Introduction and Company Background

Discuss about the Global Business for Australian Pharmaceutical Industry.

The Australian pharmaceutical industry is uniquely placed to develop the commercialization of the outcomes of Australia’s long-term speculation in medical research. The market of Australian pharmaceutical considered as chief regarding product diversity. This industry consists of biotechnology firms, biomedical research associations, generic medicines and service -related areas including delivery and wholesaling Keegan and Green (2007). Reports showed that in 2012-2013, the export revenue reached around $ 3.9 billion. This data establishes that the pharmaceutical industry is one of the Australia’s major manufactured exports. The industry employed around 16,000 people in various manufacturing activities and spent about $ 404 million on R&D research mechanism. According to the opinion of Aghazadeh (2011), it is forecasted that the growth rate of the pharmaceutical industry will increase to a great extent by 2020. 

XYZ Pvt Ltd. is one of the biopharmaceutical companies of Australia which is a part of the entire value chain of the medicines. The firm has an extensive infrastructure and is famous for the production of innovative medicinal products for the worldwide patients. The company employs around 900 people in Australia with a portfolio of 55 clinical trials. XYZ Pvt Ltd. is the largest national manufacturer of medicines that offer $ 725 million of drugs to the domestic market (Keegan and Green, 2010). The firm has also earned more than $ 440 million in exports to around 30 international markets, including Australia and New Zealand. 

The growth outlook for South Africa 

According to Atyam (2010), South Africa possesses the largest economies of Africa with all the elements. The features include mining, manufacturing, and finance and retail markets.  The market of South Africa has the potential of commercialization due to the sizeable population and rapid economic development. In supporting the present context, Aregbeshola et al. (2011) observed that the pharmaceutical industry of South Africa covers the largest part of the market.  The money-spinning policies and regulations of the country help in developing the market value of the region. This development results in increasing the margin of the area, which ranges to around $ 3.9 billion in 2013. In the current situation, the growth rate of the area is comparatively slow, which rebound only slightly in 2017 (www.mckinsey.com, 2015). This report signifies that the revenue growth is also stirring in an inhibited motion because of price regulation policy of the government. The region is also facing a slow economic growth, which results in reduced purchasing power of the population. According to Bhandarker (2014), the district is facing this problem since 2014 and is forecasted to continue till 2018. The anticipation of the growth of the pharmaceutical market is 6% in each year, which results in a total value of $ 5.1 billion.

Justification of the Selected Destination of the Country

On a contradiction, Martínez and López (2009) the growth in South Africa’s pharmaceutical industry is continuing at a great speed. The growth curve shows that there is a rise in $ 20.8 billion in 2013 from just $ 4.7 billion a decade ago. Reports also express that there will be a sharp increase in the market value and reach to $ 60 billion by 2020. This report proves to be good news for the pharmaceutical companies and other multinationals. The growth of South Africa’s health sector led to a significant number of new healthcare reform plans in the coming future. The region managed the various healthcare facilities and became more competent through various innovation in the field of drugs.

The recent reports of 2016 showed that China has a higher value in the area of pharmacy when compared to Japan. The estimation of the value of the pharmaceutical market of China depicts that there is a collection of $83.3 billion in the year 2013 (Hsieh et al..2012). The revenue margin is also expected to grow by 6.3% of CAGR by 2018. China has shown a huge acceleration in the development of health care services over the past 24 months. In the framework of the above context, Hill and Ivonne (2014) said that the trend of the pharmaceutical industry is continuously growing at a fast rate due to the government assistance. The government provide all possible support to the industry to reduce the healthcare problems. The policies and regulations are flexible for the establishment of the pharmaceutical company. The report of Global data publications showed that the market value of  China’s drugs would raise to 650% by 2020. China has a well-developed pharmaceutical industry structure that allows an elasticity for the companies to establish the business. Over the last few decades, the Chinese pharmacy industry is growing at a standard annual rate of 16.72%. 

According to Peng (2008), the investment conditions of China improve the health because of certain reasons. These goals include a significant customer demand for medicines; reduce the cost of labours and the changes in economic reforms. Although China enjoyed the profit of an expensive market for pharmaceutical production, the industry is still lacking in the innovation of product development. The Chinese market gives a good exposure to the products with high trading actions. Thus, the products can easily be exported to the potential regions for better publicity.

