UNIVERSITY OF DHAKA

INTERNATIONAL MARKETING PLAN ON

PHARMACEUTICALS EXPORT TO RUSSIA

AUGUST 2012

University of Dhaka

Department of Management Studies MBA (Evening Program) Summer, 2012 Term Paper

Course Title Course code

INTERNATIONAL MARKETING EM 555

Course Teacher Tahmina khanam Topic Date Term Paper: International Marketing plan
on Pharmaceuticals Export to RUSSIA

07- 08- 2012

Submitted by Name
NAHID RIJWAN EMDADUL HAQUE MD. ARIFUL ISLAM TANVIR RAHMAN MD. NEAZ PARVEZ

Roll
3-09-17-033 3-09-17-061 3-10-19-057 3-11-21-015 3-11-21-079

CONTENTS
Topic CHAPTER 1 AristoPharma Ltd. Company Profile Vision, Mission & Objectives Corporate History Quality Policy CHAPTER 2 Market Competitiveness Factors Driving the Price and Quality Competitiveness of Pharmaceuticals Potential Mechanisms Identified to Improve the Quality of Drugs CHAPTER -3 Highlights of the Export Operations Countries where ARISTOPHARMA products are exported CHAPTER - 4 Pharmaceuticals in Bangladesh Why Export Pharmaceutical Products? Sectors of Improvement CHAPTER - 5 Russia As A Favorable Destination Russia: Country Profile Location Climate Natural Resources and Industries Economy Government and Politics Foreign Relations Transportation Population Education Health Religion 21 22 23 24 25 25 26 27 27 27 28 28 29 14 17 21 13 13 10 10 11 2 3 3 5 Page

Topic Ethnic Groups Culture S.W.O.T. Analysis Chapter-6 Marketing Plan Marketing Objectives Target Market Expected Sales Profit Expectations Market Penetration and coverage Product adaptation or modification Promotion Mix Distribution Channels of Distribution Price Determination Types Of Product Exchange Terms of Sale Methods of payment Pro forma financial statements and budgets Chapter-7 Conclusion & Recommendation Improving price and quality on the export market BIBLIOGRAPHY

Page 29 29 29

34 34 34 34 34 35 35 36 37 40 41 41 43 44 45

46 46 49

Date: Tuesday, August 07, 2012

Tahmina Khanam Lecturer, Dept. of Management Studies; University of Dhaka; Dhaka, Bangladesh.

Subject: Submission of an International Marketing plan on Pharmaceuticals Export to RUSSIA Dear Ms Tahmina,

This project is a part of the course international Marketing at postgraduate level. The project is a market analysis based on the current situation of Aristopharma in the export business. This project evaluates the prospect of exploring a new country to export the product and examines the scope of operating a business profitably. We thank you for the opportunity to prepare such a analysis and we believe you will enjoy going through our work.

Thanking You,

Nahid Rijwan [3-09-17-033]

__________________

Md. Emdadul Haque [3-09-17-061]

__________________

Md. Ariful Islam [3-10-19-057]

__________________

Tanvir Rahman [3-11-21-015]

__________________

Md. Neaz Parvez [3-11-21-079]

__________________

CHAPTER-1: ARISTOPHARMA LTD. COMPANY PROFILE

Year of Establishment: 1986 Commercial Production: 1986 Status: Private Limited Company Type of Business: Manufacturing and marketing of finished pharmaceutical formulations Product Categories: Antihistamines, Bronchodilators, Antiulcerants, Decongestants, Antacids, Gastroprokinetics, Antibiotics, Laxatives, Anxiolytics, Antiemetics,

Antidepressants, Antidiabetics, NSAIDs, Vitamins & Supplements, Antiseptics, Antieczematous, Antifungals, Cardiovasculars, Antiepileptics, Steroids,

Antiglaucoma and Eye care products. Dosage Forms: Tablet, Capsule, Syrup, Suspension, Powder for Suspension, Lotion, Cream, Ointment, Gel, Mouth Wash, Nasal Drops, Injection & Ophthalmic Products Number of Employees: Around 2600 Export Activities: Singapore, Hong Kong, Sri Lanka, Vietnam, Myanmar, Bhutan, Macau, Ukraine & Mauritius Principal Office: 7, Purana Paltan Line, Dhaka-1000; Phone- 88-02-9351691-3 Fax- 88-02-8317005 E-mail:aplhc@bangla.net Factory: Plot # 21, Road # 11 Shampur-Kadamtali I/A Dhaka- 1204 Phone: 88-02-7415284 88-02-7415287 E-mail: aplfact@accesstel.net Web Address: http://www.aristopharma.com/

VISION We see business as a means to the wellbeing of the investors, employees and the society at large, leading to accretion of wealth through financial and moral gains as a part of the process of the human civilization. MISSION Our mission is to provide quality & innovative healthcare relief for people, maintain stringently ethical standard in business operation also ensuring benefit to the shareholders and other stakeholders. OBJECTIVE Our objectives are to conduct transparent business operations within the legal & social frame work with aims to attain the mission reflected by our vision. CORPORATE HISTORY 1986 The journey started through the formation of a proprietorship firm under the dynamic guidance of Mr. M. A. Hassan, present Chairman & Managing Director of the company. It was a modest start with the introduction of a few products in oral liquid & tablet form. The journey continued through pains & pleasures, through shines & showers. 1990 The new manufacturing unit was commissioned at Shampur-Kadamtali with highly sophisticated and advanced facilities. 1998 Production line was diversified with the addition of cream and ointment in the portfolio. 2000 Company starts its international operation Vietnam being the first country to export. 3

2001 Export starts to Sri Lanka 2002 Sterile Products Block is commissioned & Ophthalmic Products are introduced in the market. As the first Pharmaceutical Company in Bangladesh, ARISTOPHARMA exports to Hong Kong one of the most developed markets of Asia. 2003 The diversification rolls on - parenteral dosage form is introduced. 2004 Company touches another landmark in international operation - export starts to Singapore. Export of highly sophisticated Ophthalmic Products starts to Hong Kong. Export also strarts to another country - Macau. 2005 Company crosses the continental boundary export start to Ukraine of East Europe. 2006 Export starts to Mauritius of Africa. 2009 Agreement is signed with APC, Australia to set up its 3rd plant at Gacha, Gazipur for Europe/American Market. Export starts to United Arab Emirates of Middle East and Nigeria of Africa

2010 Export starts to Pakistan. The new expansion building of factory starts operation with the facilities for inhalers, insulins, lyophilized injections, pre-filled injections, suppositories etc. And the journey continues ... ..

QUALITY POLICY

MANUFACTURING FACILITY
The state-of-the-art-manufacturing facility of ARISTOPHARMA is located at ShampurKadamtali, 10 km south-east from central Dhaka. The facility is planned and designed with fine tuned future orientation to meet the local as well as international demand both qualitatively & quantitatively. World class machineries sourced from USA, Germany, England & Japan have been employed in various steps of production to ensure manufacturing of world class products. The ophthalmic and parenteral products are manufactured in the newly commissioned sterile product block. This block, built on a turn-key basis by RETAN LTD. of Belgium brings in world class facilities for manufacturing sterile ophthalmic & parenteral dosage forms. This facility equipped with HEPA filter, laminar air flow and class 100 clean room is believed to be the most modern in the country. But apart from all these facilities, the men behind the machines get the major priority in building our success blocks. Because we believe that the measure of our success is not the power of technology but the power it unleashes in people. Hence highest care is taken in selecting, developing & retaining quality people to run the quality machineries. A good blend of Pharmacists, Chemists, Microbiologists & Engineers led by the Director, Production pay their relentless efforts to bring in the highest quality products from the best quality machineries.

In ARISTOPHARMA quality comes first, profit comes to its sequence & that is reflected in its motto: Quality the unit we count. Strict quality control procedures are maintained at every step starting from sourcing of raw materials to dispatch of finished products. The latest WHO approved current Good Manufacturing Practices (cGMP) & current Good Laboratory Practices (cGLP) are followed in every step of operation. Written Standard Operating Procedures (SOPs) are maintained for every process, which are being closely monitored to ensure that all concerned personnel are complying with these procedures. ARISTOPHARMAs Quality Control (QC) lab is well equipped with the most modern & sophisticated equipments like High Performance Liquid Chromatography (HPLC), Ultraviolet (UV) Spectrophotometer, Fourier Transform Infrared Spectrophotometer (FTIR), Atomic Absorption Spectrophotometer, Antibiotic Zone Reader, Colony Counter, Polarimeter, Refractrometer, Disintegrator, Dissolution Tester & many other latest computer aided instruments & accessories to ensure the highest quality products. The total Quality Assurance activities are accomplished by two departments Quality Compliance & Quality Control, which are comprised of competent Pharmacists, Chemists, Biochemists & Microbiologists. R&D The motto of ARISTOPHARMA's R & D is to invent a healthier tomorrow. Their thrash is to support the valued customers with advanced & latest medicines at an affordable price. Every year around 20-30 new products are added to its portfolio, which is one of the many reasons that ARISTOPHARMA stands as one of the fastest growing pharmaceutical companies in the country.

