CHAPTER II: BUSINESS ISSUE
define as the creation of a unique and valuable position involving a unique set
of activities. The strategy translates the value of the company to have differentiation
compare to others. (Porter. 2006)
Definition of Scenario Planning
planning is defined as a tool to guide organizational perceptions. What the
organization sees about the outside world is determined by the schemes and the
management language used. To ensure the effectiveness, the scenario planning
should be comprehensively developing and embed the technique as part of
strategic plans. The plans should be supported by the tools and the
infrastructure to overcome the challenges and opportunities in the future.
Prediction and Uncertainty
are several factors thus influence the implementation of the strategy. The
factors could provide certainty or uncertainty in the business, and should be
identify within the organizations. Below are some points that can be ascertain:
Actor logic and motivation
Laws of nature
the other side, there are some unpredictable factors such as:
planning as one of the recommended method to identify the uncertainty with
causal principle after determine the principle of cause and effect.
Process of Scenario Planning
are some methods to build scenario planning. The scenario planning start with
business ideas and compared with the environment and situational conditions
which lead the results of the analysis of the organizations’ respond to the
future challenges and opportunities.
2.2 Conceptual Framework
build strategic plan and address the concerns, a conceptual framework is
important. Below is conceptual framework of this final project.
analysis as an overview of the macro-environmental factors that should be considered.
The analysis could be used to see the competitiveness in the market, what will
be the competition components in the industries.
analysis as an effective tool to identify the key external forces that affect
After the government applied BPJS system, the national program covers almost 70% of the populations. The government policy responded by the market, any person, including a foreigner who works at least 6 (six) months in Indonesia able to join the universal health coverage.
terms of healthcare industry, the government intervenes the budget spending for
the investment and total spending. The ministry of Health influence the BPJS
regulations related to annual budget spending for drugs and treatment to cover
the other side, for new drug should be review and distributed after received
marketing authorization from local food and drug association (BPOM) and
regulated by the ministry of health to ensure the efficacy and safety for all
drugs thus will prescribe in Indonesia. Good manufacturing practices and good
clinical practices should comply by the companies before submitting the drug.
regulation also affect the drug price, with specific regulation for value added
tax. For outpatient drugs will be charged with 10% value added tax and paid by
the patients. While for inpatient drugs or patients whom treated at the
hospital, the drugs will not be charged with value added tax and the hospital
will responsible for the tax.
the list above, it is clear that political factors have an impact on
multinational pharma company on how to maintain their business and adjust the
company policy accordingly.
Indonesia has growth 5.06 percent year-on-year
in the third quarter of 2017, The expansion was driven by
private consumption which increase firmly and net trade contributed positively
to growth. GDP Annual Growth Rate in Indonesia averaged 5.28 percent from 2000
to other south east Asian countries, Indonesia’s GDP better than Thailand and
quite similar with Malaysia. Based on the healthcare system in Thailand and
Malaysia, the system applied much better in terms of quality of healthcare
services compare to Indonesia.
to data on the expenditure side, exports went up 17.27 percent (3.36 percent in Q2) while imports
increased at a softer 15.09 percent (0.55 percent in Q2). Also on the production
side, output expanded more
than in the preceding quarter for Manufacturing (4.84 percent from 3.54 percent
in Q2); water and waste management (4.83 percent from 3.67 percent);
construction (7.13 percent from 6.96 percent); wholesale and retail trade (5.50
percent from 3.78 percent); finance and insurance (6.44 percent from 5.94
percent); business services (9.24 percent from 8.14 percent); education (3.70
percent from 0.90 percent); healthcare (7.44 percent from 6.40 percent) and
other services (9.45 percent from 8.63 percent).
