A Project Report On

“BLUE OCEAN STRATEGY”

AT

LAURUS LABS

Project Report Submitted to Osmania University in Partial Fulfilment

of the requirement for the Award of

MASTER OF BUSINESS ADMINISTRATION

DEPARTMENT OF BUSINESS ADMINISTRATION

By

(Affiliated to Osmania University)

GAGANMAHAL, HYDERABAD.
CERTIFICATE FROM THE COMPANY
 CERTIFICATE FROM THE COLLEGE

DECLARATION

I hereby declare that this Project Report titled Blue Ocean Strategy submitted
by me to the Department of Business Management, O.U., Hyderabad, is a
Bonafide work undertaken by me and it is not submitted to any other University
or Institution for the award of any degree diploma / certificate or published any
time before.

Name of the student Signature of the student

 ACKNOWLEDGEMENT
It's my pleasure to express my sincere gratitude to Prof. Yadagiri Reddy, Director
and Mrs.Taruna Shah, Head Department of Business Management for their co-
operation, encouragement and valuable guidance for the completion of this
project in my academic pursuit.
I would like to express my deep sense of gratitude to my project guide, Mrs.
Archana, Department of Business Management, A.V College P.G Centre,
Hyderabad for providing right academic climate and for her guidance and
valuable suggestion given to me throughout this project.
I would like to thank Manager Laurus Labs Limited, for providing the
opportunity to complete project work in their esteemed organization.
I extend my heart full thanks to my beloved faculty for supporting me in the
completion of my project work.
Special thanks to my parents whose love and affectionate blessings have been a
constant source of inspiration to complete my project.
All the thanks are however, only a fraction of what is due to Almighty for
granting my opportunity and the divine to successfully accomplish this
assignment.

INDEX
S.NO CONTENTS PAGE NO

 INTRODUCTION

 NEED FOR THE STUDY

CHAPTER-1  SCOPE OF THE STUDY

 OBJECTIVE OF THE STUDY

 RESEARCH METHODOLOGY

 LIMITATIONS OF THE STUDY

 PERIOD OF THE STUDY

CHAPTER-2  REVIEW OF LITERATURE

CHAPTER-3  INDUDSTRY PROFILE

 COMPANY PROFILE

CHAPTER-4  DATA ANALYSIS AND INTERPRETATION

CHAPTER-5  FINDING

 SUGGESTIONS

 CONCLUSIONS

 BIBLIOGRAPHY

 QUESTIONNAIRES

ABSTRACT
Many companies are facing high competition and unable to create new demand and attract
the customers. The Blue Ocean Strategy offers users a framework for creating uncontested
market space and change the focus from the current competition to creation of innovative
value and demand. The present study was done on Blue Ocean Strategy at Laurus Labs. The
aim of the project is to a draw parallel to the strategy in other industries where this kind of
strategy can be implemented. To evaluate the performance of the organization from
inception. To draw conclusions and to suggest suitable measures to overcome problems, if
any to improve its performance.
The proposed study has been carried on both primary and secondary sources. Main research
methodology is, conducting interviews with the employees and staff members and other
research tools like focus group and observations.
The conclusion describes Blue Ocean Strategy is the most influential new concept in
management strategy, whose exciting premise is that companies can rearrange conventional
factors of competition in order to create a leap in customer value. In the process, companies
make their competition irrelevant and discover unoccupied market space (hence the shift
from a bloody, confined red sea to an expansive blue ocean).
 CHAPTER - I
INTRODUCTION

1
1. INTRODUCTION
Blue ocean strategy is the simultaneous pursuit of differentiation and low cost to open up a
new market space and create new demand. It is about creating and capturing uncontested
market space, thereby making the competition irrelevant. It is based on the view that market
boundaries and industry structure are not a given and can be reconstructed by the actions and
beliefs of industry players. In their classic book, Blue Ocean Strategy, W. Chan Kim &
Renée Mauborgne coined the terms ’red ocean’ and ‘blue ocean’ to describe the market
universe.

The metaphor of Red and Blue oceans describes the market universe. Red oceans are all the
industries in existence today the known market space. In the red oceans, industry boundaries
are defined and accepted, and the competitive rules of the game are known.

Here companies try to outperform their rivals to grab a greater share of product or service
demand. As the market space gets crowded, prospects for profits and growth are reduced.
Products become commodities or niche, and cutthroat competition turns the red ocean
bloody. Hence, the term red ocean is used.

Blue oceans, in contrast, denote all the industries not in existence today the unknown market
space, untainted by competition. In blue oceans, demand is created rather than fought over.
There is ample opportunity for growth that is both profitable and rapid. In blue oceans,
competition is irrelevant because the rules of the game are waiting to be set. Blue ocean is an
analogy to describe the wider, deeper potential of market space that is not yet explored.

