INTRODUCTION organization and the influence of the same

INTRODUCTION

Business
environment refers to the factors which are external or internal to the
business organization and the influence of the same will affect directly or
indirectly the overall functions of the business organization.

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In
short, it is the combination of both external and internal factors which
influence the organizational functionality. Any business never exist without
its environment. And the effective utilization of these factors will help the overall
improvement of the business.

Broadly
there are two types of business environment. They are:

1.      Micro
Environment

2.      Macro
Environment

Hear
in this assignment, I am focusing only on the Macro Environment analysis of
Cipla Limited to identify the forces that will affect the organization and to
analyses how these factors will influence the structure of the organization.
For this purpose here I am using PESTLE analysis and SWOT analysis.

Objectives of
the study

1.      To
understand the macro environment of Cipla limited

2.      To
analyses how the Environmental factors have influenced the structure of the
organization.

Cipla Limited

Cipla
Limited is an Indian prominent multinational Pharmaceutical company,
headquartered in Mumbai, India. The company was founded by Dr. Khwaja Abdul
Hamied as The Chemical, Industrial
& Pharmaceutical Laboratories in 1935. Cipla is best known for
making low cost Anti- AIDS drugs for HIV positive patients in Developing
countries. It primarily makes drugs to treat
cardiovascular disease, arthritis, diabetes, weight control, depression and
many other health conditions. In the FY 2016, Cipla generated a 20 percent increase in year-on-year revenue.

 

                                                         PESTLE
ANALYSIS

PESTLE
analysis refers to macro environmental analysis of an organization using
political, economic, social, technological, and legal environment factors.
Macro Environmental forces affecting Cipla limited is analyzed using PESTLE is
given below.

POLITICAL ANALYSIS

Since
the political scenario is unpredictable these days, it is a tiresome task to
deal with it. Majority of the government policies are revealed quickly without
any short notice and therefore it makes the industries walk through a tough
phase in framing policies according to the political environment.

The
prices of the drugs are highly controlled by the government and this is
becoming a main reason why the company’s profit percentages are going down and
the positive side of this is the drugs are now available to the general public
at the lowest rate. One of the example for the political factor affecting the
Cipla Limited is described below.

GST

GST
is an indirect tax introduced on July 1st 2017 in order to replace a number of indirect
taxes prevailing before and to ensure a tax system with a single taxation
policy. Like any other new venture, the introduction of GST was too tough for
the pharmaceutical industries. When the GST was introduced, the majority of the
companies in the pharmaceutical industry where unable to cop up with the new
GST regime and took three to four days migrating data to the GST system.

India’s
third largest pharmaceutical company CIPLA Ltd. was however an exception to this
GST problem. CIPLA was able to bill the invoices under GST from the very next
day of its implementation and their GST invoice was published on the twitter
handle of the company. CIPLA successfully faced all the technical formalities
regarding the GST system. They paid proper attention to the GST norms and
upgraded their systems in accordance with it.

 Another important area was the IT system. It
was also neatly enhanced with adequate software up gradations in terms of GST.
To get the supply chain registered on GST network was yet another crucial task
which was also done accurately. Last but not the least fixing product prices,
labelling, and minimizing the loss on the pre stored stock before GST was also
very relevant. It is true that the company had some losses regarding the pre
GST stocks but how ever at the end the company was good enough to face the GST
procedures.

Most
of the medicines comes under the tax bracket of 12%. But the lifesaving
medicines comes under 5% and 0% tax bracket. On having an analysis of the
political side, there are suggestions from the part of the government to lower
the prices of medicines these days and thus it may cause some difficulties
regarding the profit margin of the company.

ECONOMIC ANALYSIS

The
economic environment of CIPLA is hopefully the best. The most discussed
financial policy of demonetization too had not affected the company in a bad
way. Obviously it caused a short term financial tension and numbness but the
company was able to carry forward their financial strength ahead. There was
indeed problem with the entire supply chain network to grab the fund needed but
as a multinational company it was not so a big deal for CIPLA to face this
financial emergency.

Like
any other industries, the crucial profit zone of CIPLA is the exporting of pharmaceuticals.
To have this priority of huge exporting profit, a company should grab the
approval from concerned authorities. In the pharmaceutical industry, these
approvals are seen as intangible assets because if an approval is cancelled
then it may cause a huge loss to a firm. In this scenario, CIPLA is successful
in getting the approvals in time and since it has a wide variety of products of
its own, it creates a completely wider marketing possibility which ultimately
results in a huge profit by their side.

As
far as the condition of the economy, the availability of funds is not a problem
at all. So the free mobility of funds, new product ideas and a completely favorable
condition for exporting is really going to increase the turnover of the
company.

Social factors

Many backward countries are still using centuries
old traditional medicines for common diseases, this can cause various other
problems regarding the health of the affected person. This is due to the lack
of knowledge regarding the medicines. So Cipla introduced medicines and other
drugs at reasonable rates in developing countries and backward countries to
make the world healthier. Even if the medicines are available in the market,
people still go to tantric, hakims, and also use magic to get cured from diseases.
This is a major problem in under-developed countries. Another factor affecting
the social environment of Cipla is that people ignore vaccination towards some
wide spread diseases like polio, chicken pox, measles, etc. because they are
unaware about the after effects.  

