Academic journal article Academy of Strategic Management Journal

The Influence of Supply Chain Integration on Company Performance through Competitive Advantage in Indonesian Pharmaceutical Industry

Academic journal article Academy of Strategic Management Journal

The Influence of Supply Chain Integration on Company Performance through Competitive Advantage in Indonesian Pharmaceutical Industry

Article excerpt

INTRODUCTION

The pharmaceutical industry is a strategic industry in Indonesia. The slogan "Mensana Incorpore Sano" or "In a healthy body there is a strong spirit" often resonated among Indonesian. It proves that health becomes a major factor in the lives of the population of Indonesia. Thus, the pharmaceutical industry is needed to support the health of the people of Indonesia.

Indonesia as a country with a population of more than 250 million inhabitants which is ranking 4th in the world is the potential market business. A large population by a substantial purchasing power attract companies from various industries to do business in Indonesia. The pharmaceutical industry is one industry that can enjoy the potential of a vast number of people in Indonesia. Moreover, the uneven distribution of the population and geographic conditions in tropical climates that cause potential viruses and bacteria thrive makes potential business opportunities for the pharmaceutical industry to improve the Indonesian pharmaceutical market.

Having a demographic bonus was not automatically put the performance of Indonesian pharmaceutical industry in the top ranking in the global market. Seen from the global pharmaceutical market in 2013, Indonesia is only the fifth-largest pharmaceutical market in Asia after Japan, China, India, and South Korea (Aitken, 2014). However, in Southeast Asia, Indonesia is the largest pharmaceutical market. There are opportunities for the pharmaceutical industry in Indonesia to be able to raise the pharmaceutical market in Indonesia. The performance of the pharmaceutical industry in Indonesia is relatively small. In 2014, the pharmaceutical market in Indonesia amounted to 69.5 trillion Rupiah. Compared with the food industry, this sales performance number is only as big as one company PT Indofood Sukses Makmur Tbk which has a sales value of 63.5 trillion Rupiah in 2014. In 2014, Indonesia's pharmaceutical sales per capita amounted to 23.2 USD. Compared to pharmaceutical sales per capita in other countries such as the United States amounted to more than 1,000 USD, Japan amounted to more than 700 USD, and Canada amounted to more than 600 USD, Indonesia has a subtle pharmaceutical market.

Furthermore, in a percentage of GDP (Gross Domestic Product), in 2014, Indonesian Pharmaceutical Industry only has figures 0.65% of GDP. The percentage is also actually declined in the last five years. In 2009, Indonesian Pharmaceutical Industry achieved 0.80% of GDP. Besides relatively small, this share of GDP shows that the actual sales performance of the pharmaceutical industry in Indonesia is declining.

Conditions on the downstream side of the pharmaceutical market in Indonesia are not necessarily the same as the conditions on the upstream side of the pharmaceutical market in Indonesia. The Indonesian government has set strict implementation of pharmaceutical business in Indonesia. Pharmaceutical Supply Chain from upstream and downstream has been regulated by the Minister of Health of the Republic of Indonesia in Permenkes No:1799/Menkes/Per/XII/2010. This regulation manages the three entities of the business involved in the pharmaceutical supply chain in Indonesia before the drug product reaches the consumer.

Figure 1 illustrates how the Indonesian government using Permenkes No:1799/Menkes/Per/XII/2010 to strictly regulate the pharmaceutical supply chain in Indonesia starting from the upstream side to the downstream side of the consumer. Pharmaceutical Industry is the entity who manufactured the drug product or the raw material. The pharmaceutical industry is not allowed to sell the product directly to the consumer. Pharmaceutical Drug Wholesaler is the party who has a license to distribute the drug product. Pharmaceutical Drug Wholesaler cannot sell the product directly to the consumer. Pharmaceutical Services Facility is the entity who sells the pharmaceutical product to the consumer such as drug store and hospital. …

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