Harvard Case - Sarva Pharmaceuticals in Cambodia: Fight or Fold?
"Sarva Pharmaceuticals in Cambodia: Fight or Fold?" Harvard business case study is written by Sandeep Puri, Rakesh Singh, Raj Agnihotri, Bindu Gupta. It deals with the challenges in the field of Marketing. The case study is 10 page(s) long and it was first published on : Jul 8, 2020
At Fern Fort University, we recommend Sarva Pharmaceuticals pursue a phased growth strategy in Cambodia, focusing on building a strong brand presence and establishing a robust distribution network. This strategy involves a combination of product adaptation, strategic pricing, and targeted marketing efforts to cater to the specific needs and preferences of the Cambodian market.
2. Background
Sarva Pharmaceuticals, a leading Indian pharmaceutical company, is considering entering the Cambodian market. The company faces a challenging landscape with fierce competition from local and international players, limited healthcare infrastructure, and a relatively low per capita income. The case study focuses on the decision-making process of Mr. Kumar, Sarva's CEO, who must weigh the potential risks and rewards of entering this emerging market.
The main protagonists are:
- Mr. Kumar: CEO of Sarva Pharmaceuticals, responsible for making the final decision on entering the Cambodian market.
- Mr. Singh: Head of International Business at Sarva, tasked with researching and analyzing the Cambodian market.
- The Cambodian Market: Characterized by a growing population, rising healthcare awareness, and a demand for affordable and effective medications.
3. Analysis of the Case Study
To comprehensively analyze Sarva's situation, we will use a combination of frameworks:
a. SWOT Analysis:
- Strengths: Sarva's strong brand reputation in India, established manufacturing capabilities, and experience in developing affordable medications.
- Weaknesses: Lack of market knowledge in Cambodia, limited distribution network, and potential challenges in adapting products to local needs.
- Opportunities: Growing demand for healthcare services, increasing disposable income, and potential for partnerships with local distributors.
- Threats: Intense competition from established players, regulatory hurdles, and potential for counterfeit products.
b. PESTEL Analysis:
- Political: Stable political environment in Cambodia, but regulatory changes and potential for corruption are concerns.
- Economic: Growing economy with rising disposable income, but income inequality persists.
- Social: Increasing awareness of healthcare, but traditional medicine practices remain prevalent.
- Technological: Limited access to technology in rural areas, but potential for digital marketing and e-commerce.
- Environmental: Concerns about environmental sustainability and potential impact of pharmaceutical waste.
- Legal: Complex regulatory environment with strict requirements for product registration and distribution.
c. Porter's Five Forces:
- Threat of New Entrants: High, due to relatively low barriers to entry and potential for new players to emerge.
- Bargaining Power of Buyers: Moderate, as consumers have limited choices and are price-sensitive.
- Bargaining Power of Suppliers: Low, as raw materials are readily available and suppliers are numerous.
- Threat of Substitute Products: Moderate, as traditional medicine and alternative therapies are prevalent.
- Rivalry Among Existing Competitors: High, with numerous local and international players vying for market share.
d. Market Segmentation:
Sarva can segment the Cambodian market based on:
- Income: Targeting different segments with varying price points and product offerings.
- Geographic location: Catering to urban and rural areas with specific distribution channels.
- Age and lifestyle: Developing products and marketing campaigns tailored to specific demographics.
4. Recommendations
Phase 1: Market Entry and Brand Building (Years 1-3)
- Product Adaptation: Focus on adapting existing products to meet the specific needs and preferences of the Cambodian market, including:
- Dosage forms: Offering smaller pack sizes and liquid formulations for easier administration.
- Pricing: Introducing a tiered pricing strategy to cater to different income levels.
- Language: Providing product information and marketing materials in Khmer.
- Strategic Partnerships: Collaborate with local distributors to establish a strong distribution network, leveraging their existing infrastructure and market knowledge.
- Targeted Marketing: Implement a multi-channel marketing strategy to reach the target audience, including:
- Consumer marketing: Utilizing traditional media, such as television and radio, alongside digital channels like social media and search engine marketing.
- Healthcare professional marketing: Engaging with doctors and pharmacists through conferences, seminars, and educational materials.
