishu Mangol Road, Kandirper

Comilla.

(880-081) 72320

Mymensingh

5/A/04 & 5/A/05, Shaheb Quarter, Kachijuli,

Mymensingh

(880-091) 55143

Chittagong

House No-1/C, Baijid Bostami Road, East

Nasirabad, Chittagong-4000.

(880-031) 654423

Maizdee

234/B, Hospital Road, Maizdee Court,

Noakhali.

(880-0321) 61683

Sylhet

Sabina Mohal, 44, Payra, Darshandewry,

Dorga Mohalla, Sylhet.

(880-0821) 725298

Tangail
Rajshahi
Faridpur

Biswas Betka, Dhaka Road, Tangail

(880-0921) 53488
106, Ambagan, Senanibas Sarak, Rajshahi
(880-0721) 760877
Mission Road, Christian Mission, Police Line,
(880- 0631) 63561
Faridpur

The extensive marketing network comprising of latest technical and logistic support along with
887 skilled and qualified field staffs is a key to succeed in achieving customer satisfaction level

beyond their expectation. The modern warehousing and completely computerized invoicing
facilities of SQUARE ensures just-in-time delivery and high customers satisfaction.
Resources

Total Distribution personnel :

2.7

887

Permanent :

420

Casual :

467

Central Depot :

01

Depot :

14

Vehicles :

212

New Plant of SPL

SQUARE is now on its way to becoming a high performance global company. To this end
SQUARE has built a new plant that went into operations by the end of 2001. This plant is the
first of its kind in Bangladesh with its MCA of UK and USFDA standard manufacturing and
quality assurance facilities.

The implementation of Pharma Unit at Dhaka (Kaliakoir) is carried out under the supervision of
M/s. Tanvec Ltd. of UK. In view of the complex and complicated design and high quality
standard required for USFDA/EU/MCA specifications the progress of implementation has to be
slower. It may be noted that during the year under review total investment increased by Tk.
463,667,368 from Tk. 317,321,566 as on 31-03-98 to 780,988,934 as on 31-03-99 on various
heads as shown below:
Square Dhaka Unit Project work was started from October 1996. After technical review and in
the best interest of the project in order to achieve quality work as State-of-the-art facility to meet
the requirement of the USFDA/MCA Good Manufacturing Practice the original project
completion schedule had to be extended.
The Dhaka Unit New Pharmaceuticals Production Facility at Kaliakoir is one of its kind in the
country to face the challenge of free world market in the beginning of new millennium.
The State-of-Art Facility incorporated certain basic requirement in the area of Purified Water
System. Floor Construction, HVAC System Process Equipment and Validation/ Qualification
Documentation as stipulated by USA, EU and other developed countries.
2.8

Export market

In an effort to expand the market for the pharmaceutical products beyond the border, the
company has been successful in exporting to several countries at an increasing ratio of its
turnover as indicated below:
(Taka in 000)
Year

Turnover
(Gross)

Exports % age of GT

2001-2002
2,422,785

44,361

1.83%

2,055,418

15,082

0.73%

1,827,983

11,503

0.63%

1,595,590

163

0.01%

2000-2001

1999-2000

1998-1999

The company has so far been able to enter into the markets of Russia, Pakistan, Sri Lanka,
Myanmar, Nepal, and Cambodia. It is expected that after the Dhaka Unit goes into production

the company will succeed in entering the markets of developed countries with expanded share of
exports.
2.9

Corporate Financial Highlights

Head
Amount
Authorized Capital

Tk. 1000 Million

Issued, Subscribed and Paid-up Capital

Tk. 496.8 Million

Reserve/Surplus (Retained Earnings)

Tk. 872 Million

Share Premium

Tk. 800 Million

Long Term Loan

Tk. 210 Million

2.10Marketing Performance
2.10.1

Product

Squares product is viewed among the most quality products in the country. This quality image
has increased its credibility among the doctors. It is also pioneer in introducing many new
products sought by the doctors. Introducing new products is one of the important objectives of
the company. But there are some complaints regarding packaging of the products. But the
company has now concentrated in this area and working hard to bring attractive and good
packaging
2.10.2

Pricing

Government fixes Price of most of the essential drugs. The number is 118 products. The
company can fix price of other products but needs to take approval of government. In pricing a
product, Square Pharmaceuticals Ltd. usually follows target pricing. Premium prices cannot be
charged, as all the competitor products are similar and not much distinguishable from each other.
But prices of some products are still higher than the competitors. But since Square
Pharmaceuticals Ltd. does not compromise with the quality, sometimes they have to charge
higher to ensure the highest quality possible.
2.10.3

Promotion

Personal selling is the main weapon in pharmaceutical industry. Medical representatives of the
company go to the doctors to promote the products. The quality of medical reps is assumed to be
the best in Square Pharmaceuticals Ltd. They are selected after a careful scrutiny and are sent to
market after some extensive training. This helps Square Pharmaceuticals Ltd. to maintain the

quality of its medical reps. Advertising can be given only in magazines related to health
profession. Square also utilizes every opportunity to explore this area
2.10.4

Distribution

square distributes its products all over the country using its own distribution channel. It has a
large number of vehicles and sales depots to ensure coverage of the whole country. Its coverage
is the best in the country.

Corporate Profile of SQUARE

Chapter-3
Although Square started its operation in pharmaceutical sector and leader in the field, it is today
a synonym of quality toiletries, health products, textile products and AgroVet products. It has
also expanded its business in real estate, engineering construction, hospitals, electronic media
and other trade & services. SQUARE is now one of the fastest growing and fastest diversifying
conglomerate in Bangladesh.
3.1

Square Family

Square family is currently comprised of following companies:

Square Pharmaceuticals Ltd.
Square Textiles Ltd.
Square Spinnings Ltd.
Square Toiletries Ltd.
Square Consumer Products Ltd.
Square Informatix Ltd.
Square Health Products Ltd.
Square Agro Ltd.
Mediacom Ltd.
3.2

Associated Companies

As part of vast diversification, SQUARE has the following associated companies:

Sheltech
Pioneer Insurance Company Ltd.
Mutual Trust Bank Ltd.
National Housing Finance And Investment Ltd.
Aegis Services Ltd.
Maasranga Productions
3.3

Corporate Headquarters:

Corporate Headquarters of SQUARE is now located at the following address:

SQUARE CENTRE
48, Mohakhali Commercial Area, Dhaka-1212, Bangladesh
Tel. : (880)-2-8827729 (10 lines); Fax : (880)-2-8828608, 8828609
Email: square@bangla.net, Web: http://www.square-bd.com
3.4

Board of Directors

Mr. Samson H. Chowdhury

Mr. Tapan Chowdhury
Dr. Kazi Harunar Rashid
Mr. Samuel S. Chowdhury
Mr. Anjan Chowdhury
Mr. Kazi Iqbal Harun
Mrs. Jahanara Chowdhury
3.5

Chairman
Managing Director
Director
Director
Director
Director
Director

Human resources

In its efforts for human resources development in all spheres of its activities the company offered
various courses of training. The company conducted in-house courses of different duration for
upgrading skill of 395 employees during the financial year of 1998-1999. 22 employees were
sent to various local institutes for training on different topics, 7 employees were sent abroad for
training/attending seminars/symposiums on various subjects including general management, 3
expatriates were also invited for holding various discussion forums for officers/staff of the
company.

The Breakdown of HR
Job Location

Manager
and above

Corporate
Headquarters

46

123

123

292

Chemicals
Division

12

64

78

Pabna Plant

19

59

459

537

Executive Non Executive

Total

Dhaka Unit

14

61

168

243

Distribution

17

174

194

Field
Force(SPL)

942

Field
Force(Agrovet)

70

Field
Force(Pesticide)

25

Total HR

84

272

988

2381

The Supervision Ratio

Criteria

Supervision

3.6

Manager

Executive

Span of Supervision

84

272

1:3

Executive

Non Executive

272

988

Activities of Key Functional Departments in SPL

1:4

As per the latest organogram SPL had 20 (twenty) functional departments for its operation. The
names of the departments are as follows:
1. Information Technology (IT) Department
2. Medical Services Department (MSD)
3. Product Management Department (PMD)
4. Sales Department
5. Distribution Department
6. International Marketing Department
7. Market Research and Planning Cell
8. Quality Management and Audit Dept.
9. Production Planning and Inventory Cell
10. Engineering Department
11. Production Department
12. Commercial Department
13. Personnel and Administration Department
14. Technical Services Department
15. Human Resource Training and Development Department
16. Quality Control Department
17. Quality Assurance Department
18. AgroVet Department
19. Accounts and Finance Department
20. Accounts (New Venture) Department
Organizational Structure

The following departments manage domestic marketing operation:

1. Product Management Department (PMD)
2. Sales Department
3. Medical Services Department (MSD)
4. Distribution Department

