BUSINESS PLAN

The Medication Vending Machine

Proposed by
Brigitta Melvina Winata
Rajinder Deol
Leung Chi Fai

April 19, 2015

City University of Hong Kong

 LETTER OF TRANSMITTAL

April 19, 2015

Mr. John Wu, Investment Banking Director

Investment Banking Department
Bank of China
1 Garden Road, Hong Kong

Dear Mr. Wu:

The attached business plan is about MedEx, which will be a new established business in Hong
Kong that provides medication vending machine services. The idea is to provide an efficiency
and accessibility for the public to receive medication.

Basically, our business plan will tackle three significant problems:

 The lack of accessibility for medical services
 The shortage of doctors in Hong Kong
 The inefficiency of travelling experienced by the public

MedEx will have its own unique features and benefits. Those particular features and benefit can
be found in the business model section. Surely, this business will have good strengths and
opportunities. As the demand for medical services keeps increasing we believe that it will keep
growing for consecutive years and will benefit us in terms of the financial aspect

We would be pleased to provide more additional information for further understanding. Should
you have any question regarding to the business plan, Melvina, our Executive Officer will
contact you or come in person at your office if necessary.
The consideration and interest you are demonstrating on behalf of MedEx is greatly appreciated
and we look forward to receiving your response for our proposed business.

Sincerely,

Brigitta Melvina Winata Rajinder Deol Leung Chi Fai

Co-Founder 1 Co-Founder 2 Co-Founder 3

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Table of Contents
EXECUTIVE SUMMARY ........................................................................................................................... i
1. BUSINESS DESCRIPTION ................................................................................................................. 6
1.1 Introduction ................................................................................................................................... 6
1.2 Vision and Mission Statements ..................................................................................................... 6
1.3 Business Model ............................................................................................................................. 7
1.4 Objectives ..................................................................................................................................... 8
2. MARKET POTENTIAL ....................................................................................................................... 9
3. MARKET ANALYSIS ....................................................................................................................... 10
3.1 Porters‟ Five Forces Model ......................................................................................................... 10
3.2 SWOT Analysis .......................................................................................................................... 11
4. MARKETING PLAN ......................................................................................................................... 12
4.1 Target Markets ............................................................................................................................ 13
4.2 Marketing Strategies ................................................................................................................... 13
4.2.1 Marketing Strategies for Pharmaceutical firms ................................................................... 13
4.2.2 Marketing Strategies for General Public ............................................................................. 14
5. OPERATIONAL PLAN ..................................................................................................................... 14
5.1 Sourcing of Medication ............................................................................................................... 14
5.2 Logistics of Medication .............................................................................................................. 14
5.3 Retail of Medication.................................................................................................................... 15
6. RESOURCE REQUIREMENT ...................................................................................................... 15
6.1 Essential for a Start-up Business ................................................................................................. 15
6.2 Initial Investment ........................................................................................................................ 15
7. MANAGEMENT TEAM ................................................................................................................... 15
8. IMPLEMENTATION PLAN ............................................................................................................. 16
9. RISK ASSESSMENT ..................................................................................................................... 17
9.1 Operational Risk .......................................................................................................................... 17
9.2 Financial Risk .............................................................................................................................. 17
9.3 Marketing Risk............................................................................................................................. 17
9.4 Legal Risk .................................................................................................................................... 17

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10. FINANCIAL PLAN........................................................................................................................ 17
10.1 Source of finance ........................................................................................................................ 17
10.2 Estimated Income Statement ....................................................................................................... 18
10.3 Estimated Cash Flow, Net Present Value and Payback Period ................................................... 19
10.4 Estimated Balance Sheet ............................................................................................................. 19
11. CONCLUSION ............................................................................................................................... 20
REFERENCES ........................................................................................................................................... 21

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List of Tables
Table 1. Two Sources of Revenue …………………………………………………….. 8
Table 2. Management Team ..…………………………………………………………….. 15
Table 3. Implementation Plan …………………………………………………………….. 16
Table 4. Estimated Income Statement ……………………………………………………. 18
Table 5. Estimated Cash Flow ……...…………………………………………………….. 19
Table 6. Estimated Balance Sheet ………………………………………………………… 20

