One of important components of competitive strategy for both domestic and international companies is quality management. In different spheres and industries standards of quality are also different, but there are several things uniting these standards such as meeting or exceeding customer expectations, excellence in all areas ”“ environments, products, services and people, and the state of ongoing refinement (Goetsch & Davis, 2009). The purpose of this essay is to analyze and compare quality management issues in two companies, domestic and international, competing within one industry.
For the analysis, I have chosen pharmaceutical industry, since it is very competitive and challenging, and quality assurance in this industry is vital for the business as a whole. Two companies to be compared are Par Pharmaceutical and Watson Pharmaceutical. Both of them are engaged in manufacturing, developing and branding generic and specialty branded pharmaceuticals. Par Pharmaceutical operates in the US market, while Watson Pharmaceutical, Inc. sells its products in the US, Europe, Canada, South America, Australia, South Africa and in the eastern part of Asia (Potdar, 2007).
In general, the process of developing and manufacturing pharmaceuticals consists of the same steps within both companies. These steps are (Potdar, 2007):
1) Preparation of the intermediates for the manufacturing process
2) Introduction of functional groups
3) Coupling and etherification
4) Separation processes (stripping, washing, etc.)
5) Purification of the product
6) Product preparation (granulation, tablet pressing, filling, coating and packaging).
Both companies have departments of quality control and assurance and implement a number of procedures to increase quality. There are several organizations in the US which are responsible for quality assurance in pharmaceutical industry such as Food and Drug Administration (FDA) and US Pharmacopeia (USP) (Roig, 2010). Manufacturers of generic drugs have to apply to Abbreviated New Drug Application (ANDA) approval as part of quality control process.
Par Pharmaceutical pays a lot of attention to the control of quality; in addition to the quality control department, it has created a special section of IT department responsible for purchase and development of systems for quality control and maintenance. However, Par Pharmaceutical does not place quality control as one of its explicit goals, and has experienced a number of claims as a result of this approach. For example, in 2003 the company failed to qualify key equipment and development data for certain products were missing (Roig, 2010). FDA found numerous deficiencies in the company’s standard operating procedures. Since that time, the company managed to improve its quality standards and competes well at the domestic level.
At the same time, quality management at international pharmaceutical companies is significantly more challenging and at the same time more rewarding. First of all, different regions have own requirements for drugs and own sets of regulations, which creates new demands for quality management. Secondly, large number of locations and suppliers require to optimize production, shipping and distribution systems in order to make the whole process cost-effective. Finally, since the manufacturing stages can take places in different locations and different countries, each step is the object of quality management, while for domestic companies such detailed quality analysis might not be necessary.
Watson Pharmaceutical does not only file for ANDA approval, but has a special ANDA distribution division which increases the company’s profitability. In 2010, Watson Pharmaceutical has created a Global Operational Excellence Initiative, which allowed to decrease costs, reduce inventories, improve the quality of customer service and increase gross margins (Roig, 2010). Moreover, Watson Pharmaceutical expanded traditional quality management procedures and introduced lean manufacturing and six sigma system across their various locations. Financial results and expansion of Watson Pharmaceutical are impressive: in 2010 it managed to increase revenue by 2.3% and reached gross margin of 46.59% (Roig, 2010). For comparison, Par Pharmaceutical in 2010 experienced a reduction in revenue by 20.2%, and its gross margin constitutes 42.08% (Roig, 2010).
Thus, quality management is a highly important issue, and it should be aligned among all departments of the company, making quality an integral part of production process. To remain competitive, both domestic and international companies should make quality management one of their top priorities. While international companies are forced to strive for quality, domestic companies might be tempted not to go beyond standard quality control procedures. The analysis of two pharmaceutical companies shows that domestic companies should pay even more attention to quality management, since their competitive position and vulnerability to changes of demand is greater compared to international companies.
Goetsch, D.L. & Davis, S. (2009). Quality Management for Organizational Excellence: Introduction to Total Quality. Prentice Hall.
Potdar, M.A. (2007). Pharmaceutical Quality Assurance. Pragati Books Pvt. Ltd.
Roig, B. (2010). Pharmaceuticals in the Environment. IWA Publishing.