The corner-stone of Blue Ocean Strategy is 'Value Innovation'. A blue ocean is created when
a company achieves value innovation that creates value simultaneously for both the buyer
and the company. The innovation (in product, service, or delivery) must raise and create
value for the market, while simultaneously reducing or eliminating features or services that
are less valued by the current or future market. The authors critique Michael Porter's idea
that successful businesses are either low-cost providers or niche-players. Instead, they
propose finding value that crosses conventional market segmentation and offering value and
lower cost.
This idea was originally proposed by Prof. Charles W. L. Hill from Michigan State
University in 1988. Prof. Hill claimed that Porter's model was flawed because differentiation

2
can be a means for firms to achieve low cost. Prof. Hill proposed that a combination of
differentiation and low cost may be necessary for firms to achieve a sustainable competitive
advantage.

1.1. Objectives of the study

In today`s highly competitive business environment, it has become strategically imperative
for firms to have a strategy in place to ensure a competitively superior fit between an
organization and its environment, rather than passively drifting forward without a strategy as
a competitive compass. As such, Blue Ocean Strategy is a business strategy that promotes a
systematic approach "for making the competition irrelevant. “A core idea is to create a leap in
value for both the company and its buyers by breaking the differentiation/low cost trade-off
and to align product value and profit propositions.

 To study the Blue ocean strategy of Laurus Labs

 To draw parallel to the strategy in other industries where this kind of strategy can be
implemented.
 To evaluate the performance of the organisation from inception.
 To draw conclusions and to suggest suitable measures to overcome problems, if any
to improve its performance.
 To compare red oceans (conventional and existing, market space) to blue oceans
(incipient and uncontested market space).

1.2. Research methodology

SOURCES OF DATA:
The data in the proposed study has been collected from both primary and secondary sources.
a) Primary Data:
The primary data was collected through face to face interviews with employees of
Laurus Labs; studying operations & strategy implementation at Laurus Labs.
b) Secondary Data:
The secondary data was collected from already published sources such as annual
reports, returns and internal records.
1. Collection of requires data from annual reports of the Laurus Labs, Hyderabad.
2. Reference from the books and internet relating to the Blue ocean strategy.

3
 c) Research Tool:
Main research methodology is, conducting interviews with the employees and staff
members and other research tools like focus group and observations.

1.3. Scope of the study

The scope of the present study is strictly confined to the study of Blue Ocean Strategy carried
at Laurus Labs. The findings and conclusions drawn therein cannot be valid outside the scope
of the study.

1.4. Limitations of the study

The following is a list of the limitations that confronted in formulating and executing the
research.

 Due to the busy schedule of the executives in the company, all the required primary
data could not be collected, which might affect the results of the study.
 Recommendations of the study to other industries are only personal opinions. Hence
the judgments may be biased and could not be considered as ultimate and standard
solutions.
 Short period of time is one of the limitations, due to which a detailed study could not
be conducted on the topic.
 The study has been conducted on limited knowledge in research. However, the
knowledge that was acquired during the study of the Research Methods course was
put to the most effective use. Assistance was sought from the experienced lecturers
and secondary information sources were consulted successfully.

1.5. Period of the study

The study was carried for a period of approximately 1 ½ months i.e. 45 days. In the report the
study of Blue ocean strategy of the company was analyzed and presented in the form of
statements and tables, accompanies by respective interpretations.

4
 CHAPTER - II
REVIEW OF LITERATURE

5
2. REVIEW OF LITERATURE
2.1 What is blue ocean strategy
Blue ocean strategy is the simultaneous pursuit of differentiation and low cost to open up a
new market space and create new demand. It is about creating and capturing uncontested
market space, thereby making the competition irrelevant. It is based on the view that market
boundaries and industry structure are not a given and can be reconstructed by the actions and
beliefs of industry players. In their classic book, Blue Ocean Strategy, W. Chan Kim &
Renée Mauborgne coined the terms ’red ocean’ and ‘blue ocean’ to describe the market
universe.

Red oceans are all the industries in existence today – the known market space. In red oceans,
industry boundaries are defined and accepted, and the competitive rules of the game are
known. Here, companies try to outperform their rivals to grab a greater share of existing
demand. As the market space gets crowded, profits and growth are reduced. Products become
commodities, leading to cutthroat or ‘bloody’ competition. Hence the term red oceans.

Blue oceans, in contrast, denote all the industries not in existence today – the unknown
market space, untainted by competition. In blue oceans, demand is created rather than fought
over. There is ample opportunity for growth that is both profitable and rapid. In blue oceans,
competition is irrelevant because the rules of the game are waiting to be set. A blue ocean is
an analogy to describe the wider, deeper potential to be found in unexplored market space. A
blue ocean is vast, deep, and powerful in terms of profitable growth.

6
2.2 Objective of blue ocean strategy
The objective of our project “Blue Ocean Strategy” is to understand the real meaning behind
the Blue Ocean and how it is different from the Red Ocean strategy. The project also
describes various steps taken to implement this strategy. Blue Ocean Strategy describe rather
than competing within the confines of the existing industry or trying to steal customers from
rivals (Red Ocean strategy), uncontested market space should be developed that makes
competition irrelevant. This project also gives us an idea of about creating new market space.
Red oceans are all the industries in existence today—the known market space. In the red
oceans, industry boundaries are defined and accepted, and the competitive rules of the game
are known. Here companies try to outperform their rivals to grab a greater share of existing
demand. As the market space gets crowded, prospects for profits and growth are reduced.
Products become commodities, and cutthroat competition turns the red ocean bloody.

