This paper is a business plan to evaluate the dynamics associated with setting up Empire Home Delivery services in the US market. The success of this business plan is based on certain key factors. On the technical front, this paper notes that, Empire should use new technology to minimize the severity of projected operational risks.
Secondly, this paper observes that, though the medical supply market is excessively regulated, there are immense opportunities to exploit in the distribution of legal and easily accessible medications. Sensitive prescriptions will therefore not be included in the product and service strategy. This paper also identifies that, the US home delivery market is not a very competitive market and Empire Home delivery services stands a good chance of succeeding in it because there are more incentives for investments in this regard.
However, considering the minimal competition that exists in the market, there is a strong need for Empire Home delivery services to differentiate its products and services. By personalizing its product packaging strategy using a sensitive “customer care” framework, Empire Home delivery services will be able to differentiate its products in the market.
This business plan also acknowledges that, an online marketing strategy will be most appropriate for Empire because it poses several advantages to the company. First, the company will be able to reach more people at a minimal cost. Secondly, Empire will be able to gain access to markets that it would otherwise not have accessed using conventional marketing techniques.
Furthermore, through the financial projections table, this business plan identifies that; Empire Home delivery services will be able to break-even during its second year of operation. Moreover, from the paper’s financial projections, this business plan identifies that; Empire will be able to achieve high levels of market success if it maintains an active in-store and online presence where it can be able to communicate with its customers and amicably deliver medication to them.
Introduction
This paper is a business plan for setting up Empire Home Delivery services in the US market. Empire Home Delivery Service will be a private company that deals in the delivery of medication throughout the United States (US). Its main business specialty will be the distribution of drugs.
Empire home delivery service will be a partnership between two individuals. The two individuals constitute the management team of the company because they have worked in the pharmaceutical industry for five years and have invaluable experience regarding the business. Considering the partners are trained pharmaceuticals in the sale and distribution of drugs, Empire home delivery services is expected to be registered as a drug distribution company.
The management team is expected to facilitate this registration process because the US government recognizes their medical qualifications (Fulco 19). Though the product and market analysis of the business plan will be further analyzed in subsequent sections of this study, Empire Home delivery services will be engaged in the sale and distribution of a wide array of products, which can be obtained over the counter.
Complex drugs, which require the doctor’s prescription (and complex legal approvals), will therefore be excluded from the company’s product strategy. For instance, illegal drugs or antidepressants require complex legal requirements before they are sold to the public Such a complexity has also affected the virtual sale of alcohol because there is fear that unauthorized customers may use the online sales platform to bypass legal requirements for purchasing such items
With increased IT adoption in medicine, the market for home delivery of medicine expects to pick in the coming years (Fulco 1). The ordering and sale of new drugs through an online platform is therefore set to take over the sale and distribution of over the counter drugs in the coming years.
Since the virtual sale of drugs is growing, there are several competitors in the market. To evaluate the pros and cons of Empire home delivery services viz-a-viz its competitors, a separate competitor analysis segment will be included in this paper. The virtual sale of medication targets weak patients who cannot buy drugs from physical drug stores.
Empire home delivery services will be financed from a capital pool to be sourced from two partners. Though the detailed financial breakdown for the entire capital outlay will be explained in the financial segment of this study, Empire Home delivery services expects to start operations with an initial capital of two million dollars.
Each partner is expected to contribute half of the capital. The expected sales and income will be explained in subsequent sections of this business plan. Nonetheless, the above dynamics of the business plan will be outlined in the company’s vision and mission statement. Empire’s company vision is to be a global leader in the virtual sale of pharmaceutical products.
The company’s mission is to enrich customer purchase experience by providing quality pharmaceutical products at an affordable price. The company’s mission also outlines the company’s core values, which is to provide great customer service and quality products. The strategies and key success factors for Empire Home delivery services will be explained in the market analysis, product analysis, industry analysis and management team analysis segments of this business plan.
Industry Analysis
The market for medications has always existed since the birth of human science. The pharmaceutical industry is perceived to be a lucrative industry of the 21st century because of the surge in terminal illnesses and increased consumer purchasing power (Fulco 19). For instance, the pharmaceutical industry is known to have low overheads of operation and a high return on investments. The high return on investments has been a common feature of the pharmaceutical industry, for a long time.
For instance, among the fortune 500 companies, the pharmaceutical industry was estimated to rake more returns than the combined median of all existing companies within its category (Fulco 5).
For example, during the late 80s period, statistics showed that, new drugs introduced during the period (80s) raked in close to $36 million in revenue after tax deductions. This profit margin was estimated to be two to three percent more than what other industries projected, even after considering the risks of researching and developing the new drugs (Fulco 17).
For a long time, many businesses have not ventured into the virtual delivery of medications because of the sensitive nature of the drug market and the numerous legislations that surround it (Smith 61). Conversely, drug users have experienced tedious hassles of having to frequent hospitals and drug stores to buy drugs.
