Competitive Pharmacy Environment in the United Kingdom - Assignment Example

? Boots UK Limited Table of Contents Table of Contents 2 Introduction 3 Boots UK Limited- Business Overview 3 Task 3 Task 2 9 Task 3 10 Task 4 12 Reference List 13 List of Figures Figure No. Figure Name Page No. 1 Trend in UK Pharmacy Industry 5 2 Competitive Pharmacy Environment in UK 6 List of Tables Table No. Table Name Page No. 1 PEST 7-8 2 SWOT Analysis 8-9 3 Marketing Plan 10-11 4 Promotional Plan-2014 11 Introduction In this paper, the researcher will shed light on business operation of Boots UK Limited which is one of the renowned pharmacy chains in UK. The researcher will try to emphasize more on marketing operation of the company in comparison to other operational activities. Analyzing marketing plan of Boots UK Limited will be the essence of this paper while understanding the research problem in context to theoretical argument of various research scholars. Before going to this discussion, the researcher will try to understand the business matrix of Boots UK Limited. Boots UK Limited- Business Overview Boots was established by John Boot in the year 1849 and the company is headquartered in Nottingham, United Kingdom (Boots-UK, 2013a). Boots UK is the subsidiary of Alliance Boots which is a multinational pharmacy-led health and beauty group (Boots-UK, 2013b). Boots UK works in close partnership with pharmacists and medicine manufacturers in order to maintain steady flow of supply. The company focuses on three major business verticals such as pharmaceutical wholesaling & retail distribution, pharmacy-led health supplement distribution and beauty retailing (Boots-UK, 2013b). Although the parent company Alliance Boots has established its presence over 25 countries but subsidiary Boots UK has not expanded its operation beyond UK and Ireland. Boots UK Limited (Boots) has expanded its retail operation with the help of establishing 2500 stores in UK and Ireland. The pharmacy chain serves more than 7 million customers every week and the company earns revenue over ?5 billion (Tata Consultancy Services, 2007). Task 1 Ans.1b- Careful analysis of the research work of Sheth and Sisodia (2006) reveals the fact that both product and service driven companies have started to look into marketing planning as a strategic move instead of perceiving it as a mere operational trick to generate brand awareness. Modern companies separately allocate resources for formulating and executing the marketing plan. Sheth and Sisodia (2006) argued that modern marketers have started viewing marketing plan as a means for generating customer satisfaction and loyalty. Modern marketing plan is created after conducting deep market research on consumer behavior, economic power index of customer, demography of customers, social dynamics of customers while in previous occasions, marketing plan was developed on the basis of product selling objectives. However, Wood (2008) pointed out that pattern of marketing plan changed in terms on inclusion of social elements in the planning phase. For example, modern marketers emphasize heavily on creating human touch points or human appeal through the marketing plan while in previous occasions, marketing plans were mechanical in nature. Capabilities of Boots UK Limited (Boots) can be assessed in terms of its resources which can be classified as tangible, intangible and human resources. Tangible Resource Intangible Resource Human Resource Capabilities Boots work as the subsidy of Alliance Boots which earns annual revenue of more than $40 billion with operating profit of $2billion. Hence, the group is in financially stable position to finance its marketing plan. Boots is market leader in UK’s pharmacy-led health and beauty with 2,500 distribution centres. Boots has got intellectual capital by establishing patent contract with leading pharmaceutical companies. Contract with pharmaceutical companies help Boots to sell generic drugs in exclusive manner to customers. The company maintains the heritage of 164 years which is greatest drive for building the brand equity for Boots. In many occasions, Boots outsource its human capital in order to reduce cost of human resource operation. Parent company of Boots maintains its operation with the help of more than 1, 00, 000 employees and technological skill and knowledge of these employees are asset for the group. Boots has the dynamic capability to recalibrate its operations in accordance with the macro-environmental requirement. For example, the company has developed logistic centres within 50km radius of the stores so that inventory of the stores can get replenished in Just-In-Time (JIT) manner. The company uses Enterprise Resource Planning (ERP) system to automate its supply chain activities and inventory management. (Source: Transport for London, 2012) Ans.1b- Boots UK Limited (Boots) is the market leader in pharmacy based chain operation and as the company concentrates more on its UK based operation hence the researcher will analyze marketing environment for Boots in context to UK. Figure 1: Trend in UK Pharmacy Industry (Source: AT Kearney, 2012) The diagram is showing that government spending on healthcare sector has been reduced in UK while no. of patients is increasing at an annual average rate of 10% in UK (AT Kearney, 2012). Hence, pharmacy chain like Boots has the opportunity to meet the demand of increasing no. of patients by expanding its distribution centres and medicine portfolio. The pharmacy market in UK is becoming hypercompetitive due to rise of pharmacy players including small & independent stores, non-retail pharmacies, retail pharmacies and super markets. More or less 200 to 300 pharmacy brands are starting their operation in UK. Hence, Boots will face highly competitive marketing environment in coming years. Figure 2: Competitive Pharmacy Environment in UK (Source: AT Kearney, 2012) Now, the researcher will analyze the marketing environment for Boots in context to external environment analysis. PEST (Political, Economic, Social and Technological) will be used to understand the macro-environment driven marketing