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Deriving the Pharmaceutical Industry of Bangladesh in terms of Porters Diamond Model

1. Factor Endowment: The industry does have enough human resources to not only
dominate the local market (97% market share in Bangladesh) but as well as to export to
other countries. However, the existing natural resources in Bangladesh do not come in
aid for the pharmaceutical industry as the industry is heavily dependent on imported
Active Pharmaceutical Ingredients (APIs). We may also derive that the knowledge
resources are not also predominant from the information given that only 15% of the
drugs produced are patented drugs, while it is the other way around in the rest of the
world. The bright side is that WTOs Trade-Related Aspects of Intellectual Property
rights agreement permits Bangladesh to reverse-engineer patented generic pharmaceutical
products to sell locally and export to markets around world.
The capital resources are more than adequate we can say, from the immense
dominance of the Bangladeshi (Square, Incepta, Beximco, Opsonin and Renata) drugs
over that of the foreign companies (Sanofi-Aventis, GlaxoSmithKline and Sandoz). Not
only the pharmaceutical industry, but also entire Bangladesh has shown brilliant growth
over the years. Hence, the country is more capable of producing all the infrastructure
(communication medium, roads, etc.) needed that may come in aid of the industries.
2. Demand Condition: Domestic Manufacturers account for the 97% of the local market
that consists a population of 160 million people. The growth rate figures (16.8% in 2009,
23.8% in 2010, and 23.6% in 2011) of the retail sales of the Bangladeshi drugs are
impressive enough to prove that the demand is prevalent. In addition, the quality of the
drugs produced locally is up to the mark in terms of quality for competing in the
international market. Hence, sophisticated consumers without any hesitation prefer the

locally produced drugs. Signs are early saturation are also viable as local competition is
not enough for Bangladeshi drug manufacturers and the government is also helping the
firms in going international (Square has 700 product approvals for export markets).
3. Related and Supporting Industries: There is no existing industry for raw materials, as
they are imported from low cost producers in China and India. However, the increase in
life expectancy from 64.7 in 2000 to 68.3 in 2009 highlights the increased health
consciousness among the people. Also the income level of the population increased over
the last decade which allowed them to spend more on healthcare. This shows increased
demand in supporting industries like hospitals, clinics and healthcare as well.
4. Firm Strategy, Structure, and Rivalry: Domestic rivalry induces firms to look ways to
improve efficiency, to innovate, to improve quality, to reduce cost, and to invest in
upgrading advanced factors. The higher the rivalry, the stronger the efficiency level
becomes. Also, the Bangladeshi manufacturers are protected from rivalry from foreign
manufacturers to a great extent as per the Drug Act 1940 adopted by Bangladesh in 1974.
The Act restricts the import of products that are already produced by the local
manufacturers.
5. Government Policy: The government has always been generous towards the
pharmaceutical industry. Starting from the aforementioned Drug Act 1940, the
government has also provided various incentives to lower the import cost of the
pharmaceutical manufacturers. The government also provides incentives to export- in
particular easing up the documentation procedures and removing bottleneck for exporting
goods.

6. Chance: The competitiveness of the four components can be affected by another factor
and that is chance. This chance may arise from any new agreement, opening of a new
market. Also, acts of pure invention, major technological changes, political decisions by
foreign governments and wars may provoke chance for any country specific industry. For
instance, a cure for the Ebola virus is invented by WHO, and Bangladesh gets to produce
and export the medicines to the Ebola-prone countries.