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International Business Project

ACKNOWLEDGEMENTS

All praise is for Allah Almighty, the Creator of


this world
Who enables me to do this work.

No work in reality is the sole effort of its writers as


many people
Like the foundation stone contributes silently. It is
unequivocally stated that among such silent
contributions Sir Manqoosh Ur Rehman,
Lecturer Dept. of Management Sciences, CIIT Lahore
stands prominent. His confidence in us, all his
motivations to do something authentic gave the
basic impetus for undertaking this interesting task.

Our project is a result of discussions with my group


members Adeel abid, and Alina Anjum, their
enthusiasm and hard work made this work possible,
in the end I thank all of my fellows who discussed
with me their valuable views.

Finally and most importantly, I am very thankful to


our parents, who pray for our success day night.

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International Business Project

Table of Contents
DESCRIPTION PAGE #

INTRODUCTION _01

PHARMACEUTICAL COMPANIES IN PAKISTAN _03

KINDS OF PRODUCTS_________________________________________04

SUPPLIERS___________________________________________________05

SUPPLY CHAIN MANAGEMENT________________________________06

OPERATING MECHANISM____________________________________07

CAPITAL EXPENDITURE _ 08

CONCLUSION________________________________________________09

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INTRODUCTION
All human societies have medical beliefs that provide explanations for birth, death, and
disease. Throughout history, illness has been attributed to witchcraft, demons, adverse
astral influence, or the will of the gods. These ideas still retain some power, with faith
healing and shrines still used in some places, although the rise of scientific medicine over
the past millennium has altered or replaced many of the old beliefs.some of the stages
thorough which the process of curing illness has passed are as:

 Herbalism
 Indian medicine
 Egyptian medicine
 Babylonian medicine
 Persian medicine
 Chinese medicine
 Hebrew medicine
 Greco-Roman medicine
 Islamic medicine
 European Renaissance and Enlightenment medicine
 Modern medicine
 Medical inventions
 7000 BC—1000 AD
 1000—present

In this course the scientific medicines were introduced in the late 1800 and early 1900.
The modern techniques made some useful contribution to the field of medicine and now
almost every disease in the world can be cured with the help of these medicines. Asian
and African countries have always been faced by the shortage of medical facilities and if
there are any facilities it is far from the range of common man. That’s why we have to
import a lot of the necessary and important medicines from abroad or they are produced
by foreign firms in Pakistan we do not have any national company or resource from
where we can fulfill these necessities. Injections and vaccinations are one kind of
medicines which is used for quick relief. In recent years Asia specifically pacific Asia and
Korea, Japan has been the hub of export and import of all sorts of medical goods and
surgical commodities. Multiple reasons come into play for this recent change in the
international market. Cheaper labor rates, sound understanding of engineering excellence,
massive support systems to cater to the ongoing demands of the healthcare industry have
all attributed to the overall success of the healthcare industry especially for the Asian

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International Business Project

countries. Korea is certainly no exception to the rule. Korea has become one of the
leading exporters of an array of medical goods that are now known for their exceptional
quality and engineering excellence. Korea is also a very sound economical play ground
for international investors and companies that want to use the skills sets of Korea to
improve and compete in different and new avenues. In countries like Pakistan where
there is extreme shortage of medical supply and even if there is availability of medicine
than their rates is reaching the shores of sky. Due to the shortage of investment in this
sector and improper conditions its better to import it from foreign countries. Korea as the
largest and cheapest producer of medicines and pharmaceutical products will be a better
market and will help us to fulfill our medical needs cheaper than other resources.
Pakistani market will be an opportunity for Korean products especially in pharmaceutical
industry. Pharmaceutical industry in South Korea is one of the emerging hotspots in
Asian region. Currently valued at US $ 8 billion, the domestic pharma sector has been
registering a double digit growth over the years. With the introduction of product patent
system in 1987, multinational companies have taken a firm foothold and continued to
expand their presence in Korea's domestic pharmaceutical market.
Korea's efforts to provide medicines at affordable costs have led the industry to
innovation. The country developed pharmaceutical bulks via the development of its own
synthesis methods, making it possible to ensure the substitution of pharmaceutical raw
materials, nearly three and a half decades ago.