Blue oceans, in contrast, denote all the industries not in existence today—the unknown
market space, untainted by competition. In blue oceans, demand is created rather than fought
over. There is ample opportunity for growth that is both profitable and rapid. In blue oceans,
competition is irrelevant because the rules of the game are waiting to be set. Blue Ocean is an
analogy to describe the wider, deeper potential of market space that is not yet explored. Like
the “blue” ocean, it is vast, deep, powerful, in terms of profitable growth, and infinite.
In Blue Oceans, demand is created rather than fought over. There is ample opportunity for
both growth and profit.
...................... W. Chan Kim

2.3 Blue ocean strategy at laurus labs

Laurus Labs is a leading research and development driven pharmaceutical company in India.
The company has grown consistently to become one of the leading manufacturers of Active
Pharmaceutical Ingredients (APIs) for anti-retroviral (ARV) and Hepatitis C. Incorporated as
a private limited company in 2005. Laurus Labs has four main divisions they are Laurus
Generics APIs, Laurus Generics Finished Dosage Forms (FDF), Laurus Synthesis, Laurus
Ingredients.

7
As of 2018, the Laurus Generics APIs business is the development, manufacture, and sale of
APIs and advanced intermediates and has a revenue contribution of 89.5 %. Laurus Generics
Finished Dosage forms (FDF) business is the development and manufacture of oral solid
formulations. Building on API Strengths to forward integrate and has a revenue contribution
of 0.3 %. Laurus Synthesis business is contract development and manufacturing services for
global pharmaceutical companies and has a revenue contribution of 7.4 %. Laurus
Ingredients business is the manufacture and sale of specialty ingredients for use in
nutraceutical, dietary supplements, and cosmeceutical products and have a revenue
contribution of 2.8 %.

To know the Blue Ocean Strategy of Laurus Labs first, we have to know about the API
(Active Pharmaceutical Ingredients) and ARV(Antiretroviral) segment.

An active Pharmaceutical Ingredient (API) is the main ingredient in a pharmaceutical drug

and it is one of the main sources of business for Laurus Labs. Within the APIs, ARVs
(Antiretrovirals) are medications that treat HIV. The drugs do not kill or cure the virus.
However, when taken in combination they can prevent the growth of the virus. When the
virus is slowed down, it slows the HIV disease. Antiretroviral drugs are referred to as ARV.
Since the drug does not cure the infection, any person infected with HIV has to use the
medicines throughout the life to manage the disease. “Efavirenz” is one such medicine used
in the management of HIV. Anti-HIV drugs such as efavirenz slow down damage to the
immune system and prevent the occurrence of AIDS-defining illnesses.
The major customer of this drug is, the WHO (World Health Organization) and the
Governments of different countries like South Africa and the USA. In the last few years,
Laurus Labs has consistently put up efforts on R&D and reduced the cost of production by
25%. Due to decrease in the cost of production, the affordability has increased and the burden
on the government has reduced More patients have enrolled and automatically the market
size has increased. In this way, Laurus Labs has created a Blue Ocean Market and by
continual development of the drug, the cost of production is reduced to 70% by the end of
2016. In the year 2016, Laurus Labs has a 55-60 % of world share in the manufacturing of
Efavirenz drug in the world market. Due to price reduction, many existing players started
buying the API from Laurus Labs and restricted themselves to producing formulation. Thus
the market size has grown consistently over a period resulting in huge revenues for Laurus
Labs.

8
It has successfully eliminated its competitors into the market and avoided becoming a Red
Ocean Market.

2.4 Analytical tools and frameworks of Blue Ocean Strategy

2.4.1 The Four Action Framework

The Four Action Framework of Laurus Labs:

Reduce:

Under the Four Action Framework the Laurus Labs reduced the cost of production of the
drug by introducing effective manufacturing techniques in the organization for the purpose of
New value creation.

Create:

Under the Four Action Framework the Laurus Labs offers the drug product to the WHO and
other Governments of the countries at very cheap rate to expand the market share globally.

9
Raise:

Under the Four Action Framework the Laurus Labs raises the standards of the company by
partnering with formulation companies for the purpose of manufacturing drug by reducing
the unnecessary cost of production.

Eliminate:

Under the Four Action Framework the Laurus Labs eliminates the competitors from the
market in the API space by converting the existing players to restrict themselves into
formulation.

2.4.2 Six path framework

The manufacturing process of Efavirenz involved high costs and hence the price of the drug
was high. Since HIV treatment is sponsored by many Governments and other organizations
such as World Health Organization (WHO), PEPFAR etc. due to the limited funds available
to the organizations, they could buy limited drugs and treat and the number of the patients
enrolled for the treatment were limited. Here Laurus Labs saw the opportunity and instead of
competing with existing players of suppliers of Efavirenz, the company went ahead and
partnered with these organization. Prior to Laurus Labs entering into ARV segment, most of
the manufacturers were producing both APIs and formulations. Due to the focus of the
companies in both API production and formulation, the companies could not constructively
put up efforts in reducing the cost of manufacturing of API. Laurus Labs with its high
potential of Research and Development has inventing new routes of production of Efavirenz
API. With this price of the API was cut down by ~30% during the initial days.

