Dr.

Reddy’s Laboratories
Corporate Strategy
Joseph AJ (F09023), Luca Crivellari (F09119), Vikas Antony (F09117)
 Contents

THE INDIAN PHARMACEUTICAL MARKET........................................................................................................... 3

OBJECTIVES........................................................................................................................................................................ 6
LITERATURE REVIEW................................................................................................................................................... 6
INTRODUCTION TO DR. REDDY’S LABORATORIES........................................................................................... 7
Company Profile and History................................................................................................................................. 7
Milestones...................................................................................................................................................................... 7
ASSESSMENT..................................................................................................................................................................... 8
Vision............................................................................................................................................................................... 8
Vision-Dr. Reddy’s...................................................................................................................................................... 8
Mission............................................................................................................................................................................ 8
Mission-Dr. Reddy’s................................................................................................................................................... 9
CORE COMPETENCIES................................................................................................................................................ 10
CORPORATE CULTURE............................................................................................................................................... 12
SWOT ANALYSIS............................................................................................................................................................ 15
PEST ANALYSIS.............................................................................................................................................................. 17
STRATEGY........................................................................................................................................................................ 19
REFERENCES.................................................................................................................................................................. 22

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 THE INDIAN PHARMACEUTICAL MARKET

The Indian Pharmaceutical Industry today is in the front rank of India’s science-based

industries with wide ranging capabilities in the complex field of drug manufacture and
technology. A highly organized sector, the Indian Pharma Industry is growing with a double
digit pace. It ranks very high in the third world, in terms of technology, quality and range
of medicines manufactured. From simple headache pills to sophisticated antibiotics and
complex cardiac compounds, almost every type of medicine is now made indigenously. 

Playing a key role in promoting and sustaining development in the vital field of
medicines, the Indian Pharma Industry boasts of quality producers and many units approved
by regulatory authorities in the USA and the UK. International companies associated with
this sector have stimulated, assisted and spearheaded this dynamic development in the past 53
years and helped to put India on the pharmaceutical map of the world

The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered
units. It has expanded drastically in the last two decades. The leading
250 pharmaceutical companies control 70% of the market with market leader holding nearly
7% of the market share. It is an extremely fragmented market with severe price competition
and government price control

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The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered
units. It has expanded drastically in the last two decades. The leading
250 pharmaceutical companies control 70% of the market with market leader holding nearly
7% of the market share. It is an extremely fragmented market with severe price competition
and government price control.

The pharmaceutical industry in India meets around 70% of the country's demand for bulk
drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals
and injectibles. There are about 250 large units and about 8000 Small Scale Units, which
form the core of the pharmaceutical industry in India (including 5 Central Public Sector
Units). These units produce the complete range of pharmaceutical formulations, i.e.,
medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals having
therapeutic value and used for production of pharmaceutical formulations.

Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the
drugs and pharmaceutical products has been done away with. Manufacturers are free to
produce any drug duly approved by the Drug Control Authority. Technologically strong and
totally self-reliant, the pharmaceutical industry in India has low costs of production, low
R&D costs, innovative scientific manpower, strength of national laboratories and an
increasing balance of trade. The Pharmaceutical Industry, with its rich scientific talents and
research capabilities, supported by Intellectual Property Protection regime is well set to take
on the international market. 

According to McKinsey analysis, the Indian pharmaceutical market will triple from 2005 to
2015 and six trends will be causing this growth:

 doubling of disposable incomes and the number of middle-class households,

 expansion of medical infrastructures
 greater penetration of health insurance
 rising prevalence of chronic diseases
 adoption of product patent
 aggressive market penetration driven by the relatively small companies.

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It has forecasted that from a market size of US$ 6.3 billion in 2005, the Indian
pharmaceuticals market will grow about US$20 billion by 2015. This implies a compounded
annual growth rate of 12,3%.

By 2015, the Indian pharmaceuticals market will be ranked among the top 10 in the world
overtaking Brazil, Mexico, South Korea and Turkey. More importantly, the incremental
market growth of US$14 billion from the decade is likely to be the third largest among all the
markets. The US and China are expected to add US$200 billion and US$23 billion
respectively.

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 OBJECTIVES

The primary objective of this paper is to study the vision and mission of Dr. Reddy’s
Laboratories and corroborate whether the strategy which it has adopted falls in line with its
mission and vision statements.