HUMAN RESOURCE
Skilled human resources are the key driving force of ARISTOPHARMA. Our success is based on attracting, developing & retaining talented & motivated human resource. They share both our desire to excel & our commitment to improve the lives of the people.

The employees of ARISTOPHARMA believe in collaborative spirit. They appreciate that working as a team multiplies the strength of the individuals involved as well as the impact of the results. 6

Skill acquisition & development of all staff is key to a companys growth, we believe. In this regard, we are always on the look out to identify training needs of our employees in order to enable them to carry out the entrusted responsibilities. Training programs undertaken, not only address skills relating to the specialty of the individuals concerned, but also improving leadership & management skills. The total no. of employees in ARISTOPHARMA is around 2600, around 60% of which are white-collar employees. Among them are Pharmacists Chemists Biochemists Microbiologists Engineers CMAs CAs MBAs Doctors Others (Graduates)

It is our people who make us different from our competitors. The secret of our success story lies in our people.

MARKETING
The theme of ARISTOPHARMAs Marketing is to care for its customers and this responsibility doesnt lie only on the shoulder of Marketing Department rather all the companys departments work together to serve the customers interests. And by the customers we dont mean only the external customers, but also the internal customers i.e. our employees. Thus we always thrive to build and maintain an integrated marketing environment within the organization. However, the core marketing job is accomplished by six departments- Product Management, Sales, Distribution, Medical Services, Sales Training and Market Research.

PRODUCT MANAGEMENT DEPARTMENT (PMD)

Product Management Department lies in the center of all marketing activities. A dedicated team with solid professional background comprising Pharmacists, MBAs, Biochemists and Medical Graduates work in this department. They formulate the strategies to uphold the market share of companys products, select and introduce new products to keep the company growing and develop promotional materials for sales people to win in the market.

SALES DEPARTMENT
The sales department lies as an important part of marketing as they do the implementation part of all strategies. A large team of around 1200 highly skilled sales people work throughout the country to bring in success for the company. Team spirit remains as the key to success of the sales department in ARISTOPHARMA.

DISTRIBUTION DEPARTMENT
To make its quality products available at every corner of the country, ARISTOPHARMA has a strong distribution network comprising of 14 depots throughout the country. A dedicated team of around 450 people and a fleet of vehicles comprising delivery vans, three wheelers etc. are engaged in the timely distribution of products throughout the country.

MEDICAL SERVICES DEPARTMENT (MSD)

In ARISTOPHARMA, we believe that our responsibility does not end only in manufacturing and marketing quality medicines but also extends to the total improvement of the healthcare sector of the country. To do this, ARISTOPHARMA has established an independent Clinical Research and Medical Services Department (CRMSD) for the first time in Bangladesh. CRMSD comprised of medical graduates, assists in conducting Clinical Researches with our own medicines on our local people upon collaboration with different medical institutions. It also arranges seminars & symposia, publishes news letters & articles and provides other professional services to the doctors.

SALES TRAINING DEPARTMENT

They organize training for sales people. Training is organized both in the entry level as well as for existing people to keep them updated with product knowledge, selling skills etc.

MARKET RESEARCH TEAM (MRT)

The Market Research Team conducts prescription audit throughout the country to find out the prescription behavior of the doctors, which acts as the major input for formulating marketing strategies.

CHAPTER-2: MARKET COMPETITIVENESS

Factors Driving the Price and Quality Competitiveness of Pharmaceuticals:
1. Manufacturing Cost. Bangladesh has a clear advantage due to low labor costs, while it is at a disadvantage with regards to the largest cost drivers for the pharmaceutical sector, i.e. Active Pharmaceutical Ingredients (APIs) and scale. 2. Workforce Skills. Although Bangladeshs pharmaceutical labor costs are approximately pharmaceutical 30% less than Indias, the industry faces challenges in the technical training required because Bangladeshs educational system lags behind global levels. 3. Government and Regulatory Environment. The current regulatory envi environment is protected and under-regulated. Importing drugs is difficult, allowing domestic firms to regulated. dominate the market. Due to the power of these firms and the government regulatory agencies weakness, quality control laws are not strictly enforced. 4. Macro Factors. Countries tend to have stronger domestic industries when the following characteristics are present: high levels of secondary and tertiary educational enrollment; GDPs greater than $100 billion; populations greater than 100 million; a high manuf manufacturing value added score by the United Nations Industrial Development Organization (UNIDO); and a net positive pharmaceutical balance of trade.

10

Potential Mechanisms Identified to Improve the Quality of Drugs Available in Bangladesh:

1. Export-led improvement. Firms tend to improve the quality of drugs that are made for export but not to the drugs made for domestic consumption. This has implications for the domestic market. But because firms tend to segment production for the different markets, with higher quality drugs going to export markets and lower quality drugs remaining in the less-regulated domestic market, the domestic industry only benefits regulated indirectly.

led 2. Regulatory-led quality improvement. A strict regulatory environment does result in higher drug quality but significant political will is required to enforce the regulations. gher Currently, the domestic regulatory institutions are not able to effectively manage quality issues and so, the public becomes at risk.

3. Competition-led improvement. There is widespread agreement that firms in led re economies with liberal trade policies and greater openness show stronger economic growth and overall development performance in the long run. Bangladeshi pharmaceutical firms operate in a closed protected market. Mo Moves to open the economy and increase competition will most likely lead to cost and quality improvement but such changes will also cause some hardship for Bangladeshi firms, primarily those operating at a sub sub-competitive level.

11

4. Private sector-led improvement. In many industries and countries, the private sector has played a role in maintaining and monitoring quality. Leaders in Bangladeshs domestic pharmaceutical industry are interested in raising product quality levels and could play a role in this regard. 5. Knowledge-transfer-led improvement. Most firms in Bangladesh want to provide the highest quality drugs possible. Government and donors should work with firms producing at less than Good Manufacturing Practices (GMP) levels to raise their standards to a minimum acceptable level. For firms striving toward higher levels of quality improvement, working with the global industry through some form of joint venture, licensing agreement, or contract manufacturing situation is the best mechanism.

12

CHAPTER-3: HIGHLIGHTS OF THE EXPORT OPERATIONS

Today, at the age of globalization, it is a world without boundaries. With the aim to cope up with the challenges of globalization, ARISTOPHARMA started its export operation in 2000, Vietnam being the first destination. Today ARISTOPHARMA export to 9 countries of three estination. continents namely Singapore, Sri Lanka, Myanmar, Vietnam, Bhutan, & Macau of Asia; Ukraine of East Europe & Mauritius of Africa. Apart from usual tablet, capsule, syrup, suspension or cream/ointment, it also exports sophisticated ophthalmic dosage forms to Hong ment, Kong and Myanmar. It is the 1st pharmaceutical company in Bangladesh to export to a developed country like Hong Kong & 2nd company to export to Singapore. Now ARISTOPHARMA is moving aggressively to increase its market share in the operating aggressively countries as well as to invade new countries. Some other African countries & countries of Middle East are under active search.

Countries where ARISTOPHARMA products are exported: exported:

Singapore Hong Kong Sri Lanka Vietnam Myanmar Bhutan Macau Nigeria Ukraine Mauritius

13

CHAPTER-4: PHARMACEUTICALS IN BANGLADESH

Pharmaceutical Industry has grown in Bangladesh in the last two decades at a considerable rate. The national companies account for more than 65% of the pharmaceutical business in Bangladesh. However, among the top 20 companies of Bangladesh 6 are multinationals. Multinational and large national companies generally follow current good manufacturing practices including rigorous quality control of their products.

The pharmaceutical industry, however, like all other sectors in Bangladesh, was much neglected during Pakistan regime. Most multinational companies had their production facilities in West Pakistan. With the emergence of Bangladesh in 1971, the country inherited a poor base of pharmaceutical industry. For several years after liberation, the government could not increase budgetary allocations for the health sector. Millions of people had little access to essential life saving medicines. With the promulgation of the Drug (Control) Ordinance of 1982 many medicinal products considered harmful, useless or unnecessary got removed from the market allowing availability of essential drugs to increase at all levels of the healthcare system. Increased competition helped maintain prices of selected essential drugs at the minimum and affordable level.