There are six basic approaches to remaking market boundaries. These approaches are called
the six paths framework. These paths have general applicability across industry sectors, and
they lead companies into the corridor of commercially viable blue ocean ideas. None of these
paths requires special vision or foresight about the future. All are based on looking at familiar
data from a new perspective.

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Value Innovation is the simultaneous pursuit of differentiation and low cost, creating a leap
in value for both buyers and the company. The concept of Value Innovation is developed by
W. Chan Kim and Renée Mauborgne and is the cornerstone of market-creating strategy.
Because value to buyers comes from the offering’s utility minus its price, and because value

11
to the company is generated from the offering’s price minus its cost, value innovation is
achieved only when the whole system of utility, price, and cost is aligned.

We can break the value-cost trade-off by answering the following questions:

A. Which of the factors that the industry takes for granted should be eliminated?
B. Which factors should be reduced well below the industry’s standard?
C. What factors should be raised well above the industry’s standard?
D. What factors should be created that the industry has never offered?

12
 CHAPTER – III
INDUSTRY & COMPANY PROFILE

13
3. INDUSTRY & COMPANY PROFILE
Note: All data presented in the following content is of the same time as Laurus Labs started
implementing its strategy 10 years back. It is not to be mistaken as outdated data.

Pharmaceutical industry contributes to the welfare of humanity and provides significant

socioeconomic benefits to the society through creation of jobs, supply chains and community
development. Indian Pharmaceutical industry is one of the world’s largest and most
developed, ranking fourth in terms of volume and thirteenth in terms of value. The country
accounts for an estimated 10% of global production and 2% of world markets in
pharmaceuticals. It has over the years made significant progress in infrastructure
development, technical capability and hence produced a wide range of pharmaceutical
products. The industry now produces bulk drugs under all major therapeutic groups. It has a
sizable technically skilled manpower with prowess in process development and downstream
processing. It has the capital investment of about US$4.1billion. It produced bulk drugs of
value of US$3.5 billion and formulations worth US$15.4billion in 2008. Bulk drugs have
grown at a rate of approximately 14%, and formulation by 24% in the nineties. There is an
increasing interest and investment in R&D. It provides employments 29 million people. The
contribution of pharmaceutical sector in India’s GDP is 2% and 12% of manufacturing sector
GDP.

3.1 Global pharmaceutical industry

Most global pharmaceutical sales originated in the “Triad‟ (US, European Union and Japan),
and together they are accounting for over 80% of the global market. The global
pharmaceutical sales have grown from US$ 334 billion in 1999 to US$ 773 billion in 2008
and further to US$ 776 billion in 2009 and nearly US$880 billion in 2011 (IMS health
2009).At the regional level US, is the major pharmaceutical market accounting for around
45% of global pharmaceutical sales, followed by Europe (24%) and Japan (11%) . As per
IMS health Inc. the highest regional global pharmaceutical sales was in North America with
40.3% share in the year 2008 followed by Europe (32%) Asia, Africa and Australia (11.8%)
(Table 1).

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The share of pharmaceutical products in world exports has grown over the years. It was 1.7%
in 2000 which has increased to 2.6% in 2005 (Exim Bank, 2007). European Union as a bloc
was the largest exporter of it and accounted for 68.7% of total global pharmaceutical exports
in 2008 followed by Switzerland (10.4%), USA (9.0%), China (1.9%) and others. India
occupies 6th position (1.4%). Together their shares stood at 96.8% of global pharmaceutical
exports (Table 2).

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3.2 Indian pharmaceutical industry:
The history of modern Indian pharmaceutical industry (IPI) dates back to the early twentieth
century, when increased nationalism gave rise to greater interest in science, including
pharmaceuticals. The foundation to two firms, which are still in existence today, marks the
start of the modern pharmaceutical industry. One is Bengal Chemical and Pharmaceutical
Work (BCPW) Ltd. set up in Kolkata by Acharya PC Ray in 1901. The other is Alembic
Chemical Works Co. Ltd. in Vadodara by TK Grajjar,Rajmitra and BD Amin in 1907. Both
the companies began an important shift from traditional methods to a more scientific
approach to the discovery, development and manufacture of pharmaceuticals. At the early
stage of development, Indian pharmaceutical companies relied heavily on foreign companies
for their bulk drug requirements. The development of the IPI can be divided into three
phases: 1) Indian Pharmaceutical Industry from 1900 to 1970. 2) Indian Pharmaceutical
Industry from 1970 to 1990. 3) Indian Pharmaceutical Industry after 1995: Post TRIPs
Period. The evaluation of IPI can be shown in the following chart (chart-1).

The government of India is striving hard to put pharmaceutical industry on the sound track of
growth and development from late 1980s. Pharmaceutical industry in India is flourishing at

16
an accelerated rate and it is assumed that soon India will be a global pharma super power and
flagship bearer in global pharmaceutical industry. The Government of India has taken some
strategic policy (including fiscal and EXIM) changes to move in that direction, which are
briefly described as follows: (NPP, 2006).

