MEDIRICH PHARMACEUTICALS

EXPERIENCES DECLINE IN SALES AND

PROFITS
SALES AND PROFIT REPORT FINDINGS

Medirich Pharmaceuticals
APRIL 22, 2014
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LETTER OF TRANSMITTAL
Mr. Julius. C. Griffin
Desa Hartamas
Kuala Lumpur 5700
Malaysia
Julius.Cesar@gmail.com
4, April, 2014

Mr. David Hoffman
Chief Executive Officer of John pharmaceuticals
5, Madison Street
Malaysia, Kuala Lumpur

Dear Mr. David
It has become my absolute pleasure to submit Medirich Pharmaceuticals financial report,
indicating and highlighting the drop in company sales and profits, as you requested on the 22
nd
of
April. This report consists of information (which was researched) which coveys to the reasons
behind the decline of sales and profits dating from the years 2012-2014.
The purpose of this report is to highlight/identify the key areas within the company that are
causing a decline in sales and profits. In Addition, attached to this report are suggested
recommendations or solutions for the declining of sales and profits.
I would like to thank our CEO (Mr. David Hoffman) of Medirich Pharmaceuticals for his
support and cooperation towards the accomplishment of this report.
This report has been established in the hopes that it will prove beneficial to the company in
maintaining and regenerating sales and profits. If they should be any need for further information
or inquiry, please do not hesitate to contact me.
Yours sincerely

Signature

Financial Manager
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TABLE OF CONTENTS

Letter of transmittal ...................................................................................................................................... 0
1.0 Abstract ................................................................................................................................................... 2
2.0 Purpose of Report ................................................................................................................................... 3
3.0 Methods of research ............................................................................................................................... 3
4.0 Introduction ...................................................................................................................................... 3
5.0 Findings and discussion ..................................................................................................................... 4
6.0 Conclusion ......................................................................................................................................... 6
7.0 Recommendations ............................................................................................................................ 6
8.0 References ........................................................................................................................................ 7

1.0 ABSTRACT

This report is based on the investigations leading to the decline in sales and profits within the
company. This report provides information obtained from a series of questionnaires, interviews,
surveys, personal experience and overviews of the companys financial annual reports dating
from 2012-2014. Interviews and questionnaires were directed to the Chief financial Officer and
other personnel in the financial department as well as personal in the logistics, communications,
and Information Technology and R&D departments. The annual reports of the company were
used to interrogate and analyze previous operations of the company, mainly marketing strategies.
Consequently, this report provides information obtained through ratio analysis, regarding the
probability and financial stability of Medirich Pharmaceuticals for the years 2012-20114. This
report will pay particular attention to identifying the reasons that have resulted to the decrease in
sales and profits. The report will comment on the prospects of the company and make
recommendations that would improve Medirich Pharmaceuticals current performance. In
addition, this report will contain the financial statements from the years 2012-2014 which will be
obtained from the companys financial annual reports, based on those years. This will give us
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projections to demonstrate how drastic are the profit declines as well as the overall financial
stability of the company in the upcoming years.
2.0 PURPOSE OF REPORT

The purpose of this report is to outline the reasons leading to a decline in profits and sales as well
as providing solutions to these problematic occurrences. It is beneficial to consistently educate
the company so these problems do not occur in upcoming years.
3.0 METHODS OF RESEARCH

The research method used to conduct this report consists of both Qualitative and Quantitative
data as well as survey methods and interview methods. By using this research method, we have
highlighted several reasons that have led to the decline in sales and profitability within the
company. These reasons are categorized into communication, prices, international taxes and
marketing.
4.0 INTRODUCTION

Medirich Pharmaceuticals has been increasing its sales and profits each year for fifteen (15)
years and has become one of the biggest medical distributors in Malaysia. However, in the last
past two (2) years, Medirich Pharmaceuticals has experienced a decline in sales and profits,
which has led to the deterioration in the companys business.
A research team was conducted to pinpoint the reasons why John Pharmaceuticals had
experienced such a dramatic drop/decline in profits and sales. The research team consisted of
members mostly from the financial department as well as the logistics and R&D (Research and
Design) departments.
It has come to my attention that, one of the reasons why the company (Medirich
Pharmaceuticals) is experiencing a decline in sales due to the lack of communication. Poor
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communication has turned potential customers away from the medical products and services
provided. In addition, the lack of communication has resulted to a loss in faith between the
company and its suppliers (Biotech) and partners, which has the potential of them seeking
services elsewhere.
Communication is one of the main reasons but they are many other factors in this report that
outline the reduction in probability and sales within the company itself. Communication is the
main reason that has led to the companys deterioration.
In all our efforts we are hoping to overcome this situation as quickly as possible in order to
become the number one (1) medical distributor in Malaysia. In order to achieve this, dedication
and hard work from all employees is required and may take time to accomplish this achievement.
5.0 FINDINGS AND DISCUSSION

