Strategic Management of Chemist Warehouse Australia

This document discusses the strategic management of Chemist Warehouse Australia, including its competitive advantage, growth strategy, and recommendations for improvement. It provides an analysis of the micro and macro-environment, as well as a SWOT analysis and Porter's Five Forces analysis. The document also suggests strategic recommendations at the functional and business level.

Running Head: Strategic Management
Strategic Management of Chemist Warehouse Australia
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Running Head: Strategic Management
Table of Contents
Introduction...........................................................................................................................................2
Micro and macro-environment analysis.................................................................................................3
Competitive advantage over rivals.........................................................................................................5
Generic Strategy of Chemist Warehouse...............................................................................................5
Growth Strategy of Chemist Warehouse...............................................................................................6
Strategic recommendations at the functional and business level............................................................6
References.............................................................................................................................................7
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Running Head: Strategic Management
Introduction
Australian Pharmaceutical market is anticipated to grow to $25.2 billion by 2020.The
continuously growing competition among various companies has resulted in more discount
stores and supermarkets that have completely changed the traditional landscape of the
industry. The annual growth of the industry has been reported to be 2.4% in the time period
of 2014-19 (IBISWorld, 2019). Chemist Warehouse, founded by Jack Gance Sam and Lydia
GanceVerrocchi families, is an Australian company that runs a number of retail pharmacies.
Also known as “the McDonalds of Pharmacy”, the company is famous for offering heavy
discounts on pharmaceutical goods. With almost 300 stores throughout Australia, the
company has around 8,000 staffs and holds 20% of the market share. Australian Government
has some regulations on the number of pharmacies that can be run by a single company in a
certain area. The franchise structure of the company is complicated and made in such a way
that the law can be avoided tactfully.
Micro and macro-environment analysis
PESTEL Analysis
Political
1. Government rules and regulation are flexible and
there is a growth in the pharmacy industry
2. Regulations on trade and tariff in the Health care
industry comes into picture.
3. Regulations on safety in Health care services needs
to be taken care of.
Economic
1. GDP of Australia is $1.69 trillion. The purchasing
power of people is comparatively high (Australian
Government, 2018)
2. Inflation rate and the various income levels of
people affect the price. Chemist warehouse is
specialized to offer heavy discounts.
Social
1. Everyone in the society requires medicines
especially the older ones and the kids.
2. CWH offers skin care and beauty products as well
that comes as another advantage as females from
every income level use beauty and skincare products.
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Running Head: Strategic Management
Technological
1. Australia is updated with all the latest
technologies.
2. With the advent of technology, social media has
become a strong tool for promotion and marketing.
Environmental
1. The Australian government has many laws to
protect the environment.
Legal
1. Australian government issues license to open
pharmacies.
2. Tax rules need to be followed.
3. There are laws to limit the number of pharmacy
stores by one company in one particular area.
Porters Five Forces Analysis
Threats of New
Entrants
1. The threat level of new entries is medium.
2. Heavy discounts on products help CWH to be on the safe
side.
Bargaining Power of
Suppliers
1.High
2. The profitability goes down if the suppliers increase the
price.
Bargaining Power of
Consumers
1.High
2. A lot of competitors exist.
Threat of Substitute
1.Low
2. Medicines are usually not replaced.
Threat of Competitors
1. High
2. Australian Pharmaceutical Industries Ltd is one of the
major players in the pharmacy industry in Australia.
SWOT Analysis
Strength
1. CWH offers heavy discount on products. Almost no
other company can beat them at the price.
2.The distribution network is strong.
3. Strong promotional activities.
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Running Head: Strategic Management
Weakness
1. Poor customer care services are reported.
2. The only focus of the company is low price.
Opportunities
1.Stable market
2. Lower inflation rate
3. New taxation will bring new opportunities
Threats
1. A new law under Paris agreement (2016) to protect
the environment can be proven as a threat to some
products.
2. Competition is too high.
3. The strike has been reported in some warehouses in
Queensland and Victoria in the demand for high wages
and condition.