 The earlier policy of procuring industrial licensing for all kind of drugs has been abolished
(it has recently been done for the last remaining bulk drugs produced by the use of
recombinant DNA technology, bulk drugs requiring in-vivo use of nucleic acids and specific
cell tissue targeted formulations).However, the need for obtaining manufacturing license
under drugs and cosmetics Act, 1940 continues for all units, whether organized or small
scale. The state drug controllers are authorized to issue such licenses in most cases.

 Now, FDI up to 100% is permitted, subject to stipulations laid down from time to time in
the industrial policy through the automatic route in the case of all bulk drugs cleared by the
drug controller general India (DCGI) and their intermediates and formulation. Recently bulk
drugs produced by the use of recombinant DNA technology, bulk drugs requiring in-vivo use
of nucleic acid as the active principles and special cell/tissues targeted formulation have also
been allowed this facility. Besides 100% EOUs and units of EPZs enjoy a package of
incentives and facilities, which include duty free imports of all type of capital goods, raw
materials and consumables in addition to tax holidays against export.

 As recommended by Mashelkar Committee in 1999, a Pharmaceutical Research and

Development Support Fund (PRDSF) with a corpus of Rs.150 crores have been set up under
the administrative control of the Department of Science and Technology. A Drug
Development Promotion Board (DDPB) to administer the utilization of PRDSF has also been
set up.

 Product patent in pharmaceuticals has been introduced in the country, with effect from
January 1, 2005 by amending the patent Act 1970 in conformity with TRIPs agreement

 VAT has been introduced in India with effect from 1st April 2005 and on medicines it has
been kept at 4%.

 In union budget 2008-09 finance minister P. Chidambaram brought down excise duty from
16% to 8% and zero excise duty on anti AIDS drugs. Besides 125% weighted deduction
granted on expenditure for out sourced R&D exemption of excise duty and 5% reduction in

17
custom duty on certain specific life saving drugs and bulk drugs used in the manufacture of
Anti-AIDS drugs is allowed. This augurs well for the industry. Besides this the rate of CST
reduced from 3% to 2% from 1st April 2008 and reduction in the general rate of CENVAT
from 16% to 14% on medicines. In 2008-09 further reduced the excise duty across the board
by 4%. This effectively meant reduction from 8% to 4% on formulation and 14% to 10% on
bulk drugs. Whereas specific reduction in taxes for pharmaceutical goods will lead to a
balanced industrial development in the pharmaceutical sector where there was lopsided
development in tax havens like Himachal Pradesh, Sikkim and Uttaranchal (express pharma
2008).

3.3 Indian pharmaceutical industry in global market

The global market for pharmaceutical industry has shown tremendous growth over the past
decade. But the geographic spread of this growth has been very uneven. Large markets in the
world are USA (45%), Europe (24%) and Japan (11%). China contributed 2% and India’s
contribution was a meagre 1.8% . The Indian industry is highly fragmented with no firm
controlling more than 7% of the market (ICRA, 2004). The top ten companies in India hold
approximately 37% of the market, which is lower than the global structure of 44%. IPI has
been consistent growing at a 12-15% (CAGR) as against global average of 4-7% during
2008-13. One of the unique features of Indian pharmaceutical market is that it has dominated
branded generic (86%) and rest (14%) generic-generic drugs market (Yes Bank Report,
2009). India accounts for 22% of global generic market. Top global generic players in 2007
were Teva ($9.1 billion), Sandoz ($5.8 billion), Mylan ($4.6 billion) and Watson ($2.7
billion). Together they accounted for 47% of the US market in 2009. As compared to these
foreign companies Ranbaxy share was $1.7 billion, Dr. Reddy’s $1.7 billion and India has
793 WHO CGMP (Current Good Manufacturing Practices) approved Pharmaceutical Plants
(DOP, 2009-10). Further India has the highest number of USFDA approved plant (119
plants) outside the US. India accounts for over 1/3rd of Drug master files and 30% of all
approved ANDAs in the US placing it at the second position next only to USA. Even in
patent challenges India ranks next to USA with a share of 21% of patent challenges.

The country also stands at 3rd position in terms of volume of production (10% of global
share) and 14thin terms of value (1.5%). Besides this India has 2% of the world
pharmaceutical market (DOP, 2009)..However, there is a vast gap in the amount of
pharmaceutical R&D expenses undertaken by foreign companies (15-20%) and the Indian

18
companies (5-8%). It is heartening to observe that India has increased its pharmaceutical
exports at a rapid pace since the 1990s. Our trade balance increased to $200 million in 1990
to $4.3 billion in 2008. India is top 17th net exporter in the world. However, irrespective of
its impressive export growth rates, India’s share in the global pharmaceutical exports has not
shown much improvement. It is hovering around 1%. Further, as per WHO study India
accounts nearly 1/3rd of world’s spurious drugs market. Similarly if we compare our per
capita drug expenditure to other developed countries it is quite low i.e. $3 while in USA it is
$222.

