Pharmaniaga Berhad (467709-M)

No.7, Lorong Keluli 1B

Kawasan Perindustrian Bukit Raja Selatan
Seksyen 7, 40000 Shah Alam
Selangor Darul Ehsan, Malaysia
Tel : 03-3342 9999 Fax : 03-3341 7777
(A member of UEM Group)

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Pharmaniaga Overview
Pharmaniaga Berhad is the largest integrated local healthcare public listed company in the Main
Board of Bursa Malaysia. Its core business is manufacturing generic pharmaceutical, logistics
and distribution, sales and marketing, supply medical product and services, hospital equipment.
The Pharmaniaga Berhad subsidiaries companies are:
i
ii
iii
iv
v
vi
vii
viii
ix
x
xi

Pharmaniaga Logistics Sdn Bhd

Pharmaniaga Marketing Sdn Bhd
Pharmaniaga Manufacturing Berhad
Pharmaniaga Diagnostics
Pharmaniaga Research Centre Sdn Bhd
Safire Pharmaceuticals (M) Sdn Bhd
Pharmaniaga LifeScience Sdn Bhd
Pharmaniaga Diagnostics Sdn Bhd
Pharmaniaga Intermational Corporation
PT Millennium Pharmacon International Tbk (Indonesia)
Pharmaniaga Pegasus (Seychelles) Co. Ltd

Company Profile
Company Name

Pharmaniaga Berhad.

Business Type

Manufacturer, Trading Company,

Product/Service

Distributor/Wholesaler
Medical Disposable &

Address

Devices,Pharmaceutical Item
7,Lorong Keluli
1B,Kaw.Perindustrian Bukit
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Raja,Selatan,Seksyen7
Company Website
Ownership & Capital
Year Established
Trade & Market
Main Market

Export Percentage
Factory Information
Management Certification:
Contract Manufacturing

CURRENT SITUATION

CURRENT PERFORMANCE

http://www.pharmaniaga.com
1993
Southeast Asia
Africa
Oceania
Mid East
Eastern Asia
31% - 40%
ISO 9001:2000
OEM Service Offered

Pharmaniaga Group its revenue for the 2010 financial year improved by 6 per cent compared
with the previous year but pre-tax profit contracted by 44.2 per cent to RM45.5 million, from
Rm81.4 million recorded in 2009.
The lower profit was due to the a RM20 million provision for the slow moving product,
oseltamivir, coupled with an increase in administration, selling and distribution expenses. Higher
sales to government hospitals and higher tender sales contributed to an increase in revenue in the
fourth quarter of 2010 by 16.1 per cent to RM376.1 million, against RM323.9 million registered
in the same quarter last year. The group foresees strong competition in the private sector market,
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and remains focused on strategies and initiatives to grow market share in its core businesses. The
company will also continue to enhance production efficiency and cost control as part of its
initiatives to improve competitiveness and profitability.
2

STRATEGIC POSTURE

Pharmaniaga Berhad is the largest integrated local healthcare company in Malaysia. Its core
business is generic pharmaceutical products, while the principal activities are manufacturing of
generic pharmaceuticals, logistics, distribution, sales, marketing, supply of medical products and
services and hospital equipments. The essence of Pharmaniaga is the seamless amalgamation of
these key disciplines, represented by an entirely integrated group of companies, processes and
people that uphold our commitment to deliver quality products and services at all times. The
company is driven by their goal to enrich the lives of all those they come into contact with be it
their employees, customers and business partners or the patients who benefit from their products
and services. Pharmaniaga Berhads commitment is to enrich life together guided by the
philosophy of doing business with conscience; a philosophy the company continues to nurture as
it journeys towards becoming a global total integrated healthcare solutions provider. The vision
of Pharmaniaga is to be the preferred pharmaceutical brand in the regional markets and to
provide quality products and superior services by professional, committed and caring employees
as a mission.
Whistle Blower Policy was established and approved by the Board in 2008 to provide a platform
and to act as a mechanism for parties to channel their complaints or to provide information on
fraud, wrongdoings or non-compliance to any rules/procedures by the employee or management
of the Company. The policy outlines when, how and to who a concern may be properly raised,
distinguishes a concern from a personal grievance and allows the whistle-blower the opportunity
to raise a concern outside this management line and in confidence. The identity of the whistle
blower is kept confidential and protection is accorded to the whistle blower against any form of
reprisal or retribution. Any concerns raised will be investigated and a report and update is
provided to the Board.

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CORPORATE GOVERNANCE

2.1. BOARD OF DIRECTORS

The Board, with its collective and overall responsibility in leading and directing Pharmaniagas
strategic affairs, has the ultimate responsibility for corporate governance and plays a key role in
charting the vision, strategic direction, development and control of Pharmaniaga Group as well as
overseeing the investments of the Company. The Board believes that effective corporate
governance is premised on three important cornerstones namely, independence, accountability
and transparency.
The Board of Directors of Pharmaniaga presently consists of five (5) members comprising one
(1) Non Independent Non Executive Chairman, one (1) Executive Director designated as the
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Managing Director, and three (3) Independent Non-Executive Directors.

With the formation of the Board Advisory Panel, the Board believes that
the composition of the Board has the right blend of skills, knowledge
and business experience around the Board table, given the size and
nature of the business of Pharmaniaga.

2.1.1 Profile by directors

DATO MOHAMED AZMAN BIN YAHYA

Non-Independent Non-Executive Chairman

Dato Azman, 46, a Malaysian, has been the Non-Independent Non-Executive Chairman of
Pharmaniaga Berhad since 15 November 2001. He is the founder and Group Chief Executive of
Symphony House Berhad, a listed outsourcing group and the Executive Chairman of Bolton
Berhad, a listed property group. Prior to this, Dato Azman was appointed by the Government of
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Malaysia in 1998 to set-up and head Danaharta, the national asset management company; and
subsequently became its chairman until 2003. He was also the Chairman of the Corporate Debt
Restructuring Committee (CDRC), which was set-up by Bank Negara Malaysia to mediate and
assist in the debt restructuring of viable companies until its closure in 2002. His previous career
includes auditing with KPMG in London, finance with the Island & Peninsular Group and
investment banking with Bumiputra Merchant Bankers and Amanah Merchant Bank; the latter as
the Chief Executive.
Outside his professional engagements, Dato Azman is also active in public service. He sits on
the boards of a number of Government Linked Corporations namely, Khazanah Nasional Berhad,
the investment arm of the Malaysian Government, Malaysian Airline System Berhad and PLUS
Expressways Berhad. Dato Azman also serves as a member of the Bursa Malaysia Securities
Market Consultative Panel, the National Council for Scientific Research & Development, the
National Innovation Council, the Special Taskforce to facilitate Business (PEMUDAH) and the
Malaysian Economic Council. Dato Azman is also a Director of Scomi Group Berhad and the
Chairman of the Motorsports Association of Malaysia. He graduated with a first class Honours
Degree in Economics from the London School of Economics and Political Science and is a
Member of the Institute of Chartered Accountants in England and Wales, (ICAEW), the
Malaysian Institute of Accountants (MIA) and a Fellow of the Malaysian Institute of Banks.

MOHAMAD BIN ABDULLAH

Managing Director

Mohamad, 49, a Malaysian, has served Pharmaniaga Berhad as the Managing Director since his
appointment on 1 January 2007. Prior to this appointment, Mohamad was the Chief Financial
Officer (CFO) of UEM Land Sdn Bhd (now a listed entity; UEM Land Berhad) since 1
December 2004 and was promoted to Chief Operating Officer on 1 January 2005. Mohamad
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holds a Master of Business Administration from University of Bath, United Kingdom. He had his
early exposure in investment banking when he was working with Arab Malaysian Merchant Bank
from 1988-1991. Prior to that he was with Azman, Wong, Salleh & Co., an audit firm. In 1992,
Mohamad moved to Kejora Holdings Sdn Bhd, the commercial arm of Kejora Group as the
Groups Corporate Finance and Audit Manager where he served for 4 years, then joined Park
May Berhad as its Financial Controller in March 1996; and was subsequently promoted to
General Manager, Corporate Affairs. He was then transferred to Faber Group Berhad, an
associate company of UEM Group Berhad, and upon being promoted; assumed the position of
Senior General Manager, Finance. In early 2004, he was promoted to Chief Financial Officer of
Faber Group Berhad. Having played a key role in Faber Groups Corporate and Debt
Restructuring, on1 December 2004, he was transferred to UEM Land. He is a member of Cluster
Working Group (CWG) on Healthcare Biotechnology under the Malaysian Biotechnology
Corporation Sdn Bhd.

DATUK SULAIMAN BIN DAUD

Senior Independent Non-Executive Director

Datuk Sulaiman, 63, a Malaysian, is the Senior Independent Non-Executive Director of

Pharmaniaga Berhad. He is also the Chairman of the Investment Committee, Nomination &
Remuneration Committee, Risk Management Committee and member of the Audit Committee.
He had an illustrious career with Malaysian Tobacco Company Berhad (MTC) where he
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ascended the corporate ladder to be its Deputy Chief Executive/Executive Director. He has been
the Chairman of Bank Pertanian Malaysia for four terms; from 1998 to 2006. He has also been a
Director of Malaysia National Insurance Berhad and Chairman of Ranhill Power Berhad. He is
currently the Chairman of Malaysia Packaging Industry Berhad and Director of Konsortium
Transnasional Berhad and Silverlake Axis Limited in Singapore. He is also a Director of UMS
Link Holdings Sdn Bhd and the Chairman of UMS Link Agro Based Sdn Bhd as well as Director
and Chairman of a number of private companies in Malaysia and abroad. He has served as a
Board Member of University Putra Malaysia and the Chairman of the Malaysia Syria Business
Council. More recently, he has been appointed as an Advisory Panel Member of the
Commercialisation Committee for all public Universities in Malaysia. He has a diploma in
Agriculture from the College of Agriculture (now University Putra Malaysia), graduating as the
Most Outstanding Student in 1968. He has a Masters in Business Administration from IMC
Buckingham and he graduated from Stanford-Insead Advanced Management Programme in
Fontainbleau, France. He spends a considerable part of his time now seeking and developing
business opportunities in Asean and the Middle East.

EMERITUS PROF. DATO WIRA. IR.DR. MOHAMMAD NOOR BIN HJ. SALLEH
Independent Non-Executive Director

Emeritus Prof. Dato Wira Ir. Dr. Mohammad Noor, 62, a Malaysian, is an Independent NonExecutive Director of Pharmaniaga Berhad. He was appointed to the Board on 15 November
2001. Prior to his present position as President of Kuala Lumpur Infrastructure University
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College, he was the Vice President of Open University Malaysia. He held the position of Vice
Chancellor of Universiti Pendidikan Sultan Idris and a similar position in Universiti Utara
Malaysia and was the Deputy Vice Chancellor in Universiti Teknologi Malaysia before that. He
sits in the Audit Committee, Nomination & Remuneration Committee and Risk Management
Committee. Emeritus Prof. Dato Wira Ir. Dr. Mohammad Noor has a Ph.D. in Civil Engineering
from the University of Strathclyde, Glasgow, UK. He is currently a Fellow of the Academy of
Science Malaysia, Fellow Member of Institution of Engineers Malaysia and a Member of the
Malaysian Institute of Management.

