306-Strategic management Assignment.
hani123
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University of Atlanta
MBA 639 – Dynamics of Corporate Strategy
Strategies to Maintain Prime Medix’s Position
as Market Leader in the Cold Medicine Industry
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Table of Contents
I. Executive Summary:................................................................................................................ 3
II. Overview of the Organization:............................................................................................. 4
Where It Was ............................................................................................................................... 4
Where It Is Now .......................................................................................................................... 5
Where It Wants To Go................................................................................................................. 5
III. Strategic Topic: .................................................................................................................... 5
Operations / Production ............................................................................................................. 5
Marketing and Sales ................................................................................................................... 6
IV. Case Analysis: ...................................................................................................................... 6
SWOT Analysis............................................................................................................................ 6
External Factor Evaluation ........................................................................................................ 8
Porter’s Model 2 ........................................................................................................................... 9
Competitor Profile Matrix ........................................................................................................ 11
V. Conclusions: ....................................................................................................................... 11
Operations / Production ........................................................................................................... 11
Marketing and Sales ................................................................................................................. 12
VI. References: ......................................................................................................................... 13
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I. Executive Summary:
Prime Medix, Inc. is facing declining sales of its main product – Coldin, a medicine especially
designed for cough and colds. It used to be the number one cold medicine in the market until late last year
when increasing costs of manufacturing and advertising forced Prime Medix to increase its prices. This
was considered the main factor why its consumers shifted to cheaper cold medicines. In addition, its
competitors rolled out marketing strategies that influenced physicians to shift to other cold medicines. As
a Consultant, the author was asked to help the Product Team in determining how to maintain the market
position of Coldin as one of the leading medicines in the market.
First, an analysis of the current internal manufacturing operations was done. It was recommended
that the processes be streamlined and raw materials be secured from lower priced suppliers while not
compromising the quality of the output.
Second, external factors were considered - primarily the effects of competitor’s aggressive
marketing strategies. In a saturated market like the cold medicine industry, it is important that Prime
Medix implement a proactive marketing campaign to hold on to their lead. They should further develop
their range of sales strategies (e.g. medical missions to entice potential buyers to purchase Coldin to
support the social cause, etc.) in order to maintain its competitive advantage over competing companies.
They should also ensure that their marketing strategies are focused to the right target market in order for it
to be effective and successful.
Third, there were experiencing some challenges with their sales workforce. As they are focal
point in the sale of Coldin, it was recommended that Medix should hire more field men in order to expand
the scope of its operations ethical divisions to more physicians, thereby increasing its domain over the
pharmaceutical market. Prime Medix should also base employee incentives on factors aside from gross
sales performance alone so they can be more motivated. Other factors like percentage increase in sales,
larger geographical area covered or increase in consumer awareness can be used as a basis.
Fourth, in terms of pricing, the decision to increase Coldin’s price by a drastic 25% must be
considered carefully, taking into account is effect on sales, market share and customer loyalty. On the
basis of these factors, Prime Medix may choose to increase Coldin’s price gradually.
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Once these are implemented, it is expected that Coldin will regain its market lead and will once
again become the most profitable cold medicine in the pharmaceutical industry.
II. Overview of the Organization:
Where It Was
Prime Medix, Inc. was founded 10 years ago as a manufacturer of different medicines with
Coldin as its flagship product. Prime Medix operates as an independent company, focusing on the sales
of proprietary and semi-ethical drugs to the market. As such, the main operations of Medix includes
manufacturing its medicines, providing pharmaceutical samples to the target market (i.e. doctors, drug
stores and private consumers), implementing advertising and promotional strategies, and establishing
good client and consumer service. Its vision and mission are as follow:
Prime Medix Vision: “To be the best healthcare provider in the Philippines.”
Prime Medix Mission: “To provide quality and affordable healthcare products and services that
promote and enrich life for all communities that we serve by working together as one united
family”
Prime Medix offers two major product lines to the market – vitamins and analgesic or cough-cold
formulas. They used to be the market leader in the cough-cold market with Coldin capturing more than
45% of the market share at one point. Its vitamin products capture roughly 5% of the market. As per
company sales, Coldin composes 65% of total revenue while other products comprise the rest.
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Where It Is Now
Due to increase in market competition and the various changes in the cost structures, Prime
Medix are facing decline in sales translating to net loss last year. In the previous ten years since its
inception, they experienced increase in sales and profits with only last year as the exception.
Its vitamins sales are as forecasted though it comprises only 5% of total product sales. On the
other hand, sales of analgesic/ cough-cold product Coldin performed below par thereby missing its
forecasted sales by 20%. As the main product this converted to a total decline in sales by 35% and its
previous year’s net profit to a net loss.