List of Figures
Figure 1. Hong Kong Population from 2004 to 2014…………………………………….. 10
Figure 2. Market Analysis Using Porters‟ Five Forces Model ………………………….. 10
Figure 3. Market Analysis Using SWOT Analysis ……………………………………… 12

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 EXECUTIVE SUMMARY
Business Description
MedEx will be specialized in doing medication vending machine business by building
partnerships with pharmaceutical companies and providing them the platform to sell their
products simultaneously. The aim is to provide express medical services for people in Hong
Kong. MedEx will allow potential customers to obtain healthcare products they need in the
fastest way and at any time.
Our concern is placed on the current issues happening in Hong Kong:
 The lack of accessibility for medical services
 The shortage of doctor in Hong Kong
 The inefficiency of travelling experienced by the public

Vision and Mission Statements

Our vision is to “Pioneer a better and improved healthcare support for Hong Kong”.
Our missions are to 1) Increase the accessibility of medication and 2) Provide an effective
solution for pharmaceutical firms.
Market Potential
MedEx has primary and secondary targets. Our primary targets are the pharmaceutical
firms and our secondary targets are the general public. We would increase the number of
partnerships in each year of our operation. In fact, the increasing trend of Hong Kong population
over the past ten years (see Figure 1), becomes a good potential for this business to enter the
market.

Revenue Model
There are two sources of revenue. First, we will charge pharmaceutical companies for
service fees, as we provide them a platform to sell their healthcare products. Second, we will
have a charge for providing medical advices to the customers through the feature of our product.
Risks Assessment
When operating this business, we will encounter four concerning risks including operational,
financial, marketing and legal risks. However, we have proposed solutions to overcome these
risks.
Financial Analysis
After assuming several aspects of the business, the calculation showed that our payback
period is 2.26 years, with a 5% discount rate and an increasing of number of sales for 5% each
year.
The net present value presented is HK$295,930. The positive net present value means
that the future benefits can cover the start-up and future costs in present value

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 1. BUSINESS DESCRIPTION

This business will specifically be in Hong Kong to provide the public with express healthcare
service through our products. In this section, further descriptions about the company‟s
background, vision, missions, business model and objectives are provided.

1.1 Introduction
An efficiency of receiving healthcare services is currently becoming a major concern in
Hong Kong. There are three problems which significantly influence the Hong Kong people to
have concern on this aspect. Those three major problems are 1) The lack of accessibility for
medical services, 2) The shortage of doctor, and 3) The inefficiency of travelling that is
experienced by the public.

Firstly, there is a lack of accessibility for medical services in Hong Kong, particularly in
the public sector services. Since the public hospitals are exposed to a cheaper fee, a lot of people
place their preference to visit them. A result to long waiting hours for two to three hours is
experienced by the citizens. In other case, they often will have their appointments rescheduled.
Such cases are often encountered by those who suffer from generic diseases like flu or cold.

Secondly, the doctor scarcity problem in Hong Kong has also triggered the public for
asking better medical cares. The demand for healthcare services keeps increasing overtime, but
the resources are limited. Dr. Man (2015) states, "It will still be a hard time from now until the
year 2020 due to the shortage.” In fact, 90 percent of patients use public hospitals, but they just
employ 40 percent of doctors (Tsang & Wong, 2014).

Thirdly, the public has experienced an inefficiency of travelling to the hospital or clinic.
Regarding to the high population and high traffic that Hong Kong has, people will often
encounter traffic congestion. This will result in a waste of time and definitely cause them to have
more expense for travelling.

The three situations have become main concerns for majority of people in Hong Kong.
Those concerns have indeed driven the initiation of our business. MedEx will be specialized in
doing vending machine business by building partnerships with pharmaceutical companies. The
aim is to provide express medical services for people in Hong Kong. With the mission of
tackling the problems, MedEx will allow customers to obtain healthcare products they need in
the fastest way and at any time.

