DR REDDY'S LABORATORIES

LTD: SEARCHING IT'S

GLORIOUS DAYS
STT || Section A
Group 03

PROBLEM STATEMENT
Dr. Reddy's Laboratory Ltd's ambition
created trends in the Indian
pharmaceutical business, but its
income stagnated over the last four
years, and profit fell.
RESPONSE FACTOR
IMPACT ON BUSINESS
Shareholders were urged to overlook
Decline in sales in North America
FY17's performance and look forward to
Tarnished the company's image
a turnaround in FY18, demonstrating
Severly hampered the company's
how strategic leadership is a key lever in
expansion goals as the USFDA's
turnarounds.
warning letters meant that no new
The senior leadership was united
goods will be approved.
throughout this difficult moment to start
the recovery effort.

Summary
ROOT CAUSES
Internal causes: The USFDA warning letter at three of its manufacturing sites (Two APIs and one formulation)— for serious
manufacturing procedures violations. Though Dr. Reddy's worked with USFDA to fix the issues, it lost its competitive advantage
when one of its warning letters was not rescinded. Reduced sales, and increased expensses eroded profitability. Profit dropped
50% between FY15 and FY17. Due to these factors, Dr. Reddy's has lost its competitive edge.
External causes: Dr. Reddy's continuous market expansion caused internal challenges and complexity. Due to currency
depreciation and political difficulties, businesses in key international markets like Russia and Venezuela suffered throughout
the years. Emerging markets saw government-induced pricing pressure.

01
WHAT NEEDS TO BE DONE DIFFERENTLY? HOW TO RESOLVE THE ISSUE
QUICKLY? OR SHOULD DR. REDDY’S STAY ENGAGED AND WAIT FOR THE
ISSUE TO GET OVER?

Solve the breaches identified by USFDA in manufacturing practices

Examine industry structure and market dynamics
Mitigate the threats faced by the firm
Enhance quality systems to meet USFDA standards
Collaborate with Academia & Government to develop next-level skills required to
cater ever expanding pharma space
Hold the market expansion, which led to complexity and internal issues
Reduce the dependence on overseas market
Fasten the new development process and approvals from the United States
Form a strategic actions planned when the company starts to decline for long-
term improvement and make short-term operational actions to survive through
the decline phase
Stakeholders perception management

02
While the United States has always been the focus market for Dr. Reddy’s in the past, was this the
time to relook at the emerging market strategy to venture into the untapped markets?
Dr. Reddy's ongoing market expansion caused organizational challenges and complexity.
Over the years, macroeconomic concerns, including currency devaluation and political difficulties, hurt
enterprises in major international markets like Russia and Venezuela.
Governments have influenced emerging market prices. Expanding markets and operations simultaneously is
the key.
The expenditures had risen with a fall in sales and revenues. With USFDA restrictions, it is not advisable to
venture into a new market.
Was there a need to rejig the organization to inject fresh line of thinking in the senior management
to launch initiatives to manage costs, sell off non-profitable businessesand facilities, manage
pricing pressure in emerging markets, etc.?
Yes, there was a need to rejig the organization to inject fresh thinking into the senior management.
The senior management was aware of the decline in revenue from 2015 and was transparent regarding it to
the shareholders. It even hired a US-based consultant to find independent product-quality assessments after
USFDA.
However, the aggressive expansion in the markets was a wrong move; the senior management seems to take
actions to take damage control but needs to be visionary enough to take the proper steps for the
organization. A new perspective in the group would help the organization set the right goals and carefully
work towards them.
03
 Succession Planning
The market expansion in almost 100 nations is not constant and is impeded by macro-environmental variables. Short-term
recovery and long-term sustainability should guide the comeback.
It's time to hand the torch to the next leader, who will aggressively develop the firm in new areas and improve old methods
for sustainable growth.
It will be wise to identify a new replacement within the organization, someone who knows the company's issues.
The company's Management Council has several problem-solving leaders; choosing one of them for the turnaround is the
best option. Looking for a successor is also innovative because it will provide a fresh perspective to these difficulties, but
the organization needs more time to get started.
Mergers and Acquisitions
The company must steer itself out of what was being called a 'Perfect Storm.''
Strategic action needed to be taken to drive long-term performance
Achieving product differentiation through proprietary product development and a strong franchise will give a competitive
advantage to the company
Enter into emerging businesses like biosimilar
Expanding product portfolio in developed market
Shift towards drug discovery services
Foray into Contract Research & Manufacturing Services
It should go ahead with mergers and acquisitions to acquire the capability to achieve the above objectives.
Raw Materials
Research & Pharma
Licensing & Inbound
Development Manufacturing Distribution
Logistics
04


Which direction should the company steer itself so that it can come out of the ‘perfect storm’? Which path
should the company take to hold or to run with the compliance issue? Where to find a successor—within or
outside the company?Also, should the company plan for organic or inorganic (M&A) growth to avoid
moderate recovery and failure?

a. The company must steer itself out of what was being called a 'Perfect Storm.'' We recommend the organization examine
industry structure and market dynamics, hold the market expansion which led to complexity and internal issues, reduce its
dependence on overseas markets and make short-term plans to increase operational efficiency while simultaneously working on
a long-term project. It should work on achieving product differentiation through proprietary product development, and a strong
franchise will give a competitive advantage to the company

b. The company should run with the compliance issue. However, its primary focus should be on the case, and it needs to
continue the subject continuously.

c. There are many competent personnel in the management council of the organization, and Dr. ReddyReddy's can find its
successor from within the organization. Hiring someone from within the organization will have numerous advantages because
that leader would have seen the organization work through the storm and in good times. Their new perspective will help the
organization grow and emerge from the 'perfect storm.''

d. We recommend the organization plan for inorganic growth (M&A). The organization's targets' growth and development are
impossible through organic growth. It needs to expand its business into emerging businesses like biosimilars and expand its
product portfolio to reduce its dependency on the overseas market. Entering into an M&A will help it grow its business.

05
 GROUP 3
Nikita Prakash Katkade (M378-21)
Abhilasha Singh (M111-21)
Shubham Shekhar (M091-21)
Saumya Kanniguli (M356-21)

Thank You! Tanya

Akhil Azmeera
(M100-21)
(M235-21)
Rohit Chakma (M281-21)