3.4 Laurus labs Limited

3.4.1 Company history
Laurus Labs is a leading research and development ('R&D') driven pharmaceutical company
in India with a leadership position in generic active pharmaceutical ingredients ('APIs') for
select high-growth therapeutic areas of anti-retroviral ('ARVs') Hepatitis C and Oncology.
The company also manufactures APIs in oncology and other therapeutic areas such as anti-
asthma ophthalmology anti-diabetics cardiovascular proton pump inhibitors (PPIs) among
others. The company currently operates six manufacturing facilities in Visakhapatnam
Andhra Pradesh. Five of these facilities manufacture APIs and ingredients while the sixth
facility produces Finished Dosage Formulations (FDFs) and one API.
The company's strategic and early investments in R&D and manufacturing infrastructure has
enabled it to become one of the leading suppliers of APIs in the ARV therapeutic area to
multi-national pharmaceutical formulation companies which cater to the large and fast-
growing 'donor-funded access-to-medicines markets' of Sub-Saharan Africa South-East Asia
and Latin America.
The company also has growing synthesis and nutraceutical/cosmeceutical ingredients
businesses. Further it is increasingly focused towards growing its integrated generics finished
dosage forms ('FDFs') business in which it has made significant investments. Laurus Labs
operates in four business lines: Generics - APIs Generics - FDFs Synthesis and Ingredients.
Its Generics - API business comprises the development manufacture and sale of APIs and
advanced intermediates; its Generics - FDF business comprises the development and
manufacture of oral solid formulations; its Synthesis business includes contract development
and manufacturing services for global pharmaceutical companies; and its Ingredients business
comprises the manufacture and sale of specialty ingredients for use in the nutraceutical and

19
cosmeceutical sectors.
The company has launched 59 products since its inception in 2005. Its key customers include
Aspen Pharmacare Limited Aurobindo Pharma Limited Cipla Limited Mylan Laboratories
Limited NATCO Pharma Limited ('NATCO') and Strides Shaun Limited. As of September
30 2016 the Company owned 34 patents and had 152 pending patent applications in several
countries. Laurus Labs Limited was originally incorporated as Laurus Labs Private Limited
on September 19 2005 at Hyderabad Andhra Pradesh India as a private limited company. The
company was subsequently converted into a public limited company and its name was
changed to Laurus Labs Limited on February 12 2007. Subsequently the name of the
company was changed to Aptuit Laurus Limited consequent to the strategic partnership
entered into by the company with Aptuit Singapore on July 19 2007. Thereafter the company
was converted into a private limited company and its name was changed to Aptuit Laurus
Private Limited on July 24, 2007. Subsequently the name of the company was changed to
Laurus Labs Private Limited consequent to the proposed dilution of the shareholding of
Aptuit Singapore in the Company on February 21, 2012. Further the company was converted
into a public limited company and the name of the company was changed to Laurus Labs
Limited on August 16 2016.
The company disinvested its 100% stake in Viziphar Biosciences Private Limited vide
Agreement dated April 18 2016 and the effective date of Agreement was April 1 2016 and
therefore Viziphar Biosciences Private Limited ceased to be the Subsidiary of the Company
w.e.f. April 1 2016.
The company's dedicated manufacturing facility for Aspen was inaugurated and became
operational from November 2016. The company acquired balance 73% of equity
shareholding of its Associate Company namely Sriam Labs Private Limited with effect from
November 1 2016 thereby Sriam Labs Private Limited became 2nd 100% wholly Owned
Subsidiary of the Company. Sriam Labs Private Limited is a private limited company based
in India and engaged in design development and manufacture of Active pharmaceutical
intermediates and Intermediates to cater to the needs of pharmaceutical industry in exchange
for cash.
The Group acquired Sriam Labs Private Limited because it will help realize the anticipated
growth opportunities and synergies from combining these businesses. The company
successfully completed its Initial Public Offering (IPO) and Offer for Sale (OFS) and the
Equity Shares of the Company were listed on the National Stock Exchange of India Limited

20
(NSE) and BSE Limited (BSE) with effect from December 19 2016. In the process the
Company had offered 7009345 Equity Shares for an aggregate amount of Rs 2997.10 Million
(6936775 equity shares of Rs 10/- at a price of Rs 428 per equity share to the Public and
72570 equity shares of Rs 10/- each at a price of Rs 388 per equity share to the employees
under employee reservation category).
The Private Equity Investors namely Aptuit (Asia) Private Limited FIL Capital Management
(Mauritius) Limited Fidelity India Principals and Bluewater Investment Ltd. have together
offered 24107440 equity shares in the Offer for Sale (OFS) in the IPO for an aggregate
amount of Rs 10308 Million. Therefore, the total IPO including Offer for Sale was for
31116785 equity shares of Rs 10/- each for a total amount of Rs 13305.10 Million. During
the year ended 31 March 2017 the company completed expansion of its R&D Centre at
Hyderabad. During the year under review the company-initiated ARV API supply into the
European market.
During the year under review USFDA and WHO-Geneva Inspections at the company's Unit-
2 was completed successfully. During the year under review the company entered into a
contract with Dr.Reddy's Lab for the development and marketing of several anti-retroviral
formulations on profit and cost sharing basis.
Under Profit sharing arrangement between Laurus Labs and Natco for Hepatitis-C Segment
Natco launched Velpatasvir and Sofosbuvir combination in Nepal and launched in India in
May 2017. During the year ended 31 March 2017 Laurus Labs signed manufacturing and
supply agreement for Oncology NCE for clinical phase and commercial supplies. During the
year under review the company filed 3 ANDAs with USFDA and one dossier with WHO-
Geneva.