1.2 Vision and Mission Statements

The clarity of “why” is very important in which it reflects the vision of MedEx to
“Pioneer a better and improved healthcare support for Hong Kong”.

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 “How” MedEx achieves its vision is with its two missions. First is to “Increase the
accessibility of medication”. Second is to “Provide an effective solution for pharmaceutical
firms”.

1.3 Business Model

1.3.1 Products
MedEx‟s vending machine will have 4 important features, which are:

 Medicines
MedEx will sell over-the-counter drugs, in which they do not require pharmacists or
doctors prescriptions. The commonly used medicines will be placed in the machine for
curing generic diseases. The categorizations of the products are as the following:

o Cold and Flu (ex. Panadol, Lozenges, Vicks)

o Pain and Fever (ex. Paracetamol)
o Pain and Sprains (ex. JointEze Spray)
o Eye care (ex. Similasan Dry Red Eyes)
o Nasal care (ex. SinuFix Nasal Spray)

 Other Healthcare Products

Besides providing non-prescription medicines, MedEx also sells other healthcare
products such as vitamins, supplements and first aid kits.

 Online Advice Service

MedEx will assume the customers already have familiarity or knowledge about the
products in terms of the brands and procedures of use. In case they have confusion of
what to buy, MedEx has its special feature which is an online advice service. Only by
inputting their symptoms, MedEx‟s machine will recommend the customers which
medicine to purchase. Using this feature will cost the customers of an additional HK$5.

 Authentication
Having the authentication feature is especially used to prevent excessive purchases made
by the customers. Basically, MedEx will also make partnership with the Octopus Card
Company to make a system which will be able to count and limit customers‟ purchases.

1.3.2 Benefits
MedEx will provide a differentiated service than the services offered by the existing local
drugstores in Hong Kong. There are three key benefits that MedEx offers to the customers
through the vending machine business, which are:

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  MedEx operates the business for 24 hours and 7 days. It means customers will
know they can obtain their needs at any time, at their convenience, with discretion, and
without queuing. Since then, MedEx will minimize the first background problem which is
the lack of accessibility for medical services.
 MedEx saves customers‟ money. By running vending machine business, MedEx
does not employ additional staffs like salesperson and pharmacists. Therefore, there is a
reduction in the total cost because of having no salaries expense.
 MedEx saves customers‟ time. Recalling the first and third background problems
that have initiated our business, it took time for customers to get medicated because of
travelling as well as experiencing long waiting hours. Thus, the presence of MedEx will
provide an easiness and convenience for the customers.

1.3.3 Revenue Model

Our company comprises two sources of revenue as explained in Table 1.
Source Description Charge
Service charges on the Charge on providing platform to 10% of the total sales
pharmaceutical company sell drugs amount
Service charges on consultation Charges on medical advice 5 dollar for each time
Table 1. Two Sources of Revenue

1.4 Objectives
Our company‟s objectives are divided into two parts, which are the short-term objectives
and long-term objectives.

Short-Term (Year 1-3)

 Place 15 vending machines in high traffic places in Hong Kong
 Build partnerships with 9 pharmaceutical companies
 Build brand awareness and credibility
 Breakeven point will be reached if at least there are 10 customers each day
 Increase sales by 5% each year

Long-Term (Year 4 onwards)

 Expand our business by placing at least 20 vending machines
 Build partnerships with at least 15 pharmaceutical companies
 Strengthen brand image

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2. MARKET POTENTIAL
Understanding the market potential is important to run a start-up business. In the following
section, a brief explanation about our target partners and customers are given which then will be
explained in the marketing plan. More information is also provided about how customers behave
in the market and how large our target market is.

 Who
a. Targeted Partners
Our target partners are the pharmaceutical companies in Hong Kong.
Pharmaceutical companies that produce non-prescription medicines or other
healthcare products such as vitamins, supplements and first aid kits, will become
our suppliers.
b. Targeted Customers
Our target customers will be the general public of Hong Kong which need express
medication, especially those who suffer from common illnesses.

 Customers‟ Consumption Behavior

There are two significant behaviors which affect the customers‟ consumptions of buying
healthcare products.