In 1981, there were 166 licensed pharmaceutical manufacturers in the country, but local production was dominated by eight multinational companies (MNCs) which manufactured about 75% of the products. There were 25 medium sized local companies which manufactured 15% of the products and the remaining 10% were produced by other 133 small local companies. All these companies were mainly engaged in formulation out of imported raw materials involving an expenditure of Tk 600 million in foreign exchange. In spite of having 166 local pharmaceutical production units, the country had to spend nearly Tk 300 million on importing finished medicinal products.

A positive impact of the Drug (Control) Ordinance of 1982 was that the limited available foreign currency was exclusively utilized for import of pharmaceutical raw materials and finished drugs, which are not produced in the country. The value of locally produced 14

medicines rose from Tk 1.1 billion in 1981 to Tk 16.9 billion in 1999. At present, 95% of the total demand of medicinal products is met by local production. Local companies increased their share from 25% to 70% on total annual production between 1981 and 2000.

In 2000, there were 210 licensed allopathic drug-manufacturing units in the country, out of which only 173 were on active production; others were either closed down on their own or suspended by the licensing authority for drugs due to non compliance to GMP or drug laws. They manufactured about 5,600 brands of medicines in different dosage.

Other significant therapeutic classes include non-steroidal anti-inflammatory drug (NSAID), vitamins, central nervous system (CNS) and respiratory products.

There are three public sector drug manufacturing units. Two of them are the Dhaka and Bogra units of Essential Drug Company Ltd. (EDCL), which is functioning as a public limited company under the Ministry of Health and Family Welfare. EDCL produced medicines worth Tk 964 million in 2000. There are separate vaccines and large volume IV fluids production units under the Institute of Public Health (IPH). The productions of both EDCL and IPH are mostly used in government hospitals and institutions. In 2000, there were 261 unani, 161 ayurvedic, 76 homeopathic and biochemic licensed manufacturing units. They produced medicines worth Tk 1.2 billion in 2000.

One of the major positive impacts of Drug (Control) Ordinance is the rapid development of local manufacturing capability. Almost all types of possible dosage forms include tablets, capsules, oral and external liquids (solutions, suspensions, emulsions), ointments, creams, injections (small volume ampoules/dryfill vials/suspensions and large volume IV fluids), and aerosol inhalers are now produced in the country. In recent years, the country has achieved self-sufficiency in large volume parenterals, some quantities of which are also exported to other countries.

Physical distribution of pharmaceuticals in Bangladesh has evolved in a unique way. Unlike other countries Bangladesh pharmaceutical industry is more retail oriented and bulk of distribution is done by the companies themselves. Pharmaceutical companies distribute their

15

products from their own warehouses located in different parts of the country, as no professional distribution house is available.

There two external forces currently impacting bangladeshs pharmaceutical sector which can provide opportunities for change. The first is wtos trade related aspects of intellectual property (trips), which grants bangladesh domestic manufacturing opportunities and limited export advantages. Pursuing trips opportunities must be carefully considered for the following reasons: they are time sensitive, require up-front investments, are likely influenced by international political pressures, provide unclear benefits, and china and india, the world leaders in low-cost pharmaceutical manufacturing, are still extremely competitive. If bangladesh decides to invest in pharmaceutical manufacturing to take advantage of trips, it should strive to create a sustainable and growing industry after 2016, when the trips flexibilities are scheduled to end.

The second force affecting the industry is the rapidly changing international marketplace. Globalization has resulted in an extremely competitive international market with firms seeking low-cost manufacturing sources. Multinational corporations (mncs) are closing expensive excess capacity and searching for new, less expensive suppliers of active pharmaceutical ingredients (apis) or for developing countries in which to undertake the entire manufacturing process. Due to cost constraints in the european and us health markets and a narrow product pipeline from innovative firms, generic drug companies are growing faster than innovative research.

Wholesalers play a limited role in this regard since companies supply goods to both retailers and wholesalers. Export of pharmaceutical products is still in an infant stage, although a number of private pharmaceutical companies have already entered the export market with their basic materials and finished products. They export their products to Vietnam, Singapore, Myanmar, Bhutan, Nepal, Sri Lanka, Pakistan, Yemen, Oman, Thailand, and some countries of Central Asia and Africa.

16

The annual per capita drug consumption in Bangladesh is one of the lowest in the world. However, the industry has been a key contributor to the Bangladesh economy since independence. With the development of healthcare infrastructure and increase of health awareness and the purchasing capacity of people, this industry is expected to grow at a higher rate in future. Healthy growth is likely to encourage the pharmaceutical companies to introduce newer drugs and newer research products, while at the same time maintaining a healthy competitiveness in respect of the most essential drugs.

WHY EXPORT PHARMACEUTICAL PRODUCTS?

The pharmaceutical industry is the country's second largest taxpayer. The annual per capita he drug consumption in Bangladesh is one of the lowest in the world. However, the industry has been a key contributor to the Bangladesh economy since independence. With the Bangladesh development of healthcare infrastructure and increase of health awareness and the purchasing capacity of people, this industry is expected to grow at a higher rate in future. Avenues are being created in this sector to emerge as a specially promising one to increase export of the tor country after RMG. Bangladesh is the only least developed country (LDC) among 50 LDCs of the world, which is self sufficient in pharmaceuticals industry, with the present market for pharmaceuticals rising to about Tk 2500 crore annually, compared to merely Tk 243 crore in aceuticals 1982. Bangladesh as a LDC country is eligible to export and produce pharmaceuticals without patent up to 2016. Currently leading pharmaceutical companies such as Square pharmaceuticals, Beximco Pharmaceuticals are already exporting pharmaceutical products to harmaceuticals, 17

62 countries, including countries like Libya, North Africa. Bangladeshi manufacturers are now trying to export their pharmaceutical products to 57 other countries of the world and established pharmaceutical plants in Nepal, Pakistan and Vietnam.

Pharmaceutical firms in Bangladesh export approximately $27.54 million in products to 68 countries. Bangladeshi firms can export to the following markets:

Regulated: Aristopharma, the only Bangladeshi pharmaceutical firm accredited in a regulated market, received the UKs regulatory approval in May 2007. The largest barriers to regulated markets are manufacturing facilities which come at a cost of at least $50 million and knowhow.

Moderately Regulated: Some markets, such as Tanzania and Malaysia, are moderately regulated. While countries do not always require stringent certification, a certification from a regulated market signifies quality and provides a firm with a competitive advantage.

Unregulated: Most Bangladeshi pharmaceuticals are exported to less than fully regulated markets such as Bhutan, Pakistan, Sri Lanka, Nepal, Vietnam and Myanmar.

The majority of Bangladeshs pharmaceutical exports are from Novartis/Sandoz, as shown in the Table. Novartis/Sandoz, an MNC operating in Bangladesh, has approximately 25 manufacturing sites globally (Bangladesh Association of Pharmaceutical Industries 2009). Bangladesh is one of its smaller sites. The Bangladeshi manufacturing site is an EU certified 18

plant which produces about 500 million tablets a year and generates about $35-$40 million in sales. It has been growing rapidly15-18% per yearand is responsible for a significant portion of Bangladeshs pharmaceutical export growth. It imports APIs, acquires packaging domestically, and manufactures final formulations in Bangladesh for export of $12 million or for sale to the domestic market ranging from $23-$28 million. Exporting a pharmaceutical product is challenging. Each country has its own product regulations, registration requirements, language requirements, cultural preferences, national packaging requirements, and industry protection mechanisms. Sales on the global market are quite competitive with firms from around the world vying for business. Furthermore, initiating exports requires a significant investment in money, time and paperwork to register the product in the target country. As generic products are branded in less regulated markets, pharmaceutical firms also need to make significant investments in sales and marketing to create product demand. All these investments are made without a guarantee of future sales.
Company Export (USD) Novartis / Sandoz Beximco Pharmaceuticals Square Pharmaceuticals Aristopharma Jams Pharmaceuticals Jayson Pharmaceuticals The Acme Laboratory Co Eskayef Bangladesh Renata Navana Pharmaceuticals Aventis ACI Essential Drug Co Globe Pharmaceuticals Opsonin Pharmaceuticals 12,820,162 1,400,000 1,200,000 733,721 726,546 600,000 331,876 305,648 281,788 240,175 223,999 156,392 124,687 68,410 34,109

Table 2: Recent Exports by Some Bangladeshi Pharmaceutical Firms

Source: Bangladesh Association of Pharmaceutical Industries (2009)

19

Most pharmaceutical firms are family owned. While many have the capacity to export, some do not have the in-house expertise. As a result, approximately only sixteen firms export products. There are no majority exporters, e.g., companies that sell more than 50% of their output in export markets (Fernandes 2006). Beximco, for example, is one of the leading exporters. Its 2005 exports were $1.3 million or 2.7% of total sales (Beximco Pharmaceuticals 2005).19 A brief profile of Beximco is provided in Box 1. However, many companies initiated the process of product registration in international markets only in the last two to three years. The export situation is evolving. For example, Aristopharma increased exports by 24% from 2006-07 to 2007-08.

