This report is prepared in fulfillment of the requirement of the term paper of MBA program of IIUCDC about the company-Square Pharmaceuticals
EXECUTIVE SUMMARY This report is originated as a partial requirement of the internship program of the International Islamic University Chittagong (Dhaka Campus), Bangladesh with a foremost objective to study structural and operational activities of the Square Pharmaceuticals Limited. Square Pharmaceuticals Limited is an old company starting its journey way back in the middle of the century it has grown in size and age. They have established almost countrywide operations and have wide access to distribution channels. They had taken several actions for their product improvement. They have strong potential through the country as of innovative research for tomorrow’s health. In fact, they are in the industry maturity stage now. Square Pharmaceuticals Limited today stands for reliance. The foundation of this reputation lies in its resourceful manpower, updated technology and above all devotion. Devotion to humanity and commitment to progress made the story a success. SPL with its solemn vow to uplift the community health stands in the forefront. SPL does not dedicate only in the realm of production but also ensure high quality and potentially larger product range. Domestic companies constitute about 70% of the pharmaceuticals market, the balance being the share of multinationals. The three leading local companies are Square, Beximco and Opsonin, which together comprise about 55% of this sector. While the market is growing at around 15% annually, Square expects to grow at 23% pa. over the next five years. Consequently, its market share will rise to 20%. Strategies for future are recommended for the Square Pharmaceuticals Limited for achieving its target growth rate. Rectifications of promotional activities are recommended to achieve the market leader position. 1.0 Introduction This report is prepared in fulfillment of the requirement of the term paper of MBA program of IIUCDC about the company-Square Pharmaceuticals Ltd. where we have worked for collecting information. 1.2 Objectives •
To trace what strategic process activities are practiced by them.
•
To analyze their performance.
•
To investigate what are the internal strengths and weakness and external threats and opportunities.
•
To assess the problems and possible solutions regarding these phenomenon.
1.3 Scope The scope of this report is limited to the investigation of some documents and reports of the SPL. 1.4 Vision, Mission & Objective statement: 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. 1.5 Methodology Information used to prepare this report has been collected both from primary and secondary sources within the company and text materials. An open discussion method was followed to gather primary information by interviewing people working there. 1.6
Present Status of SPL
Square Pharmaceuticals Limited today stands for reliance. The foundation of this reputation lies in its resourceful manpower, updated technology and above all devotion. Devotion to humanity and commitment to progress made the story a success. SPL with its solemn vow to uplift the community health stands in the forefront. SPL does not dedicate only in the realm of production but also ensure high quality and potentially larger product range.
1.7
Limitations
Although they have provided toward us to meet report objectives, however due to limitation of time the information gathered may not be a thorough one. However the company confidentiality is a major constraint for us to determine necessary requirement. 2.0
SPL-A corporate profile
2.1
Corporate Focus
Our vision, our mission and our objectives are to emphasize on the quality of product, process and services leading to growth of the company imbibed with good governance. 2.2
Corporate Governance
Top Management: Board of Directors As per provisions of the Article of Association, Board of Directors holds periodic meetings to resolve issue of policies and strategies, recording minutes/decisions for implementation by the Executive Management. 2.3
Types of Ownership
In 1958, SPL started as a proprietary firm and Mr. Samson H. Chowdhury was the sole proprietor. In 1960, it was converted into a partnership company through accepting few people as co-owners. It was converted into a private limited company in 1964. In 1991, it became a public limited company, but it did not offer shares to the public. In 1994, it offered 20% of its shares to the general public and the rest were sold to foreign investors. The authorized capital of SPL is now 1000 million, which is divided into 10,000,000 shares of Tk.100 each and 2,000,000 ordinary shares of Tk.100 each was offered and subscribed in the following manner. Sl. No. 1 2 3 4 5
Group of people
No. of shares
Sponsors Foreign investors ICB SPL employees General public
1,000,000 800,000 40,000 10,000 150,000
% of the total share offered 50% 40% 2% 5% 7.5%
Par value 100,000,000 80,000,000 4,000,000 1,000,000 15,000,000
Table2.1 1,000,000 ordinary shares are offered to the public at Tk.900, which includes a premium of Tk.800 per share. All 2,000,000 ordinary shares subscribed and fully paid up in cash. 2.4 Type of Organization The Executive Management is headed by the Managing Director, the Chief Executive Officer (CEO) who has been delegated necessary and adequate authority by the Board of Directors. The
Executive Management operates through further delegations of authority at every echelon of the line management. The Executive Management is responsible for preparation of segment plans/sub-segment plans for every profit centers with budgetary targets for every item of goods & services and is held accountable for deficiencies with appreciation for exceptional performance. These operations are carried out by the Executive Management through series of committees, subcommittees, ad-hock committees, standing committees assisting the line management. So all these imply SPL is a tall organization. 3.0
The Various Square Concerns
3.1
Square Textiles Ltd.
SQUARE first ventured into the textile sector with the establishment of the first unit of the SQUARE Textile Ltd. in 1997. A year later the establishment of the second unit followed. Today it has one of the most sophisticated vertically integrated set-ups in the country. SQUARE Group's ventures in the textile arena are: SQUARE Textiles Limited, SQUARE Spinnings Limited, SQUARE Knit Fabrics Limited and SQUARE Fashions Limited 3.2
Square Textile & Square Spinnings Ltd. SQUARE Year Unit 1
Textiles :
of 1997;
Ltd.
Establishment Unit 2 : 1998
Manufacturing Business 100% Cotton Ring Spun Yarn for Hosiery
Manufacturing 100% Cotton Yarn for
Target Export Garments
Target Export Oriented Garments
Market Readymade Industry
Oriented
Investment Unit 1 : US$ 20.00 Unit 2 : US$ 13.50 million
3.3
SQUARE Spinnings Ltd. Year of Establishment 2000
million,
OE
Business Rotor Hosiery
Market Readymade Industry
Investment US$ 12.00 million
Financial Status (2005) Annual Turnover : US$ 34.00 million
Financial Status (2005) Annual Turnover: US$ 16.00 million
SQUARE Year 2001
SQUARE Fashion Ltd. Year of Establishment 2001
Knit of
Commencement June
Fabrics Ltd. Establishment of
Production 2002
Commencement of Production June 2002
Manufacturing Knit Fabric
Business Production
Target Market Export Oriented Readymade Garments Investment US$ 20.00 million Financial Status (2005) Annual Turnover: US$ 16.40 million
3.4
Square Toiletries Ltd.
Manufacturing Readymade Knit Target Europe
and
Business Apparel Market USA
Investment US$ 15.00 million Financial Status (2005) Annual Turnover: US$ 25.33 million
SQUARE Toiletries Ltd. started its journey in 1988 with a single product as a separate division of SQUARE Pharmaceuticals. In 1994, SQUARE Toiletries Ltd. becomes a Private Limited Company. At present, STL is the country's leading manufacturer of international quality cosmetics and toiletries with over 50 products. Currently, STL is Carrying out its production in its two automated plants at Rupsi and Pabna. Depending on the nature of products, formulation and packaging, STL has product specific machinery. STL uses raw materials from the world renowned suppliers like Dragoco, Firmeuich etc. STL always performs international standard production process which follows the Good Manufacturing Practice (GMP).
Financial
Status
(2003-04)
Annual Turnover : US$ 24.19 million Growth
3.5
:
5%
Square Consumer Products Ltd.
In 2001, SQUARE Consumer Products Ltd started its operation as an individual company. Within a very short span of time SCPL has drawn the attention of the consumers by providing quality products and preferred services.
