MARKETING
STRATEGY 3
Cipla
Round 3
Ques 1: What are Dr Hamied’s motives
Humanitarian or Pirate?
Are his practices unfair competition?
Ques 2: Analyze Cipla’s Options
Is Cipla’s Business Model sustainable
The Case: Cipla What should Dr Hamied do next?
Ques 3: Should Pharma firms be responsible to society? Should
the government have any role here?
Was there a failure in South Africa
What will you pay for a
life saving drug?
Supply-side economies of scale, scope, or experience. FedEx
Demand-side benefits of scale: Amazon; Flipkart
Customer switching costs: Microsoft Windows
Capital costs
A large required capital commitment can deter new entrants.
Is Cipla a Incumbency advantages
threat? Incumbent mining companies/ Technology inventors (innovators).
Unequal access to distribution channels: P&G; Disney.
Barriers to
Restrictive government policy
entry Patents can deter market entry by imitators. Getting new licenses.
High barriers to exit
High labor severance costs can deter market entry.
Anticipated vigorous incumbent response
The threat of price cuts or expensive advertising campaigns
Slow industry growth
Newcomers must take share from incumbents.
Can profit be fair?
It is fair for sellers to pursue a pricing rule of raising prices when
their costs increase, but not reduce their prices when costs
decrease
Raising price to maintain profits is fair (i.e., perceived by buyers to
be fair). As such, a cost-justified price increase is fair, even though it
"Dual occurs at the expense of buyers.
Entitlement" Raising price to increase profits is not fair.
Maintaining price in the face of a cost decline (which leads to an
increase in profits) is fair since consumers will continue paying the
price they are entitled to.
Apply this to the Pharma industry
LOBBY
What are REFOCUS ON OFF-PATENT EXPORTS
Cipla’s
options?
DEVELOP AN INDIA INITIATIVE
Glivec (Anti-Cancer Drug), from Novartis
In 2006, the Indian Patent Office first refused Glivec’s patent under
Section 3(d) of the Indian Patent Act arguing that it was only a
Case in Point: modified version of an existing drug, and therefore that the drug
was not innovative.
Novartis The Supreme Court of India gave its final decision on April 1st of
2013, rejecting the appeal of the Swiss giant drug manufacturer.
The next quarter
Quarter 3
The Goal is to
Maximize Learning
Quarter 3 - Go and Not Profits.
to Test Market
Develop distribution strategy
Hire sales and service personnel
Open new sales outlets for Q4
Set selling prices
Quarter 3 - Go Develop advertising campaign
to Test Market Design an ad for each brand
Schedule ad placement
Develop internet marketing strategy
Set up a website
Contract for market research on
customers and competition
Check financial projections
Quarter 3 - Go
to Test Market
• Costs – production, marketing,
overhead
– you probably won’t be able to go
above your costs
How to Set the • Profit goals
Price? – Difficult to meet
• What market will bear
– Get people to adopt
• Competition
– Who am I competing against
– What will they do
How to Create
Ads?
What is the Right Number of Benefits
Which response function is at work?
How Much to
Say in an Ad?
OR
How Often Do
You Advertise?
How Many
Salespeople?
Shift the Response Function
upwards with better brands,
The Response prices, advertising, and sales
Function is force placement.
Dynamic!
Salespeople will probably sell
between 30 and 70 units
each. On average,
salespeople will sell 50
Projecting units each for the entire
first quarter of the test
Demand market.
Demand is a function of
market potential of the
segment and city along
with the quality of your
marketing decisions.
Enter all decisions. The financial component of each decision will be posted to
Project Division Profitability.
Project demand. Estimate demand per salesperson, then multiply by number of
salespeople. Next, divide total among the brands for sale.
Load demand and price data into the financial worksheet.
Projecting Check division profitability. A desired operating profit for the quarter would be
Division 300,000 and net profit would be -500,000 or better.
Profitability Prepare a pessimistic scenario.
Reduce demand by 50%, keeping all the other expenses the same; Reload the
financial worksheet
For this pessimistic scenario, the operating profit should be 25,000, and net
profit should be -700,000 or better.
Prepare a worst-case scenario.
Set demand at 100 bikes in total; Look at the numbers, how bad would it be?
Strategy follows from
objectives and tactics
follow from strategy.
Always think about how
Link Tactics to your tactics support your
Strategy strategy. Make sure your
tactics are consistent and
coordinated within and
between the functional
areas.