The Growth Outlook for China

Comparing the market scenarios of China and South Africa, a conclusion can be made that the Chinese market is far better and flexible. The South African market is still developing. The market conditions of China are very likely for XYZ Pvt Ltd. to start the business. Therefore, the firm can pierce in the Chinese market. 

The weak condition of economic data is one of the major risks while penetrating in the market of China. According to the opinion of Martínez and López (2009), the undercapitalized banks can be the major obstruction for the firm, XYZ Pvt Ltd., Australia to expand the market share. Adding to this, the slow IP (Industrial Production) growth is the other factor of risks for the chosen firm while penetrating in the Chinese market. The education level of the country is in the middle stage compared to the other developing countries.

The coastal area of South Africa faces the natural calamities arises in the surrounded Ocean, which affects the economical structure of the country. According to the view of McManus et al. (2008), the lack of technology in South African market hampers the resource’s ability. Thus, the agricultural resources of the country cannot grow effectively. Due to the lack of advanced technology, the South African market loses the opportunity to develop efficiently. Additionally, XYZ Pvt Ltd., Australia can face the productive issue due to the problem of unemployment and inadequate knowledge amongst the labour (Omar et al. 2009). The high taxation level can be one of the severe risks for the chosen pharmaceuticals firm while expanding the market share.

The stable workforce is one of the major growth opportunities in China. The infrastructure for transportation and communication is highly advanced in China. The Shanghai-Hong Kong connecter has improved the transportation system of the country (Sankrusme, 2012). Hence, the chosen pharmaceutical firm of Australia is going to get the opportunity in a Chinese market. Adding to this, the marketer forms the Australian firm can easily garb the target bottleneck industries of energy, transportation and communication. In this current scenario, Hill and Ivonne (2014) mentioned that the pharmaceuticals market in China had been increased to $84.2 billion in the year 2013 and the revenue margin is expected to increase by 8.2% by 2020. As per the statics of 2016, China has rapidly increased the research and development on the sector of life science and the health care segment (Walls et al. 2015). Hence, the rising trend of the pharmaceuticals industry in Chinese market would be favourable for the Australian pharmaceutical firm.  Moreover, it is found that the Chinese group of customers is largely influenced through the process of information sharing and communication process via social media sites (Keegan and Green, 2007). Thus, the promotional activity of the XYZ Pvt Ltd. like social media campaign and online support system would be helpful to draw the attention of the Chinese customers (Hill and Ivonne, 2014).

Risks in Chinese Market

The renewable source of energy available in South African market can be beneficial for the Australian pharmaceuticals firm to produce the goods at lower price. In the addition, Walls et al. (2015) stated that the South Africa had become one of the largest transhipment points across the world. Therefore, XYZ Pvt Ltd. can have the advantage to expose the product amongst the different customers. Thus, the revenue of the firm can also be increased. Adding to this, the market value of the South African countries is lucrative in terms of having flexible policies. According to the view of Bhandarker (2014), the pharmaceuticals market in the South African region has increased its profitable margin by $4.2 in 2013. As per the present records, it is expected that the market growth for pharmaceuticals business domain would be augmented soon. Hence an inference can be drawn that the Australian pharmaceutical firm can have a significant market position while expanding the business unit in South Africa.

The local distribution network, the purchasing attitudes of the customers and the regulatory framework of the country has made the China an extremely complicated market to access. In the framework of the current context, the market environment of this country is entirely separated from the other economies of the world. For an example, Aghazadeh (2011) cited that 35% of the US products fails in the Chinese market. In the addition, the power distance culture between these two countries can be the threat aspect for the Australian marketer.

The political condition of the South African country is highly terrific due to the attack of a terrorist threat. Considering the words of Keegan and Green (2007), the multifaceted culture among the South African people can be the other challenging situation for the marketer of XYZ Pvt Ltd. It has been observed that South Africa is a tricky place for the overseas trade operation and the marketers experienced lots of difficulties for the international commerce.

After evaluating all the expected risks and challenges, it can be inferred that XYZ Pvt Ltd. could receive a huge exposure for the product lines in the Chinese market. According to the opinion of Walls et al. (2015), the trading action in the Chinese market is considerably high rather than the South African market. Hence, the firm, XYZ Pvt Ltd. can easily export the required products to the prospective regions for the further publicity.