Financial Status (2005) Year 2001
of
Establishment Annual Turnover : US$ 15.80 million
Commencement of Production June 2001 Manufacturing Business Powdered spices (Chili, Turmeric, Cumin, Coriander & mixed spices) and ethnic snacks. Target Market Bangladesh and currently being exported to countries like USA, UK, UAE, Italy, Germany, Saudi Arabia, Kuwait & South Korea . Investment US$ 15.00 million 3.6
Square Informatix Ltd.
The vacuum in the quality data connectivity within distributed offices for online systems inspired SQUARE to diversify into the information and communication technology (ICT) sector. SQUARE InformatiX Ltd. pioneered and commissioned the first of its kind VSAT Control Center with capacity to control 16,000 VSATs at Gazipur to provide the most secured, reliable and cost effective data communication within and outside the country Apart from the communication solution, SQUARE InformatiX Ltd. also have long experiences in providing complex network solution, deployment of integrated Enterprise Resource Planning system and provider of Corporate Internet Services. MicroserveLtd. Microserve Ltd., a subsidiary of SQUARE InformatiX Ltd., was chosen by Microsoft Corporation as the sole Market Development Partner for Bangladesh for all Microsoft products. 3.7
Square Agro Development & Processing Ltd.
AgriBiotech Project : SQUARE has setup a plant tissue culture laboratory to develop agricultural/agro processing sector in the country and is committed to bring improved quality planting materials and year round production through AgriBiotech. The major activities of AgriBiotech is to provide disease free, stress free, high yielding seed & seedlings such as potato, banana, ginger, turmeric and some flowers including varieties of orchids to the farmer & nurserymen to solve quality seed problems in this agro based country. Well equipped around 4000 square feet tissue culture laboratory is situated at Uttara, a convenient location, having careful designing and planning, facilitated to produce 10,00000 seedlings per year. The other activities of this project will be of research and development in the field of Biotechnology to protect some of endangered medicinal plant and to bring some new as cane, rattan, bamboo which is almost extinct in the country. 3.8
Square Hospitals Ltd
The hospital is nearing completion at a cost of over US$ 40 million and is scheduled to go into operation in mid 2006.
Focused to provide International standard healthcare services at an affordable price SQUARE Hospitals Ltd. is a multi-disciplinary hospital with specialty in Cancer, Cardiac and Pediatrics. One stop state of the art Diagnostic Services will be it’s another major service. The hospital will be exclusively managed by Bumrungrad Hospital International of Thailand, only US accredited hospital in Asia.The 300-bed hospital is located in the city center. 1200 patients can be served per day by its out patient department through it’s 60 exam room. Housed in an 18 storied building covering 40,000 sq. meters the facility can also accommodate 200 cars in its 3 basement parking areas 3.9
Square Harbal & Nutraceuticals Ltd.
SQUARE is the leading Pharmaceuticals of the country. SQUARE is dedicated to advance technology and the pioneer in introducing innovative ideas. SQUARE HERBAL & NUTRACEUTICALS LTD. - an endeavor of SQUARE Group that has been evolved to ensure the availability of modern Herbal Medicines to the people of this country. To ensure modern Herbal Medicines, the company is -
dealing with the products of natural sources that have scientific data to prove their clinical indications and efficacy. ─ operating a GMP compliant manufacturing plant and quality assurance that are in line with the practices of developed world. ─ sourcing raw materials from the renowned suppliers only. ─ ensuring the products having quality assurance commensurate to
SQUARE’s quality
policy.
─ involving highly qualified, skilled and well trained personnel in manufacturing, marketing, sales and distribution.
SQUARE HERBAL & NUTRACEUTICALS LTD. is devoted to Rational Phytotherapy based on four basic rules of phytomedicines suggested by the German Commission E – 1. Phytomedicine therapy based on dose-effectiveness 2. Efficacy demonstrated from clinical studies 3. Phytomedicines that are standardized extracts. 4. A high level of pharmaceutical quality for successful phytotherapy
SQUARE HERBAL & NUTRACEUTICALS LTD.
Introducing Western Herbal Medicine HepatoprotectiveSilymarin Cognitive disorders - Ginko biloba AntidepressantSt. Johns wort Vitalizer- Ginseng
Modernization Medicine Cough Iron Vitalizer Digestives etc.
of
Ayurvedic syrup supplement
SQUARE is committed to ensure better health through quality medicines Associated Companies SHEL TECH (PVT.) LTD. PIONEER INSURANCE CO. LTD. MUTUAL TRUST BANK LTD. NATIONAL HOUSING FINANCE AND INVESTMENT LTD. EKUSHEY TELEVISION LTD. CONTINENTAL HOSPITAL LTD. APOLLO HOLDINGS LTD. Major Competitors BEXIMCO OPSONIN FISONS GLAXO RHONE-POULENCE RORER ACI RENETA SKF INCEPTA Name of the company Square Pharmaceuticals Limited.
4.0
Products
The formulation plants are producing wide range of dosage forms like Tablets :
(Total Dosage Form = 190 Nos.) Non-Coated (plain, chewable, dispersible, vaginal) Coated (sugar coated, film coated, enteric coated) Sustained/Extended Released (coated, non – coated)
Capsules : (Total Dosage Granulated Pellets Filled
Form = Material
53
Nos.) filled
(Total Dosage Suppocire based
Form
08
Nos.)
Suppositories : =
Injections : (Total Dosage Form = 41 Vials containing Dry Powder for Small Volume Liquid Parenterals
Nos.) Injections
Liquids : (Total Dosage Form = 38 Nos.) Oral Syrups (Sugar based, Non-Sugar based) Oral Suspensions Topical Liquids Spray, Drops, Ointment, Cream and Powder : (Total Dosage Form Small Volume Sterile Small Volume Nasal Topical Ointments Topical Antibiotic Powder
= 56 Nos.) Eye & Ear Drops Drops & Sprays & Creams
Oral Dry Powders : Total Dosage Form = Dry Suspensions (Antibiotic & Dry Syrups (Antibiotics)
30 Anti
Nos.) Infectives)
Dry Powder Inhalers : (Total Dosage Form = 04 Nos.) Partial Filled (Premix) Capsules for Respiratory Tract Application with a Device Metered Dose Inhalers : (Total Dosage Form = 10 Nos.) Pressurized Canisters for Oral use with an Actuator Chemical Division started commercial production in 1995. From the year 1997 it started it’s fullfledged production and marketing to all top pharmaceuticals within the country including Aventis
Pharma, Novartis Bangladesh Ltd., Glaxo Smith Kline, ACI Ltd., Reckitt & Colman, Beximco Pharmaceuticals Ltd., The Acme Laboratories Ltd, Eskayef Bangladesh Ltd., Opsonin Chemicals, Renata Ltd., Essential Drugs Co. Ltd. etc. with good reputation and loyalty. 4.1 New Products January, 07 Product
Generic Name
Cardipro Cardipro 50 Atenolol BP+ Chlorthalidone USP plus tablet
Strength
Pack Size
Dosage Form
Atenolol 50 mg 3 x TABLET + 10’s Chlorthalidone 25 mg
Dermasol-N Dermasol-N
Clobetasol Propionate (0.05mg+5mg+ 15 gm CREAM BP+Neomycin Sulphate 1 lac unit) per BP+Nystatin BP gm Dermasol-N Clobetasol Propionate (0.05mg + 5mg 15 gm CREAM Cream BP+Neomycin Sulphate + 1 lac unit)/gm BP+Nystatin BP Dermasol-N Clobetasol Propionate (0.05mg + 5mg 15 gm OINTMENT Ointment BP+Neomycin Sulphate + 1 lac unit)/gm BP+Nystatin BP Angilock plus 100/12.5 Angilock plus Losartan Potassium 100 mg + 12.5 3 x TABLET 100/12.5 tablet USP+Hydrochlorothiazide USP mg 10’s 4.2 Product Image SPL has strong image for producing good quality products. This image is due to their dedication to advanced technology. The manufacturing processes and analytical methods are fully validated. Chemical and stability tests are part of the regular routine. The origin of raw material is also another reason for their product image. SPL used to import raw materials from Singapore, Taiwan, India and some European countries. For 8 years, SPL has been producing chemicals in their chemical division. SPL’s prime competitor BEXIMCO is enjoying a very good product image in the market. Their R/M source is also the same and moreover, they started producing chemicals before SPL started. But recently, the crisis of corruption in the company abates the image of BEXIMCO. 4.3 Highest Number of Products Among the pharmaceutical companies Among existing pharmaceutical companies SPL has the largest number of products and dosage forms. This also gives the company image regarding production facilities and financial capability
of producing this large volume of medicines. BEXIMCO is the next largest producer in this industry. 4.4
Customers and Users of SPL -Products
The customers of SPL can be broadly classified into different groups. •
Qualified Doctors
•
Rural Medical Practitioners
•
Institutions
•
Chemist
The doctors are taken as the prime customers here because majority of demand for pharma products are dependent on doctor’s prescription. To spread a country wide marketing network SPL has 253 MPO/SMPO, which is also marked as a single market. Each MPO/SMPO has report to supervisor (PS). PSs has to report to Area Managers. There are areas where Area Managers report to Zonal Managers. There are three zones and Zonal Manager controls each. 5.0
Market Structure and Growth
Domestic companies constitute about 70% of the Pharma market, the balance being the share of multinationals. The three leading local companies are Square, Beximco and Opsonin, which together comprise about 55% of this sector. While the market is growing at around 15% annually, Square expects to grow at 23% p.a. over the next five years. Consequently, its market share will rise to 20%. 5.1
Market Share
SPL has a market share of 15% to 16% with about 300 pharmaceutical products. The market share of each product is determined through prescription analysis by the MPO of SPL in every month.