Where It Wants To Go
With the variances of actual and expected scenarios from previous periods and changes in the
consumer environment, Prime Medix wants to bounce back and get their market leadership back. They
want to be the market leader in the cold medicine industry. This means they have to capture back their
market share to 45%.
They also want to regain profitability by cutting down its costs and increasing its sales. They plan
to cut costs by 15% and increase sales by 20%.
III. Strategic Topic:
Operations / Production
In this case, it is important to consider what improvements should Prime Medix implement with
regard to its company operations in order to improve efficiency and profitability. As costs of
manufacturing are increasing, they should be able to cut down its raw material costs and streamline its
processes to facilitate decrease in its total cost structure.
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Once they are able to cut down their costs, they can regain their advantage of lower pricing against its
competitors to regain its consumers who shifted to the lower priced competitors. In addition, they will
able to contribute to profitability.
Marketing and Sales
As defined by Dr. Lexis Higgins, marketing is the conceptualization and delivery of customer
satisfaction 1 . Since Prime Medix is losing its hold as the market leader, they should analyze their
marketing strategies to maximize its sales performance on a per product basis, specifically for Coldin –
the lifeline of the company. They should look on the threats presented by competitors and on possible
ways for counter offense.
By being able to roll out proactive marketing strategies, they might be able to recapture the
market share they lost.
IV. Case Analysis:
SWOT Analysis
Strengths: By being in the business for 10 years, they have somehow gained intellectual
maturity in the production cycle of medicine manufacturing. They have built processes that can be easily
improved if need be.
In addition, Prime Medix has a strong brand name that will enable them to roll out new products
that is related to Coldin.
They also have salespersons who have gained rapport and long term relationship with doctors
who prescribed their medicines to their patients.
Weaknesses: Since they have experienced decline in sales and profitability, their ability to
increase capital expenditures to roll out manufacturing improvements is hampered.
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Also, there are some negative employee sentiments brewing as they felt that management
expectations are not realistic. They also felt tremendous pressure to perform higher that possible due to
current market conditions.
Opportunities: Prime Medix has a strong brand name that will enable them to roll out new
products that is related to Coldin. Since they already have cough-cold medicine, they can now produce
new products targeted to specific target markets like babies, toddlers, or pregnant women. It should be
noted though that thorough market research should be done before any new venture will be started.
Threats: Its competitors are implementing very aggressive marketing campaigns that influence
consumers to buy the substitute products thus decreasing Prime Medix’s share of the pie.
Also, tougher government regulation for any new products can be a hindrance to new ventures.
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External Factor Evaluation
Prime Medix - Key External Factors Weight Rating Weighted Score
Opportunities
Influence and exposure of medical representatives to
prescribers such as doctors and drug stores 15% 3.0 45%
Brand name and customer recall 15% 3.0 45%
Qualified, driven salesperson 15% 2.5 38%
Long term relationship with physicians and hospital staff 5% 3.0 15%
Threats
Presence of medical representatives in target areas 10% 2.5 25%
Market response to an increase in prices of Medix products 10% 2.0 20%
Prices of competing products 10% 2.5 25%
Costs of advertising and promotional strategies 10% 2.5 25%
Increasing manufacturing costs due to changing business
environment 10% 2.5 25%
100% 2.63
Given the opportunities and threats listed above and the rating based on the current plan of Prime
Medix, it can be concluded that they are slightly above average in its effort to capture external
opportunities and to avoid threats.
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Porter’s Model 2
Porter’s Five Forces Model 3
Threat of the entry of new competitors: Profitable markets that yield high returns will
attract new firms. The more profitable the industry, the more attractive it will be to new
competitors. Since switching costs in this case is low and new competitors can easily have access
to distribution channels, Prime Medix is facing a lot of challenges from new entrants. Prime
Medix has to capitalize on physician loyalty or in this case, physician loyalty in recommending
their products.
Threat of substitute products or services: There’s a high buyer propensity to substitute
since buyer switching costs is low and perceived level of product differentiation is low. There are
also a lot of substitute products available and there’s a high level of ease of substitution. So
Prime Medix has to lower their pricing while maintaining their current product quality to prevent
consumers to switch to other products.
Bargaining power of customers (buyers): The bargaining power of customers is also
described as the market of outputs: the ability of customers to put the firm under pressure, which
also affects the customer's sensitivity to price changes. Buyer switching costs relative
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to firm switching costs is lower in this case. Though buyer information availability is dependent
on physician prescribing the medication, the availability of existing substitute products can affect
Prime Medix’s profitability.
Also, in a down economy (with the onset of financial crisis and job layoffs), buyer price
sensitivity is increased. They will try to save any penny and this may cover medicines.