Inference can be drawn from the above analysis that the Chinese pharmaceutical market is best for the XYZ Pvt Ltd., Australia to penetrate. Therefore, the business environmental analysis is exclusively done in the Chinese pharmaceutical market.

Growth Opportunities in Chinese Market

The statistics of 2008 reflects that the innovative Company Income Tax Law and other regulations have been provided as a tax incentive initiative to boost the R&D resources (Aghazadeh, 2011). It also offered preferential income tax tariff to turn over the tax exemptions rate for the R&D centres seeking to provide the research services to overseas enterprises.  According to Keegan and Green (2010), the Pharma producers are made eligible for reducing the income tax pace in case the enterprises receive the approval as the “Advanced & new technology enterprise”. It has been considered as the same line as the HNTE incentive, which is standing for the High New Technology Enterprise that is being taxed at the preferential rate of 15% in its place of the standard 45%. The specific set of measures adds up to the tax holidays of 2 consecutive years within the five special economic zones.

Aregbeshola et al. (2011) mentioned that China has been identified as the most popular pharmaceutical market in the global context, how the statuses are sometimes arguably due to the immaturity of the market size. The primary drivers of market growth are the increasing the health care awareness and have been fuelled by economic enlargement, huge and ageing population. The rising total and the per capita health expenditure, and the ongoing healthcare reform are increasing with a random measure (Atyam, 2010). This helps the overall pharmaceutical enterprise to increase its market maturity level. Pharmaceutical sales growth in China has outstripped that of health care expenditures overall. Sales of the Chinese pharmaceutical market grew at a CAGR of 25.9 % between the years 2007 – 2010 (Bhandarker, 2014). Furthermore, the margin is expected to prolong strong, yet the occurrence of the strong growth seems to appear from the year 2010 -2015, at a CAGR of 15.5 %.

Figure 1: Pharmaceutical sales in China, 2007–2015

(Source: Walls et al. 2015, pp. 163)

In the circumstance of the current statement, Hsieh, H.-H., Hodnett and Van Rensburg (2012) mentioned that the pharmaceutical sector in the China is driving towards innovation. The specific industry has been the part of the seven key industries in the position of the governing authority. According to Smith (2012), the regulatory body has an indifferent objective to attain through the series of the reform that aimed to extend the healthcare coverage to the overall population. Sankrusme (2012) determined that with the purpose of attaining the goals, the government has introduced a series of reforms to reshape the healthcare sector in China. Moreover, the previous records signify that Chin has been very attractive outsourcing region due to its cheap labour cost (Singh, 2011). The foreign enterprises can still receive the benefits of the affordable labour force.  The governing authority has already managed to increase the employment rate by allowing the foreign enterprises to penetrate within the region and enjoy the benefit of the free labour force. 

Risks in South African Market

The management of XYZ Pvt Ltd. needs to make a joint research analytics with the leading players and the providers. In the similar context, Lund (2006) mentioned that in the initial stage, the enterprise would hardly have a concrete knowledge of Chinese market. Therefore, the joint research analytics would help the enterprise to expand its networks. The collective analytics process would be a smart effort to understand the requirements of the customer in the specific genre and the useful efforts that can lead to a potential conversion. According to Turner  (2012), the above idea can also provide sufficient opportunity to the enterprise to pitch the product lines that are strategized to introduce in the Chinese market.  Lucrative ideas can facilitate the firm to get the joint venture offers from the leading Giants

Drugs that are independently discovered by company require using a cost control initiatives within the fewer markets. The policy needs to be introduced with greater delays than the product that are originated in the countries without any price control. In the opinion of Peng (2008), the enterprises have the propensity of delaying the commence within the price-controlled markets and few of the marketers prefer to pioneer the products lines within the new markets after its incursion with the low price range. Hence, the price control efforts would be the supreme suitable planned entry strategy for XYZ Pvt Ltd. within the Chinese market.

Conclusion

The current study evaluates on the importance of recognising the suitable market that can provide productive revenue in the near future. Analysing the study, it could be inferred that the economic and sustainability margin of South Africa is comparatively weak. However, the growth prospect of China is relatively better. Moreover, the governing body in China is taking huge initiatives of supporting the international marketers that plan to penetrate within China. Moreover, the government is making a decent financial contribution towards the research and development activities to improve the quality standards of the pharmaceutical based drugs.

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