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Company Background
After the Second World War in 1945, Mariano Que began his corporate
journey. The Filipinos, who had just suffered a devastating war, had a very
limited access to medicine at that time. Que with his P100, bought a bottle
of the wonder drug Sulfathiazole, and sold it by piece or tingitingi using a
pushcart on the streets of Sta. Cruz, Manila. From pushcart peddling and
with his previous working experience in a drugstore before the war, he
eventually opened his first small drugstore in Bambang Street.
1
Mercury Drug has long been the uncontested leader in the local retail
drug sector, cornering more than 50 percent of the market share in 2014.
(Richmond Mercurio, Philippine Star: September 2014).
2
With P104.49 billion gross revenue, or 62% share of the market this
th
has catapulted Mercury Drug to the 6 spot in 2015s Top 1000 Corporations.
Its competitors, Watsons Personal Care (Philippines), Inc., and Rose
Pharmacy, Inc., trail Mercury Drug by a mile, with revenues of 19.34 billion
and P8.44 billion respectively. (Uy, Leo Jaymar, Business World Research:
December 2015)
A. Mission
B. ObjectivesStrategies
Objectiv Strategi
es es
To sustain its leadership in the Opening more than 1,000 stores
retail drug industry nationwide
Ensuring high quality of branded and
generic medicines
"Nakakasiguro Gamot ay Laging Bago"
E.Business Model
A. Board of Directors
Shares
Name Title Stockhol
Type/Num
der
Vivian QueAzcona Chairman Yes ber
Common
Josefina P. Romero Member Yes 5
Common
Jacinto J. Concepcion Member Yes 2
Common
Jesus P. Mangrobang Member Yes 2
Common
Alicia A. Lumanog Member Yes 2
Common
Corazon S. Lim Member Yes 2
Common
Ignacio D. Bernal Member Yes 1
Common
1
The company stock of MDC remains privately held as well. There are
29,933,330 common shares outstanding and only around 15 stocks or 0.01%
is owned by the Board of Directors. 99.99% is owned by the parent company
Mercury Group of Companies.
B. Top Management
Corporate
Officers
Vivian QueAzcona Chairman of the Board, Stock holder
Jacinto J. Concepcion President
Member of the Board, Vice Stock holder
Jesus P. Mangrobang Presidentof the Board,
Member Stock holder
Joy Ann Marie N. Garcia Treasurer
Secretary NA
There are four corporate officers which three of them are stock holders
including Chairman Vivian QueAzcona.
V. EXTERNAL ENVIRONMENT
A. Societal Environment
Threat of
New Entrants
Bargaining Bargaining
ModeratePower
to of Suppliers Industry Power of Buyers
Low
High Competitors
High
Threat of
Substitute
Low
1
0
Hence, they tend to have moderate to high control over the
prices of these products.
80% of the countrys medicine purchases are done in drug
stores, because its normally difficult for distributors to
coordinate their operations.
1
1
C.List of Opportunities and Threats
Opportunities
Threats
Weighted
Weight Rating Comments
Key External Factors Score
Opportunities
Market expansion into international markets 5% 2 0.1 Joint venture in other ASEAN
Expanding into new geographic markets 16 4 0.6 Countries
Feasibilty study in key provinces
Expanding the companys product line to % 4
meet a broader range 3 Intensify other catrgories
of customer needs 10 0.3 (beauty
welness)and
Online sales 8% 1 0.08 Intensify Ecommerce
Entering into alliances or joint ventures 7% 2 0.14
Acquiring rival firms or companies 5% 1 Consdier buying South Star Drug
0.05 Rose Pharmacy
and
Join venture outsie the
pharmacuetical Industry
Threats
Likely entry of potent new competitors with
lower price
of medicines Threat of
5% 3 0.15 Substitues
Growing bargaining power of suppliers 8% 3 0.24 Threat of Suppliers
Increasing intensity of competition among 12% 4 0.48 Competitor Check
industry
Loss of sales to substitute products 7% 3 0.21 Threat of
Entrants of government regulated drugstores 12% 2 0.24 Substitues
Regulatory
(Botika ng Bayan)
Loss of sales through shoplifting cases 5% 2 0.1 Compliance
In store security
100% 2.73
Legend: 1 = the response is poor. 2 = the response is below average. 3 = above
average. 4 = superior.
Weights are industry specific. Ratings are company specific.
A. Corporate Structure
Decentralized organization storesbranches are divided into
sub units base on locations.
Segmented into three functions : Drugs, Personal Care, Customer
Service
B. Corporate Culture
Mercury Drug Stores is conservative that maintains the
management of the company as privatefamily held
organization.
The President and at Chairman of the board is the daughter of the
founder
The board of directors and corporate officers assumed positions
such as directors, executives, managers in the pharmaceutical
industry.
