Situation Analysis (SWOT Analysis)
The following SWOT analysis captures the strengths and weakness within Dragon Biotech and the opportunities and threats that exist in our environment. This analysis highlights areas to be leveraged and points out where we must improve within the firm and within our industry and market.
As we look at our SWOT analysis to follow, we are in a sustainable overall position, we have strengths to balance our weaknesses, and particularly our knowledge of where we are heading for and what our customers need. We also have some attractive opportunities. However, we have a weakness in competiting against price-oriented competition from both local and international brand names.
Dragon Biotech's strengths include:
OStrong business model embracing both generic and proprietary drug development.

OProven proprietary technology platform that outperforms competitors' methods.
OSolid financial position with established cash flow.

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OFlagship product, EPO, achieved remarkable revenue growth in a US$4,8 billion market.

OUnique marketing strategy to penetrate geographic areas with quick drug approvals.

OExperienced well-connected management team and board of directors.

OCaptured 30% of EPO market share in china, endorsed by Chinese medical Assn. For superior quality EPO.

OOver dependence on EPO and therefore, a lack of diversification in our revenue sources.

OOur EPO price is a high-end product, and this limits its sales volume. Most patients in China are from suburban or rural areas. They have huge demand for EPO, but they couldn't afford it.

OChina's new reimbursement policy requires people to pay part of their drug bills, which were previously, all covered by the government. Due to EPO's relatively high price, the new policy will reduce the consumption of EPO.

OLack of a China company made it more time-consuming and costly to sell products to China.

Opportunities available to Dragon include:
OThe booming Chinese economy creates an increasing need for more expensive yet better quality drugs.
OChina has committed to devote its medicine quality improvement and patents protection after its WTO entry. This will significantly reduce the number of "me-too" drugs as well as competition among brands. The State Drug administration will continue to issue regulations to normalize the market. Meanwhile, the Ministry of Health also issued regulations to control drug usage in hospitals. In an effort to reduce the burden of medication spending on patients, MOH also stipulates that pharmaceutical factories must bid for the orders from hospitals nationwide. These regulations will also reduce drug abuse and benefit cost-effective drugs. This is good news to our product, because cost-effectiveness is one of our main strengths.

OAs Chinese people become more aged and better well off, they work harder in a quicker pace, eat more food with high fat and low carbohydrate, and exercise less. These changes, coupled with environment pollution, will induce a higher demand for drugs. EPO can treat anemia --- a common symptom associated with the above-stated diseases. Undoubtedly EPO faces great market potential in China.
OThe strong Chinese economy has been good for the pharmaceutical industry. Continued growth is anticipated.
Threats include:
OIncreased competitor form foreign companies such as Amgen, Kirin and Roche who adopt high quality premium price strategy with professional promotion teams to fight for their market shares.

OLocal companies gain support from government and employ low price strategy to earn market share. In particular, Shenyang Sunshine biotech reduced its EPO price from $20/2000IU to $7/2000IU in 2000. From then on, the price game has been played constantly. Each time the first mover will gain the lion's share of the market, then other companies will follow suits. The market is almost occupied by local brands now, and the competition is among local brands.

OAmgen will launch its launched its second generation EPO in China soon. The so-called "second generation" EPO, more efficient and effective, is very expensive, nearly four times of a common one in USA; however, patients who had to take EPO dosage three times per week in the past now need only use the new EPO one time per week. Amgen's new product will be our main competitor in the upper market in future.