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Marketing plan for a medical distribution company in Iraq

5106 words (20 pages) Essay in Marketing

5/12/16 Marketing Reference this

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This company believes that the success of its business is highly dependent on the strategies that the management will adopt in running the business. Accordingly, there was a need to establish a business model that would be used in operating the medical distribution office (scientific bureau).

The company will implement the following two business models:

Business model 1:

Where the distribution office purchases products from the manufacturers, and then prices them before delivering them to customers.

Business model 2:

Where the distribution office acts as an agent on the manufacturer’s behalf, such that the manufacturer pays the distributor a commission on sales according to a mutual agreement.

The scientific bureau will make use of both business models in order to maximize gains from the business. The first model will help the company to gain profits by selling quality products at affordable prices. This model is also flexible because it allows the business to set prices that are compatible to the situation at hand. An example is where the business may want to attract customers through lowering prices. The second model will be useful to the company because it will reduce financial pressure as well as bringing in more capital. The business will only be required to supply products to customers on behalf of manufacturers to get commission. This essentially means that no initial capital outlays will be required since the manufacturer will be liable for all expenses. This model appeals to multi-national companies who want to get a foothold in the developing economy of Iraq, since they can’t come in themselves because of the volatile security situation.

CORE STRATEGY

Mission statement: To continuously facilitate clients by effective provision of medical supplies and services, while considering the social, political and religious beliefs of the surrounding environment.

Market scope

The market segmentation for the company will be based on faith communities.

Baghdad, like many other provinces in Iraq, is divided into mainly Sunni and Shi’ia communities. [1] These are the two denominations of the Muslim faith. The company’s employees will be highly trained and have knowledge of how to interact appropriately with each of these communities since their traditions, political beliefs and some religious beliefs are different. The distribution office will focus on these communities in Baghdad and beyond and will address the medication needs of hospitals, health centres, physicians, and pharmacies. The individuals’ category will mostly be served by the hospitals and pharmacies and will further be categorized into men, women and children. Notably, each of these customer focus groups has different needs, despite requiring common medications in certain circumstances.

During the start up phase the company won’t be targeting the Kurdish community that lives in the north of Iraq. This is because the company is unfamiliar with their language, traditions and the way they conduct business. However, during the growth stage the company may consider working as an indirect distributor to this community by building links with Kurdish traders. They in turn will target the Kurdish community.

Because the security situation in Iraq continues to be volatile [2] , people continue to be injured on a daily basis. The company will provide the hospitals and pharmacies with the appropriate equipment, supplies and medication to deal with these injuries. In addition to that, the company will provide medical equipment needed to revive the health industry. This industry has been damaged by 30 years that saw the Iraq/Iran war and the 1st and 2nd Gulf Wars.

As the business continues to grow, it is highly probable that the products portfolio is likely to expand such that more goods will be incorporated. Examples will include dental equipments, laboratory equipments such as microscopes, X-ray machines and other radiography machines.

Basis for differentiation

The distribution office will ensure that the goods obtained are of high quality and that counterfeit drugs like the ones possessed by other sellers are avoided. The pricing would be such that the distribution office makes enough profits but offers a price that is lower than that of competitors. This will most definitely attract customers to the office as they seek lower prices. This is an important strategy even for a start-up company because the economy in Iraq is developing slowly.

The distribution office will be the first to introduce a loyalty program, which will reward regular customers with discounts. This loyalty program will be designed in such a way that customers gain points whenever they shop at the medical distribution office, which can then be redeemed in the form of products or reduction in prices. A certain number of points will allow customers to gain goods worth a specific amount of money. This, in turn will promote customer loyalty and consequently enhance the distribution office’s differentiation.

STRATEGIC RESOURCES

Core competencies:

The company’s internal resources will give it a competitive advantage; mainly it’s knowledge capital and the dedication of the employees. These employees will have a high standard of knowledge about the company’s products and after sales care. They will undergo training courses in all these elements and be required to up-skill on a regular basis in order to be promoted within the company. They will also be highly trained in communication and will have a great cultural knowledge, which will enable them to develop unique relationships with customers from different backgrounds. This approach is unique and will be essential for the success of this business.