Bangladeshi firms that export are 9-10% more productive than non-exporting firms (World Bank 2006). Some possible reasons for this advantage may be due to:

1. Technological lessons learned from foreign buyers.

2. Exporters improved their own technological capabilities to exploit profitable opportunities in export markets. For example, exporters need to adopt stringent technical standards to satisfy more sophisticated consumers, and/or they are under more pressure to fill orders in a timely fashion and to ensure product quality for export markets which are more competitive than domestic market.

3. Better firms self-selected to enter export markets rather than the effects of exporting necessarily improving the firms.

Firms have several potential sources for new investment capital. In 2004, 35% of new pharmaceutical investment financing came from the sale of stock and there were twelve firms listed on the stock exchanges in Dhaka and Chittagong; 33% came from domestic commercial banks; 14% was from the firms own internally retained earnings; and 2.5% was from international commercial banks. Incepta, profiled in Box 2, has primarily used retained earnings for its impressive growth.

20

SECTORS OF IMPROVEMENT:
Heating, ventilation and air-conditioning (HVAC) systems to ensure no

crosscontamination. Most Bangladeshi firms use bag-filters (97% efficiency), whereas many international standards require hepa filters (98-99% efficiency). To install these, a facility would have to shut down for approximately six months.

Warehouse. International standards dictate that warehouses must maintain the environmental standards stated on the product insert. If the insert indicates that the item must be stored at less than 25 degrees Celsius, the warehouse must also maintain the required temperature. Bangladeshs warehouses are not air-conditioned and temperatures from May through July can reach 30 degrees Celsius, and higher.

Validation documentation. While the Government of Bangladesh does not require validation documentation, international certifications demand extensive documentation of procedures. The cleaning validation is the most important and challenging validation to achieve. It documents equipment and factory cleaning procedures before changing the drug being produced on the production line to prevent any cross-contamination. Building a new facility may be easier than attempting to upgrade an existing facility to meet GMP or other international standards. To build a new high-quality facility requires at least $50 million, two years, and available land. In 2000, Square Pharmaceuticals spent $50 million on its new plant designed to meet UK certification. To construct this plant, Square hired a British firm to design the plans, and then a 250-member team from Thailand worked onsite to interpret the plans and build the appropriate facilities. Skilled workers were imported because these skills did not exist in Bangladesh. Building an equivalent plant would be much more expensive today due to the Takas decreasing value.

21

Chapter-5: Russia As A Favorable Destination

The reason why Russia seems like a good market to take advantage of is, around 74% of the Russian Federation pharmaceutical market is supplied by imports. Healthcare in Russia remains in a poor state. Public hospitals and polyclinics face severe funding shortages, although some facilities have been upgraded under the national health project; so far, R16 billion (US$0.6 billion) has been spent on the procurement of medical devices and pharmaceuticals. Relying heavily on imports, the 1998 economic crisis left Russia with severe drugs shortages. Prices doubled and imports fell. The pharmaceutical market is estimated to have lost more than half its value since 1997. There are, however, signs of improvement. Both domestic production and imports have increased since 2000 and the government finally imposed VAT on imported pharmaceuticals in December 2001. Despite continual funding difficulties, the federal drug supply system (DLO) introduced in January 2005 has made the industry more competitive and has acted a gateway for foreign companies to enter the market.

Russia: Country Profile

Founded in the 12th century, the Principality of Muscovy, was able to emerge from over 200 years of Mongol domination (13th-15th centuries) and to gradually conquer and absorb surrounding principalities. In the early 17th century, a new Romanov Dynasty continued this policy of expansion across Siberia to the Pacific. Under PETER I (ruled 1682-1725), hegemony was extended to the Baltic Sea and the country was renamed the Russian Empire. During the 19th century, more territorial acquisitions were made in Europe and Asia. Defeat in the Russo-Japanese War of 1904-05 contributed to the Revolution of 1905, which resulted in the formation of a parliament and other reforms. Repeated devastating defeats of the Russian army in World War I led to widespread rioting in the major cities of the Russian Empire and to the overthrow in 1917 of the imperial household. The Communists under Vladimir LENIN seized power soon after and formed the USSR. The brutal rule of Iosif STALIN (1928-53) strengthened Communist rule and Russian dominance of the Soviet Union at a cost of tens of millions of lives. The Soviet economy and society 22

stagnated in the following decades until General Secretary Mikhail GORBACHEV (1985-91) introduced glasnost (openness) and perestroika (restructuring) in an attempt to modernize Communism, but his initiatives inadvertently released forces that by December 1991 splintered the USSR into Russia and 14 other independent republics. Since then, Russia has struggled in its efforts to build a democratic political system and market economy to replace the social, political, and economic controls of the Communist period. In tandem with its prudent management of Russias windfall energy wealth, which has helped the country rebound from the economic collapse of the 1990?s, the Kremlin in recent years has overseen a recentralization of power that has undermined democratic institutions. Russia has severely disabled the Chechen rebel movement, although violence still occurs throughout the North Caucasus.

Location:
Northern Asia (the area west of the Urals is considered part of Europe), bordering the Arctic Ocean, between Europe and the North Pacific Ocean (Geographic coordinates 60 00 N, 100 00 E). It is bordered by Azerbaijan, Belarus, China (southeast), China (south), Estonia, Finland, Georgia, Kazakhstan, North Korea, Latvia, Lithuania (Kaliningrad Oblast), Mongolia, Norway, Poland (Kaliningrad Oblast) and Ukraine. The Russian Federation stretches across much of the north of the super-continent of Eurasia. Because of its size, Russia displays both monotony and diversity. As with its topography, its climates, vegetation, and soils span vast distances. From north to south the East European Plain is clad sequentially in tundra, coniferous forest (taiga), mixed and broad-leaf forests, grassland (steppe), and semi-desert (fringing the Caspian Sea) as the changes in vegetation reflect the changes in climate. Siberia supports a similar sequence but is taiga. The country contains 23 World Heritage Sites and 40 UNESCO Biosphere reserves.

23

Climate:
The climate of the Russian Federation formed under the influence of several determining factors. The enormous size of the country and the remoteness of many areas from the sea result in the dominance of the continental climate, which is prevalent in European and Asian Russia except for the tundra and the extreme southeast. Mountains in the south obstructing southeast. the flow of warm air masses from the Indian Ocean and the plain of the west and north makes the country open to Arctic and Atlantic influences. Throughout much of the territory there are only two distinct seasons wi winter and summer; spring and autumn are usually brief periods of change between extremely low temperatures and extremely high. The coldest month is January (on the shores of the sea seaFebruary), the warmest usually is July. Great ranges of temperature are typical. In winter, temperatures get typical. colder both from south to north and from west to east. Summers can be quite hot and humid, even in Siberia. A small part of Black Sea coast around Sochi is considered in Russia to have subtropical climate. The continental interiors are the driest area.

24

Natural Resources and Industries:

Russia got wide natural resource base including major deposits of oil, natural gas, coal, and many strategic minerals and timber. The main industries of Russia are mining, machine building, defense, shipbuilding, agricultural machinery, construction equipment, consumer durables, textiles, foodstuffs and handicrafts; suggesting it is not dependent on only few industries.