OH KIM SUN
Non-Independent Non-Executive Director

Oh Kim Sun, 61, a Malaysian, is a Non-Independent Non-Executive Director of Pharmaniaga

Berhad. He was appointed to the Board on 12 December 2005. He is the Chairman of the Audit
Committee and a member of the Investment Committee and Nomination and Remuneration
Committee. Oh is a member of the Malaysian Institute of Certified Public Accountants (MICPA).
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An accountant by training, he began his career in 1972 with Coopers & Lybrand in London. He
has over 36 years of experience in finance and has held various positions such as Finance
Director of Taiko Plantations Sdn Bhd, Financial Controller of ICI Malaysia and Finance
Manager (Secondment) of ICI Headquarters in London; responsible for Northern Europe. Oh led
a successful management buyout of ICIs Malaysian operations in 1994 and was appointed Group
Executive Director of Chemical Company of Malaysia Berhad until 2003. His directorships in
other public companies include Faber Group Berhad, UEM Land Holdings Berhad and Nikko
Electronics Berhad. He is also a Director of IMPAX Laboratories Inc., a company listed on
National Association of Securities Dealers Automated Quotations (NASDAQ).

2.1.2 Roles and Responsibilities of Chairman and Managing Director

The roles and responsibilities of the Chairman of the Board and the Managing Director are
distinct and separated. The Chairman is responsible for the conduct of the Boards discussions
and that these are conducted in such a way that all views are taken into account before a decision
is made.
The Managing Director has the general responsibility for running the business on a day-to-day
basis thus ensuring a balance of power and authority so as to provide safeguard against the
exercise of unfettered powers indecision making. The Boards principal focus is the overall
strategic direction, development and control of Pharmaniaga Group. As such, the Board approves
Pharmaniaga Groups strategic plan and its annual budget; and throughout the year, reviews the
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performance of the operating subsidiaries against their budgets and targets. The Managing
Director is responsible for the implementation of the broad policies approved by the Board and
he is obliged to report and discuss at the Board Meetings all material matters currently or
potentially affecting Pharmaniaga Group and its performance, including all strategic projects and
regulatory developments. Accountability is part and parcel of governance in Pharmaniaga - whilst
the Board is accountable to the shareholders, Management is accountable to the Board. The
Board ensures that the Management acts in the best interest of the Company and its shareholders
by working to enhance the Companys performance.
In performance of the Board duties, the Board also observes a Directors Code of Conduct which
continues to govern the standard ethics and good conduct expected from the Directors. The
Directors Code of Conduct, which forms part of the Board Policy Manual sets out the
performance of Directors duties and conduct in relation to Corporate Governance, its
relationship with the shareholders, employees, creditors and customers as well as its social
responsibilities.
It is the Boards belief that having a whistle blower policy in place will increase investor
confidence in the Company. A whistle blower policy strengthens, supports good management and
at the same time demonstrates accountability, good risk management and sound corporate
governance practices. As such, The Board has established five Board Committees. The Board has
entrusted specific responsibilities to the Board Committees, which operate within clearly defined
written terms of references on which the Committees deliberate the issues on a broad and in
depth basis before putting up any recommendation to the Board.
2.2 TOP MANAGEMENT

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2.2.1 Nomination& Remuuneration Commitee

The members of the Audit Committee are:

Datuk Sulaiman bin Daud (Chairman)

Oh Kim Sun
Emeritus Prof. Dato Wira Ir. Dr. Mohammad Noor bin Hj Salleh
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There are few objective of the Nomination & Remuneration Committee in Pharmaniaga Berhad:

To annually examine the size of the Board with a view to determine the number of

Directors on the Board in relation to its effectiveness.

To assist the Board in the annual review of the required mix of skills, experience and
other qualities, including core competencies, which Non-Executive Directors should bring

to the Board and disclose the same in the Annual Report.

To annually carry out the process to be implemented for evaluating the effectiveness of
the Board as a whole, the Committees of the Board and the performance and contribution
of each individual Director based on the process implemented by the Board, and to

identify areas for improvement.

To recommend suitable orientation, educational and training programmes to continuously

train and equip the existing and new Directors.

To ensure that the appointment of any Executive Director or Managing Director shall be
for a fixed term not exceeding 3 years at any one time with the power to reappoint,

remove or dismiss thereafter.

To identify and recommend new nominees to the Board of Pharmaniaga Berhad and its
subsidiaries and associated companies, whether to be filled by Board members,
shareholders or executives. It is also to identify and recommend for all directorships
proposed by the Managing Director, any Director or shareholder to fill the seats on the

Audit, Nomination & Remuneration or other Committees.

To identify and recommend Senior Management position at Grade UT2 and above, and its
terms and conditions, for the Boards approval. To consider the following when
recommending candidates for directorship such as

skills, knowledge, expertise and

experience, professionalism, integrity, ability to discharge functions or responsibilities.

To set, review, recommend and advise the policy framework on all elements of the
remuneration such as reward structure, fringe benefits and other terms of employment of

Executive Director and the Managing Director.

To advise the Board of the performance of the Managing Director and an assessment of
his/her entitlement to performance related pay. The Committee also should advise the
Managing Director on the remuneration and terms and conditions of senior management

staff holding Grade UT2 and above.

To represent the public interest and avoid any inappropriate use of public funds when

considering severance payments for senior staff.

To review the history of and proposals for the remuneration package of each of the
Companys committees.
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2.2.2 Audit Commitees

The members of the Audit Committee are:

Oh Kim Sun (Chairman) - appointed on 8 May 2009

Datuk Sulaiman bin Daud
Emeritus Prof. Dato Wira Ir. Dr. Mohammad Noor bin Hj Salleh

The Audit Committee shall be appointed by the Board of Directors from amongst its numbers,
which fulfils the following requirements:

The Audit Committee must be composed of no fewer than three members

A majority of the Audit Committee must be independent Directors
At least one member of the Audit Committee must be a member of the Malaysian

Institute of Accountants (MIA) or any equivalent qualifications recognized by the MIA

No alternate director shall be appointed as a member of the Audit Committee

The members of the Audit Committee shall elect a Chairman from among themselves who will
be an Independent Director. All members of the Audit Committee, including the Chairman, will
hold office only so long as they serve as Directors of Pharmaniaga Berhad.
The Board of Directors must review the term of office and performance of the Audit Committee
and each of its members at least once every three 3 years to determine whether the Audit
Committee has carried out its duties in accordance with its terms of reference.
The objectives of the audit committee in Pharmaniaga to to assist the Board to carry out their
responsibilities and with the primary objective of assisting the Board of Pharmaniaga Berhad in
fulfilling its fiduciary responsibilities relating to corporate accounting, system of internal controls
and risk management processes, and management and financial reporting practices of the Group.
Besides, the audit committee also has to ensure consistency with Bursa Malaysia commitments to
encourage high standards of corporate disclosure and transparency. The Audit Committee will
endeavor to adopt certain practices aimed at maintaining appropriate standards of corporate
responsibility, integrity and accountability to Pharmaniagas shareholders.
The Audit Committee is responsible for monitoring, overseeing and evaluating the duties and
responsibilities of the Internal Audit and the external auditors as those duties and responsibilities
relate to the organizations processes for controlling its operations. The Audit Committee is also
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responsible for determining that all major issues reported by the Internal Auditors, the External
Auditors and other outside advisors have been satisfactorily resolved by the Management.
Finally, the Audit Committee is responsible for assisting and reporting to the Board matters
deemed critical to the organizations controlling processes and risk management activities
including the implementation of the appropriate systems to manage risks.
In carrying out its duties and responsibilities, the Audit Committee will have the following rights.
They have explicit authority to investigate any matter within its terms of reference and have the
resources required performing its duties. They also have full, free and unrestricted access to any
information, records, properties and personnel of the Company and of any other companies
within the Group. Other than that, they have direct communication channels with the external
auditors and person carrying out the internal audit function or activity. Head of internal audit
should report directly to audit committee. They have authority to obtain independent professional
or other advice and to invite outsiders with relevant experience to attend the Committees
meetings and to brief the Committee. Finally, they have discretion to invite other Directors and
employees of the Company to any particular Audit Committee meeting with specific relevance
and authority to convene meetings with external auditors, internal auditors or both, excluding the
attendance of other directors, executive members of the Committee and employees of the
company, whenever deemed necessary.
2.2.3 External Auditors
The Board maintains a transparent and professional relationship with the Auditors, through the
Audit Committee, conferred with the authority to directly liaise with both the External and
Internal Auditors. The Board, through the Audit Committee, seeks the External Auditors
professional advice in ensuring compliance with the provisions of the Companies Act, 1965 and
applicable Reporting Standards in Malaysia. The appointment of the External Auditors is subject
to the approval of shareholders at the Annual General Meeting, whilst the Board determines their
remuneration. It is a policy of the Audit Committee that it meets with the External Auditors at
least twice a year to discuss their audit plan, audit findings and the Companys financial
statements as well as any other issues without any Executive Directors and the management
present.

