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November 7, 2017
Industry: Pharmaceutical Industry
Consists of large chains and small pharmacies that provide retail drug
prescriptions, over-the-counter medications, generic/branded medications,
health and beauty products, and often, many other general merchandise
product categories.

(i.e. Mercury Drugstore, South Star Drugstore, Rose Pharmacy, Watsons Pharmacy, The Generics Pharmacy,
Generika Drugstore, Gamot Publiko Drugstore, etc.)
Formerly Pacific Insular Co (est 1949) engaged in importing and wholesaling
European-branded medicines in the Philippines, post World War II.
Initially established by a group of German entrepreneurs; in 1960, Pacific Insular Co.
was acquired by Liuson family.
The original business model was to do wholesale trading to hospitals, clinics, and
regional distributors
in 1983, Benjamin Liuson shifted focus to generic medicine due to the need for
affordable medicine.
In 2001, the company ventured into retail, with its first branch in Quezon City.
In 2007, TGP expanded through franchising, with its first franchise outlet in Pasay
In 2012, the company grew to 1,400 stores nationwide, becoming the countrys
largest drugstore chain in the country.
To date, TGP has 1,912 retail outlets nationwide with Robinsons Retail Holdings, Inc.
National Budget for Department Lack of technological
of Health (O) advancement (T)

Philippines is the third largest Climate change (T)
market in pharmaceuticals in
Disposable income (O)

Majority of the people belonged Cheaper Medicines Act (O)
to Class D sector of the society. The Generics Act of 1998 (O)

FORCE High/Low Threat/Opportunity

Industry Rivalry High Threat

Bargaining Power of Buyers High Threat

Bargaining Power of Suppliers Low Opportunity

Threat of Substitutes High Threat

Threat of Entrants High Threat

Industry Rivalry
Mercury Drusgtore is the leading drugstore in the Philippines, established in 1945, with
an estimated 700 owned and franchised stores. Other competitors include South Star
Drug, Rose Pharmacy - Berovan, and Watsons Pharmacy, which retails both branded and
generics drugs.

Direct competitors:
Generika Pharmacy, a regional player with 140 stores, carries branded products,
medical supplies & consumer goods. Additional services include free blood pressure
checks, low-cost blood sugar tests, free cholesterol screening, patient counseling
services, and generic awareness presentations to the public.
Gamot Publiko Generic Drugstore, a regional player with approximately 30 stores and
was similar in nearly all aspects to TGP.
Bargaining Power of Buyers
Bargaining power of buyers is high given that buyers switching costs are low.

Since there are available substitutes of generic pharmaceutical products, with minimal
variations in pricing, buyers can easily switch to Generika Pharmacy, or even to other
major players such as Mercury Drug, Watsons Pharmacy, South Star Drug, etc. depending
on the level of need and level of medicine.

Buyers have the liberty to choose between branded medicines and generic prescriptions,
especially those who are price and quality conscious. TGP products are undifferentiated
versus its existing competitors, which makes room for buyers to have more options in
selecting a drug store.
Bargaining Power of Suppliers
Suppliers have little bargaining power in terms of changing the prices.

Aside from government-mandated price decrease of branded drugs, they also experience
difficulty in terms of finding a retailer that will put them in a price advantage. Pharmacy
industry has the upper hand in terms of forcing the suppliers (wholesalers and
manufacturers) to cut down their prices or even allow them to purchase items in bulk
which would further stifle the suppliers profit margin.

Another option for the players in this industry is to force these suppliers to claim that they
can find another manufacturer whose product may be more known to the masses at the
same time will be willing to comply with their terms and conditions.
Threat of Substitutes
There is a high threat of substitutes given that branded medicines, a substitute product of
the generic drugs offered by TGP, is readily available in the market. Also, consumers may
also switch to alternative medicines should they decide to do so.

Purchase of medicines has always been the prerogative of the consumers based on what
is needed, what is prescribed, and based on the quality and price. Should there be cases
that branded medicines may deemed be necessary to cure a certain illness, several
substitutes to generic products are easily attainable due to presence of a lot branded
medicines nationwide.

Aside from alternative medicines as a means of substitutes, convenience stores such as

7-11 who are selling over-the-counter drugs without the need of licensed pharmacist.
Threat of Entrants
Threat of new entrants for TGP is high due to minimal product differentiation.

