Current Status of Industry and Market - Macro and Micro Environmental Factors Conditions - Management Accounting Assignment Help

Assignment Task:

1. The Current Status of Industry and Market:

Under the leadership of CEO Mr Hong, the company invested heavily in the R&D for new products such as food supplements and innovations in hearing devices. The influx of global competitors in the Malaysian industry is presenting novel threats to HP. This influx was mainly a result of significant worldwide growth in the pharmaceutical industry.  The industry is expected to grow at a rate of 7.5% annually with an annual sale of about $1,158.5. The growth of the pharmaceutical industry is largely due to innovation and technology, government support, stakeholder engagement, strong regulatory environment. The global market is dominated by the top 10 companies and even though there is high competition, there appears to be room for niche high-end quality products and low-cost generic products. In respect of the Asia-pacific region, the pharmaceutical industry has three main players, namely, China, Australia and Malaysia. Malaysian market can be categorized into prescription medicines, over-the-counter products, traditional medicines and health/food supplements. Production of drugs that are based on innovative practices is crucial for establishing a strong presence in the Malaysian market. Local companies like HP who do not have resources for such investment in R&D has the opportunity to act as an outsourcing agent for global firms.

China accounts for 1.5% of the global drug market. The pharmaceutical industry in China is largely fragmented and inefficient. But the annual growth rate of 16.72% suggests that China's market holds great potential for future development. However, the regulatory policies of China discourage foreign entry, along with poor evidence of KFC. The Australian pharmaceutical industry is dominated by biotechnology firms, bio-medical research and generic medicine companies with turnover of $23.4 billion and total export of around 3.89 billion. Even though Australia has a smaller population, it consumes over 1% of total global sales and ranks 12th in global drug market and is expected to export over $5 billion.

2. Macro and Microenvironmental factors Conditions:

Business is influenced by both microenvironment and macro-environment factors. A macro environment is a common surrounding, that can have an impact on the operation of all commercial organizations In contrast to this a microenvironment is the neighbouring surrounding, beneath which the organization functions (Witkowski, Cheba, & Kiba-Janiak 2017 p. 49). Business needs to focus on the micro and macro environment since the macro environment has an impact on the whole budget and also it influences decision-making practice of the enterprises. Similarly, the micro-environment has an impact on the performance of the business since it affects the operation of the organization (Mose, 2016).

2.1. Macro environmental factors:

The macro-environmental factors influencing HP are as follows;

2.1.1. Political:

The politically stable government in Malaysia has enhanced the growth of HP. Its strong finance and credit policy is has encouraged the further growth of the business. The implementation of proper trade and industry policy, regulation and framework by the government could support smooth functioning and planning of business in a better way.
 
2.1.2. Economical:

The strong economy of Malaysia has been vital for the growth of HP. Especially the current economic situation of Malaysia with low inflation rates, low-interest rates, good exchange rates, low corporate tax rates, good demand/supply chains, proper wages and good disposable incomes. It also provided a good platform for attracting MNEs and increasing competition in the industry.

2.1.3. Technological:

The current market of OTC drugs seems to be very competitive and HP uses its technological capabilities to develop a new product in the market to sustain the business and its growth. The research and development culture of HP has to lead to new products like bio-medicals, Health Food Supplements and radical products like hearing devices. The technological capability of HP helps to compete with the existing competitors and provide barriers for new entrants.

2.2. Micro Environmental Factors:

The Microenvironmental factors influencing industry are as follows;

2.2.1. Potential Entrants:

The high threat of new entrant especially from MNEs and a low entry barrier for them can make an industry more competitive for HP... Aspiring entrants like MNEs, armed with new capacity and hungry for market share, can enhance the investment required for the company like HP to stay in the game (Porter, 2008).

2.2.2. Bargaining Power of Buyer:

The high number of a pharmaceutical company with an almost similar product with low switching cost has created high bargaining power for buyers which could force down prices by playing with HP and its competitors. This signifies that HP has low profitability rate but this can help in making strategic decisions.

2.2.3. The threat of substitute;

Due to the of high number substitute products entering into the market similar to that of HP and low switching cost among the buyers has created High threat of substitute. This can drive HP to plan and operate its business in the most efficient manner to control the cost and maintain profitability.

3. Key Success Factors:

Key success factors (KSF)” are defined as the primary elements or activities that are needed for a company or an organization to achieve the desired goals and ensuring success (Hughes et al 2017). The key success factors of Pharmaceutical industry needed for companies are research and development, financial resources, skilled human resources, quality/product performance, global funding partnership, market/product distribution, government and stakeholder support, commercialization and brand recognition.
The key success factors can be used to enhance the overall business strategy of the organization (Zhang et al. 2016) Thus, HP as has enhanced its business success through maintaining and improving its strong research and development culture, retaining its skilled human resources, maintaining it's quality and product performance, providing quality customer service and injecting financial resources. HP still needs to improve its global funding partnership, market/ product distribution beyond Malaysia, seeking more stakeholder and government support through proper regulations and achieving brand recognition through commercialization. 

4. HPs Strategic and Competitive Challenges:

For the success of the organization, it is important to implement competitive strategies as the old competitive strategies cannot address the current competitive position of market and industry. It is important for HP to address the strategic and competitive challenges in order to further ensure growth and enhance success of business (Augier & Marshall, 2017 p. 284). The increasing competition in the local market, the global pressure and forecast of future growth is pressuring HP to improve and develop its human resource skills to a global level. There is also a need to improve and develop its strong product distribution not only within Malaysia but at a global level to maintain a positive return on investment and reduce debt to equity ratio. It also needs to retain its local customers through improved quality product and customer service. Seeking assistance from Government through incentives and tax write-offs could help HP to match the capabilities of research-intensive MNEs and also to diversify its products through R&D. 

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