Case Analysis

On
“Guardian Pharmacy”
For
IRF RISING STAR CHALLEGE 2011

INSTITUTE OF MANAGEMENT TECHONOLOGY

GHAZIABAD

By Team-Trishul

AnkushChourasia

Kaustaba KV

Manish Kumar

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Table of Contents
Abstract ............................................................................................................... 5
Introduction to Retail........................................................................................... 6
Structure of Indian Retail Sector..................................................................... 7
Organized Retail Sector .................................................................................. 7
Unorganized Retail Sector .............................................................................. 8
The Evolution of retail in India......................................................................... 8
Current Scenario of Indian Retail Sector ........................................................... 9
Indian Retail on the fast-track ......................................................................... 9
Major Indian Retailers ................................................................................... 11
Retail Pharmacy in India ............................................................................... 11
Learning of Organized Retails in India ......................................................... 13
Guardian Pharmacy.......................................................................................... 15
About Guardian Pharmacy............................................................................ 15
Vision ............................................................................................................. 16
Objective ........................................................................................................ 16
Guardian Products and Services .................................................................. 16
Guardian Brand.......................................................................................... 17
GNC............................................................................................................ 17
Yves Rocher............................................................................................... 17
Quit Smoking Aid ....................................................................................... 17
Hospital Pharmacy..................................................................................... 18
Guardian Retail Stores Features...................................................................... 18
Factors that led Guardian Pharmacy to adopt a Retail Model..................... 19
Guardian Retail Pharmacy Business Model................................................. 21
Porter’s Five Forces Analysis........................................................................... 22
Industry competition ...................................................................................... 24
Bargaining power of buyers .......................................................................... 24
Bargaining power of suppliers....................................................................... 25
Barriers to entry ............................................................................................. 25
Threat of substitutes...................................................................................... 26
New Business Strategy for Guardian Pharmacy ............................................. 26
Acquisitions.................................................................................................... 27

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 Consolidate North and look forward to South .............................................. 27
Online Retailing ............................................................................................. 27
Addition of new products to its ...................................................................... 28
Increasing Private Labels.............................................................................. 28
Effective marketing campaign....................................................................... 28
Optimise Supply Chain Network ................................................................... 28
Better Shelf Management ............................................................................. 29
In-Store Nutrition Counsellor......................................................................... 29
Tie up with top pharmacy colleges in India .................................................. 29
Investment into Rural Market ........................................................................ 29
Location ......................................................................................................... 29
Customer Service and Relationship ............................................................. 30
Increasing visibility through social media ..................................................... 30
Research........................................................................................................... 30
Research Methodology ................................................................................. 30
Questionnaire ................................................................................................ 30
Target Audience ............................................................................................ 31
Data Analysis................................................................................................. 31
Sample Size................................................................................................... 31
Data Analysis & Findings .............................................................................. 31
Occupation of Respondents ...................................................................... 31
Household Income Group.......................................................................... 31
Monthly Purchase of Medicines ................................................................ 32
Most purchased products at Retail counters............................................. 33
Effectiveness of Advertising medium in the sales of medicines & related
products...................................................................................................... 34
Factor Analysis .............................................................................................. 35
KMO and Bartlett's Test............................................................................. 35
Communalities ........................................................................................... 35
Extraction Method: Principal Component Analysis................................... 36
Interpretation of Data..................................................................................... 36
Component Matrix (a) ................................................................................ 37
Rotated Component Matrix (a) .................................................................. 38
Naming of Factors...................................................................................... 38
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Conclusion ........................................................................................................ 40
References........................................................................................................ 41
Questionnaire.................................................................................................... 43

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Abstract

The retail revolution sweeping across the country has brought in changes to the
way average urban Indians shop for a host of products and services — from routine
groceries to attractive apparels, and from petrol and lubricants to books and
magazines.

But a majority of Indians still visit the crowded neighbourhood pharmaceutical store
to buy a vitamin pill or a painkiller, and in some of the smaller cities have to double-
check to ensure that the medicines are according to the doctor's prescription,
cosmetics like shampoos and creams are genuine, and the chocolates are not past
the 'best before' date.

Retailing is one of the fastest-growing segments of the economy. Pharmaceutical

retailing is a growing market and as per ORG estimates it is expected to grow by a
rate of more than 25 % per annum in the next 5 years.

Guardian Pharmacy is India’s fastest growing retail chain of Pharmacy, Wellness,

Health and Beauty retail outlets. Built on a strong platform of reliability and service
to the consumer the company has more than 230 outlets in 20 cities and serves 75
lakh customers in a year.

