Strategic Overview
The target company for this report is the Lyst Pharmacy Limited which is a pharmaceutical company currently operating in Australia and Japan. Primarily, the company engages in research, development, marketing, and distribution of the said drugs. The company employs several main strategies to aid it in achieving its financial objectives for the current fiscal year. The company utilizes aggressive advertisement, pricing strategies, and product differentiations to acquire and retain its market share which directly impacts its profit margins. The company has significant pressure to improve its profit margins through the three strategies mentioned here in a competitive industry which consist of nine other competing firms. The company’s performance over the five months studied has been positive despite fluctuating net income figures as displayed in the graph below.
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Chart 1 shows the distribution of the revenue, costs or expenses, and the net income in thousands recorded by the Lyst pharmacy Ltd Company in the five-month period under study.
Chart 2 shows the market share distribution of the pharmaceutical industry based on the percentage of revenue generated by each of the ten competing firms in the industry. The information ranks Lyst Pharmacy Ltd at pole position compared to other active companies competing in the industry.
Chart 3 shows the distribution of the market share of the pharmaceutical industry based on the number of units sold by each of the ten actively competitive companies measured using percentage values. The information ranks Lyst Pharmacy at 6th on the overall ranking in an industry led by AAA Company.
Performance Challenges and Solutions
Application of Porter’s generic strategy identifies three distinct strategies available for use by the Lyst Pharmacy Company which include an aggressive advertisement campaign (cost leadership), pricing strategies, and product differentiations. The three strategies sought to create uniquely desirable products or even services, offering a unique service or product in the market, and adopting the no-frills approach. The high levels of differentiation allow the company to create a niche for itself in a particularly competitive industry such as the pharmaceutical industry. Adopting higher differentiation will enable Lyst Pharmacy Limited to introduce products that are easy to recognize and contribute to the brand image, thereby gaining a competitive advantage. The approach also permits for the restructuring of the price allocation for company products depending on the market factors as competitor pricing, and the desired revue collection returns (Kurt & Zehir, 2016). Pricing strategies could also help beat out the competition by appealing to consumers based on this metric as the deciding factor for consumer tastes and preferences. Furthermore, cutting down advertisement costs in regulating the company expense under the assumption that previous campaigns were effective in creating lasting product awareness.
According to Porter’s five forces model of analysis, the industry has a low threat of new entry due to the cutthroat nature of the industry where there are several highly competing firms with the dominant market presence (Rothaermel, 2015). The number of competing firms hands the consumers higher bargaining power because the consumers have a wide variety of products from different pharmaceutical companies with the same applying to the suppliers. The company’s financial performance brought to the fore three distinct challenges throughout the five-month period under study where the drawbacks that came up included stunted market potential, employee issues at the workplace, and meeting additional market demands
Challenge 1: At the five-month point, Lyst Pharmacy Ltd recorded the same financial profit margin similar to that of the previous period as outlined by the Vice-president of Finance. The company’s performance affected the share price which stood at $11.45 earning the company a total of 1.45% per share.
Solution 1: The Company’s performance as represented in Chart 1 indicates that profitability could improve through the introduction of cost-cutting measures in line with the cost leadership ideals of Porter’s Generic strategies. The company could restrategize the allocations in the budget for advertisement to target newer markets to improve product penetration in Australia and Japan (Salavou, 2015). The company could also increase the price of its units from $9 to $10 which would not adversely affect the number of units sold while advertently increasing the revenue collected.
Challenge 2: The five-month mark also revealed the company’s struggle in handling employee issues at the workplace as highlighted at the workplace. The Vice president operation indicates that the company was at 87%, representing a negative deviation of 9.3%, while the HR score dropped from 62% to 59%. Furthermore, the company employee morale is down from 67% to 64% indicating dissatisfaction in working for the company. Moreover,the levels of productivity dropped from 40% down to 33%.
Solution 2: The most viable solution would involve conducting engaging market research to unearth practical yet effective methods used by other companies to improve employee satisfaction, productivity, and reduce employee turnover (Choi & Whitford, 2017). The company could adopt a mix of solutions as illustrated in the chart below to improve employee satisfaction in the company.
Chart 4 indicates possible solutions for combating workplace challenges that affect employee satisfaction and subsequent performance at their workstations after conducting market research. The solutions could aid Lyst Pharmacy Ltd in meeting its objectives.
Challenge 3: The Vice president of Products revealed that the company did not incur any carrying costs for the period ending in the fifth month. However, the company missed $74, 747 unit sales due to underproduction of products leading to an increased loss in revenue amounting to $575,552 and a cumulative total of $1,154,966. The excess demand for products may result from an underproduction of products by competitors leading to unmatched demands for Lyst pharmacy products.
Solution 3: The most viable solution would be to introduce a mechanism to increase production of company products by approximately 25% of the missed unit sales as a pilot undertaking to gauge market reaction and company capacity to handle increased demand. Eckstein, Goellner, Blome, and Henke (2015) suggest the need for increased production volume as a means of meeting the excess demand and settling on new supply-demand equilibrium.
Chart 5 shows how the company can resolve the demand deficit created by underproduction which leads to an undersupply of the products produced in the industry by Lyst Pharmacy and other competing firms in the industry. The new supply will offer increased unit volumes in anticipation or excess demands of the market caused by a shortage of products in circulation albeit at a slightly higher price. Such an approach will also guarantee an increase in the volume of sales if all factors remain constant as it was in the previous period.
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References
Choi, S., & Whitford, A. B. (2017). Employee satisfaction in agencies with merit-based pay: Differential effects for three measures. International Public Management Journal, 20(3), 442-466.
Eckstein, D., Goellner, M., Blome, C., & Henke, M. (2015). The performance impact of supply chain agility and supply chain adaptability: the moderating effect of product complexity. International Journal of Production Research, 53(10), 3028-3046.
Kurt, A., & Zehir, C. (2016). The relationship between cost leadership strategy, total quality management applications and financial performance.
Rothaermel, F. T. (2015). Strategic management. New York, NY: McGraw-Hill Education.
Salavou, H. E. (2015). Competitive strategies and their shift to the future. European business review, 27(1), 80-99.