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Pharmacist was not able to provide the information sought and this led to higher deaths due to negligence in the administration of drugs
Very selective number of brands and products were available
Q1) Find out the profitability of each of the formats discussed in the chapter and suggest which one Planet Health should adopt?
Operating Ratio
It measures the relationship between operating cost and net sales Its used to determine the operational efficiency with which production and selling operations can be carried out
Operating Ratio and operating profit ratio are complementary to each other
Q1 (Contd.)
Computation Operating Ratio = Operating Cost * 100 Net Sales
Operating Cost = Start up cost (Capex)+ Gross expenses + Interest on FV Premises Net Sales = Gross Sales Sales Returns
Q1 (Contd.)
250 Square Feet
1 2 3 4 5 Average
5063 3452
6539 3692
8472 4028
10555 4448
13149 4835
68.16
56.46
47.54
42.14
36.77
58.642
Q1 (Contd.)
500 Square Feet
1 2 3 4 5 Average
7170 5790
9260 6123
11957 6592
14847 7179
18559 7716
Operating
Ratio
80.75
66.12
55.13
48.35
41.57
58.384
Q1 (Contd.)
1000 Square Feet
1 2 3 4 5 Average
Net Sales
Operating Cost Operating Ratio
8547
9774
11038
10154
14301
10690
17815
11364
22193
11971
114.3 5
91.99
74.75
63.79
53.94
79.764
Q1 (Contd.)
2000 Square Feet
1 2 3 4 5 Average
11034 16875
14295 17346
18520 18853
23071 18853
28641 19597
152.9 3
121.34
101.79
81.71
68.42
105.38
Q1 (Contd.)
Interpretation
The ratio indicates an average operating cost incurred on a sales of goods worth Rs 100
Lower the ratio , greater is the operating profit to cover the non operating expenses , pay dividend and create reserves Therefore, Planet Heath should adopt 500 Sq feet format because the operating ratio over a period of time is lower than other formats
Q2. What values does Planet Health want to deliver? How does each format stand with regard to delivering these values?
The values intended to be delivered are: Providing qualified pharmacists acting as a link between patients and doctors Provide air-conditioning and refrigeration facilities to preserve medicines properly assuring quality to the customers Sell all merchandise on bills to avoid any unethical practices Providing a valuable shopping experience to customers with a bigger store and multiple products and brands
Q2 (Contd.)
Store Format and Location: Stores located in residential areas to provide a good and efficient shopping experience to customers Store to be prominently visible providing enough parking space Proposed to open a set of mother and daughter combinations Store Design and Layout: Design based on building trust among the shoppers through purity, openness and transparency Store looked to design like a lifestyle store Provision to dispense medicines from a side window during late night hours for convenience
Q3) How does each format relate to the location of the stores?
Has to be near residential areas Presence of doctors or hospitals in the area Proximity to the educated middle and upper class households The trading area to be situated nearby Parking availability Prominent visibility Nearness to complementary outlets ( Mother and daughter store)
Q 4) What changes are required for each of the formats in regards to categories , layout and branding decision? Categories SGI can remove the Food & Snack and Beauty Care product category as it goes against the identity of what Planet Health actually stands for It can also reduce the number of brands and products for easier management of inventory in turn increasing productivity and bringing down the costs
Q4 (Contd.)
Branding
Medishop would have been a better name since it would have better connected with the activity the Sagar Group was trying to do. In this case it was a pharma shop Ayurvedic products should not be stocked initially . They should only concentrate on allopathic drugs to build a loyal clientele of doctors as well customers Drugs which require refrigeration should be avoided initially. After certain doctors who prescribe are brought on board then only should it be stocked Bar Codes should not be started initially since the personnel are not trained. Only data entry should be introduced
Q4 (Contd.)
Layout SGI should not separate the entry and the exit points as it would cause inconvenience to the customers Also the information kiosk and a counter that provided information on the loyalty programmed near the exit point is not required as it would just add to the costs and not be of much use to Indian customers
THANK YOU