Holmes Institute - HC3141: Chemist Warehouse Strategic Report Analysis

This report analyzes the cost leadership strategy employed by Chemist Warehouse, the largest pharmaceutical goods retailer in Australia. The company's business model, based on a franchisee system, allows for bulk purchases and discounted pricing, enabling them to capture a significant market share. The report highlights how Chemist Warehouse prioritizes cost minimization to offer competitive prices, adhering to a strict code of conduct across its franchises. It examines the role of economies of scale in supporting this strategy and concludes that cost leadership is a suitable strategy for the company within the competitive Australian pharmaceutical industry. The analysis references key sources to support its findings, providing a comprehensive overview of Chemist Warehouse's strategic approach and its impact on the business.

Running head: INTERNATIONAL STRATEGIC MANAGEMENT
International Strategic Management
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1INTERNATIONAL STRATEGIC MANAGEMENT
Table of Contents
Generic strategy followed by the Chemist Warehouse:..................................................................2
References........................................................................................................................................4

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Generic strategy followed by the Chemist Warehouse:
Chemist Warehouse is the largest pharmaceutical goods retailer in Australia. The
business model of the company is based on the trusted franchisee system for bulk purchase and
retailing of the pharmaceutical goods. The company is operating a wide range of pharmaceutical
retail chain through various tie-ups and franchisees across Australia. They have almost 20
percent of the total market share of the pharmaceutical market in Australia
(Chemistwarehouse.com.au2020).
Chemist Warehouse is known for discounted price for the pharmaceutical goods. In the
pharmaceutical industry, it is difficult to follow the differentiation strategy as the differentiation
strategy requires to develop and supply unique and customized products and services to the
consumers. On the other hand, under focus strategy, the company identifies a particular segment
of the customer group and delivers goods and services according to their
needs(Chemistwarehouse.com.au 2020). Therefore, it can be concluded that, the Chemist
Warehouse is following the cost leadership strategy. They supply products to their franchisees at
a very low costs and it enables retailers to offer discounts to the customers. They have a set code
of conducts and policies, which all the franchisees and retailers have to follow mandatorily
(Tansey, Spillane and Meng 2014).
Cost leadership strategy enables an organization to minimize the cost of their products
and services and to offer their products and services at a very challenging price in the market. It
helps them to gain a competitive edge through the pricing strategy and t capture a huge market
share in the industry. On the other hand, cost leadership strategy does not mean that the quality
of the products or services will be compromised in order to reduce cost and to serve the products

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and services at a lower price (Kinyuira 2014). Hence, keeping the quality of the products and
services intact to its standard, strategies to minimize costs can be a good strategy for the Chemist
Warehouse, which they are following successfully. Economies of scale are one more important
factor which is helping the Chemist Warehouse to follow this strategy successfully. Bulk
purchase and supply is the main reason behind successfully implementation on the cost
leadership strategy (Moon et al. 2014).
From the above discussion, it can be concluded that, cost leadership strategy can be a
good and helpful business strategy for an organization in the Australian pharmaceutical industry.
The cost leadership strategy as followed by the Chemist Warehouse is helping them in the
competitive market situation, to capture a significant market share of the retail market of the
Australian Pharmaceutical industry.

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References
Chemistwarehouse.com.au. 2020. Chemist Warehouse: Australia's Cheapest Online Pharmacy .
[online] Available at: https://www.chemistwarehouse.com.au/ [Accessed 16 Jan. 2020].
Kinyuira, D., 2014. Effects of Porter’s Generic competitive strategies on the performance of
Savings and Credit Cooperatives (Saccos) in Murang’a County, Kenya. IOSR Journal of
Business and Management, 16(6).
Moon, H.C., Hur, Y.K., Yin, W. and Helm, C., 2014. Extending Porter’s generic strategies: from
three to eight. European Journal of International Management, 8(2), pp.205-225.
Tansey, P., Spillane, J.P. and Meng, X., 2014. Linking response strategies adopted by
construction firms during the 2007 economic recession to Porter’s generic
strategies. Construction management and economics, 32(7-8), pp.705-724.