Caso Lixis HEC Endeavor. Estrategia de entrada al mercado europeo de equipamiento de Control de Calidad para la Industria farmaceútica. Por José-Manuel Benzanilla-Guarachi y Pablo Porolli.

1. HEC – ENDEAVOR
PROJECT FOR LIXIS
ENTRY STRATEGY TO THE EUROPEAN MARKET
José-Manuel Benzanilla-Guarachi
Pablo Porolli
Table of contents
1. Introduction
1. Objectives of the investigation
2. Brief description of the industry
3. Most significant players (manufacturers, OEMs, distributors, final clients)
2. Value proposition
3. Business model
1. Industry needs
2. Industry requirements
3. Entry strategy
4. Positioning
5. Targets
6. New opportunities
7. Sustainability
4. Action plan
1. INTRODUCTION
1. Objectives of the investigation

2. 2. Brief description of the industry
3. Most significant players (manufacturers, OEMs, distributors, final clients)
(To be completed)
2. VALUE PROPOSITION
Lixis offers a range of quality control equipments for the pharmaceutical industry that equals its
competitor’s performance standards for a lower price. It offers also a higher quality of before and
after sales services. Lixis follows the concept of before and after sales nursing. Lixis also
include the installation and the validation of the equipments in their services.
Details of the value proposition
In Lixis value proposition there are four distinguishing proposals:
1. Range of products
2. Price
3. Before- and after-sales nursing
4. Installation and validation
1. Range of products
Lixis should offer a complete range of quality control devices in the “solid category” for the
pharmaceutical industry. Nowadays, it is producing the following items:
• Color Vision Blister Control System
• Black and White Blister Control System
• Micro Systems
• Barcode Readers
• Pharmalyzer NIR System
The industry shows the following needs:
• Date- and Lot-Stamping Control System
• Sealing Control System

3. • Label Control System (including character reading)
• Aluminum Notification Systems (some companies are using Pharma Code’s system for
this purpose nowadays)
• Over Printing Control System: a system that may control everything that is printed.
The key issue would be to integrate these systems. For example, many customers proposed the
integration of the Blister Control System with the Date- and Lot-Stamping Control System.
The market towards Lixis is orientated should be thought in a broad way. Final customers
include not only pharmaceutical laboratories but also independent sub-contractors that work
exclusively for certain labs, cosmetic- and bio-products manufactures and even the food industry
for some devices.
Lixis may develop other products for the pharmaceutical industry. Control issues also arise in the
production of liquids and solids packed in flasks and veils.
Having a larger range of products will also allow Lixis to build a reliable image and show
customers that it masters the technology it sells and that the firm has long-term goals and,
therefore, it will stay in business for the years to come.
2. Price
Lixis’ today prices are competitive in the European market. If the company is able to
demonstrate that their products perform as those of the competition, Lixis will have a market.
“At equal performance, price wins.” Customers have the perception of these products as highly
expensive and Lixis could profit from having lower prices.
The main reason why laboratories do not have the total number of their lines updated is because
of the high expenses that the installation of these devices demand.
3. Before- and after-sales nursing
Final customers are highly concerned about after-sales service. They demand very specific
features:
• Immediate telephone contact.
• Ability to send a technician to the site in less than 24 hours.
• Availability of spare parts. This should include a permanent stock in Europe and, for
some big plants where several equipments are installed, to provide a whole machine that
may serve as spare.
• Fast and high quality technical service. Technicians have to know thoroughly the
machines. Medium quality technicians will not be accepted.
• Provide electronic and hard copy of all the documentation.
• Service through internet, but under limitations due to security issues. Double approval
for changes in the system has to be warranted.