Trade Performance: Imports of Pakistan (2006, in USD thousands)

Import Growth Number of Number of Net trade


value of imported supplying
Industry imports products countries
in value
(% p.a.)
All industries 29,825,75 33 2881 159 -12,892,881
4
machinery; nuclear 3,343,977 24 425 78 -3,231,029
reactors, etc
Miscellaneous 373,929 14 52 51 -362,410
chemical products
Pharmaceutical 244,408 14 23 46 -157,722
products

Trade Performance: Exports of Korea (2002-2006, in USD thousands)

Product group Value 2002 Value 2003 Value 2004 Value 2005 Value
US$ '000 US$ '000 US$ '000 US$ '000 2006
US$ '000

Medicinal and 204,683 213,948 212,928 263,873 273,197

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pharmaceutical
products,
Medicaments(including 119,277 142,784 171,336 198,285 234,772
veterinary medicaments)
Miscellaneous chemical 564,069 658,411 767,584 913,996 1,139,891
products.
Essential oils, perfume 2,811 3,548 4,597 4,544 4,239
and flavour materials

PHARMACEUTICAL COMPANIES IN PAKISTAN


There are many firms working in Pakistan in pharmaceutical industry. Some of them are
worlds leading firms such as GlaxoSmithKline, Getz, GlaxoSmithWellcome, Bristol-
Myers Squibb, Searle etc. in addition to these firms a lot of importer also import from
US. Europe, china, Korea, and India some the leading firms working in Pakistan and
information related to them are given as:

 GlaxoSmithKline

Headquartered in the UK and with operations based in the US, GSK is one of the industry
leaders, with an estimated seven per cent of the world's pharmaceutical market. But being
a leader brings responsibility. Every hour GSK spend more than £300,000 (US$562,000)
to find new medicines. GSK produce medicines that treat six major disease areas –
asthma, virus control, infections, mental health, diabetes and digestive conditions. In
addition, GSK are a leader in the important area of vaccines and are developing new
treatments for cancer.

KEY FACTS

Every second...GSK distribute more than 35 doses of vaccine


Every minute...more than 1,100 prescriptions are written for GSK products
Every hour...GSK spend more than £300,000 (US$562,000) to find new medicines
Every day...more than 200 million people around the world use a GSK brand toothbrush
or toothpaste
Every year...GSK factories produce 9 billion Tums tablets, 6 billion Panadol tablets and
600 million tubes of toothpaste

 Bristol-Myers Squibb

During 2007, the Bristol-Myers Squibb Patient Assistance Foundation and company-
sponsored programs under the Lifelines of Care initiative assisted more than 290,000
indigent patients in the U.S. in filling prescriptions with pharmaceuticals valued at more
than $236 million at wholesale prices.

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Number of Employees: 42,000


Global Sales: $19.3 billion
Businesses: Pharmaceutical products.

 Searle Pakistan limited

Searle Pakistan Limited (SPL) was incorporated in Pakistan as a Private Limited


Company on October 5, 1965 as a subsidiary of G.D. Searle & Co., U.S.A.In 1966,
Searle Pakistan (Private) Limited acquired a small manufacturing facility in S.I.T.E. and
production of Aldactone, Lomotil, Diodoquin, Ovulen, Neomycin Sulphate, Probanthine
and Hydryllin, etc. started there. Over the years the operation expanded and during 1984
construction of a new factory started. During mid 1986 manufacturing operations of high
quality pharmaceutical products commenced at this newly built factory at Plot # F-319,
S.I.T.E. Area, Karachi, measuring 5.24 acres. The company employs 586 permanent staff
members including a dedicated sales force of 302 persons who call on doctors,
pharmacists, retail outlets and wholesalers to promote the company’s products. The sales
force is assisted by a team of 30 marketing support personnel.