5. Market Research and Planning Cell

The following paragraphs describe the key functions of the above-mentioned Departments:
Information Technology (IT) Department
The main functions of IT Department are as follows:
1. Provide computer and other related accessories supports to all the user
2. Maintenance of server and ensure smooth LAN operation
3. Provide up to date technical and software support to all the sectors of SQUARE
4. Development and maintenance of centralized databases and provide routine and ad hoc
reports for management decision making.
Medical Services Department (MSD)
The main functions of MSD are as follows:
Arranging clinical meeting with the physicians on different products
Provide answers to different queries of the physicians through mail or telephone
Arranging education programs for the rural medical practitioners
Publishing of medical journals
Arranging of special promotional campaign of different products
Product Management Department (PMD)
PMD is the core and centralized department for managing the total marketing effort. Basically
PMD performs the all planning, implementation of plans as part of marketing management
functions. The two key functions of PMD are as follows:
1.Introduction of new product into the market
2.Manage the existing portfolio to achieve the marketing objectives.
To this end PMD undertakes all relevant activities including the following:
1. Preparation of Marketing Plan.
2. Designing and development of promotional materials

3. Training of field forces

4. Feasibility study of new products
5. Management of regulatory affairs with Drugs Administration
6. Preparation of printed promotional material (literature/pad/brochure/show card etc.).
7. All relevant coordination works with supplier/factory and procurement department
concerning machinery and raw materials that will be used to manufacture the concerned
brands.
Sales Department
1. Pay regular visit to the doctors; show the benefits of new existing products with the help
of promotional tools.
2. Monitor the competitors activities.
3. Handles initial product queries from doctors and product complain from the market.
4. Receive sales order from the retailers /drug stores.
5. Coordination among different markets
6. Market rearrangement
7. Handling different problems of field forces
Distribution Department
Ensure smooth distribution of products to all over the country
Collection of payments from the customers
Performs functions as the representative of SPL at the depot level.
Maintenance of vehicles and depots
International Marketing Department
Exploration of new markets all over the world
Operating of export business in the different countries
Provide training to field forces in overseas countries

Provide all types of documents for registration of SPLs products in overseas countries.
Market Research and Planning Cell
Performing market survey on the Bangladesh Pharmaceutical Market
Regular prescription share analysis and report generation for SPL market share analysis.
Performing different market research work on different issues
Provide all kinds of support to Field Colleagues in effective planning in the market level.
Quality Management and Audit
Ensure the practices of Quality Management System (QMS) at every stage of operations of SPL
in full compliance with ISO 9001.
To monitor the activities to ensure compliance with defined quality policy at every stage of
business.
Develop process and instructions for continuous development of operations to increase
productivity.
Production Planning and Inventory Cell (PPIC)
Prepare the monthly production schedule of different products
Maintain the inventory status of different raw materials and packaging materials
Technical Services Department (TSD)
1. Provide technical support to QC, QA, Production and other departments with regards to
any kind of technical issues.
2. To procure new Raw Material and production and quality facilities in coordination with
Commercial Dept.
3. Development of formulation of new products
4. Selection of machinery and equipment including spare parts.
5. Coordination and follow-up of the designing and implementation of the Master Plan of
the factory. All matters related to development of factory facilities.
6. Handling various forms of product complaints from market, field forces, and different
departments.

7. Recipe development and necessary changes in formulations, product improvement.

Current performance of SPL.
4.1

Corporate financial highlights

As on March 31, 2006 the corporate financial position of SQUARE was as follows:
1. Authorized Capital

Tk.
1000 Million

2. Issued, Subscribed and Paid up Capital

Tk.

3. Reserve/Surplus (Retained Earnings)

Tk.

4. Share Premium

Tk.

5. Long Term Loans

Tk.

436.8Million 4.2

Corporate
872 Million operational results
The following three years
800 Million financial data proves that
SPL is operating through
maximizing the shareholders
benefits.
210 Million
(Figures in thousands)

6. Number of Shareholders (2006)

13,206
2003-2004

2004-2005

2005-2006

(12 months) (12 months) (12 months)

Turnover (Gross)

3451523

4234244

4729743

Value Added Tax

450577

563433

663892

Turnover (Net)

3000946

3670811

4065851

Gross Profit

1081340

1435655

1466282

Net Profit before

691636

905736

929604

Tax

Net Profit after Tax

573677

759448

764885

Paid-up Capital

300,000

300,000

300,000

Earning per Share

229.47

253.15

254.96

Dividend per Share

70.00

75.00

70.00

4.3

Output/Capacity utilization

The actual production of the various categories of products (except inhalers) including chemicals
increased substantially leading to higher capacity utilization as summarized below:

Production (000)
Product
Categories

Units
2005-2006 2004-2005

% age
increase /
(Decrease)

Capital Utilization

2005-2006 2004-2005

Tablets

Pcs

1829089

1736561

5%

105%

231%

Capsules

Pcs

295234

286350

3%

96%

119%

Liquids

Bottles

21210

16105

32%

118%

153%

Injectables

Pcs

13325

23075

(42%)

74%

90%

8651

10778

(20%)

192%

207%

5 ENT Preparations Phials

Opthal
Preparations

Phials

1083

966

12%

181%

116%

Dry Syrup

Bottles

4048

2634

54%

169%

88%

Inhalers

Can

298

148

101%

50%

Basic Chemicals

Kg

219

201

9%

64%

59%

10 Tablets-AgroVet

Pcs

1262

1697

(26%)

67%

99%

11 Powder-AgroVet

Gm

34911

15252

129%

189%

127%

The capacity utilization rate in some areas of production decreased due to strategic changes in
favor of increased production of higher value added products in each category resulting in higher
turnover in value.
4.4

Dhaka Expansion

Despite numerous oddities and complex artifices usually associated with a state-of-art plant, the
management is in the final phase of implementation of the project with the planning, supervisory
and technical support form the consultants e.g. M/s Bovis Lendles and Tanvec of UK and
KUPPA collaboration of Thailand, though the target of commissioning had to be revise / shifted a
few times in the past. It may be appreciated that the project in hand is only of its kind in the
region with USFDA and EU pharmaceutical manufacturing standards requiring highly rigid and
unquestionable quality of materials, workmanship, and performance. The process of
implementation has often suffered from various hazards of communication, transports,
movements and planned accomplishments was not achieved fully due to malfunctioning of ports,
airports, airlines, shipping services, etc. Due to carious reasons as are rampant in the country
since the project was taken in hand. Considering all these factors and the technical complexities
of such a project as well as non-availability of requir5ed man-machine-material in Bangladesh,
the delay in implementation of the project would not be termed unusual and abnormal. It may
also be mentioned that the consultants also had often failed to identify and consider every
possible situation in Bangladesh. In spite of these the unit is scheduled to start functioning by
end 2001.
During the year 2005-2006, an amount of Tk. 807,016,104 has been invested on various heads as
detailed below:

Particulars
As on 31-03-05 As on 31-03-06 Increase
Land & Land Development
86,725,346
107,550,519 20,825,173

Building/Civil Work

318,783,360

812,111,406 493,328,04
3

348,897,963

576,923,068 228,025,10
5

6,315,634

19,954,395 13,638,761

5,577,622

47,501,489 41,923,867

Imported Plant & Machinery

Other Assets

Interest during Construction

Period
Unallocated Expenditures

14,689,009

23,964,161

9,275,152

Total Tk.
780,988,934

1,588,005,038 807,016,10
4

The remaining implementation work is expected to be now completed by end of 2004 at an

estimated final cost of Tk. 1,830 million and commence production thereafter.
Square Dhaka Unit Project work was started from October 1996, which completed by end of
March 2000. After technical review and in the best interest of the project in order to achieve
quality work as State-of-the-art facility to meet the requirement of the USFDA/MCA Good
Manufacturing Practice the original project completion schedule had to be extended.
The Dhaka Unit New Pharmaceuticals Production Facility at Kaliakoir is going to be one of its
kind in the country to face the challenge of free world market in the beginning of new
millennium.
The State-of-Art Facility incorporated certain basic requirement in the area of Purified Water
System. Floor Construction, HVAC System Process Equipment and Validation/ Qualification
Documentation as stipulated by USA, EU and other developed countries.
4.5

Export market

The companys export drive is being continued with great stress. However, there are number of
problems in exports of medicines from Bangladesh. As a result, the value of exports in Taka
declined by 9.1%. To counter this in future, registration process of products for export purposes
has been initiated in few more countries. The company expects to make a break through in
exports when the Dhaka Unit is commissioned. (Taka in 000)
Year

Turnover
(Gross)

Exports % age of gross

turnover

2005-2006
2,655,952 40,324

1.52%

2,422,785 44,361

1.83%

2,055,418 15,082

0.73%

2004-2005

2003-2004

The company has so far been able to enter into the markets of Russia, Pakistan, Sri Lanka,
Myanmar, Nepal, Combodia. It is expected that after the Dhaka Unit goes into production the
company will succeed in entering the markets of developed countries with expanded share of
exports.
4.6

Financial results

The operating financial results of the company for the year under report as compared to the
previous year are as follows:

Figure in thousand : BDT

2005-06

Turnover (Gross)
Value Added Tax
Turnover (Net)