Market Share 18%
5.2
Square Baximco Incepta ACME Opsonin Others Multinational Company
Distribution
Approximately 20% of the products of Square are distributed through wholesalers and the rest 80% through retailers. The distribution of SPL products is based upon the concept of “Warehouse on the wheels”. The MPO receive orders from the chemists and druggists and send those to the invoice sections in the said sales centers, through which the orders are being processed. About 20 trained persons are working in the invoice sections and are capable or processing more than 2000 invoices per day. The goods are packed as per the invoice in these centers and then the consignment goes to the different distribution points. SPL has 13 distribution points. In these points Distribution Assistants (DA) receives the goods, consignment letters and party-wise invoice. Then the goods and invoices are delivered to the chemists and druggist shops through collection persons (CP) of the market concerned for delivery. About 72 CP, 11 DA, 6 Sales Assistants, 1 Assistant Manager and a Senior Executive in Pabna and Dhaka are involved in the distribution process. 5.3
Promotions
The promotional aspects of SPL are carried out in the form of personal selling. According to the govt. rule no promotional campaign of general nature are followed by the pharmaceuticals companies. SPL promotes its products to its target market through the MPO. Apart from sales cost SPL provides newsletters, literatures, “Dear Doctor” letters, different kinds of gifts, pads and conducts seminars and symposiums, scientific seminars and “Continuing Medical education” Program at different medical collages. Square has also been granted scholarship to top three MBBS internees of each govt. medical collage of Bangladesh since last few years. 5.4
SPL in Foreign Market
SPL has extended its range of services towards the highway of global market. It pioneered exports of medicines from Bangladesh in addition to meeting the requirements of the domestic market demand. SPL also export its antibiotics and other products to the highly conscious countries. Countries to where SPL exported and they it exported first: United Kingdom
-
1987
Singapore
-
1987
Nepal
-
1990
Pakistan
-
1996
Yemen
-
1996
Myanmar
-
1997
Srilanka
-
1997
Cambodia
-
1997
Russia
-
1997
5.5
Good Relationship with Press
Earlier SPL used to keep a very low profile in respect of publicity. But as the prime competitor BEXIMCO is maintaining a very good relationship with press, political parties, and business associates and can exert pressure on govt. authorities regarding policy making, now SPL has also started keep a good relationship with press and trying to build corporate image. 5.6
Strong Brand Image
SPL is enjoying a strong brand image for some of its products, like Entacyd. Neotack, Cetamol, Civet etc. These products are well known in the pharmacy market. Some products of BEXIMCO, RPR also have strong brand image. 5.7
Quality of the Promotional Material
The quality of promotional items like literature, booklets, pads, gifts etc. project company image. At present in some cases BEXIMCO, OPSONIN, RPR are enjoying lighter position in this respect than SPL. SPL is producing good quality printed materials, but gifts provided by SPL are not much attractive. 5.8
Product Management Department
Every executive of PMD is allocated a number of brands for which he/she is totally responsible. One of the major roles of Product Executives in maintaining inter-departmental coordination to make the new product launching programs a successful one. 5.9
Market Research Department
1)
Judge the self and competitor’s performance in market place.
2)
Identify any market opportunity and effectiveness of promotional activities.
3)
Find out prescription share of own companies every market of SPL.
4)
Operates to reveal specific information for a certain problem.
6.0
Image and Reputation Analysis
6.1
Sources of Image •
Quality of the products
•
On time delivery system
•
Good relationship with chemists and doctors
•
Dedicated, friendly and smart sales force
•
Cordial behavior of the employees with all kinds of people
•
Good relationship with press
•
Availability of the products
•
Medicines supplier of the local WHO office
•
Exporting in European and Asian countries
•
A modern architectural Head Office at Mohakhali
•
Strong brand image
•
Quality of the printed materials
Highest number of products among the pharmaceutical companies 7.0
Human resources Management
The company has kept up with its human resources development program for the improvement of the quality of products and services. The company normally sends officers on foreign training to Germany, Japan, India, Pakistan and also local training institutions. In addition, the company organized in house courses for its officers, staffs at its factory with the assistance of local expatriate and consultants and experts. These activities of improving the skill level of employees and maintaining good employee relations are vital to creating value of SPL. 7.1
Human Resource : Practices & Climates
SQUARE, with its progressive business outlook, believes and practices corporate work culture with a classic blend of efficiency and equity. SQUARE believes in company growth by increasing efficiency level of employees and for that offering excellent environment and support for skill and knowledge upgradation. SQUARE values productivity as the spontaneous contribution of Human Resources. Strategic Human Resource Development Programs are the energy sources for SQUARE HR for running towards the zenith of success. Flow of clear and specific information and justification of queries play the vital role to ensure the market reputation of SQUARE as the most trusted and transparent company and it enriches the motivation level of HR who are the real
contributors and owners of his / her own jobs. At SQUARE, HRD symbolizes the unique blending of professionalism as well as sharing the stress and success equally like a family where every member has deep concern, feelings and pride for their own company SQUARE. HR ensures the strong supporting role to develop & implement HR policy guidelines for ensuring uninterrupted operation and spontaneous participation to achieve organizational objective as well as fulfillment of employee needs. HR is maintaining an effective way to deal with labor union and still no unrest has been recorded as dispute. Personnel working here are taking care of SQUARE as if it is their own family. Employee-employer relation is cordial and supporting always. 7.2
Legal Issue and Government Relations
Legal issues and govt. relations demand a lot of top management’s time. Handling such issues effectively can have a significant impact on a corporation’s long-term viability. The Drug Policy limits the operations of pharmaceutical companies. 7.3
Personnel and Administration Department • Engages in the activities of recruitment, promotion, transfer and retirement of the employees. • Deals with remuneration, fringe benefits namely cost of living allowance, insurance, house rent, medical and conveyance allowance, technical allowance, profit bonus etc. • Looks after facilities like lunch, transportation service etc.