Guardian Pharmacy has retail outlets at High Street, Mall, Neighbourhood, and
Hospital. Guardian Pharmacy has its presence in North India only. The Stores
serves various categories of Customers like Allopath Medicines, Ayurvedic
Medicines, Cosmetics, Baby Care, Nutrition Supplement, and Basic Medical
Equipment. Presently Guardian Pharmacy as a whole is doing well and expanding
at good rate.

In this case we will give devise business strategy for Guardian Pharmacy to
strengthen its position in North India and expand its territory in other parts of India
as well. We will also work on marketing strategy to create awareness about the
Guardian Store Brand, as well will work on increasing its sales by marketing
Guardian’s unique proposition it offers to its customers.

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Introduction to Retail
The term Retailing is defined as “All activities involved in selling goods and services
directly to final consumers for their personal and non-business use”. In simple
terms, it implies a first-hand transaction with customer. Retailing involves a direct
interface with the customer and the coordination of business activities from end to
end right, from the concept or design stage of a product or offering, to its delivery
and post delivery service to the customer. The industry has contributed to the
fastest changing and dynamic industries in the world today.

Retailing, it is an emerging trend in the India is not far behind which is also
witnessing the stupendous growth and opportunities presented by this sector. Many
institutions- Manufacturing, Wholesalers and retailers – do retailing, but most
retailing is done by Retailers. A business wholesales come from primarily from
retailing. It is a proven fact that in India the retail industry has become the 2nd
largest employer after agriculture. Indian retail sector is in boom period and many
reasons are contributing to it.

The retail scenario in India is unique. Much of it is in the unorganized sector, with
over 12 million retail outlets of various sizes and formats. Almost 95% of these retail
outlets are less than 500 sq. ft. In size, the per capita retail space in India being 2
sq. ft. compared to the US figure of 16 sq. ft. Thus India’s per capita retailing space
is the lowest in the world.

With more than 9 outlets per 1000 people, India has the largest number of outlets in
the world. Most of them are independent and contribute as much as 95% to the
total retail sales. Because of the increasing number of nuclear family, working
women, greater work pressure and increased commuting time, convenience has
become a priority for the Indian consumers.

The growth and development of organized retailing in India is driven by two main
factors – lower price and benefits the consumers can’t resist. According to experts,
economies of scale drive down the cost of supply chain, allowing retailers to offers
more benefits offered to the customers. Globally, retailing is customer-centric with

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an emphasis on innovation in products, process and services. In short, the
customer is the king.

The emergence of organized retailing has led to competition which has resulted to
the demographics & psychographic changes in the life of urban consumers. The life
style and purchasing power of the middle class & upper class segment have fuelled
the growth of organized retailing to intense competition among the big players.

Structure of Indian Retail Sector

The retail industry continued in India in the form of Kirana stores till 1980. Soon,
following the modernization of the retail sector in India, many companies started
pouring in the retail industry in India like Bombay Dyeing, Grasim etc. From that
time the retail sector in India can be widely split into the organized and the
unorganized sector.

Organized Retail Sector

After 50 years of unorganized retailing and fragmented Kirana stores, the Indian
retail industry has finally begun to move towards modernization, Systematization
and consolidation. Today, modernization is the catch phrase and the key to
understanding retail in the next decade.
There has been a boom in retail trade in India owing to a gradual increase in the
disposable incomes of the middle class households, as a result of good
performance of IT, Service and Infrastructure sectors. More and more players are
entering the retail business in India to introduce new formats like malls,
supermarkets, discount stores, department stores and even changing the traditional
looks of bookstores, chemist shops, and furnishing stores.

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Organized retail formats prevalent globally

• Malls
• Supermarkets
• Hypermarkets
• Discount Stores
• Department Stores
• Specialty Stores
• Internet Retailing
• Convenience Stores
• MBO

Unorganized Retail Sector

The unorganized retail sector basically includes the local Kirana stores, hand cart,
the vendors on the pavement (sidewalk) etc. This sector constitutes about 95% of
the total retail trade. As 70% of the employment is generated in Agriculture sector,
hence this form of retailing is widely seen in those areas and of course to some
parts of the urban. There is a lot of hue and cry in the sector for opening of sector
for direct investment from the foreign players, but government cannot neglect the
interests of small players. One of main reason of not opening this sector to FDI is it
may shrink the employment in the unorganized sector and expand that in the
organized.