Furthermore, the company’s strategy will embrace a combination of a wholesaler/agent model. This will ensure that the company’s financial resources are not depleted; while the company continues to make profit. Also, the office will enhance customer needs satisfaction due to the availability of products and fair prices. The two business models will allow flexibility in such a way that the company can easily adjust to new opportunities. These could include the sale of medical equipment such as wheel chairs, radiography equipments and surgery kits among others.

Strategic assets

Apart from the medical supplies, the distribution office will have three transport vehicles that will be used to ferry products from the store to the customer’s location. These transport vehicles, will be driven by skilled drivers, who know the ins and outs of the city of Baghdad. This is essential due to the traffic disruptions caused by highly security measures and checkpoints. [3] This is to ensure that goods are delivered on time thus improving customer satisfaction.

The distribution office will also have special forklifts that will be used in transferring items from the store to the loading zone during a sale and from the loading zone to the store during delivery. These forklifts will not only save time but also reduce the number of staff required to work at the store. These will set the business apart from competitors because we believe this strategic asset will give the businesses an added advantage over competitors.

PARTNERSHIP NETWORK

Supply chain management

The distribution office will use an integrated supply chain that aims at connecting the manufacturers, retailers and customers. An integrated supply chain will help to join the functions of the firms involved so that they can easily connect to one another and obtain important information.

The company believes that a supply chain can only perform effectively if the right technological infrastructure is utilised. This approach is new to the Iraqi market, which has not traditionally relied on technology. The medical distribution office will make use of supplier portals [4] .

This technology has an advantage in that it combines a variety of activities including order management, demand visibility, bar code generation, advance ship notice functions and the generation of shipment requirements. This system will assist the medical distribution office in organising its supply chain in such a way that information flows effectively between the office, the retailers and the manufacturers. As a result, supply will be continuous and factors within the supply chain including demand and order replenishment will be addressed with ease.

Other key relationships

The business needs to establish proper relationships with other stakeholders other than the manufacturers and customers in order to enhance co-existence. Good business in Iraq is determined by how well connected the business owners are. The strength of relationships that they have with others in the business world, government representatives and within the community cannot be underestimated. The business will join the scientific bureau consortium so as to act together in dealing with issues such as government regulation. In essence, it is advisable for a business to be part of a group with similar interest.

CUSTOMER INTERFACE

a- Target market:

As stated above, the medical distribution office will focus on Sunni and Shi’ia faith communities. This market segmentation plays an important role in ensuring that the needs of each segment are met. The company will focus on pharmacies, hospitals, and governmental bodies in these communities. It will then further divide the communities in terms of men, women and children. This allows for easy collection of information regarding the needs of a particular group so that they can be served more effectively. In essence, segmentation allows specialised treatment of clients.

According to recent information on the World Health Organisation website [5] , the following are the most common illnesses that the company will be providing medication and services for:

Water-borne diseases, such as typhoid fever and hepatitis A, are on the rise as a result of the damage to water and sewage systems caused by the war.

Heart diseases are a leading cause of death – both cardiovascular and rheumatic heart diseases are on the rise. The second one especially, because of the uncertainty of the security situation and the country experiencing three wars in the last 30 years.

Upper respiratory tract and diarroheal infections are high among children. Incidences of childhood cancer are ten times that of developed countries. This is highly contributed to the emissions from bombs during the wars. There are inadequate supplies of chemotherapeutic drugs, which is an area the company can build on.

Maternal mortality rates are very high as over 40% of births occur outside of health institutions.

Upon entry into the Iraqi market, competitors will react negatively and may even attempt to push the distribution office out of business. The distribution office will need to be well prepared; which will involve a proper analysis between targets and the firm’s resource configuration. The company will be using the combination of its core competencies (as detailed above) and its supply chain technology to achieve its targets. This approach will minimise the threats of competitors and other new entries to the market. Once the company has been established, new opportunities such as increased business within the same industry or in a different setting may be undertaken thus increasing the business’ profitability.

b- Fulfilment and support

The business will make use of direct channels to distribute the products. From the manufacturer, the distribution office will sell or deliver them straight to the individuals or organisations buying the products. This direct approach will minimise the cost and enable the office to build good relations with both the manufactures and the clients. The client base will be served by a dedicated customer support staff that will help in recording order specifications so as to ensure the right products are bought. The skilled drivers will ensure that they are delivered in time. With time, the distribution office could have a few subsidiaries within the region to supplement the main office.

c – Pricing structure:

The pricing strategy will depend on the prices offered by the manufacturer. The strategy for the medical distribution office will be to provide a price that is slightly below that of competitors. While this may impact on profitability, it will attract more customers to the office.