2002-03

2001-02

7,085,553 6,199,135 5,482,088 5,482,088

4,234,244

995,648

2004-05

867,088

2003-04

760,536

663,892

563,433

6,089,905 5,332,047 4,721,552 4,065,851

3,670,811

Gross Profit

2,564,503 2,172,593 1,906,592 1,466,282

Net Profit before Tax

1,533,043 1,513,019 1,151,636

929,604

905,736

Net Profit after Tax

1,165,865 1,255,848

764,885

759,448

Shareholders Equity

6,402,015 5,568,790 4,590,142 3,851,098

3,273,714

Total Assets

9,298,987 7,907,933 6,021,497 5,164,320

4,526,115

Total Bank Borrowings

2,334,925 1,902,331

988,611 1,070,163

1,098,874

Total Current Assets

4,031,685 3,242,502 2,016,056 1,441,552

1,452,494

Total Current Liabilities

2,260,755 1,949,949 1,250,676 1,247,967

1,181,473

Current Ratio

4.7

1.78

1.66

970,044

1.62

1.16

1,435,655

1.23

Concluding comments

Square Pharmaceuticals Ltd. has a very good working environment where the employees get
enough opportunity to show their ability and creativeness. Its communication channel is superb.
Informal channel of communication is very active. Many interdepartmental issues are solved in
informal meetings, often over a cup of tea. Introduction of LAN has smoothened the process.
Every member of Square Pharmaceuticals Ltd. feels like he or she is a member of the Square
family. This family feeling is a big asset for this company. Most of the employees are dedicated
and motivated to work. Since good performance is always highlighted and creative ideas
welcomed people are eager to contribute their best.
Square Pharmaceuticals Ltd. believes in honesty in every phase of business. The management
promotes this idea to its workers. The image of the company is also good all over the country.
Customers all over the country recognize Square as a quality company and an honest company.
SWOT ANALYSIS

Chapter:5
Strengths
Nationwide & worldwide recognition.
Big multinational clients.
Quality assurance.
Providing quality research.
Client satisfaction.
Continuous innovation and investment on core categories and new business initiatives.
Constant focus on effective and innovative ways of consumer communication.
Qualified employees.
Reliable & trusted employees.
ISO certified.
Learning economy.
Weakness
Employee turnover (as it reveals the secrets of the company).
Unnecessary permanent employees almost in every department.
Excess workload on employees.
Too much importance attached to the role of top management.
High production cost.
High marketing expenses affect their margin significantly.
Opportunities
Big unserved but potential international market.
Entering into new foreign pharma markets.

Threats
Too many competitors.
Frequent change in government rules & regulations.
Unstable political situation.
Regular devaluation of money increasing the cost of exports.
Part Two: The Project
Introduction
Todays Pharmaceutical industry is very much competitive with more than 200 companies
operating nationwide. Though only few of them are operating in national scale, the market is
very competitive. The national players are fighting aggressively for grabbing some market share.
In addition of the local share, some of the major pharmaceuticals are also trying to find market of
their products in foreign markets.
Furthermore, after implementation of WTO agreement, as the local market will see many foreign
players, there will be scope to export medicines to other countries as well. To get a firm foothold
then, Square and other companies need to enter some foreign markets from now.
Different countries have different environment that includes social, cultural, legal, infrastructural, political environments. Depending on these environments, entry strategy to each
country must be customized. So, it is essential to set specific entry strategy for each country a
company wants to enter.
1.1

Title of the Report

Title of the report is Deciding Entry Mode for Square Pharmaceuticals Ltd. for its export
operations in Russian Pharmaceutical Market.
1.2

Objective of the Study

Major objective of the study is to help SPL to draw an entry strategy for Russian Pharmaceutical
Market. Specific objectives include:
To get an overview of Squares global operation
To develop a country profile of Russia
To get an in-depth view of the Russian pharmaceutical market
To set an entry strategy based on the above information

To discuss some implementation issues

1.3

Scope of the Study

The study will concentrate on Russian Pharmaceuticals Ltd. market only.

1.4

Methodology

Source of Information:
The report is primarily based on secondary data on Russian market. Books and journals were
consulted for theoretical material. Previous studies made regarding this market have also been
used to get an insight.
Some documents of Square Pharmaceuticals International Marketing Department were used.
Managers related to international operation of Square were interviewed for information and
clarifications.
1.5

Limitations

The primary limitation of the report is that it will be based on facts, accumulated from word of
mouth, while consulting secondary data. Some information presented in the report may be
biased, as the companies may be reluctant to provide all the information.
Squares Global Operation
Square extended its horizon by exporting and marketing its products abroad. Square is now
strengthening its export operations on its way to becoming a high performance global competitor
by supplying quality pharmaceuticals at most competitive price. Starting its first export to UK
and Singapore in 1987, it is now exporting to several countries of Europe and Asia, which
includes Russia, Sri Lanka, Pakistan, Myanmar, Kosova, Nepal and Yemen. As recognition to its
export contribution to national economy, Square received the National Export Trophy in 1997.
2.1

Sales earnings from Global Operations

Company
Square
2.2

2003(MillionTaka)
44

2004(MillionTaka)
41

Countrywide breakdown (2005)

Pakistan 15 Million Taka

Sri Lanka15 Million Taka
Myanmar.. 10 Million Taka

2005(MillionTaka)
41.5

2006(MillionTaka)
49

Nepal.0.8 Million Taka

Yemen.. 0.4 Million Taka
Kosova. 0.3 Million Taka
.
Total = 41.5 million taka
2.3

Mode of entry strategy adopted in different countries

Pakistan Export
Sri LankaExport
Myanmar.. Export
Nepal.Export
Yemen..Export
Kosova. Export
RUSSIA: COUNTRY PROFILE
3.1

RussiaGeography & Others

Country name:
Conventional long form: Russian Federation
Conventional short form: Russia
Local long form: Rossiyskaya Federatsiya
Local short form: Rossiya
Former: Russian Empire, RussianSovietFederativeSocialistRepublic
Location: Northern Asia (that part west of the Urals is sometimes included with Europe),
bordering the Arctic Ocean, between Europe and the North Pacific Ocean.
Area: 17,075,200 sq km
Land: 16,995,800 sq km
Water: 79,400 sq km

Area comparative: slightly less than 1.8 times the size of the US.
Land boundaries: 19,961 km
Coastline: 37,653 km
Maritime claims: continental shelf: 200-m depth or to the depth of exploitation.
Exclusive economic zone: 200 NM, territorial sea: 12 NM
Climate: Ranges from steppes in the south through humid continental in much of European
Russia; Sub-arctic in Siberia to tundra climate in the polar north; winters vary from cool along
Black Sea coast to frigid in Siberia; summers vary from warm in the steppes to cool along Arctic
coast.
Land use: arable land: 8%, permanent crops: 0%, permanent pastures: 4%, forests and
woodland: 46%
other: 42% (1993 est.)
Irrigated land: 40,000 sq km (1993 est.)
Natural hazards: Permafrost over much of Siberia is a major impediment to development;
volcanic activity in the Kuril Islands; volcanoes and earthquakes on the KamchatkaPeninsula
Geography:
Largest country in the world in terms of area but unfavorably located in relation to major sea
lanes of the world; despite its size, much of the country lacks proper soils and climates (either
too cold or too dry) for agriculture; Mount Elbrus is Europes tallest peak
3.2

RussiaPeople

Population: 145,470,197 (July 2001 est.)

Age structure:
0-14 years: 17.41% (male 12,915,026; female 12,405,341)
15-64 years: 69.78% (male 49,183,000; female 52,320,962)
65 years and over: 12.81% (male 5,941,944; female 12,703,924) (2001 est.)
Population growth rate: -0.35% (2001 est.)
Birth rate: 9.35-births/1,000 population (2001 est.)
Death rate: 13.85-deaths/1,000 population (2001 est.)

Net migration rate: 0.98 migrant(s)/1,000 population (2001 est.)

Sex ratio:
At birth: 1.05 male(s)/female, under 15 years: 1.04 male(s)/female, 15-64 years: 0.94
male(s)/female
65 years and over: 0.47 male(s)/female, total population: 0.88 male(s)/female (2001 est.)
Infant mortality rate: 20.05 deaths/1,000 live births (2001 est.)
Life expectancy at birth:
Total population: 67.34 years
male: 62.12 years, female: 72.83 years (2001 est.)
Total fertility rate: 1.27 children born/woman (2001 est.)
Nationality: noun: Russian(s) , adjective: Russian
Ethnic groups: Russian 81.5%, Tatar 3.8%, Ukrainian 3%, Chuvash 1.2%, Bashkir 0.9%,
Byelorussian 0.8%, Moldavian 0.7%, other 8.1%
Religions: Russian Orthodox, Muslim, other
Languages: Russian, other
Literacy:
Definition: age 15 and over can read and write
Total population: 98%, male: 100%, female: 97% (1989 est.)
3.3