1. Social Influence
The buying of healthcare products is affected by people‟s social environment. In terms of
buying medical products especially for non-prescription drugs, people have a dependency to
listen to pharmacists opinions. Besides, second opinion from family or friends about which
medicines could work effectively for certain diseases will also become considerations before the
purchase. Therefore, MedEx will provide the recommendation feature and place some
information about the medicines on the side of the machine.
2. Product Brand
Brand loyalty is one factor which can influence customers‟ buying behavior for pharmacy
products. They tend to stay with a particular brand if they think it works effectively. Purchasing
the same medicine repeatedly for the same symptom is basically what they do. For that reason,
MedEx will basically provide medicines that are commonly used and known by the public.

 How Large The Target Market is

Hong Kong is known as one of the highest populated country in the world. In 2014 the
government has updated the number of population in Hong Kong that there were 7.2 million
citizens. There is an increasing trend of Hong Kong population over the past ten years (see
Figure 1). In fact, our target market is actually large.

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 Figure 1. Hong Kong Population from 2004 to 2014

3. MARKET ANALYSIS
The competitiveness of our business will be examined using Porter‟s five forces model
and SWOT analysis.

3.1 Porters‟ Five Forces Model

 Threat of New Entry
MedEx is a type of new service provided in Hong Kong that has its own
uniqueness in its products. Since then, an access to proprietary technology and
production is required to have this business. It also needs sufficient funding.
However, customers will have a low switching cost because of the existence of many
substitutes. As a result, we have a moderate threat of new entry.

•Moderate
Threat New
•Need funding to use new
Entry
technology •High
•Custom-made vending
Supplier Power
machine
•A lot of suppliers
•Low customer loyalty
Threat of
Existing Rival •No EXACT business
doing the same thing
•Medium
Buyer Power •A lot of substitutes
•Moderate •Price sensitive
Threat of •A lot of substitute
Substitution •Low switching cost
•Differentiated service

Figure 2. Market Analysis Using Porters‟ Five Forces Model

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  Threat of Existing Rival
There is no exact business that has the same service like MedEx. Therefore, our threat
of existing rival is low. However, since MedEx is a new business, we still have low
customer loyalty and low recognition from the public. As a result, we need more
effort in formulating and implementing the sales and marketing strategies.
 Threat of Substitution
The threat of substitution for MedEx is moderate. MedEx has a lot of substitutes like
the local drugstores, Mannings, or Watsons. Even though we have a low switching
cost, that it is hard to restrict people‟s buying from those drugstores, we are offering
differentiated service than them. MedEx has its own benefits of providing 24 hours
service and saving customers‟ time and money.
 Bargaining Power of Suppliers
The suppliers have a high power of bargaining, since there are a lot of suppliers
providing the raw materials for vending machine. Additionally, our vending machine
is also custom-made and unique by its features.
 Bargaining Power of Buyers
The buyer power is moderate. As there are numerous substitutes, customers will have
a lot of comparisons in terms of the products and prices. However, as MedEx has a
cost advantage, we should have benefited the customers by giving lower prices.

3.2 SWOT Analysis

 Strengths
MedEx has an advantage in terms of the cost because of not having salaries expense.
Although this business might exist in some other countries, we are the pioneer in
Hong Kong and it becomes one of our strengths. Moreover, as technology is getting
more advanced nowadays, we are trying to make use of that and implement it in our
business.
 Weaknesses
There are two weaknesses that our business has which are low recognition and low
brand loyalty from the customers. These two weaknesses can occur because MedEx is
a new business idea in Hong Kong. The effort of overcoming the weaknesses is to
have more power in the sales and marketing.
 Opportunities
There are three opportunities that work as external factors which will help the growth
of our business. First, the opportunity of building strategic agreements with
pharmaceutical companies will support us in terms of the share profits that we will
receive from the sales of their products. Second, as the fact shows that the market
keeps growing over the past ten years (refer to Figure 1), we will have the opportunity

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 to expand our market. The expansion can be done by placing more vending machines
and targeting more partners and customers. Lastly, the increasing demand for medical
services is also a good opportunity to grow our business.