This situation has created an environment where there is a lot of time wastage and manpower loss because people could use their time to do other productive things (instead of making frantic trips to hospitals and drug stores to buy basic medications).
Though this situation prevails, the drug market is unique to conventional markets because its end-users are normally not in a perfect physical condition to visit drug stores or hospitals to purchase drugs. Often, most consumers at the tail-end of the drug supply chain are patients who may be ailing from a certain condition, or who are not in the right physical state to drive or walk to drug stores to get their medication.
However, considering the dynamics of the current market, most of such patients have been forced to travel long distances to buy drugs (though their physical conditions may not allow them to do so). Sometimes, some patients are forced to miss their dosages because they were not in a good position to purchase drugs (Madura 26).
In addition, considering the fragile nature of sick patients; emergencies (which require a prompt administration of drugs) may turn out to be fatal experiences if patients fail to obtain drugs when they need them most. A scenario where a patient stays alone and does not have a helper may further worsen this situation. Certain drug stores also have strict operating hours that are not flexible to patients’ needs. These dynamics form the basis for the venture of Empire home delivery services into the medications supply market.
The medications supply market in the US has often experienced several operational problems (Madura 26). These problems are multifaceted, but the end-user (who is often the patient) is the one who suffers most. However, the drug supply market is not immune to market changes that happen in today’s business world. The general business environment has mainly changed because of shifts in consumer tastes, preferences and technological advancements (Madura 20).
From this understanding, the home delivery business has grown in many business segments such as food delivery, grocery delivery (and the likes). Major retail companies in the world, such as Wal-Mart and Tesco, have adopted the virtual delivery business model in the supply of goods and services.
Tesco has especially specialized in the delivery of groceries through an online platform where orders are placed virtually. However, the drug market is not similar to the food market, though they share the same business model (home delivery of goods).
The above businesses are not direct competitors of Empire home delivery services.
As a result, the market for home delivery medication is not crowded. The most established companies that engage in the trade (delivery of medications) include RX America, and Direct RX (Critser 27).
Other companies that engage in the home delivery of goods do not specialize in the exclusive delivery of medications. They include the delivery of other goods such as groceries, meals and the likes. This last group of competitors is not going to be a threat to Empire Home Delivery services either because they do not specialize in the delivery of medications.
Marketing Strategy
Empire’s marketing strategy will be guided by the company’s mission to enrich the customer’s purchase experience by providing quality pharmaceutical products at an affordable price. The marketing strategy will be mainly based on online techniques, where virtual marketing tools such as, e-mail listings; promotional advertisements (and the likes) will be used to improve customer loyalty and seek the participation of potential customers (Gay 7).
Since Empire home delivery service is a new company, it is crucial to acknowledge that, it will not have the capacity to develop an internal expertise pool that is able to develop a sophisticated technological infrastructure to handle payments, orders, feedbacks, marketing services and similar services.
Consequently, this paper proposes that, such services be outsourced to an internal market place provider who can design such a technological platform. Though this process will be outsourced, it is crucial to understand that, the technology already exists, and since it has been tested in other home delivery companies. Therefore, the risks associated with its implementation will be significantly reduced (Gay 2).
Regardless of the sophistication of its marketing tools, Empire home delivery services still needs to differentiate itself in the market. To do so, Empire will personalize its products and services through the development of new product packaging (Meyerson 23). Currently, many medical supply companies operating the home delivery business do not personalize their packaging. Empire aims to capitalize on this opportunity.
Empire will also adopt an e mailing list to support its online marketing strategy because it will use this platform to send product promotions, sales advertisements and similar marketing tools that complement the company’s marketing strategy. This sale strategy will not be designed to sell medications but rather, to market the company to customers (Meyerson 23).
Price will also be an integral factor to be considered in the formulation and implementation of Empire’s marketing strategies. Since most of the company’s marketing strategies are electronic, minimal costs are likely to be incurred. As a result, the company is expected to sell its products at an affordable price. The only (relatively) expensive marketing strategy will be the direct mailing strategy.
Concerning the ‘place’ concept of the marketing plan, Empire home delivery services aims to have a strong regional presence in the US because it will have distribution outlets in every region.
Its regional presence will be facilitated by its online market presence. Nonetheless, in spite of these marketing costs, Empire expects to realize high returns from the same marketing campaigns. However, if an effective marketing strategy is to be realized, the working staff needs to be properly trained. The training costs will be considered as part of the company’s start-up costs.
Product Strategy
The supply of medication through the home delivery model is expected to be done through an online platform. Medications that require a doctor’s prescription will not be sold through this business model.