Healthcare has increase significantly after
BPJS era with almost 70% of the population covered in the universal healthcare
program since 2014.
economic factors for multinational pharma company is currency rate, the value
of foreign currency compare to Indonesian rupiah determine the price of the
drugs which perceived expensive before VAT.
lifestyle and education level of the Indonesian, shows the consumption level of
the population. The rise of the middle class in Indonesia also shows customers’
level in healthcare spending and health consciousness. Less people aware the
importance of health insurance and rely on universal healthcare coverage. Also
their awareness on early detection and prevention of the chronic and
age distribution of Indonesian population, almost 50% of the population in
productive age. Population with age 25-54 years: 42.35%, and elderly
population start form 55-64 years: 8.4% and 65 years and over: 6.79% from
total population. This shown that the population will have more issue in health
start from chronic and non-infectious disease caused by lifestyle worker people
with long hours work time and fast food consumptions.
known as the biggest Muslim population and the Halal logo or manufacturing
process on the drugs has become major issue for certain company whom produces innovative
drugs such as vaccine, cancer drugs and others.
internet technology supports the people to learn the newest health technology
and also the latest update on treatment of the disease. The most important
value to sustain the business of multinational pharma company is to have drugs
pipeline so the company will have more value and certainty for the future.
company should also develop new way to produce and communicating the goods and
services to the customers, included the healthcare professionals and also the
government (Ministry of Health and BPJS). They should find new way to market
and sell the products.
2006. Porter’s Five Forces Model
of New Entrants (High)
commitment from the government to provide universal healthcare coverage to all
Indonesia people give pressure for the industry. The payers govern pricing and
give restriction for prescribing the drugs which may lead decreasing revenue of
the company since the declining of volume after price reduction. Government has
some issue with budget constraint and as multinational pharma company not able
to fulfill the price reduction, there will be opportunity for cheap
manufacturer from India, China or South America to enter the market.
of Substitutes (High)
limited knowledge of people about healthcare and update on treatment lead to
alternative treatments such as herbal, physical treatment and etc. The over
claim treatment easily adapts by the customer especially if the price lower and
promoted with word of mouth marketing without evaluating long term efficacy and
government encourage local manufacturer to produce biotechnology and other
commodities drug whereas cost effective drug become one of the concern from ministry
of health. Also there are possibilities for investor to build manufacturer in
Indonesia as long as they have mutual collaboration with our local government
and invest on local resources to build the economy. Whereas most of the multinational
pharma company limited the investment on manufacturing due to maintain the
profit and loss for business sustainability.
power of suppliers (Low)
to business model applied by the multinational pharma company to distribute
their drugs. Most of the drug produced outside and only repackage in Indonesia,
thus lead to the supplier’s bargaining only for inventory and distribution to
power of Buyers (High)
government applied policy and code of conduct for the implementation of
universal health coverage therefore if the multinational pharma company would
like to list the drugs, they should able to fulfil the requirements and follow
the negotiations. The government set Harga Perkiraan Sementara for guidance,
unfortunately based on Kemenkes No 524/ 2017 there is no further explanation
related to drugs cost ration compare to benefit. The guidance did not explain
on how to calculate the price and the benefit, thus may lead misperception from
the industry itself.
the regular market, there are unclear regulations related to drugs retail price
whereas the hospital or pharmacy could sell the drugs more expensive depends on
the setting of revenue in each outlets. From the regulation, stated maximum
retail price for drugs is 28% before tax. In fact, drugs listed in the
hospitals cost more than the cap.
2.4. Internal Analysis
internal environment determines the company’s business process, code of conduct
and visions. There are some points influenced the business process of the company
such as sales and marketing strategy, the company’s values and senior
leadership managements. The analysis will describe the internal competencies
and desirable improvements to ensure the sustainability of the business and
solve the unmet needs of the market.
ensure the continuity of the business process, multinational pharma company has
to develop its resources, capabilities and core competencies also known as the
internal analysis of the company from the company’s resources and capabilities
also to find the most suitable connection of resources and capabilities to
build the company’s core competencies especially the competitive advantages to
sustain the business for long term profit.