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The role and responsibility of the external auditors are they audit plan, audit strategy and scope of
work for the year. The results of the annual audit, their audit report and Management letter
together with Managements response to the findings of the external auditors. They also assessed
the independence and objectivity of the external auditors during the year and prior to the
appointment of the external auditors. The Committee also received reports from the external
auditors on their own policies regarding independence and the measures taken to control the
quality of their work. They deliberated and reported the results of the annual audit to the Board
and recommended to the Board the appointment and remuneration of the Group External Auditor.
They have to meet with the Group External Auditor without the presence of management to
discuss any matters that they wish to present.
2.2.4 Group Internal Audit
The Group Internal Auditors from UEM Group Management Sdn Bhd (UEMGM) continues to
provide the internal audit support function to the Audit Committee and the Board during the year.
The internal audit function of Pharmaniaga Group is carried out by the GIA of UEMGM. GIA
provides independent, objective assurance on areas of operations reviewed, and advice on best
practices that will improve and add value to the Pharmaniaga Group. In the year under review,
GIA carried out audit programmer which focused on the management of the Groups significant
corporate risks and executed audit plans approved by the Audit Committee. In conducting their
independent audit, GIA placed emphasis on a risk-based auditing approach. The audit findings
and recommendations, which also highlighted areas of non-compliance with the Groups policies,
procedures and guidelines, were communicated to the Audit Committee to enable a timely
evaluation of the adequacy and integrity of the Groups internal control system. The internal audit
activities undertaken by UEMGM are in conformance with the International Standards for the
Professional Practice of Internal Auditing issued by the Institute of Internal Auditors. The
Internal Auditor has the responsibility for ascertaining that the ongoing processes for controlling
operations throughout the organization are adequately designed and are functioning in an
effective manner, taking into account the Groups objectives and policies in the context of
evolving business and regulatory environment. Internal audits are conducted to identify and
report risks in units under the Groups major core activities.
2.2.5 Risk Management Committee

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The members of the Audit Committee are:

Datuk Sulaiman bin Daud ( Chairman)

Mohamad bin Abdullah
Emeritus Prof. Dato Wira Ir. Dr. Mohammad Noor bin Hj Salleh
Stephen Sze Kwong Yew
Raja Nazim bin Raja Nazuddin
Errman Zuhady bin Zainal

This Risk Management Committee (RMC) was established with the primary responsibility of
ensuring the effective functioning of the integrated risk management function within the
Pharmaniaga Group. RMC assists the Board of Directors to oversee the overall management of
all risks covering industry risk, country risk, strategic risk, financial risk, customer risk, product
risk, internal processes risk, people risk and information technology risks. The Committee also
reviews and evaluates the adequacy of overall risk management policies and procedures and
ensures that there is adequate risk reporting of core business activities. On risk management, the
RMC updates the Audit Committee the significant changes in the business and the external
environment which affect the key risks. The Audit Committee then reports to the Board on the
status of the risk management. The Audit Committee then reports to the Board significant
changes in the business and the external environment, which affect the key risks. The Board
monitors the implementation of the risk strategies and any changes to the risk profiles are
highlighted to the Board for consideration. In this way, the Board will ensure that the risk
strategies are progressing according to the implementation plan.
The functional of the Risk Management Committee are as below:

To provide oversight, direction and counsel to the risk management process

To establish risk management guidelines
To evaluate the structure for the Group risk management, risk management processes and

support system
To consider the half yearly report on risks, major findings and management responses
thereto on material issues, highly significant risks, changing environments and required

urgent changes in the risk management programmer

To review and approve action and contingency plans developed to mitigate key significant

risks
To advise the Board on risk related issues and recommend strategies, policies and risk
tolerance for Board approval

2.2.6 Investment Committee

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The members of the Investment Committee are:

Datuk Sulaiman bin Daud ( Chairman)

Mohamad bin Abdullah
Oh Kim Sun

The Investment Committee assists the Board in fulfilling its obligations by receiving reports,
evaluation and making recommendations to, or where authorized decisions on behalf of, the
Board in respect of investments and matters related thereto. The Investment Committee also
plays a key role in the Business Expansion and Growth strategies of the Group by reviewing the
viability of proposals or projects or investments at the Initial Project Assessment Stage and
providing appropriate direction to the Management.
The roles and responsibilities of the investment committee are as below:

To review and recommend to the Board the investment policies and strategies.
To receive quarterly reports, deliberate and decide on the compliance with the overall

investment policies and strategies. Subsequently report the findings to the Board.
At the Initial Investment Initiation stage investment committees have to review and
approve for the Company to precede with the investment initiation activities, if the
Committee is satisfied that the investment is viable and for overseas ventures, is in line

with the overall Expansion Strategy adopted by the Group.

The Committee is given the power to authorize the Company to enter into any
agreements, understanding and/or contracts with potential partners initiation stage and
approve such terms in relation to the said agreement, understanding and/or contracts
which may include equity participation of the Company.

2.2.7 Managing Directors

The Managing Director of the Pharmaniaga Berhad is Mohamad bin Abdullah. He has the
general responsibility for running the business on a day-to-day basis thus ensuring a balance of
power and authority so as to provide safeguard against the exercise of unfettered powers in
decision making. The Managing Director is responsible for the implementation of the broad
policies approved by the Board and he is obliged to report and discuss at the Board Meetings all
material matters currently or potentially affecting Pharmaniaga Group and its performance,
including all strategic projects and regulatory developments. Accountability is part and parcel of
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governance in Pharmaniaga - whilst the Board is accountable to the shareholders, Management is

accountable to the Board.

2.3 SHAREHOLDERS
Pharmaniaga is committed to maintaining a constructive relationship with its shareholders,
pursuing its on-going commitment to sustain the highest standards of corporate governance
practices throughout the Group with full appreciation of its impact on long term corporate
performance and optimal shareholder value.
In this regard, Pharmaniaga has developed and maintained an Investor Relations Policy to ensure
a high level of quality and service is achieved when information is provided to investors and
stakeholders. There are 30 largest shareholders as per the Register of Depositors, 3 substantial
shareholders as per the Register of Substantial Shareholders and directors shareholding as per
the Register of Directors' Shareholding in Phamarniaga.
A key channel of communication used to provide its shareholders and investors with information
which include its business, financials and other key activities is the Annual Report of the
Company, contents of which are continuously enhanced to take into account developments
amongst others in corporate governance practices. Apart from the mandatory requirement to
make public announcements via Bursa Malaysia, Pharmaniaga also disseminates information on
corporate events and business as well as any significant developments of Pharmaniaga Group
through press releases. Further, the timely releases of financial results, in line with Main Market
Listing Requirements Bursa Malaysia provide shareholders with an overview of Pharmaniaga
Groups performance and operations. Besides the key channels of communication through the
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Annual Report, general meetings and announcements to Bursa Malaysia as well as analyst and
media briefings, there is also continuous effort to enhance the Companys main website
Information that is disseminated to the investment community conforms to Bursa Malaysia
disclosure rules and regulations. While the Company endeavors to provide as much information
as possible to its shareholders, it must be wary of the legal and regulatory framework governing
the release of material and price sensitive information. Therefore, care has been taken to ensure
that any information that may be regarded as undisclosed and market sensitive information such
as corporate proposals, financial results and other material information about Pharmaniaga Group
will not be given to any shareholder or shareholder group without first making an official
announcement to Bursa Malaysia for public release.

3.0 EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREATS (SWOT)

3.1 NATURAL PHYSICAL ENVIRONMENT: SUSTAINABILITY ISSUES
The natural environment includes physical resources, wildlife, and climate that are an inherent
part of existence on Earth. Until the 20th century, the natural environment was generally perceived
by business people to be a given something to exploit, not conserve. It was view as a free
resource, something to be taken or fought over, like arable lands, diamond mines, deep water
harbors, or fresh water. The concept of sustainability argues that a firms ability to continuously
renew itself for long term success and survival is dependent not only upon the greater economic
and social system of which it is a part, but also upon the natural ecosystem in which the firm is
embedded. A business corporation must thus scan the natural environment for factors that might
previously have been taken for granted, such as the availability of fresh water and clean air.
Pharmaniaga gives a high priority to protecting the environment and assuring the health and
safety of employees, stakeholders and interested parties who come to our premises in the course
of business.This commitment is declared in the Environmental, Health & Safety (EHS) Policy
statement as follows, firstly, to comply with Malaysias relevant EHS regulations within the
scope of Pharmaniagas operations. Secondly, to prevent pollution, accidents, injuries,
occupational diseases and illnesses by taking pre-emptive measures in the form of process
modification, installation and engineering control, waste management system, chemical handling,
adherence to established procedures and the efficient use of resources. Thirdly, to generate the

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highest degree of EHS awareness amongst all employees, and provide skills and knowledge
training in environmental, health and safety aspects relating to our products and services.
To achieve excellence in EHS performance by promoting continual improvement and constantly
reviewing our objectives and targets based on risk assessment records and implemented
programmes. A baseline analysis was first done to gauge Pharmaniagas current levels of
compliance with statutory requirements and to outline remedial measures. Pharmaniaga also
conducted an aspect and impact analysis with regard to the Companys impact on the
environment. The study covered the entire spectrum of operations at Pharmaniaga, from the
receiving of materials through to testing activities and on to the final storage and delivery to
customers. From the data gathered, Pharmaniaga designed a programme to ensure that the
Company would operate in an environmental-friendly manner.
Pharmaniaga had over the last few years put in place various measures and initiatives to ensure a
more effective and efficient Environment, Safety and Health (ESH) system. Several
committees have been formed to spearhead the ESH issues to ensure that all statutory guidelines
are adhered to. Due to such efforts, the Group achieved its target to extend ISO 14001
certification to all branches of Pharmaniaga Logistics Sdn Bhd in Juru, Kota Kinabalu and
Kuching. After completing three phases of consultation and training by its internal committee,
SIRIM recommended the extension of ISO 14001 to all branches.
Pharmaniaga is committed to reducing energy and water use throughout its research and
development, manufacturing and distribution processes. This focus results in more efficient, cost
effective operations while conserving natural resources vital to the Group operations and the
communities in which it operates. Pharmaniaga actively seeks opportunities to minimize its
environmental impact and reduce waste with particular attention on protecting the quality and
availability of water and reducing air emissions through energy conservation. Hence, the Group
has undertaken several measures to ensure that environmental, safety and health values are not
compromised.
Waste management is a key component of the programme and ensures that all wastes are
disposed off without polluting the environment. The programme also makes good business sense
as it will result in significant cost savings for Pharmaniaga. Scheduled factory wastes and
obsolete pharmaceutical products are disposed at the national waste management centre at Bukit
Page | 22

Nanas, Negeri Sembilan. For the year 2009, Pharmaniagas objective is to reduce scheduled
wastes from rejected materials by 10%. Nonscheduled wastes are addressed through a recycling
programme that resulted in a 30% reduction in 2010. A new target for 2011 is to reduce paper
usage by 15%. The emission of carbon monoxide from our own fleet of lorries and vans is also
regularly monitored.
Pharmaniaga tracks scheduled waste sent off-site from their facilities. The chart shows the
amount of scheduled waste disposed. The main components of scheduled wastes (discarded
drugs) are raw materials, products and dust collector. For tracking purposes, scheduled waste is
defined as any material, solid and liquid, that can no longer be used as it was originally intended
and must be modified in some way for beneficial reuse or destroyed to render it harmless to
human health and the environment. The vast majority of scheduled waste is incinerated and the
Group managed to reduce scheduled waste generated per kilogram by 20.0 per cent despite the
increase in production in 2007 with the implementation of full utilization of materials related to
the manufacturing process. Contaminated materials per output decreased by 40.0 per cent and
Reject products decreased by 63.6 per cent as a result of improvements in overall manufacturing
process.
Pharmaniaga defines nonhazardous wastes as those wastes discarded from manufacturing,
distribution, and administrative sources, including cardboard, paper, plastics and off-spec
product. The Group tracks its generation, recycling, and disposal of nonhazardous waste.
However, the Group continues to promote recycling as a preferred alternative to disposal. In sync
with that, the Group started to monitor the usage of pallets since July 2007. An average 240
pallets were reused in the packaging processes during the year under review. The Group has
continuously recycled all other packaging materials such as boxes, cartons and other materials.
Pharmaniaga has corporate standards and guidelines in place to ensure that its facilities meet or
exceed regulatory requirements regarding the treatment and management of wastewater effluents.
The Group measures parameters that contribute to water quality degradation, either in the form of
depleted oxygen levels (total suspended solids and chemical oxygen demand) or toxicity to
human and aquatic life (nitrates) to arrive at a total for discharge of general pollutants. The
quality of effluent water discharged from the plant met the Standard A requirements. The Group
will continue to collect metrics on these parameters.