The online sales strategy will be able to transcend the geographical boundaries that conventional drug stores are limited to. This business model will capitalize on the opportunities that technology provides the healthcare sector because Empire Home delivery services will market its products to new market bases, which do not fall within the limitations of conventional drug supply systems (Gay 7).
Through this online business model, Empire will be able to realize a positive growth projection because drug users will be able to gain access to drugs from the convenience of their homes. There will not be any significant changes to Empire’s product offing because its array of products is strongly limited by existing legislations. Therefore, any product modifications will have to be excluded from the context of this business.
Adopting a simpler and convenient platform for ordering and delivery of services is going to be relied on as the main strategy for outperforming the competition. This strategy will be backed by an online marketing strategy that is expected to increase the customer pool. Empire will ensure its products are distributed to different customer locations from the nearest store location, thereby guaranteeing timely shipping by avoiding the bureaucracies and inconveniencies of operating one store.
The operation of several drug stores will be a costly affair (in terms of maintenance and initial setup costs) but considering the huge potential of the business, the establishment of several outlets is still going to be a viable strategy. Success is expected to be realized by stocking adequate inventories and ensuring customer satisfaction is attained because Empire anticipates that repeated purchases and word-of-mouth marketing will sustain the company’s sales.
The pricing formula for Empire’s products will be 30% above the product mark-up costs. Depending on the market environment and the business cycle, this percentage is expected to be revised. The main suppliers will be drug-manufacturing companies. During the initial start-up phase, Empire home delivery services intends to source its drugs from GlaxoSmithKline because it has a strong distribution network in the US.
Management Team
Considering Empire Home delivery service has an ambitious plan of being a leader in the virtual sale and distribution of medication, it needs to have adequate staff to oversee its operations. A staff of 150 people will be appropriate in the early stages of the company’s lifecycle. As mentioned in earlier sections of this business plan, the company’s two partners will be sitting at the top managerial level. The main position below the two partners will be the online sales manager’s position.
The main role of an online sales manager will be to give directions regarding existing and upcoming sales opportunities. The second (main) position to be filled will be the online marketing manager’s position. This office is expected to undertake periodic comprehensive market researches that include the identification of target markets and the identification of workable strategies to satisfy the needs of such target markets.
Next to these two positions will be the procurement manager’s position and the distribution manager’s position. These departments will have a share of the company’s 150 employees, depending on the roles and responsibilities of the departments. The above team structure will be in existence during the early stages of the company’s operations, but it is will be reviewed in subsequent stages of the company’s life cycle. Appendix one shows the management Team Structure
Financial Projections
The financial projection for Empire home delivery services is based on conservative financial forecasts for the next 12 months (and the preceding months that follow this period). The cost projection forecast constitutes a start-up capital of two million dollars. In the first month of operation, the company expects to make a loss of $49,000.
The sales forecast for the first month of operation is $350,000 but the expected costs of operation spread over several overheads, including staff training costs; cost of purchasing transport, machinery and equipment; cost of designing, building and establishing the online store; cost of website maintenance, cost of projected materials; shipping costs, insurance costs and staffing costs. Staffing costs are expected to be recurrent.
The projected material cost, shipping costs, insurance costs, website maintenance costs, and the cost of purchasing transport, machinery and equipment are also expected to be recurrent. The financial breakdown of these costs is explained in appendix two (under “Monthly income Statement”). The company is also expected to break-even during its first year of operation because the expected cash flow is expected to surpass two million dollars by the end of the first year.
The projected sales for the first three years is dependent on a sales increase forecast of $100,000 every month. In the first year of operation, the company expects to make about five million dollars in sales. With an increment of $100,000 for every month of operation, Empire home delivery services intends to increase its sales revenue by $1.2 million every year. Consequently, the company will realize sales revenue of 6.2million in the second year of operation and 7.4 million in the third year.
This financial breakdown is explained in appendix two (monthly income statement). However, the monthly income statement is subject to several assumptions including a constant store sales projection, and a completion of operating expenses within one year (there should be no balances carried forwards or instances of backdating). The pro forma balance sheet is also explained in appendix three and the monthly cash flow statement is explained in appendix four.
Works Cited
Critser, Gerald. Generation Rx: How Prescription Drugs Are Altering American Lives, Minds, and Bodies. Michigan: Houghton Mifflin Harcourt, 2007. Print
Fulco, Charles. Development of Medications for the Treatment of Opiate And Cocaine Addictions: Issues for the Government and Private Sector. New York: National Academies Press, 1995. Print.
Gay, Richard. Online Marketing: A Customer-Led Approach. Oxford: Oxford University Press, 2007. Print.
Madura, James. Introduction to Business. London: Cengage Learning, 2006. Print.
Meyerson, Mary. Success Secrets of the Online Marketing Superstars. New York: Kaplan Publishing, 2005. Print.
Smith, Michael. Pharmaceutical Marketing: Strategy and Cases. London: Routledge, 1991. Print.