4. • Some sites will demand a local language speaker. But most of them will accept English
as a lingua franca.
Before-sales service is also crucial since companies pursue a long process before purchasing the
product. The process could be described as follows:
• URS: User Requirement Specification
• DS: Design Specifications
• PS: Purchase Specifications
• SAT: Site Acceptance Test
• IQ: Installation Qualification
• OQ: Operation Qualification
• PQ: Process Qualification
Note: A thorough description of the process will be presented in a book attached to the present report.
This process should be followed by the selling company in very detail. Customers would like to
see a person in charge of the sale which will deal with every single aspect of the process.
The idea of nursing is to come up with a system in which the client will feel that he is looked
after all the time. Assigning people to both stages (before and after sale) will provide the
customer security. He will have 24 hours direct contact with his representative and the latter will
deal with every need that the client may have. Excellence in service will make a difference for
the company.
4. Installation and validation
The installation is always done by the selling company. Therefore, Lixis will have to provide the
installation. However, validation is not usually done by the supplier. Then, providing the
validation process within the selling price of the equipment will be a differentiating service for
Lixis. The clients believe that if the validation is done by the supplier their cost of purchasing the
equipment will be lower and that this fact shows that the company is reliable and trustworthy.
Although validations are not usually a minor cost of the equipment, providing it in the sale
contract will clarify the client’s costs. He will hence perceive a higher value added in the
product.
The provision of validation will also convert Lixis in a solution company. In our view, this is the
best image that a firm might have in this market. Laboratories’ goal is to sell medicine, not to
install production lines. They are willing to pay for solutions.

5. 3. BUSINESS MODEL
a. Industry needs
There are two types of needs that have to be covered in order to enter the European market. First,
needs concerning products. Second, necessities concerning services.
Products needed
1. Sealing Control System.
2. Vision Blister Inspection, including Color and Black and White Systems.
3. Date- and Lot-Stamping Control System.
4. Sealing Control System.
5. Label Control System.
6. Aluminum Notification Systems (some companies are using Pharma Code’s
system for this purpose nowadays).
7. Over Printing Control System: a system that may control everything that is
printed.
8. Micro fissures and pores which may occur on aluminum-aluminum blister
packs.
9. Raw Materials Control System.
Service
1. “On-line” technical assistance.
2. “On-Site” technical assistance.
3. Installation of equipments.
4. Validation of equipments.
5. Training programs including updating courses for operators, maintenance and
repair people.
6. Availability of spare parts.
7. Personal contact.
8. High quality documentation.
b. Industry requirements

6. Details of product needs
1. Comply with regulations. The most important regulation is the FDA 21 CFR Part 11.
(Detains on the regulations will be given in an attached book.)
2. The combination of the Blister Inspection with a Sealing Control System will be a very
interesting device for customers.
3. 100% Online Check (better than aside samples). This is the tendency of the market.
4. Overprinting control: Systems to control everything that is printed (blister, tablets,
brochures, date- and lot-Stamping and packaging.
5. Mix-ups is the most important issue that the quality control department of laboratories
have to deal with. So, systems to avoid mix-ups are welcomed.
6. Label Control System may include character reading.
7. Aluminum Notification Systems. Other systems besides Pharma Code will be
appreciated.
8. Complete documentation of the products. It has to include a full list of specification of
the products, the standards by with they are developed, explanation of the technology
used, concrete evidence of their performances (measurable), description of training
programs provided to the people who will do the after-sales services and description
training programs given to operators and maintenance people (if any). All
documentation should be delivered in electronic and hard format.
Attributes of the products requested
1. Reliability (dependability). No defective blister. No mix-up. Full unit.
2. Efficiency. Speed is a key factor.
3. User friendly.
4. English language. (However, local market language can be a big competitive advantage.)
5. Durability. Equipment should not break down.
Service requirements
1. Immediate telephone contact.
2. 24 hours service.
3. Ability to send a technician to the site in less than 24 hours.
4. Fast and high quality technical service. Technicians must know the machines and must
resolve problems quickly.
5. Service through internet, but under limitations due to security issues. Double approval
for changes in the system has to be warranted.
6. Reliable before- and after-sales service. Continuous presence.
7. Provide integrate solutions and anticipate clients needs.

