As a corporate strategist, I am dismayed that the grass roots response
to the Supermarket juggernaut appears to be an emotional one, rather
than a cold, rational and objective business counter-attack and
the evolution of Pharmacy with new models of competition.
Many talk of this as a King Canute response, but Canute was craftier
than many give him credit for (See segment at end of this note).
Pharmacists
have been bemoaning and deriding the supermarkets' proposed entry
into Pharmacy goods, but really need to marshal themselves into
an effective "business coalition".
The appropriate short and longer-term response is a commercial
one, although political and consumer-level guerrilla war by such
a coalition can also effectively 'buy time'.
Simply put,
Pharmacy is a specialist professional retail / distribution service.
No more, and no less.
As goods / services are commoditised, the consumer is motivated
by price / convenience, and not by service.
Service encourages repeat sales, but remains a secondary force
in an educated, sophisticated consumer base.
The reality is that Pharmacy is largely commoditised for the next
generation of consumers; this commoditisation started the day
the first Pharmacy sold the first lipstick.
Corporate
strategy advises that with commodity status, success comes only
from being the lowest cost producer (buying power) and having
widest distribution.
For Pharmacy in Australia, this is essentially about owning both
Manufacture and Brands).
The competitive
advantages of the supermarkets are essentially about economies
of scale and branding. The Pharmacy coalition has capacity to
directly combat these advantages today.
Pharmacy
has become hostage to two major, local manufacturers, who own
the brands and control much of the supply line and its delivered
price.
To combat the Supermarket threat, the commercial response of Pharmacy
(the Guild) - directly or indirectly - should be to:
1) re-establish
and more effectively exercise ownership control of two key listed
companies and
2) fully own their own brands.
API is weakened
in the market, while Mayne is undoubtedly eying Sigma.
Only ACCC considerations have stopped the merger of 2 or more
of these players, but no such limitation exists for the Supermarkets.
Any control via ownership or a strategic stake by supermarkets
in API, Sigma or a spun-out Fauldings will totally incapacitate
Pharmacy's strategic capabilities, both defensive and offensive.
Time is now
critical.
The response of the Guild must be commercial.
Pharmacists are in business first, it is not a vocation.
Pharmacy has the financial muscle and incentive to evolve into
a juggernaut of its own.
But it appears to lack an effective strategic plan and the financial
/ business model and structure that positions it for commercial
and sustainable competition.
This is the crux of Pharmacy's strategic imperative.
How will Pharmacy
respond?
Dan Da
Silva © 2003 Cycam Investment Banking & Strategy Consulting
From
Viking warrior to English king -
Canute (Knud) The Great
'Written for The Viking Network by Barrie Markham Rhodes
Canute
started his adult life as a Viking warrior and went on to become
the ruler of an empire which, at its height, included England,
Denmark, Norway and part of Sweden.
Canute
the politician
"Let
all men know how empty and worthless is the power of kings. For
there is none worthy of the name but God, whom heaven, earth and
sea obey".
So
spoke King Canute the Great, the legend says, seated on his throne
on the seashore, waves lapping round his feet. Canute had learned
that his flattering courtiers claimed he was "So great, he
could command the tides of the sea to go back". Now Canute
was not only a religious man, but also a clever politician. He
knew his limitations - even if his courtiers did not - so he had
his throne carried to the seashore and sat on it as the tide came
in, commanding the waves to advance no further. When they didn't,
he had made his point that, though the deeds of kings might appear
'great' in the minds of men, they were as nothing in the face
of God's power.
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