Date: Saturday, April 08, 2023

Mir Semon HaiderLecturer, School of BusinessNorth South UniversityDhaka

Subject: Submission of a business plan on Handicraft Export to North America and Europe

Dear Mr. Haider,

This project is a part of the course international business at undergraduate level. The project is a business 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,

Shahriar M Osman

041 309 030

Mohd Fahad Ifaz

061 409 030

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ARISTOPHARMA LTD.

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Year of Establishment 1986

Commercial Production 1986

Status Private Limited Company

Type of BusinessManufacturing and marketing of finished pharmaceutical formulations

Product CategoriesAntihistamines, Antiulcerants, Antacids, Gastroprokinetics, Laxatives,  Bronchodilators, Decongestants, Antiemetics, Antibiotics, Anxiolytics, 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 ActivitiesSingapore, Hong Kong, Sri Lanka, Vietnam, Myanmar, Bhutan, Macau, Ukraine & Mauritius

Principal Office 7, Purana Paltan LineDhaka-1000Phone- 88-02-9351691-3Fax- 88-02-8317005E-mail:aplhc@bangla.net

Factory Plot # 21, Road # 11Shampur-Kadamtali I/ADhaka- 1204Phone: 88-02-7415284           88-02-7415287E-mail: aplfact@accesstel.net

http://www.aristopharma.com/

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VISION, MISSION & OBJECTIVE

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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.

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THE JOURNEY

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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.

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.

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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.

And the journey continue ... ..

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.

QUALITY POLICY

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MANUFACTURING FACILITY

The state-of-the-art-manufacturing facility of ARISTOPHARMA is located at Shampur-

Kadamtali, 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.

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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.

ARISTOPHARMA’s 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.

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HUMAN RESOURCE

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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.

Skill acquisition & development of all staff is key to a company’s 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

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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 ARISTOPHARMA’s Marketing is to care for its customers and this

responsibility doesn’t lie only on the shoulder of Marketing Department rather all the

company’s departments work together to serve the customers’ interests. And by the

customers we don’t 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 company’s products, select and introduce new

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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

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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.

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COMPETITIVENESS

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4 FACTORS DRIVE 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 Bangladesh’s pharmaceutical labor costs are

approximately 30% less than India’s, the industry faces challenges in the technical

training required because Bangladesh’s educational system lags behind global levels.

3. Government and Regulatory Environment. The current regulatory environment is

protected and under-regulated. Importing drugs is difficult, allowing domestic firms to

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

manufacturing value added score by the United Nations Industrial Development

Organization (UNIDO); and a net positive pharmaceutical balance of trade.

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5 POTENTIAL MECHANISMS HAVE BEEN 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 indirectly.

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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.

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

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. 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-competitive level.

4. Private sector-led improvement. In many industries and countries, the private sector

has played a role in maintaining and monitoring quality. Leaders in Bangladesh’s

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.

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HIGHLIGHTS OF THE EXPORT

OPERATIONS

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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 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 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 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

Singapore

Hong Kong

Sri Lanka

Vietnam

Myanmar

Bhutan

Macau

Ukraine

Mauritius

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PHARMACEUTICALS IN

BANGLADESH

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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

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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

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.

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THERE TWO EXTERNAL FORCES CURRENTLY IMPACTING

BANGLADESH’S PHARMACEUTICAL SECTOR WHICH CAN

PROVIDE OPPORTUNITIES FOR CHANGE. THE FIRST IS

WTO’S 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

COMPANIES.

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 products from their own

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warehouses located in different parts of the country, as no professional distribution house

is available.

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.

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.

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WHY EXPORT PHARMACEUTICAL PRODUCTS?

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The pharmaceutical industry is the country's second largest taxpayer. 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.

Avenues are being created in this sector to emerge as a specially promising one to

increase export of the 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 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 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.16 Bangladeshi firms can export to the following markets:

Regulated: Aristopharma, the only Bangladeshi pharmaceutical firm accredited in a

regulated market, received the UK’s regulatory approval in May 2007. The largest

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barriers to regulated markets are manufacturing facilities which come at a cost of at least

$50 million and know-how.

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.

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The majority of Bangladesh’s 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 plant which produces about 500 million tablets a

year and generates about $35-$40 million in sales. It has been growing rapidly—15-18%

per year—and is responsible for a significant portion of Bangladesh’s 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.