opportunity for Boots. Table 1: PEST External Environment Characteristics Opportunity for Boots UK Limited (Boots) Political (P) Government has reduced funding on healthcare sector by 1% while the same government has reduced the corporate tax bar for retailers by 2%. Government is offering some special benefits to leading pharmacy chains in accordance with their corporate social responsibility (CSR) measures. Poor healthcare spending of government will increase demand for getting medicines from private level pharmacies among customers and reduction in corporate tax bar will also help Boots to expand operation. Economic (E) UK is still battling with sovereign debt crisis and per capita income of people has been significantly reduced as result of economic crisis. As a result for rise in healthcare cost, patients of UK are looking for low cost generic medicines instead of patented drugs. Rise in demand for generic drugs will create opportunity for Boots to increase its generic drug inventory level in order to meet the emerging demand. Social (S) As the lifestyle of customers has become busy hence they prefer online retail purchasing for pharmacy product. Online retail purchasing is growing at a rate of more than 20% annum in UK. Patients are also seeking for expert and convenient pharmacy service. In such context, Boots has the opportunity to increase penetration of its online retailing portfolio in order to tap the demand. Boots need to offer specialized pharmacy services in order to engage patients who seek personalized attention. Technological (T) Technological expenditure in UK pharmacy sector has been increased by 5% in last two years. Many of the pharmacies have started using vendor management system and ERP solution in order to maintain inventory of medicines. Boots is already using ERP system to manage its supply chain activities and they are even taking help of Tata Consultancy Services for improving its customer relationship management system. (Source: AT Kearney, 2012) It is evident from the macro-environmental analysis that Boots UK Limited (Boots) has great opportunity to get both bottom-line and top-line growth after implementing a strategic marketing plan. In such context, internal analysis of the company in terms of its strength, weakness, opportunity and threat will establish foundation stone for the marketing plan. Table 2: SWOT Analysis Strength Weakness Boots is the market leader in pharmacy retailing has strong brand presence among people of UK. Strong financial position of the company helps them to finance strategic activities. Boots has opened more than 2500 pharmacy-led health and beauty retail stores which create problems for competitor retailers to become relevant in the eye of customers. Boots has failed to establish its presence beyond UK and Ireland and the company depends heavily on financial leverage of Alliance Boots. Technologically, Boots face problem to manage cost of its value chain activities. Boots lacks in having a formidable digital marketing strategy which can push the brand to young and online customers. Opportunity Threat Boots has the opportunity to increase store numbers in rural section of UK in order to expand its market penetration. As the company has started offering unrelated products such as games in the store hence there is opportunity for the company diversify its product portfolio by mixing both related and unrelated products. Even, the brand can increase penetration of its marketing activities by optimizing most of the elements of integrated marketing communication. Rise of online pharmacy retailing might eat the bottom-line pie for Boots. The company is also facing competitive threat from low cost individual retailers. Increasing cost for inventory management for pharmacy, beauty & health products can also be an operational threat for Boots. (Source: Transport for London, 2012) Task 2 Ans.2a- Research scholars stated that a marketing plan can never be classified as comprehensive in context to its capability to address every marketing challenge. McDonald (1992) pointed out companies face difficulties in preparing a comprehensive marketing plan due to various obstacles. These barriers can be created by both external environmental variables such cultural issues, social context of target population, political situation etc and internal variables such as lack of resources, lack of objectives, lack of coordination etc (McKeage, et al., 1999). Taking help of the scholarly work of McDonald (1992), barriers in implementation of marketing plan can be exemplified as, 1- lack of coordination between resource centres and marketing division which creates problem for the marketing department to access both financial and non-financial resources to implement the formulated marketing plan, 2- lack of clarity about the objective of marketing plan among top level management might lose their interest on the plan and 3- the marketing division might fail to create a process map for plan implementation due to lack of expertise and skill set. In such context, Boots UK Limited (Boots) needs to communicate the objective and benefits of the marketing plan clearly to parent group Alliance Boots in order to generate interest of the parent company Alliance Boots on the plan. Managers of Boots also need to work with top level marketing manager of Alliance Boots regarding critical decision areas such budget determination, resource allocation, activity flow etc. With such steps, Boots will be able to overcome first two marketing barrier mentioned in the above section. Marketing division of Boots should also identify both strategic and operational variables in the marketing plan and prioritize each variable as per their importance in order to remove unclear objective related barriers in marketing plan. Task 3 Ans.3a- Marketing plan for Boots UK Limited (Boots) can be briefed in the following manner; Table 3: Marketing Plan Objective Increase distribution channel to 3000 stores within next 5 years and achieve 20% return on investment from marketing activities within next 3 years. Product Offer both generic and patented medicine to patients. Offer herbal diet & weight loss health solution to patients and increase the depth of beauty and utility products such as fragrances, toiletries, electrical items, gift items etc. Price Competitive pricing should be used for most of the product portfolio while discount might be given to slowly moving inventories. Discount point can be given to customers for every ?20 purchase. Distribution Equal emphasis should be given and brick and mortar retailing and online retailing. Multichannel retailing would be preferable distribution channel for the company. Promotion Sales promotion can be used in seasonal basis while print and billboard advertisements can be used in regular intervals to generate brand awareness. 