BUSINESS RESEARCH

Opportunities in setting up a medical distribution office in Iraq

It emerged that the warfare that has existed in the country for the last 30 years has put the country in disarray and not many businesses have been able to operate at an optimal magnitude. Currently, Iraq’s 29,671,605 [6] population is served by only 150 medical distribution centres. This can be attributed to the serious damages to infrastructure that occurred during the wars [7] . Most of the offices that exist are either small or medium sized, with a capital value of between $1million to $3million US [8] . This indicates that the population’s demands are not being met, that the competition is not stiff, and a well-organised medical distribution office is bound to excel in the Iraq market.

Local population preferences

The buying habits of Iraqi people are to buy medicine from local pharmacies, as they often skip the doctor’s diagnosis. However, if they do get a local doctor’s prescription, they prefer to buy their medicine from their local pharmacies because there is a lack of medical supplies in the hospitals [9] . For example, a Sunni person will visit their local Sunni doctor and buy their medication from a Sunni pharmacy. These findings support the approach that this medical distribution office is taking by targeting communities. At the start the Sunni and Shi’ia community and, at a later stage, the Kurdish community.

While some Iraqi people preferred local products because their sources could be trusted, others were of the view that imported medicine is likely to be more effective especially if it comes from the developed countries where manufacturers use more advanced production methods.

Statistically, 8 out of 10 of the participants [10] preferred to use imported medication while the others indicated they would rather use local medications. The group in support of the imported medication maintained that international companies tend to manufacture good quality products as opposed to local companies. They tended to trust imported medications more because they used them successfully before. Furthermore, they believed that as the industrial infrastructure is damaged in Iraq it is hard for these local factories to produce good quality products. The number of products they can produce also limits these local factories. As a result, they were afraid of trying out the local medications. Participants who preferred local medications did so because they had been using them for years and didn’t want to switch. These findings suggest that the business should continually supply imported medications, as these are likely to attract higher demand than local medicines. (See figure 1)

1-MACRO ENVIRONMENT ANALYSIS

Political factors

Political stability in Iraq is quite uncertain and businesses investing need to take proactive measures aimed at protecting their businesses from harm in case of an incident. It is notable that while things have cooled down and reconstruction efforts are underway, it may be hard to predict political unrest that is likely to occur. The political system in Iraq is composed of a number of parties of differing, specific faiths. They are either Sunni, Shi’ia or Kurdish parties. It is essential for the business to have political connections, as the level of corruption in Iraq [11] is so high that it would be very hard for a business to succeed without both political and financial support.

Economic factors

The International Monetary Fund predicted that Iraq’s economy would grow by 7.9% in 2011 [12] . This growth is linked to the improving security situation in the country. The level of employment will rise, therefore increasing the population’s disposable income. Baghdad remains the most economically important city in Iraq, with the highest population. It is also regarded as the richest city in the country. [13] It is the capital city and is therefore bound to be the centre of all activity. Given its estimated population of 8 million people, the medical distribution office is likely to perform well in Baghdad. With continuous restructuring of the city to clear the effects of the war, normal business is expected to resume such that the business will perform well.

Social-cultural factors

Iraq is rich in terms of social and cultural aspects. Being a Muslim dominated country, with different denominations within that faith, it is notable that there are visible differences with the rest of the world in terms of social behaviour and business expectations. It is therefore important for this business to train its employees how to interact and communicate with these different communities. There are, however, some similarities that should be respected and complied with. Crossing one’s hands or legs during a conversation, for example, is considered rude and should therefore be avoided. A handshake at the beginning and departure is highly regarded. Friendships and connections are highly emphasised in Iraq and it is common to find people doing business only with the people they know. Bribes are also common such that getting various tenders and privileges may require a business to part with a significant amount of money as a bribe unless the owners are well connected politically. [14] 

Technological factors

Traditionally, most businesses in Iraq have not relied heavily on technology, beyond the basic use of emails, fax etc. One of the main obstacles for the use of technology has been the shortage of electricity. It is, however, an area that is developing rapidly in recent years. It is expected that it will be essential for the success of the business. This supports the company’s plan to introduce supplier portals as part of its supply chain.

