ZBx: A shot in the arm for Indian pharma
September 20, 2018
Ruling the global medical roost
India is one of the world’s biggest suppliers of generic drugs and complex formulations—accounting for 20 percent of global generics exports volume. It’s also among the top five fastest-growing pharma markets. The Indian pharma industry has had a dream run so far. However, in the past two years, it has faced a downturn.
The culprits:
- Heightened US FDA scrutiny
- Pricing pressures in the domestic and global markets
- Rise in manufacturing, employee and compliance costs, among others
The fallout: declining top-line growth and profits. That’s not all, India’s pharma stocks have also taken a beating in the past few years.
Clearly, the Indian pharma industry is at a critical inflection point. The downturn of the sector has presented an unprecedented opportunity for pharma players to tighten their grip in a way they have never done before. To recuperate, pharma companies need a NEW comprehensive cost management mindset that can augment profitability and fuel growth.
From riches to rags
The India pharma industry has been faltering in the last two years, with declining topline growth and profits.
13%
Drop in y-o-y revenue growth from 19% in FY13–14 to 6% in FY16–17
15%
Fall in EBITDA percentage from 23% in FY13 to 18% in FY17
Zero-based Mindset (ZBx) is the future of competitiveness for Indian pharma.
Say yes to ZBx for cost optimization
ZBx, or zero-based mindset, is a new way to look at profitability through four zero-based approaches to address the challenges of today’s digital disruption. The ZBx approach assesses every line item across the organization and sets it to a zero base—from front office to supply chain and everything in between.
Zero-based Budgeting—Health tonic for Indian pharma
While India pharma companies have several paths to growth, ZBx is number one in establishing control over costs and getting back to the high-growth track. Moving past traditional cost reduction efforts, Indian pharma companies must start with a blank slate, calculating costs from a zero base.
A new prescription for profitability
A zero-based approach focuses on four essential areas to help businesses become and stay agile in today’s volatile business environment.
General and administrative (G&A) expenses
Zero base spend to improve growth, capability investments and EBITDA
Sales and marketing
Zero base front-end operations to cut customer acquisition costs and optimize customer spending
Direct and indirect labor
Zero base organizational design to create new business value and drive profitable growth
Cost of goods sold
Zero base supply chain by identifying “should costs” and enabling ongoing renewal for continuous resetting of cost baseline
From zero to hero with ZBx
To achieve cost optimization and fuel growth, Indian pharma companies must prioritize three areas:
- Grow leadership commitment: Make CEOs and leaders responsible for driving and incorporating ZBx into the daily workings of their organizations.
- Intensify focus: Scrutinize costs carefully—from plant maintenance and customer marketing to sales. Reset the budget to a zero base and bring about relevant changes in the company governance and culture.
- Build an owner’s mindset: Ensure that a sustainable cost management philosophy is part of the organizational DNA and that employees constantly question the need for spending. Adopt a new operating model that cuts complexity, fixes responsibility and helps enable a sustainable corporate lifestyle.
Read the full report to know how ZBx can help you be on top of the game and compete with global peers.
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