Economy
Russia ended 2007 with its ninth straight year of growth, averaging 7% annually since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble initially drove this growth, since 2003 consumer demand and, more recently, investment have played a significant role. Over the last six years, fixed capital investments have averaged real gains greater than 10% per year and personal incomes have achieved real gains more than 12% per year. During this time, poverty has declined steadily and the middle class has continued to expand. Russia has also improved its international financial position since the 1998 financial crisis. The federal budget has run surpluses since 2001 and ended 2007 with a surplus of about 3% of GDP. Over the past several years, Russia has used its stabilization fund based on oil taxes to prepay all Soviet-era sovereign debt to Paris Club creditors and the IMF. Foreign debt is approximately one-third of GDP. The state component of foreign debt has declined, but commercial debt to foreigners has risen strongly. Oil export earnings have allowed Russia to increase its foreign reserves from $12 billion in 1999 to some $470 billion at yearend 2007, the third largest reserves in the world. During PUTIN's first administration, a number of important reforms were implemented in the areas of tax, banking, labor, and land codes. These achievements have raised business and investor confidence in Russia's economic prospects, with foreign direct investment rising from $14.6 billion in 2005 to approximately $45 billion in 2007. In 2007, Russia's GDP grew 7.6%, led by non-tradable services and goods for the domestic market, as opposed to oil or mineral extraction and exports. Rising inflation returned in the second half of 2007, driven largely by unspecialized capital inflows and by rising food costs, and approached 12% by year-end. In 2006, Russia signed a bilateral market access agreement with the US as a prelude to possible WTO entry, and its companies are involved in global merger and acquisition activity in the oil and gas, metals, and telecom sectors. Despite Russia's recent success, serious problems persist. Oil, natural gas, metals, 25

and timber account for more than 80% of exports and 30% of government revenues, leaving the country vulnerable to swings in world commodity prices. Russia's manufacturing base is dilapidated and must be replaced or modernized if the country is to achieve broad-based economic growth. The banking system, while increasing consumer lending and growing at a high rate, is still small relative to the banking sectors of Russia's emerging market peers. Political uncertainties associated with this year's power transition, corruption, and lack of trust in institutions continues to dampen domestic and foreign investor sentiment. President PUTIN has granted more influence to forces within his government that desire to reassert state control over the economy. Russia has made little progress in building the rule of law, the bedrock of a modern market economy. The government has promised additional legislative amendments to make its intellectual property protection WTO-consistent, but enforcement remains problematic. The economic development of the country though has been uneven geographically with the Moscow region contributing a disproportionately high amount of the country's GDP. Much of Russia, especially indigenous and rural communities in Siberia, lags significantly behind. Nevertheless, the middle class has grown from just 8 million persons in 2000 to 55 million persons in 2006. Russia is home to the second largest number of billionaires in the world after the United States, gaining 40 billionaires in 2007 for a total of 101.

Government and Politics:

Russia is a federation and a presidential republic, wherein the President is the head of state and the Prime Minister is the head of government. The Russian Federation is fundamentally structured as a representative democracy. Executive power is exercised by the government. Legislative power is vested in both the government and the two chambers of the Federal Assembly. The government is regulated by a system of checks and balances defined by the Constitution of the Russian Federation, which serves as the country's supreme legal document and as a social contract for the people of the Russian Federation. The president is elected by popular vote for a four-year term (eligible for a second term but constitutionally barred for a third consecutive term); election last held 2 March 2008. Ministries of the government are composed of the premier and his deputies, ministers, and selected other individuals; all are appointed by the president. The national legislature is the Federal Assembly, which consists of two chambers; the 450-member State Duma and the 176-member Federation Council. 26

Leading political parties in Russia include United Russia, the Communist Party, the Liberal Democratic Party of Russia and Fair Russia.

Foreign Relations:
China and Russia have demarcated the once disputed islands at the Amur and Ussuri confluence and in the Argun River in accordance with the 2004 Agreement, ending their centuries-long border disputes; the sovereignty dispute over the islands of Etorofu, Kunashiri, Shikotan, and the Habomai group, known in Japan as the "Northern Territories" and in Russia as the "Southern Kurils," occupied by the Soviet Union in 1945, now administered by Russia, and claimed by Japan, remains the primary sticking point to signing a peace treaty formally ending World War II hostilities. Russia and Norway dispute their maritime limits in the Barents Sea and Russia's fishing rights beyond Svalbard's territorial limits within the Svalbard Treaty zone. The dispute over the boundary between Russia and Ukraine through the Kerch Strait and Sea of Azov remains unresolved despite a December 2003 framework agreement and on-going expert-level discussions. Kazakhstan and Russia boundary delimitation was ratified on November 2005 and field demarcation should commence in 2007. Russian Duma has not yet ratified 1990 Bering Sea Maritime Boundary Agreement with the US . Russia has a multifaceted foreign policy. It maintains diplomatic relations with 178 countries and has 140 embassies.

Transportation:
As of 2007 there are 1,260 airports in Russia. Railways total 87,157 km and roadways 871,000 km in total across Russia. Waterways are 102,000 km (including 33,000 km with guaranteed depth), out of this 72,000 km system in European Russia links Baltic Sea, White Sea, Caspian Sea, Sea of Azov, and Black Sea.

Population
According to preliminary estimates, the resident population of the Russian Federation on 1 January 2008 was 142 million people. The Russian Federation is a diverse, multiethnic society, home to as many as 160 different ethnic groups and indigenous peoples. 27

73% of the population lives in urban areas. As of the 2002 Census, the two largest cities in Russia are Moscow (10,126,424 inhabitants) and Saint Petersburg (4,661,219). Eleven other cities have between one and two million inhabitants: Chelyabinsk, Kazan, Novosibirsk, Nizhny Novgorod, Omsk, Perm, Rostov-on-Don, Samara, Ufa, Volgograd, and

Yekaterinburg. In 2006, 186,380 migrants arrived to the Russian Federation of which 95% came from CIS countries. There are also an estimated 10 million illegal immigrants from the ex-Soviet states in Russia. The mortality rate in Russia declined 4% in 2007 compared to 2006, reaching some 2 million deaths, while the birth rate grew 8.3% year-on-year to an estimated 1.6 million live births. The primary causes of Russia's population decrease are a high death rate and low birth rate. While Russia's birth-rate is comparable to that of other European countries (Russia's birth rate in 2007 was 11.3 per 1000 people compared to the European Union average of 10.00 per 1000) its population declines at much greater rate due to a substantially higher death rate (In 2007, Russia's death rate was 14.7 per 1000 people compared to the European.

Education:
Russia has a literacy rate of 99.4%. As a result of great emphasis on science and technology in education, Russian medical, mathematical, scientific, and space and aviation research is generally of a high order.

Health:
While Russia has more physicians, hospitals, and health care workers than almost any other country in the world, since the collapse of the Soviet Union the health of the Russian population has declined considerably as a result of social, economic, and lifestyle changes. In 2006, the average life expectancy in Russia was 59.12 years for males and 73.03 years for females. Heart diseases account for 56.7% of total deaths, with about 30% involving people still of working age. About 16 million Russians suffer from cardiovascular diseases, placing Russia second in the world, after Ukraine, in this respect. More than 260,000 lives are lost each year as a result of tobacco use. HIV/AIDS, virtually non-existent in the Soviet era, rapidly spread following the collapse, mainly through the explosive growth of intravenous drug use. Officially there are currently more than 364,000 people in Russia registered with HIV. Russia's 160 ethnic groups speak some 100 languages. 28

Religion:
Christianity, Islam, Buddhism, and Judaism are Russias traditional religions. In 2006 it was estimated that Russian Orthodox was major religious group then 15-20%, Muslim 10-15%, other Christian 2%. These estimates are of practicing worshipers; Russia has large populations of non-practicing believers and non-believers, a legacy of over seven decades of Soviet rule.

Ethnic Groups:
Russians are the dominating ethnic group with 79.8% followed by Tatar 3.8%, Ukrainian 2%, Bashkir 1.2%, Chuvash 1.1%, other or unspecified 12.1%.

Culture:
Russian culture is one that is rich and colorful. Russians have a rich cuisine. Russian art is considered by some to be very interesting and unique. Russians are also known for their sense of humor. Russian literature was greatly influential to world literature.

S.W.O.T. Analysis:
It will be divided in two parts, internal and external. Strength and weaknesses will be considered as the internal part of the analyses. On the contrary opportunity and threats will be considered as external factors affecting the process.