7.4
Empowerment
The management is highly concerned about the employee empowerment. They develop the soft side to employee. They recognize that workers are the valuable assets and act accordingly to develop those assets. They let their employees to feel that they are the organization. The top-level managers are used to tell the employees that are ‘SQUARE FAMILY’ and they all are the members of this family. 7.5
Training
The company’s top management provides opportunities for prospective job incumbents through a process of provision training for 2 months that makes a crucial decision about an employee of being hired or fired. They provide both in-house and outside training at all levels from top to bottom level employees. 7.6
Company Employees
Total number of permanent employees if SPL is about 2381 including both the Dhaka and Pabna Office.
46 123 123 292
Chemicals Division 2 12 64 78
Pabna Plant 19 59 459 537
Dhaka Unit 14 61 168 243
Distribution 3 17 174 194
Field Force(SPL) 942
Field Force(Agrovet) 70
Field Force(Pesticide) 25
Criteria Manager Executive Span of Supervision
Supervision 84 272 1:3
Executive Non Executive
Sn. Sn.Executive Executive (Market (MRD) Audit))
Corporate Headquarters
Manager (Commercial)
Total
Manager (TSD)
Non Executive
Manager Manager Manager (IMD) (Distribution) (Sales) Manager (PMD) Manager Manager (P & A) (Engineering) (Procurement) (PPIC)
Manager Audit
Manager Executive and above
Manager Manager Manager Sales & Marketing Manager Plan Manager (Pharma) (MIS) (NSD) Distribution
988
Manager (Finance & Accounts)
988
Executive Director General (MIS) Manager (Marketing) Manager General Manager (QAD)& Administration) (Commercial
Manager (Share)
272
Executive Director
General Manager (Finance & Accounts)
272 Organogram
Co-ordination Board
84
Resident Advisor (Plant) Company Sectary
Managing Director
Total HR
Vice Chairman
7.7
Chairman
Board of Director
Organogram of Square Pharmaceuticals Ltd. Job Location
2381
The Supervision Ratio
1:4
8.0
SWOT Analysis of SPL
8.1
Strengths Company image SPL enjoys strong brand image in the pharmaceutical market for over 35 years in 1985, SPL becomes the market leader in the pharmaceutical sector. Its size and stature make it a ling-term core holding in the market. High growth of turnover It was the first company to cross 1-billion taka turnover in 1992. It controls 14% of the Bangladesh pharmacy market and its financial ability is gradually increasing. Good management team and disciplined work force Good management team is taken under consideration at a first phase of the company. The company follows strict discipline in every part of the production process and management. This leads to create a healthy and disciplined environment company-wide. Largest manufacturer of formulation products in the country. Excellence in distribution SPL has an efficient and innovative distribution system throughout the country. Country wide marketing network is very strong SPL’s distribution cost is 30-40% less than the compactors. It has good and effective R&D department, which already has succeeded in developing new hi-tech product lines with foreign collaboration and technical know-how. Less fixed and administrative cost. Wide product line and so increased coverage. Introduce new product very quickly before the competitors. Possesses most organized largest sales force and highest number of professionals pharmacists, chemists etc. Faster and informal decision making in all levels. International Medical Statistics (IMS) IMS is a secondary source provides valuable qualified data regarding the total market behavior, behavior of the market segments and performance of the competitors. Although
it is a biannual report, SPL is the subscriber, which gets the report quarterly. This is a valuable data source and an important starting point for making marketing plans. 8.2
Weaknesses •
Management approach of SPL is somewhat unstructured rather that systematic. In formal and faster decision making in some cases may be erroneous.
•
Proper attention may not be given to all products due to huge product line, insufficient number of employees and frequent introduction of new products.
•
Although large in number, SPL’s field forces (MPOs) are not so efficient in their duty like some of its competitors (as observed from survey).
•
There is less marketing orientation in SPL. Although the PMD is responsible for marketing activities, most of the executives engaged in this dept. do not have marketing background, which could strengthen their efforts.
•
Obliged to maintain high inventory levels of imported raw material.
8.3 Opportunities •
Pharmaceutical industry is a growing industry at the arte of 15-20% annually. SPL has to avail the opportunity by matching itself with industry growth rate and increase its market share.
•
Excess capacity in certain areas of manufacturer can be utilized.
•
Good opportunity for backward integration. It can manufacture raw materials and minimize production cost. It can also grow in related fields like diagnostic, beverage etc.
•
Bangladesh being a signatory to GATT, product patents will come into effect within few years time. In the mean time, SPL can plan to enter into tie up with the international companies having rights to patented products.
8.4
Threats •
The regulatory authority of the government dictates the pricing policy to the pharmaceutical industry.
•
Any adverse police change in government level, i.e. import policy change, change of import duty in machinery; tax policy etc. will hamper profitability.
•
Technological obsolescence may present marketing problem.
•
Failure in any suitable arrangement of environment and pollution control facilities as required by the dept. of environment, which is under way, may result further delay in commercial production of chemical plants.
Bangladesh signed GATT, which implemented in the year 2005. In that case, the intellectual patent right of products has to be followed and new product launching will not be advantageous like now. 8.5
GE Framework
8.6
INDUSTRY ATTRACTIVENESS CRITERIA Annual industry growth rate Historical profitability of the industry Macro-environmental opportunities Overall industry size Seasonality of the industry of the industry Intensity of competition Industry predisposition to unionization Rate of innovation in the industry
High High High High High High High High
8.7 BUSINEAESS UNIT STRENGTH CRITERIA Market share Firm profitability Per unit cost of production Process R & D performance Product quality Managerial and personal talent Market share growth Operational capacity Technological know-how Product R&D performance Brand reputation
High Low High High Excellent Excellent Moderate High High High High
The above analysis shows that the Industry Attractiveness Criteria for SPL, are high. The industry is growing. The Business Unit Strength is also high. Therefore SPL falls into the criteria of Successful Business Unit and should invest more into the operations. GE Matrix Strength
Successful Business Unit SPL
Average Business Unit
Business Strength
Unsuccessful Business Unit
Weakness
High
Low Industry Attractivenes s Figure GE Matrix
8.8
Stage of Development of the Industry Since SPL is an old company starting its journey way back in the middle of the century it has grown in size and age. They have established almost countrywide operations and have wide access to distribution channels. They had taken several actions for their product improvement. They have strong potential through the country as of innovative research for tomorrow’s health. So they are in the industry maturity stage now. Volume Standardization Growth Emergency
Rejuvenation
Maturity
Time Figure Industry Life Cycle 8.10
Leadership Style and Organizational Culture Analysis
8.10.1 Leadership Style With the span of time, SPL developed Transactional Leadership. The top management gathers information to make plans; set goals for them etc. the decision-making followed here cab be called Benevolent Autocratic. 8.10.2 Leadership Style at Different Levels. 8.10.3 Top Management Level The present management style is somewhat achievement oriented. Here the leader determines all the policies. The personality traits (like intelligence, social maturity, inner motivation & achievement drive and human relation attitude), which are necessary for a successful leader, are all present in the top management. In most of the cases, the leadership is task oriented. In managerial grid the leadership style is somewhat like (9, 5) that is concern for production is 9 and concern for people is 5, in the continuum of leadership behavior the leadership is “manager sales decision� that is somewhat Boss Oriented. 8.10.4 Mid Management Level Mid management level of SPL is situational, professional people oriented and more on subordinate centered. 8.10.5 Lower Level Management It is democratic task oriented, situational and usually presents tentative decision subject to change. 8.10.6 Identification of Corporate Culture The culture of an organization and that creates and reinforces particular norms of thinking, feeling and action. Square has built its own culture possessing unique characteristics. The nature of corporate culture of the organization can be identified through focusing and illustrating the ideology, values, beliefs, philosophy etc, as well as customers and institutions developed to uphold the corporate ideology, values, beliefs etc. The basic philosophy of square is being number one pharmaceutical company in Bangladesh by dedicating its resources, talents and energies to help empower human health and the quality of life of people throughout the world.
