Indian Institute of Management Kozhikode

Retail Management : Assignment 1

Defining a Retail Strategy

Traditional Medical store Vs MedPlus

Submitted To: Dr. Ranjan Chaudhuri

Project Submitted By : Name John Augustine Navin Mundada Satish Ramaswamy Satyanarayana Nalluri Vikas Dhawan Roll No. EPGP-04A-040 EPGP-04A-057 EPGP-04A-088 EPGP-04A-089 EPGP-04A-110

Intorodcution
Pharmaceutical industry in India is highly fragmented with majority of it being handled by the unorganised sector. There are around 5.5 lakh retailers for $6 billion market. Though the numbers look huge, the overall reach is still very restricted to urban and semi urban areas with rural areas contributing to just 10 %. As such in India, the pharmaceutical retailers have been enjoying relatively strong margins of around 20%. While there can be around 10-15 thousand SKUs at a pharmacy, less than 5% of pharmacies have used the computerized billing/inventory systems. There is shortage of training staff and the lack of regulatory oversight. Counterfeits are estimated to be in the range of 5-30% and therefore getting customer to trust on the integrity of the medicines can be tough. There is expected to be an annual growth of 15% in the industry and therefore the size of it will be doubled in the next 5 years. This will be driven by disease profiling, increasing restriction on freedom to choose pricing and rural penetration. All the above factors provide excellent opportunity for the organized retail to gain in the market and make its mark. Organised sector, though small, has been growing at the rate of around 25% and is expected to grow at 35-40% in the next decade. Currently there are 15 players in organized sector and have around 2000 stores. Increasing consciousness and disposable income are going to be key factors driving the organized retail sector in pharma. Looking into the future, there will be entry of multiple formats like pharmacy, hospital pharmacy, clinic cum path lab pharmacy, wellness centres and one-stop-shops for all medical sciences. Growth potential will also give popularity to franchisees model.

Customers Point of View

Traditional Medical store Conveniently placed at the location of hospitals, it is routine for patients to get an appointment with doctors, do medical tests, consult doctors and buy prescribed medicines. Usually prescribed medicines are available at store. Even if it is not available doctors prescribed different brands. Long queues at the counter during hospital timings. No additional service is provided. Usually no proper bills are issued unless insisted. Price of the medicine is written on back of prescription or on a piece of paper for calculation purpose. Does not accept credit cards Shopkeeper tries to maintain good personal relationship if they are not busy. Sometimes sold drugs without prescription. There were incidents where customers bought drugs asking a medicine for cold, cough , loose-motions and light fever. Medplus Located conveniently in residential areas. No need to go near hospitals to buy drugs when they are over. Offered 5-10% discounts or credit points on which customers can buy more products. Professional service, did not suggest different brand drugs during out of stock. They promptly delivered out-of-stock during at home in few hours. Always provided original bills with batch number and expiry date written. Customers felt they are buying genuine drugs

Good ambiance, air-conditioned shop, and polite shopkeepers. There were no queues. There are small queues during rush-hours. Drugs are not sold without prescription Except over the counter drugs like crocin, saridon, vicks etc.. Cheaper Medplus brand medical instruments and protein supplements are available.

Hospital and Doctors Point of View

Traditional Medical store Complementary service to the hospital business, co-operate with each other Provides convenience to the patient Handy during emergencies, hospital also buy medicines during operations and for inpatients. Get goodies and discounts from the medical shop. Some places they share profits. Good relationship between Medical Representatives from Pharma companies, Doctors and medical shop owners. Medplus Offered discounts to the customers but did not offer any benefits to the doctors or hospitals. Mostly located at residential locations and market areas, need not be close to hospitals. Did not maintain good relationship with Doctors, Hospitals and Medical representatives. Some patients did not buy drugs at hospital medical stores as Medplus was offering discounts. Pharma companies were by-passing doctors and directly selling medicine on bulk to MedPlus.

Core Competency
Traditional Medical store Core competency is the close relationships with Doctors and Pharma company dealers and distributors Medplus Core competency is bulk sourcing, distribution and retail shop network. They capture customer data, analyse and thrive to meet customers demands.

Differences:
Traditional Medical store Near hospitals and clinics No Discounts Through Dealers of company Depends on Dealers and Distributors or company agents Family owned Through Tieups with Doctors and Clinics/Hospitals Mostly what Doctors prefer and prescribe During stock out stores recommend different brands or ask doctors to prescribe available brand Only sell company distributed products No customer data is maitained MedPlus Mostly Nearer to Residential places 5-10% discount on bills to Members Centralized sourcing and distribution Own supply chain maintained Franchise Directly targeting end users Most of the medicines are kept at store Stock outs are met through central distribution centre. Medicines are delivered at home same day or next day. They have their own brand medical equipment like Glucometers and BP meters. Customers are issued membership cards. All purchases are tracked used to improve service Air conditioned shop in residential area. Well maintained shop Well maintained, Enough refrigeration and storage racks to store medicine

Location Pricing Sourcing Supply chain Ownership Sales promotion Stock

Medicine assortment

Customer tracking

Infrastructure

Normal shop near hospital with low rental Only one small refrigerator to store sensitive medicines.

Medicine storage

Potters 5 Forces Analysis:

PORTERs FIVE FORCE MODEL

Easy in the unorganized sector though getting into organized sector can be tricky with high infrastructure cost

Customer bargaining power is low as they have to go with what doctors/chemist would recommend

Highly competitive, huge number of unorganized and rising number of organized players

Switching cost is not very high as lot of pharma companies are present

Alternate medical treatments (ayurvedic, homeopathy)