INTRODUCTIONBusinessenvironment refers to the factors which are external or internal to thebusiness organization and the influence of the same will affect directly orindirectly the overall functions of the business organization.Inshort, it is the combination of both external and internal factors whichinfluence the organizational functionality. Any business never exist withoutits environment. And the effective utilization of these factors will help the overallimprovement of the business.Broadlythere are two types of business environment. They are:1.
MicroEnvironment 2. MacroEnvironmentHearin this assignment, I am focusing only on the Macro Environment analysis ofCipla Limited to identify the forces that will affect the organization and toanalyses how these factors will influence the structure of the organization.For this purpose here I am using PESTLE analysis and SWOT analysis.Objectives ofthe study1. Tounderstand the macro environment of Cipla limited2. Toanalyses how the Environmental factors have influenced the structure of theorganization.Cipla LimitedCiplaLimited is an Indian prominent multinational Pharmaceutical company,headquartered in Mumbai, India. The company was founded by Dr.
Khwaja AbdulHamied as The Chemical, Industrial& Pharmaceutical Laboratories in 1935. Cipla is best known formaking low cost Anti- AIDS drugs for HIV positive patients in Developingcountries. It primarily makes drugs to treatcardiovascular disease, arthritis, diabetes, weight control, depression andmany other health conditions. In the FY 2016, Cipla generated a 20 percent increase in year-on-year revenue. PESTLEANALYSISPESTLEanalysis refers to macro environmental analysis of an organization usingpolitical, economic, social, technological, and legal environment factors.Macro Environmental forces affecting Cipla limited is analyzed using PESTLE isgiven below.POLITICAL ANALYSISSincethe political scenario is unpredictable these days, it is a tiresome task todeal with it. Majority of the government policies are revealed quickly withoutany short notice and therefore it makes the industries walk through a toughphase in framing policies according to the political environment.
Theprices of the drugs are highly controlled by the government and this isbecoming a main reason why the company’s profit percentages are going down andthe positive side of this is the drugs are now available to the general publicat the lowest rate. One of the example for the political factor affecting theCipla Limited is described below. GSTGSTis an indirect tax introduced on July 1st 2017 in order to replace a number of indirecttaxes prevailing before and to ensure a tax system with a single taxationpolicy. Like any other new venture, the introduction of GST was too tough forthe pharmaceutical industries. When the GST was introduced, the majority of thecompanies in the pharmaceutical industry where unable to cop up with the newGST regime and took three to four days migrating data to the GST system.India’sthird largest pharmaceutical company CIPLA Ltd. was however an exception to thisGST problem. CIPLA was able to bill the invoices under GST from the very nextday of its implementation and their GST invoice was published on the twitterhandle of the company.
CIPLA successfully faced all the technical formalitiesregarding the GST system. They paid proper attention to the GST norms andupgraded their systems in accordance with it. Another important area was the IT system.
Itwas also neatly enhanced with adequate software up gradations in terms of GST.To get the supply chain registered on GST network was yet another crucial taskwhich was also done accurately. Last but not the least fixing product prices,labelling, and minimizing the loss on the pre stored stock before GST was alsovery relevant. It is true that the company had some losses regarding the preGST stocks but how ever at the end the company was good enough to face the GSTprocedures.Mostof the medicines comes under the tax bracket of 12%. But the lifesavingmedicines comes under 5% and 0% tax bracket. On having an analysis of thepolitical side, there are suggestions from the part of the government to lowerthe prices of medicines these days and thus it may cause some difficultiesregarding the profit margin of the company.
ECONOMIC ANALYSISTheeconomic environment of CIPLA is hopefully the best. The most discussedfinancial policy of demonetization too had not affected the company in a badway. Obviously it caused a short term financial tension and numbness but thecompany was able to carry forward their financial strength ahead. There wasindeed problem with the entire supply chain network to grab the fund needed butas a multinational company it was not so a big deal for CIPLA to face thisfinancial emergency.
Likeany other industries, the crucial profit zone of CIPLA is the exporting of pharmaceuticals.To have this priority of huge exporting profit, a company should grab theapproval from concerned authorities. In the pharmaceutical industry, theseapprovals are seen as intangible assets because if an approval is cancelledthen it may cause a huge loss to a firm. In this scenario, CIPLA is successfulin getting the approvals in time and since it has a wide variety of products ofits own, it creates a completely wider marketing possibility which ultimatelyresults in a huge profit by their side.Asfar as the condition of the economy, the availability of funds is not a problemat all. So the free mobility of funds, new product ideas and a completely favorablecondition for exporting is really going to increase the turnover of thecompany.
Social factorsMany backward countries are still using centuriesold traditional medicines for common diseases, this can cause various otherproblems regarding the health of the affected person. This is due to the lackof knowledge regarding the medicines. So Cipla introduced medicines and otherdrugs at reasonable rates in developing countries and backward countries tomake the world healthier. Even if the medicines are available in the market,people still go to tantric, hakims, and also use magic to get cured from diseases.This is a major problem in under-developed countries. Another factor affectingthe social environment of Cipla is that people ignore vaccination towards somewide spread diseases like polio, chicken pox, measles, etc. because they areunaware about the after effects.