Our main focus will be on the import of medicines and injections from Korea initially we
will focus on three types of injections then seeing the opportunity in the market we will
expand our area of business to other business too. Initially we can not take such big risk
and as budget constraints are also there so we have to really take care of that. We have
contacted two Korean companies who manufacture pharmaceutical products who are
contacted through our friends who have previously contact with these firms and have
good corporate relations who will also take care of the orders and delivery and any paper
work that is necessary for the contract. Membership with LCCI will be attained for which
the necessary requirements are fulfilled. Furthermore Letter of credit will also be attained
from National Bank of Pakistan.

KINDS OF PRODUCTS
The following type of medicines will be imported initially. All of them will be vaccines.
Initially they will be imported in limited quantity. Then looking to the market we will
expand our area of business. Here are some names and their description:

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The Various Types of Common Vaccines


Vaccine
Disease Advantage Disadvantage
Type
Live, Measles, Produces a strong Not safe for people
weakened mumps, rubella immune response so with compromised
vaccines (German can provide life-long immune systems.
measles), polio immunity with 1–2 Needs refrigeration to
(Sabin vaccine) doses. stay potent.
and chicken
pox
Inactivated Cholera, flu, Safe for people with Usually requires
or "killed" hepatitis A, compromised immune booster shots every
vaccines rabies, polio systems. Easily stored few years to remain
(Salk vaccine) and transported; does effective.
not require
refrigeration.

Subunit Hepatitis B Lower chance of Research can be time-


Vaccines adverse reaction. consuming and
difficult.
Conjugate Haemophilus Safe for people with Usually requires
Vaccines influenzae B immune compromised booster shots every

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International Business Project

(or Hib) and systems. few years to remain


pneumococcal effective.
vaccine

SUPPLIERS
The suppliers have been contacted through the reference of our friend who is already
engaged in this business for more than 5 years. So contact with the suppliers will not be a
big problem. However the suppliers name and their addresses have been mentioned
below. They will provide us two types of medicines mainly vaccines and as I said earlier
which will be expanded to more variety of products. The types of medicine are discussed
earlier and their description and usage as well. Here are the names and addresses of two
suppliers who are contacted:

 Kyung Dong Pharmaceutical Co Ltd.

Kyung Dong Pharmaceutical Co., Ltd. is a Korean company engaged in the manufacture
and sale of pharmaceutical products for multiple therapeutic fields The Company’s three
main product groups are comprised of finished compounds and raw materials.

535-3Daeyang-riYanggam-myeon
Hwasung445-930
SouthKorea
+82-31-3520990 (Phone)
+82-02-5775195 (Fax)

 KunWha Pharmaceutical Company

For the fiscal year ended December 2003, the company generated sales revenue of $50.5
million (50,813,058,000 KRW). During the same period, the company recorded net
income of $4.5 million (4,496,171,000 KRW).

KunWha Building
Karak-Dong,
94 Songpa-gu Seoul 138-
160 South Korea
Tel: 82 2

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431 3100 Fax: 82 2


443 5757

SUPPLY CHAIN MANAGEMENT


The supply chain process of our business will be simple. This starts from ordering the
sample of the vaccines and their approving of ministry of health or any legal
authorities. Formally our supply chain will contain the following important steps:

 Complete information about the products and their specification


 Reviewing the information given by the exporter or the supplier
 Ordering the sample
 Checking the samples, and confirming the order
 Confirmation of order and delivery

In this procedure banks will also be involved who will act as intermediary between us.
However that procedure will be discussed later. After the delivery takes place and the
issues of tariffs and duties are resolved the products will be shipped to our outlet or shop
in Lahore near any big hospital which will be specialized for any type of vaccines first
and then we will try to expand our area of business. The above points also contains some
small points, like in information will collect information about the products their
specification, quality, delivery time and product sample. Secondly after that exporter
give information about their products then payment modes are decides and the sample is
ordered. After that if any deficiency found in product will be reported and the order will
be confirmed, in the last stage the delivery of the order is confirmed. One point to be
noted that in all this process two banks will be involved, one from each side..
Fortunately all the supplier are operating in the same city i.e. Seoul which is the hub of
Korean industry this will be a plus point because we will have to collect the order from
the same point.