The values and beliefs of an organization give rise to a set of management practices concrete activities that are usually rooted in the values of the organization. The company believes in strict ethical code of business. They dedicate their knowledge, creativity, skill to the diseases, which people are still ill equipped to tackle. They believe in investing for people. Their values concern more with people than with business. They have relentless endeavor for investing cure and hope for people. But they do not compromise with quality for cost efficiency. Square has been successful to built a corporate culture which ultimately responsible for turning the organization as “the most effective organization” in the pharmacy industry. SPL has a principal to let each employee, to manager in the corporate office to a line worker in the factory, feel like an active family member and participate openly in the overall management activities. Square strives for the highest quality and continuous improvement in its products and service for all of its customers, internal and external, maintaining the highest standards of integrity in all its relationship. Employees of square are integrated to their works due to high motivation and job satisfaction. Employees are motivated of well-defined job description, continuous feedback from the management, impartial appraisal and equal promotion opportunity, lucrative compensation package including fringe benefit, bonuses, lunch, transport and other facilities. Each employee, from a liftman to the CEO, is punctual and sincere. Working environment to the square if friendly and co-operative. Healthy environment and well decorated office place with all kinds of supporting facilities keeping each employee happy. Employees are integrated to the organizational goals because each employee is well aware about the organization’s objectives and believes that achievement of his or her own goal is possible through achieving organizational goals. Each employee prepares a program sheet starting with works she is going to perform in the very next day. Managers of each department frequently sit for internal meeting with departmental employees to figure out the action plan, to evaluate the performance, to provide feedback and to fix future course of action. At square, strong employee integration through effective personnel management led to maximum productivity of the company, which drives the organization at pinnacle of success. Therefore, one statement can reveal the nature of the corporate culture of square-“Quality and Professionalismour Duty and Pride” is the motto of each and every member of the square family. 9.0
Sales Department •
Distribute the sales target fixed by PMD it in respect of market and MPO both in terms of value and unit.
•
Deals with survey of product with respective PMD Executives.
•
Passes competitor’s information to PMD.
•
Communicates upwards and downwards.
•
Participates in training of the sales people, checks TA/DA bill, tour program and other expenses of field staff.
•
Complies data or marketing research, identifies weak markets and sends letters to those areas.
•
Solves nay problem obtaining from doctors and chemists.
Deals with transfers and promotions of the MPO along with market reshuffling, if necessary and fulfills their personal requirements. 9.2
Cordial Behavior of the Employees
SPL is practicing relationship marketing at present. The employees are very friendly and behave well with all kings of people. But in other companies, this atmosphere is rare. 9.3
Availability of Products
With the current distribution system, SPL is supplying its products every alterative day to different chemist shops, whereas BEXIMCO is supplying its products to chemist shop within 6 hrs. of placing the order and the return per order of BEXIMCO is more than SPL. 9.4
Medicine Supply to the Local WHO Office
It is a prestigious matter to be the supplier of medicine in the local WHO office. It helps to build the image of quality product producer. 9.5
Marketing & Sales
Customers of products are doctors, chemists, institutions and hospitals. As the company does not contract directly with its existing market, thus there is a great need for them to make a better relationship with their customers. As a result, MPOs have the present market. At SPL 300 skilled and qualified field staff is a key to success. 9.6
Services
Managers are increasing recognizing customers as one of the firm’s most important activities. Customer services include activities such as installation, repair, customer training, parts supply and product adjustment, as well as courtesy and prompt response to customer inquires and
complaints. SPL encourages bulk purchases to offering extra discount to large customers so that retailers can purchase from the whole sales at a price that would be the same if the purchases were made directly from the company. 9.7
Clinical meeting
It is found during the survey that out of the six companies under consideration SPL more often arrange clinical meeting but it also found that the doctors are very much frustrated about the clinical meeting arranged by the pharmaceutical companies. This is such a way where the doctors can be motivated to prescribe SPL products. Hence, SPL should arrange more clinical meeting as they are doing in practice. These meetings can be arranged allover the country especially in the renowned hospitals and clinics compounds. Specialist doctors from overseas can be called upon the deliver their valuable lecture in such occasions.
10.0 10.1
Technology & Development Information System
At SPL, the communication system is done through sophisticated local area network system to its sell centers for information system. 10.2
Technical Service Department 1)
Selection and standardization of raw materials and packaging materials.
2)
Preparation of standard in-house specification of raw materials and coordination between factory and procurement or import dept.
3)
Selection of machinery and equipment including spare parts and coordination with factory and procurement or import dept.
4)
Coordination and follow-up of the designing and implementation of the master plan or the factory. All maters related to development or factory facilities.
5)
Dealing with various types of product complaints from markets field forces and different depts.
6)
Recipe development and necessary changes in formulation and product improvement.
7)
Dealing with Narcotics, Pest Control Services, Dept. of Environment etc.
8)
Unreason product quality.
11.0
Implementation and Practices of TQM in SPL
11.1
Maintaining Quality by the Company
Square pharmaceuticals Limited. To achieve and maintain a steady quality, a range of sophisticated state of the art technology is being engaged to operation. SPL has not just control quality but a “Quality Assistance Department� responsible to ensure and maintain quality of products starting form the procurement of raw materials to consumption of finished goods. The sophisticated plant and equipment are matched with technical and professional expertise. The manufacturing process and analytical methods are fully validated. Chemical and stability tests are part of the regular routine. The devotion of the export professionals is reflected in the GMP approved plant processes with customized quality beyond pharmacopoeia. 11.2
Barrier Elimination
There is good labor-management relationship exist in the organization. Management is always aside for the problem solving of the employees. There is no hierarchical chain or command between management and the employees. There is a yield authority to the lowest possible level to resolve problems.
11.3
Future Strategies for SPL
11.4
Corporate Level Strategy
11.5
•
SPL should go for concentric diversification strategy as increasing concern for the animal health and nutrition and agrochemical business. Though they have started a veterinary department, they should continue to more emphasis on it. As SPL has gathered experience in pharmaceutical sector, it is easier for it to go up for manufacturing of insecticides and pesticides, hormone preparation in which there is a prospective in the market in our country.
•
SPL should also go for conglomerate diversification strategy for more diversified business, which would ensure smooth earning for them. It can extend its efforts for food and beverages. Even if SPL is already launched some consumer products such as Preglac (Nutritional Beverage, Suitee (diet juice), Breath Freshner, it can move the business on chemicals, fiber, polymers etc.
Business Level Strategy •
Given the per-capita income of this country, medication facilities remain out of reach from the bulk of the population. Besides, SPL’s products are high quality, high priced, which leaves SPL with no other choice but setting of the lowest level possible so as to bring it down within the purchasing power of the mass people.
11.6
Functional Level Strategy •
SPL should continue its strategy of acquiring raw materials from well-known foreign company.
