Abby’s Pharmaceuticals Export Business

Purpose 

The purpose of the plan is to guide Abby’s pharmaceutical as it ventures into a new country. The business plan details all the key aspects such as market analysis, sales forecasts and financial statements that make it possible for the firm to make strategic moves (Asad, 2014). The pharmaceutical industry in the U.S. is quite competitive; pharmaceutical giants hold a bigger percentage of the local market and new pharmaceutical companies have to venture to other markets. Abby’s pharmaceuticals specializes in developing generic and brand medication targeting all demographics. The perfect place to export the products is Africa and other third world nations. The business plan will offer a step to step guide to the export process after a careful analysis of the firm and the target market. 

Table of Contents 

Cover Page 

Purpose 

Table of Content 

Executive Summary 

Introduction 

Situational Analysis 

Description of firm and products 

Company Resources 

Competitive Situation 

Export Organization 

Export Marketing Plan 

Long and Short Term Goals 

Total sales in units 

Total sales in dollars 

Sale by product line 

Market share 

Profit and loss forecast 

Characteristics of Ideal Target Market 

GDP 

GNP 

Size of the target 

Identify, Assess and Select Target Market 

Market Contact Programs 

Market Screening 

First screening 

Second screening 

Third screening 

Fourth screening 

Fifth screening 

Field trips to the best prospects 

Export Marketing Strategies 

Product lines to export 

Export pricing method 

Channels of Distribution 

Promotion Methods 

After Sales Service 

Export Financial Plan 

Export Performance Evaluation 

Executive Summary 

Abby’s Pharmaceutical Limited is a New York based pharmaceutical company that researches and manufactures generic and brand drugs and medical devices. Abby’s Pharmaceuticals has been in existence for the past 30 years, and has established a niche customer base in New York and other surrounding cities. The company wants to increase its sales by offering quality and affordable drugs to developing nations, starting with Kenya. Kenya is an emerging market in Africa, however, it is still facing many health challenges. For instance, according to WHO (2011) Kenya’s maternal death rate was at 488 out of 100,000, a high number which could have been avoided if the women had access to drugs and medical services. 

The challenges of doing business in Kenya is the high cost of setting up and securing the necessary government support. Like any foreign nations, there are laws and regulations that guide establishment of international business in Kenya. Marketing the drugs to Kenyans will be a challenge, however, Abby’s Pharmaceuticals intends to partner with major health facilities across the country. Abby’s Pharmaceutical Limited is hopeful that expanding to Kenya will be a profitable venture, and will act as the foundation to expanding across Africa. 

Introduction 

Abby’s Pharmaceutical Limited is a small pharmaceutical company aimed at offering affordable services to improve public health. Like many developing nations, about 60% Kenya’s population cannot afford essential medications, and yet generic medications are not available throughout the country (WHO, 2012). Eventually, people turn to unsafe counterfeit drugs, which are deadly. Lack of access of “essential medicine” that satisfy priority health needs is a big problem in Kenya, and it has adversely affected its economic growth. 

Abby’s Pharmaceuticals plans to deliver safe medications throughout different locations in Kenya to ensure that quality and affordable medication is available to everyone. Abby’s will achieve the mission through an effective supply-chain management and partnerships with key players in Kenya. 

Situation Analysis 

Description of Firm and Products 

The situational analysis acts as the first step of the planning process. Abby’s Pharmaceutical has unique strengths, ranging from its diverse product portfolio to its mission of providing the best health care services for the whole family. Abby’s Pharmaceuticals was established in 1974 by Abby Miller to provide affordable medication for the whole family. The company has been guided by the same mission, and now it wants to venture into a location where it is hard to access essential medication. 

Having identified a gap in the Kenyan pharmaceutical industry, Abby’s Pharmaceuticals will export the following classes of products: medical products, medical equipment, nutrition and dietary supplements. 

Company Resources 

Abby’s Pharmaceuticals has set aside the necessary resources to be used in the export. The startup costs for setting operations can be costly, yet the business also has to increase its manufacturing capabilities to fulfill the needs of the expanding market. Abby’s Pharmaceutical Limited has to set aside adequate financial and human resources both in the U.S. and in Kenya for the new venture. The company will have to partner with healthcare institutions and in major pharmacies across the country through sales representatives. Lastly, the business will incur a lot in marketing and establishing a good brand name in Kenya. 

Competitive Situation 

Kenya’s pharmaceutical industry has many players, both local and multi nationals. Top pharmaceutical companies include: Alpha Medical Manufacturers, Aventis Pasteur, Bayer, Shelys Pharmaceuticals, Cosmos Limited. Notable global brands such as Glaxo Smithkline and Pfizer Corp exist in Kenya, but they have failed to monopolize the market because of the expensive nature of their products. Abby’s Pharmaceuticals plans to compete with the other pharmaceutical companies by offering niche services targeting families in Kenya. 

Export Organization 

Abby’s Pharmaceuticals will have a distributing center in Kenya, which will act as the base of all operations. The distribution center will liaise with the manufacturing plant in New York. A host marketing, distribution, and financial services will be also carry out in Kenya. Abby’s Pharmaceuticals will form strategic partnerships with hospitals across Kenya by offering cheap medications and medical equipment. It will also partner with a logistic company to create an effective supply chain. 