• Cost • New idea

advantage • Not much
• Innovation recognition
• Use of Strength Weaknesses • Brand loyalty?
emerging
technology

• Have strategic • A lot of

agreements substitutes
with • Governmental
companies Opportunities Threats regulations (LSP
• Market License)
expansions
• Increasing
demand

Figure 3. Market Analysis Using SWOT Analysis

 Threats
Our first threat is the numerous substitutes that we have. Drugstores are selling the
same products like MedEx will do. People will have choices to buy from our vending
machine or from the drugstores directly. Second, we have to deal with governmental
regulations for registering our business. The procedure is to take the LSP (Listed
Seller of Poisons) license, in which it is for retailers who are only allowed to sell
medicines without the supervision of pharmacists (Category 3 medicines).

After examining the competitiveness of our business through its internal and external
factor, MedEx is still a lucrative business. Specifically, it is because MedEx is a newly start-up
business in Hong Kong that serves its customers with a differentiated medical service than the
existing substitutes. Despite all of the weaknesses and threats, MedEx still have its own
strategies to overcome those challenges as well as huge opportunities to grow its business.

4. MARKETING PLAN
In this section, we discuss about our two target markets and our formulation about the
marketing strategies in terms of the 4Ps will be elaborated.

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 4.1 Target Markets
Since MedEx‟s positioning is as the middleman between the pharmaceutical firms and
general public, thus, we have two target markets. Firstly, the medication vending machine is a
cost-effective solution provided to pharmaceutical firms. Therefore, they are our primary targets.
Secondly, MedEx‟s secondary targets are the general public. Since there are two target markets,
the marketing strategy for both parties would be different.

4.2 Marketing Strategies

To formulate and implement marketing strategies, they are divided into different parts
corresponding to the two target markets. The marketing strategies would be assessed in terms of
the 4Ps which are product, price, promotion and place.

4.2.1 Marketing Strategies for Pharmaceutical firms

 Product
The product offered is the service of MedEx‟s Vending Machines.

 Price
In term of price strategies, market skimming and premium pricing would be used. The
rationale behind this is due to unique differentiated product that we have. Since the service is
relatively new in the market, it is best to use a higher price.

 Promotion
In terms of promotion for the pharmaceutical firms, only push strategy would be
implemented, since the relationship with pharmaceutical firms is mainly served as niche
marketing. With this focused target group, the tactics in push strategy includes personal selling
and direct marketing. Personal selling includes directly having a meeting with firms and
delivering keynote speeches or presentations. Personal selling is used due to its interactive
nature. Using customized message delivery to each different firm would be a beneficial way to
have an effective relationship building. Moreover, in direct marketing, MedEx would send direct
email or place cold calls as well as using online sales platform such as LinkedIn. In this sense,
direct marketing is useful to reach more potential customer.

 Place
In terms of the place, direct distribution would be better, since it is best if MedEx directly
communicates with pharmaceutical firms.

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 4.2.2 Marketing Strategies for General Public

 Product
The product offered to general public is the medication itself as well as the
recommendation service.

 Price
For customer, market penetration pricing would be used. This is because in order to
differentiate from the market, MedEx offers low priced medicines.

 Promotion
To capture customers, only pull strategy would be used such as advertising and sales
promotion. Advertising is used to grab their attention and increase our reach to a high number of
customers, as well as providing first-hand information and to have an effective brand building.
Second, for sales promotion, MedEx will hold seasonal discounts and provide the target market
with coupons. The rationale behind this is to offer incentives to customer to buy our products,
also to gain public recognition.

 Place
In terms of place, direct distribution would be used, since MedEx vending machines are
the first hand providers for medication.

5. OPERATIONAL PLAN
MedEx‟s operational flow is divided into 3 sections. First is the sourcing of medication.
Second is the logistics of medication. Last is the retail of medication.

5.1 Sourcing of Medication

For getting medication to supply MedEx vending machines, liaising and partnering up
with pharmaceutical firms is the first step. The first operational item is to do sales, then to
arrange company meeting with potential customers and finally to sign agreement and contract.