•
SPL can follow the JIT Technology, as it would lower inventory storage and management cost. But it is pretty difficult for the company like them who are heavily depend for raw materials supply from foreign companies and also located in such a political in-stable country like Bangladesh to implement JIT Technology.
•
SPL can introduce Economic Order Quantity Approach to determine inventory levels has used by firms for many years.
11.7
Financial Management •
SPL can plan to enter into tie up with international companies having rights to patented products and gain profit. Since SPL have strong financial positions, they can go for Joint Venture (Strategic Alliance) to have strong presence through the country.
11.8
R&D •
Though they are not directly involved in R&D sector, SPL has brought in advanced technology for R&D. as competition increases they should give more emphasis on this sector. They can concentrate research focus on Cancer. Infectious Diseases, cardiovascular Diseases and other concerning areas.
11.9
HRM Strategy •
SPL should implement HRM strategies: they should focus on the soft side of HRM to get the maximum of employee motivation.
•
The personnel dept. can plan for effective promotional plan, career plan, grievance management, performance etc.
•
More informal discussion should going on.
•
SPL should recognize that workers can be a valuable asset and should act accordingly to develop that asset as to continue with the innovative structure and should ensure proper training and development for the employee.
•
They should continue to focus on employee empowerment.
11.10 Marketing Strategy •
They should go for market survey more frequent and accurately.
•
To support marketing strategy, marketing operations can be expanded in areas where the competitors are weak.
•
Strategic moves should be taken for weak markets where share is declining.
•
In order to keep better control of the wide product line, SPL can drop some of its slow moving products.
•
Aggressive marketing program by experts can push sale of slow moving items. Strong promotional campaigns can improve its position in products whose sales are not up to the mark.
•
Gift items, such as table calendar, penholder, and paper are very effective promotional materials. If doctors have materials with SPL name on their desk, it will help them to be kept touch with SPL and prescribe SPL’s products. During my survey, I have observed that SPL’s gift items are not much accessible. SPL should provide more attractive, useful gift items to promote their products.
They should continue to depend on primary information and some overseas source for secondary data for gathering and processing marketing information.
12.0 Finance 12.1 Introduction Square Pharmaceuticals Ltd has its own reputation in the pharmaceuticals industry. Its mission is to produce and provide quality & innovative healthcare relief for people, maintain stringently ethical standard in business operation also ensuring benefit to the shareholders, stakeholders and the society at large. Square Pharmaceuticals Ltd has effective objectives. Its objectives are to conduct transparent business operation based on market mechanism within the legal & social framework with aims to attain the mission reflected by its vision. General idea is that the company is financially solvent and self-sufficient. As a part of our Financial Management course we will like to apply our learning in evaluating Square Pharmaceuticals Ltd’s last four years Financial report from 2001-02 to 2004-05. 12.2 Annual Report Highlights Following is the Total assets, Total Liabilities, Total Owners' Equity, Net Working Capital, Book Value of the Firm, Cash flow from assets and Cash flow from creditors from 2001-02 to 2005-06. Figure in thousand : BDT
Turnover (Gross) Value Added Tax Turnover (Net) Gross Profit Net Profit before Tax Net Profit after Tax Shareholders Equity Total Assets Total Bank Borrowings Total Current Assets Total Current Liabilities Current Ratio
2005-06
2004-05
7,085,553 995,648 6,089,905 2,564,503 1,533,043 1,165,865 6,402,015 9,298,987 2,334,925 4,031,685 2,260,755 1.78
6,199,135 867,088 5,332,047 2,172,593 1,513,019 1,255,848 5,568,790 7,907,933 1,902,331 3,242,502 1,949,949 1.66
2005-06
2004-05
2003-04 5,482,088 760,536 4,721,552 1,906,592 1,151,636 970,044 4,590,142 6,021,497 988,611 2,016,056 1,250,676 1.62
2002-03
2001-02
5,482,088 663,892 4,065,851 1,466,282 929,604 764,885 3,851,098 5,164,320 1,070,163 1,441,552 1,247,967 1.16
4,234,244 563,433 3,670,811 1,435,655 905,736 759,448 3,273,714 4,526,115 1,098,874 1,452,494 1,181,473 1.23
2002-03
2001-02
Figure in thousand : US$ 2003-04
Turnover (Gross) Value Added Tax Turnover (Net) Gross Profit Net Profit before Tax Net Profit after Tax Shareholders Equity Total Assets Total Bank Borrowings Total Current Assets Total Current Liabilities Current Ratio
100790 14162.85 86627.38 36479.41 21807.15 16584.13 91067.06 132275.77 33213.72 57349.72 32158.67 1.78
93997.49 13147.65 80849.84 32943.03 22941.91 19042.42 84439.57 119908.00 28845.04 49166.06 29567.08 1.66
93137.75 12921.10 80216.65 32391.98 19565.68 16480.53 77984.06 102302.02 16795.97 34251.71 21248.31 1.62
81659.93 11462.22 70197.70 25315.64 16049.79 13205.89 66489.95 89162.98 18476.57 24888.67 21546.39 1.16
73947.68 9839.91 64107.77 25072.56 15817.95 13263.15 57172.79 79044.97 19190.95 25366.64 20633.48 1.23
12.3 Common Sized Balance Sheet Following is the common sized balance sheet from 2001-02 to 2005-06. SQUARE PHARMACEUTICALS LTD. Common size Balance Sheet Assets 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 Current Assets Cash 0.7 Marketable Securities 1.4 Short Term Loans 13.1 Trade Debtors (Account
0.6 0.4 7.5
0.9 0.3 13.9
4.8 0.3 16.2
3.41 0.22 20.40
3.2 11.4
2.7 14.3
3.8 13.5
3.4 14.5
3.10 14.44
2.3 32.1
2.4 27.9
1.8 34.3
1.8 41.0
1.79 43.36
11.3
23.2
20.8
21.0
20.60
equipments 24.1 Less: Accumulated
63.1
58.0
47.9
43.66
Depreciation Net fixed Assets Capital Work in Process
13.0
17.2
19.9
18.6
18.88
45.6
3.1
6.8
8.7
11.59
100.0
100.0
100.0
100.0
100.0
Receivable) Stocks (Inventories) Advances, Deposits,
and
Pre-payments Total Current Assets
Investment- long term Fixed Assets Property,
plant
Total Assets
&
Liabilities and Stockholders’ Equities 2001-2002 Current Liabilities Short Term Bank Loans 19.7 Long Term Loans- Current
2002-2003
2003-2004 2004-2005 2005-2006
17.8
15.2
17.3
15.8
3.0
1.7
1.0
1.8
2.8
0.7 0.8 2.0 26.1
0.7 0.4 3.6 24.2
0.9 0.3 3.9 21.3
1.1 1.3 3.2 24.7
.85 .50 4.2 24.3
1.6
1.3
0.6
4.9
6.4
27.7
25.4
21.9
29.6
31.15
Shareholders’ Equities Share Capital (Common Stocks)5.5 Share Premium 17.7 General Reserve 2.3 Tax Holiday Reserve 10.4 Retained Earning 36.4 Total Shareholders' Equities 72.3 Total Liabilities and
5.8 26.5 2.1 12.8 27.4 74.6
6.1 34.6 1.8 14.5 21.0 78.1
5.5 25.7 1.3 11.6 26.2 70.4
5.3 21.9 1.1 10.2 30.3 68.8
100.0
100.0
100.0
100.0
Portions Trade Creditors
(Account
Payables) Liabilities for Expenses Liabilities for Other Finance Total Current Liabilities Long term loans- Secured Total Liabilities
Shareholders' Equities
100.0
12.4 Common Sized Income Statement Following is the common sized Income Statement sheet from 2001-02 to 2005-06. SQUARE PHARMACEUTICALS LTD. Common size Income Statement For the year 2001-2002, 2002-2003, 2003-2004, 2004-2005 & 2005-2006.
