Response strategies of multinational Pharmaceutical corporations to challenges of competition for institutional markets in Kenya

Abstract

The Kenyan pharmaceutical industry like any other industry has been faced with challenges in the past decade which has led Multinational Pharmaceutical Corporations to strategize for survival in the market. They have in the recent past shown keen interest in the institutional markets in order to grow their market share. This study looked at challenges of competition facing MPCs for institutional markets and response strategies to these challenges. This study will benefit company executives and top management teams of various MPCs in the Pharmaceutical industry as they are the drivers of the companies' grand strategies for business growth. Other stakeholders in the industry like investors, collaborating multinational donor Agencies and the public in general would benefit as this research would provide detailed information for making informed decisions. Key institutions like Department of Defence (DaD), Kenya Pots Authority (KP A), Referral hospitals (KNH, MTRH) and universities health facilities could also be of interest to foreign investors as they make good and reliable business partners in terms of quantity of purchase and consistency in payment. Primary data was collected using self-administered drop and pick questionnaires which were distributed to the managers in each of the 25 MPCs. These managers were picked because of their knowledge of the industry and were in a position to expound the strategic issues facing the companies. The questionnaires were semi-structured having both open-ended and closed-ended questions. The study used descriptive statistics for data analysis. These measures included frequency, mean and percentage. Tables were used exclusively to present the findings and to generate quantitative data which was finally integrated to form a comprehensive report. The findings revealed that the bulk of business comes from institutions 68.4%, while the rest comes from open market 3l.65 %, and the majority of respondents agreed that buyers insisting on lower prices, parallel lillegal imports, cheaper substitutes, undercutting of prices, competition using unorthodox methods, counterfeits and threats from importers of generic products pose a great challenge in pharmaceutical industry. They went further to clarify that counterfeits and illegal imports threat was more in the open market than institutions. On the side of practice this study recommends that pharmaceutical firms need to form strategic alliances with institutions in order to lock out parallel/illegal importers and counterfeit products. The Pharmacy and Poisons Board (PPB) should come up with legislations to curb parallel/illegal imports and counterfeits in order to minimise unhealthy competition. The use of professionals (either outsourced or in-house) in the negotiation process with formulary committees and preparation of tender documents to deal with institutions is an option that the firms should look at. This is because the institutions are getting more advanced, away from manual to e-tendering, ordering and even payment which calls for further training or use of skilled personnel who understand the complexities associated with such processes. Further, there are other legal parameters that must be met by tendering firms that calls for the input of professionals. The study recommends that multinationals are better placed to use local distributors to undertake local logistics in relation to tenders. This is in relation to what the distributors can undertake locally as compared to the multinationals. The legal requirements (both local and international) restrict the participation and involvement of the multinationals in certain activities.