3.4.2 Vision
The vision of Laurus Labs is to become a leading player in offering integrated solutions to
global pharmaceutical needs in creating a healthier world.

3.4.3 Mission
The mission of Laurus Labs is to constantly strive for innovation to enhance quality and to
provide affordable integrated pharmaceutical solutions to facilitate wellness and well-being
across the globe.

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3.4.4 Performance
2016

 Successful US FDA inspection of the kilo lab facility at R&D Centre, Hyderabad
 Received approval from BfraM Germany for Unit 2 at Vishakhapatnam
 Crossed INR 15 billion in revenues
 Filed first ANDA with the US FDA and first dossier with the WHO

2015

 Commenced commercial operations at Unit 3, Visakhapatnam

 Acquired 27% stake in Sriam Labs Private Limited, Hyderabad
 Successful inspection by WHO, NIP Hungary and US FDA for Unit 1 and Unit 3
manufacturing sites

2014

 Purchased about approximately 135 acres of land at Visakhapatnam for future expansion
 Investment of `3,000 million by Bluewater and acquisition by Bluewater of significant
stake from FIL Capital Management and FIP (acting through FIL Capital Advisors)
through secondary share purchase transaction
 Commenced construction of Unit 2
 Incorporated Laurus Inc. at Delaware as a wholly owned subsidiary of our Company

2013

 Crossed INR.10 billion of revenues

 Received WHO approval for Unit-I at Visakhapatnam

2012- Investment of INR. 490 million in our Company by FIL Capital Management and FIP
through primary investment and secondary acquisition of Aptuit’s majority stake in the
Company along with additional investments by one of our Promoters

2011

 Received USFDA certification for the R&D Center, Hyderabad

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 Received Korean FDA certification for Unit 1, Vishakhapatnam and the R&D Centre,
Hyderabad.

2010

 Received US FDA certification, TGA and UK MHRA certification for the Unit 1,
Vishakhapatnam
 Supplied our Company’s first product to the USA

2009

 DSIR recognition received from the R&D Centre, Hyderabad

 Commercialised four nutritional Fine Chemicals
 Launched first product in Europe
 Entered into a license agreement with an international organisation and a multinational
company for license to manufacture and sell one of our products in the ARV segment

2008

 Filed first-ever Drug Master File

 Commenced operations at Unit-I Visakhapatnam
 Supplied company’s first product to the USA

2007

 Set up API manufacturing facility Unit-I at Visakhapatnam

 Investment by Aptuit Singapore of `1.02 billion in our Company
 Executed manufacturing and services agreements with three multinational companies
 Commenced operations at R&D Centre

2006

 Set up the R&D Centre at IKP, Knowledge Park, Hyderabad

 Signed Term Sheet with a leading Indian pharmaceutical company for oncology APIs
 Filed our first patent application

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3.4.5 Business Divisions

3.4.6 Corporate structure

24
3.4.7 Corporate Governance

3.4.8 Risk management process

The objective of our risk management activities is to recognise, assess and manage risks early
on and to implement appropriate measures to minimise them. Risk management at Laurus
Labs is a continuous process of analysing and managing all the opportunities and threats
faced by the Company in its efforts to attain its goals and to ensure continuity of the business.
It is an integral part of management, embedded in Company’s culture and practices, and
tailored to fit the business functions and processes of the organisation. The process is a
continuous loop comprising context formation, risk assessment, risk treatment,
communication and consultation, and finally, monitoring and review. We have established
processes and guidelines, along with a strong overview and monitoring system, at the Board
and Senior Management levels.

25
There are 5 steps in Risk Management Process

1. Context formation
2. Risk assessment
3. Risk treatment
4. Communication and Consultation
5. Monitoring and review

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3.4.9 Value Creation Model
Laurus Labs strategy is to deliver high-quality, affordable medicines to patients by
reinforcing our position in specialty products, targeting different therapeutic segments as a
leading global manufacturer.

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 CHAPTER – IV
DATA ANALYSIS AND INTERPRETATIONS

28
4 DATA ANALYSIS AND INTERPRETATION
4.1 Base data on HIV patients
Number of people living with HIV on antiretroviral therapy, global, 2010–2015

Distribution of antiretroviral therapy, by country, 2015

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 PEOPLE LIVING WITH HIV BY WHO REGION, 2017
Wastern Pacific
Europe 4%
9%
Americas
Eastern 9%
Meduterranean
1%

South-East Asia
9%
Africa
68%

PEOPLE RECEIVING ARV BY WHO REGION, 2017

Europe Western Pacific
5% 4%
Americas
Eastern 10%
Mediterranean
3%

South - East Asia

8%

Africa
70%

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4.2 Percapita spent on HIV treatment

Year People living People accessing Total Spent Total spent Spending Per
with HIV ARV therapy for HIV for base of Patient
(Millions) (Millions) (Billions $) year 2000* ($/year/patient)
(Billions $)
2005 30.1 2.1 9.4 8.29 3,947
2010 32.4 8 15.9 12.56 1,570
2012 33.7 11.4 18.8 14.1 1236
2013 34.3 13.2 19.5 14.41 1,091
2014 35 15.1 19.2 13.97 925
2015 35.6 17.2 19 13.8 802
2016 36.3 19.4 19.1 13.7 706
2017 36.9 21.7 21.3 14.96 689

*-Annual spent is corrected to $ inflation to baseline to year 2000

4.3 Interpretation
In the above pie chart the Africa has the highest region of HIV suffering with 68% and next
place with America's, Europe, South East Asia 9 %. The next place is Western Pacific with
4% and at last with 1 % of Eastern Mediterranean region.

