Assignment 1 Business Report - Chemist Warehouse PDF

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First Assignment Business Report during 2019 s2. Was based on Chemist Warehouse and I got 80% as the mark....

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1. Introduction This report contains an environmental analysis of the Australian pharmacy retail business, Chemist Warehouse, which establishes a comprehensive understanding of the environment the company operates in. This analysis examines the impact of stakeholders, incorporating customers and employee organisations within the task environment, and political-legal and demographic forces within the general environment. Furthermore, this report identifies significant challenges posed to the business and subsequently encompasses four strategic recommendations, that the company can utilise to combat these vulnerabilities. This report ultimately aims to quantify the influence of certain stakeholders on Chemist Warehouse’s internal and external environments, to highlight challenges within the business environment, and provide effective strategic solutions. 2. Business Analysis 2.1 Environment Analysis 2.1.1 Impact of Employee Organisations Employee organisations are an extremely impactful external stakeholder that substantially influence the internal environment of Chemist Warehouse. Employees associating with employee organisations such as unions, fundamentally alter the workforce of the business, through developing employment requirements. (Addison, 2005) emphasised the impact of employee organisations on unionized businesses, highlighting an increase in productivity (25%) across 986 firms and stating an increase in morale and reduction in employee turnover. Utilizing unions, Chemist Warehouse employees have established an immediate pay rise for all employees (8%) and implemented robust training routines. These conditions transform the internal environment for employees, a crucial internal stakeholder, which results in increased effectiveness, technical skill and staff satisfaction, emphasising the significant impact of employee organisations on the organisation. 2.1.2 Impact of Customers Customers are currently a significant and impactful external stakeholder of Chemist Warehouse. Freeman (2001, p.43) states that “customers provide the life blood of the firm”, emphasising a focus on developing a company around a central demand 1|Page

and customer. Customers significantly impact business operations, due to the nature of demands. The fluctuation in the availability and preferences of products, results in companies having to evolve around fulfilling changing demands on an ongoing basis. (Haggan, 2018) emphasises the impact of customers in the current strategic plans of Chemist Warehouse by revealing a customer-oriented focus on large scale expansion, encouraging convenience through close proximity to stores. Reimers & Chao (2014, pg 2215) state that “convenience is universal”, reinforcing the strategic decision, whilst reiterating the extent to which customer needs impact on Chemist Warehouses’ strategic direction. 2.2.1 Influence of Demographic Forces Demographic forces play a strong role in Chemist Warehouses current position. Demographic factors including, age is an influential force due to the presence of an aging population (Claessens 2015) and the changing customer demands over time as a result of different customer desires. The percentage of the Australian population aged over 65 (15%) has tripled in the last 90 years from (5%) in 1927, whilst the median age(41.1yrs) is increasing. Chemist Warehouse generates a third (33.3%) of their revenue through prescriptions, and two thirds (66.6%) from regular retail sales. The company’s current revenue streams are based around meeting the demands of a variety of customer demographics and preferences, emphasising the factor of age in providing a market for Chemist Warehouse currently and underlining the extent to which demographic forces affect the company. 2.2.2 Influence of Political-Legal Forces The influence of political-legal forces on Chemist Warehouse is currently very significant. This is due to government regulation and rules present in the pharmacy industry, which controls the number of pharmacies per state. The maximum of number of pharmacies owned in all Australian states and territories is a combined 16 stores (Hattingh 2011). The influence of political-legal forces on Chemist Warehouse is significant as displayed by the strong regulation to support growth of smaller chains, despite Chemist Warehouse promising 60% lower prices (Paola 2018), and restrictions for large scale business expansion. 2.3 Identified Challenges

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2.3.1 Challenges of Expansion Government regulation of the growth of Chemist Warehouse, through tight policies, poses a threat due to a limit of a total of 16 stores in the country, with additional stores less profitable due to the nature of acquiring stores through equity. Chemist Warehouse has identified 60 towns it would open stores in if not for regulation (Paola 2018). This could lead to stagnation in the market due to increased competitors, tight restrictions on growth, and less profitable stores. 2.3.2 Challenges with Public Perception There are several key factors that threaten Chemist Warehouses’ ability to maintain a positive public image, because of the public disputes with the employee’s union, where poor pay conditions and sexual harassment allegations reached mass media headlines. An aging demographic also provides a challenge to maintain old customers and entice new customers. Additionally, the rapid expansion across considering the poor work conditions, and friction with independent pharmacies, in smaller areas could lead to an unwanted reputation as a bully in the market and harm brand loyalty and trust. 2.4 Recommendations 2.4.1 Employee Relations Chemist Warehouse is struggling from poor employee relations. Management should invest time and resources into engaging in an employee enterprise agreement with the union, to bridge the divide between management and employees and make ongoing commitments to improving work conditions, through theoretical and practical training, to combat harassment and other workplace issues. This should result in a flatter business structure in terms of perceived power, and should reduce turnover, whilst boosting productivity. 2.4.2 Customer Loyalty Chemist Warehouse management should implement a customer rewards program to encourage customer loyalty and repeat purchases. This combats the lack of growth and potential stagnation by enticing new customers to try the store. This should combat challenges faced with expansion and growth in the short term. The analysis

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of external stakeholders identified customers as the most impactful influence and is central to the business’ success. 2.4.3 Public Relations The company should employ a public relations manager, and employ media communication consultants, to combat negative press received from the strikes and union intervention. The media communication consultants should focus on conveying the company principles of convenience and value, through advertising campaigns, to boost public image and customer trust. This strategy should also solve an aging demographic through creating loyalty and encouraging word of mouth to bring in new customers and new demographics. 2.4.4 International Expansion The business should invest resources in long term strategic planning, with the intention of expanding overseas incrementally, whilst continuing expansion in New Zealand. This should combat the negative impact of government forces and provide huge opportunity for growth heading into the future. 3. Conclusion The environmental analysis performed on Chemist Warehouse reveals the impact of external stakeholders on the internal business environment. By evaluating the influence customers and unions in the business, an understanding of positive and negative forces interacting on the business is gained. The impact of legislation and the markets demographic provides context of the external environment the business operates in. The stagnation of growth as a result of strict government regulation and a poor public image on the back of employee mistreatment are challenges that have been identified for management to address. Four recommendations have been submitted to address employee and customer relations, and the companies’ public image in the short term. International expansion provides a long-term strategic plan to counter barriers to expansion. By implementing these strategies, a strong strategic direction for the company can be established.

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