RussiaEconomy

Economy:
A decade after the implosion of the Soviet Union in 1991, Russia is still struggling to establish a
modern market economy and achieve strong economic growth. In contrast to its trading partners
in Central Europe, which were able to overcome the initial production declines that accompanied
the market reforms within three to five years. Russia saw its economy contract for five years, as
the executive and legislature dithered over the implementation of many of the basic foundations
of a market economy. Russia achieved a slight recovery in 1997, but the governments stubborn
budget deficits and the countrys poor business climate made it vulnerable when the global
financial crisis swept through in 1998. The crisis culminated in the August depreciation of the
ruble, a debt default by the government, and a sharp deterioration in living standards for most of
the population. The economy rebounded in 1999 and 2000, buoyed by the competitive boost

from the weak ruble and a surging trade surplus fueled by rising world oil prices. This recovery,
along with a renewed government effort in 2000 to advance lagging structural reforms, have
raised business and investor confidence over Russias prospects in its second decade of
transition. Yet serious problems persist. Russia remains heavily dependent on exports of
commodities, particularly oil, natural gas, metals, and timber, which account for over 80% of
exports, leaving the country vulnerable to swings in world prices. Russias agricultural sector
remains beset by uncertainty over land ownership rights, which has discouraged needed
investment and restructuring. Another threat is negative demographic trends, fueled by low birth
rates and a deteriorating health situation including an alarming rise in AIDS cases that have
contributed to a nearly 2% drop in the population since 1992. Russias industrial base is
increasingly dilapidated and must be replaced or modernized if the country is to achieve
sustainable economic growth. Other problems include widespread corruption, capital flight, and
brain drain.
GDP:
Purchasing power parity $1.12 trillion (2005 est.)
GDP real growth rate: 6.3% (2005 est.)
GDP per capita: purchasing power parity $7,700 (2005 est.)
GDP composition by sector:
Agriculture: 7%, industry: 34%, services: 59% (2005 est.)
Population below poverty line: 40% (2005 est.)
Household income or consumption by percentage share: lowest 10%: 1.7%, highest 10%: 38.7%
(2004)
Inflation rate (consumer prices): 20.6% (2005 est.)
Labor force: 66 million (2005)
Labor force by occupation: agriculture 15%, industry 30%, services 55% (2004 est.)
Unemployment rate: 10.5% (2000 est.), plus considerable underemployment
Budget: revenues: $40 billion, expenditures: $33.7 billion, including capital expenditures of
$NA (2004 est.)
Industries: Complete range of mining and extractive industries producing coal, oil, gas,
chemicals, and metals. All forms of machine building from rolling mills to high-performance
aircraft and space vehicles; shipbuilding; road and rail transportation equipment;
communications equipment; agricultural machinery, tractors, and construction equipment;

electric power generating and transmitting equipment; medical and scientific instruments;
consumer durables, textiles, foodstuffs, handicrafts
Industrial production growth rate: 8.8% (2004 est.)
Electricity
Production: 798.065 billion kWh
Consumption: 728.2 billion kWh
Exports: 20 billion kWh
Imports: 6 billion kWh
Agriculture products: grain, sugar beets, sunflower seed, vegetables, fruits; beef, milk
Exports: $105.1 billion (2005 est.)
Commodities: petroleum and petroleum products, natural gas, wood and wood products, metals,
chemicals, and a wide variety of civilian and military manufactures
Partners:US 8.8%, Germany 8.5%, Ukraine 6.5%, Belarus 5.1%, Italy 5%, Netherlands 4.8%
(2004)
Imports: $44.2 billion (2005 est.)
Commodities: machinery and equipment, consumer goods, medicines, meat, grain, sugar, semi
finished metal products
Partners:Germany 13.8%, Belarus 10.7%, Ukraine 8.3%, US 7.9%, Kazakhstan 4.6%, Italy 3.8%
(1999)
Debt external: $163 billion (2005 est.)
Economic aid recipient: $8.523 billion (2003)
Currency: Russian ruble (RUR)
Exchange rates: Russian rubles per US dollar 28.3592 (January 2001), 28.1292 (2000),
24.6199 (1999)
3.4

Russia. Communications

Telephones

Main lines in use: 30 million (1998)

Mobile cellular: 2.5 million (October 2000)
Radios: 61.5 million (1997)
Televisions: 60.5 million (1997)
Internet country code: .ru
Internet Service Providers (ISPs): 35 (2000)
Internet users: 9.2 million (2000)
3.5

RussiaTransportation

Railways: 149,000 km
Highways: total: 952,000 km
Waterways: 95,900 km (total routes in general use)
Ports and harbors:
Arkhangelsk, Astrakhan, Kaliningrad, Kazan, Khabarovsk, Kholmsk, Krasnoyarsk, Moscow,
Murmansk, Nakhodka, Nevelsk, Novorossiysk, Petropavlovsk-Kamchatskiy, Saint Petersburg,
Rostov, Sochi, Tuapse, Vladivostok, Volgograd, Vostochnyy, Vyborg
Merchant marine: total: 878 ships (1,000 GRT or over) totaling 4,314,485 GRT/5,344,958
DWT
Ships by type: barge carrier 1, bulk 20, cargo 543, chemical tanker 4, combination bulk 21,
combination ore/oil 7, container 31, multi-functional large-load carrier 1, passenger 35,
passenger/cargo 3, petroleum tanker 164, refrigerated cargo 24, roll on/roll off 17, short-sea
passenger 7
Airports: 2,743 (2000 est.)

PHARMA MARKET, RUSSIA, AN IN-DEPTH ANALYSIS

4.1

Overviews of Health care system:

Russia is one of the largest countries in the world, with a population of 148 million. Currently
Russia is facing, among other problems, a deep crisis of its health care system revealed in low

health care indicators, poor condition of health care facilities, return of certain diseases (such as
diphtheria, cholera, and tuberculosis) which have been forgotten for decades.
Experts cite the collapse of the Russian state-run health care system and declining living
standards induced by economic reform as the fundamental causes of these problems. The current
difficulties are principally due to lack of funding and the low political priority placed on health
care by the Russian government. The federal budget allocation for health care in 1997 accounted
for only 1.53 percent of the total budgetary expenses and 0.31 percent of the Gross Domestic
Product. Current spending practices in the Russian health care sector cause further concern for
foreign investors.
Because Russian health care spending has for years been inefficient, resulting in large purchase
of medicines and medical equipment with low clinical effect, Russia represents a promising
market for foreign companies. In fact, buyers are too often ready to spend money and do not
demand high quality in the goods they buy. The Ministry of Health is trying to improve
procurement practices, and has established Public Council on pharmaceutical supplies composed
of representatives of Russian pharmaceutical enterprises. At the same time, government policy,
according to the former Minister of Health Ms. Dmitrieva, has attempted to provide maximum
support for local producers of pharmaceuticals and medical equipment through tax benefits and
other measures. The Ministry prefers to promote foreign investment in the medical industry as an
alternative to imports of Western medical goods.
4.2
4.2.1

Market Highlights & Best Prospects

Market Profile

The pharmaceutical sector has undergone significant change in the past several years. Despite
progress in decentralization of production and distribution of pharmaceuticals and relative
saturation of the market, many important issues remain on the table of the policy makers and
industry participants. A long-standing deficit in pharmaceutical supply continues to hamper
effective health care. Another factor that aggravates the current pharmaceutical market
difficulties is low funding. Only 9 percent of the total funds spent on health care in Russia go
into the purchases of pharmaceuticals. Government financing of pharmaceutical purchases is
very low. Individual patients pay for more than 70 percent of all pharmaceutical purchases, the
rest of the purchases are paid by local and federal budgets. Despite the fact that the Russian
population is larger than the population of Japan or Germany, the pharmaceutical market in
Russia is several times smaller than in Japan or Germany.
4.2.2

Domestic market

Over the last three years the production of pharmaceuticals has plunged by almost 65 percent in
volume terms and the range of available products has shrunk drastically. Over the same period,
production of cardiovascular, anti-tumor and psychotherapeutic drugs has declined by 30 to 40
percent. In spite of the collapse in volume, producers have raised prices to international levels to
the extent where total domestic output measured in US dollars has actually increased by over 150
percent over the last four years.

Over the last five years the production of substances has declined by 60 percent. The domestic
producers raised the prices of substances drastically making them less competitive in comparison
to imported ones. As imported substances are generally much cheaper than those produced
locally, many factories prefer to buy them abroad, especially in India and China. Ninety-three
percent of pharmaceuticals manufactured in Russia are made from foreign chemicals.
The production of vaccines has fallen even more dramatically. Russian Health Minister Tatyana
Dmitrieva has stated that Russias production of vaccines and serums the countrys only
protection from infectious diseases is at a standstill. The government owes vaccine and serum
producers $40 million.
In 1997 Russian pharmaceuticals production showed some improvement. According to
investment bank Alfa Capital, Russian pharmaceuticals production increased 15 percent in the
first nine months of 1997, compared with less than 2 percent for industrial production as a whole.
The top 50 Russian companies profit margins vary from 25 to 45 percent, nearly twice that of
comparable companies in the West. According to the Alfa Capitals research, the expected
sectors annual growth rates for the next few years are estimated at 15 percent. Higher rates are
projected for such companies as ICN, Moskhimpharmpreparaty, Akrikhin, and Bryntsalov.
Six years ago about 70 percent of medications were produced locally and one third imported; the
ratio has now reversed: only one third of pharmaceuticals is produced locally, while 65 percent is
imported.
4.2.3

Import market

Domestic pharmaceutical producers supply about 35 percent of the total market while the ratio of
imported drugs in the market is 65 percent. Imported pharmaceuticals have increased their
presence in the Russian market in the last several years thanks to a number of factors, including
high unsatisfied demand for pharmaceuticals, intensive advertising by foreign companies, and
Russian health care authorities actions toward streamlining the registration procedures for
foreign pharmaceuticals. Pharmaceutical imports were up 15 percent in 1996 compared with
1995. In 1997 they were up 35 percent in comparison to 1996.
Although many types of pharmaceuticals have become more available recently, on average only
60 percent of the populations drug requirements are being met, with the situation considerably
worse in some regions. At the same time, the ability of patients in need to gain access to high
quality medicines is severely limited.
With a low rate of consumption and a high rate of population, the Russian pharmaceutical market
offers enormous potential to pharmaceutical manufacturers. The report on the Russian
pharmaceutical market done by the Russian investment bank Alfa Capital confirms that in 1996
per capita pharmaceutical consumption in Russia was only 33 percent of that of Germany and 20
percent of that of the United States.

