Square Pharmaceuticals Limited has been a household name in Bangladesh since 1958 when it started its operations as a partnership, getting incorporated in 1964 and finally getting listed at the stock exchange in 1995. The company has been in the leading front of innovation, and continues to introduce new and better medicines in the market every year. Today the 97% of the demands for medicine in the domestic market is catered to by the local pharmaceuticals company and Square Pharmaceuticals limited has captured a significant portion of this market.
The company has been growing consistently for over the years, and their growth has exceeded the growth of the industry growth at times.
|Years |1999 |
|Square Pharmaceuticals Limited |20.06 |
|Incepta Pharmaceuticals Limited |7.53 |
|Beximco Pharmaceuticals Limited |7.09 |
|The Acme Laboratories Limited |5.25 |
|Eskayef Pharmaceuticals Limited |4.64 |
|ACI Limited |4.52 |
|Opsonin Chemical Industries Limited |4.30 |
|Renata Limited |4.22 |
|Aristopharma Limited |4.18 |
|Drug International Limited |3.39 |
Source: IMS fourth quarter, 2008
The market is oligopolistic in nature and is thus dominated by high levels of entry and exit barriers, considering the first mover advantage already achieved by the dominating firms in the form of economies of scale. Besides this, entry into this market also requires heavy capital expenditure which is also translated into exit barriers, in the form of high sunk cost. Additionally, government rules pertaining to the industry to maintain standards also acts as a form of entry barriers. Even though the products of the firms are comparable in nature because of the absence of patent protection, the firms work very hard to create a differentiation in the minds of the consumers, so as to capture a greater market and ensure higher consumer loyalty. Given this, one of the major features of such markets is the high level of price-competition that they tend to engage in, which may conversely also lead to price-collusions in the market as well which could lead to the formulation of cartels. In the case of this particular market, the common products- paracetamols, cough syrups etc are competitively priced, while the more specialized medicines can be priced according to the firm's own discretion. The nature of the market tends to ensure that the firms are price-makers rather than takers, given that they differentiate based on consumer perceptions. However, they tend to face a kinked-demand curve, which means that the firms face an more elastic demand curve if they raise there prices (thus they tend to lose more than they gain given that customers switch easily to other firm's products), while if they lower prices the competitors closely follow suit, which usually leads to a price war, thus dissipating a lot of the benefits achieved by the lower price. At present, Bangladesh 20% of the local API requirements, rest of the requisite imported. Even though, a number of 21 local pharmaceutical companies are producing 41 APIs for pharmaceutical products but most of the companies find investment in API production unattractive grant a higher bargain power to the supplier.
|Competition in the industry : Intense | |Rivalry between existing firms |High | | Industry Growth Rate |Moderate | | Concentration and Balance of Competitors |Moderate | | Degree of Differentiation and Switching Cost |Low | | Scale of Economies |High | | The ratio of...