as an inputs to strengthen the organization to achieve the company’s missions. The
multinational pharma company have similar resources to run their business and will
be differ based on the business core of the company. Resources could be
classified as tangible or intangible as the company competitive advantage for
resources have a clear and easily determined market value, or known as physical
assets thus utilized by the company as physical resources, financial resources
and human resources. While for intangible resources consist of intellectual
such as originator drug, formula of the drug, drugs patent and the innovative
culture which inherit in the company and build the company image as the market
on the theory above, tangible resources for the multinational pharma company
resources based views are:
Senior leadership management, sales and
Building, company vehicle
Laptop, IPad for sales and marketing
team, office equipment
the intangible resources, the multinational pharma company has their skills and
knowledge to manage the company’s assets and understand the market to compete
by differentiation or enhance the marketing strategy while maintain the company
sales and marketing team should build harmonious collaboration and minimized
the conflict which may occur during business process with internal or external
stakeholders. The management will hire expert people with strong
self-motivation to contribute for the company and sustain the business with
continuous innovative ways of thinking.
company will have access to use their appropriate capabilities to support the
business. Capabilities are a firm’s capacity to deploy resources.
multinational company has several experiences that shown that they are capable
doing business. The company supported by the expertise with broad background
and experiences within the industry in so many years and really know how to
overcome the issue and optimize the potential in the market.
market is very niche and specialized, there are only a few pharma company had
innovation drugs for example targeted therapy, immunotherapy. This specific
drugs have unique selling points for example mechanism of action, delivery of
the drugs, dosing and etc. For the company, the expertise in oncology need
continuous learning and huge investment. Therefore, most of the company put big
investment for the oncology pipeline.
are defining by the various components such as observable and measureable
knowledge, skills, abilities and personal attributes that contribute to
enhanced the company’s resources and ultimately result in the successful of the
business strategy to achieve the missions. The multinational company has more
prestige value and capability to assigned a team of experts who knows exactly
what they are doing with the market to win the competition.
senior leadership mostly from local and expatriate experts whom worked in the
industry for years of experiences with good quality and already has their own
credibility. The sales and marketing team strengthen their skills with
continuous training and development program so they could optimize their
potentials to strengthen the company.
Resources Based View
Difficult to imitate
Organized to capture value
Product Innovation &
Corporate social responsibility
Value Chain Analysis
Activities. Kotler (2006)
Step 1 – Customers’ value-creating
Step 2 – Differentiation strategies for
improving customer value
Product innovation with features to add
value and provide solution for the unmet needs
Give value to all stakeholders by
providing one stop solution for healthcare
Scientific activities to update
knowledge for the healthcare professionals to build engagement and
Step 3. Best sustainable differentiation
Novel drug with good efficacy and safety
and also build partnership with government and institutions to open access
for all eligible Indonesia patients
chain analysis for multinational pharmaceutical industry
strategical method to analyze the internal and external factors before next
step of implementation. The analysis as follows:
Multinational company with basic research
and innovation products
Advanced pipeline products with good
Strong work culture and comply with local
Overall price of the products is medium to
The products semi-finished goods or
limited advocacy with the government in
terms of healthcare policy and regulations related to drugs listing
The growth of Indonesia population
especially medium-high class income
Collaboration with third party to support
healthcare system in Indonesia
Limited published information related to
drugs listing and price negotiation
The decision maker in government
structures has limited collaboration related to universal healthcare coverage
Government endorsement for cheaper drugs
which lead local company to produce generic drugs
Uncertainty of universal healthcare coverage
after President’s election
2.5. Root Cause of the Problem
on internal and external environment analysis above, could be summarized and
concludes the main causes of the business problem. The major issue of the
multinational pharma company is how to sustain the business in BPJS era with
not yet establish regulations and policy. Also there are some other factors
such as not yet establish data registry in Indonesia related to oncology and
the suboptimal healthcare infrastructure may lead to suboptimal treatment for
patients. It is clear that the multinational pharma company should build their
values and differentiation to sustain the business and the product portfolio
for the future.
innovative drugs are the main business source for multinational pharma company,
there should be continuous collaboration with the government to prepare and establish
the market. The life-enhancing medicines that will change the treatment
landscape from current standard of care which offer better survival and improve
quality of life for patients and caregivers.
beneficial effect of universal healthcare coverage contributes to improve
health indicators in Indonesia and stronger economic development for the future.