Reference no: EM13985057 , Length:
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Introduction
Acino Pharm is a Swiss Pharmaceutical Company shift their business from BtB Market to BtC market 4 years ago by acquisition of other companies, they are operating in emerging markets in Latin America, Africa-Middle East, and Eastern Europe with objective to reach 1 billion BtC sales by 2020, currently their revenue about 450 million.
One of the major operating areas is Middle East which consider about 40& from the annual revenue, today Middle East is highly dynamic in term of policy and economic, accordingly any organization operating in Middle East should conduct external analysis through PESTEL or ScanStep to evaluate the external environment, I prefer to conduct ScanStep model as it provide risk analysis for the situation
Regarding middle east business, KSA consider about 50% of the business with plateau double digit growth about 12% while Iraq 20% of the business with highest growth +30%
ScanStep Analysis:
Socio-culture: it is stable market in term of sociocultural behavior with its conservative behavior and Islamic faith, they respect European product quality
The end user is the patient receiving its medication through doctor prescription which is mostly expatriate, there is a trend to replace expatriates by Saudi doctors which is called plan of Saudization, I think it is no effect for this point on the organization.
Authority: Saudi And Gulf regulation is tough regulation and considered as high barrier for entry specially for pharmaceutical products, the updated regulations which resulted from the political situation prevent any export from Iran either for the product or its ingredients
On other hand new laws give a preference for Saudi manufactured product on the cost of the other product (especially in institutional and tender business) , this considered as a medium risk that will affect the company
Natural: character of the climate in gulf region (High temperature most of the year) may affect some product stability and need to pay attention to storage condition.
Security:
Safety and security is raising issue in this time as increase of terrorist in the region which resulted from two major wars (Syria and Yamane), this may affect the security of the employees as 95% of the employees are expatriates, accordingly any organization should prepare risk registry and risk management plan.
On other hand insurance terms and conditions are increased which may affect the organization profit. Any company should minimize the fixed assets in the region to decrease its risk. This issue considered as high impact issue.
Technology:
Gulf region is highly developed in its technology infrastructure and fast growing in development of E- Government which is have a positive impact on any industry and investment.
Economics:
This issue is the most important issue in our analysis. Gulf region and KSA enjoyed for years petroleum premium price over 100 USD but one year ago there is a sharp decline in petroleum prices which reach about 35USD. This situation has an impact on two aspects, the first is the customer and the second is government
The customer will decrease his amount of disposable money either for purchase or investment which will affect buying power
The second aspect is governmental as the government will not invest in a huge projects which will indirectly affect the customers, for ex. Construction sector is the most affected sector by downsizing about 30% (Bn Laden Group which is the first contractor in KSA make downsizing by 50%)
The war in Yemen and Syria increase the demand for some goods as a basic life support goods (Food and medicine) which is the positive aspect for some industries
On other hand Saudi Arabia increase fuel price by 40% which will affect transportation cost, for pharmaceutical industry it will directly affect the profit as the medicine is fixed priced and not permitted to increase the prices.
On other countries, like Egypt, decrease in exchange rate between local currency and foreign currency (Local Currency lost about 30% from its value against USD) affect directly the operation cost which affect some organizations and leads to its closer and market withdrawal
Economic aspect in ScanStep is of high impact and all sectors have to pay attention to economic changes and prepare their alternative plan, specially that Middle East Market contribute by 40% from Acino total revenue
Political: it is not far from economic situation, it is highly linked together the two wars in the middle east (Syria & Yamane) added to revolutions in Egypt, Tunisia and Libya. All the previous affect the political situation in the region and affect the relationships between countries.
Political changes in the region affect foreign investment attraction, favored position for Chinese companies followed by European and American.
On other hand stability of the government in KSA and other gulf region give some sort of security for the business. Sharp decrease in petroleum price enforce the governments to find other investment solution to compensate the deficit
Although all of surrounding political and economic conditions in the region but Gulf area considered to be more stable and their crisis management plan can tolerate petroleum price up to 20 USD.
From the above ScanStep Analysis, it is clear that the main issue is political and economic which need to continuous monitoring to get proactive position before any action, Security action should take place and risk management plan should be ready to implement any time
References:
Pitt, M., & D. N. Koufopoulos, (2012) Essentials of Strategic Management, London: Sage
https://www.acino-pharma.com/html/index.php?id=165&L=1
https://www.cia.gov/library/publications/the-world-factbook/geos/sa.html
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