Page | 23

Pharmaniaga is committed to working with its neighbors to ensure that its operations do not
negatively impact the community. The Group understands that nuisance issues, such as noise and
odours, can become significant if left unaddressed. In the event that odours or noise become a
problem for any members of the community, the Group encourages them to contact the
engineering and facility management.
The results from its monitoring of air quality have shown readings that are below the Malaysian
Environment Quality Act limits. Due to consistent and excellent outcomes recorded, the
frequency of air monitoring has been reduced since 2004. For the quality of air emission, the
average of particulate level was 0.0185 g/Nm3, well below the requirement level of 0.4 g/Nm3.

Each division is required to develop and maintain an energy management programme based on
the characteristics of its specific operational situations. The Environment, Health, and Safety
Committee reviews these programmes annually and reports its findings to senior management.
The programmes objectives are supported by a number of other company initiatives that require
consideration of energy issues. Pharmaniaga collects and reports data on electricity use and fuel
usage from its manufacturing facilities in Bangi. The majority of the fuel consumed by its
facilities is natural gas, which produces less air pollution than oil fuel.
2

SOCIETAL ENVIRONMENT

From the overall SWOT analysis, Pharmaniaga has its own opportunities and threat in the
pharmaceutical and healthcare sectors from the societal environment. The opportunities that
having is government support for local drug makers. Besides, expected growth in Malaysias
pharmaceutical industry and the biotech sector also help to improve the performance of
Pharmaniaga. Pharmaniaga also gain opportunity that overseas expansion through local
manufacture, joint ventures and product launches. In the other hand, Pharmaniaga also get
opportunity in increasing healthcare costs and consumer awareness boosting demand for cheaper
locally manufactured drugs.
The treats facing by Pharmaniaga is the companys growth and performance dependent upon
economic conditions in Malaysia and other countries, particularly Singapore, the Philippines and
Page | 24

Vietnam. Besides that, the pharmaceutical and healthcare sector is relatively low barriers to entry,
which is creating intense competition from new entrants such as Indias Ranbaxy. Pharmaniaga
also facing threat of pricing that generic manufacturers competing on price due to weak patent
law and wide variety of generics available, further reducing profit margins. The governments
policy of tariff-free imports of pharmaceutical products also a biggest threat facing by
Pharmaniaga as foreign competitors. The trend towards the purchase of branded drugs over lowcost locally manufactured generic drugs to benefit importers of products from companies based
in the US, UK and Germany. On the others hand, the company may eventually lose its generic
supply agreement with the government or see less favorable conditions in the near term.

Economic

Trends in the economic part of the societal environment can have an obvious impact on business
activity. In BMIs Business Environment Ratings matrix for the Quarter 3 of 2010, Malaysia
dropped from eighth to ninth place, having already slipped from fifth place in Quarter 1. In the
current quarter, the countrys overall score was 54.2, down from 55.7 previously, but there is
hope for the remainder of 2010 as the economy slowly begins to get back on track. In the
meantime, key attractions of the Malaysian pharmaceutical market over the longer term will
remain the governments encouragement of the biotechnology sector and the countrys economic
development, which will improve consumer purchasing power regarding pharmaceuticals. On the
other hand, per-capita pharmaceutical consumption is quite low, especially due to the high out-ofpocket payment levels, which make the market vulnerable to economic downturns.
This phenomenon affect to the Pharmaniaga which is a leader in the pharmaceutical market.
However, if compare to the last few years. The market is having a robust growth overall. It also is
good news that absence of price controls in the private sector, for Pharmaniaga, this is a good
economic variable towards them that the price is can be manipulated. Malaysia is facing the
problems that markedly behind South Korea, Singapore and Taiwan in terms of pharmaceutical
expenditure and foreign direct investment (FDI). This economic factor should be a way that to
revise the Pharmaniaga mission and try their best to improve in foreign direct investment to
explore their business in other countries. Pharmaniaga are likely to use the growing trade links
Page | 25

with the Middle Eastern Islamic markets for their halal medicines. Indeed, while pharmaceutical
companies have been aware of this niche for some time, they have only recently begun explicitly
targeting this growth area. Similarly, the government is aiming to promote the biotechnology
industry in order to attract foreign investment, with the sector already showing dynamism.

3.2.2 Technological
Changes in the technological part of the societal environment can also have a great impact on
multiple industries.Most recently, US-based biopharmaceutical company Emergent BioSolutions
and government-owned Ninebio (9Bio) formed a joint venture in Malaysia for the production of
biodefense biologics and vaccines. The government has identified biotechnology as one of the
core technologies to accelerate the transformation of Malaysia into a knowledge-based economy
and an industrialised nation by year 2020. The Malaysian Biotechnology Corporation
(BiotechCorp) is the leading agency responsible for the co-ordinated implementation of the
National Biotechnology Policy (NBP). With the government focusing on biotechnology as one of
the new drivers of economic growth, a number of new biopharmaceutical research companies
have emerged in recent years. The most important biologic manufacturers include Bioven, CCM
Duopharma, Inno Biologics and Ninebio. The National Pharmaceutical Control Bureau (NPCB)
has adopted the Guidance Document and Guidelines for the Registration of Biosimilars, making
Malaysia only the second country, after Australia, in the Asia Pacific region to adopt regulations
for biosimilar registration. In March 2010, Indian-based Avesthagen announced that it has begun
manufacturing two biosimilar products at Inno Biologics Putra Nilai facilities in Malays. This is
good news for the pharmaceutical companies in order to manufacture high quality and better
medicine for the patients.But also a threat for the local companies that the biotechnology seemed
dominated by the multinational companies.

Page | 26

The government will also allow private healthcare providers to promote their services through all
media, including newspapers, electronic media and online. The Health Minister said the decision
was taken to keep Malaysia in line with changes in the wider healthcare environment and to
ensure that the country maintains its competitiveness to attract medical tourists. This is a good
opportunity for Pharmaniaga that have their own website and always update their corporate
information and news in the space. It is a way to improve the competitive advantage among the
competitors and awareness for the customers and investors. As we know, now is the age of
technology, thus it is necessary for Pharmaniaga Company to follow the trend and fulfill the
customers expectation. However, advance technology involving high cost to fulfill customers
expectation to get the cheap yet high quality pharmaceutical products.
Pharmaniaga Bhd, the country's largest integrated pharmaceutical company, will be investing
more than RM300 million to develop 92 new products over the next five years to grow its
business. It is understood it will be spending more than RM300,000 to develop each product,
which will be produced at its plants in Bangi and Puchong in Selangor. The products will be
rolled out from 2012 for distributions in Asia Pacific, including Malaysia. New markets will
include the Middle East and Europe. Currently, Pharmaniaga has 60 products in the market
manufactured at its plant in Bangi which is 45 per cent utilised. The Puchong plant, which is
being set up for RM138 million, will operate by the first quarter of 2011. It has capacity to
produce 40 million units per annum, said Mohamad Abdullah, managing director for
Pharmaniaga. Mohamad was optimistic on the outlook for the industry and said it will grow by 810 per year. Mohamad said the group's financial performance is expected to improve in the
second half of the year, driven by higher demand for pharmaceutical products in government
clinics.
3

Political legal

Trends in the political-legal part of the societal environment have a significant impact not only on
the level of competition within an industry but also on which strategies might be successful.
Malaysia is an Islamic country; therefore it is vital to make sure all edible products in Malaysia
are halal. That serves as one of the challenges for Pharmaniaga to make sure that all
pharmaceutical products in Malaysia are Halal. Some of pharmaceutical product may need the
non-halal ingredients to product it; it is one of the challenges for Pharmaniaga to modify them
into halal products.
Page | 27

This industry will also be supported by a reduction in the approval period for the registration of
pharmaceutical products with single ingredients from six months to 60 days in 2011, according to
Health Minister Datuk Seri Liow Tiong Lai. This change in the regulatory framework is part of
the government's efforts to encourage growth in the pharmaceutical industry. Reducing the
approval period will boost drugmaker revenue in the country and consequently facilitate foreign
direct investment into manufacturing plants and research and development (R&D) facilities. This
regulation undoubtful brings good news for Pharmaniaga in order to manufacturing a new
medicine in a short period. In January 2009, the health ministry of China allowed the importation
of medicines from Malaysia that had been certified by the Malaysian government. Malaysia's
membership of the Pharmaceutical Inspection Convention and Pharmaceutical Inspection Cooperation/Scheme (PIC/S) puts local manufacturers in a good position to export to developed
markets. That is good time for Pharmaniaga explore their business into China.
3.2.4 Sociocultural
Sociocultural is one of the part of the societal environment and have a significant impact to the
business. Demographic trends are part of the sociocultural aspect. Malaysia's majority Muslim
population and the government's ongoing efforts to boost Islamic finance could see Malaysia
become a major financial hub over the medium-term horizon. This is a good economic
opportunity towards the Pharmaniaga. Pharmaniaga hold the 30% of this sector and distribute the
medicine to the government hospital, the visitors to the government hospital commonly are
Malays. So if Malaysia ongoing to boost the Islamic Finance, the effect from the plans will be
increase the purchasing power of the patients and sales of Pharmaniaga will be increased.
But, the treat that the opportunity for private-sector-led growth will improve as the government
continues divestment of state shareholdings in order to raise funds to narrow the budget deficit, it
will be give effect to Pharmaniaga because the decreased budget for the pharmaceutical sector,
the demand of Government hospitals will be decreased and also bring effect to the sales volume.
Besides that, wages are higher in Malaysia than in a number of its competitors, such as China and
Vietnam, which could be a long-term hindrance to economic expansion. To maintain its
competitive edge, Malaysia needs a steady stream of inward investment. The wages problem will
be caused the cost of the drugs become higher than other countries; Pharmaniaga also will lose
the opportunity to export the medical products to other countries.
Page | 28

Other than the wages problem, Malaysia's dependence on migrant labour, also a treat, particularly
for low-skilled jobs, poses a threat to long term economic stability. For the long term economic
foreseeing, it will caused the cash flew out to other countries, Pharmaniaga also will be effect
because hiring the migrant labor due to decrease the manufacturing cost, but it also will be cash
out to others countries and did not help to boost the domestic economy.