7. 8. Warranty that equipments comply with international regulations (proofs).
9. Commercial representatives in Europe.
10. Stock of products in Europe to warranty fast delivery of spare parts. Less that 24 hours
to deliver parts.
11. Guarantees its customers the supply of spare parts for the entire lifetime of each
machine.
12. Some sites will demand a local language speaker. But most of them will accept English
as a lingua franca.
13. Salespeople with a solid technical background.
14. Installations and validation tests at the OEM and customers' plants.
15. Complete Manuals and validation procedures.
16. Estimates for new systems, upgrades, overhauls, spares.
c. Entry Strategy
As clients are highly demanding in their needs, a simple export model will not work. It might
satisfy a tiny demand, but will not produce a sustainable presence in the market. A successful
entry strategy would have, in our view, two steps that may be simultaneously carried out. The
first step would be to re-enforce sales to groups that have presence both in Europe and in Latin-
America. This step implies an entry through a subsidiary strategy. The fact that the company is
already selling its products to a group subsidiary will facilitate access to customers in Europe and
would smooth the first selection criteria of the clients. As previous knowledge of the supplier is
usually a key factor for choosing it, the fact that the provider is already working with a
subsidiary of the group may boost its chances of success doing to the next phase of the
purchasing process.
The second step would be to make an alliance with an existing player. A partner can solve many
requirements that a company from Argentina without a strong presence in Europe would not be
able to do by its own. A partner may be in charge of the following:
• Sending a technician to the site in less than 24 hours.
• Providing spare parts quickly.
• Showing local presence to the customers.
• Integrating Lixis’ products in their own sales catalogues.
• Exhibiting the products to existing customers.
• Backing up Lixis’ products with its brand and presence in the market.
The benefits of an alliance can be listed:
• Combination of sales efforts.
• Access to existing market base.
• Exchange of expertise.
• Knowledge of the market.

8. Among the drawbacks, it can be found:
• Product overlap.
• Addition of an additional margin.
• Loss of control of products.
Two types of targets for alliances can be identified: integrators and distributors.
Advantages and disadvantages of an alliance with integrators and distributors are:
Disadvantages
Advantages
• Better knowledge of the
technology. Thus, a priori
better after-sales service.
• Exclusivity contracts
• Good and long relationships
may make difficult to
with customers.
make an alliance with
• Good position for accessing
them.
Integrators the market of new lines.
• Limits the number of
• Fewer competing devices in
clients that can be
their catalogue.
targeted to the
• Possibility to increase
integrator’s target.
margins due to Lixis’ low
prices. So, they may be
interested in the partnership.
• Easier to establish an
alliance. They might be • Customers disregard
willing to add new products distributors.
with competitive prices to • More numerous
Distributors their catalogue. competing devices in
• Possibility to increase their catalogue.
margins due to Lixis’ low • Few important
prices might boost interest distributors.
in partnership.
Two main targets are suggested, one in each category.
Integrator:

9. Although Uhlman has a preferred supplier with is Visiotec, the important presence in the market
that this company has makes it the most desirable target for Lixis to make an alliance. Lixis has a
lower price for the same performance. Therefore, the value created can be shared with the
integrator. Uhlman may be interested in such a proposition. However, it is crucial for this
partnership that Lixis is able to explain properly the characteristics of its products and to prove
their performance. An exclusivity agreement may tempt the integrator even more.
Distributor:
Packunion seems to be the best known distributor for the pharmaceutical industry in Europe. A
proper demonstration of the products performances and an excellent presentation of the company
might be enough to start the dialogue in order to enter the firm’s catalogue.
d. Positioning
Lixis should be recognized as an actor able to offer quality control devices for the
pharmaceutical industry in the solid category with “the best price/quality relation” and a “before
and after sales nursing service”.
To achieve this positioning it is necessary represent the current value curve of the market.
This value curve captures the current state of play in the known market space. This allows you to
understand where the competition is currently investing, the factors the industry currently
competes on in products, services and delivery; and what customers receive from the existing
competing offerings on the market. Its X axis captures the range of factors the industry competes
on and invests in. The Y axis captures the offering level that buyers receive across all of these
key competing factors. A high score means that a company offers buyers more and hence invests
more in that factor (except for price which in this case means a higher price).
After several interviews with some potential customers we identified the most important criteria
for the industry. We built the value curve using these criteria where it is possible to see the
customer’s needs and what the customers are receiving from Lixis’ future competitors in the
European market. The level expected by the customers in each criterion is depicted by the red
line. The level offered buy Lixis’ main competitors (Laetus, Scanware, Tattile, etc.) is depicted
by the black line.