The Evolution of retail in India

Traditional Formats Established Formats Emerging Formats

Itinerant Salesman Kirana shops Exclusive retail
Outlets Convenience/Department Hypermarket
stores
Haats PDS Malls/ Multiplexes
Melas Pan/ Beedi Shops Speciality Malls
Kiosks Post Office Shops Fast food outlets etc

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 India's Largest retail Chains:

1. PDS (Public Distribution System): 463,000

2. Post offices: 160,000
3. KVIC (Khadi& Village industries): 7,000
4. CSD (Canteen Stores Department) Stores:3,400
(Source business world marketing White book 2005)

Current Scenario of Indian Retail Sector

The Indian retail market, which is the fifth largest retail destination globally, has
been ranked the 2nd most attractive emerging market for investment after Vietnam
in the retail sector by AT Kearney’s seventh annual Global Retail Development
Index (GDRI), in 2008. The share of retail trade in the country’s gross domestic
product (GDP) was between 8-10% in 2007. It is currently 22% (end of 2010)

A McKinsey report 'The rise of Indian Consumer Market', estimates that the
Indian consumer market is likely to grow four times by 2025. Commercial real
estate services company, CB Richard Ellis' findings state that India's retail market is
currently valued at US$ 511 billion

Indian Retail on the fast-track

• The Indian retail market is the fifth-largest retail destination globally. It grew from
the US$ 330 billion in 2007 to US$ 427 billion by 2010 and further expected to grow
to US$ 637 billion by 2015. Indian retail showed a growth rate of 49.73% with a
turnover of US$ 25.44 billion in 2007-08 as against US$ 16.99 billion in 2006-2007.
• Retail contributes to 10 per cent of India’s Gross Domestic Product and provides
employment to 8 per cent of India’s working population.
• Higher disposable incomes, easy availability of credit and high exposure to media
and brands has considerably increased the average propensity to consume over
the years.

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The analysts foresee bright future of the retail sector. A huge number of shopping
malls, nearly 100, have come up in the recent past, generating 20mn sq ft. retail
space, extending more space of about 12mn sqft to it. Nearly 60 malls are on the
verge of completion and may be operational by the end of current financial year. A
forecasted number of nearly 200 malls, in a move to make additional 50mn sqft of
retail space, will be completed within the next two-years.

India retail industry is expanding itself most aggressively; as a result a great

demand for real estate is being created. Indian retailers preferred means of
expansion is to expand to other regions and to increase the number of their outlets
in a city. In the Indian retailing industry, food is the most dominating sector and is
growing at a rate of 9% annually. The branded food industry is trying to enter the
India retail industry and convert Indian consumers to branded food. Since at
present 60% of the Indian grocery basket consists of non- branded items. The
global retail giants like Wal-Mart, Spar International, Tesco, K-Mart/SEARS,
Carrefour, ZARA, FCUK, Carrefour Group and The Home Depot, NEXT, Mother
Care, lKEA, Trussardi, DKNY and many more have made plans to march in the
Indian market.

Companies like Spencer’s, Shoppers Stop, Trent, Reliance, Lifestyle, Pantaloons

Tanishq, Crossroads, Vishal and More already have planned to invest over Rs
5,000cr. Trent is on the edge to take both its brands 'Star India Bazaar' and
'Westside' to new cities, meanwhile Shoppers' Stop has recently geared up for
expansion of present ones and to add 11 new stores including two hypermarkets.
Pantaloon has planned to add eight 'Big Bazaar' malls within the next 6 to 8 months
and also Spencer has geared up for opening 15 hypermarkets in near future.

After partition, Reliance Industries Ltd (RIL) is substantially getting ready to enter in
field of retailing. RIL is poised to emerge as the single largest player in this sector.
On the other hand, Tosco’s, Wal-Marts or Safeway does ultimately enter in the
country. So finally, Shoppers' Stops, Westside, Pantaloons and West sides in
coming years have will face stiff competition.

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 Major Indian Retailers

• RPG Retail-Formats: Music World, Books & Beyond, Spencer’s Hyper, Spencer’s
Super, Daily, Express & Fresh
• Pantaloon Retail-Formats: Big Bazaar, Food Bazaar, Pantaloons, Central,
Fashion Station, Brand Factory, Depot, aLL, E-Zone etc.
• The Tata Group-Formats: Westside, Star India Bazaar, Steel junction, Landmark,
and Titan Industries with World of Titans showrooms, Tanishq outlets, Chroma.
• K Raheja Corp Group Formats: Shoppers’ Stop, Crossword, Hyper City, Inorbit
• Lifestyle International- Lifestyle, Home Centre, Max, Fun City and International
Franchise brand stores.
• Pyramid Retail-Formats: Pyramid Megastore, True-Mart
• Nilgiri’s-Formats:Nilgiri's’ supermarket chain
• Subhiksha-Formats:Subhiksha supermarket pharmacy and telecom discount
chain.
• More-Formats: Supermarket chain and hypermarket chain
• Vishal Retail Group-Formats: Vishal Mega Mart
• BPCL-Formats: In & Out
• Reliance Retail-Formats: Reliance Fresh
• Reliance ADAG Retail-Format: Reliance World
• German Metro Cash & Carry:- Wholesale
• Shoprite Holdings-Formats: Shoprite Hypermarket

Retail Pharmacy in India

Retailpharmaciesare waiting totakeoff. Thepotentialis huge and thescenarioissimilar
to whathappenedintraditional retail.
Nobodythoughtthatpeoplewouldwanttogoandbuyeverythingfrom one place like Big
Bazaar,Pantaloons and Shoppers Stop.