25% advertising budget should be allocated for promoting the brand through online blogging, social media marketing and website advertisements. (Source: Boots, 2013) Promotional plan for Boots can be depicted in the following manner; Table 4: Promotional Plan-2014 Jan- Feb Mar-April May-June July-Aug Sept-Oct Nov-Dec Advertising Frequency News Paper 2 1 2 1 3 3 Magazine 1 1 0 1 2 2 Sales Promotion No Yes No No Yes Yes Digital Marketing 3 3 4 3 4 4 Ans.3b It is evident from PEST and SWOT analysis that Boots UK Limited (Boots) has the opportunity to utilize its resources to implement a formidable marketing plan which can help the company to achieve sustainable leadership position in UK retail pharmacy segment. According to Elizabeth Fagan (Marketing Director at Boots), Boots can never take the risk of losing loyal customers while wasting resources in order to implement a new marketing strategy (Chapman, 2012). It is evident from the conversation of Elizabeth Fagan that for last four years, Boots mainly targeted woman consumers and family centric customers but now the company has planned to target all the segment of customers. In such context, it is recommended for Boots to emphasize more on healthier side of its portfolio in order to attract larger base of customers. The company should use more below the line promotional tools such as print media advertisements, billboards, and in-store displays instead of banking on costly TV commercials. On the basis of SWOT analysis, it can be recommended that Boots should use different online promotional medium in order to increase reach of the brand among young customers. Taking help of the suggestion of Elizabeth Fagan, it can be recommended that Boots shouldn’t use sales promotion in terms of discounting aggressively to push its healthcare products. Over emphasis on discounting might create doubt over quality of medicines among customers. Discounts can be given on beauty & gift items during particular seasons such as Christmas, Halloween etc. Increasing number of stores in both urban and rural territories of UK can be part of distribution strategy. In long run, TV commercial with local celebrities should be used in order to communicate value message to customers. Hence, it can be said that the company should use TV commercials if it feels that other mediums are not able to provide significant push to the brand. Task 4 Ans.4a- Rundle-Thiele and Wymer (2010) defined marketing ethics as set of principals, code of conduct, legal framework which prevents marketers from involving in any kind of activities which can hurt the interest, value system and personal belief of customers. From procedural viewpoint, marketing ethics can be viewed as self-righteous of marketers for not practicing activities which can disrespect the social belief of customers or violate the legal principals of competition. When preparing the marketing plan for Boots, above mentioned ethical issues needed to be considered. Ans.4b- Rundle-Thiele and Wymer (2010) pointed out that marketers need to consider large set of consumer ethics variables whenever they go for formulating a marketing plan. For example, Boots should not use any racially biased content in the advertisement which hurt the sentiment of particular customer group. TV advertisement or other promotional messages should not use any irrational, unscientific false promises in order to attract customers and ingredient, dosage of the medicine would be clearly labelled behind the product package. People of UK regard Boots as respectable and trusted brand hence customers expect that the brand will not participate in any kind of unethical practices. In such context, above mentioned ethical measures for restoring interest of customers will definitely improve credential and brand equity of Boots among customers in UK. Reference List AT Kearney., 2012. The Future of Community Pharmacy in England. [pdf] Available at: [Accessed 3 July 2013]. Boots., 2013. Pharmacy & health. [online] Available at: [Accessed 3 July 2013]. Boots-UK., 2013a. About Boots. [online] Available at: [Accessed 3 July 2013]. Boots-UK., 2013b. Our Group. [online] Available at: [Accessed 3 July 2013]. Chapman, M., 2012. Boots' Elizabeth Fagan on juggling a change in creative strategy for Christmas. [online] Available at: [Accessed 3 July 2013]. McDonald, M. H. B., 1992. Ten Barriers to Marketing Planning. The Journal of Product and Brand Management, 1(4), pp. 51-64. McKeage, K., Skinner, D., Seymour, R. M., Donahue, D. W. and Christensen, T., 1999. Implementing an interdisciplinary marketing/engineering course project: Project format, preliminary evaluation, and critical factor review. Journal of Marketing Education, 21, December, pp. 217-31. Rundle-Thiele, S. R. and Wymer, W., 2010. Stand-alone ethics, social responsibility, and sustainability course requirements. Journal of Marketing Education, 32(1), pp. 5-12. Sheth, J. N. and Sisodia, R. S., 2006. Tectonic shifts, the geoeconomic realignments of globalizing markets. New Delhi, NY: Response Books (Sage). Tata Consultancy Services., 2007. Client Experience. [pdf] Available at: [Accessed 3 July 2013]. Transport for London., 2012. Boots UK – Games planning case study. [pdf] Available at: [Accessed 3 July 2013]. Wood, M., 2008. Applying commercial marketing theory to social marketing: A tale of 4Ps(and a B). Social Marketing Quarterly, 14(1), pp. 76-85. Read More