Environmental factors

Baghdad is centrally located and is therefore a viable location for business. Being at the centre of most economic activity in the country, Iraq’s capital Baghdad is expected to have good returns for businesses.

Since the security situation is still volatile, and the government is focusing on stabilising it and on the reconstruction of the damaged infrastructure, it is putting all its efforts into these areas.

The implementation of environmental legislation is not a priority for the next few years.

Legal and regulatory

The legal system in Iraq is improving slowly. It is however notable that bias still exists within the system for people with money or political connections. Bribery is highly apparent and one is likely to be served faster if they give a bribe than when they do not.

For the medical distribution office the regulation is that all the company’s products must pass the quality control insurance department test in the Ministry of Health. Also, the company must register with KIMADIA [15] , which is a department in the Ministry of Health. This is the only authorised governmental body to which the company can tender in order to supply the government’s needs for pharmaceutical products and equipment. If the company fails to comply with these policies, it will not be able to practice in the Iraqi market.

Industry Analysis

Prior to the costly Iraq/Iran war, the health industry in Iraq was characterised as being one of the best in the region. Following the first Gulf War in 1991, the UN imposed sanctions to encourage Iraq to disarm its weapons of mass destruction. The effect of this had disastrous effect on the economy, especially on the health sector. UNICEF estimated that 500,000 died as a result of a lack of medical supplies, clean water and malnutrition during this time. This sanction was lifted after the invasion of Iraq in 2003 [16] .

The industry remains unstable as most businesses are still recovering from the effects of the wars. As the economy in Iraq is emerging gradually the performance of the health industry is quite encouraging. It is estimated that the health infrastructure will need around $8 billion US to be revived.

As Iraq is a country with 90% of its revenue coming from the sale of oil, therefore the development of the health sector largely depends on how many barrels of oil are exported. The Iraqi budget for 2011 will be approximately $86billion [17] , with around 7% (or approx. $6 billion) of it to be allocated to the health sector. This excludes the private sector health facilities (pharmacies, hospitals etc). This would indicate that there is room for more than the 150 medical small to medium size distribution offices that currently serves the population.

Most of the private health care facilities, including the medical distribution offices, are locally owned. As a result, the population is more likely to identify with the owners, given similarity in culture. There are very few foreign owned businesses in Iraq because of the unstable security situation and the government’s inability to protect foreign investors. (See figure 1)

(Figure 1) Ranking of Iraq in Protecting Investors – Compared to good practice and selected economies [18] 

The health sector in Iraq is controlled by government regulation. It dictates the types of medication and medical equipment that can be brought into the country. However, the government has no legislation as regards the price of products. This falls under the individual medical distribution office’s remit.

Competitor Research:

There are a number of scientific bureau (medical distribution offices) competitors in Baghdad. Most of these businesses are small to medium sized businesses, all of which aim at providing medication and medical equipment. The major and most respected competitors are Al Assad Scientific Bureau, Al Bashaer Scientific Bureau, and Kasim Irzzouki Scientific Bureau. Al Assad is a leading distributor and has been a main vendor for the Ministry of Health. It is well known and enjoys a high market share both in Baghdad. However, the company does not have any branches or market share in the Shi’ia southern region of Iraq, especially Basra. In addition to that the company has not won any tenders with the Ministry of Health for the last two years. Kasim Irzzouki is the main distributor in Iraq for Organon. [19] This company mainly produces anti-impotence drugs for both men and women. It has the major market share in this area and distributes all over Iraq. Al Bashaer has a wide range of Egyptian and Indian medical products. They are well known for supplying hospitals with disposable items such as cannulae and Foley catheters. Neither Al Assad or Al Bashaer has done well outside of Baghdad. It is worth noting that none of the major competitors supply chemotherapeutic drugs, even though there is a need in the Iraqi market due to the high incidences of childhood cancer.

