HIGHNOON LABORATORIES 1 Value Chain of Highnoon Primary Activities Inbound Activities: Inbound logistics is primarily associated with receiving, storing, and distributing inputs to the product. It includes material handling, warehousing, inventory control, vehicle scheduling, and returns to suppliers. Highnoon is mostly purchasing molecules and other chemicals from different suppliers in Pakistan and also importing from United States, U.K., Germany, Switzerland, Japan, Holland and France. According to the company “Only the best Raw materials make it to the finished products, thus ensuring that what roles of the production line the finest of products and is nothing less”. Once the materials are sorted out then they are shifted to companies Operations:
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HIGHNOON LABORATORIES 1
Value Chain of Highnoon
Primary Activities
Inbound Activities:
Inbound logistics is primarily associated with receiving, storing, and distributing inputs to the
product. It includes material handling, warehousing, inventory control, vehicle scheduling, and
returns to suppliers. Highnoon is mostly purchasing molecules and other chemicals from
different suppliers in Pakistan and also importing from United States, U.K., Germany,
Switzerland, Japan, Holland and France. According to the company “Only the best Raw
materials make it to the finished products, thus ensuring that what roles of the production line the
finest of products and is nothing less”. Once the materials are sorted out then they are shifted to
companies
Operations:
Operations include all activities associated with transforming inputs into the final product form.
Highnoon ensures that tools employed in production process are of the top most quality.
According to the company HighNoon production plant is comprised of latest equipment from
HIGHNOON LABORATORIES 2
UK, Germany, France and Italy. Highnoon is also one of the few companies in Pakistan that
have a dedicated antibiotics manufacturing facility in Pakistan. Medicines are made while
keeping all the specific procedure that is assurance of highest quality medicine produced.
Outbound Logistics:
Activates related to the outbound logistics are associated with collecting, storing, and distributing
the product. Highnoon laboratories have its own distribution channel but it is not as strong as
other companies having. Highnoon manages all the outbound functions by itself, like storing in
warehouses to the distribution of medicine to doctors and general stores. Highnoon should
improve its distribution channel globally. So it can compete with the other pharmaceutical
laboratories.
Marketing and Sales force:
Highnoon laboratories have highly skilled motivated and competent sales force to market its
products. Since HighNoon is a pharmaceutical company so making sure that the sales force are
to capture the market by using innovative approaches towards doctors and medical stores is
important. Highnoon have selected the most appropriated channel i.e. referrals by Doctors and
medical stores. And also because Highnoon is working with a differentiation strategy through
setting up the price and product line they have been successful in capturing their part of the
market.
Services:
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Pharmaceutical companies need to work with very error free environment and there is not much
margin for errors in them. Highnoon understands the situation and make sure that all the expired
medicines are taken out of the market on time. Relations with the Doctors are also key aspect of
the companies services policies.
Secondary Activities:
General Administration and Infrastructure
General administration in Highnoon consists of number of activities like general management,
planning of how much productions are needed and how to produce according to the demand of
the customers, finance and legal and government affairs as it is a highly a sensitive industry with
no chance of error.
The production unit and the head office of the Highnoon are located at Multan Road, Lahore. All
the demands are fulfilled by the production from this facility.
Human Resource Management
Highnoon is very much concerned about the humans which it hires because it can fulfill the
needs of the customers by recruiting the best human resources. Highnoon investment in human
resource starts with the recruitment. It invests heavily on the human resource because it is one of
the resources from where they are getting competitive edge over their competitors.
Technology
HIGHNOON LABORATORIES 4
Pharmaceutical companies mostly rely on their research and development because it is a key
success factor for any pharma company. The research and development is based on the latest
technology and Highnoon is well equipped with latest machinery for the production of anti-biotic
products. This machinery recently has been imported from Germany and France. Research and
development has been geared up in Highnoon to introduce new products and to increase the
market share.
Procurement
In order to have good relation with their suppliers, Highnoon has made their suppliers as
business partners. Following are the suppliers from where Highnoon purchases the raw materials.
Solvay Pharmaceuticals (Germany)
Mitsubishi Tanabe Pharma Corporation (Japan)
Chugai Pharmaceuticals Co., Ltd (Japan)
Laboratories Almirall, S.A (Spain)
Bouchara Recordati (France)
` Yes/ No How Highnoon does create value for its customers?
Primary
Inbound logistics Yes Highnoon is currently purchasing the best raw materials
from the best pharma product suppliers in the world.
Operations Yes Highnoon is equipped with latest production units which
help it to efficient production development and timely new
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launches.
Outbound Logistics No Highnoon is not well equipped with distribution.
Marketing and Sales No Because of the poor distribution, their marketing activities
are also disturbed.
Services Yes Highnoon is facilitating their customers with after sale
services.
Support
Procurement Yes Highnoon is purchasing from the well known companies
all around the world.
Technology yes Highnoon is equipped with the latest technology and
efficient research and development.
Human resource
Management
Yes Intellectual capital is the main resource of Highnoon
competitive edge.
General
Administration
Yes Highnoon management is working effectively to manage
all the activities in order to create value for their customers.