OPERATING MECHANISM
The operating mechanism starts with membership with the Lahore chamber of
commerce and industry. Once you have decided to start a business of import or export
immediately you register with the LCCI, it is very necessary step if you have to make an
LC or letter of credit in any bank. A letter of credit is a means of marketing payments
for the import of goods. It is issued by the buyer’s bank in favor of seller. All terms and
conditions are stated in it. The person who purchases the goods from the other country is
called buyer and he requests for opening L.C.

Membership with LCCI

There are three type of membership with the LCCI we will be having associate
membership because of less annual turn-over. The main steps of procedure are as:

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International Business Project

 Fulfilling the legal requirements.


 Issuance of Certificate of Origin and Attestation of Commercial Documents.
 Issuance of Visa Recommendation Letter.
 For Employee :For salaried senior executive of the firm, a certificate mentioning
their designation, period of service, monthly salary and copies of paid tax challan
shall also be accompanied with the application.

Establishment of Letter of Credit (L/C)


A party receiving an import license must establish an L/C/ through a foreign exchange
bank within the effective time period. In an unavoidable circumstance, however, the
period can be extended by submitting to the competent bank an application for
amendment to the L/C. When arranging the L/C, the same information as noted on the
import authorization form must be used. The amount of the L/C should not exceed the
authorized amount, and it must be expressed in the same currency specified in the import
authorization form.

Receipt of Transport Documents

The foreign exporter having received the L/C, ships the goods according to the
conditions of the L/C and negotiates with the exporter's bank a documentary bill which
is issued using the transport documents as security. The exporter's bank then sends the
transport documents to the bank which issued the L/C, and after the L/C opening bank
has verified that the conditions of the transport documents are consistent with those of
the L/C, it settles the account of the import transaction and transfers the transport
documents to the importers. The importer submits the bill of lading (B/L) to the shipping
company and collects the imported freight. If, however, the freight has already arrived
but the transport documents have not, the importers may present a letter of guarantee
(L/G) to the shipping company and receive the freight in advance, after receiving from
the importer's bank the L/G prepared under fixed conditions.

Customs Clearance

The importer unloads the imported freight from the ship and places it in a bonded area,
and then submits a report of import to the superintendent of the customs house. The
customs clearance report can only be prepared by a consignee, employing a certified
customs specialist or a certified customs clearance corporation. Upon receipt of the
import report, the customs house inspector will verify that the contents of the imported
merchandise correspond with that described in the import authorization form and
confirm the documentation is in order. The tariff on the merchandise is then calculated
and levied, and an import approval is presented to the person reporting the import. This
person may remove the imported merchandise from the bonded area. After doing so, the
import procedures are completed.

In all these processes two banks will be involved one from each side. You can say the
transaction will be held between the banks. The bank in Pakistan i.e. MCB will contact

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International Business Project

one of Korean bank where supplier have accounts. Some of the payment will be made
before the delivery to the Korean bank where the supplier has account. They will ship
the order to the place and then when we take the products from the bank at that time we
will make the rest of the payments. After which our bank will make payment to the
supplier’s bank.

CAPITAL EXPENDITURE (in Rupees)

 Outlet (shop) security...........................................................….......300, 000


 Setup costs………………………………………………………...50, 000
 Account in bank……………………………. …………………….50, 000
 Membership fees with LCCI………………...................................4500(Total)
 Contact with the suppliers and collecting necessary information...250, 000(Total)

CONCLUSION
The above project was really an opportunity for us to learn about the trade procedure.
Pakistan’s import has always been greater and most of which involves the import of oil.
In the pharmaceutical industry Pakistan has always been lagging behind. Most of our
pharmaceutical products come from India and china. Although it is more convenient
from these countries but still there is room for trade with other countries. And Korea is
one of the emerging countries in this field. To import from a new market will be a new
experience and opportunity for us to explore. Although some of the small scale
businesses are already importing fro these countries but they are in small numbers.
Initially it will be not good to take high risk but we are sure the increasing success of
this business will help us to explore more area of this field and broadened our area of
our business. In Pakistan the lack of technology and labor is a big issue and for this
industry both those things are required. So it is beneficial for us to import these items if
we don not have competitive advantage in this field. This will also increase the quality
of the products and lower the costs as in Korea both the technology and labor is
available at low cost.

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