The biggest advantage for the industry is the 30 percent gap that exists between demand and
available supply. Market demand will continue to expand as government health care allocations
and real wages begin to increase.
4.2.4

Best selling therapeutic Classes:

Local production does not meet the demand for many types of drugs needed for treatment.
Pharmaceutical imports help solve the problem, but there is still large unsatisfied demand for
many types of medicines. According to local market surveys, the best sales prospects in the
Russian pharmaceutical market include cardiovascular drugs (18.2 percent of the total demand),
analgesics, antiseptics & anti-inflammatory drugs (16.7 percent), antibiotics (14.3 percent),
vitamins (9.8 percent), tranquilizers, psychotherapeutic medicines & central nervous system
stimulants (7.5 percent), antivirus drugs (5.8 percent), antihistaminic preparations (4.2 percent),
purgatives (3.3 percent), ferments (3.0 percent), and other pharmaceuticals (17 percent of total
demand).
According to the American Chamber of Commerce, the area of OTC drugs deserves additional
attention. For the growing pharmaceutical industry, OTCs represent perhaps the most attractive
market to pursue. Whereas prescription drug markets rely heavily on limited state funds, the
consumer market for OTC drugs is growing rapidly. From the viewpoint of the Russian Health
Care Reform, appropriate self-medication may play a positive role in reducing demand on
primary health care facilities. A wide spectrum of regulatory issues faces policy makers in trying
to ensure safety and proper education concerning self-medication practices. In this and other
areas of pharmaceutical regulation, Russia has the opportunity to build on experience of other
countries in order to reach the most effective policy decisions.
Research done by the Russian Investment Bank Alfa Capital estimates that by the year 2000,
sales of painkillers are expected to increase by 25 percent from 1995 levels. The research adds
that sales of gastric medicines are expected to increase by 20 percent over the same period while
sales of non-prescription cough and cold medicines may jump by 60 percent. Vitamins are
predicted to grow even larger by 80 percent.
Alfa Capitals research emphasizes the potential growth in the vitamin market. In 1993 the only
vitamin B-1 production facility in Russia was closed. Three years later, Russias Nutrition
Institute of the Academy of Sciences reported that consumption of some essential vitamins was
barely 50 percent of recommended levels. In 1996 the Russian vitamin market was estimated at
90 million dollars, or 0.61 dollar per capita. Imports accounted for 86 percent of total vitamin
production, covering 37 different types. The rapid expansion of vitamin imports is evidently at
great expense of domestic market share. Considerable potential in this area remains for both
foreign and domestic producers, as Russian consumers spend approximately the same amount on
all pharmaceuticals as Western consumers spend on vitamins. Many Russian consumers have
begun to prefer foreign-made vitamins to Russian-made ones. Alfa Capital researcher maintains
though that Russian consumers perceive domestically produced vitamins as superior to imported
brands and that Russian medical professionals, often, continue to recommend the domestic
variety.

4.3

Customer analysis

The major end-users of pharmaceuticals are federal, regional and local authorities, clinics,
hospitals and polyclinics, pharmacies, and private consumers.
As centralized purchases of pharmaceuticals from the federal budget decline, regional
governments, hospitals, pharmaceutical wholesalers and pharmacies have become major buyers
of pharmaceuticals. Final end-users of pharmaceuticals are, of course, individuals who pay for 70
percent of all pharmaceutical purchases. Despite declining living standards of the Russian
population, purchases of pharmaceuticals by citizens of Russia have been growing.
The federal government is still a significant buyer of pharmaceutical products in Russia. In 1996,
different bodies of federal government spent about 132 million dollars on drugs consumed by the
military, medical research centers, ministry of emergencies. Federal government purchases
pharmaceuticals to execute nation-wide programs in the health care area, such as Diabetes
Program, Vaccination and Prevention Program, Mother and Child Care Program, Anti-AIDS
Program, etc.
Since early 1990 when the central drug purchasing system ceased to exist, territories have
formed their own procurement practices. Any regional budget has a health care section to finance
such items as administrative costs of regional health department or fixed capital expenditures of
medical institutions in its territory. This money is available to the institutions and distributed by
lobbying capabilities and political weight of clinics chief physicians.
Operating costs of clinics (including pharmaceuticals) are covered by regional Mandatory Health
Insurance Funds. In most regions, those funds contract local Pharmacias (government drug
procurement agencies which among other functions supply municipal chains of pharmacies and
clinics) to supply local hospitals with basic drugs. Thus, obtain a certain economies of scale as
compared to the situation when each hospital would run its own supply department and buy
products in smaller quantities. Russia is now trying to reform the system of drug purchases.
Particular emphasis is placed on the elimination of direct purchases by hospitals and the
requirement of tenders for the purchase of all reimbursed medicines.
There are several factors that influence the actual demand for pharmaceuticals. First, a large
portion (46%) of the population is chronically ill or disabled. There are between 33 and 44
million cases of infectious diseases annually. About 85 percent of the population lives in areas
where air quality does not correspond to the norms set by the Ministry of Health (mainly due to
pollution from cars and industry).
Second, Russia has a high proportion of retirees (19%of the population) and a sharply worsening
mortality rate, which in 1996 was 14.4 per 10,000 people, versus 10.5 in the European Union.
From 1991 to 1995 the general mortality rate rose 31.6 percent, the average life expectancy fell
by four years, reaching 65 years in 1995, and mortality in the most active segment of the
population rose to 60 percent.

The actual demand differs from the solvent demand. The actual demand is based on the needs of
the public for medicines, but cannot be satisfied due to the inability of the state or population to
buy them. In reality the size of the market is determined by the solvent demand, which is based
on the purchasing power of the population and is significantly lower than the actual demand.
4.4

Disease Prevalence

In recent years in Russia social stratification is taking place with an accelerated differentiation
population in their financial positions. It is very important to establish peculiarities in health and
health problems in different groups of population.The survey was conducted in 1999 (sample of
population 4017 people in 4 regions of Russia), using the questionnaires.
The prevalence of main diseases is established in different population groups in connection with
the social status of patients. The obtained outcomes show higher prevalence the cardiovascular
diseases, diabetes, chronic lung diseases in poor families. So the prevalence of hypertensive
disease was 21.6% among people indicated the gross deterioration of their financial positions, in
the solvent group with improved them 8.5% in the same age. The prevalence of diabetes in
groups of population of middle level of material conditions 2.4%, in poor families 7.7%.
None of the diabetics indicated the material well-being of their family as rich. Almost 60% of the
people with lower level material conditions indicate a disadvantage in their nutrition; almost
25% patients have no opportunity to buy necessary medicines.
4.5

Distribution Pattern

Russias existing system of pharmaceutical distribution exhibits a large degree of fragmentation.

Likewise, the system of retail pharmacies remains undeveloped. There are about 4,000
pharmaceutical wholesalers in Russia. Of these, fewer than 30 offer what may be considered
nationwide coverage. About 10 percent of pharmaceutical wholesalers are direct importers with
remaining 90 percent either dealing with exclusively domestic products or reselling drugs
imported by bigger competitors. Private distributors now handle over 90 percent of local
pharmaceutical distribution.
While most of Russian wholesalers are small to medium size companies operating only within
their regions, some distributors are big nation-wide networks or vertically integrated structures.
They buy directly from manufacturers and often possess their own manufacturing capabilities in
Russia and/or other CIS republics as well as pharmacy network in major cities.
All wholesale distributors can be divided into several categories. The first category is Pharmacies
which are state-controlled bodies to supply their regions with drugs for the public sector. Oldtime state employees who made their careers during Soviet times of central purchasing often
manage pharmacies. Their motivations and business practices often differ from those of the
managers of private companies.
In the second category are companies transformed from former state-owned suppliers in the
process of privatization in 1993-1995. Old-time state employees who made their careers during

Soviet times of central purchasing also manage them. Their motivations and business practices
often differ from those of the managers/owners of private companies.
The evolution of entrepreneurial private companies has taken place during last 3-5 years. Profitdriven, those companies have been more successful than their state-controlled competitors.
Practically in every region, the major players in the local market are new private companies.
Some of them became nation-wide vertically integrated structures with manufacturing,
distribution and retail network components (like Vremya); others aggressively expand in the
regions by creating new franchise-type units (Ecohelp). The largest private distributors report
monthly sales in excess of 20 million dollars.
And finally, the last group of distributors is composed of international companies that were brave
enough to step into the Russian market and establish their Western-style operations here. While
their retail clients do typically not appreciate their prices, terms, and styles, Western
manufacturers prefer to deal with these companies due to cultural similarities, business practices,
and transferability of risk and commitments to distributors parent companies in the West. Many
of these distributors run their own pharmacy networks (Multi-Pharma, Suramed). Like
representative offices of the manufacturers operating in Russia, all these distributors are based in
Moscow.
There are 18,000 pharmacies in Russia, 23 percent of which belong to regional governments, 60
percent to municipal authorities, and 17 percent are private. In addition to pharmacies there are
50 thousand small pharmaceutical kiosks.
Russia has only about 10 pharmacies per 10,000 of people, compared to 14 in Poland and 30 or
more in Western Europe. The number of pharmacies may be a key area of growth in the near
future.
Western firms typically enter the Russian market by initially working through local distributors
and buyers and, if this goes smoothly, possibly broadening their activities to include joint
production agreements with local partners. Some companies start by opening representative
offices to market their products in Russia. If they wish to, they can later form a Russian legal
entity having the right to directly buy and sell within Russia.
Some doctors have started to work as distributors of pharmaceuticals and medical goods,
especially vitamins and food additives. Mark-ups by doctor-distributors seem typically to be
between 20 and 30 percent. Doctors often agree to become distributors because they are
underpaid at their primary place of work. U.S. companies may note that working with and
promoting their product through Russian doctors has already proven an effective marketing
approach.
Pharmaceutical products are subject to mark-up limitations imposed with the purpose of holding
retail prices. These limitations specify the percentage of allowable mark-up for both wholesalers
and retailers and vary from region to region. For imported pharmaceuticals, mark-up limitations
do not apply to the first importer, which gives advantages to the companies importing directly
from abroad. At the same time, by various contractual mechanisms agents further down the

