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Reasons for Failure – Continued……
We continue our discussion on entrepreneurship by the Pharma Industry employees.
Someone, who has been working as an employee for several years, develops a certain mindset. He is part of a team where work is divided, and responsibility is shared. Everyone does their job and goes home, leaving office worries behind. It is rare to get disturbed in off hours. Then there is possibility of annual leaves, casual leaves (which are taken mostly for casual reasons), and sick leaves (mostly availed as a matter of right, not need). There is family time, and friends time, and maybe personal time. The most important aspect of employment is that the buck keeps moving from one level to the other. It does not stop at any employee unless he is the top guy.
Becoming an entrepreneur means taking all responsibilities, including the ultimate one. It feels nice to succeed and earn money, but the route to it is quite stressful and time taking. The timings, weekdays, weekends may all get mixed up. The family and friends may demand their previous share of time making the person irritated.
Senior managers suffer from employee mindset in a different way. They would like to have a nice office with all amenities, like they had before, and they would like that they should only manage like they used to manage in their employment.
On the other extreme, some people get into too much of an owner mindset and start mistreating the newly formed team. This is even worse than the employee mindset.
These are self-defeating behaviors which affect the enterprise outcome seriously and negatively. This is a sure route to failure.
Wrong Product Selection
Pharma people understand the products that sell well, in larger volumes, and at better prices. Therefore, everyone runs to get these. An antibiotic, a painkiller, an anti-ulcer is considered winning combination, but there are several of these, and not all are accepted equally. For example, Cefixime and Ciprofloxacin and Ceftriaxone are at the top; omeprazole is still the top; and so on. Others also sell but in much less volumes. If these are not available, the entrepreneur gets whatever is available because he must start anyway. And he thinks that he needs to get a small share and that should be possible with anything. It does not happen that way. For new players, the safer bet is to target the largest cakes so that even a sliver of it becomes good for them.
Similarly selling acute care products such as mentioned above is easier; selling chronic care therapies for diabetes, high blood pressure, cardiac problems is much more difficult. Starting an enterprise with chronic care of this kind is very risky.
Product selection is critical, and wrong selection becomes fatal many times.
Maximum Retail Prices – MRP of pharmaceutical products are fixed by DRAP. There is however, no restriction if anyone decides to sell at less than the approved MRP. In fact, there are numerous cases where companies decide to sell at lower than approved prices due to marketing reasons. An entrepreneur of the franchiser type may decide to put the maximum price so that he may maximize his own margin and be able to invest in customer services. It is a tricky area. Theoretically, it may make sense, but market dynamics do not work the way we desire. Market based pricing is essential or it will invite hardships.
This is even more rampant in the unregulated nutritional products. The seller can keep any price he wishes, but he does not operate in vacuum; there are plenty of competitors to attack him if he goes out of line.
All such cases where market dynamics are/were ignored in the interest of expedience and/or profit, lead to failure.
This is another serious issue. I have mentioned on multiple occasions that the pharma market in Pakistan is highly unevenly divided. Over 95% market is captured by top 50 companies, while 700 companies struggle in less than 5% market. This is a very unfair situation, but who said life was fair? The 5% market is further subdivided into larger and smaller players who are trying to somehow survive. Survival mode leads to certain practices under compulsion which are not right, but these are the companies who are the source of products for new, aspiring entrepreneurs. Though lot of goodwill is expressed, but the supplying companies cannot meet the requirements. The delays are common, the quality issues may arise, and the threat to increase the price may come up. The entrepreneur who is already struggling with the stress of settling his new business is severely hit. There are no clean solutions to this problem because our manufacturers, even the larger ones, who offer products to others, for marketing or franchising, are not serious in meeting their commitments. I may say here that if they were really serious, they would have made their own market. The very fact that they are depending on others shows the weakness in their system.
In recent times, it has become common practice that large companies are also taking products from several smaller manufacturers to expand their product portfolio quickly. In my experience, the customer service at that level is also less than satisfactory. Mostly, it is due to inefficiency of the system which leads to this. The larger companies minimize the damage by keeping extra stocks. It has a cost, but it is less than the cost of lost business and lost customers. Smaller marketing companies can neither carry large stocks nor have the power to push the supplier.
Beside interrupted supplies, price changes without warning, and selling stock of running products directly to market severely undermines the small businesses. Wrong suppliers usually spell doom for the small startups.
To be Continued……
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