Bargaining power of suppliers: Suppliers of raw materials, components, labor, and
services (such as expertise) to the firm can be a source of power over the firm, when there are
few substitutes. Suppliers may refuse to work with the firm, or charge excessively high prices for
unique resources. Good thing for Prime Medix that there are other substitute inputs available in
the market. As such, they can negotiate for lower pricing from their suppliers.
As to its employees, they have employee solidarity though there’s some employee
resentment brewing that should be addressed soonest.
Intensity of competitive rivalry: For most industries, the intensity of competitive rivalry
is the major determinant of the competitiveness of the industry. To be able to compete, Prime
Medix should have sustainable competitive advantage and larger market share. They should also
increase the level of advertising activities at the most optimal mix.
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Competitor Profile Matrix
The competitors of Prime Medix are catching up faster than expected. Based from the competitor
profile matrix below, VitMEd and Unimedi are doing well compared to Prime Medix. They have beaten
Prime Medix in the critical areas of Market Share, Advertising, Pricing and Manufacturing Costs. Though
Prime Medix still has the Physician Loyalty, this may be captured by competitors as well through their
aggressive marketing strategies.
Prime Medix Unimedi Vitmed
Critical Success Factor Weight Rating Score Rating Score Rating Score
Market Share 25% 2.50 63% 3.00 75% 3.00 75%
Advertising 20% 3.00 60% 3.50 70% 3.00 60%
Pricing 20% 2.50 50% 3.00 60% 3.00 60%
Physician Loyalty 18% 3.00 54% 2.50 45% 2.50 45%
Manufacturing Costs 17% 2.50 43% 3.00 51% 3.00 51%
Total 100%
2.69
3.01
2.91
V. Conclusions:
Based on the analyses presented above, Prime Medix should roll out initiatives to
improve its operations and increase its market share.
Operations / Production
Internal manufacturing processes should be streamlined. Unnecessary steps in production should
be eliminated to lower employee costs. Also, distribution channels maybe analyzed for possible cost
savings.
For raw materials, supplier pricing must be reviewed to open opportunities for possible
negotiations with current vendors if they are amenable to it. If not, raw materials can be secured from
lower priced suppliers while not compromising the quality of the output.
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Marketing and Sales
Think about the common attributes of the ideal customers. Conventional approaches to
market segmentation that revolve primarily around demographics (industry, age, income,
location, etc) are a useful first step but are insufficient. The structural, behavioural, and
environmental attributes should also be carefully considered 4 .
The effects of competitor’s aggressive marketing strategies are taking a toll in Prime Medix’s
bottom line. In a saturated market like the cold medicine industry, it is important that Prime Medix
implement a proactive marketing campaign to hold on to their lead. They should further develop their
range of sales strategies.
In addition to their current marketing activities, they should conduct medical missions to entice
potential buyers to purchase Coldin to support the social cause. They can also increase their airtime in the
media outlets like television, radio and magazines. They can also add a Coldin ambassador. Leaflets
should be included in the packaging of Coldin cold medicines because this is a form of good customer
service and is thus a significant factor in achieving customer loyalty and trust.
The increase in their advertising costs should be offset by the decrease in their manufacturing
costs.
In order to maintain its competitive advantage over competing companies, they should also
ensure that their marketing strategies are focused to the right target market in order for it to be effective
and successful.
As they were experiencing some challenges with their sales workforce, it is recommended that
Medix should hire more field men in order to expand the scope of its operations ethical divisions to more
physicians, thereby increasing its domain over the pharmaceutical market. Prime Medix should also base
employee incentives on factors aside from gross sales performance alone so they can be more motivated.
Other factors like percentage increase in sales, larger geographical area covered or increase in consumer
awareness can be used as a basis.
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In terms of pricing, the decision to increase Coldin’s price by a drastic 25% must be considered
carefully, taking into account is effect on sales, market share and customer loyalty. On the basis of these
factors, Prime Medix may choose to increase Coldin’s price gradually.
At the end of the day, prime Medix should have a powerful competitive strategy to cope up
with the fast changing times in the pharmaceutical industry.
VI. References:
1 Higgins, Lexis, Ph. D. Principles of Marketing. 2001. November 19, 2011.
<http://www.principlesofmarketing.com/>.
2 Kotler, Philip and Gary Armstrong. Principles of Marketing (13
th Edition). New Jersey:
Prentice Hall, 2009.
3 “Porter’s Model”. Wikipedia. 2007.
<http://en.wikipedia.org/wiki/File:Porters_five_forces.PNG>
4 Fearless Competitor. Apollo, Bob. 2011. Inflexion-Point. November 17, 2011
<http://www.inflexion-
point.com/Portals/41408/docs/an%20introduction%20to%20the%20business%20model%20fram
ework.pdf>.