Export Marketing Plan 

Long and Short term Goals 

Total Sales in Units 

Given the wide product portfolio, Abby’s Pharmaceuticals is planning to sell 5 million units within the first year of operation in Kenya. 

Total Sales in Dollars 

Abby’s Pharmaceuticals prides itself on offering affordable drugs, hence the average selling price will be $10 per unit. The average total revenue after the first year is $50 million. 

Sale by Product Line 

Different product lines will attract different prices, Abby’s Pharmaceuticals has over 100 generic and brand drugs as well as dietary supplements. Each product line will attract different pricing, with simple products such as a package of 70 lozenges going for $10. Each product line will attract a different price based on the cost involved in research and development, packaging, and whether it is a brand or a generic product. 

Market Share 

With the high number of pharmaceutical companies in Kenya, Abby’s Pharmaceuticals hopes to attain 5% of the market share by the end of the first year. Abby’s Pharmaceuticals will achieve this market share through aggressive marketing, and an effective supply chain management that will enable it to deliver its services to all locations across Kenya. 

Profit and Loss Forecasts 

The projected sales of $50 million act as the gross sales, and it will be used to create a profit and loss forecast based on the expenses involved in setting up the business in Kenya. The net income will be attained by establishing the amount involved in manufacturing the products. Major expenses will include: legal fees, marketing and advertisement, warehouse and distribution, insurance, and salaries and wages for Abby’s Pharmaceutical employees (Gani, 2014). 

b. Characteristic of Ideal Target Market 

GDP 

Kenya had a GDP of $63.40 billion in 2015 (Trading economics, 2016). 

GNP 

The country also had a gross national income of $123. 33 billion in 2013. Kenya’s GDP has expanded 5.9% since the first quarter of 2016 (Trading economics). Different sectors of the economy, particularly, the manufacturing, wholesale and retail, construction and agriculture are growing. The growth increases the disposable income that will be used for health care. 

Size of the Target Market 

The estimated population of Kenya in 2016 is 47,537,134 

c. Identify, Assess and Select Target Market 

Market Contact Programs 

The U.S. Department of Commerce will be the primary market contact, it has an extensive network of commercial offices in Kenya. Additionally, the U.S. embassy in Kenya has contacts of the major partners necessary for the project to succeed. The world trade center, New York state export assistance program and Small Business Administration will provide the much-needed information for setting up a business in Kenya. 

Market Screening 

Pharmaceutical products are quite sensitive, hence, a rigorous market screening process is necessary. The market screening process is divided into different stages, each stage focusing on an important aspect of the market (Gould, 2002). 

First Screening 

The first screening is about establishing Kenya as a potential based on need. Pharmaceutical products are quite costly in Kenya, and they do not reach remote places where they are needed most. There is a general lack of affordable brand and generic drugs, and the locals tend to rely on unsafe counterfeited drugs. 

Second Screening 

Kenya is one of the fastest growing economies in Africa, now considered a middle-income country. Kenya’s GDP of $63.40 billion in 2015 shows the economic potential of this young nation (Trading economics, 2016). The GDP has expanded by an average of 5.9% since the first quarter of 2016, and the economy is operating on a positive trend. The inflation rate has been operating between 5-7.78% in 2016 (Trading economics, 2016). The Kenyan currency continues to weaken against the dollar, with an expected exchange rate of 107 Kenyan shillings against the dollar by the end of 2016. 

Third Screening 

Kenya restricts its imports of illegal products, and it has created different policies and guidelines to guide the importation of sensitive products in the pharmaceutical industry. Kenya’s Poison and Pharmacy Board (PPB) is responsible for setting the standards and price controls for pharmaceuticals in Kenya. The drugs are tested at the Ports of Entry. 

Abby’s Pharmaceuticals must be registered by PPB, it must attain a business license and a permit before engaging in any form of business. However, the registration costs are quite low and the process does not take much time. Kenyan government reduced its pharmaceutical import tariffs to zero in an effort to make drugs affordable to the public. The Kenyan government and the public have a positive attitude towards American products; American products are viewed as high quality products. However, the business has to be ready to deal with the corrupt public officials and legal system in the country. 

Fourth Screening 

The attitudes and beliefs of Kenyans vary, Kenyans in urban areas are liberal and they are accepting of foreign products. However, those in marginalized areas might not be accepting of foreign products, because they have not been exposed to foreign products. Nonetheless, Kenyan citizens are highly educated, and they understand the value of good health care. 83.2% of Kenyans between the ages of 15-24 are educated, with the overall literacy rate at 83.5 (UNICEF, 2013). 

Kenya has a unique culture since there are 47 ethnic communities in the country, each with a distinct language, however, English is the official language of conducting business. 

Fifth Screening 

Below is a figure of Kenya’s pharmaceutical industry: 

Source: UNIDO Estimates 

Alpha Medical Manufacturer is the largest domestic pharmaceutical company in Kenya with a market share of 26%, followed by Aventis Pasteur with a market share of 17% (UNIDO, 2010). The local pharmaceutical companies specialize in both generic and brand originals, while foreign companies such as Glaxo Smithkline focus on over the counter medication only. 