distribution ladder may also avoid mark-up limitations. As a result mark-ups in some cases vary
from 120 to 200 percent.
The Moscow government has recently introduced a new regulation that provides that a
consolidated wholesaler plus retailer margin in pharmaceutical products sold in Moscow cannot
exceed 25 percent of the original manufacturers price (down from 30 percent before). The
declared purpose of this action is to make survive only those wholesalers who work directly with
manufacturing companies and thus can offer the lowest prices to retailers. This action will
definitely result in a wave of mergers, acquisitions and bankruptcies in the Moscow
pharmaceutical market as well as to stronger trend towards vertical integration between
wholesalers and retailers. However, since Russian taxes do not allow any company to operate
with such a low gross margin, many retail and wholesale companies will be subject to increased
pressure from regulatory authorities with more corruption as a result.
4.6

Financing

There are two major government sources of funding for medical purchases: budget allocations
from federal and local budgets, and the federal and regional Obligatory Medical Insurance (OBI)
funds. In Russia, payroll contributions to the OBI account represent 3.6 percent of earnings. In
Western Europe, payroll contributions to analogous funds range from 8 to 12 percent of earnings.
Actual collections of regional OBI funds are only 60 to 90 percent of budgeted revenues; in
addition, OBI money is often used for items other than health care.
The Federal Medical Obligatory Fund disposes of approximately 30 percent of all resources
devoted to health care in the Russian Federation. Local governments pay for 93 percent of state
pharmaceutical purchases, while the federal government accounts for only 7 percent of such
purchases
4.7
4.7.1

Regulations
Import Climate

Current Russian legislation does not erect significant barriers to importers of pharmaceuticals.
Before July 1995 all pharmaceuticals were exempt from customs duties. On July 1, 1995, the
government introduced 10 percent customs duty for a significant number of pharmaceuticals, and
starting April 11, 1996, the Government of Russia increased customs duties for pharmaceuticals.
Customs duties now range from 5 to 30 percent. Experience shows that higher import duties are
passed on in the form of higher end-user prices. Imported registered pharmaceuticals are
generally exempt from VAT.
4.7.2

Registration of Pharmaceuticals

According to Russian law, all drugs and biological products must be registered with the Ministry
of Health of the Russian Federation in the name of the manufacturer and/or an authorized
representative. In addition, the pharmaceutical or substance must be registered and listed with the
Food and Drug Administration (FDA) by the manufacturer.

The Russian Ministry of Healths Bureau of Registration of New Pharmaceuticals and Medical
Equipment is responsible for drug registration. Documents required include an application, a
product description, and certification/approval papers obtained in the United States. Trading
companies seeking product registration must present a letter from the manufacturer authorizing
them to do so.
The current registration fee is $15,000, and is valid for five years. All documents should be
submitted to the Bureau of Registration of New Pharmaceuticals and Medical Equipment, which
issue the registration certificate.
4.7.3

Certification of Pharmaceuticals

Besides registration, an importer must obtain a Russian quality certificate. Gosstandart

authorizes a number of organizations to certify pharmaceuticals, though many drug companies
prefer to act through the Inspectorate of Quality Control of Drugs and Medical Equipment of the
Ministry of Health. The Inspectorate also can provide information on testing laboratories that can
provide certificates of conformity for drugs.
Since certification and registration procedures are similar, an applicant may present copies of
tests and analysis carried out during registration to the certification body. This information is
normally sufficient for certification without any additional testing, or reduces testing to a
minimum.
Vitamins and biologically active additives in the majority of cases are registered and certified the
same way as ordinary drugs. In some cases, when the contents of micronutrient of mineral salts
in biologically active additives does not exceed daily requirement by six times, registration is not
needed. At the same time, imports of such vitamins and biologically active additives to Russia
should be accompanied by a certificate of hygiene which can be issued by the Institute of
Nutrition of the RussianAcademy of Medical Sciences. The hygiene certificate is valid for three
years.
One area of regulatory concern regards the distinction between OTC drugs and dietary
supplements. Because no clear criteria have been established to distinguish OTCs and dietary
supplements, several cases of dual registration have been observed. In several observed cases,
companies, having first registered their product with the Institute of Nutrition as a dietary
supplement, have obtained a second product registration through the Ministry of Health.
Companies may deem a second registration profitable because products registered as
pharmaceuticals carry no VAT obligation. Lack of clarity may benefit some manufacturers
through tax reduction, while on the other hand such a system of dual registration may benefit
regulatory agencies by increasing assessed fees. In the end, however, such system will trickle
down to consumers in the form of increased prices.
4.7.4

Marking and Labeling Requirement

On May 17, 1997 the Russian government adopted a decree On Marking of Goods and Products
Within the Territory of the Russian Federation with Marks of Conformity which are protected

from Falsification. A mark of conformity is a duly registered mark confirming that the goods or
products labeled with it comply with the standards and requirements adopted for the relevant
types of product, including pharmaceuticals. The decree states that such marks shall be placed on
all goods produced on the territory of Russia, imported into the country or confiscated by
customs and later offered in the consumer market. Currently Russian authorities require that
labels for imported pharmaceuticals be in Russian. Pharmaceuticals also should be marked with
EAN or UPC standard bar codes.
4.7.5

Import licenses

Importers of pharmaceuticals must have an import license. Until recently, the Ministry of Health
maintained complete control of pharmaceutical imports and was the only entity responsible for
issuing import licenses. In June 1997 the Government of Russia established new two-step
procedures that require licenses to be approved by both the Ministry of health (which takes up to
25 days to process) and the Ministry of Foreign Economic Affairs (requiring more than a month
for processing). The result of the new requirements is an even more complicated process, which
has doubled the approval and import time to over two months.
4.7.6

Patent Violations

The ongoing practice of overlooking sales of pharmaceutical products that are in violation of
Russian patent law has been an area of concern for U.S. investors. All companies producing
pharmaceuticals can be decided in two major groups. The first group is made up of companies
actively involved in research and development and producing original patented drugs. The other
group is made up of generics, which represent copies of brand name drugs for which the term of
patent protection has expired. There is also a third type of drugs these are pirate copies of drugs
for which the term of patent protection has not expired. Drugs belonging to the third group come
mostly from India and are sold in bigger volumes than original patented drugs.
This has become possible because of the loopholes in the patent law. The patent law which
existed before 1992 protected only the manufacturing process, rather than the final molecule. A
new law introduced in 1992 provides full protection, but since new drugs take an average of ten
years to develop, very few have so far been registered under the more stringent legislation. As a
result many Western original drugs are not able to come to the Russian market as there are
already similar copied drugs here sold at lower price.
Although the Russian Federation passed a patent law in 1992 that is essentially in agreement
with internationally accepted principals, the enforcement of this law is not satisfactory at all.
4.8

Logic of Entry in Russia:

As domestic pharmaceutical producers of Russia supply only 35 percent of the total market, so
enormous opportunity is there in Russian Pharmaceutical market for a foreign company which is
really having comparative advantage. Imported drugs are controlling 65 percent of the total
pharma market of Russia. Imported pharmaceuticals have increased their presence in the Russian
market in the last several years and continuously having positive growth in each year. High

unsatisfied demand for pharmaceuticals, intensive advertising by foreign companies, and Russian
health care authorities actions toward streamlining the registration procedures for foreign
pharmaceuticals are seen as the opportunities.
In the recent years the production capacity of Russian pharmaceuticals has decreased by almost
65 percent in terms of volume and the range of available products has shrunk drastically. Again
increased prices of the domestic producers drastically making them less competitive in
comparison to imported ones. Ninety-three percent of pharmaceuticals manufactured in Russia
are made from foreign chemicals.
Moreover the major positive break is that, end users are increasingly becoming interested for the
foreign products than the domestic products. Perceived value is poor in case of domestic
products. Again healthcare budget is increasing day by day. The major source of Healthcare
budget in Russia is
Federal Budget
Regional Budget
Federal & Regional Budget for obligatory medical insurance.