5.2 Logistics of Medication

In terms of logistics of medication, pharmaceutical manufacturer will directly ship the
stock of medication to our warehouses. MedEx warehouses located near shipping ports will stock
the medications. Since the demand varies among different district, MedEx vending machines
include a technological intelligence system that will notify MedEx system about the shortage of
certain drugs or medicine in certain vending machines. After the alerting our computers, MedEx
van will ship and refill the stock in those vending machines.

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 5.3 Retail of Medication
The retail of medicines will be done through MedEx vending machines.

6. RESOURCE REQUIREMENT

6.1 Essential for a Start-up Business

We will require three essential actions to start this business. First is to have the license
of „Listed Seller of Poisons‟. Second is to get permission from MTR to install vending machines
near the stations‟ area. Third is to build partnership with Octopus Card Company.

6.2 Initial Investment

The initial investment for this business is HK$ 380,000 for ten vending machines that are
purchased from a vending machine company. The initial cost of each machine is HK$ 33,000.
Due to machine customization and MTR rental contract, the cost for each machine becomes
HK$ 38,000.

7. MANAGEMENT TEAM
The following table shows the management-level staffs that MedEx requires for its
business.

Title Name Role

Chief Executive Officer Co-Founder 1
Chief Operating Officer Co-Founder 2
Chief Financial Officer Co-Founder 3
Table 2. Management Team
Partnership and liaison responsible
Operation and logistic responsible
Financial and legal affairs
responsible

The management team consists of three co-founders.

 The first one is the “Chief Executive Officer”. The main responsibility is for the person to
find and form partnership with pharmaceutical firms as well as being in charge of
marketing in MedEx.

 The second is “Chief Operating Officer”. For this position, the person is responsible for
all operation and logistics flow as well as the job also requires equipping MedEx with
information systems.

 The last one is “Chief Financial Officer”. The main job duties include handling finance
and legal related tasks, as well as being in charge of human resource management.

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8. IMPLEMENTATION PLAN
Our implementation plan is shown below in Table 3.

Table 3. Implementation Plan

PC - Pharmaceutical Companies VM - Vending Machines

No Task Target Number Year Year Year Year Year Year

0 1 2 3 4 5

1. Business registration -
(licensing)

2. Partnering with
Octopus Card
Company

3. Recruit staff for -

maintenance

4. Marketing -

5. Partnering with 3(PC)

pharmaceutical
companies 6(PC)

9(PC)

12(PC)

15(PC)

6. Placing additional 10(VM)

machines
15(VM)

20(VM)

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9. RISK ASSESSMENT

9.1 Operational Risk

Since the vending machines will be installed in the public area near MTR stations, the
risk of suffering from intentional damage can be high. To avoid this risk, we will use a strong
glass and metal as the materials of the vending machines. Thus, we also prevent some criminals
to steal the medicines. Another risk that we might have is a machine breakdown. It will increase
the day of out of service. Indeed, one machine breakdown will cause loss in our revenue while
our fixed cost will remain the same.

9.2 Financial Risk

In terms of the financial risk, bank may not process our loan application or they may
charge us with a high interest rate to compensate the high default risk. High interest rate implies
that our business have to bear a huge interest payment in the future. Under our estimation, this
business has a sufficient cash inflow to pay the interest and loan. If the economy faces a sudden
downturn, the sales volume may drop significantly and we will suffer from a tremendous loss.

9.3 Marketing Risk

Although there is no exact business providing similar service like MedEx, our indirect
competitors such as Watsons or Mannings have drugs‟ advisors and more types of drugs
available. Consumers will prefer buying medicines from those stores rather than from us since
they have not trust us yet. As a way to reduce this risk, a simple description about the medicines
can be listed on the machines, as a reminder for the customers to read before they purchase.

9.4 Legal Risk

In legal aspect, MedEx will become the „Listed Seller of Poisons‟ which can only sell
„Category 3‟ drugs. Although the ownership of drugs belongs to the local pharmacies, the
consumers may sue the business for careless drug prescriptions. Despite the low possibility of
legal charge, the chance is still exist. The action to reduce the risk is by recommending
consumers to consult to doctors and refrain from discriminate self-medication if in doubt.

