George Farin is the sole proprietor of the Valley Drug Mart that he has built in his hometown of Middleton, Nova Scotia, over a period of fifteen years. The business has thrived and grown through the acquisition of the towns' only competition and the relocation to a 7000 square foot building.
After fifteen years in business, Mr. Farin has learned that a major pharmacy Lawton's Drugs would be opening in a new strip mall approximately one kilometre from his business. With a population of approximately 4,000 people Mr. Farin believes that the area cannot support two large pharmacies. The question of how to compete against a major chain threatens Mr. Farin. His drugstore though, has acquired the objectives for which every successful business strives, growth, social responsibility and survival.
Mr. Farin has several key elements that are in his favour. He is strongly committed to the success of the community through his store and himself. He understands how important his stakeholders are to the success of his small business. His store is customer-driven, in a time when quality and service are important.
The opening of Lawton's brings about opportunities for Mr. Farin, the chance to reinforce his business philosophy creating a strong customer-driven Drug Mart.
PROBLEM IDENTIFICATION
The problem facing Mr. Farin is how to survive against a large organization, namely Lawton's Drugs. Mr. Farin must devise a strategy and tactics to maintain Valley Drug Mart's market share which will allow him to compete successfully with Lawton's Drugs .
SELECTION OF DECISION CRITERIA
The strategy selected must consider the consumer. The following criteria must be present in order for the alternative to achieve success:
1) Increased convenience
2) Increased quality
3) Increased service
4) Increased comfort
The above criteria will determine if the alternative selected will be successful once fully implemented.
IDENTIFICATION OF ALTERNATIVES
Mr. Farin is faced with the problem of keeping his market share in a small town where there now is competition. The following is a list of possible alternatives:
1) Do nothing. Hope that the Valley Drug Mart has a strong enough market niche within the community to withstand competition. Mr. Farin is already a well-known member of the community and his Drug Mart sponsors many community events.
2) Create strategic alliances with the other pharmacies in the area. This could provide for economies to scale in purchases of pharmaceutical and front store items and an important information network.
3) Advertise and market his store more. Offer a special savings card to Valley Drug Mart members. Produce a flyer with coupons in it. Sponsor the van to chauffeur local residents who require medical treatment to Halifax. Tie the Drug Mart in with other non-competing retailers, ie: he might exchange promotional material with a nearby pizza franchise. Each of the two retailers may agree to offer, with each purchase, discount certificates for purchases at the other store. Extended businesses hours. Offer a computerized health watch (similar to Shoppers Drug Mart). Become a branch post office. Offer an incredible no questions asked return policy. Hold contest drawings (a mailing list will be created as an offshoot).
ANALYSIS OF ALTERNATIVES
Alternative 1
The pros of this alternative are that it does not require the implementation of anything and will not require any additional funds to be set out. Mr. Farin has already been very responsive to the needs of his stakeholders in the past and this should allow him to maintain his market share.
The cons of this alternative are that it does not meet the criteria standards. None of the criteria is increased with this alternative, they all remain at their current levels. This alternative incorporates assumption into the factor, which will not guarantee success.
Alternative 2
The pros of this alternative are that it will create a strong information network among the pharmacists. This information network could provide an increased service to the customers because more information will be available to the pharmacist. The purchasing power of the stores will also increase due to the alliance, economies to scale. This will reduce the cost of everything from sundries to medication. The lower cost of goods could allow the pharmacies to purchase quality items at a lower cost. This therefore increases the quality of the products while lowering the cost to the customer. An increased level of comfort could be attained by the customer because they know their pharmacist is trying to help them in the best way he/she can.
The con of this alternative is the absence of customer convenience when a strategic alliance is formed with the other pharmacies. The customers convenience is in no way increased. There may also be some in the alliance who will do more taking than giving. As well, Mr. Farin or other pharmacists may not be comfortable sharing their market information, new pharmaceutical knowledge etc. with others.
Alternative 3
Advertising promotes Valley Drug to people who previously never shopped at the store. Coupons increase business especially with today's value conscience customer. The chauffeured van increases service and convenience to the customers, all while promoting the Valley Drug Mart. Forming a strategic alliance with a non-competing retailer supports the community. Extending businesses hours increases the convenience to the customers/community. Offering a computerized health watch offers the customer a piece of mind, knowing that no two drugs will have a harmful interaction. Overall the customer will feel comfortable knowing the pharmacist/drug store is looking out for them. Becoming a branch post office will offer the customer convenience. The return policy will imply to the customer that if they are not happy with their product, Valley Drug cares and will make it right. Holding contests increases businesses and provides a great mailing list to send out newsletters and surveys, which could further increase business. Offering the above will provide the community with a high quality of service and convenience, possibly putting them ahead of their competition.
The cons to this alternative would be the time and cost needed to implement the alternatives. The Valley Drug Mart may also have to increase staff to provide some services mentioned, ie. the branch post office, extended store hours.
DECISION/RECOMMENDATION
The alternative that would offer the greatest reward while meeting the decision criteria is alternative three, to advertise and market the Valley Drug Mart more. This alternative will not only maintain Mr. Ferin's market share but will increase it allowing the Valley Drug Mart to successfully compete against Lawton's Drugs.
IMPLEMENTATION
The advertising and marketing the Valley Drug Mart can be split into two areas. Short and long terms plans.
Short Term
-Produce a special members card that will allow customers to obtain discounts.
-Produce a weekly flyer to distribute in the local newspaper, in the local mail.
-Begin to research the cost of implementing the van program.
-Do an in-depth survey of the community to see how many people would use the van, and how often.
-Begin discussion with local insurance companies to see if they would provide insurance in return for advertising space on the van.
-Begin discussion with the local service club (ie. rotary clubs) to see if they would provide a driver and possibly pay for all or part of the gas.
-Begin researching to find a local non-competitive retailer who would be interested in exchanging promotional material.
-Implement new improved return policy.
-Hold a meeting with staff to discuss ideas for contests and begin the draws.
-Begin research into computerized health watch system.
-Begin research into opening a branch post office.
Long Term
-If economically feasible implement computerized health watch system.
-Hire on more staff to operate the post office and store if necessary.
-Implement the van program.
-Implement promotional exchange with a local non-competitive retailer.
-Offer extended hours.
-Begin mailing with names from contest draws.
Implementation of the above will increase Valley Drug Mart's market share, therefore allowing Mr. Farin to successfully compete with Lawton's Drugs.