Similarly, thingsareslowlychanging inthePharmaceutical retail

space.Today,retailchainslikeApollo,haveanall-Indiapresencethrough
300oddoutlets.ThegrowthratesofotherchainslikeMedicineShoppe, and Guardian

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Pharmacy, Religare (Genuine medicine) chain are phenomenal as theyare adding
three-four outlets every month.

Thereisclearlyaconsumer-driven requirementfor pharmacy

chains.Consumerswanttoensure thatthemedicinesthatthey
buyarenotfakeorspurious.Inadditiontocounterfeiting,itisalso the
locationthatisanimportantissue.Traditionally,chemists orpharmacists
haveadoptedaneighbourhoodcentricmodel,whereconsumerstypically
goandgetmedicinesfrom thesameneighbourhoodshop.Hence, convenienceof
locationwill beanimportantsuccessfactorfor retail pharmacychains.

Other factors, such as good bargains, discounts, ensuringthequality

ofmedicinesandavoidingretailsubstitutionwillalso ensurethegrowthof retailchains.

The pharmacy trade in the country generates an estimated businessofRs.32,000

crore,apartfromaboutRs.18,000 added
byhospitalpharmaciesandexports.Almostallthechemists besidesselling
allopathicmedicinesalsoofferOTCandalternate medicines,surgical,
rehabilitationaidsandbodycareproductslikesoaps,toothpastes,hair
oils,shampoos,cleansinglotionsandneutraceuticals,amongothers,for
salewhichaccording toroughestimates generateanadditionalturnoverof about
Rs.15,000crore.

Theorganized pharmacyretailmarketisdominated bybig

industrialhouseslikeRanbaxy's(Fortis), Pantaloon(Tulsi), RelianceRetail's
(RelianceHealthand Pharma) aswell ashealth careplayers like
ApolloHospitalsGroup's(ApolloPharmacy), ZydusCadilla's(Dialfor Health),
SagarDrugs &Pharmaceuticals' (PlanetHealth), Guardian Lifecare's (Guardian
Pharmacy),Religare(Genuine medicine),etc.

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 Learning of Organized Retails in India
Retail is nice to talk about but it is very tough to implement. Some of the hurdles in
setting up of a retail pharmacy are listed below:

Competition from Unorganised sector:

• The unorganised sector is not a “pushover”. It has had a strong relationship with the
customer for many generations. Customers are habitual of visiting chemist shops
for taking prescribed and non-prescribed medicines.

Real Estate:
• Cost of real estate is critical to success for any retail shops. It costs between 6% -
8% of revenue
• Location of Retail shop plays a huge role in increasing the footfall and revenue.
• Carpet area vs Super built up area is a huge add on cost.
• Store maintenance on time becomes very critical.

Costs:
• Overhead costs run out of control very fast if it is not taken into consideration
beforehand.
• Capital expenditure must be minimised for generating profits

Customer:
• Customer knows what he / she wants from the shop. We cannot forcefully sell to
them
• They like good stores but do not necessarily buy from the same store.
• They have an emotional link with the neighbourhood kirana shop / chemist which is
very difficult to break.

Supply Chain:
• It is the heart of any retail network
• Getting goods to stores on time is critical to success

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• Taking expired or spoilt goods back from stores is a logistical nightmare, it’s a huge
cost that needs to be recovered by the stores
• Significant inventory needs careful monitoring and management

Finance:
• It is very easy to build spread sheets but very difficult to achieve top line and bottom
line.
• A large retail chain needs very deep pocket to expand their business and it is very
difficult to get capital until investors get confidence into the business succeeding in
future.

People:
• Need significant training
• Have very high expectations of remuneration
• Carry their resume in their pocket

Technology:
• Robust back office system critical for success
• POS system needs to be user friendly
• RFID, Bar Codes and other technology must be implemented progressively

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Guardian Pharmacy

About Guardian Pharmacy

Guardian Pharmacy is a seven-year-old retail chain of Pharmacy, Wellness, Health
and Beauty Stores. Based on the premise of service and reliability the company
currently serves 7.5 million customers annually and is India's fastest growing
pharmacy retail chain with more than 230 outlets.

