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STT Group5

Dr. Reddy's Laboratories Ltd is facing several challenges that require strategic changes to address declining performance. The company needs to resolve ongoing compliance issues with the US FDA to regain competitive advantage in the key US market. There is also a need to reduce reliance on the US by expanding into new emerging markets, and to restructure management by bringing in new leadership with a fresh perspective to help manage costs and pricing pressures. Succession planning is important to appoint a new CEO to oversee the company's turnaround efforts. While acquisitions could boost growth, the primary focus should remain on organic expansion through internal research and development given the company's strengths in innovation.

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26 views

STT Group5

Dr. Reddy's Laboratories Ltd is facing several challenges that require strategic changes to address declining performance. The company needs to resolve ongoing compliance issues with the US FDA to regain competitive advantage in the key US market. There is also a need to reduce reliance on the US by expanding into new emerging markets, and to restructure management by bringing in new leadership with a fresh perspective to help manage costs and pricing pressures. Succession planning is important to appoint a new CEO to oversee the company's turnaround efforts. While acquisitions could boost growth, the primary focus should remain on organic expansion through internal research and development given the company's strengths in innovation.

Uploaded by

ganesh
Copyright
© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
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Dr.

Reddy’s Laboratories Ltd:


Searching Its Glorious
Days

GROUP 5
Presented to: Prof. Rohit Kumar
Q1 USFDA compliance issues: While engagement with USFDA was
happening since the receipt of the warning letter and a couple of years
now, the critical question is—What needs to be done differently? How to
resolve the issue quickly? Or should Dr. Reddy’s stay engaged and wait
for the issue to get over?

The main focus should be on the third site as it's warning letter hadn't be
revoked. Dr Reddy's should keep working with the US consultant and
USFDA to resolve this issue as due to this they are losing competitive
advantage.
Regular product quality assessments should be done from the time of
site establishment- This should be made mandate activity which either
assigned to some department or small group of team should be formed
which look into this on regular basis.
There is heavy reliant of industry on US market hence another strategy
could be to reduce the dependency on this production sites within USA.
Q2 Focus on Emerging markets: While the United States has always been
the focus market for Dr.Reddy’s in the past, was this the time to relook at
the emerging market strategy to venture into the untapped markets?
No, the company should venture into untapped markets and reduce its dependence on US market which
has been dwindling after USFDA gave three warning letters to the company
North America contributed 47% of total sales as of FY15.visible sales erosion in North
America, wherein sales growth was muted.
Exports comprise 80% of revenue, showing the importance of entering new markets.
Need to resolve Internal Issues before considering expansion to new markets.
Businesses in key overseas markets such as Russia and Venezuela were affected
significantly because of macroeconomic factors such as currency depreciation and
political issues.
There has been government-inspired pricing pressure in emerging markets.
Intense competition, pricing pressure in emerging markets and spiralling costs.
Q3 Rejig the organization: Was there a need to rejig the organization to inject
fresh line of thinking in the senior management to launch initiatives to manage
costs, sell off non-profitable businesses and facilities, manage pricing pressure
in emerging markets, etc.?

Benefits to rejig the organization to inject fresh line of thinking in the senior management:
Dr. Reddy’s senior management was aware of the decline, and they had seen the signs of it in
FY16 as outlined in its letter to shareholders. But no big steps was taken to avoid it which
shows the need of fresh mind which shows proactive approach of work.
CEO and senior management must be compensated to balance both the short-term
recovery and long-term sustainability of the organization as any deviation to this will be
detrimental to the organization turnaround process. A management team with combination
of old and new members will be motivated and compensated to initiate the turnaround
process. This team should be refocused to effectively initiate and accelerate the turnaround
process.
A talent shortage in the pharmaceutical industry is derailing the sector, and restructuring will
also help attract and identify new talent within the company.
Q4. Succession Planning
For a long time (starting in 1990 as CEO and But the market expansion in almost 100 countries is
continuing in 2001 as Vice Chairman & CEO), Mr a challenge. Several macro-environmental factors
G.V. Prasad served as the company's CEO. He has come into play. The turnaround process should
supported the company in providing robust focus on short-term recovery and long-term
speciality and custom medicines businesses across sustainability, which would help cover the temporal
many continents, primarily focusing on developed aspects
markets.

It would be prudent to find a new replacement


within the enterprise, a member of senior We believe that now is the ideal time to hand the
management who is familiar with the company's reins over to the new supervisor, who will work
issues. The most excellent option for the company's diligently to expand the company's outreach into
turnaround is to appoint a member of the company's emerging markets and transform its current
Management council who is already resolving operations to achieve long-term sustainability
problems
Q5 Mergers and Acquisitions: Another choice that the company was facing was
whether to pursue an inorganic route to boost the top line and profit even though
earlier inorganic growth avenue woes continue to haunt it.

Recovery could be a sharp bend and an opportunity exists


for a premium merger and acquisition(M&A).In case of
moderate recovery, there is a high probability of
discounted M&A and a possible re-organization of the
company structure
But the company should not go aggressively for inorganic
growth, instead focus on organic growth because
Company’s strengths are in innovation, early market entry,
and global footprints and Pharma industry is R&D driven
and major efforts should be put in that
Thank you !

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