LITERATURE REVIEW

An organization is created to achieve some purposes, which is decided by the CEO and the
top management team. Top executives decide on the end purpose the organization will strive
for and determine the direction it will take to accomplish it. It is this purpose and direction
that shapes how the organization is designed and managed. Indeed, the primary responsibility
of the top management is to determine an organization’s goal, strategy and design, therein
adapting the organization to a changing environment. Middle managers do much the same
thing for major departments within the guidelines provided by the top management.

The direction setting process typically begins with an assessment of the opportunities and
threats in the external environment, including the amount of change, uncertainty and resource
availability.

Top management also assess internal strengths and weaknesses to define the company’s
distinctive competence compared with other firms in the industry. The assessment of internal
environment often includes an evaluation of each department and is shaped by past
performance and leadership style of the CEO and the top management. The next step is to
define overall mission and official goals based on the current fit between external
opportunities and internal strengths. Specific operational goals or strategies can then be
formulated to define how the organization is to accomplish its overall mission.

The choices top managers make about goals, strategies and organization design have a
tremendous impact on organizational effectiveness. Top managers and middle managers must
select goals for their respective units and the ability to make these choices largely determine
the firm success. Organizational design is used to implement goals and strategy and also
determine organization success.

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 INTRODUCTION TO DR. REDDY’S LABORATORIES

Company Profile and History

Established in 1984, Dr. Reddy’s Laboratories (NYSE: RDY) is an emerging global

pharmaceutical company whose purpose is providing affordable and innovative medicines for
healthier lives. Dr. Reddy’s is vertically integrated with a presence across the pharmaceutical
value chain through its core businesses of Global Generics, Pharmaceutical Services &
Active Ingredients (PSAI), and Proprietary Products, which includes New Chemical Entities,
Biosimilars and Differentiated formulations. The company’s products are marketed globally,
with a focus on India, US, Europe and Russia. Dr. Reddy’s conducts NCE drug discovery
research in the areas of metabolic disorders, cardiovascular indications, anti-infective and
inflammation.

From the corporate profile posted on the website, it is possible to understand many of the
features of this pharmaceutical giant. The peculiarities we want to underline are:

 Its global presence: the focus in on the US, Germany, India and Russia but it has
wholly-owned subsidiaries in the US, UK, Russia, Brazil, New Zealand, Turkey and
Mexico;
 Three product lines;
 High commitment towards employee satisfaction;
 High commitment towards social responsibility issues.

Milestones

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 ASSESSMENT

Vision

A vision statement is sometimes called a picture of a company in the future but it’s so much
more than that. The vision statement is your inspiration, the framework for all your strategic
planning.

A vision statement may be applied to an entire company or to a single division of that

company. Whether for all or part of an organization, the vision statement answers the
question, “Where do we want to go?”.

What you are doing when creating a vision statement is articulating your dreams and hopes
for your business. It reminds you of what you are trying to build.

While a vision statement doesn’t tell you how you’re going to get there, it does set the
direction for your business planning. That’s why it’s important when crafting a vision
statement to let your imagination go and dare to dream – and why it’s important that a vision
statement captures your passion.

Unlike the mission statement, a vision statement is for the management team and the other
members of the company, not for customers or clients.

When writing a vision statement, the mission statement and the core competencies can be a
valuable starting point for articulating values.

Vision-Dr. Reddy’s

To become a discovery-led global pharmaceutical company

Mission

The overall goal for an organization is often called the mission, the organization’s reason for
existence. The mission describes the organization’s vision, its shared values and beliefs and
its reasons for being. It can have a powerful impact on the organization. The mission is
sometimes called the official goals. Official goal statements typically define business
operations and may focus on values, markets and customers that distinguish the organization.

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One of primary purposes of a mission statement is to serve as a communication tool. The
mission statement communicate to current and prospective employees, customers, investors,
suppliers and competitors what the organization stands for and what it’s trying to achieve. A
mission statement communicates legitimacy to internal and external stakeholders, who may
join and be committed to the organization because they identify with its state purpose. Most
top leaders want employees, customers, competitors, suppliers, investors and the local
community to look on them in a favourable light, and the concept of legitimacy plays a
critical role. The corporate concern for legitimacy is real and pertinent.