The company currently operates in 20 cities in North, East and West India—
Mumbai, Gurgaon, Delhi, Noida, Meerut, Faridabad, Ghaziabad, Jaipur, Varanasi,
Hissar, Rewari, Ludhiana, Lucknow, Kanpur, Gorakhpur, Allahabad, Agra, Jhansi
Jodhpur, Kota, Ambala, Karnal, Panipat and Bangalore.

The store formats in which the company operates are:

1. High Street
2. Mall
3. Neighbourhood
4. Hospital
5. Shop-in-shop

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 Guardian Pharmacy shop in Gurgaon

Vision
The Guardian vision is to offer their customers the best and the most reliable
pharmacy in India and build a modern Health and Beauty Retail organization built
upon honesty, trust and commitment using contemporary technology.

As a friendly neighbourhood pharmacy, they will integrate with the community they
serve and treat their customers with respect and dignity. They will always abide by
the law and will act as responsible corporate citizens.

Objective
The Guardian aim is to expand the number of stores in India and open few stores in
international market. They are planning to double the number of their stores to 400
over the next two years.

Guardian Products and Services

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Guardian Brand
Guardian Brands is their private label and it has an exhaustive range of more than
220 SKUs. They have 'Guardian', 'Xtra' and 'Guard' brands in their overall
categories. Their range comprises of Nutrition, Sports Nutrition, Vitamins, Hospital
Care, Health Care, Personal Care, Body Support, Mineral Water and Diapers.

GNC
Guardian is the India master franchise for GNC, Inc, USA, America's largest selling
brand of vitamins and dietary supplements. In India, GNC products are available
through implant GNC stores within 36 Guardian Pharmacy stores and are
distributed at another 60 Guardian Pharmacy stores. With GNC stores they are
offering customers solutions to live well. This includes supplementing their dietary
deficiencies, accelerating weight loss, providing answers to age-related symptoms
and products for people who are into body building, and herbal solutions.

Yves Rocher
Yves Rocher, botanical beauty giant from France with an experience of more than
50 years retails its products only through select Guardian outlets. These organic
beauty, skin and hair care products are for women of all ages, are environment
friendly and are not tested on animals.

Quit Smoking Aid

If a smoker wants to quit----- ‘Honeyrose’ is the best option for him. The Honeyrose
Method replaces tobacco cigarettes with Honeyrose herbal cigarettes, gradually
reducing the amount smoked but at the same time retaining the tactile pleasure of
smoking. One can stop smoking more easily with Honeyrose if he/she follows the
recommended plan. The Honeyrose range of herbal cigarettes and smoking
mixtures are tobacco-free, nicotine-free and non-addictive. They are formulated to

17
 help one give up smoking. Clinical trials have shown that smoking Honeyrose
herbal cigarettes has no adverse effects on heart rate or blood pressure.

Hospital Pharmacy
They have an extensive experience in running hospital pharmacies with a presence
inside hospitals with over 11,000 beds in various Private/ Central/ State
Government and Charitable hospitals. Besides, they are an approved supplier to
CGHS (Central Government Health Scheme). Guardian currently manages the IPD
and OPD pharmacies of the various hospital pharmacies in India.

Guardian Retail Stores Features

1) Guardian stores have international look and feel and qualified pharmacist is there at
each store to dispense medicines. Their pharmacists' role profile is beyond
dispensing medicines. They provide information about drugs and their usage and
help customers maintain the record of their medicines as well.

2) Guardian health and beauty stores offer a range of prescription and over the
counter (OTC) drugs, food supplements, toiletries, skin care, mother and baby care
products and self-diagnostic equipment i.e. Glucose Monitors, Blood Pressure
Monitors etc.

3) Guardian Lifecare has rolled out 'Guardian XtraValu Card' for customers and the
membership is free. Each time we shop at Guardian, we earn points that can be
redeemed at any Guardian store. Incidentally, they have 3.5 lakh members enrolled
as of now and their membership is growing at the rate of 10,000 new members
every month.

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4) The company's magazine Guardian Health Chronicle is a 64-page monthly health
magazine in English and Hindi. The online edition of the paper is available at
www.myhealthguardian.com

5) Guardian salutes senior citizens of India with a special offer. Senior citizens get
10% +1% off on prescription medicines at Guardian stores.

6) Guardian Pharmacy conducts free health check-up camps to monitor high blood
pressure and blood sugar. As a part of community service, they donate cut strips of
medicines to NGO.

7) With intensive staff training Guardian Pharmacy ensures that their pharmacists turn
as useful allies in customer health management goals.