Gross Turnover (Sales) Less: VAT Net Turnover (Sales) Less: Cost of Goods Sold Gross Profit Selling and Distributions Expenses Administrative Expensive Allocations to WIF Other Income
2001-2002 100 13.3 86.7 52.8 33.9 8.4 2.6 1.1 1.3
2002-2003 100 14.0 86.0 55.0 31.0 8.4 2.4 1.0 3.1
2003-2004 100 13.9 86.1 51.3 34.8 9.8 2.6 1.1 1.6
2004-2005 100 14.0 86.0 51.0 35.0 10.9 2.6 1.2 5.8
2005-2006 100 14.05 85.95 49.75 36.19 11.26 2.63 1.08 2.39
Earning Before Interest & Income Taxes (EBIT) Financial Expense
23.2
22.3
23.0
26.1
25.63
Expenses) Net Income Before Taxes Income Taxes Net Income
1.8 21.4 3.5 17.9
2.6 19.7 3.5 16.2
2.0 21.0 3.3 17.7
1.7 24.4 4.1 20.3
1.97 21.64 4.70 16.45
Earnings Per Shares
0.00000598 0.00000449 0.00000492 0.00000469 0.00000453
(Interest
12.5
Turnover, Net Profit after Tax & Share Holder Equity
2005-06
2004-05
2003-04
No. of Share Outstanding
4,968,000 4,320,000 3600,000
Dividend per Share(Cash) Dividend per Share(Stock) Shareholders' Equity per Share Earning per Share (SPL) Earning per Share (Consolidated) Quoted Price per Share - DSE Quoted Price per Share - CSE Price Earning Ratio - DSE (Time) Number of Shareholders
75 20% 1,289 234.67 272.65 2,276 2,289 9.70 13,206
77 15% 1,289 290.91 303.55 3,768 3,766 12.95 10,486
70 20% 1,063 224.55 233.29 2,272 2,316 10.12 9,270
12.6 Ratio Analysis From the data acquired we have done the Ration Analysis as follows
2002-03 3000,00 0 70 20% 891 177.06 171.26 1,178 1,180 6.65 9,295
2001-02
2500,000 75 20% 758 175.80 211.00 1,261 1,278 7.17 9,358
12.7
Current Ratio= Current Asset/Current Liabilities
Current Ratio
2001-2002 2002-2003
2003-2004
2004-2005
2005-2006
1.23
1.61
1.66
1.78
1.16
2 1.5 1
Current Ratio
0.5 0 2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
Interpretation This ratio shows a firm’s ability to cover its current liabilities with its current assets. The ratio decreased in 2002-2003 it is a bad sign and then it is increasing from 2003-2004 to 2005-2006 that is a good sign. In 5 years, Square pharmaceuticals CA>CL that is also a good sign. 12.8
Quick Ratio= (current asset-inventories)/current liability
Quick Ratio
2001-2002
2002-2003 2003-2004
2004-2005
2005-2006
0.79
0.56
1.08
1.18
0.98
1.4 1.2 1 0.8 0.6 0.4 0.2 0
Quick Ratio
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
Interpretation This ratio shows a firm’s ability to cover its current liabilities with its most liquid assets. This ratio is the same as current ratio except that is excludes inventories. The ratio concentrates primarily on the more liquid current assets-cash, marketable securities and receivables. Here we can see it decreased in 2002-2003 and in the same year the inventory was more. But after that it
increased which is a good sign. Especially in 2003-2004 to 2005-2006 it is more than 1, which means they are able to cover their liabilities with their liquid assets. 12.9
Cash Ratio= Cash/current liability
Cash Ratio
2001-2002 2002-2003 2003-2004
2004-2005
2005-2006
0.03
0.20
0.14
0.02
0.04
0.25 0.2 0.15 Cash Ratio
0.1 0.05 0 2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
Interpretation This ratio shows a firm’s amount of cash as a portion of its liability. The amount of current liability, which can be paid of by the amount of Cash, the most liquid asset. It has an increasing trend accept for 2002-2003 to 2004-2005 and it is very high in 2004-2005. But it decreases in 2005-2006. (Which can indicate two things. Either they have a very good ratio or they are incurring opportunity cost of holding money rather than lending it. But all depends on the industry ratio). 12.10 Debt to Total Asset Ratio=Total Debt /Total Assets
Total Debt Ratio
2001-2002
2002-2003 2003-2004 2004-2005
2005-2006
0.28
0.25
0.28
0.22
0.30
0.35 0.3 0.25 0.2
Total Debt Ratio
0.15
Colum n 19
0.1 0.05 0 2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
Interpretation It is used to measure the percentage of funds measured by creditors. It has decreasing trend up to 2003-2004 then again increased in 2004-2005. But decreased in 2005-2006.
12.11 Debt to Equity Ratio= Total Debt / Share Holder’s Equity
2001-2002 Debt -equity Ratio 0.38
2002-2003 2003-2004 2004-2005
2005-2006
0.34
0.40
0.28
0.42
0.5 0.4 0.3 Debt -equity Ratio
0.2 0.1 0 2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
Interpretation It is used to measure how much a company is financed by debt compared to its stockholders money. It has decreasing trend up to 2003-2004 then again increased in 2004-2005. But decreased in 2005-2006. 12.12 Interest Coverage Ratio= EBIT / Interest Expense
2001-2002 2002-2003 2003-2004 2004-2005 Time Interest Earned Ratio 12.96
8.47
11.60
16 14 12 10 8 6 4 2 0
15.21
2005-2006 10.96
Tim e Interest Earned Ratio
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
Interpretation This informs us how many times the company’s EBIT can cover its interest expense. This ratio mainly observed by the lenders, as they want to know whether the company will be able to pay off
their loan with interest. . It has an increasing trend accept for 2002-2003. But it decreased in 2005-2006. Again whether it is good or bad depends on the industry ratio. 12.13 Cash Coverage Ratio= EBIT+ Depreciation / Interest Expense
2001-2002 2002-2003 Cash Coverage Ratio 20.74
15.62
2003-2004
2004-2005 2005-2006
22.38
29.01
23.51
35 30 25 20
Cash Coverage Ratio
15 10 5 0 2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
Interpretation This informs us how many times the company’s cash inflow can cover its interest expense. It has an increasing trend accept for 2002-2003 & 2005-2006. Again whether it is good or bad depends on the industry ratio. 12.14 Inventory Turn Over Ratio= COGS /Inventory
Inventory Turnover
2001-2002 2002-2003
2003-2004 2004-2005
2005-2006
4.35
3.54
2.62
3.51
2.76
5 4 3 Inventory Turnover
2 1 0 2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
Interpretation The widely used ratio tells how fast the inventory is moving. It is an indicator of the liquidity of inventory, since it tells the rapidity with which the inventory is turned over into receivables through COGS. For Square it seems like they are loosing efficiency as the data overtime is
showing a downward trend. Again whether it is good or bad depends on the industry ratio’s current situation. 12.15 Day’s Sales in Inventory= 365/ Inventory Turn Over Ratio
2002-2003
2003-2004
2004-2005 2005-2006
83.98
103.88
103.19
132.27
Days' Sales in Inventory
2001-2002
139.31
150 100 Cash Coverage Ratio 50 0 2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
Interpretation The widely used ratio tells how much time a good is on the shelf before it is sold. We have an increasing trend over here that means now they more time to sell one unit of product. 12.16 Receivable Turnover Ratio = Net Sales / Accounts Receivable
2001-2002 Receivable Turnover 28.97
2002-2003
2003-2004
2004-2005
2005-2006
33.65
24.35
23.17
21.09
40 35 30 25 20 15 10 5 0
Cash Coverage Ratio
2001-2002
Interpretation
2002-2003
2003-2004
2004-2005
2005-2006
Receivable Turnover Ratio measures the number of times accounts receivable was collected during the year. SPL Receivable Turnover Ratio was increasing in 2002-2003 then decreasing. Again whether it is good or bad depends on the industry ratio’s current situation.