It is very certain that the company is experiencing a downfall in profitability, despite its ability of
maintaining its thirteen years of success. It has come to our astonishment that our profits have
decreased severely in only a limited amount of time. Net profit margins have drastically
declined this year including a decline in all medical sectors as shown in figure 1.0. By observing
the sectors which experienced a decline, it was clear on what caused these declines.
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Figure 1.0


It was analyzed that most of these sectors shared one thing in common, oil. Most of these sectors
use oil for medical instruments and suppliers, medical appliances and equipment, drugs delivery
etc. The price increase has been having a trickle-down effect on this company. It is becoming
more expensive for us to provide patients with the treatment they need, due in a large part to the
rising cost of fuel. The cost of medical supplies like gloves, syringes and tubing made of PVC,
polypropylene and other oil based products are going up. Figure 1.0 shows the product costs
have increased five (5) to seven (7) percent on a wide variety of product categories, with some
rising as much as fifteen (15) percent. This has led the company to pass along those increases to
customers. We are experiencing extreme increases in the cost of doing business right now.
This has resulted to a drop in sales due to our products being so expensive; therefore the
company has received no profitability. This is an environmental force that the business cannot
control. It would be common sense to reduce the prices of our products to achieve and increase
in sales, however, it was founded that the company had done this in 2012.
Even though the company had achieved an increase in sales, its gross profit started decreasing. A
decrease in the selling price that is not accompanied by a decline in the cost of goods sold causes
a decline in gross profit. When revenues go down while cost of goods sold stays the same, you
will see a decrease in gross profit margin.
-10
-5
0
5
10
15
20
M
i
l
l
i
o
n
s

Profit Margins By Sector
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Through my research, I have seen that communication between the company and its consumers
and suppliers and partners is not fully established. This is a very serious matter as it has the
potential to lose our most trusted supplier and consumer. This would mean no raw materials and
no consumers to buy our end product which would lead to the closure of this company. Many of
the employees in this company have failed to ask clients and partner questions to establish if our
products and services are beneficial.
6.0 CONCLUSION

This report has highlighted the reasons leading up to the decline of sales and profit for the
company Medirich Pharmaceuticals. Decline in profits and sales have been cause by the external
increase of oil prices which has drastically increased company expenses. It has been
recommended to reduce other company expenses as the company cannot reduce oil prices. It was
recommended that the company increase product prices reasonably.
Second issue was that the company lacked communication between its suppliers and customers
and partners. This has the potential to result to a deterioration of loyalty by which the company
could lose customers and supplies. It has been recommended to make suppliers feel like they are
part of the company, building a strong relationship and for the company to provide support for e-
commerce and communicating with their consumers online as well as physically; we have
conducted this report in the hopes that it will help the company overcome this situation of
declined sales and profits.
7.0 RECOMMENDATIONS

It is recommended that the company, increases it product prices to a descent amount so that it
achieves sales and also covers operating expenses for the company. The company should also
start reducing costs, probably by negotiating lower prices with our suppliers, reviewing processes
and systems to minimize wastage, or the company becoming more virtual, minimizing travel
costs.
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It is recommended to build strong relationships with our partners, consumers and suppliers and
get their feedback. Make them feel like they are a part of the company. I would also recommend
e-commerce for consumers and clients to interact with the business. The company should also
provide online health diagnosis so consumers feel valued. By doing so, the company will start to
become noticeable by the market through word of mouth and through advertisements, resulting
to an increase in consumers.
8.0 REFERENCES
8.1.1.1
8.1.1.2
Raul Avenir (2012) What Causes the Decline in Gross Profit Margin?, Available at:
http://yourbusiness.azcentral.com/causes-decline-gross-profit-margin-5298.html (Accessed: 24
April 2014)

LANGWORTHY COMPANY (2013) Top Reasons Why A Small Business Loses Sales,
Available at: http://www.langworthycompany.com/why%20sales%20decrease.htm (Accessed:
24 April 2014)

Pat O'Connor (2014) Reasons for Revenue Slippage, Available at:
http://smallbusiness.chron.com/reasons-revenue-slippage-34302.html (Accessed: 25 April 2014)