Factors that led Guardian Pharmacy to adopt a Retail Model

1) Guardian operates in a high growth sector with structural weaknesses that it

focuses on exploiting.

Industry Environment
• Total size of market is US$ 23 billion sales, equally split between pharmaceutical
and FMCG products. Organised retail is less than 0.1%.
• Pharmaceutical retailing in India is unorganized and fragmented with about 750,000
mom and pop Pharmaceutical outlets and over 75.000 distributors
• Historical revenue growth at 18% per annum. Fundamentals point to an even more
accelerated growth.

Structural Weaknesses
• Spurious drugs contribute to over $1.5 billion. Unscrupulous retailers take
advantage of lack of customer education.
• Most retail outlets are small, congested and offer poor customer experience.
• Fragmentation has led to low margins for the retailers.

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2) Retail Healthcare Sales are growing at a rate of 18% per annum and expected to
accelerate.

• Indian consumption of pharmaceuticals and wellness products is relatively low

when compared with many other countries.
• The most important stream of income for commercial pharmacies in developed
countries is now derived from dispensing managed care prescriptions.
• With lifestyle diseases proliferating the urban Indian landscape, preventive and
maintenance medication for cardiac diseases, diabetes, etc. is fast becoming a
significant proportion of retail medical expenditure.
• With increased access to cheap Health Care insurance, Indians are spending more
and demanding better facilities

3) Over 35% cent of the drugs sold through retail Pharmaceutical trade is spurious or
fakes and the shopping environment is user unfriendly

• The annual sales figure of spurious drugs is close to Rs 4,500/- crores (US$ 1
billion). Over 35% of the world's spurious drugs, according to the World Health
Organization, are produced in India.
• The counterfeit drugs industry is no longer restricted to tablets and capsules and
has graduated to production of expensive and sophisticated injections, expensive
tablets and inhalers.
• In the next 10 years, spurious drugs are expected to be the single biggest problem
in public health. With only about 30 drug inspectors for Delhi for over 10,000
chemist shops, real enforcement is an impossible task for the Government

4) Small congested stores with “under-qualified “staff results in poor customer

experience

• Congested and crowded small stores without self-service.

• No product explanation.
• Typically customer has no option for making impulse purchases

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• Non air-conditioned, hot, dusty and unhygienic environment -complete anti-thesis of
health care.
• Absence of a qualified pharmacist.
• Out-dated / Expired stocks.
• Frequently out of stock of critical SKUs

Guardian Retail Pharmacy Business Model

Guardian is one of India's fastest growing pharmacy chains with a network of 230-
plus stores across 26 cities and seven states, 7.5 million customers annually, and a
top line of 170 crore. Guardian is currently rolling out 2 stores a week.

Some of the key highlights of Business Strategies adopted by Guardian Pharmacy:

1) Guardian differentiated its brand from others, moving away from the clutter and
chaos of the normal chemist shop to a neatly arranged, well-lit and cheerful space
that promised to take away the gloom of buying medicines.
2) An in-store pharmacist is the biggest USP of Guardian Pharmacy
3) Treating customer as patient first. Every other pharmacy chain treats the patient as
a customer.
4) It assures 100% reliability guarantee of medicines or any other products.
5) They give utmost importance to location and supply chain network. Each store is
stocked with 7,000-plus active store keeping units, or SKUs.
6) All stores are connected via DSL
7) They have documented every single activity into Standard Operating Procedures
which are followed religiously.
8) They have achieved “mantra“ of standardisation to guarantee the same experience
to every customer.
9) The management of Guardian is actively involved in day to day operations as
business is capital intensive and they knew that one needs to be aware of the
minute operational details.
10) They were aware of the fact that for further expansion they needed capital, They
were continuously striving for arranging capital and in the process in 2007 raised 60
crore from Samara Capital, a private equity firm to fund expansion.
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11) They cleverly ventured into Hospital Pharmacy which guarantees them both volume
and a captive customer base. Guardian today runs 47 hospital stores and 55 per
cent of the company's turnover and bottom line comes from hospital outlets.
12) Guardian innovated with various loyalty schemes like an advantage card that
entitled customers to discounts, free medical camps and features like a prescription
reminder order, where an in-store pharmacist calls them to order their regular
medicines in advance.
13) Guardian pharmacies double up as wellness stores which caused the "sticking
factor" to their brand.
14) They continuously looked for market opportunity and availed wherever possible
strategically. Their deals with GNC, American's largest selling nutritional
supplements brand, and Yves Rocher, a French cosmetics brand—solely retailed
through Guardian stores in India—have helped as much to drive up footfall, as has
the extensive range of products offered under the Guardian label.
15) They are focussing on producing products under their private label which are giving
them an extra margin of 5-10% compared to other pharmacy retail chains.
16) Currently they are looking to franchisee model for accelerating further expansion
17) Training, acquisition and retention of talent are their primary focus.