C. Corporate Resources
a. Marketing
Market leader and the pioneer in the industry since 1940s S
Captured 60% of the market shares S
Strong brand positioning S
Product lines that targeted different age groups S
b. Finance
99.9% of shares comes from the parent company Mercury
Group of companies S
2015 Financial performance shows a positive result compare
from the loss of 2014 S
Companys current assets are dependent on inventory W
Company liquidity is efficient (Basis: Free Cash Flow) S
f. Information Technology
The net profit margin of 2% and 3% for 2014 and 2015: The negative
NPM is due to the retirement benefits provided during that year, worth
almost P6.9 billion. Mercury Drug Corporation was able to use its assets
more efficiently in the year 2015 compared to 2014, as shown by the
increase in ROA by .14 in 2015. The profit that the company has created
using the shareholders money has also increased by 1.7, as shown in the
ROE. The entity was also able to reduce the leverage of the company by
reducing its debt ratio, lesser proportion of the companys assets that are
financed by debt.
Current Asses
Cash and Cash Equivalents 13.11% 13.07%
Receivables 34.11% 34.78%
Inventories 40.84% 41.92%
Prepayments 1.17% 0.96%
Total Current Assets 89.23% 90.73%
Non-Current Assets
Deferred Tax Asset 5.79% 4.69%
Property and Equipment net 4.89% 4.48%
Other Assets 0.09% 0.10%
Total Non-Current Assets 10.77% 9.27%
Current Liabilities
Accounts Payable and Accrued 70.32% 69.72%
Expenses
Income Tax Payable 0.90% 0.20%
Total Current Liabilities 71.22% 69.92%
Non-Current Liability
Retirement Liability 17.36% 13.13%
Total NonCurrent Liabilities 88.58% 83.05%
Equity
Paidup Share Capital 8.58% 8.08%
Retained Earnings 2.84% 8.87%
Total Equity 11.42% 16.95%
1
6
F. Altman Z-Score
Formula:
Strengths
Weaknesses
Has no global distribution capacity
Weak inventory management procedures
High Operating Expenses
Low paidincapital from stock holders
Weight
Internal Key Factors Weight Rati Comme
ed
ng nts
Strength Score
An attractive customer base 10% 3 0.3 Customer Loyalty
Strong advertisement and promotions 8% 2 0.16 Good Madvertising and
Good customer service capabilities 10% 4 0.48 PromotionsRetention
Customer
Wide geographic coverage 10% 4 0.44 Georgraphical Representation
High product quality competencies and 10% 4 0.4 Product Quality Standards
capabilities
Diverse product range 8% 3 0.24 Product Availability
Weakness
Lack of adequate global distribution 3% 1 0.03 Distribution Channel
capability
Weak inventory management procedures 9% 2 0.2 Internal Inventory System
High Operating Expenses 10% 2 0.2 Cost Minimization
Low paidincapital from shareholders 12% 4 0.2 Shareholders ROI
Current Assets are dependent on 10% 4 0.2 Inventorry Turnaround
inventory 100% 2.85
The ratings in internal matrix refer to how strong or weak each factor
is in a firm. The total weighted score ranges from 1 to 4 (where 1 is low, 4 is
high and 2.5 is average).
The weighted average score for the internal key factors is 2.85 which
is almost above average which means that the company has a strong
internal position.
VII. Strategic Alternatives and Recommended Strategy
OPPORTUNITIES THREATS
TOWS ANALYSIS
Mercury drug is already the uncontested leader in the local retail drug
with 62% market share and more than 1,000 stores nationwide across most
provinces. With this, Mercury drug has little to no room for expansion in the
Philippines as it has penetrated nearly all the feasible markets it has
available in the Philippines. With this, we have formulated the following
strategies for Mercury drug to not only maintain but improve on its position.
A. Strategic alternatives
Pros:
Cons:
Pros:
Cons
2
0
Minimal growth potential
2
1
Create Mercury branded specialized stores such as Mercury skin care
store which can compete with shops like The body shop.
Pros:
Cons:
Pros:
Cons:
Pros:
Cons:
CRITER WEIGH
A. IA
Sustainability (Longrun) TS
.20
B. Growth Opportunity .35
C. Profit Maximization .25
D. Customer Retention .20
Weight
Alternatives A(. B(.3 C(.25) D(.2)
ed
2) 5)
1.Improve profit SCOR
margins through 4 5 3 (0.75) 2(0.4) 3.7
Backward (0.8) (1.75
Integration
2. Improve brand )
loyalty by providing 5 (1) 1 1 (0.25) 4(0.8) 2.4
added value through (0.35)
services
3. Diversification 2.4
3 (.6) 2 2 (0.5) 3(0.6)
through specialized
(0.7)
stores
4. Using ABC 2.35
2 (.4) 1 4 (1) 3(0.6)
analysis to merged
(0.35)
inventories 3.1
5. offer Stocks to 4 5 3 (0.75) 1(0.1)
Public (0.8) (1.75)
VIII. Conclusions
A. Financial Statements
B. The Business Model Canvass
VII. References:
Uy, Leo Jaymar, Top 1000 Story: Pockets of Monopolies Amid Growing
Economy
Business World Research, posted Friday, December 11, 2015.
Extracted August 14, 2016.
th
Wheelen and Hunger, Strategic Management and Business Policy 13 ed.
www.mercurydrug.co
m.ph
www.philstar.com
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