- Brand Positioning: Position Sarva as a trusted and reliable provider of high-quality, affordable medications, emphasizing its commitment to social responsibility and patient well-being.
- Market Research: Conduct ongoing market research to monitor consumer behavior, competitor activities, and emerging trends, informing product development and marketing strategies.
Phase 2: Expansion and Growth (Years 4-6)
- Product Innovation: Introduce new products tailored to the specific needs of the Cambodian market, leveraging Sarva's expertise in developing affordable and effective medications.
- Digital Marketing: Invest in digital marketing channels, such as e-commerce platforms, mobile apps, and social media, to reach a wider audience and build brand awareness.
- Customer Relationship Management (CRM): Implement a CRM system to manage customer interactions, track purchase history, and provide personalized recommendations, fostering customer loyalty.
- Corporate Social Responsibility (CSR): Engage in CSR initiatives, such as sponsoring health awareness campaigns, supporting local communities, and promoting sustainable practices, enhancing brand image and building trust.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Mission: Leveraging Sarva's existing strengths in manufacturing, product development, and brand reputation, while adapting to the specific needs of the Cambodian market.
- External Customers and Internal Clients: Catering to the needs of both consumers and healthcare professionals, ensuring product accessibility and affordability.
- Competitors: Differentiating Sarva from competitors through product adaptation, pricing strategies, and targeted marketing efforts.
- Attractiveness: The recommendations aim to maximize profitability by balancing market entry costs with potential revenue growth, considering factors like pricing, distribution, and marketing effectiveness.
6. Conclusion
Sarva Pharmaceuticals has a strong foundation for success in the Cambodian market. By adopting a phased growth strategy, focusing on product adaptation, strategic partnerships, and targeted marketing, the company can build a robust brand presence, establish a strong distribution network, and achieve sustainable growth in this emerging market.
7. Discussion
Alternatives:
- Rapid Expansion: Entering the market with a large-scale investment and aggressive marketing campaign. This approach carries higher risk but could lead to faster market share gains.
- Joint Venture: Partnering with a local company to leverage their market knowledge and distribution network. This option could reduce risks but might limit control over operations.
Risks and Key Assumptions:
- Regulatory Changes: Potential for changes in regulations could impact product approvals and distribution.
- Economic Instability: Fluctuations in the Cambodian economy could affect consumer spending and demand for healthcare services.
- Competition: Intense competition from established players could make it challenging to gain market share.
Assumptions:
- Stable Political Environment: The Cambodian political landscape remains stable, allowing for long-term business planning.
- Growing Healthcare Demand: The demand for healthcare services continues to grow, driven by rising disposable income and awareness.
- Effective Product Adaptation: Sarva can successfully adapt its products to meet the specific needs of the Cambodian market.
8. Next Steps
- Market Research: Conduct in-depth market research to validate the assumptions and gain a deeper understanding of the Cambodian market.
- Product Development: Initiate the process of adapting existing products and developing new products tailored to the Cambodian market.
- Partner Selection: Identify and evaluate potential local distributors for strategic partnerships.
- Marketing Plan Development: Develop a comprehensive marketing plan outlining the target audience, marketing channels, and budget allocation.
- Regulatory Compliance: Secure necessary regulatory approvals for product registration and distribution.
By taking these steps, Sarva Pharmaceuticals can effectively enter the Cambodian market, establish a strong brand presence, and achieve sustainable growth.
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Case Description
In January 2020, Jai Prakash Chaubey, the managing director of Sarva Pharmaceuticals Private Limited (Sarva), needed to decide whether or not to accept a proposal from Gursim Pharmaceutical Limited (Gursim) to market some of Sarva's products in Cambodia. Sarva had been performing well; however, the company's profitability in Cambodia was minimal. Should Chaubey accept Gursim's offer? Or should he hire a new country head who could drive the sales in the country and motivate the sales team for better results? Other options included restructuring Sarva's product portfolio or shutting down the company's marketing arm to focus solely on distribution. What strategies should he adopt to turn around his company's performance, strengthen its presence in Cambodia, and remain on course to achieve the company's target for 2020?
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