TASK ENVIRONMENT

3.3.1 Threat of New Entrants

New entrants of an industry typically bring to it new capacity, a desire to gain market share, and
substantial resources. For the Pharmaceutical market, there is a lots entry barrier for the new
entrants. Some of the entry barriers is because of the needs of expertise in this field and high
advanced technology to manufacture the medicine. The economics of scale is a possible entry
barrier because the exits pharmaceutical companies already have their own plant and efficiency
in manufacture the medicine, so that for the new entrants, it is not easily for them to produce the
low price medicine. For the product differentiations point, this is not a high entry barrier because
the medicine need to used in always same and common, it is also easily found at many retail
shops not only in the pharmacy. Government policy maybe a strict barrier to get entry in this field
because the health issues is important to all the people so that licensing requirements, the
manufacturing process and raw material is strictly control. So that, it can be concluded that the
threat of new entrants into the industry is medium.
3.3.2 Rivalry among Existing Firms
In most industries, corporations are mutually dependent. A competitive move by one firm can be
expected to have a noticeable effect on its competitors and thus may cause retaliation. In
Page | 29

Pharmaceutical Markets in Malaysia, there are few companies dominated the industries. They are
Pharmaniaga, CCM Duopharma, Apex Healthcare, Hovid, Y.S.P Southeast Asia and Kotra
Industry. The Pharmaniaga is dominated 30% of market share in this industry. The rate of the
industry growth is slower than other industries because the competition is not only between the
local companies and also the foreign companies that invest in Malaysia. Pharmaniaga do not
faced a big competition among its competitors because it has a comprehensive management with
its own plant, research and development company, distribution company and also manufacturing
company. Its value chain management is strong compare with others. So, the rivalry among the
existing firms is low.

Threat of Substitute Product or Services

In Pharmaceutical industry, besides domestic pharmaceutical industry, also have the foreign
pharmaceutical industry, for example Johnson and Johnson is getting involved in biotechnology
field and market for ED treatments, with the condition affecting estimated 2.2mn men in the
country, the main players in the field include US major Eli Lilly, which launched its ED drug
Cialis (tadalafil) in January 2004. German pharmaceutical company Bayer and GlaxoSmithKline
Malaysia (a subsidiary of British GSK) entered the market with the introduction of Levitra
(vardenafil). The drugs also compete directly with Pfizers Viagra (sildenafil). However, the ED
treatments have also been a frequent target of counterfeiting activities. Other multinationals are
also making more concerted efforts to capture higher market shares in Malaysia, outside the ED
segment. German drug giant Schering AG (now part of Bayer), leading Indian drugmaker
Ranbaxy and Belgium-based Agfa have made known their intentions to expand activities in the
country, with the latter planning to create a regional R&D centre in Malaysia, and Ranbaxy
intending to establish its Malaysian operations as a regional manufacturing base. Besides, the
traditional medicines are frequently used by the Malaysian, often in tandem with modern drugs.
However, some of the old generations still believe in the usage of traditional medicines instead of
the modern medicine. In conclude, the threat of substitute products or services is high.

Bargaining Power of Buyers

Page | 30

Buyers affect an industry through their ability to force down prices, bargain for higher quality or
more services, and play competitors against each other. In Pharmaceutical market, the buyers are
the patients, in Malaysia, the purchasing power of the patients is low, so that, the price for the
medicine especially for the government hospitals and clinics is subsidized, and the price is lower
than other distributors. Pharmaniaga is one of the companies that provide the medicine supply to
the government hospitals and clinics. The price is cannot be manipulated by the sellers, so that in
this industry, the bargaining power of buyers only will effect to the quality of medicine they
produced. So that, the bargaining power of buyers to effect in the industry is relatively medium.

Bargaining Power of Suppliers

Suppliers can affect an industry through their ability to raise prices or reduce the quality of
purchased goods and services. In the Pharmaceutical industry, Pharmaniaga do not face this
problem. This is because it has its own comprehensive value chain management, from
manufacturing the medicines until distribute the medicines to their customers. The company
operates through nine business units: Manufacturing, Marketing, Logistics, Solutions,
Pharmaniaga Research Centre, Pharmaniaga Diagnostics, Pharmaniaga Biomedical and Esteem
Interpoint. The company produces through Raza Manufacturing, while its distribution unit,
Pharmaniaga Logistics Sdn Bhd (formerly known as Remedi Pharmaceuticals) provides
pharmacy management services. So that, the bargaining power of suppliers is low because it did
not give a significant effect to the Pharmaniaga.
3.3.6 Relative Power of Other Stakeholders
The variety of stakeholder groups from the task environment are governments, local
communities, creditors, trade associations, special interest groups, unions, shareholders and
complementors. In Pharmaceutical Industry, the government plays an important role in control
the quality of medicines, the licensing and the regulatory related to the medical and health issues.
The any decisions make by the government could affect the business strategy of the company.
For example, the governments policy of tariff-free imports of pharmaceutical products, it is a
Page | 31

treat for the domestic company and need formulate a new strategy for this threat. So that, the
relative power of other stakeholders is high for Pharmaniaga.

3.4 Summary of External Factors

EFAS table
External Factors
1
Oppurtunities

Government

support
Seek opportunities

Weight

Rating

Weighted

Comments

Score
4

0.15

4.0

0.60

Leader in pharmaceutical

0.35

market
Middle Eastern Islamic

0.10

3.5

Markets.

for geographical
and strategic
expansion

Economic

development
Research and

0.15

development
Promotion channels

0.10

0.05

2.5

0.125

Purchasing power of

3.2

0.48

patients increase.
Identified biotecnology

3.0

0.30

electronic media, online

and newspaper

Threats
Economic

0.10

instability
Demographic trends 0.05

3.0
3.0

0.30

Societal environment

0.15

unstable.
Different social-culture
Page | 32

Competitors
Substitute of

0.10
0.10

3.5
3.3

0.35

each countries
Rivalry among existing

0.33

firms and new entrants

Traditional medicines and

product or services

foreign pharmaceutical

Government new

industry
Tariff free imports of

policy
Total Scores

0.15

3.8

0.57

Pharmaceutical Product
1.00

3.555

4.0 INTERNAL ENVIRONMENT: STRENGTHS AND WEAKNESSES (SWOT)

4.1 CORPORATE STRUCTURE
A corporate structure with clearly defined lines of responsibilities, limits of authority and
accountability is aligned to business and operations requirements in order to support the
maintenance of a strong control environment. Delegation of authority include authorization limits
at various levels of management and matters requiring the Boards approval are clearly defined
under the Discretionary Authority Limits (DAL) to ensure accountability and proper segregation
of duties. The DAL is reviewed regularly to ensure that it continues to be relevant and effective.
Policies and procedures for all key processes are clearly documented and reviewed at regular
intervals. Certain subsidiaries companies are certified under the carious standards such as ISO
9001, ISO 14001, ISO/IEC 17025 and OHSAS 18001. The business operations of Pharmaniaga
are also governances by various regulations and laws applicable to the pharmaceutical and
healthcare industry.
Pharmaniaga is a company that practice divisional structure. Divisional structure is appropriate
for a large corporation with many product lines in several related industries. Employees tend to
be functional specialists organized according to product or market distinctions.
Pharmaniaga consists of four functional structures, which are generic pharmaceuticals, logistic,
medical products and services, and others. In generic pharmaceuticals, there are several
functional lines. It consists of Pharmaniaga Manufacturing Berhad, Pharmaniaga LifeScience Sdn
Bhd, Pharmaniaga Marketing Berhad, Pharmaniaga Research Centre Sdn Bhd, and Pharmaniaga
Page | 33

Biovention Berhad. For logistic, it includes Pharmaniaga Logistic Sdn Bhd and PT Millenium
Pharmacon International Tbk (Indonesia) which is subsidiary of Pharmaniaga International
Corporation Sdn Bhd. Medical products and services consists of Pharmaniaga Biomedical Sdn
Bhd in which is a subsidiary of Pharmaniaga Logistic Sdn Bhd. Besides the functional structure
stated above, Pharmaniaga is a holding company for Pharmaniaga International Corporation Sdn
Bhd and it also participate in associated company for Forte Tech Solution Sdn Bhd.
A structured Performance Management System (PMS) which is linked to and guided by
established Key Performance Indicators (KPI) and Key Result Areas (KRA) parameters has been
implemented. PMS was driven by Pharmaniagas five-point focus value creation to support
business unit and organization strategies. It included productivity of resources, expansion and
growth of business, people and organization developments, system and process improvement and
image and perception management. The business unit provides a framework to translate and align
Pharmaniagas strategy into measurable operational terms and was used as a business unit and
organization performance measurable tool. This system has been implemented on employees at
the executive and managerial level.
The present structures are consistent with current organization mission in which is to provide
quality products and superior services by professional, committed and caring employees. It
means that each different functional structure has its own professional, committed and caring
employees who are able introduce the products and services to customers. They have particular
knowledge regarding to the pharmaceutical.
4.2 CORPORATE CULTURE
Corporate culture is the collection of beliefs, expectations, and values learned and shared by a
corporations members and transmitted from one generation of employees to another. The
corporate culture generally reflects the value of founders and the mission of the firm. It gives a
company a sense of identity.
Pharmaniaga now is adopts the Balance Scorecard quadrants (FCIO) to measure the KPIs
achievements, which are financial, customer, internal business process and organizational
learning and growth. Emphasis is placed on talent and competencies of employees through a
recruitment strategy and continuous training and development. Training and development needs
Page | 34

of employees are identified to ensure employees are adequately trained and competent in
discharging their duties effectively. Recruitment and promotion guidelines within the
organization are established to ensure appropriate people of caliber are selected to fill positions
available. Succession plan is also reviewed annually to ensure continuity at all critical positions.
Through PMS, employees competencies are being properly addressed and suitable training
programs or schemes identified to expand on the competencies.
There are proper guidelines within the organization for hiring and termination of staffs, formal
training program for staffs, appraisals and other relevant procedures in place to ensure the
employees are competent and adequately trained in carrying out their duties and responsibilities.
Organization provide handbook that contain the human resource policies and code of conduct is
available to all staffs. All employees are required to renew their declaration of non-conflict of
interest very year. Induction programs are conducted for all new employees to ensure that they
are immediately aware of the accepted code of ethical conduct and employees obligation and
responsibilities under the Safety and Health policies.
In addition, operational review meetings are conducted on a monthly basis to review and monitor
matters pertaining to the business operations. The review is based on performance reports which
provide comprehensive information on financial performance and other key non-financial
indicators.
Pharmaniagas risk management philosophy is to balance risk awareness and control with the
need to create and exploit opportunities. The organization practices a holistic risk management
since it offers a consolidated view of all types of risks and opportunities across the organization,
management processes and business activities. In manufacturing sector, Pharmaniaga also
exposed to the economic conditions of the global economy, impact of competition from other
pharmaceutical players, market demand, shortage of raw materials and changes in regulatory
environment. Ongoing risk monitoring is conducted to actively review the economic conditions
and its impact to the business and the effectiveness of risk mitigation measures. Pharmaniaga had
expanded its market penetration strategy including overseas markets where Vietnam and
Indonesia have been identified as priority markets. There are several risks inherent in the
organizations business operating environments in which include non-compliance to legal and
regulatory requirements, risks associated to environment and social responsibilities and retention

Page | 35

of key personnel. Pharmaniaga assessed the risk of an adverse effect on its business operations
arising from the above risks as low as the moment.