HIGHNOON LABORATORIES 6
Inbound
LogisticsIn
boun
d
Log
isti
csO
pera
tion
s
Out
boun
d
Log
isti
cs
Mar
keti
ng
and
Sal
es
Ser
vice
s
Pro
cure
men
t
Tec
hnol
ogy
Hum
an R
esou
rce
Man
agem
ent
Gen
eral
Adm
inis
trat
ion
Operations Yes No Yes No No Yes Yes Yes Yes
Outbound
Logistics
No Yes No Yes No No Yes Yes Yes
Marketing and
Sales
No Yes Yes No Yes No No Yes Yes
Services No No Yes Yes No No No Yes Yes
Procurement Yes Yes No No No No No No Yes
Technology Yes Yes Yes No Yes No No Yes Yes
Human
Resource
Management
No Yes Yes Yes Yes No No No Yes
General
Administration
Yes Yes Yes Yes Yes Yes Yes Yes No
HIGHNOON LABORATORIES 7
Resource/
Activity
Is it Valuable? Is it Rare? Are there few
Substitutes?
Is it Difficult to
make?
In bound
Logistics
Yes No No No
Operations Yes No Yes Yes
Outbound
Logistics
Yes No No Yes
Marketing and
Sales
Yes No No Yes
Service Yes No No Yes
Procurement Yes No Yes No
Technology Yes Yes No Yes
Human Resource
Management
Yes Yes No Yes
General
Administration
Yes No No Yes
HIGHNOON LABORATORIES 8
Resources of HIGHNOON
Following are the resources that give HIGHNOON a competitive edge over their competitors;
Efficient Production Process
Human Resource
Highly Efficient R&D
Due to the above mentioned resources, HIGHNOON are enjoying a competitive edge over their
competitors. The competitive edge is that they are having differentiation products that are being
sold at high prices in the market.
For Example:
Loprin
Lipirex
Blokium
Xyilin
Cidine
Colofac
Duphaston
These above mentioned medicine are formulas that other companies also have and producing the
same formula products under different names but Highnoon is differentiating them by having
higher prices in these medicines and they are successful in doing so. The prices of these types of
products of Highnoon are 3 to 4 Rs. Higher than competitors.
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Highnoon is creating competitive edge with patents rights of more than 5 formulas, which they
have acquired with extensive Research and Development. These formulas are under patent and
copyrights of Highnoon so no other pharma company can produce medicines from these
formulas. These formulas are the resources from which Highnoon is making itself different from
other market players. Highnoon is also creating differentiation by having higher prices than its
competitors and customers are willing to buy at given prices.
Example
Compivair
Taivor cap + Taivor F
Revolizer spacer
Artrodar
Ratio Analysis (2009-2010)
Short-Term Solvency or Liquidity Ratios
a) Current Ratio = Current Assets/Current Liabilities
= 866,886,416/640,403,587
= 1.35 Times
If it is less than 1.90 then it is dangerous for the company and if it is above 2.10 then it is in-
efficiency of the company. In this case current ratio is 1.35 which shows that company is in a
dangerous position.
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b) Quick Ratio = Current Assets – Inventory/Current Liabilities
= 866,886,416-640,844,633/640,403,587
= 0.35 Times
Industry average for this ratio is 1.20 so that is not good for the company because it is low then
the industry average.
Long-Term Solvency or Financial Leverage Ratios
a) Total Debt Ratio = Total Assets – Total equity/Total Assets
= 1,740,968,895-188,475,264/1,740,968,895
= 0.90 Times
Industry average for this ratio is 0.90 so the ratio for the company is good because it is according
to the industry average.
b) Debt Ratio = Total Debt/Total Assets
= 1,028,359,762/1,740,968,895
=60 %
This ratio shows the risk factor of the business, if it is between 40%-60%, then it is reasonable.
In this case debt equity ratio for the company is 60% so it is reasonable for the company.
c) Time Interest Earned Ratio = EBIT/Interest
= 105,580,358/89,424,804
= 1.180 Times
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This ratio shows that how many times the firm can pay interest. Industry average for this ratio is
6 times and in this case it is 1.180 so it is below industry average.
Asset Utilization or Turnover Ratios
a) Inventory Turnover = CGS/Inventory
= 1,732,983,015/640,844,633
= 2.70 Times
This ratio shows that how many times we sell our inventory in a year. Industry average is 9
times, but for it is 2.70 which is below the industry average.
b) Receivable Turnover = Sales/ Account Receivables
= 2,636,538,261/195,710,292
= 13.48 Times
This ratio shows that how many receivables we have in a year, the low is better. It is high so it
needs to be minimized.
c) Total Asset turnover = Sales/Total Asset
= 2,636,538,261/1,740,968,895
= 1.52 Times
This ratio shows that using total assets, how much sales we managed in a year. Industry average
is 1.8 times and for the company it is 1.52 times, so it needs to be improved.
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d) Capital Intensity = Total Asset/Sales
= 1,740,968,895/2,636,538,261
= 0.66 Times
Profitability Ratios
a) Profit Margin = Net Income/Sales
= 70,343,964/2,636,538,261
= 2.67%
This ratio shows that if we make a sale of 1$, how much in this 1$ is our profit. Industry average
is 5% and in this case it is 2.67% which is very below as compare to industry average.
b) Return on Asset = Net Income/Total Asset
= 70,343,964/1,740,968,895
= 4.04%
This ratio shows that how many returns we can gain by engaging the total assets. Industry
average is 9.0% and for the firm it is 4.04% which is below then the industry average.
c) Return on Equity = Net Income/Equity
= 70,343,964/712,609,133
= 9.88%
In this ratio we do not check performance, we check benefits. Industry average is 15.0% and for
the company it is 9.88% which is below then the industry average.