OCTOBER, Edition # 35, 2001

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I had started to put together a series of articles dealing with the "microeconomic" areas of management and marketing, within community pharmacy, and what reasonable strategies could be developed to assist growth and expansion for 2002.

Then came the terrorist attacks in America and the aftermath of a world, including Australia, preparing for a third World War.
On top of this catastrophe, major business collapses, including the infrastructure of air transport in the form of Ansett, appeared from nowhere.
The massive unemployment and supporting business dislocation, generated by these business collapses, is still to be measured for full impact.

In all the ensuing confusion and anger (which we all experienced in varying degrees) as events unfolded, it became difficult to maintain an equilibrium, and to develop insights on what to expect for the year 2002.
So I have digressed partially, to align my thoughts with current events.
The following material was sent to me by Terry Irvine, a writer for this newsletter. I think the message is worth sharing, as it helps to maintain a perspective on one of these recent events.

This is a rational and thought provoking commentary. It comes from Tamim Ansary, a writer and columnist in San Francisco, who is originally from Afghanistan. This is very, very interesting and a little chilling....

"I've been hearing a lot of talk about 'bombing Afghanistan back to the Stone Age.'
Ronn Owens, on KGO Talk Radio today, allowed that this would mean killing innocent people, people who had nothing to do with this atrocity, but 'we're at war, we have to accept collateral damage. What else can we do?'
Minutes later I heard some TV pundit discussing whether we 'have the belly to do what must be done.'

And I thought about the issues being raised especially hard, because I am from Afghanistan, and even though I've lived here for 35 years, I've never lost track of what's going on there.

So I want to tell anyone who will listen how it all looks from where I'm standing. I speak as one who hates the Taliban and Osama Bin Laden.
There is no doubt in my mind that these people were responsible for the atrocity in New York.
I agree that something must be done about those monsters.
But the Taliban and Ben Laden are not Afghanistan.
They're not even the government of Afghanistan.
The Taliban are a cult of ignorant psychotics who took over Afghanistan in 1997. Bin Laden is a political criminal with a plan.
When you think Taliban, think Nazis.
When you think Bin Laden,think Hitler.
And when you think 'the people of Afghanistan' think 'the Jews in the concentration camps.'
It's not only that the Afghan people had nothing to do with this atrocity.
They were the first victims of the perpetrators.
They would exult if someone would come in there, take out the Taliban and clear out the rats nest of international thugs holed up in their country.
Some say, why don't the Afghans rise up and overthrow the Taliban?
The answer is, they're starved, exhausted, hurt, incapacitated, suffering.
A few years ago, the United Nations estimated that there are 500,000 disabled orphans in Afghanistan--a country with no economy, no food.
There are millions of widows.
And the Taliban has been burying these widows alive in mass graves.
The soil is littered with land mines, the farms were all destroyed by the Soviets. These are a few of the reasons why the Afghan people have not overthrown the Taliban.
We come now to the question of bombing Afghanistan back to the Stone Age. Trouble is, that's been done.
The Soviets took care of it already.
Make the Afghans suffer?
They're already suffering.
Level their houses?
Done.
Turn their schools into piles of rubble?
Done.
Eradicate their hospitals?
Done.
Destroy their infrastructure?
Cut them off from medicine and health care?
Too late.
Someone already did all that.
New bombs would only stir the rubble of earlier bombs.
Would they at least get the Taliban?
Not likely.
In today's Afghanistan, only the Taliban eat, only they have the means to move around. They'd slip away and hide.
Maybe the bombs would get some of those disabled orphans, they don't move too fast, they don't even have wheelchairs.
But flying over Kabul and dropping bombs wouldn't really be a strike against the criminals who did this horrific thing. Actually it would only be making common cause with the Taliban--by raping once again the people they've been raping all this time.
So what else is there?
What can be done, then?
Let me now speak with true fear and trembling. The only way to get Bin Laden is to go in there with ground troops.
When people speak of 'having the belly to do what needs to be done' they're thinking in terms of having the belly to kill as many as needed.
Having the belly to overcome any moral qualms about killing innocent people. Let's pull our heads out of the sand.
What's actually on the table is Americans dying.
And not just because some Americans would die fighting their way through Afghanistan to Bin Laden's hideout.
It's much bigger than that folks.
Because to get any troops to Afghanistan, we'd have to go through Pakistan. Would they let us?
Not likely.
The conquest of Pakistan would have to be first.
Will other Muslim nations just stand by?
You see where I'm going.
We're flirting with a world war between Islam and the West.
And guess what: that's Bin Laden's program.
That's exactly what he wants.
That's why he did this.
Read his speeches and statements.
It's all right there.
He really believes Islam would beat the west.
It might seem ridiculous, but he figures if he can polarise the world into Islam and the West, he's got a billion soldiers.
If the west wreaks a holocaust in those lands, that's a billion people with nothing left to lose, that's even better from Bin Laden's point of view.
He's probably wrong.
In the end the West would win, whatever that would mean, but the war would last for years and millions would die, not just theirs but ours.
Who has the belly for that?
Bin Laden does.
Anyone else?