12.17 Average Collection Period= Days in the year/ Receivable Turnover
Days' Sales in Receivables
2001-2002 2002-2003
2003-2004 2004-2005 2005-2006
12.60
14.99
10.85
15.75
17.3
20 15 10
Cash Coverage Ratio
5 0 2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
Interpretation This ratio tells us the average number of days that receivables are outstanding before being collected. SPL Average Collection Period of accounts receivables was decreasing in 2002-2003 that was very good sign of SPL but after 2002-2003 it started to increase. Again whether it is good or bad depends on the industry ratio’s current situation. 12.18 Total Asset Turn Over Ratio= Net Sales /Total Assets
2001-2002 Total Asset Turnover 0.94
2002-2003
2003-2004 2004-2005 2005-2006
0.92
0.93
0.78
0.65
1 0.8 0.6 Total Asset Turnov er 0.4 0.2 0 2001-2002
Interpretation
2002-2003
2003-2004
2004-2005
2005-2006
The Total Asset Turn Over Ratio measures a company’s effectiveness in generating sales revenue from investments back into the company. This ratio evaluates the efficiency of managing all of the company’s assets. Square has an decreasing trend accept 2003-2004 which is usually a bad sign but we can conclude anything with out seeing the industry ratio. 12.19 Profit Margin Ratio= Net Profit After Tax / Sales
Profit Margin
2001-2002
2002-2003
2003-2004
2004-2005
0.18
0.16
0.18
0.20
2005-2006 0.16
0.25 0.2 0.15 Profit Margin
0.1 0.05 0 2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
Interpretation The Profit Margin Ratio is a measure of the firm’s profitability of sales after taking account of all expenses and income taxes. It tells us a net income per dollar of sales. It has an increasing trend accept 2002-2003 & 2005-2006. Which is not a good sign. 12.20 Return on Asset (ROA) = Net Profit After Tax /Total Asset
2001-2002 2002-2003 2003-2004 2004-2005 Return on Assets (ROA) 0.17
0.15
0.17
0.16
2005-2006 0.12
0.2 0.15 0.1
Return on Assets (ROA)
0.05 0 2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
Interpretation The ROA tells how much each of each dollar of assets is generating what amount of net income. Using the Du-Pont analysis. We can say the ROA in the later year decreased because of decrease in asset Turnover. It has decreasing trend except 2003-04.
12.21 Return on Equity (ROE) = Net Profit After Tax /Share Holder’s Equity
Return on Equity (ROE)
2001-2002 2002-2003
2003-2004 2004-2005 2005-2006
0.23
0.21
0.20
0.23
0.18
0.25 0.2 0.15 Return on Equity (ROE)
0.1 0.05 0 2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
Interpretation This ratio shows the earning power on shareholder’s book investment. This ratio indicates how much a company is making on the money that was invested in the firm and hits to investors how efficiently one’s operation are and how well the firm is being managed. Basic accounting says that stockholders invest to get something in return and the company who can return more is performing better than the others or the previous years. Using the Du-Pont analysis we can say ROE increased 2003-2004 to 2004-2005. But decreases in 2005-2006.
Ratio Analysis- At a Glance Current Ratio Quick Ratio Cash Ratio Total Debt Ratio Debt -equity Ratio Cash Coverage Ratio Inventory Turnover Days' Sales in Inventory Receivable Turnover Total Asset Turnover Profit Margin Return on Assets (ROA)
2001-2002 1.23 0.79 0.03 0.28 0.38 20.74 4.35 83.98 28.97 0.94 0.18 0.17
2002-2003 1.16 0.56 0.02 0.25 0.34 15.62 3.51 103.88 33.65 0.92 0.16 0.15
2003-2004 1.61 0.98 0.04 0.22 0.28 22.38 3.54 103.19 24.35 0.93 0.18 0.17
2004-2005 1.66 1.08 0.20 0.30 0.42 29.01 2.76 132.27 23.17 0.78 0.20 0.16
2005-2006 1.78 1.18 0.14 0.28 0.40 23.51 2.62 139.31 21.09 .65 0.16 0.12
Return on Equity (ROE)
0.23
0.20
0.21
0.23
0.18
13.0 Personal Observations 13.1
Recommendation & Observation of Organization
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Decision related to sales is taken by the Marketing Director but new product launching decision is taken by the Chairman. He also gives trade name of new products.
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Mr. Samson H. Chowdhury is a man of great entrepreneurial spirit & farsightedness. His prediction is correct in almost all cases and highly praised by Square employees.
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Square’s clinical meetings, seminars, symposiums with doctors are less than requirement.
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The promotional activities for some of the brands are less than its nearest competitors.
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No public relations dept. in Square. The personnel department is performing the job of public relations department. As a result, the personnel department is facing extra workload.
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The quality of lunch in Square is not up to the mark.
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The salary structure is not satisfactory at some levels of management. Performance appraisal of the employees mainly depends on respective departmental supervisors.
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Regarding vacation, Square is not strict as before. Square is strict in handling financial operations.
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Normally, the MPO’s are evaluated within three year, but in some special cases the time is shortened to one year. The field staffs are called together, a written test followed by a viva is taken & is passed, they are promoted (in 6 months period). In every year a special team selects ‘Man of The Year’ based on performance. The company gives awards to ‘Area Manager of The Year’, ‘Field Supervisor of The Year & MPO of The Year’.
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The salary is paid on the first day of the following months. They get five bonuses in a year, which include two festival and three incentive bonuses.
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Employees enjoy service benefits like gratuity, provident fund, group insurance, workers participation fund (for non0executives only), medical leave, earned leave, free lunch, and free transport. Promotion depends on seniority, merit, output, managerial quality, etc.
• 13.2
Observations During research
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Aventis bears an outstanding image although the MPO’s visit the doctors less frequently.
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Promotional activities on the part of Beximco are more than Square.
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Medical promotion officers’ skill in personal selling is less than its nearest competitors.
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Doctors usually prefer drugs of antibiotics.
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The young doctors are very much co-operative and enthusiastic in giving their opinions.
• 14.0
While prescribing antibiotics, company reputation plays little or no role. On the other hand, area of coverage and effectiveness of antibiotics play a dominating role. Conclusion
Square Pharmaceuticals Ltd is a well reputated company. They view business as a means to the material and social well being 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 In our project we have shown all the financial analysis according to the help of financial report. All the ratios are shown in a perfect way that will help us to forecasst on the overall financial condition of the company. From all the information we can easily conclude that Square Pharmaceuticals Ltd is a financially solvent company and they can run their business opertations in their desired level in the upcoming years. Bibliography •
Kotler P. Marketing Management, Millennium Edition, 1999, Prentice Hall of India.
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Newtorm & Davis, Organizational Behavior at Work, 1998, Tenth Edition, Prentice Hall of India.
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Donald S. Tull, Marketing Research, sixth Edition, 1999, Prentice Hall of India.
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Stphen P. Robbins, Organizational Behavior, 2000, Ninth Edition, Prentice Hall of India.
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Kotler P. Principles of Marketing, 1997, Seventh Edition, Prentice Hall of India.