In 2002 budget of above sectors is increased significantly. It is like the followings

Federal Budget = Increased 44% accounting to 1.05 billion US$
Regional Budget = Increased 32% accounting to 7.6 billion US$
Market growth is as high as 36% in import segment.
Considering all the facts it is perfect to take decision to enter in Russian Pharmaceutical market.
DECIDING ENTRY MODE FOR RUSSIA

5.1 Possible Options:

Exporting
Foreign Direct Investment
Licensing
Comparative overviews of the three options

Criteria
Total returns

Exporting Licensing
Moderate Moderate to
low
Financial resource costs
Low
Negligible
Managerial resource costs Moderate Small
Control over foreign
High
Low
Operation
Ordinary commercial risk Low
Almost Zero
Political risk
Low
Zero
Foreign exchange or
Low
Lowest
convertibility risk
Effective tax rate
Highest Lower
Threat of creating
Low
Can be high
competition

FDI
High
High
High
High
High
High
High
High
Very Low

5.2 Major drawbacks of Bangladesh Export policy for pharmaceutical products

Bangladesh bank currently permits to transfer maximum 5% of L/C value as commission. For a
representative marketing office in a foreign country to promote exports are allowed to remit only
US$ 30,000/year to meet office expenses.
Export License is required for each & every consignment of Pharmaceutical products export
form Drug administration despite having free Sales certificate.
Exporting product sample limit is as follows.
For international trade fairUS$ 2000
For Product registration, export promotion & others US$ 1500
For sending samples by post taka 5000
Tax exemption on export sales is 50%
No cash export Incentive in Bangladesh.
5.3 Problems to be faced by Square in Russian Market
Poor quality Image
Lack of Infrastructure
Low value added products

Govt. Apathy
Lack of marketing activities
Lack of Financial muscle.
5.4 Selecting an entry mode
Considering all the above-mentioned analysis I recommend the following Entry mode for Square
in Russia.
Export through Distributor.
Office setup in Russia for Marketing Integration
Logic:
Under current export policy of pharma products of Bangladesh, FDI is not at all possible for
Square. FDI requires high level of Financial resource costs, Managerial resource costs, Control
over foreign Operation, Foreign exchange or convertibility risk etc. which is not possible for
Square to take care in the initial level.
Lack of expertise of Square in FDI will create more risk for Square.
Poor country image of Square is the major burden for Square for Licensing.
Exporting is the best way to move, as Square is already doing business in different countries by
following this entry mode.
Low risk, moderate to low Financial & managerial resource cost will provide better opportunity
to become succeed in case of exporting.
Marketing integration by office setup and recruiting working personnels will help firm footings
in the foreign country
5.5 Timing of Entry
Timing of entry directly related with the product registration process. Normally it takes around
01(One) year for the product registration in Russia. So timing will be determined by this factor
mainly. Following processes may be carried out simultaneously.

Product registration process

Office registration Process.

Developing Business contract with the distributor.

Considering this entire factor it is worth to get enter in the first quarter of 2003. By the time all
the following procedures will be completed.

Product registration

Recruitment of Colleagues

Training for the Country representative to work in Russia.

Completion of All implementation issues like office setup, Structure, Supply chain
management, Financial issues. Etc.

5.6 Strategic Objectives:

To achieve the target of 15 million Taka in year 2003.

To launch the generics in the fastest growing therapeutic classes & snatch a major portion
of share (%) positions.

5.7 Forecasted Target in the next three year

Square

2008(Million taka)
15

2009(Million taka)
20

2010(Million taka)
25

5.8 Market Analysis & Target Market Identification:

Total Market: 4 billion US$
Growth: 15%
Market Segmentation:
Two types of market are there in Russia which are as follows.
Domestic: accounted to approx. 35% of the total pharma sale. Size is 1.4 billion US$. Growth is
(-) 18%.
Import: accounted for 65%. Size is 2.6 billion US$. Growth is (+) 36%.
Therapeutic Class Analysis (Basis of Competition)
Local production does not meet the demand for many types of drugs needed for treatment.
Pharmaceutical imports help solve the problem, but there is still large unsatisfied demand for

many types of medicines. According to local market surveys, the best sales prospects in the
Russian pharmaceutical market include
Market Size & growth (Million US$)
Therapeutic class wise market size, growth and market share is given in the following table:
Therapeutic Class
Cardiovascular
Analgetics &
antinflammatory
Antibiotics
Vitamins
CNS
Antiviral
Antihistaminic
Purgatives
Ferments
Others

Market
Size
473
434.2

Growth
%
20
25

% Share of total
demand
18.2
16.7

371.8
254.8
195
151
109
86
78
442

25
80
10
10
60
5
8
N/A

14.3
9.8
7.5
5.8
4.2
3.3
3.0
17

Target Market
Cardiovascular:
Square should launch one important live saving product in cardiovascular sector. The reasons
are:

Cardiovascular sector is the largest sector in Russian Market

Market Size is 473 Million US$

Growth is 20%

Disease prevalence is increasing.

Unsatisfied demand is there.

Analgesic & anti-inflammatory

Square should launch one important product in analgesic & anti-inflammatory sector. The
reasons are:

Second largest sector in Russian Market

Market Size is 434 Million US$

Growth is 25%

Disease prevalence is increasing.

Square is having better generic in the product line.

Absence of quality products is there.

Market will increase more.

Antibiotics
Square should launch one important product antibiotic in Russia. Because

High Disease prevalence.

High market growth 25%

Market Size is 371 Million US$

Market is increasing

Gastrointestinal
Square should launch one advanced gastrointestinal product in Russia. Because

Projected market growth is highest in this sector.

High disease prevalence.

5.9 Competition
Total Pharma Company:

4,500.

Foreign: 1050 companies from 66 (Sixty Six) countries

Country wise share breakdown:
Country
Germany

Share % of Import Sales

18

CzechRepublic
Italy
France
Latvia
Turkey
Switzerland
US

13.6
10.7
10
9.4
7.3
7.0
3.3

Top Manufacturers:
Followings are the top 10 manufacturers

Aventis

Novo Nordisk

GlaxoSmithkline

Gedeon Richter

Sanofi-Synthelabo

Eli Lilly

KrKa

Novartis

Roche

Berlin Chemie

Sale of major players

Rank
1
2
3
4

Company

Import Sales Volume

(2001)
Aventis
102
Novo Nordisk
82
GlaxoSmithkline 60
Gedeon Richter 57

Growth %
+65
+76
+60
+32

5
6
7
8
9
10

SanofiSynthelabo
Eli Lilly
KrKa
Novartis
Roche
Berlin Chemie

49

+41

44
40
39
36
30

+118
+40
+67
+10
+35

Major portfolios of the competitors

Company
Aventis:

Portfolios
AntibacterialGastrointestinal
Anticancer

Novo Nordisk:
GlaxoSmithKline

AntidiabeticsGrowth Hormone
AntiasthmaticsAIDs & HIV Products.
Anticancer

US situation
Although the U.S. share of the Russian pharmaceutical import market is only 3.3 percent, major
American pharmaceutical companies are very active on the Russian market. Baxter, BristolMyers Squibb, Eli Lilly, Johnson & Johnson, Procter & Gamble, Lederle, Merck, Sharp&Dohme
Idea Inc., Pfizer International and many other companies have successfully penetrated the
Russian pharmaceutical market, opened representative offices and established distribution
networks.
US strategy
It is important to note, that a substantial amount of investment is being made by U.S. companies
on an ongoing basis in the form of extended credit to its Russian distributors. By extending such
credit, Russian distributors are able to considerably decrease their capital needs as well as allow
for more rapid growth of the industry. The credit terms being offered to the Russian distributors
are non-collaterized high-risk loans at times reaching millions of dollars over ninety days. Such
extensions of credit are not practiced elsewhere in the world and should be recognized as a form
of investment as the capital necessary to purchase goods is instead being used to grow and
improve the distribution network for Russia.

5.10

Marketing Mix

Product
In cardiovascular Market: ANGILOCK (Losartan Potassium)
Features & Advantages:

Angilock is the preparation of Losartan Potassium

This is the new concept of hypertension management.

This is an AT1 receptor antagonist to inhibit Angiotensin 2 to its receptor site.

It is having competitive advantages over conventional antihypertensives.

Less side effects.

More effective.

Capable to manage all grades of Hypertension.

In Analgesic & Anti-inflammatory Market: Vega 25 (Rofecoxib 25)

Features & Advantages:

Vega is the preparation of Rofecoxib

This is the new concept of pain & Inflammation management.

This is a COX2 antagonist to inhibit the activity of Cyclooxygenase 2 & thereby inhibit the
pain & inflammation.

It is having competitive advantages over conventional anti-inflammatory agents.

Less side effects.

More effective.

Capable to manage both acute & chronic painful conditions.

In Gastrointestinal: Seclo (Omeprazole)

Features & Advantages:

Seclo is the preparation of Omeprazole

This is the Proton Pump inhibitor for the management excessive acid secretion.

This is the noble proton pump inhibitor to manage gastrointestinal disorders.

It is having competitive advantages over conventional anti-ulcerant. It offers more

selective treatment options.

Capable to manage all types of gastrointestinal ulcers like peptic ulcers, duodenal ulcers
etc.

In anti-infective: Zimax (Azithromycin)

Features & Advantages:

Zimax is the preparation of Azithromycin.

This is an antibiotic of macrolide class for the management of different types of bacterial
infections.

This is a special antibiotic for the management of Respiratory infections, Skin & soft
tissue infections & sexually transmitted disease.

It is having competitive advantages over other antibiotics.

It ensures prompt relief of the symptoms.

Tissue directed mechanism of action of the product provides additional benefit for the
management of Skin & soft tissue infections.