Strength
Quality: Bangladesh pharmaceuticals industry is well known for its products. Moreover Aristopharma pharmaceutical is a well reputed organization. Bangladesh is exporting these pharmaceuticals products to many parts of the world. So it is really a positive sign for this industry, as they are already well known for its high quality products. Also Square is already exporting pharmaceuticals products to some countries so they are known with the exporting

29

criterion. It will help us to enter into a new market with regard to the international quality standards. Low Price: Lower production cost one of the other strengths our several industries have. As a LDC Bangladesh can manufacture and export pharmaceutical products without patent until 2016. This gives us a great advantage over other exporting countries. This actually pulls down the cost. This absence of the patent costs ultimately lowers the price of the products that gives our pharmaceuticals industry a huge benefit over others competitors. Moreover Bangladesh is still known for low wages of labor. That generally brings down the labor cost, thus reducing the cost of production. Since the cost of production is lower than many other foreign competitors AristoPharma can afford to charge lower price even after the costs involved with exporting. Human Resource: AristoPharma has a total of 2600 employees at its disposal. This proved to be sufficient for its successful production and distribution of products across the country and also exporting them. Perhaps few more personnel will be needed to handle the export to Russia, but it does seem sufficient enough. Facilities: The state-of-the-art-manufacturing facility of ARISTOPHARMA is located at ShampurKadamtali, 10 km south-east from central Dhaka. The facility is planned and designed with fine tuned future orientation to meet the local as well as international demand both qualitatively & quantitatively. World class machineries sourced from USA, Germany, England & Japan have been employed in various steps of production to ensure manufacturing of world class products. The ophthalmic and parenteral products are manufactured in the newly commissioned sterile product block. This block, built on a turn-key basis by RETAN LTD. of Belgium brings in world class facilities for manufacturing sterile ophthalmic & parenteral dosage forms. This facility equipped with HEPA filter, laminar air flow and class 100 clean room is believed to be the most modern in the country. But apart from all these facilities, the men behind the machines get the major priority in building our success blocks. Because we believe that the measure of our success is not the

30

power of technology but the power it unleashes in people. Hence highest care is taken in selecting, developing & retaining quality people to run the quality machineries. A good blend of Pharmacists, Chemists, Microbiologists & Engineers led by the Director, Production pay their relentless efforts to bring in the highest quality products from the best quality machineries. These facilities proved to be efficient and effective in producing high quality products at lower costs.

Weaknesses
Lack of skilled workforce: The pharmaceutical industry of Bangladesh is still in a growing phase. There is shortage of trained and skilled professionals which are essential for maintaining the standard in production. It is essential that education level of the country is increased and social infrastructure for growing industries like RMG, pharmaceuticals is created. This should deliver workers specific for this industries, thus increasing efficiency.

Corruption: Corruption has been the curse for our country for ages. Corruption is indirectly affecting our exporting sector of pharmaceutical industry. The inefficiency and corruption of government officials could slow down the process of exporting. That will only frustrate the involved parties and be too much of a burden for many corporations.

Political Condition: The political instability of our country can also hamper the performance and image of the pharmaceutical industry. Riots, hartals, and political unrest will only hamper the production and exporting process. A deadline could be missed because of such incidents. Although under caretaker government the condition is quite stable at the moment, but political condition in Bangladesh is like a ticking time bomb, it could explode any time.

Port: Corruption, inefficiency, conflicts and strikes have also engulfed the most important port of Bangladesh, Chittagong Port. It takes 9 to 10 days to load and unload a ship as opposed to international standard of 2 to 3 days.

31

Opportunity
Demand for Imported Pharmaceutical Products: Around 74% of the Russian Federation pharmaceutical market is supplied by imports. The global pharmaceutical market will more than double in value to $1.3 trillion by 2020, according to a new PricewaterhouseCoopers report. Russia is among the countries where consumption of medicines is expected to grow dramatically. By 2020, Brazil, China, India, Indonesia, Mexico, Russia and Turkey could account for one fifth of global pharmaceutical sales, according to PwC report. Growth of the markets in those countries is driven by soaring demand for medicines and preventative treatments as the population grows, ages and becomes more prosperous. GDP in those seven countries is expected to triple during the next 13 years from $5.1 trillion in 2004 to $15.7 trillion in 2020. According to the data of the DSM Group research company, the total volume of this market amounted to $9.01 bln (about 2% of the worlds market) in 2005, registering a 35% increase from the 2004 indicator. Among other world markets, only the pharmaceutical markets of Brazil and China grow nearly as fast as that (37% and 28%, respectively). Cost of Production: There are some countries that are exporting medicines to Russia. Germany, India, U.S.A and France are the main exporter of medicines to Russia. There are also some other European countries that are exporting medicines to Russia. But the main problem of these European countries is that their cost of production is significantly higher then that of Bangladesh. In addition to that they have to consider the cost of patent. Bangladesh and other LDCs are at a better competitive position in these terms.

Threats
Competitors: Competitors can be also threats to our new export. Indian pharmaceuticals are our main competitor since cost of production will be quite similar to ours and their facilities are better. European companies might have higher cost of production but their companies are still major players in Russian pharmaceutical industry. Sanofi-Aventis and BerlinChemie/Menarini Group the two European corporations, are the market leaders in Russia. The Pharmstandart holding, which is the best of the Russian producers, is among the five leading companies, and Dr. Reddys Laboratories Ltd., the Indian pharmaceutical company leading in the volume of sales, is among the 20 leading companies on the Russian market.

32

New possible policies: Russian government has intent to tighten the regulations regarding pharmaceutical imports. However, Vladimir Putin opposed this movement in past since Russia is looking to enter WTO, so trade liberalization policies are needed to be adopt. Hopefully new president, Medvedev will continue with this vision.

Corruption: Russian political leaders and bureaucrats are getting known for higher level of corruption. This will affect the trades in that country adversely. The process involved with imports will be delayed. This red tape needs to be removed in order to achieve smooth and efficient trades.

Nationalists Views: Although Russians have been carrying nationalists views since the Soviet times it took an extreme turn within new generation. The young extremists in Russia are known to exercise force and other violent means on foreigners, especially with darker skins. Although it does not have any effect at the moment, it is not wise to ignore the impact of this in future.

Counterfeit medicines: In addition to competitors, illegal competitors also need to be faced. The official statistics say there are 7-12% of counterfeited medicines consumed in Russia. Before the major part of counterfeit were simple medicines, now enormous number of expensive strong medicine: immuno-modulators, antibiotics, cardiologic, antifungal, hormone containing and gastroenterological medicines are being counterfeited.

33

CHAPTER-6: MARKETING PLAN

Marketing Objectives:
AristoPharma shall extend its current objective of transparent business operation based on market mechanism within the legal & social frame work with aims to attain the mission reflected by their vision. In addition to that AristoPharma shall have some specific objectives keeping the market in mind.

Target Market:
AristoPharma shall target the markets where import liberalization policies are being adopted. Since Bangladesh, especially AristoPharma is known for high quality products in comparatively cheaper prices. Therefore the countries looking for those criterions shall be target market. Obviously the population with growing and stable but lower income per capita (as compared to other developed) countries will be target. Equal income distribution is also needed, as it will increase the size of the consumer market. In this case it is Russia as the county already dependent on large number of imported medical goods, as final products and as raw materials. Eventually neighboring Eastern European blocks shall also be target market once established in Russia. Countries like Ukraine, Belarus, Moldova, Romania, Czech Republic, Bulgaria, Slovakia, Slovenia, Hungary and other Eastern European countries have got similar if not same economic and cultural characteristics as Russia. So, through Russia AristoPharma shall expand to these regions.

Expected Sales:
AristoPharma is expecting to sell large volume of their products, using lower price as their advantage. Most probably a reasonable expectation will be $4 million on final goods and around $1 million on strategic exports (raw materials).

Profit Expectations:
AristoPharmas expected profit could be approximately 15%-20% return on their investment (capital). 34

Market Penetration and coverage:

AristoPharma will produce and export their existing products. But in time depending on demand and requirements AristoPharma can produce new products specific to the market of Russia.

Product adaptation or modification

AristoPharma can ensure strict compliance with WHO GMP standards and local regulatory norms in every phase of sourcing & procuring quality materials, manufacturing, quality assurance and delivery of medicines. Using product component model, three crucial parts have been identified. Those are a) Core Component b) Packaging Component c) Support Service Component.

Core Component: The core components consist of the physical products platform that contains the essential technology and all its design and functional features. Alterations in design, functional features, flavors, color, and other aspects can be made to adapt the product to cultural variations. It will not be needed to change the core component of AristoPharma, since it maintains the standard by WHO; unless of course some specific medicine or raw materials are illegal for a certain country. But in case of Russia, none of the products are needed to be altered in terms of core component.

Packaging Component: The packaging component includes style features, packaging, labeling, trademark, quality, price and all other aspects of a products package.

Packaging: of the product does not need to be altered, as AristoPharma already have experience in successfully exporting products without any complain of damage.

Labeling: On the other hand has to be altered when products are exported to Russia. Although AristoPharma already has its labeling in English, large segment of Russia do not know English or prefer Russian language. Therefore, besides English the labeling needs to be done in Ruski for the convenience of Russia consumers. Instructions, components and expiry dates will be clearly written. 35

Price: is not written on the package, although later a price tag is sealed separately, as it could vary from country to country.

Quality: In terms of quality it maintains the standard by WHO and is ISO certified.

Trademark: AristoPharma will continue using its company logo to protect consumers from counterfeit products.

Support Service Component: This is required to maintain the after sell relationship with the customer and goodwill of the company. It includes repair and maintenance, instruction, installation, warranty, deliveries, and the availability of the spare parts. But none of these services apply to a pharmaceutical company. Therefore as support service component, official web address shall be given on the package to help consumers with any queries. Consumers can get contact address, contact number and mailing address from the website. But to reduce the cost of a call and speeding up the process, local distributor will also be given this responsibility. Thus, while labeling the name of the distributor will be given, along with web address of the distributor.