Mission-Dr. Reddy’s

Commitment to providing Affordable and Innovative medicines for healthier lives.

There exists a two pronged focus on:

Affordability: Dr. Reddy’s believes that high cost of many medicines puts them out of the
reach of millions of people who desperately need them. They take very seriously their
responsibility to help alleviate the burden of disease on individuals and on the world.
Through their Global Generics business, they provide high quality, lower-cost alternatives to
innovator drugs.

Innovation: Despite the great advances of medical science, there are still far too many
diseases for which there are no cures or no satisfactory treatments. The company believes that
innovation – in research, processes and technologies – holds the key to finding solutions for
unmet or inadequately met medical needs. Their Proprietary Products business is dedicated to
discovering new or better treatments than currently exist. In addition, their Custom
Pharmaceutical Services business works with Innovator companies and emerging biotech
firms to accelerate the development of new molecules, while lowering research costs.

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 CORE COMPETENCIES

A Core Competency is a deep proficiency that enables a company to deliver unique value to
customers. It embodies an organization's collective learning, particularly of how to coordinate
diverse production skills and integrate multiple technologies. Such a Core Competency
creates sustainable competitive advantage for a company and helps it branch into a wide
variety of related markets. Core Competencies also contribute substantially to the benefits a
company's products offer customers. The distinguishing feature of a Core Competency is that
its hard for competitors to copy or procure. Understanding Core Competencies allows
companies to invest in the strengths that differentiate them and set strategies that unify their
entire organization.

In keeping with its vision and mission, the company has identified the following core
competencies essential for attaining business objectives:

Deep Manufacturing Expertise

The company has 16 world-class manufacturing facilities of which 9 have a long history of
regular USFDA inspections. With an annual capacity of nine billion tablets/ capsules a year,
dedicated to servicing the more regulated markets, one of its finished dosages facilities is
among the largest in Asia. The facilities are designed to respond to a wide range of
technologies - oral solids, injectibles, topicals, inhalers, cytotoxic, hormonals and other
dosage forms.

Likewise the firm’s API facilities offer lean manufacturing, adhere to stringent regulatory
guidelines and continually drive cost competitiveness. Such manufacturing capabilities and
inherent expertise to navigate intellectual property road blocks makes Dr. Reddys a preferred
partner for some of the world’s leading pharmaceutical companies.

Globally Synchronized Supply Chain

The company puts the needs of its partners and customers first. Its globally synchronized
supply chain and a comprehensive Information technology platform helps assure customers
of timely delivery and superior inventory turns. The uninterrupted success of its customers’
business is the firm’s foremost promise.

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Regulatory Performance

Over the years Dr. Reddys has built an expertise in understanding the regulatory frameworks
of the various countries in which it operates. This has given them a distinctive edge, for
themselves and their customers. They have built a successful track record of timely and
extensive approvals. As an example, the firm is among the leaders in terms of Abbrevaited
New Drug Applications (ANDAs) in the US.

Quality & Product Responsibility

At Dr Reddy’s, quality control and quality assurance systems are strictly followed as
specified by regulatory requirements in each of the geographies in which they operate. For
them, product responsibility extends through the life cycle of the product- from product
development to manufacture to product release to post-launch. They comply with the
internationally accepted International Conference on Harmonization (ICH) guidelines in
product development and have independent quality control and quality assurance teams to
ensure multi-stage quality compliance.

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 CORPORATE CULTURE

Culture is the set of values, norms, guiding beliefs and understanding that is shared by
members of an organization. Everyone participates in culture, but culture generally goes
unnoticed. It is only when organization try to implement new strategies or programs that go
against basic cultural norms and values that they come face to face with the power of culture.

Organizational culture exists at two levels. On the surface are visible artefacts and observable
behaviours, the ways people dress and act, the symbols, the stories and ceremonies
organization member shares. The visible element of culture, however, reflects deeper values
in the minds of organization members. These underlying values, assumptions, beliefs and
thought process are the true culture.

Culture provides members with a sense of organization identity and generates in the a
commitment to beliefs and values that are larger than themselves. Though ideas that become
part of culture can come from anywhere within the organization, an organization’s culture
generally begins with a founder or early leader who articulates and implements particular
ideas and values as a vision, philosophy or business strategy. When the idea and value leads
to success, they become institutionalized, and an organizational culture emerge that reflects
the vision and strategy of the funder or leader.