Competitive advantage over rivals
Chemist Warehouse is one of the biggest online pharmacies that retails in Australia. It is clear
that the market is heavily competitive. The main focus of the company is to provide products
at heavily discounted prices that make them stand out in the crowd. They offer discounts in
both their online and offline stores. The layouts of the stores are designed in such a way that
they create an image of offering products at cheap prices. While the prescriptions are being
filled, the customers are given buzzers so that they can go and browse through products while
the prescriptions are getting done. Another interesting way is to keep heavy discounts on the
products displayed at the check-out counters. They are so heavily discounted that the
customers finally give in. The company spends around $100 million per year so that it looks
cheap.
Another way is promotional activities. They spend a lot on ads and campaigns. They connect
to the local health events and health professionals at times. "Nothing beats cheaper in
Australia" is their slogan. Not only the traditional way of promotion, but CWH also takes the
help of digital marketing. They make ads on YouTube and take help of other popular social
media platforms for their promotion. The main competitive advantage of the company is the
cheapest price in the market. The other companies cannot beat them at price as they possibly
won't have any margin if they offer products at such cheap prices. The company is very
particular about the niche they are offering.
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Running Head: Strategic Management
Generic Strategy of Chemist Warehouse
The main strategy that Chemist Warehouse follows is the "cost leadership" in the market.
Cost of the product is an important factor that influences a customer's buying decision. After
calculating the discount and the final price (Christian, Dirk and Melanie, 2014), a customer
buys a product. The slogan of the company is "Nothing beats cheap in Australia". They spend
millions so that they look cheap to the buyers. Starting from the store layout to the ads and
campaigns, Chemist warehouse concentrates on building a picture of them offering products
at the lowest prices. The founder of the company stated that other companies will not be able
to offer the product at such a low price because they will lose the margin that way. Most of
the actions taken by the company is to make sure that they maintain the cost leadership in the
market. At present, 20% of the market share has been captured by Chemist Warehouse
following the cost leadership strategy. From the logo to the banners of the stores are made in
such a way that creates an impression of selling inexpensive products that helps attract the
customers.
Growth Strategy of Chemist Warehouse
Chemist Warehouse started its journey as a pharmacy retail company that used to sell
medicines. The main focus of the company was to sell products at the cheapest prices in the
market. With time, the company adopted a diversification strategy to continue the growth and
to survive in the intensely competitive market. With time, the company started to sell skin
care products. Gradually, the company ventured into beauty products as well. They started
selling products such as lipsticks, perfumes etc. at heavily discounted prices. When people
come to the stores to buy medicines and get the same at the lowest price in the market, they
get intrigued and usually end up buying other items from skin care or other health care
sections. Adding new products has helped the company to grow and to earn high profit.
Another key point of their growth strategy is to bring small pharmacies under their wing. The
pharmacies get benefit from the purchase of products at bulk and the company provides them
with a low margin.
Strategic recommendations at the functional and business level
Chemist warehouse follows the strategy of cost leadership in the market. There is a potential
for the company to target the elder people who require regular medical services. The
company can provide some special benefit and programs for them. It is recommended to
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Running Head: Strategic Management
collaborate with the local health professionals and doctors so that elders can get both
suggestions from a medical practitioner and the medicines. It's not always the lowest price
that works. The company needs to think about value addition in some cases, not necessarily
at the cheapest price. For example, providing special services to the elders can be a value-
addition to the services. In this case, the company needs not to be the one offering the lowest
price in the market. In collaboration with the nearby medical practitioners and targeting the
elders in the area can help them enhance growth.
With the help of the SWOT analysis, it is clear that the company needs to take care of the
employees in a better manner. From the functional level point of view, the company needs to
offer good pay and look after the conditions of the employees. A strike has been reported in
some warehouses in the demand for high pay and conditions, it is high time, the management
of Chemist Warehouse become serious about human resource management. If the workers
are not satisfied in a company, it becomes difficult to operate in a seamless manner. The
satisfaction and the mental peace of the employees are one of the main focal points for a
company. It seems that Chemist warehouse concentrates only on low price. In due course,
they avoided the staff condition. For further growth, the company immediately needs to work
on an employee benefit.
References
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