Porter’s Five Forces Analysis

Porter’s Five Forces provides a convenient framework for exploring the economic
factors that affect the profits and prices of an industry. Porter’s analysis
systematically and comprehensively applies economic tools to analyse an industry
in depth:

• How can the firm make profits?

• Opportunities and threats to Success?
• A basis for generating strategic choices.
• Applies to service sectors as well as industrial.

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Porter’s Five Forces

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Industry competition
Pharmaceutical industry is one of the most competitive industries in the country with
as many as 10,000 different players fighting for the same pie. The rivalry in the
industry can be gauged from the fact that the top player in the country has only 6%
market share, and the top five players together have about 18% market share.
Thus, the concentration ratio for this industry is very low. High growth prospects
make it attractive for new players to enter in the industry.

Another major factor that adds to the industry rivalry is the fact that the entry
barriers to Pharmaceutical industry are very low. The fixed cost requirement is low
but the need for working capital is high.

The fixed asset turnover, which is one of the gauges of fixed cost requirements,
tells us that in bigger companies this ratio is in the range of 3.5 to 4 times. For
smaller companies, it is even higher. Many smaller players that are focused on a
particular region have a better hang of the distribution channel, making it easier to
succeed, albeit in a limited way.

An important fact is that Pharmaceutical is a stable market and its growth rate
generally tracks the economic growth of the country with some 1.2 times of average
in India. Though volume growth has been consistent over a period of time, value
growth has not followed in tandem.

The product differentiation is one key factor, which gives competitive advantage to
the firms in any industry. However, in Pharmaceutical industry product
differentiation is not possible since India has followed process patents till date, with
laws favouring imitators.

Bargaining power of buyers

The unique feature of Pharmaceutical industry is that the end user of the product is
different from the influencer (read doctor). The consumer has no choice but to buy

24
what doctor says. However, when we look at the buyer's power, we look at the
influence they have on the prices of the product.

From Guardian perspective, the buyers are scattered and they as such does not
wield much power in the pricing of the products. However, government with its
policies plays an important role in regulating pricing through the NPPA (National
Pharmaceutical Pricing Authority).

Bargaining power of suppliers

The Pharmaceutical industry depends upon several organic chemicals. The
chemical industry is again very competitive and fragmented. The chemicals used in
the Pharmaceutical industry are largely a commodity.

The suppliers have very low bargaining power and the companies in the
Pharmaceutical industry can switch from their suppliers without incurring a very
high cost. However, what can happen is that the supplier can go for forward
integration to become a Pharmaceutical company. Companies like Orchid
Chemicals and Sashun Chemicals were basically chemical companies, who turned
themselves into pharmaceutical companies.

Barriers to entry
Pharmaceutical industry is one of the most easily accessible industries for
entrepreneur in India. The capital requirement for the industry is very low; creating a
regional distribution network is easy, since the point of sales is restricted in this
industry in India.

However, creating brand awareness and franchisee amongst doctors is the key for
long-term survival. Also, quality regulations by the government may put some
hindrance for establishing new manufacturing operations. Going forward, the
impending new patent regime will raise the barriers to entry. But it is unlikely to
discourage new entrants, as market for generics will be as huge.

25
 Threat of substitutes
This is one of the great advantages of the Pharmaceutical industry. Whatever
happens, demand for Pharmaceutical products continues and the industry thrives.
One of the key reasons for high competitiveness in the industry is that as an on-
going concern, Pharmaceutical industry seems to have an infinite future. However,
in recent times, the advances made in the field of biotechnology, can prove to be a
threat to the synthetic Pharmaceutical industry.

New Business Strategy for Guardian Pharmacy

Guardian Pharmacy started in 2003. In eight years, it has become one of India's
fastest growing pharmacy chains with a network of 230-plus stores across 26 cities
and seven states, 7.5 million customers annually, and a top line of around 170
crore.

Up ahead are ambitious plans—of adding up to 200 stores in the next two years,
and becoming a 300-crore company by April 2013.