Promotion Mix
Advertising : Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor. Examples: Print ads, radio, television, billboard, direct mail, brochures and catalogs, signs, in-store displays, posters, motion pictures, Web pages, banner ads, and emails. Since the product is mainly exported the main objective will be to sell the products to the distributor in that location. Therefore expensive TV and radion ads will not be needed in primary stages. However, it is suggested to distributors to take initiative to increases the awareness of the product at leas through print ads, billboards, brochures, posters and banners. But should they require any assistance AristoPharma shall provide it. AristoPharma will provide with existing TV, radio or any other commercial to their dealer for assistance. Dealers can either dub or translate those samples into Russian or take some ideas and make a promotion of their own. Besides, it shall be helpful in future if a step of direct

36

investment is taken. But for initial stages all AristoPharma will do is promoting their product to their business partner through brochures, posters and personal selling. Sales promotion: For sales promotion AristoPharma can suggest their distributors or dealer to organize few conferences about a particular wide spread and dangerous diseases and then distribute free samples there. Personal selling : AristoPharma shall be involved in personal selling with their distributor and dealer; however they will suggest their dealers to promote their products in different public and private hospitals and to doctors in order to robust their sales.

Distribution
A smooth and efficient distribution channel will help the products to reach the consumers in every part of the country and in time. Distribution could take place from producers, through distributors/dealers, wholesalers, retailers to the consumers. There could be numerous middlemen involved or just a few. It all depends on the country a product is being sold. A distribution channel is the vital part behind a successful sale of a product. Various types of distribution channel of pharmaceutical product in overseas market are as stated below:

i) Manufacturer ii) Manufacturer iii) Manufacturer iv) Manufacturer Agent Wholesaler Wholesaler Tenderer Retailer Retailer

Patients. Patients. Patients. Patients.

Russia is a large country, so it will be wise to choose more than one port and mode for distributing the products in different parts Russia. Port selection Origin Port: despite a number of problems Chittagong port is still the better option for export purposes. Zia International Airport will also be considered as the means of exporting for aerial transfer of the products. AristoPharma already exporting to Ukraine and Ukraine have got means of land communication with Russia; thus additional products can be exported to 37

Ukraine and from there those products can be exported to Russia. In this case Ukraine is used as transit point. Destination Port: There could be a number of destination ports for the purpose of covering the large area of Russia. Port of Saint Petersburg, Port of Arkhangelsk, Port of Onega etc. can be used as the destination for sea/ocean carriers. From there the products can be distributed in the nearby areas. Moscow airport will also be a destination port, for distributing products in Moscow and areas near her. Products exported through Kazakhstan can reach the Novorossiysk or any other port area near the Central Asian part of Russia.

Mode Selection Due to diverse selection of ports different modes can be selected to serve the purpose of distribution. Railroads and Motor carrier: these are the means of carrying products through land. Since Kazakhstan has got both railroads and roads connected to Russia from Soviet time, both of these methods can be adopted. It is a lengthy process but a cheap one. Air Carrier: Moscow airport will be the chosen destination for such mode. This is the fastest way of distribution but also the most costly one. Ocean Carriers: several ports have been chosen for this purpose. This is the lengthiest process but also a cheaper one.

Packing Marking and labeling regulations: Regulations like declaring ingredients of the medicines, in descending order and classified by quantity in case of products for home use shall be strictly followed. And regulations for raw materials for a particular distributor or corporation shall also be declared and labeled.

Containers: the products are packed in boxes then put into crates which are compiled in the containers.

Costs: the cost of packing could range from 2-3% of total export cost.

Documentation Required All of these documents will be required in order to complete a successful and legal export. 38

Bill of Lading: It is a document issued by a carrier, e.g. a ship's master or by a company's shipping department, acknowledging that specified goods have been received on board as cargo for conveyance to a named place for delivery to the consignee who is usually identified. It is a contract between shipper and carrier, receipt from the carrier and declaration of ownership of goods

Dock Receipt: Document issued by a shipping company to acknowledge that goods have been received for shipment. Dock receipt transfers the accountability for the safe custody of the cargo from the shipper to the carrier, and serves as the basis for preparing the bill of lading.

Commercial Invoice: Document required by customs to determine true value of the imported goods, for assessment of duties and taxes. A commercial invoice (in addition to other information), must identify the buyer and seller, and clearly indicate the (1) date and terms of sale, (2) quantity, weight and/or volume of the shipment, (3) type of packaging, (4) complete description of goods, (5) unit value and total value, and (6) insurance, shipping and other charges

Pro forma invoice: Abridged or estimated invoice sent by a seller to a buyer in advance of a shipment or delivery of goods. It notes the kind and quantity of goods, their value, and other important information such as weight and transportation charges. Shippers Export declaration: given to importer by shipper after reaching the destination. Statement of Origin: Dhaka chamber of commerce will give a document declaring the exporting country.

Insurance Claim Since the products are exported, insurance claim will not be needed by AristoPharma.

Freight Forwarder It is a firm specializing in arranging storage and shipping of merchandise on behalf of its shippers. It usually provides a full range of services including: tracking inland transportation, preparation of shipping and export documents, warehousing, booking cargo space,

39

negotiating freight charges, freight consolidation, cargo insurance, and filing of insurance claims. Freight forwarders usually ship under their own bills of lading or air waybills and their agents or associates at the destination (overseas freight forwarders) provide document delivery, deconsolidation, and freight collection services. AristoPharma could use it, since it does not have a transportation department for such long distances.

CHANNELS OF DISTRIBUTION
According to the latest rating of the Pharmexpert Marketing Research Center, the leading national distributors are TsB Protech, SIA International, ROSTA, the Shrea Corporation, Biotech, NPK Katren and Apteka-Holding. AristoPharma shall negotiate with one of these leading distributors e.g. Apteka-Holding. From the distributors the products can be distributed to retail buyers/stores or pharmacy chains who will further distribute the product to final consumers. Few pharmacy chains which are quite effective and efficient in Russia are Apteka 366, Pharmakor, Implosia, 03, Doctor Stoletov, Vita, Rigla, Natur Produkt, Pervaya Pomoshch(First Aid) and Stary Lekar (Old Doctor). The products can also sell their products to drugstores who in turn will sell them to retailers and, private and public hospitals. Distributing products to private and public health sectors can also be done directly.

Distributor

Drugstores

Drugstores

Public & Private Health Sectors

Retailer/pharmacy chains

Public & Private Health Sectors

Consumers

Figure: Distribution channel

40

PRICE DETERMINATION
The price of the products exported will depend largely on the cost of export. Since the cost of production is already lower than the competitors AristoPharma can charge lower for their products given cost of exporting allows doing so. The reason behind choosing different ports and mediums for export is to reduce overall cost and also to increase the area covered, so higher volume can be sold. Cost of exporting through aerially is higher than cost of exporting by ocean or land; but distribution in vast areas, larger volume of sales and lower costs through ocean and land will minimize average cost of of shipment of goods. Therefore an expensive medium will not affect overall price by big margin.

Transportation Costs: cost of transportation via air will cost higher than that of water or land.

Handling Expenses: This will depend with the charges imposed by Chittagong port. This includes pier charges, wharfage fees, loading and unloading charges.

Insurance Costs: Since AristoPharma are exporters, they need not to provide any insurance. Once the products are exported it is duty of importer to have insurance.

Customs duties: This will only apply in case of Chittagong port not ports of Russia for AristoPharma.

TYPES OF PRODUCT EXCHANGE

Mainly three types of exchanges of pharmaceutical products are found in the pharmaceutical market. These exchanges are stated below:

i)

Dynamic Exchange Payment

Pharmacis t Drugs 41

Patients

ii)

Complex Exchange Drug Drug Drug Payment

Pharmaci st

Pharmaceu tical Manufactu rers

Drug Payment

Patients

Payment Wholesal

iii) Interactive Exchange

Information Product

Physician Information
Patient

Title
Pharmaceutical Manufacturer

Title
Drug Wholesaler

Title
Pharmacist

Product Information Payment

Product Information Payment

Product Information

Information

Payment

Information Payment

Third Party

Figure. Examples of Types of Exchanges in the Pharmaceutical Market

42

Information

Payment

TERMS OF SALE
Terms that set out the rights and obligations of buyers and sellers as applicable in the transportation of goods. Thirteen major terms of sale (called Incoterms) have been standardized by the International Chamber Of Commerce (ICC) for world-wide use. These terms are: 1. C&F (Cost And Freight), 2. CIF (Cost, insurance, And Freight), 3. Delivered At Frontier, 4. Delivered Duty Paid, 5. Ex quay, 6. Ex ship, 7. Ex works, 8. FAS (Free Alongside Ship), 9. FOB (Free On Board), 10. FOB Airport, 11. FOR/FOT (Free On Rail/Free On Truck), 12. Free carrier, 13. Free Carriage Paid To and Free Carriage Paid To And insurance.