Anotherproblem affecting the health of people are the pollution, which can causenumerous diseases like lung problems, asthma, etc. Polluted water is the main causeof death among children because they do not care about their sanitation andthus causing malaria, jaundice, TB, etc. Poverty is another thing that isaffecting the health of the people because in backward regions the people arenot that rich and most of them cannot afford good health care services so inthat areas the mortality rate is much higher compared to other areas. Inpoverty affected areas malnutrition is also a cause of high rate of infantmortality rate.Unhygienichealth habit is another aspect regarding social environment of thepharmaceutical industry.
Unhygienic health habit include lifestyle of people,food habit, lack of sanitation facilities, poor waste management, lack ofawareness regarding health problems, conception of alcohol, gutka, smoking etc.Whenwe discussing about the Cipla’s social environment, the above mentioned are thefactors the company has to deal with. If the situation continuous more healthproblems are likely to appear. So the company has to constantly evolve itsresearch and development team. And also improve its customer services andincreased need to educate people about the situation.Technological Whenwe are looking towards the technological environment of Cipla Limited,automation and advancement are the first thing that strikes us. The improvementin the technology leads to automation of machinery. It resulted in a massproduction of medicines.
It helps to increase the output and to reduce cost.When the cost is reduced then it help everyone to afford the cost of medicineand led a healthy life. In short computerization brought accuracy andefficiency in pharma sector.
Newinnovation in the industry helped to deliver drugs to the needed once at theright time and save their lives. It also helped to decrease the number ofemployees and it resulted an increase in profitability. It is all because ofthe efficient research and development team. Newer medicines are being producedto diagnose diseases with fewer side effects and faster recovery of thepatient. Now a days stem cells are also preserved when a new child is born thishelps in fighting dangerous diseases in their near future. Automationalso affected adversely in the industry many people lost their jobs and it leadto the formation of both government and labour union and they are against newinnovation because it was effecting its member’s jobs.Fromthe above information we can understand that the important technologicalfactors that affect the environment of Cipla ltd. are automation, advancement,innovation and discoveries etc.
It also resulted in the reduction of jobopportunities but it helped to increase the profitability of the company. Todeal with the rapid advancement of technology more responsive and effectiveservices are required. New information and communication technology had led tothe development of new electronic models. LegalThelegal factors of pharmaceutical companies is based on patent, testing, rulesand regulations, laws, side effects, its ingredients, etc. Testing of medicinesshould be done several times before the medicines are made available to thepublic. The quality of the medicines should be standard and follow all thenorms put by the government. Themedicine should possess as little side effect as possible and if the medicineis not fit to be consumed with certain foods it should be mentioned.
Thecontents of the medicines should be clearly mentioned on the back side of thestrip. Also, there is a number of laws and regulations which are implemented bythe government of different countries are also influence the environment ofpharmaceutical industry.Theone of the most effective way to overcome this scenario is by improving thequalities of the product by satisfying the all legal procedures. Cipla issatisfying all the legal factors and in no ways working illegally.EnvironmentalSinceold times water is constantly contaminated by untreated waste water dumbed by thecompanies led to water pollution. The effect of the chemicals on the nature areunknown to date. So the chemicals must be treated before they are disposed inthe water.
They also pollute soil so, the chemicals must be neutralized beforethey are buried.Cipla’soperations are spread all over the world and the company must satisfy all theenvironmental policies laid down by the government of the country it issituated.Thechemicals must be disposed off safely or coming in contact with other chemicalsthey can react unpredictably.
If the level of pollution is increased it cancause many health problems such as miscarriages, cancers, deaths of live stocksetc. SWOT Analysis of Cipla LimitedExternalfactors are analyzed by opportunity and threats of SWOT analysis. They are:Opportunities:1.
StrategicExpansion: In recently, Ciplahas been widening its business through initiatives such as investments, acquisitions,and partnerships in India as well as in the international market. For instance, Cipla invested in a biotechmanufacturing facility in South Africa. It also acquired InvaGenpharmaceuticals in the USA etc.2. Introductionof new drugs and formulations will help Cipla in generating more revenue. 3. Treatmentof HIV: Cipla offers a widerange of ARV products through C-GA for the treatment of HIV/AIDS in bothchildren and adults. The increasing number of patients can be provided cure byCipla’s medicines.
4. Grow inEmerging markets: Cipla shouldlook forward to growing in emerging new markets, especially places wheremedical infrastructure is improving and hence pharmaceutical is also have ascope to grow.Threat:1.
DrugPricing control methods in India: Governmentshave influence over pricing of a drug through national health organisations. InIndia, a new pricing policy under Drug price control has been proposed whichcan have a negative impact on the industry. Changes in pricing policy could affectpharmaceutical companies operating margin expansion.2. Intensecompetition in generics industry: Ciplafaces a large competition in the Indian generics industry from major rivalriessuch as Lupin, Sun Pharma etc. This affects the growth potential as wellas limits the market share for Cipla.
3. Fluctuationin Exchange rates: Anyfluctuation in the exchange rates affect the company’s financial agreement withother countries and thus it can affect the profitability of the company.Conclusion From this assignment I can understand aboutthe macro environmental factors affecting the environment of Cipla limited. Forthis analysis I used two main tools which are PESTEL analysis and SWOTanalysis. From analysis I have found that the environment of Cipla ltd and howoutside factors affect the business environment and how can it be improved sothat the business can get profit and also help the society to lead a healthylife.