From the above table it is clearly observed that in 2005 the number of people living with HIV
is 30.1 million and people accessing the ARV therapy are only a 2.1 million with the
available resources of 9.4 billion which cost $ 3,947 per person annually. But Laurus Labs
with its high potential of Research and Development has inventing new routes of production
of Efavirenz API. With this price of the API was reduced, considering the price reduction,
many existing players started buying the API. Many similar API companies have adopted the
same strategy for different products within the ARV segment, moving the total industry of
ARV segment to reduce the costs resulting in reduction of spending per patient; however, it is
to be noted that all companies have pioneered in cost reduction in their respective product
instead of competing on the same product, thus avoiding competition which is generally seen
in red ocean strategies.

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Due to the cost reduction in production of the API, the savings were passed on to the end
patients / organizations that provide finance for the treatment; this in turn resulted in more
number of patients enrolling for the HIV treatment. By the end of 2017 the people with HIV
are 36.9 and people accessing ARV therapy are 21.7 and spending per patient was only $
689.40. Which clearly states that the greater number of people are accessing the medicine at
very low price compared with 2000 year.

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 CHAPTER-V

FINDINGS, SUGGESTIONS & CONCLUSION

33
5.0 FINDINGS
 Laurus labs with high research and development reduced the cost of production and
become the first person in the market to sell the drug at lower rate when compared to
other competitors.
 The Laurus Labs continual R&D has reduced the cost of production and expanded its
market level at globally.
 The fair process stimulates better industrial relations within and out the market either
nationally or internationally. Working with other Client partners helped in making the
drug.
 Laurus labs as a high leadership process in overall ARV world market and leading the
other ARV client partners.
 The Research and Development plays a very important role in the overall Blue Ocean
Strategy, with the continuous innovation and R&D helped the Laurus Labs to remain
a major key player in the World Market.
 The Laurus Labs used Four action Framework analytical tool for the creation of Blue
Ocean Strategy.

5.1 Suggestions
 From the interviews, focus groups and observations it was found that the to achieve
simultaneous low cost and great value, managers should reinforce Blue Ocean
Strategy with other contemporary value-oriented concepts like the Total Quality
Management (TQM) and other cost-efficient concepts like the Just In Time
philosophy (JIT). Otherwise, no matter how brilliant and strong, Blue Ocean Strategy
may be, it cannot survive solo in isolation of other contemporary strategic pillars and
building blocks.

 Continuous Research and Development helps the organization to stay as a blue ocean
otherwise it would easy become another red ocean market.
 Applications of Blue ocean strategy in other drug manufacturing areas.

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5.2 CONCLUSION
According to my study I can conclude that the application of Blue Ocean Strategy in Laurus
Labs is a successful Strategy and it can also be applied in other fields of different Industries.
The Blue Ocean Strategy is the most influential new concept in management strategy, whose
exciting premise is that companies can rearrange conventional factors of competition in order
to create a leap in customer value. In the process, companies make their competition
irrelevant and discover unoccupied market space.

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 Questionnaire

1. Is Blue Ocean Strategy a sustainable business level strategy in Pharma Industry?

A. Yes B. NO

2. Why would you say so?

3. In your opinion, what may be some of the benefits and constraints that can be realized
implementing Blue Ocean Strategy as a business level strategy in Laurus Labs?
a. Benefits?
b. Constraints?

4.Given that a Blue Ocean tends to turn red at some point, how far can Blue Ocean strategy
thrive as a winning strategy?

5.To what extent can there be any noticeable differences between organizations that compete
in red oceans and those that continuously create blue oceans?

6. How can blue oceans be fortified so that they don’t turn red in the long run?

7. What is API and ARV? What is role & impact of Laurus Labs in ARV segment at Global
level?

8.What are the major Analytical tools and frameworks of Blue ocean Strategy in Laurus
Labs?

9.What are the Business Division of Laurus Labs?

10.What is the Risk Management Process of Laurus Labs?

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 BIBLIOGRAPHY
Websites
 https://www.blueoceanstrategy.com
 https://en.wikipedia.org/wiki/Blue_Ocean_Strategy
 https://www.slideshare.net/
 https://hbr.org/blue-ocean-strategy
 https://managementmania.com
 https://www.who.in

Books

 Blue Ocean Strategy: How to Create Uncontested Market Space and Make the
Competition by W. Chan Kim and Renée Mauborgne
 Blue Ocean Strategy Complete Self-Assessment Guide by Gerardus Blokdyk

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