Most players in the pharmaceutical industry are located in Nairobi, the capital city of Kenya. Abby’s Pharmaceuticals will venture into other places across the country to gain a competitive advantage. Abby’s Pharmaceuticals will also offer improved after-sales services and partner with health care institutions to address the health problems in Kenya, something that the other pharmaceutical companies have failed to do. 

Field trips to the best Prospects 

Kenya’s ministry of commerce, ministry of health, Poison and Pharmacy Board, and other pharmaceutical organization are the best sources of information on how to enter the Kenyan pharmaceutical industry. 

D. Export Marketing Strategies 

Product Lines to Export 

Abby’s Pharmaceuticals has over 200 product lines, both generic and original, and it will export most of them based on the health needs of the Kenyan people. Each product line attracts a different price based on the manufacturing expense. 

Export Pricing Methods 

Abby’s Pharmaceuticals will adopt a competitive pricing strategy based on the competition. The firm will price its products a bit lower in order to attract new customers, and attain a 5% market share by the end of the year. Abby’s Pharmaceuticals will use different pricing strategies for its partners, such as, bundle pricing, promotion and discounts. 

Channels of Distribution 

Abby’s Pharmaceuticals will use both direct and indirect channels of distribution, it will sell pharmaceutical products directly to hospitals and to distributors who act as the middlemen. 

Promotion Methods 

Abby’s Pharmaceutical will use aggressive TV, online and radio marketing to introduce its products. Abby’s Pharmaceuticals will also use sales representatives and partnerships with healthcare organizations in Kenya to promote its products. 

After sales and Warranty Policies 

Abby’s Pharmaceutical will offer delivery services to its customers as an after sales services. 

Export Financial Plan 

Pro forma Profit and Loss Statement 

Abby’s Pharmaceuticals 

Profit & Loss Statement 

For the Period ended Year One 

Break even Analysis 

The formula for calculating break-even quantity is: 

BEQ=Fixed Costs/ (Average price per unit- average cost per unit) 

Therefore, Abby’s Pharmaceuticals need to sell at least 375,000 units per month to cover its expenses and make profit. 

Export Performance Evaluation 

Frequency 

Market 

Abby’s Pharmaceutical Limited is hoping to attain 5% market share by the end of the first year, and if it achieves the target, the business will be doing well. 

Product Lines 

The performance of each product line will be used to evaluate the business, such that by the end of the first year the firm will focus on selling products that are in high demand only to reduce storage and shipping costs for slow moving products. 

Export Personnel 

The productivity of the export personnel will be also used to evaluate the success of the business. Export personnel have to work towards achieving their respective sales targets. 

Variables to be Measured 

Sales per Unit 

The average price per unit is $10, however, it is bound to increase or decrease based on the demand and the competition. If the amount does not decrease, the company stands to make more profits. 

Sales Growth 

The annual sales growth for the entire firm and different product lines will also be evaluated to ensure that the firm achieves its sales target of 5,000,000 units within the first year. 

Product Line Productivity 

Each product line will be evaluated to identify and maximize on the profitable lines. 

Market Share 

Abby’s Pharmaceuticals will strive to increase its market share through aggressive marketing, after sales service, and competitive pricing. The aim is to achieve a 5% market share by the end of the first year. 

Competitors’ efforts in each market 

The competitors’ efforts in the market can be used to evaluate the performance of the firm. The entry of a new formidable firm will affect how other firms in the industry do business, some will react by reducing prices, product differentiation or aggressive marketing. 

Actual results compared budgeted results 

The actual results will provide a real evaluation for the first year performance of Abby’s Pharmaceuticals. The actual results will not be far from the projected results, since the business plan is based on research. 

References 

Asad, M. (2014). Import-Export Business Plan. Lahti University of Applied Sciences. Retrieved from: http://www.theseus.fi/bitstream/handle/10024/71515/Asad_+Muhammad.pdf;jsessi onid=3145E314E7D2ACE5D9800F3DD372BABA?sequence=3 

Gani, M.O. (2014). Distribution System Of Pharmaceuticals Products: A Study On Square Pharmaceuticals Limited. Journal of Marketing, 17 (1), 257-279. 

Gould, R. (2002). International market selection-screening technique: replacing intuition with a multidimensional framework to select a short-list of countries. RMIT University. 

UNICEF. (2013). Statistics: Kenya. Retrieved from: http://www.unicef.org/infobycountry/kenya_statistics.html#117 

Tradingeconomics. (2016). Kenya GDP Annual Growth Rate 2004-2016. Retrieved from: http://www.tradingeconomics.com/kenya/gdp-growth-annual 

United Nations Industrial Development Organization (UNIDO). (2012). Pharmaceutical Sector Profile: Kenya. Retrieved from: https://www.unido.org/fileadmin/user_media/Services/PSD/BEP/Kenya_Pharma%20Sect or%20profile_TEGLO05015_Ebook.pdf 

Warren, C. S., Reeve, J. M., & Duchac, J. (2013).   Financial & managerial accounting . Cengage Learning.