Market analysis, planning and research

The population of Baghdad is approximately 8 million. This is a considerable market size and the business could benefit immensely if it could manage to get a large market share. During the start-up phase the company’s operations will be conducted in Baghdad. There are approximately 10,000 physicians in Baghdad [20] . Furthermore, there are around 1,500 pharmacies in the city [21] . There are three main governmental hospitals and three main private sector hospitals.

This indicates a large potential client base for that the medical distribution office. It is notable that the medication market has widened significantly. It is projected that in the next few years, as the security situation and the economy in Iraq improves there will be a return of pharmacists and doctors who fled, for their own safety, during the last 20 years. There will also be an increase in the number of hospitals, and it is projected that the population will increase.

Baghdad is divided into two main regions, Al Kahr and Al Risafa. Each of these regions has both Sunni and Shi’ia communities living in separate areas. There are only a few areas where you will find a mix of these communities living together. There are other minority groups too, but the company will not focus on them at first. The market strategy for the company is to target the hospitals, clinics, pharmacies and medical centres in each of these areas. The company will rank these potential clients in terms of the number of people they treat on a daily basis. During the start-up phase the priority will be to target those with the largest client base and build a relationship with them. The company will also target those with a smaller client base, but with less frequency. The Ministry of Health will be one of the major potential clients. In the expansion phase, the company will target the other provinces in southern and northern Baghdad. The southern provinces of Baghdad are mainly Shi’ia communities, while the provinces north of the city, as far up a Kurdustan, are Sunni communities.

As previously mentioned, the knowledge capital of the company’s employees will play an important role in its development. The staff will have a wealth of cultural knowledge, which is essential for the business. They will be highly skilled, which will enable them to build and maintain good relationships with customers from different communities. Repeat business should occur once good relations have been established between the institution or individual and the medical distribution office.

The company will also adopt Internet advertising. The web site will include the company’s details such as the address and the products they deal in, with the objective of informing customers about their work. Most of the Internet posts will contain the businesses’ achievements and well-known clients in order to promote a professional look.

In addition to raising more capital, the company’s growth strategy is to implement the same ideology in provinces other than Baghdad. It may also branch into sales in the Kurdish community as an indirect supplier, and introduce new products to the Iraqi market.

ORGANISATION MANAGEMENT AND OPERATIONS

Management team and model

The team

The management team will consist of the board of directors, the Chief Executive Officer, the human resource manager and the head of accounts. This team will be responsible for steering the business through addressing various aspects. The CEO will oversee the operations of the company and manage resources in such a way that the business’ objectives are met. The CEO will govern every employee in the company through the Human Resource Manager. The business will employ two HR officials, one of who will be the HR manager. He or she will oversee the business’ human resource needs and ensure that the business is well equipped with people skills to enhance smooth operations. The HR will govern the hiring process, training, payment issues and employee welfare within the business. One of the employees in the accounting department will act as the head of accounts. He or she will ensure that financial resources within the business are well managed and accounted for so as to ensure that the needs of the business are met effectively. The head of accounts will also be responsible for effectual distribution of resources within the firm.

Management model

The management will apply the management by objectives model (MBO). Under this method, the company defines objectives, which should be met by all employees and then compares their performance against these objectives. This model is effective in maximizing performance and avoids indulgence in activities that deviate employees from their objectives. Accordingly, the business is likely to succeed as opposed to where employees’ efficiency is unaccounted for.

Management philosophy

Concern for employees

The business intends to maintain an integrated system, whereby the management will oversee efficiency in the firm while allowing employees to actively participate in the management process. The employees remain the major assets of the firm and are definitely responsible for the success of the business. The business will go to every length to ensure that it finds; hires and trains good employees and treat them like family. The management will ensure that they communicate effectively with employees and continually acknowledge their importance through proper reward systems and involving them in management decision making.

Hands-on management

Managers will be expected to know the business comprehensively and guide employees through the accomplishment of the business’ main objectives. They will continually interact with customers and employees in order to effectively understand and meet their needs. Managers will set the pace for the employees and as many business people would attest, employees are likely to wo

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