Culture serves two critical functions in organizations: to integrate members so that they know
how to relate to one another, and to help the organization adapt to the external environment.
Internal integration means that members develop a collective identity and know how to work
together efficiently. Its culture that guides day-to-day working relationships and determines
how people communicate within the organization, what behaviour is acceptable or not and
how power and status are allocated. External adaptation refers to how the organization meets
goals and deals with outsiders. Culture helps guide the daily activity of workers to meet
certain goals. It can help the organization to respond rapidly to customer needs or the moves
of a competitive advantage. Culture plays a key role in transforming an organization’s
performance from average to truly great.

The organization’s culture also guides the employee decision making in the absence of
written rules or policies. This, both functions of culture are related to building the
organization’s social capital, by forging either positive or negative relationships both within
the organization and with outside.

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Once again, keeping with its Vision and Mission statement, Dr, Reddy’s strives to imbibe the
following corporate culture to further its operational effectiveness:

 The company seems truly concerned about sustainability and environmental issues,
we can see it because the commitments of the company have been reported several
times along the corporate annual review and website.
 It has put in motion a kind of strategic philanthropy because it’s producing products at
a low price so that everybody (or almost) can afford them.
 The company seems to have a transparent kind of communication, given that all the
documents are available on the website along with financial data, reports and
statement.
 It cares for its employees, given that it has won the award for “best company to work
for” in biotech/pharma industry by the Great place to work Institute in collaboration
with the Financial Times.
 The company seems to have a global culture given that it has many participation and
connection abroad and many of the non-executive directors in the board are non-
Indian.
 It has high commitments towards the employees that can be stated through those
concepts:
o Attract, develop and retain multi skilled high-performers;
o Create a learning organization;
o Develop and nurture young leaders;
o Promote teamwork and collaboration;
o Build a diverse workforce and meritocracy.

The traits of the organisational culture that we have explained till now need to merge with the
culture of all the employees the company has. This is an even more difficult task to
implement given that the people employed at Dr. Reddy’s come from more than 40 nations
worldwide.

In our opinion, a message of the chairman Dr. Anji Reddy can summarize the common
pattern of beliefs and ideals shared among the people in the organization:

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“If the world’s burden of disease is to be diminished, it needs science that is both good and
cost-effective. India has the potential to deliver on science that is both. I have great
confidence in our army of chemists and biologists. And I firmly believe that walking on the
trail of innovation will lead to creating a great company -a company that doctors, patients,
investors and the public will admire”.

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 SWOT ANALYSIS

SWOT analysis is a strategic tool used to evaluate the Strengths, Weaknesses,

Opportunities, and Threats involved in a project or in a business venture by specifying the
objective of the business venture or project and identifying the internal and external factors
that are favorable and unfavorable to achieve that objective. It helps in generating strategic
alternatives from a business alternative.

SWOT Analysis for Dr. Reddy’s Laboratories

STRENGTHS WEAKNESS
 Strong market portfolio  May lose out to countries in the west
 Has a product portfolio of over 150 because of a more stable currency
APIs and 20 products under  Over reliance on partnerships
development  Lack of strategic partnerships needed
 Wide range of anti-cancer drugs to develop products, thereby
developed competing effectively in global
 Expertise in developing innovative markets
product formulations  Comparatively less focus on generic
 Research driven-6120 employees drugs
worldwide including 951 scientists in  Lack of robust patent registration
which 323 are dedicated towards new mechanisms in India, which affects
drug discovery research sales of its products
 Partnerships with key players in the
market space
 Markets pharmaceutical products in
over 115 countries
 Wholly owned subsidiaries in US and
Europe
 Low cost base

OPPORTUNITIES THREATS
 Lack of middlemen in its value chain  Need for FDA approval for all
 Excellent supply chain management products
 Opportunities to increase domestic  Time consuming FDA trial process

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footprint after reforms in patent affecting revenues from the US and
legislations Europe markets
 Competition from US and European
companies
 Concerns about legal problems with
Pfiezer and judgment in respect of
certain acquisitions

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 PEST ANALYSIS

PEST analysis is basically an evaluation of the macro-economic environment in which an

organization operates, expressed in terms of the impact of Political, Economic, Social and
Technological factors on it.