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Company Export (USD)

Novartis / Sandoz 12,820,162

Beximco Pharmaceuticals 1,400,000

Square Pharmaceuticals 1,200,000

Aristopharma 733,721

Jams Pharmaceuticals 726,546

Jayson Pharmaceuticals 600,000

The Acme Laboratory Co 331,876

Eskayef Bangladesh 305,648

Renata 281,788

Navana Pharmaceuticals 240,175

Aventis 223,999

ACI 156,392

Essential Drug Co 124,687

Globe Pharmaceuticals 68,410

Opsonin Pharmaceuticals 34,109

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Table 2: Recent Exports by Some Bangladeshi Pharmaceutical Firms

Source: Bangladesh Association of Pharmaceutical Industries (2009)

Most pharmaceutical firms are family owned. While many have the capacity to export,

some do not have the in-house expertise.18 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,

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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 firm’s 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.

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SECTORS OF IMPROVEMENT

| 36

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. Bangladesh’s 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 Taka’s decreasing value.

| 37

Is Russia 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.

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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 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 Russia’s 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

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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.

Climate :

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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 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 — 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

—February), the warmest usually is July. Great ranges of temperature are typical. In

winter, temperatures get 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.

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

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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, and timber account for more than 80%

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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:

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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. 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

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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.

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.

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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

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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.

Religion:

Christianity, Islam, Buddhism, and Judaism are Russia’s 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.

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S.W.O.T.

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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 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

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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 Shampur-

Kadamtali, 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. These facilities proved to be efficient and effective in producing

high quality products at lower costs.

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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.

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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.

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 world’s 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

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higher then that of Bangladesh. In addition to that they have to consider the cost of

patent. Bangladesh and other LDC’s 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

Berlin-Chemie/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. Reddy’s Laboratories Ltd., the Indian pharmaceutical

company leading in the volume of sales, is among the 20 leading companies on the

Russian market.

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

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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.

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PRELIMINARY MARKETING PLAN

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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: AristoPharma’s expected profit could be approximately 15%-20%

return on their investment (capital).

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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.

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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.

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.

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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 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.

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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.

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 Ukraine and from there those products can be exported to Russia. In

this case Ukraine is used as transit point.

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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.

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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.

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

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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.

Shipper’s 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, 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.

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Distributor

Drugstores Drugstores

Public & Private Health Sectors

Retailer/pharmacy chains

Consumers

Public & Private Health Sectors

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 36’6, 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.

Figure: Distribution channel

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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.

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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.

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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.

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.

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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.

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

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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.

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RECOMMENDATION

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IMPROVING PRICE AND QUALITY ON THE DOMESTIC MARKET

1. Increase competition. Bangladeshi pharmaceutical firms are operating in a

domestically protected environment. They should excel in price and quality of products

manufactured, not as a result of import restrictions. In this study, we do not explore if

Bangladeshi firms lag behind global standards. But if the firms do lag behind in global

standards for quality then that would be damaging to the health of the overall population

as they are provided with lower quality drugs. The other issue that needs consideration is

how to open up the domestic pharmaceutical market to global competition in case the

Government wants to do so. The 1982 DCO, which resulted in the protection of the

Bangladesh market, is supported by significant national sentiments. Considerable

political tact would be required to modify or alter it. Before opening the market, however,

the drug regulatory institutions need to be strengthened to prevent dumping of low-

quality products from abroad. Issues of safety nets and transition costs also need to be

addressed to ensure that increased competition from global providers does not destroy the

domestic industry without giving it a fair chance to compete. Clearly, increased domestic

competition would cause difficulties for some pharmaceutical manufacturers, especially

those with lower quality / higher prices, and open markets would be resisted. But

competition will also improve the overall cost and quality of drugs available in the

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domestic market, the overall competitiveness of the domestic industry, and the overall

competitiveness of exporting firms.

2. Improve the government’s regulatory function. Strict regulatory environments are

associated with higher quality drugs. The Government of Bangladesh should investigate

the financing and structure of the institutions used to regulate drugs in Bangladesh.

Financing. Resources for the DDA and DTL institutions need to be significantly

increased to support the responsibilities required of them. Small incremental increases are

insufficient for the task. Options to increase their resources include:

o Increased regular budget. The DDA requested an upgrade from a directorate to a

directorate-general, which would result in a corresponding increase in resources. The

government is considering this request.

o Increased fee revenue. The self-financing of drug regulatory agencies through higher

fees used to exist only among industrialized countries such as France, Sweden, the United

Kingdom, and United States. Many countries are now following their example, such as

Zimbabwe’s autonomous Drug Control Council (DCC), which is entirely self-sustaining.