Since TGP offers generic medicines, access to distribution channel is easy. Also, initial
capital investment may not be that costly in setting up a pharmacy or a drug store on a
small-scale level as it does not require heavily on research and development costs and
other expensive technology. Business model is easily replicated, which makes it easier for
new players to enter the market. Location is not an issue given the presence of several
pharmacies nationwide, not necessarily as big as the major players. Finally, the
government supports cheaper and affordable medicine for everyone. Thus, government
policy is not an issue for possible new entrants in the industry.
Climate change and the increasing Increasing disposable income
temperature 90% of the Filipinos belong to class C, D, E.
Absence of biotechnology to invent These classes prefer generic medicines
medicines versus branded because of affordability
Arising competitors offering the same There is a continuous demand for
generic products pharmaceutical products and medicines
Large retail players had started to sell Governments continuous efforts to make
generic or branded generic pharmaceutical medicine affordable for everyone.
International drug firms that offered
branded generic products may leverage
their global supply chains
Local government-owned and privately
owned government-supplied drug stores
were increasing in number
Inbound Logistics
Accessible location (e.g. customer parking)

Pharmacist knowledge of product

Outbound Logistics
Product distribution is in good condition

Marketing and Sales

Infomercial about generic products.
Promotional discount and coupons

Free check-up, blood pressure test, cholesterol screening
Inexpensive blood sugar test
Firm Infrastructure
Inventory management of products
Operate one central warehouse, one company-owned retail store and one packaging and forwarding
Outsourcing sales function in relation with marketing and promotion.
Aid new business owners with seed capital through consignment stocks.
Standardization of delivery using single type of truck.

Technology Development
Point of sale system for order processing and financial compliance
Human Resources
Hiring of pharmacists
Hiring of medical staff for ancillary services
Provision of training and supervision
Employee engagement through franchising via seed capital and consignment stocks.

Procure products using local currency
Contract with small to medium-sized local manufacturers and small number of international generic
manufacturer representatives in the Philippines.
Complete storage of single product per category of 90% of major diseases
Assign a single contractor to build all franchise outlets.

Offers quality products with competitive Not all stores are air-conditioned
prices at convenient locations Customer perception that generic drugs is
Offers free medical check-up, blood less effective as branded.
pressure check and discounted blood
sugar check
Positioned as an everyday low-cost
To be the drugstore of choice for safe, quality and affordable generic medicines through the widest,
most profitable franchise network nationwide; leveraging on complementary healthcare services,
integrated technology and processes, and the strength of our people and culture.
A Filipino Deserves Nothing Less for Less Cost. We understand the value of a healthy Filipino in
making a happy home and in nation building. We shall address the health needs of every Filipino by
providing a complete range of safe, quality, and cost-effective generic medicines and healthcare
products and services. As we profit in this mission, we ensure our growth is shared among our
franchisees, partners and employees.
Mabisa na, Matipid pa.
The Generics Pharmacy acknowledges the need for quality medicines at affordable prices.
Thus, TGP focuses on generic medicines to provide Filipinos a more affordable alternative
without compromising the quality.

As the demand grew, the company decided to adapt the franchising business model to
make their products available and accessible nationwide, especially in the rural areas.
Caters the need of two customers - (1) who wants an affordable medicine and (2) who
wants to own a business.
Able to serve those who cant afford to buy medicines and made it more accessible to
the underserved and unserved sector
Advertising on primetime television - may be indicator that they have large profits to
Market Target and Type of Competitive Advantage Being Pursued
Location/Accessibility and Product Variety
Relationship to Other Companies and Vertical Integration
ACA 1: Increase market share and product accessibility by adding mores stores
in prime areas as well as in location where the unserved and underserved
segment are situated.

Advantage Disadvantage
Expand its target market to middle- to Uncertainty of market reception and
higher-income individuals to cater acceptance
more customers and gain market Difficulty in finding location to cater to
share from the top players in the the unserved market.
More accessibility to serve the low-
income class
Potential increase on the profit as a
result of incremental revenues brought
about by additional customers
ACA 2: Expand product diversification by adding more varieties in the product
offering ranging from generic to branded medicines including non-
pharmaceutical products.

Advantage Disadvantage

Enhance customers Low cost reputation will be

responsiveness by providing compromised
them wide array of products in Increase in inventory level and
the market purchasing costs of new
Opportunity to capture products
customers from different Increase in operating expenses
segments due to marketing and
Expand to higher-income advertising
ACA 3: Explore backward integration through manufacturing generic

Advantage Disadvantage

More control to other parts of Would require huge capital

the supply chain investment
Cost control Learning curve might be costly
due to lack of experience in

Criteria Weight ACA1 ACA2 ACA3

Financial Capability 30% 20% 20% 10%
Alignment on the Vision/Mission 20% 20% 20% 15%
Revenue Growth 25% 20% 20% 20%
Market Positioning 25% 20% 20% 25%
Total 100% 80% 80% 70%
The group recommends ACA1 and ACA2: increase accessibility by adding more stores and
explore product diversification by offering branded medicines and non-pharmaceutical

TGP owes its success to their effective strategies related to: 1) offering good products 2)
selling products at lower price 3) franchising 4) advertising.

TGP should venture in areas where the underserved and unserved sectors are found.
Cheap medicines are usually bought where it is most convenient and having stores in
locations like these would augment companys visibility and accessibility.

TGP should also explore product diversification to address and cater the needs of
individuals from various social classes.
November 7, 2017