Another
problem affecting the health of people are the pollution, which can cause
numerous diseases like lung problems, asthma, etc. Polluted water is the main cause
of death among children because they do not care about their sanitation and
thus causing malaria, jaundice, TB, etc. Poverty is another thing that is
affecting the health of the people because in backward regions the people are
not that rich and most of them cannot afford good health care services so in
that areas the mortality rate is much higher compared to other areas. In
poverty affected areas malnutrition is also a cause of high rate of infant
mortality rate.

Unhygienic
health habit is another aspect regarding social environment of the
pharmaceutical industry. Unhygienic health habit include lifestyle of people,
food habit, lack of sanitation facilities, poor waste management, lack of
awareness regarding health problems, conception of alcohol, gutka, smoking etc.

When
we discussing about the Cipla’s social environment, the above mentioned are the
factors the company has to deal with. If the situation continuous more health
problems are likely to appear. So the company has to constantly evolve its
research and development team. And also improve its customer services and
increased need to educate people about the situation.

Technological When
we are looking towards the technological environment of Cipla Limited,
automation and advancement are the first thing that strikes us. The improvement
in the technology leads to automation of machinery. It resulted in a mass
production of medicines. It helps to increase the output and to reduce cost.
When the cost is reduced then it help everyone to afford the cost of medicine
and led a healthy life. In short computerization brought accuracy and
efficiency in pharma sector.

New
innovation in the industry helped to deliver drugs to the needed once at the
right time and save their lives. It also helped to decrease the number of
employees and it resulted an increase in profitability. It is all because of
the efficient research and development team. Newer medicines are being produced
to diagnose diseases with fewer side effects and faster recovery of the
patient. Now a days stem cells are also preserved when a new child is born this
helps in fighting dangerous diseases in their near future.

Automation
also affected adversely in the industry many people lost their jobs and it lead
to the formation of both government and labour union and they are against new
innovation because it was effecting its member’s jobs.

From
the above information we can understand that the important technological
factors that affect the environment of Cipla ltd. are automation, advancement,
innovation and discoveries etc. It also resulted in the reduction of job
opportunities but it helped to increase the profitability of the company. To
deal with the rapid advancement of technology more responsive and effective
services are required. New information and communication technology had led to
the development of new electronic models.

 

Legal

The
legal factors of pharmaceutical companies is based on patent, testing, rules
and regulations, laws, side effects, its ingredients, etc. Testing of medicines
should be done several times before the medicines are made available to the
public. The quality of the medicines should be standard and follow all the
norms put by the government.

The
medicine should possess as little side effect as possible and if the medicine
is not fit to be consumed with certain foods it should be mentioned. The
contents of the medicines should be clearly mentioned on the back side of the
strip. Also, there is a number of laws and regulations which are implemented by
the government of different countries are also influence the environment of
pharmaceutical industry.

The
one of the most effective way to overcome this scenario is by improving the
qualities of the product by satisfying the all legal procedures. Cipla is
satisfying all the legal factors and in no ways working illegally.

Environmental

Since
old times water is constantly contaminated by untreated waste water dumbed by the
companies led to water pollution. The effect of the chemicals on the nature are
unknown to date. So the chemicals must be treated before they are disposed in
the water. They also pollute soil so, the chemicals must be neutralized before
they are buried.

Cipla’s
operations are spread all over the world and the company must satisfy all the
environmental policies laid down by the government of the country it is
situated.

The
chemicals must be disposed off safely or coming in contact with other chemicals
they can react unpredictably. If the level of pollution is increased it can
cause many health problems such as miscarriages, cancers, deaths of live stocks
etc.

 

SWOT Analysis of Cipla Limited

External
factors are analyzed by opportunity and threats of SWOT analysis. They are:

Opportunities:

1.     
Strategic
Expansion: In recently, Cipla
has been widening its business through initiatives such as investments, acquisitions,
and partnerships in India as well as in the international market. For instance, Cipla invested in a biotech
manufacturing facility in South Africa. It also acquired InvaGen
pharmaceuticals in the USA etc.

2.     
Introduction
of new drugs and formulations will help Cipla in generating more revenue.

3.     
Treatment
of HIV: Cipla offers a wide
range of ARV products through C-GA for the treatment of HIV/AIDS in both
children and adults. The increasing number of patients can be provided cure by
Cipla’s medicines.

4.     
Grow in
Emerging markets: Cipla should
look forward to growing in emerging new markets, especially places where
medical infrastructure is improving and hence pharmaceutical is also have a
scope to grow.

Threat:

1.     
Drug
Pricing control methods in India: Governments
have influence over pricing of a drug through national health organisations. In
India, a new pricing policy under Drug price control has been proposed which
can have a negative impact on the industry. Changes in pricing policy could affect
pharmaceutical companies operating margin expansion.

2.     
Intense
competition in generics industry: Cipla
faces a large competition in the Indian generics industry from major rivalries
such as Lupin, Sun Pharma etc.  This affects the growth potential as well
as limits the market share for Cipla.

3.     
Fluctuation
in Exchange rates: Any
fluctuation in the exchange rates affect the company’s financial agreement with
other countries and thus it can affect the profitability of the company.

Conclusion

From this assignment I can understand about
the macro environmental factors affecting the environment of Cipla limited. For
this analysis I used two main tools which are PESTEL analysis and SWOT
analysis. From analysis I have found that the environment of Cipla ltd and how
outside factors affect the business environment and how can it be improved so
that the business can get profit and also help the society to lead a healthy
life.