Tamim Ansary "

It is commentary like the above, that is causing a rethink by American leaders in regard to generating a full scale war. And by association, Australia is slightly "off the hook" as far as its commitment is concerned, to giving military support.

Which brings us back to the local economy.

OECD forecasts give Australia a positive economic growth prospect for 2002.
Although the forecast was prepared before the above events, there are still good prospects for growth.
The government is stating that there will be no income tax cuts because any budget surplus is now committed to extraordinary expenditure generated by the above events plus dealing with the boat people (most being Afghans).
This will have a negative effect on consumer spending, and will reinforce conservative spending attitudes, which prevail among consumers when there are high levels of unemployment.
Retailers are already experiencing high levels of competition, presumably because retail trading area has expanded so rapidly in the past two years, it has now reached saturation point. Coles, and the Japanese retailer, Daimaru, are some of the higher profile casualties of this process. Poor management is also a major contributing point.
Businesses located in tourist destinations are going to have mixed fortunes.
If their business depended on overseas tourism, then they will experience initial downturns to the order of 50 percent. If the destination point is located within two to four hours travel from a capital city, then they will experience boom holiday influxes after an initial hesitancy, as people take to their motor vehicles.
Businesses dependent on air transport, or who are involved in servicing the airline industry, will experience downturns of varying magnitudes. The flow-on in these sectors will be disruptive to the local economies in the areas in which they are based.
One positive note is that regional airlines will probably rise from the ashes and actually expand, as more people choose domestic holidays rather than overseas.
As most regional airlines were already profitable before the Ansett collapse, we may see an upswing in some rural and regional economies.

All this economic activity will fall unevenly on community pharmacy depending on what style of business you run and where you are located.
Government health expenditure through pharmacy, as always, will provide some level of insulation.
However, both the wholesaler margin reduction mooted next year, and the potential flow on into community pharmacy, would have a greater and more adverse effect than if it were attempted in a more stable economic climate.
Therefore, for pharmacy stability, official pharmacy must wage an effective argument for an indefinite postponement of such action.

So what can community pharmacy do now that may alleviate what is obviously going to be a difficult and uncertain 2002?
Well, in my last article I discussed the examination of all the markets you are servicing, and if necessary, a repositioning. All the products and services held to service these market segments, should be painstakingly assessed for their contribution to market share and profitability.
It is really clean-out time.
Get rid of any surplus inventory, and with the Christmas period just around the corner, look at dressing up some of the giftware stock from last year, rather than order in a new range. Use Christmas to generate surplus cash, even if you have to discount your entire range to achieve it.
Build liquidity and if possible, place surplus cash flow in a cash management account, for future use in the management of peaks and troughs in the business cycle.
Look at staffing.
Is it balanced and well trained?
Do you need to pull back hours now to conserve capital, and would any monies generated this way be better spent on staff training?
Plan your e-commerce system in earnest. This will be the only way you will be able to control future overhead escalation and be able to participate in Internet bulk buying exercises.
Look at e-retail, e-purchasing, e-accounting, e-dispensing, e-clinical, e-market research and at a suitable "gateway" system to tie it all together.
Official pharmacy may come out with a model in the future, but you may not be able to afford to wait.

It is also probably a good time to negotiate a line of finance, even if you don't actually need it at the moment. It may become difficult to borrow next year as banks lose confidence in retailers.
Simply draw down the full facility and deposit in a cash management account.
Yes, there will be an offset cost between interest charged and interest received, but remember that if you plan to stay in business, you should follow the golden rule of "stay profitable, stay liquid, and do both at the same time".

In light of the difficult year most community pharmacists have experienced in terms of demands on their time, particularly in endeavouring to build clinical skills and to develop a compliance regime, it is now time to look at the retail end of your business.
This is necessary, because it will take some time before an adequate income flow will be generated by the new clinical services coming on stream.
Retailing has always formed a useful buffer in times of clinical pressure, and this should not be forgotten.
Now is the time for housekeeping.

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