10. Criteria definition
• Service: include technical assistance, technicians know how, after sales service, etc.
• Norms: Warranty that equipments comply with international regulations.
• Zero defects: In the inspection and avoid mix-up mistakes.
• # of languages: Number of languages required (English and others).
In order to give more add value to the customers we recommend Lixis to create, eliminate,
increase or reduce some these important criteria.

11. • Increase: Above the industry standards or at least at customers´ expected level for those
criteria.
• Reduce: Those criteria that customers are taking from granted as a consequence of prior
competition, and now are over designed.
• Create: those that would be necessary for Lixis
• Eliminate: Those that are not necessary anymore.
Therefore the new value curve for Lixis would be:
e. Targets
The universe for quality control devices for packaging lines is huge. It could also be extended
from the pharmaceutical industry up to cosmetic industry, food and others.
We recommend Lixis to remain in the solid category for now. After several interviews with
potential customers in Europe we concluded there is an opportunity for Lixis to sell its products
in Europe. These potential customers are big players of the pharmaceutical industry with

12. presence in Europe and Latin America (such as Pfizer, Sanofi Aventis, Merck) who need to
update or buy new packaging lines for the solid category.
f. Opportunities in the European market
Some uncover needs were detected. These are existing opportunities for the suppliers.
1. Sealing Control System and blister inspection ideally in the same device. Most of the
customers manifested there is not possible to be detect if the blister is complete sealed.
2. Overprinting control. Integrate the control of all the information required to be printed
and the instructions.
3. Complete solution that guarantees to avoid mix-up mistakes. Today the mix-up mistake
exists and there is not solution.
4. Differentiation through service. Give more add value to the customer than the current
competition with “before and after sales nursing service”. This idea would give to the
customer better service according their needs and expectations. Some customers
complained that they have not received the expected level of service or the supplier did
not carry out what they promised. Some key elements are no mistakes at the beginning
of the relationship with the new customer, never offer something that is not achievable,
installations and validation tests at the OEM and customers' plants, and no guarantee to
comply with international regulations.
g. Sustainability
How could Lixis make its entry to the European market sustainable? Which are the Key Success
Factors to gain market share and establish a solid business in Europe for the company?
Lixis could make its entry to the European market sustainable combining 3 elements:
1. Build an innovative business model.
In this case the business model would be the alliance between Lixis and existing OEM.
Without a partner would be difficult or very expensive for Lixis to solve many
requirements by it own (see entry strategy above).
2. Satisfying uncover needs and opportunities.
After our investigation we found out that even if there are important players in the market
(Laetus, Tattile and Scanvision) there are still some uncover needs which mean
opportunities for Lixis. Some of them are mentioned above (Opportunities in the
European market). The challenge for Lixis is to be able to develop the quality control
devices to satisfy these opportunities and give the expected level of service through its
partner.

13. 3. Using the advantage that Lixis has.
During our investigation we concluded that “at equal performance, price wins” Lixis has
a competitive advantage base in a superior capabilities-cost ratio. Therefore, Lixis could
match the expected quality and performance required in the European market with better
prices for the consumers. The challenge is to find the correct partner to create an alliance.
However, we also found out that for a new player or brand would be critical to make
mistakes (with the service, technicians, etc) at the beginning of the relation with the new
customer. This probably will cost to loose the customer for ever.
The key successful factors would be:
• Give real add value to the customers.
• Build strong relation with the new customers.
• Continue investigating the market to find new uncover needs.
• Be able to develop new devices to satisfy the current and future opportunities in the
European market.
4. ACTION PLAN
To be finished
Fairs
Attendance to fairs is essential in this industry. All production managers go to fairs in order to
meet suppliers and to have information about new offerings. The main fairs, in order of
importance, are:
1. Interparck. Location: Düsseldorf, Germany.
2. Salon de l’emballage. Location: Paris, France.
3. Achema. Location: Frankfort, Germany.
4. Hispack. Location: Barcelona, Spain.
5. Ipack. Location: Milan, Italy.
The first two are the most important fairs. They are the biggest and the most expensive. The last
two are less expensive and interesting places in terms of attendance of potential clients.