Price
Available price structure of Russian Pharma Market
Cardiovascular=Angilock (Losartan Potassium)
Brand
Kozaar

Company
BMS

Country
USA

infamatory= Vega (Rofecoxib)

Entirely new generic in market.
Gastrointestinal=Seclo 20 (Omeprazole)

Price (USD)
11

Analgesic & anti-

Brand
Losec

Company
Astrazeneca

Country
Sweden

Price(USD)
39

Antibiotic=Zimax (Azithromycin)
Brand
Sumamed

Country
Croatia

Price (USD)
8

Price to be offered
Square needs to make a flexible pricing policy for the market. In this Policy Square has to
consider break-even pricing policy, strategic pricing policy, protection of sub distributors
interest, doctors interest, product establishment cost. It is not always recommended to leave the
pricing policy to the distributor.
This price policy should be controlled by Square, because it has the maximum involvement for
the product promotion and others.
Price policy is a subject to mutual negotiation between the representative & head office.
There is no other alternative but to give competitive price of products.
A major portion of product consumers will be federal, regional and local authorities, clinics,
hospitals and polyclinics.
This sector is the price sensitive sector & will procure the products of lowest price.

Promotion
The following promotional tools should be used:

Launching Ceremony.

Clinical Meeting.

Direct promotion to doctors.

Samples & gift to Doctors.

Deal with the govt. entities.

Place/ Target Segment

Prescription oriented market-To different federal, regional and local authorities

Square should be focusing to federal, regional and local authorities, clinics, hospitals and
polyclinics, pharmacies, and private consumers.
The federal government is still a significant buyer of pharmaceutical products in Russia. In 1996,
different bodies of federal government spent about 132 million dollars on drugs consumed by the
military, medical research centers, and ministry of emergencies. Federal government purchases
pharmaceuticals to execute nation-wide programs in the health care area, such Diabetes Program,
Vaccination and Prevention Program, Mother and Child Program, Anti-AIDS Program, etc.
In 2002, budget of all these authorities increased for the medicine procurement.
OTC (Over The Counter)
For the growing pharmaceutical industry, OTCs represent perhaps the most attractive market.
The consumer market for OTC drugs is growing rapidly. From the viewpoint of the Russian
Health Care Reform, appropriate self-medication may play a positive role in reducing demand on
primary health care facilities. But the problem is OTC product sale is entirely dependent on the
media advertisement. Media advertisement is huge expensive media and Square at the initial
stage cannot go for this sector. I suggest phase entry from prescription oriented to OTC sector.
Target Regions
Moscow
St. Petersburg
Moscow: (population 9m) is the capital and seat of government. The city acts as a distribution
hub for the whole country. Local industries include the power sector, machine building, food, and
chemicals. Moscow is the second largest city in Europe.
St. Petersburg: (population 5m), located in Leningrad region is the main business hub of north
westRussia. It is the main port and an area of machine building, food, power industries and light
manufacturing. St Petersburg is the fourth largest city in Europe.
Logic for selecting Two Russian cities

Sales of pharmaceuticals in Moscow and St Petersburg are 26% of Russias $4.00 billion
pharmaceutical sales.

The 100 best-selling products out of more than 4500 pharmaceuticals on the market
accounted for 33% of total sales.

More than 18% of the top 100 products is sold in Moscow

More than 7% of the top 100 products in St. Petersburg.

Solvent demand for medicines differs from region to region and depends mainly on the state of
local budget financing. A market analysis conducted on 200 medicines within the main
pharmacotherapeutic groups showed that the highest market saturation was registered only in the
central regions and only for an average of 70 percent of products. The more remote a region, the
lower saturation. According to the Ecohelp Group, the range of medicines on sale in outlying
provinces can be as low as 10-15 percent of the availability in pharmacies in Moscow and St.
Petersburg.
Considering the above Square should be targeting two only 02 (Two) major cities which are
Moscow & St. Petersburg.
IMPLEMENTATION ISSUES:
CHAPTER-6
Distributor Profile
M/S Zao Protos showed interest to market & distribute Squares product in Russia & this
company might be appointed as distributor for Square in Russia. As per the meeting with Square
official M/S Zao Protos is very much enthusiastic to market & distribute Squares product in
Russia.
M/S Zao Protos is an entrepreneurial private company and doing Pharmaceutical business in
Russia for last 5 years. It is a successful company, which is a profit-driven organization. Its a
vertically integrated structured with distribution and retail network components. It is maintaining
a wide pharmacy networks in Moscow & Saint Petersburg. Main operational office of M/S Zao
Protos is based in Moscow.

Structure
Square will go for office setup in Moscow. Distributor of Square will take necessary measures to
setup the office in Russia. International marketing department of Square will take necessary
measures to supply documents from Bangladesh. Following documents are required for office
registration.
Letter of Authorization.
Application for Office registration.
Memorandum and article of Association.
Bank solvency certificate
Board resolution to open representative office.
MCCI certificate regarding company registration.

All the documents should be translated into Russian Language and authenticated by Notary
public, foreign ministry and Russian embassy in Dhaka. After receiving the documents Local
Distributor will take necessary measures for the office registration in Russia.
Working personnel & Organogram:
Head of Operation/Country representative: Initially 01 personnel would be going to Russia
for overall operations in the country. He will be the head of country operation and will be
responsible for monitoring all the marketing activities in two states, Moscow & Saint Petersburg.
Medical Promotion Officer: Would be recruited from Russia.
20 persons will be recruited for two states. 10 will be working in Moscow & 10 will be working
in St. Petersburg.
Regional Managers: 02 (Two) Regional Managers will be recruited for supervision of 20
(Twenty) Medical promotion Officer of two states. Each will be monitoring 10 MPOs. Two
regional managers will be reporting to Head of Country Operations.

Cost Breakdown

S/N
1.

2.
3.
4.

Expenses head
Office Expenses(staff wages,
Correspondence, office materials and
others)
20 Representatives wages
Product Registration Cost
Promotional expenses (Sample +
launching Ceremony + Clinical Meeting
+ Gift + Advertisement etc.)
Total

USD/month
600

USD/year
7200

3000
US$15000 x 4 (Four
Product) =$ 60,000
500

36000
60000
6000

1,09,200

Relationship with CHQ

Reporting: Head of Country operation, Russia will be reporting to Manager Intl. Marketing,
who is currently reporting to General manager Marketing of CHQ from Bangladesh. All
marketing activities will be conducted from Moscow representative office.
Approval Authority: Approval authority will be the General Manager, Marketing of Square
Pharmaceuticals Ltd.
Product registration: Representative office of Square will take necessary measures to register
products in Russia through distributor Zao Protos. International marketing department will work
to supply necessary documents for the product registration, which are as follows.
1. Drug manufacturing license (notarized copy).
2. Free sale certificate (notarized copy).
3. Certificate of GMP (notarized copy).
4. Pharmaceutical information.

4.1. Dosage form and strength

4.2. Description of product (shape, size, color) and manufacturing formula.
4.3. Manufacturing direction (equipment, manufacturing procedure and precautions).
4.4. Standard specifications and test-procedures.
5. Information concerning stability monitoring program, shelf-life and storage conditions.
Supply Chain Management
A supply Chain encompasses all the facilities, functions and activities involved in producing and
delivering a product or service from suppliers (and their suppliers) to customers (and their
customers). It includes planning and managing supply and demand, acquiring materials,
producing and scheduling the product or service, warehousing, inventory control, distribution &
delivery and customer service. Supply Chain management coordinates all these activities so that,
customers can be provided with prompt and reliable service of high quality products at the least
cost. Successful supply chain management in turn can provide the company with a competitive
advantage.
Key issues related to supply chain management:
The major issues related to supply chain management for export operations would be dealing
with the following sectors.
Sourcing
Product Design & Production
Sales & Distribution.
Sourcing:
Sourcing will be done as per the companys current procedure.
It could be divided into both of the followings:
Local & Outsourcing: Square Pharmaceuticals Ltd. is dependent on both of the sourcing
procedure.
Sourcing will be done as per the current procedure.
Product Design & Production

Product design & production will be done in the Bangladesh from the two manufacturing units of
Square. This will be produced like the other export products of Square. Customized packaging is
necessary for the specific product for Russia. This should be in English & Russian language.
International Marketing department will take necessary measures for the developments of this
customized packaging.
Sales & Distribution
Protos of Moscow office will control sales & distribution. International marketing department of
Square will ensure exporting the product as per demand & forecast of Moscow office. After
receiving the goods in Russia sales & distribution will be conducted by the Protos. Head of
operation in Russia will look after all the issues through the recruited members of the Moscow
office.
Transfer of Money
Square has the following options in this regard:
L/C at deferred payment:
The Distributor through bank transfer on the Squares account could make payment for the
supplied goods within a certain calendar days from the date of issuance Airway bill. There would
be a contract between Square & the Distributor where mode of payment will be clearly
mentioned.
L/C at site:
After the negotiation documents submission, within 07 working days, Bank will pay to exporters
if the terms of the L/C at site.
Advance payment:
Buyer will pay the money in advance & then shipment will be done after receipt of the money.
Decision:
Considering the entry mode & strategic aspects we recommend following L/C at deferred
payment mode for transfer of Money. Payment for the supplied goods will be made by the
Distributor through bank transfer on the Squares account within 45 (forty five) calendar days
from the date of issuance Air way bill. There would be a contract between Square & the
Distributor where mode of payment will be clearly mentioned.