4.3 CORPORATE RESOURCES

4.3.1 Marketing
Pharmaniaga marketing approach is driven by human behavior. The members in Pharmaniaga are
considering as consumer too. They demand the best product from their organization. In addition,
they spend their time in researching what is the best, how is the best and when is the best for the
sake of giving the best products and services to their customers or fulfill customers needs.
Pharmaniagas members are aware that their action will affect their organization reputation. That
is the reason why their dedicated sales teams are not only knowledgeable in the strategy on
selling products but more important, they set out to foster long-lasting relationships with
whomever they come into contact with, be it their agents, partners, customers or consumers. They
will not stop there, and want to render their world-class services globally and will continue their
efforts to make Phamarniaga a household name in every corner of the world.
In addition, strong and motivate marketing team that has been formed is crucial in promoting and
advertising their products and services. Pharmaniaga has the largest sales team among local
generic healthcare companies which is beneficial and relevance in persuading and urging
customers to make an order.
Marketing mix refer to the particular combination of key variables under an organizations
control that can be used to affect demand and gain competitive advantage. These variables are
product, place, promotion and price. Pharmaniaga is a medicine provider in which medicine is a
core product while other supplementary services such as logistic, marketing or information
technology are offering value added to fulfill customers needs. This is due to the fact that
customers are used to judge a performance based on the whole value of the core product instead
Page | 36

of merely concentrating on a sole product. Thus, Pharmaniaga has successfully implemented their
product strategy by adding value through welcomed enhancements.
Since Pharmaniaga has its own logistic department thus methods and channels to deliver have to
be well decided. Customers can place their order through electrical channel since there is stable
network to support and manage the customer order form. Furthermore, an alternative network has
been designed to avoid network being jammed thus customers can make an order either through
physical channels or electrical channels since both channels are reliable and easy to use.
Successful marketing programs rely on its effective communication. Promotion and education
play important roles to provide related health information and advice and develop strong
relationship with customer through effective communication channels. Pharmaniaga has
organized several campaigns, such as Mesti Ambil Tahu (MAT) and Skuad Operasi Sihat
(S.O.S) to provide related health information and advice to public. At the same time,
Pharmaniaga also placed importance on corporate social responsibilities besides promotion and
education. MAT is a community projected that aims to increase public awareness to be more
proactive in understanding health issues and the basics of healthcare. The project mostly runs by
doing road show to public places, urban and suburban to reach out to the mass. The road shows
involve fun activities like quizzes on healthcare topic and the distribution of leaflets. The leaflets
are produced in three languages that are Bahasa Malaysia, English and Chinese. At the same
time, quizzes are also done over radio station. SOS is a mobile clinic that does not only perform
health screening, but also provides resources and establishes education and awareness for rural
and marginalized populations in promoting a healthy lifestyle. SOS extends basic health
education, counseling service and medical check-ups to the general public.
Pharmaniaga maintains a good price strategy since the reduced priced are reaching the final
customer and not being absorbed by resellers in the marketing channel. This will enable
Pharmaniaga to gain more profits as intermediate costs could be eliminated. On the other hand,
customers can keep away from bearing the higher prices as they are paying wholesaler prices
instead of retailer prices. As a result, customers pay less but qualities of the products are assured
and customers satisfaction can be increased.

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4.3.2 Finance
Pharmaniaga is an investment holding company. It is a public limited liability company,
incorporated and domiciled in Malaysia and listed on the Main Board of Bursa Malaysia
Securities Berhad.
The preparation of financial statements in conformity with the provisions of the Companies Act
1965 and Financial Reporting Standards, the MASB Approved Accounting Standards in Malaysia
requires director to make estimate and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reported period. The preparation
requires the use of certain critical accounting estimates and also requires management to exercise
judgment in the process of applying the organizations accounting policies.
Subsidiary companies are entities in which the organization has the power to govern the financial
and operating policies so as to obtain benefits from their activities, generally accompanying a
shareholding of more than one half of the voting rights. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered when assessing whether
the organization controls another entity. Subsidiary companies are fully consolidated from the
date on which control is transferred to the organization and are de-consolidated from the date that
control ceases. The purchase method of accounting is used to account for the acquisition of
subsidiary companies by Pharmaniaga. The cost of an acquisition is measured as fair value of the
assets given, equity instruments issued and liabilities incurred or assumed at the date of
exchange, plus cost directly attributable to the acquisition. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are measured initially at
their fair value at the acquisition date, irrespective of the extent of any minority interest. The
excess of the cost of acquisition over the fair value of the organizations share of the identifiable
Page | 38

net assets acquired at the date of acquisition is recorded as goodwill. If the cost of acquisition is
less than the fair value of the net assets of the subsidiary company acquired, the difference is
recognized directly in the income statement.
Pharmaniaga applies a policy of treating transactions with minority interests as transactions with
parties outside the organization. Disposal to the minority interests result in gains and losses to the
organization that are recorded in the income statement. Purchases of equity from minority
interests result in goodwill, being the difference between any consideration paid and the relevant
share acquired of the carrying value of net assets of the subsidiary company. Pharmaniagas share
of its associated companies post-acquisition profits or losses is recognized in the income
statement and its share of post-acquisition movement within reserves is recognized in reserves.
The cumulative post-acquisition movements are adjusted against the carrying amount of the
investment. Investment in associated companies is accounted for using the equity method
accounting and is initially acknowledge as cost.
The consolidated financial statements are presented in Ringgit Malaysia, which is Pharmaniagas
functional and presentation currency. Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at the dates of the transactions. Assets
and liabilities for each balance sheet presented are translated at the closing rate at the date of the
balance sheet. While Income and expenses are translated at the average exchange rates and all
resulting exchange differences are known as a separate component of equity in the organization.
On consolidation, exchange differences arising from the translation of the net investment in
foreign entities and the borrowing and other currency instruments designated as hedges of such
investments, are taken to shareholders equity. When a foreign operation is sold, the exchange
differences are known in the income statement as part of the gain or loss on sale. Goodwill and
fair value adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the closing rate.
Freehold land is not depreciated as it has an infinite life. All the property, plant and equipment are
depreciated on the straight line method to write off the cost of the assets to their residual values
over their estimated useful lives. Property, plant and equipment are stated at historical cost less
accumulated depreciation and impairment losses. Subsequent costs are included in the assets
carrying amount or known as a separate asset, as appropriate, only when it is probable that future

Page | 39

economic benefits associated with the item will flow to the organization and the cost of the item
can be measured during the financial year in which they are incurred.

4.3.3 Research and Development (R&D)

In R&D sector, Pharmaniaga has invested an amount of money to investigate and plan for the
best strategy for advance development. As a result, it successful development scale-ups of
products and speedier product development and promoted new products in the market faster in
cost-effective manner is compared to the competitors. The proven platform and talented
employees will continue to achieve the productivity gains and provide value added services, such
as improvements and reengineering of existing formulations and manufacturing processes. The
Quality Control and Research & Development Laboratories are accredited to the ISO/IEC 17025
Laboratory Accreditation Scheme. Furthermore, Pharmaniaga advancing into new areas of
biotechnology including biogenetics and potential drugs developed from local herbal remedies.
In Research and Development (R&D) lab, Pharmaniaga currently has acquired 22 research
talents, and is planning for 6 additional talents to strengthen its focus on the bio-equivalent and
bio-similar segmentation. Furthermore, Pharmaniaga takes initiatives to source talents from
India, Canada, Pakistan and United Kingdom for its Product Development team. This strategy is
aim to improve the dynamism of the organization through re-skilling and changing mindset
among talents. This approach that gears the organization towards multi-skilling and multi-tasking
among them is crucial as the organization is the largest producer of pharmaceutical products in
the country.
4.3.4 Operational and Logistics
There are several flows of Pharmaniaga in providing its products and services to customers. The
flows are including information, consultation, order taking, hospitality, safekeeping, exception,
Page | 40

billing, billing and payment. In the first step, customers are likely to seek for information
regarding to the products and services before making a decision. On the other hand, Pharmaniaga
has been creating a strong marketing team to focus on promoting and providing relevant
information for their customers. In addition, customers can gain information easily through their
website as well as words from mouth. This is because some new customers are lack of the related
information so that precious advices are necessary to avoid misunderstanding about the product
or service provided.
The second step in providing products and services in Pharmaniaga is consultation. Consultation
strongly inspired in supplementary services. Customers are more likely to get responses from the
service provider especially when there is variety products or services which then to confuse them.
On the other hand, Pharmaniaga has been developing an effective consultation scheme to guide
their customers in improving their relationship with the organization. It will also increase
customer loyalty indirectly when they have better understanding towards the products or services
provided.
The third step in providing products and services in Pharmaniaga is order taking. Order taking
will take place when customers decided to buy a product. The organization can handle the order
fast, accurately and timely. For example, Automated Storage and Retrieval System (ASRS) aim
to store and remove inventory automatically since there is a low probability for the organization
to make a mistake or delay customers order.
The forth step in providing products and services in Pharmaniaga is hospitality. Service provider
has to provide an ideal environment and procedure to attract new customers in this process.
Pharmaniaga able to provide such an environment since their employees are well trained and
their systems used are in advance. Furthermore, well managed logistic system also help in
increasing customers satisfaction because they save time and efforts while purchasing a product
from Pharmaniaga.
The fifth step in providing products and services in Pharmaniaga is safekeeping. Pharmaniagas
products are well taken care in terms of packaging. Moreover, its products are reliable and have
been certified and the organization has an efficiency logistic system that can deliver products to
customers on time. Through safekeeping service, customers satisfaction may increase since the
organization is paying attention on their products safety and security.
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The sixth step in providing products and services in Pharmaniaga is exception. Exception is a
supplementary service that beyond the normal routine. Pharmaniaga design a guideline in
advance to avoid unanticipated circumstances. The organization has to handle as soon as possible
if there is problem or complaints regarding to the services provided. In addition, the organization
is reliable for any mistake and compensate for lass damage or injury in serious cases.
The seventh step in providing products and services in Pharmaniaga is billing. Pharmaniaga is
supplying their products to government or private hospital in large amount, so it has to make their
billing timely and effectively since convenient and easy billing methods are requested by
customers. Besides that, billing details are completed with information on how total was
calculated.
The last step in providing products and services in Pharmaniaga is payment. Pharmaniaga has to
control their account receivable and account payable in order to reduce overload debt. Customers
are expected to make payment once they received the billing notice. The organization has
prepared several billing methods, such as debit card and credit card or cash transfer, as long as
the method is convenient for customers.
In logistics sector, Pharmaniagas customers can make their order through Pharma*Net. When
customer service order management (SCOM) had received the customer order through eordering, they will send the order to the warehouse in picking out the product through Automated
Storage Retrieval System (ASRS). After products have been picked up, the product will be put at
staging area for shipping to the destinations. In addition, Pharmaniaga is the leading Malaysian
distributor of pharmaceutical and healthcare related products for local and foreign principle with
a customer-based that include government hospitals, private medical centre, pharmacies and
private clinics.
4.3.5. Human Resources Management (HRM)
Pharmaniaga takes responsibilities to ensure that its employees are enjoying the welfare provided
by organization. Prioritizing the relationship within the organization, Pharmaniaga enhance its
employees with several beneficial commitments. Employee Relation (ER) maintains employeremployee relationships that contribute to satisfactory productivity, motivation and morale. ER
also conducts activities to enhance the working relationship among employees with sports, social
Page | 42