PEST Analysis

POLITICAL ECONOMIC
 Over-regulation by the government  Very small percentage of the GDP
by way of stringent price control spent on healthcare
measures  Low per-capita income per individual
 Problems created by inappropriately leading to lesser priority for regular
framed patent laws leading to several healthcare check ups
competing companies manufacturing  High incidence of tax - Excise duty
and marketing the same product under (State & Central), Customs duty,
a different brand name Service tax, License fees, Royalty,
 Existence of a huge PSU segment in Pollution clearance tax, Hazardous
the pharma industry which is substances (Storage & Handling)
chronically sick and highly license, Income tax, Stamp duty etc
inefficient. The government diverts  Low number of registered medical
surpluses from efficient units into practitioners
these sick units thereby unduly  Inadequate storage and transportation
subsidizing them facilities for special drugs owing to a
 The government’s decision to charge poor road and rail network
excise duty on MRP rather than cost
of manufacturing, thereby making
finished products more costly
 The Government provides extra
drawbacks to some units located in
specified area, providing them with
subsidies that are unfair to the rest of
the industry, bringing in a skewed
development of the industry. As a
result, pharma units have come up at

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 place unsuitable for a best cost
manufacturing activity.

SOCIAL TECHNOLOGICAL
 Rampant poverty  Progress in automation across the
 Poor sanitation facilities industry
 Preference for household treatments  Recent advances in bio-sciences
handed down over generations including stem cell research etc
 Widespread prevalence of hakims,  Newer drug delivery systems
tantriks etc  Increased focus on Research &
 Increasing pollution levels Development
 Increase in the number of smokers
 Ignorance about benefits of
vaccination etc
 Rampant prevalence of superstitions
 Huge unemployment

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 STRATEGY

Based on references in numerous press releases, the investor presentation and the mission
statement available on the company website, it could be inferred that the company adopts a
Low Cost Strategy to ward off competition and capture the market. The idea is to increase
capabilities in such a way so as to be able to offer the lowest price for quality drugs in the
market. It does this through an improved supply chain management system, elimination of
middlemen in the value chain, an innovative business model and a robust research and
development initiative.

Their strategy pans out in the following ways

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The success of this strategy is shown by the following

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In conclusion we feel that the strategy of Dr. Reddy’s Labs is in line with its vision and
mission, as reflected in its financial performance over the past 5 years. However, with the
space in which the company operates getting increasingly smaller and much more
competitive with each passing day, we also feel that Dr. Reddy’s incorporate the elements of
knowledge sharing among its employees, thereby creating a lean and agile workforce which
is insulated from change and competition to a large extent owing to its competitive
advantage.

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 REFERENCES

 R.L. DAFT – Organizational theory, structure and design, Cengage Editions, 2009
 K. ASWATHAPPA, SADHNA DASH – International Human Resource
Management, McGraw Hill Editions, 2008
 R. REGIS – Strategic Human Resource Management and Development, Excel Books
Editions, 2008
 Web resources:
 Indian Pharma 2015, unlocking the potential of the Indian pharmaceuticals market,
McKinsey&Company
 The Indian pharmaceutical market 2011, Business Insight
 http://www.drreddys.com/index.html
 http://en.wikipedia.org/wiki/Strategic_planning
 http://sbinfocanada.about.com/od/businessplanning/g/visionstatement.htm
 http://www.iloveindia.com/economy-of-india/top-50-companies/dr-reddy.html
 http://www.drreddys.com/aboutus
 http://www.fundinguniverse.com/company-histories/Dr-Reddys-Laboratories-Ltd-
Company-History.html

 Dr. Reddy’s Company analysis report

 Dr. Reddy’s Investor Presentation
 Dr. Reddy’s Corporate Brochure
 Edelweiss Report
 Fundamental Analysis-Dr Reddy’s Lab
 Report on the Indian Pharma market
 India Pharma report 2015
 Dr. Reddy’s Annual report
 Dr. Reddy’s Factsheet

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 India Pharma Dr Reddys annual FactSheet Dr Company analysis Dr.Reddys Investor
2015.pdf report.pdf reddys.pdf report.pdf Presentation.pdf

DrReddys Corporate Edelweiss Report.pdf Fundamental Report on the Indian

Brochure.pdf Analysis-Dr Reddys Lab.pdf
Pharma market.pdf

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