10. FINANCIAL PLAN

10.1 Source of finance

The source of finance for MedEx comes from the purchase of the machines and the MTR
contract. In the first year of the operation, ten machines are planned to be purchased from
vending machine company, in which the total cost will be up to HK$360,000. Since MTR

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Company will require us to pay HK$20,000 for a one month deposit rental contract, the initial
investment becomes HK$380,000.

10.2 Estimated Income Statement

MedEx will generate its revenue from 1) Service charges on the pharmaceutical company
and 2) Sales from customers. According to MTR statistic census, there are approximately 80,000
passengers in every station each day. Relying to the information provided by MTR, we have
made several assumptions which are as the following:
 There will be 40 customers who will purchase one item from the vending machine in
each station every day.
 The growth rate that we expect is 5% per annum based on the growth rate of MTR
passengers.
 The average selling price of our products is around HK$30.
 There are 25% of the customers that will use the online advice service.

Apart from the revenue, the fix cost will be mainly constituted by rent and repair costs. The
monthly rent will be HK$2,000 for each MTR station and HK$5,000 for the warehouse. In
addition, there will be monthly HK$ 8,000 repair cost and HK$3,000 logistic cost which will be
used to employ third party service providers. For the depreciation, the machines are expected to
have 5 years useful life and depreciated by HK$72,000 each year. Moreover, this business is
subject to 16.5% corporate tax and the interest expense will occur at the end of year 4 until the
repayment of the loan (refer to Table 4).

Table 4. MedEx‟s Estimated Income Statement

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 10.3 Estimated Cash Flow, Net Present Value and Payback Period

Regarding to the cash flow of the business, first, there will be 5 additional machines that will
be purchased in the third and fifth year (refer to Table 5). Second, the bank loan payment will be
settled at the end of year 4. Third, we assume that the payback period of the business is 2.26
years.

Payback period = 2 + (53615.1/203346.54) = 2.26 years

NPV=150239.5/1.05+176145.4/1.052 +23346.5/1.053-129054/1.054+100935.1/1.055
= $295930

As the inflation rate recorded in January 2015 is 4.1%, we assume that the discount rate is
5% (refer to Table 5). The positive net present value of HK$295,930 means that the future
benefits can cover the start-up and future costs in this present value.

Table 5. Estimated Cash Flow

10.4 Estimated Balance Sheet

Basically, MedEx will have two assets which are the vending machines and the bank. The
absence of inventory is due to the ownership that is not belong to MedEx rather it belongs to the
local pharmacies (refer to Table 6).

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 Table 6. Estimated Balance Sheet

11. CONCLUSION

MedEx is not only a choice for investors to make money, indeed it is also a business
which can deliver value to the society. MedEx has an ambitious vision as well as a feasible
development plan. Our business deserves your support because of our comprehensive analysis,
effective and sustainable operation plan. The reliable financial and market analysis give potential
investors an understanding and insight in this industry. Additionally, consumers and
pharmaceutical companies will be benefited from our service in terms of saving time and money.
MedEx will gives you a better return, more importantly, a better society.

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 REFERENCES

Public or Private? An Insider Guide to Healthcare in Hong Kong. (2013, August 19). Retrieved
April 3, 2015, from http://hk.localiiz.com/public-or-private-a-comprehensive-guide-to-
healthcare-in-hong-kong/#.VSY_fk903cs

Tsang, E & Wong, O. (2015, March 3). Hong Kong's Doctor Shortage will not Ease until 2020:
Government Report. Retrieved April 3, 2015, from http://www.scmp.com/news/hong-
kong/article/1728880/plan-increase-medical-school-places-beat-chronic-doctor-shortage

Hong Kong Population. (n.d.). Retrieved April 3, 2015, from

http://www.tradingeconomics.com/hong-kong/population

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English for Business Communication – GE 2402

Business Plan Project

Created by Group 3

Group Members

Brigitta Melvina Winata 53798987

Rajinder Deol 54044849

Leung Chi Fai 53018477

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