events and recreational activities. Industrial Relations (IR) creates and establishes a harmonious
working environment for employees. IR also prevents and resolves problems involving
employees among the organization. Organization security ensures that the security of personnel
and property within the office compound. It manages the parking arrangement and traffic flow of
vehicle in the office hours.
In addition, Pharmaniagas welfare establish to satisfied employees. The welfare includes setting
up of a Joint Consultative Council, establishing Kelab Sukan & Rekreasi Pharmaniaga Berhad
branches at every entity so that the organization can organize outings, activities and events.
Furthermore, the organization also establishes a Surau Committee, organizing in-house employee
relation activities, such as family day and dinner monthly, providing financial assistance to
eligible employees with the guidance of Lembaga Zakat Selangor and reserving designated
parking space to expecting mothers or employees with health problem.
At Pharmaniaga, talent management is defined in two different perspectives. The first perspective
is related to individual performance using the balance scorecard with defined key performance
indicators such as sales targets and the number of new products that can be developed and
marketed within a specific timeframe. The second perspective looks at the individual potential
that is gauging leadership ability, mobility to be relocated and behavioral characteristics. The
organization does not create any particular pools if talents make the management believes that
talents exist across the organization. The identified talents whoever they are in the organization
will be ear-marked for advancement position and succession planning.
Pharmaniaga places lots of importance on Key Performance Indicators (KPIs) as a measurement
in monitoring business performances. Through KPIs, the organization able to identify who, what,
when, where and how often to develop potential successor. Employees at Pharmaniaga are
categorized into four types, which is high potential with the ability to take higher responsibility,
promotable, well-placed with mere contributors and some difficulties adjusting and issues
employees with miss-fit. However, the last type employees are subjected to Performance
Improvement Program (PIP) to improve their work performance and put them back on track.
Pharmaniaga believes in going for quality. Their utmost aim is to equip people with competencies
and knowledge on current trend so that employees can be versatile and flexible to economic
changes. The pharmaceutical industry in general is noted to be a rather economic recession proof
Page | 43

industry. On the other hand, the organization records low attrition rate and does not have any
regrettable loss of talents. Pharmaniaga always strived to recruit the best talent in tern of
capability and suitability to ensure that its selection provides the right talents for the tight
positions.
In addition, Pharmaniaga emphasize on the mobility of talents where talents should be agile and
multi-skilled to avoid being too specialized in one job. The organization also places
o=importance on observable behaviors in the required values, such as integrity and how people
consistently behave in the absence of the boss. There must be self-governance in the absence of
enforcement to facilitate a democratic work environment. The organization benchmarks across
industry with the aim to source best practices and becoming the employer of choice in order to
keep itself up-to-date and current with human capital development globally.
For the manager level, Pharmaniaga is providing them with the leadership development program
and skills development courses. The courses are to nurture them towards top position of the
organization in the future. Pharmaniaga is a Government-linked organization; it has the
opportunity to participate in the cross-assignment exercise operated by Khazanah Nasional
Berhad. Pharmaniaga emphasize on people and talent optimization as its business niche and
competitiveness rely more on people than having process in place. So, it is important to identify
talents to be sharpened, widen and expand their acquired skills technically and managerially. This
is because process can be fixed but these must also be flexible to people needs, the people who
make targets materialized.
In addition, Pharmaniaga focus on building its bench strength and the ability to provide different
opportunities to employees whenever they are available. For example, Pharmaniaga believes that
talents must be all rounder and should be trained to acquire the essential skills of the ability to
have a helicopter view of the business. So, it holds talent management as a top strategic priority
of the organization. Pharmaniaga encourages its employees to build their multi-tasking skills,
make them marketable within and outside the organization by branding one-s expertise as well as
enhancing networking with as many strategic people as possible.
Pharmaniaga considers effective communication with shareholders and investors as extremely
important. Pharmaniaga embarks on an active Investor Relation (IR) program aimed at fostering

Page | 44

high quality dialogue as well as building credibility and trust with the broad envestment
community.
The Managing Director or IR personnel is primarily responsible for all IR activities. The
activities include hosting, teleconferences, responding to email or telephone enquiries, catering to
numerous requests for private meetings with investors and analysts, and organizing trips for
investors to visit the organizations warehouse, plants and factories.
Furthermore, Pharmaniaga has communicated to investors and shareholders the solid of the
Board and management, auguring well for the continuity of current and future business. The
organization is committed to maintain constructive relationship with shareholders in pursuing the
highest standards of corporate governance practices throughout the organization, with full
appreciation of the impact of sound governance on long-term corporate performance and optimal
shareholders value.
4.3.6. Information System (IS)
Pharmaniaga has its own website, which is www.pharmaniaga.com. This website shares business
overview, investor resources, photo gallery, newsletter, online catalogue and answer to frequently
asked questions. In addition, shareholders can receive up-to-date information through the
website. A dedicated e-mail address is also available at wmaster@pharmaniaga.com. It provided
a contact point for shareholders or customers on any issues concern. Furthermore, the
organization website provides an excellent medium of communication and source of information
to shareholders and the general public regarding to the annual report and media briefings. Besides
that, the organization website consists of latest financial results, investor presentation and news
releases besides the avenue for up-to-date information of the organization.
Pharmaniaga is an organization that applying online ordering. This ordering method is easy for its
customers to purchase products necessary. E-ordering enables customers order their products
online without visiting the outlets. Customers are order products online thus the organizations
employees will process the order as soon as possible so that the products can deliver to customers
on time.

Page | 45

In addition, Pharmaniaga applies several electronically payment method, such as credit card,
cash transfer and debit card. These payment methods are an easy way for those customers who
purchase expensive products and services.
Pharmaniaga needs to prescribe medication that generates higher returns to the organization
compared to over-the-counter products that provide smaller profit margin. The organization also
invest into ICT to address the geographical and regional divide in the pharmaceutical business
and being a leading pharmaceutical organization in the nation requires focus on people
management for leadership accountability.
4.4 SUMMARY OF INTERNAL FACTORS
Integration of manufacturing, marketing, logistics, medical planning, equipping and distribution,
information technology and research and development are meeting customers expectancy or
exceed their expectation. Pharmaniaga is able to control its production so that the organization
can fulfilled customers demand without any products shortage. The organization emphasized on
better quality of life thus providing products and services in an affordable level. As a result,
different field in the organization is responsible to achieve their mission and vision as well as
objectives.
In addition, Pharmaniaga is emphasizing in delivering value to its customers via superior quality
products and services which is stated as the mission. It puts a lot efforts and guidelines to achieve
the desired mission. This is proven by Quality Management System is maintaining at the
excellent level without any deviation in production of quality products. The organization Quality
Management System is certified to the ISO 1990 standard, which is the essence of effective
quality management.
Pharmaniaga is growing rapidly in domestic as well as international market in which it has been
internationally recognized as a healthcare solutions provider. The organization fully applied
creativity and innovation into its marketing strategy which enable them to become a potential
market leader. This is because the organization understands that different people tend to hold
different perception and belief in decision making.
However, Pharmaniaga has its own weakness that is it has to cover maintenance and operation
costs. The organization has to plan and launched for relevant strategies to make sure that

Page | 46

maximum capacities can be operated without wasting its organization resources. In addition, the
organization has to plan the budget for the maintenance costs since profitability is affected.

IFAS table
Internal Factors

Weight

Rating

Weighted

Comments

Score
1
2
Strengths
4.0
Vertical integration 0.15
4.0
Leadership of top 0.10

management
Potential

trained sales teams

Products quality
International

and 0.10

oriented
Weakenesses
Maintenance costs

Financial position

Process

operational
Pool of talents

0.15
0.05

4.5
4.0

0.6
0.4

Improve productivity
Construct
organization

0.3

reputation
Increase

0.675
0.2

market share
Satisfied customers needs
Larger
pharmaceutical

organization

industry
0.15
0.05

oriented 0.05

Marketing strategy
Total Scores

3.0

0.10
0.10
1.00

3.5
2.5
3.0
4.0
3.3

0.525

Planned for maintenance

0.125

budget
Advance budgeted for new

0.15

products line
Slow on processing

0.4

product
Lack

0.33
3.705

of

medical

knowledge
More on persuading

Page | 47

5.0 ANALYSIS OF STRATEGIC FACTORS (SWOT)

5.1 SITUATIONAL ANALYSIS
SWOT analysis is referred to a scan of the internal and external environment is an important part
of the strategic planning process. Environmental factors internal to the firm usually can be
classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as
opportunities (O) or threats (T).
Strengths in the SWOT Analysis are attributes or characteristics within the organization that are
considered to be important to the execution and ultimate success of the project. While
weaknesses in the SWOT Analysis formula have to do with internal factors that could prevent the
achievement of a successful result to the project.
The third classification of factors in the SWOT analysis is Opportunities. This classification has
to do with external elements that will prove helpful in achieving the goals set for the project.
Last, the final essential component for the SWOT Analysis is Threats. Here, external factors that
could threaten the success of the business venture or project are listed and addressed.
The SWOT analysis provides information that is helpful in matching the firm's resources and
capabilities like Pharmaniaga to the competitive environment in which it operates. As such, it is
instrumental in strategy formulation and selection. The following diagram shows how a SWOT
analysis fits into an environmental scan:

Page | 48

Strength

Weakness

S1. Vertical integration

S2. Leadership of top
management
S3. Potential and trained sales
teams
S4. Products quality
S5. International oriented

