Appropriating Returns from Investments in Innovations: A Case Study of Magic Herbs Pvt.Ltd

Abstract

India has a reputation for its traditional therapies around the world. However given the vast diversity of the country there are thousands of such herbs and therapies. Given this diversity, traditional knowledge for long has been lying dormant and also getting lost. However scientific trial and usage of this can bring successful new products. This knowledge has been successfully exploited albeit under controversy by large multinational firms. Small entrepreneurial ventures get lured to herbal medicine market by low legal entry barriers. However they face serious challenges in market access of prescriptions markets. Magic Herbs (P) Ltd. was a small entrepreneurial pharmaceutical firm dealing in herbal medicines located in Southern Indian state of Kerala. Company was promoted by Mr. Kapil Malik who was son of a senior dermatologist Dr. A. V. Malik. Magic Herbs had developed unique herbal products by converting traditional knowledge into successful products. Dr. Malik and Magic Herbs had invested a considerable time and resources in development and trials of these new drugs. These products were launched in 1998 in prescription drug market in Kerala. During late 2001 Magic Herbs had reached a plateau in the product sales and its profitability was very low. The company tried to create a marketing network but it could only attain a low performing level. Despite having innovative power products, Magic Herbs was struggling to find a clear strategic path for itself. Company CEO Mr. Malik had just called off services of its entire sales staff. Mr. Malik had been seriously thinking about various options before him, which included from complete sell off to high investments in marketing. He knew that Magic Herbs was entering into a second stage of its life-cycle, where it could transform itself into a large innovative herbal firm or just fade into obscurity. There were ample opportunities for him but at the same time he also knew that if he did not act fast, environment was rapidly changing to more internationally competitive one.