Generoso Pharmaceutical & Chemical Inc.

(Case analysis)

Submitted by:
Risty D. Despillo
The Facts of the Case
Generoso Pharmaceuticals and Chemicals (GPC) was founded by Mr. David Generoso together
with his wife Elizabeth Reyes and his business associate Mr. Rafael Buenaventura. David was a
philosophy graduate and began his career in the Philippine pharmaceutical industry as a salesman
in Central Luzon region.
The business is located in Tarlac with an initial capital of P300 and started only with a dozen
bottles from pharmaceutical firms which they had been connected with before. And because of
good track record they were able to expand their customer base beyond central Luzon. And in just
few years the number of sales representative of GPC increased from 2 sales representative in 1978,
into 75 in 1983. Because of increasing volume of operations of GPC, David, Elizabeth and Rafael
moved their operation based was moved from the Generoso residence in Tarlac to a modest office
in Quezon City. From its initial assets of P300 in 1978, GPC had total assets of P12 million in
1983.
David began purchasing a pieces of laboratory equipment and storing them temporarily in his
Tarlac Residence as he dreamed to put up laboratory for GPC’s research and development. In
1983, David traveled to United States and some European countries to established several contacts
who could supply raw materials for him to sell to the leading pharmaceutical firms in the
Philippines. GPC has become very competitive in the market because it can afford to offer lower
prices for quality goods. Also GPC a leading inventor of raw materials in the Philippines because
David invented a raw material which he sold to the leading manufacturers in the Philippines.
David has to leave the management of the company to Rafael because he busy establishing
networks for raw materials but Rafael’s management did not go well and a result David decided
to go back to GPC to recover from downward trend on its operation. And by the year 1988,
Elizabeth initiated GPC’s reorganization to control over different product lines which was
composed of several subdivisions: Pharmaceutical Distribution Division, Agrovet Division,
Cosmetics Division, Raw Materials Indenting Division and the Contract Manufacturing Division.
But later there is fast turnover of participants in the industry. Small companies always constantly
struggle the stigma of being a local company with inferior quality. GPC suffers in their costly
promotion expense with buyers including doctors, pharmacists and hospitals. More over there is
an increasing number of competitors in pharmaceutical laboratories in the Philippines, most of
which manufacture only their own brands and/ or brands licensed by foreign drug manufacturers
and about six were engaged in contract manufacturing.
Apart from that No one is engaged in the extraction of active ingredients from locally available
raw materials or in the formulation of new products from known active ingredients. As a result,
the country continues to rely heavily on imported pharmaceutical products and raw materials.
In 1988, the American principal offered his plans to David of GPC engaging in the contract
manufacturing of pharmaceutical products for both the domestic and export markets. The project
will be capable of meeting most orders within a month, as compared to other contract
manufacturers to require up to about 6 months processing an order using outdated equipment. The
only thing is that there is a need for hire a German expatriate to oversee the problem and the
additional budget for the project because Filipino chemist who specialize the technology of the
project could qualify for GPC to remain competitive. The company has only 40 million funds and
project would cause 135 million, that’s the reason why David need to assess carefully whether to
accept or reject the project proposal.
The Problems
GPC had a hard time expanding its business operation and possible actions the Generoso
Pharmaceuticals & Chemicals, Inc. (GPC) should take in order to stay in competition, where to
find additional capital and to hire German expatriate to oversee the project.
The Causes of the Problem
Fast turnover of participants in the industry. It is very difficult to expand. Small companies always
constantly struggle the stigma of being a local company with inferior quality. Small manufacturers
tend to cost cut in production costs in the absence of economies of scale. GPC suffers in their
costly promotion expense with buyers including doctors, pharmacists and hospitals. More over
there is an increasing number of competitors in pharmaceutical laboratories in the Philippines,
most of which manufacture only their own brands and/ or brands licensed by foreign drug
manufacturers and about six were engaged in contract manufacturing. No one is engaged in the
extraction of active ingredients from locally available raw materials or in the formulation of new
products from known active ingredients. As a result, the country continues to rely heavily on
imported pharmaceutical products and raw materials.
Alternative Courses of Action
1. GPC can borrow money from banks or other financial intermediaries.
2. GPC should accept the project.
3. Hiring of Qualified German Expatriate

Advantages and Disadvantages of each Alternative

Alternative Courses of Action Advantages Disadvantages of each
Alternative

1. GPC can borrow money from a. Early implementation of the
banks or other financial project
intermediaries. b. The project can be financed.
c. Long term payments
d. Can gain additional support for
the project.
a. Generates interest
b. The longer the period the debt
is not paid; the higher interests
generates.
c. The borrower pledges some
assets as collateral for the loan.

2. GPC should accept the project a. It will make the company stay a. It is too costly and risky
in competition
b. Creditors will provide the
needed budget
 3. Hiring of Qualified German a. Higher quality of products can a. it will be costly
Expatriate be attained.
b. The company will remain
competitive.

Evaluation of Advantages and Disadvantages

Each of the courses of alternatives has a balanced benefit in terms of advantages and it will greatly help
GPC in its current operation. Each advantages gives the company more opportunity to compete better in
market nut aside from that it is also coupled with some disadvantages that makes it a sense of trade off. It
is clear from the above that the benefit from choosing alternative yield more advantages than disadvantages.
Selection of best Alternatives (Recommendation)
1. Accept the project
2. Hire a German Expatriate

As a Recommendation, Generoso Pharmaceuticals & Chemicals, Inc. should accept the proposed project
in order for them to stay in the fast growing competitive market in pharmaceutical industry. It helps them
to expand their operation and gives more opportunities for growth and development. In terms of problems
about the insufficient fund of GPC they can borrow from financial institutions which offers low interest
rate. As to the research and development, they should hire a German expatriate for the better quality
products and produce more affordable medicine without degrading its quality. It will greatly help them to
earn customer satisfaction and recognition within the industry.
Plans for Implementation

Detailed Activities Person Responsible Time Frame Budget Remarks

Discussed the company project Owner and Principal 1 day

Make a detailed plan of making the Principal 1 week

project

Borrow money from banks Owner 1 month

Searching of German chemist Management 2 weeks

Hiring of German chemist Management 2- 3 days