Opportunity

O1. Government support

O2. Seek opportunities for
geographical and strategic
expansion

O3. Economic development

O4. Research and development
O5. Promotion channels

W1. Maintenance costs

W2. Financial position
W3. Process oriented

operational
W4. Pool of talents
W5. Marketing strategy

Threats

T1. Economic instability

T2. Demographic trends
T3. Competitors
T4. Substitute of product or
services
T5. Government new policy

5.1.1 Strength
First strength of pharmaniaga is vertical Integration. Integration of manufacturing, marketing,
logistics, medical planning, equipping and distribution, information technology as well as
research and development aid in meeting customers expectancy or exceed their expectation.
Better quality of life is emphasized yet affordable products and services are provided. Through
Page | 49

the integration, Pharmaniaga is able to control their own productions thus demands from different
level of customers can be fulfilled thus shortage of the products are reduced. As a result, different
field is responsible to achieve their mission and vision as well as objectives of the company.
Second strength is Pharmaniaga have a strong leadership of management. Pharmaniaga has many
capabilities leaders which are ability to inspire employees to overcome challenges and increase
productivity. Besides that, they also can utilize a leadership management style to create a
workplace environment where people feel like equals. Their employee who doesnt feel like a
subordinate is more productive and more open to constructive criticism, knowing that their hard
work and willingness to improve is helping to achieve a common goal. Tapping into the spirit of
teamwork is one of the best ways to energize employees.
Third is potential and trained sales teams. This is because Pharmaniaga always providing
employees with numerous training and workshop to give them attain more wide knowledge like
how to sales to customer, how to build out friendly relationship with customers, how to retain
existing customers and attract new customers to using Pharmaniagas products and services.
Through this training programmed, Pharmaniaga had fostering potential and professional sales
teams. They are now able to plan the suitable marketing strategy to attract more customers to
purchase their products and willing to use their services, which in turn make the business more
profitable.
Fourth strength is products quality. Pharmaniaga is emphasizing in delivering value to their
customer through superior quality products and services which is stated as the mission of their
company. Therefore, efforts and guidelines have been made or complied to achieve their desire
mission. Hence, Quality Management System is maintaining at the excellent level without any
deviation in production of quality products. Their Quality Management System is certified to the
ISO1990 standards, which is the essence of effective quality management.

Fifth strength is international oriented. Pharmaniaga understand their potential customer

thoroughly. This is due to the fact that different people tend to hold different perception and
belief in decision making. Thus, innovation and creativity are greatly applied into marketing
strategy which enables them to become a potential market leader. As a consequence,

Page | 50

Pharmaniaga is growing rapidly in domestic as well as international market in which it has been
internationally recognized as a healthcare.
5.1.2 Weakness
First of the weakness is maintenance costs which related to the high costs that Pharmaniaga has
to cover such as maintenance and operation costs. Therefore, relevant strategies have to be
planned and launched to make sure that maximum capacities can be operated without wasting
their resources. Moreover, budget for the maintenance costs have to be planned carefully since
profitability is affected if maintenance costs are not spent accordingly
Second of the weakness is financial position. Pharmaniaga is careless on balancing state in the
demand and supply of a product. Companies tried to reach the break-even point in order to gain
profit when sufficient products are supplied to meet the customers demand for a particular
product. This is due to the fact that excess demand or excess supply may affect the profitability of
a company. However, it is a challenge for Pharmaniaga in maintaining profitability associated
with a fluctuating rate16.
Third weakness of Pharmaniaga is Process oriented operational. Pharmaniaga is providing its
products and services to customers. The flows are including information, consultation, order
taking, hospitality, safekeeping, exception, billing, billing and payment. Because the flow and the
step is more complete so it will become Pharmaniagas weakness when they rush to complete
their products. This weakness will make Pharmaniaga lost bigger profit.
Forth is pool of talents. Automation and analysis of Pharmaniaga recruiting and hiring processes
provides the immediate workforce visibility and insights that they need to significantly improve
their bottom line. They not much emphasize whether these person talent or not or are they
suitable to hold this position in the department. As a result, poor talent of employees consider of
planning the projects just in their own perspective, they cant observe some projects in different
perspective and cause Pharmaniaga loss the profit and low performance.
Fifth of Pharmaniagas weakness is marketing strategy. Pharmaniaga sometime wrong defined
target customers and not have a clear marketing strategy which is a necessity for any business.
This is because a clear marketing informs us what products will sell and how to sell them. It

Page | 51

dictates important budgeting and long-term planning decisions. It affects how many employees
that need. So, Pharmaniaga needs try to avoid these problems from happen again.
5.1.3 Opportunity
First of the opportunity in Pharmaniaga is government support. For example, government
cooperate with Pharmaniaga promote the biotechnology industry in order to attract foreign
investment, with the sector already showing dynamism. Government also provide leadership
development program and skills development courses to Pharmaniagas employees. Besides that,
Government gives subsidiary to Pharmaniaga. As a result, reduce Pharmniagas finance problems
and expand to other country.
Second of the opportunity in Pharmaniaga is seek opportunities for geographical and strategic
expansion. Since Pharmaniaga has operating warehouses in 36 sites across 4 countries which is
Malaysia, Indonesia, Vietnam and China. With the rapid growth and development, they have the
opportunity to expand their businesses into other Asian countries and USA. Therefore, efforts to
increase their productivities and improving profitability must be realized since this is a golden
opportunity for Pharmaniaga to expand their strategies and businesses worldwide.
Third of the opportunity is economic development. This opportunity allows Pharmaniaga produce
different product, because at that time customers have a high purchasing power. It means they
can afford to buy products even if prices are negotiable rather expensive. As a result, it allows
companies to make high profits and subscriber rate is raise.
Forth of the opportunity is Pharmaniaga invest a lot of efforts in research and development field
in which an amount of money spent to investigate and plan for the best strategy for advance
development. As a result, successful scale-ups of products and speedier product development can
be developed and new products can be promoted in the market faster in cost-effective manner as
compared to their competitors.
The last of the opportunity in Pharmaniaga is promotion channels. Pharmaniaga had successful
implemented effectiveness promotion through mass media such as newspaper, radio, television,
internet, and so on. Besides, Pharmaniaga also offer sponsorship in some entertainment
programmed include concerts, exhibition and sport events. Other than that, Pharmaniaga has
Page | 52

provided scholarship for students as one of their promotion method. This will indirectly help to
promote their brand.
5.1.4 Threats
First of the threat in Pharmaniaga is economic instability. This is because economic can change in
a vary conditions which it can develop and also may experience a severe recession. Pharmaniaga
cant expect when the economic status is occur. So, they will always think carefully in all aspects
before create out new products to market. It is because if the product failure in market, so it mean
Pharmaniaga will lost a big profit especially if economic instability. Besides that, it also will
stifle innovative and creative thinking among employees.
Second threat is demographic trends. This situation occurs because related to different society
and social structures. Changes in the structure of the population, and in consumer lifestyles and
behavior will affect buying patterns. For example, Malaysia just will use or accept to buy the
halalproducts. So, it make challenges to Pharmaniaga because it needs to do more research to
this halal ingredient that they didnt try it before.
Third threat of Pharmaniaga is exists many competitors. Although Pharmaniaga has become a
potential market leader in Malaysia but they still have to compete with other competitors in order
to strive and attain their goal. This is a challenging as well as threatening task for Pharmaniaga
since customers are more likely to compare the similar products with respect to the different price
and quality offered. However, Pharmaniaga may view this as a challenge to improve their
companys performances.

Forth threat to Pharmaniaga is substitute of product or services. Due to exist many competitors,
many of them try to counterfeit Pharmaniagas products and sell in a lower prices to consumers.
Low price strategy has attracted many consumers to buy their products. As a result, it will reduce
the company's sales and consumers loyalty to our products. If the situation happen continuous, it
will cause the company lost profit that we cant expect it.
The last threat of Pharmaniaga is government new policy. Government policy maybe more strict
barrier to get entry in this field because the health issues are important to all the people so that
licensing requirements is difficult to get it. Pharmaniaga needs to experience many procedure
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before approve by government. Long steps and complex procedures make Pharmaniaga cant
expand their market to other country easily. This situation will disturb or delay whole of the
companys operation. Furthermore, impose tax by government will also increase the financial
burden of Pharmaniaga.
The SFAS (Strategies Factors Analysis Summary) Matrix is summarizes on Pharmaniagas
strategic factors by combining the external factors from the EFAS table with the internal factors
from the IFAS table.
SFAS TABLE
1

4 Duration
S
H
O
R
T

I
N
T
E
R
M
E
D
I
A
T
E

L
O
N
G

Strategy factors
S1 Vertical
Integration
S3 Products quality

Weight
0.15

Rating
4.0

Weighted
score
0.60

0.10

3.0

0.30

W1 Maintenance
costs
W4 Pool of talents

0.10

3.5

0.35

0.10

4.0

0.40

O1 Government
support
O2 Seek
opportunities for
geographical and
strategic
expansion

0.10

4.0

0.40

0.15

3.5

0.53

O4 Research and
development

0.10

3.2

0.32

Comments
Improve productivity
Satisfied customers
needs
Planned for
maintenance budget
Lack of medical
knowledge
leader in the
pharmaceutical market
through local
manufacture, joint
ventures and product
launches

identified
biotechnology
Page | 54

T3 Competitors

0.10

3.3

0.33

T5 Government
policy
Total cost

0.10

3.8

0.38

1.00

The rate of the industry

growth become more
slower
tariff free imports of
Pharmaceutical Product

3.61

5.2 REVIEW OF DIRECTION

5.2.1 Current Mission
Pharmaniaga is one of UEM subsidiary company and a public listing company in the Main Board
Bursa Malaysia Securities (BMS) with the mission is to be Malaysia's foremost integrated
healthcare solutions provider, contributing significantly to improving wellness of people by
providing high quality products and services.
.Pharmaniaga mission is to be the preferred brand in healthcare in the market we choose to serve
and the Pharmaniaga mission is to deliver maximum value to our customer through superior
quality products and services by committed professional and caring employees.
With a vision to be the premier Malaysian pharmaceuticals company, Pharmaniaga is guided
byits philosophy of doing business with a conscience and empowered by its mission of
enriching life together.
Already operating in 38 sites across 3 countries (Malaysia, Indonesia & Vietnam) the
Pharmaniaga Group is poised to be a regional player in the international pharmaceuticals arena.
5.2.2 Current objectives
Pharmaniaga is driven by its goal to enrich the lives of all those that it comes into contact with,
be it its own employees, customers, partners, or the patients who benefit from Pharmaniaga
products and services.
"Mesti Ambil Tahu" is testimony to Pharmaniaga's commitment towards enriching life together,
and will continue to be part of Pharmaniaga's philosophy of doing business with a conscience.

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