For testing, DCC charges $300 for imported drugs and less for drugs repacked or

manufactured in Zimbabwe. As a result of its self-sufficiency, the DCC acts as an

independent agency, although the Ministry of Health still appoints DCC staff (Bennett

1997).

o Donations. International organizations and financing institutions or bilaterals could

fill the gap through donations to the regulator agencies. The WHO, for example, has

supported and trained regulatory institutions.

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o Collaboration with the domestic pharmaceutical industry. The domestic

pharmaceutical industry has a vested interest in better quality drugs, is proactive, and

willing to pay for improvements. However, the pharmaceutical industry is also reputed to

have significant influence over the DDA. The government has hesitated to give industry

more control because the government would like to maintain control over the regulatory

function.

Structure. The current regulatory system is not delivering adequate services,

considering the amount of resources the institutions do have. Staff morale, accountability,

transparency and quality of services delivered are all low. Corruption is allegedly

rampant. Further investigation into the regulatory processes and agencies is necessary to

determine how best to improve them.

Some areas to consider are as follows:

o Reviewing regulatory procedures and incentives. Institutional measures should be

investigated to increase transparency and provide inspectors with incentives to find,

report, and fine low-quality manufacturers. Of the 235 registered pharmaceutical firms,

approximately only 85 are active. Most problems are reportedly with the smaller, less

active firms. The criteria to approve an operating license and the monitoring to continue

the license should be investigated.

o A reorganization of the regulatory authority. Many governments have satisfactorily

appointed a semi-autonomous regulatory authority. The authority’s independence

promotes a professional discharge of responsibilities.

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o Cracking down on corruption. The current government is targeting corruption and

drug safety. Improving the drug inspection process is an important issue for the

population’s health. In the interim, international inspectors could train staff and complete

inspections for a limited time period.

o Making strategic personnel choices. The DDA’s director should be selected

transparently based on technical skills and proven managerial abilities.

o Increasing public involvement. Public awareness campaigns have been very

successful in improving drug quality in many countries. Bangladesh could investigate the

possibility of undertaking such a campaign combined with providing consumers with a

toll-free number to report bad drugs. The government would have to commit to

responding to the public and taking action if such an initiative were enacted.

3. Level the playing field. Firms that make investments in quality are in a sense penalized

as long as firms that produce substandard drugs are allowed to sell their drugs on the

marketplace, and the consumer is unable to differentiate between the drugs before

purchasing them. Box 5 describes Medicines Transparency Alliance (MeTa), which is

working with countries to address issues of transparency and accountability.

The Government of Bangladesh could address this issue through a variety of

mechanisms:

Regulatory Approach. Use the regulatory function to remove low-quality drugs.

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Transparency Approach. Knowledge is power and if consumers and doctors knew

which drugs were better, they would migrate to quality. If, for example, all the producers

of one drug each month were tested and the results released to the pubic, this would

increase drug quality transparency. The 2005 Drug Law already sets up a provision for

such a measure by stating, “…any information on substandard, spurious, and counterfeit

drugs should be made freely available to all concerns by wide publicity in both print and

electronic media (Ministry of Health and Family Welfare 2005).” A sample testing

program would have to be designed to be as impervious to corruption as possible.

4. Involving the private sector in quality control. As a “police function,” the regulation

of an industry has traditionally remained a government function. While efforts to enhance

enforcement (the stick) should be made, the industry may have incentives to have better

regulation (the carrot). Because government regulatory agencies lack capacity and the

pharmaceutical sector has a sincere interest in improving quality, mechanisms to include

the private sector in some sort of quality control mechanisms should be explored.

However, a duplicate system should not be created nor a system as susceptible to

corruption as the current system. Further analysis is needed of private sector examples

from other countries and an examination of the success rates of its involvement in quality

improvement programs. BAPI would be interested in the following types of private sector

involvement:

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IMPROVING PRICE AND QUALITY ON THE EXPORT MARKET

Several possible mechanisms are available to raise the international competitiveness of

Bangladesh firms, including:

1. 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.

2. 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.

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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

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.

3. 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-à-vis firms from India and China.

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4. 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.

5. 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 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,

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backward integration from the raw solvents should be considered.

CONCLUSION: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.

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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_rep

ort.pdf

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

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9) Wikipedia

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

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