Ex Works: Term of sale signifying that the price invoiced or quoted by a seller includes charges only up to the seller's factory or premises. All charges from there on are to be borne by the buyer. This would transfer all the obligations to the buyer after the products reaches the destination. No further obligation is there but this would certainly reduce control over the products inside the country.

FOB: Term of sale under which the price invoiced or quoted by a seller includes all charges up to placing the goods on board a ship at the port of departure specified by the buyer. No risk of insurance is required over the products once they are exported. But this could help in reducing the cost of exporting.

FAS: signifies that the price invoiced or quoted by a seller includes all charges only up to the ship at the port of departure. The buyer is responsible for loading and all subsequent charges.

43

C&F: Term of sale signifying that the price invoiced or quoted by a seller for a shipment does not include insurance charges, but includes all expenses up to a named port of destination. In comparison, carriage paid to (CPT) terms include all transport charges (but not insurance) up to a named place (usually the buyer's warehouse) of destination.

CIF: Term of sale signifying that the price invoiced or quoted by a seller includes insurance and all other charges up to the named port of destination. In comparison, carriage and insurance paid to (CIP) terms include insurance and all charges up to a named place in the country of destination (usually the buyer's warehouse).

It is recommended that AristoPharma either chooses FOB or C&F on initial stages. If on later stages they would want to increase their export and tighten the relationship with distributors they can embrace CIF.

METHODS OF PAYMENT
Cash in Advance: Payment method in which an order is not processed until full payment is received in advance.

Open Accounts: It will be much easier to trade if an open account is created with the buyer. It reduces the fear of default or fraud by the buyer.

Consignment Sales: Trading arrangement in which a seller sends goods to a buyer or reseller who pays the seller only as and when the goods are sold. The seller remains the owner (title holder) of the goods until they are paid for in full and, after a certain period, takes back the unsold goods. It is a risky approach as buyer may default or delay paying.

Sight Draft: Bill of exchange payable on the day it is presented to the named entity

Time Draft: Bill of exchange payable at a fixed future date or a determinable future time such as 30 days after presentation (after sight). The purpose of a time draft is to allow the buyer some time to pay for goods bought. In contrast, a sight draft becomes payable at the time it is presented to the buyer.

44

Date Draft: Bill of exchange that becomes payable (matures) on a fixed date, irrespective of the date it was accepted by the payer.

Letter of Credit: Written commitment to pay, by a buyer's or importer's bank (called the issuing bank) to the seller's or exporter's bank (called the accepting bank, negotiating bank, or paying bank). A L/C guarantees payment of a specified sum in a specified currency, provided the seller meets precisely-defined conditions and submits the prescribed documents within a fixed timeframe. These documents almost always include a clean bill of lading or air waybill, commercial invoice, and certificate of origin.

It is recommended that Aristopharma either accepts cash in advance, open account or letter of credit through negotiation as method of payment.

Pro forma financial statements and budgets

It is a projected or estimated financial statement that attempts to present a reasonably accurate idea of what a firm's financial situation would be if the present trends continue or certain assumptions hold true. Pro forma statements are used routinely in preparing 'what if' scenarios, formulating business plans, estimating cash requirements, or when submitting financing proposals.

Marketing budget: AristoPharma should have enough budget to bear the cost of exporting. If selling expense goes over $1.2 million (80 million taka) then they can allocate enough money (10 million taka approximately) in distribution expense since there is not much or none advertising expense involved initially.

45

CHAPTER-7: CONCLUSION & RECOMMENDATION

AristoPharma have got all the capacity to handle the exporting to Russia in terms of capital, finance and human resource. Russia is a promising market for pharmaceutical industry as trade liberalization reforms are taking place. And Bangladesh have got competitive advantage over lower cost of production and high quality Therefore it is strongly suggested to explore this potential market and contribute further to the economic growth of Bangladesh by earning foreign currency.

IMPROVING PRICE AND QUALITY ON THE EXPORT MARKET

Several possible mechanisms are available to raise the international competitiveness of Bangladesh firms, including: Encourage contract manufacturing. As production of both patented and non-patented drugs moves to low-cost manufacturing areas, Bangladesh firms could build export experience in finished dosage manufacturing through contract manufacturing with foreign firms. Contract manufacturing is a good business opportunity, and if done well, it can also enable technology transfers to domestic firms. Technical Assistance. One barrier to exporting that many firms face is a lack of knowledge. The government and the international community can help to bridge this information gap. Government training, however, can be slow and bureaucratic, and it often requires training itself. Other potential trainings could involve international organizations, exchanges with China and India and other mechanisms. Bangladeshi firms want information on the following specific topics. Inspections and GMP certification. Both the government and firms need training in the necessary requirements to pass inspections, including what is required for the HVAC system, how the inspection process works, and what needs to be done to pass inspection. Exporting pharmaceutical products. Firms want information on how to get USFDA, UKMHRA, or TGA approval, the regulation requirements of other countries, and how to

46

manage the approval process. Also, firms need training in international marketing, sales and negotiations.

Investment and Strategy. Mid- and small-level firms need training and assistance on manufacturing and selecting products, investments, and export markets. Not all pharmaceutical production is the same. Some therapeutic areas are more niche; whereas others depend more on low-cost bulk APIs. All markets are not the same either. Markets vary in levels of regulation, product sophistication, drug quality on the market, and the size of market potential. Bangladeshi pharmaceutical firms need to analyze which markets would provide the maximum competitive advantage based on their current capabilities and cost structures.

TRIPS. The Government and the firms need more information on TRIPS so that they are able to understand how they can make use of the opportunity that exists till 2015.

Government support for firms that export. Box 6 and 7 include examples of how the Governments of China and India support their domestic pharmaceutical industries. Although the market, and not government subsidies, should drive competitiveness for Bangladeshi firms, current government support levels should be analyzed to determine if they put Bangladeshi firms at a disadvantage vis--vis firms from India and China.

Investigation into the feasibility of a bioequivalence laboratory. In order to export a drug to a regulated market and to some moderately regulated markets, Bangladeshi products must undergo bioequivalence testing. No bioequivalence laboratories exist in Bangladesh currently. Additional analysis of laboratory construction and operational costs is required to determine if a domestic laboratory could offer financially comparable services If analysis supports a local laboratory, regional or private-sector alternatives should be considered as well, because a bioequivalence laboratory requires a significant investment.

Investigation of API production. Because API production requires scale economies, Bangladesh will find it difficult to compete internationally. Nevertheless, Bangladeshi pharmaceutical firms may need to acquire API skills if they are going to effectively compete in the global market for final formulations as API costs are a major determinant of final cost and profit. Further analysis is needed to determine which APIs Bangladesh could produce on 47

a scale relevant to the Bangladesh environment and still be price competitive.The following areas should be fully supported if API production is pursued.

The API park. The government has promised the construction of an API park for many years, but little action has been taken. The potential value of the park declines each day that its creation is not realized and the TRIPS 2016 deadline nears. Prioritizing the API park and starting construction is vital if Bangladesh chooses to manufacture APIs.

API skill. Skills in reverse engineering and chemical synthesis should begin to be locally developed in collaboration with local universities and other countries.

Backward integration. To develop the entire supply chain for pharmaceuticals, backward integration from the raw solvents should be considered.

48

BIBLIOGRAPHY

1) Banglapedia http://banglapedia.search.com.bd/HT/P_0154.htm 2) Bangladesh Pharma Industries http://www.pharmadu.net/bps/pharmaindustries.htm 3) Business Dictionary http://www.businessdictionary.com/definition/at-sight.html 4) CIA Factbook https://www.cia.gov/library/publications/the-world-factbook/geos/rs.html 5) Research Market http://www.researchandmarkets.com/reports/461359/russia_pharmaceuticals_and_healthcare_report.p df

6) Russian Economy and Industry Newsletter http://newsletters.cii.in/newsletters/russian_newsletter/pharmaceutical_in_russia.htm 7) AristoPharma http://aristopharma.com 8) The Saint Petersburg Times http://www.sptimes.ru/index.php?action_id=2&story_id=22036

9) Wikipedia http://en.wikipedia.org/wiki/People%27s_Russia

49