In order to achieve these targets and to become India’s largest Pharmacy Retail
chain, we have devised following business strategies:

1) Acquisitions
2) Consolidate North and look forward to South
3) Online Retailing
4) Addition of new products into its portfolio
5) Increasing Private Label products
6) Effective Marketing campaign
7) Optimise Supply Chain Network
8) Better Shelf management
9) In Store Nutrition Counsellor
10) Tie up with top Pharmacy Colleges in India
11) Investment into Rural Market
12) Location

26
13) Customer Service and Relationship
14) Increase Visibility through social Media

Acquisitions

Guardian has to go for acquisition of neighbourhood chemist shops,

Greenfield projects and other small retailers in order to grow and expand its
market. There are pharmacy shops like “MedPlus” in south which Guardian
should be aiming to acquire for as it will give it an edge over other pharmacy
retail chains. If it do acquire through its competitiveness, it will not have to
invest time and money to look out for suppliers, manufacturers and
distributors. It can utilise the existing supply chain network of the existing
company. They would also be relieved of the location and franchisee factors
for starting up the new retail store.

Consolidate North and look forward to South

Currently, Guardian is operating out of seven north Indian states having 230
retail stores. In future, first it should consolidate its north business so that
there are no irregularities or difference arises due to expansion. The
inventory, supply chain, distribution network should be robust. After this, they
can look towards south part of India for further expansion and increase its
penetration to pan India level.

Online Retailing
Guardian can look out to start online retailing for its existing stores including
hospital pharmacies. Digital Revolution has really caused the professional,
students as well as old age people to spend most of their time on internet
looking for mails, opening various sites or online shopping.

Online retailing will allow registered customers to have prescriptionsfilled in

retail pharmacies as well as through the mail, and customers may also place

27
orders by telephone and via the Internet. Company can maintain database for
these customers which will help it to provide various exclusive offers and
benefit to them. At the same time customer will save time to go to pharmacy
shop for getting medicines.

Addition of new products to itsportfolio

Apart from existing products, Guardian can keep products like Nutritious
biscuits, less calorie chocolates, energy drinks, juices, malted milk shakes
and equipment like thermometer, glucometer, weighing machines, heat pads,
steam inhalers, mosquito repellents etc. This will increase the reason for
customers to visit the retail shop.

Increasing Private Labels

Private Labels of any product lead to increase in margin of 5-10%. Guardian
can really squeeze in profit by using more and more private labels into its
portfolio.

Effective marketing campaign

There is less awareness of Guardian brand among people who are not
associated with pharmacy or medical background. There is a real need for
using effective marketing campaign for increasing the brand awareness
among old age people, professionals and students. By giving online
promotion or using proper advertising, Guardian brand cognizance can be
improved.

Optimise Supply Chain Network

Supply Chain Network is the core of any retail business. Guardian should
strengthen its network of suppliers, manufacturers and distributors and focus
on reducing the incurred input for any product. This will increase the profit
margin and improve its balance sheet.

28
Better Shelf Management
Shelf in the retail store should be managed in such a way that as soon as
customer enters the shop, he gets attracted to the product and buy it. Most
important and daily used products should be placed at a level where customer
can easily reach.

In-Store Nutrition Counsellor

Each store can keep a nutrition counsellor or expert who can give real time
advice to customers regarding dietary supplements for people suffering from
diabetes, kidney stone, pregnant women etc.

Tie up with top pharmacy colleges in India

Guardian should tie up with top pharmacy colleges for research, innovation
and current pharmacy trends. Their collaboration with pharmacy colleges will
also result into increasing their brand awareness. College can also provide
online counselling support. Guardian can sponsor events being organized in
pharmacy colleges.

Investment into Rural Market

Guardian had started “Auasadhi” shops for catering to the needs of rural
people but because of far distance of these shops from warehouse, it resulted
into delay of the product to reach to the shops. Guardian can restart these
shops again by establishing warehouse nearby to these shops.

Location
A pharmacy must be present in a neighbourhood market near a hospital, on a
busy highway, near office complex, areas where fuel pumps are located.
Pharmaceutical retailing can be very significant at fuel pumps because of
locational advantage and Parking advantage.

29
Customer Service and Relationship
Customer Relationship management has become an important tool for
companies to flourish its business. It leads to serving the needs of customer
by understanding their latent needs. The store employees should be given
proper training beforehand to treat customer as a king and resolve their
queries. Customer should leave the store thinking that he would come again
to this shop.

Increasing visibility through social media

Social media has become an easy way for companies to market their brand.
They are organizing online events through social networking site like
Facebook and using twitter for promotion. Guardian can tread the same path
by promoting online events, games, quizzes and gifts. This will increase it’s
visibly into online world.

The above strategies have been determined after adopting proper research
methodology. We used questionnaire to determine the response from the target
audience and then performed data analysis using software tools like MS Excel and
SPSS.

Research

Research Methodology

Design of research is exploratory. Non Probability sampling designs are used.

Convenience sampling is selected & the analysis is based on structured answers to
the questionnaire.

Questionnaire
Detailed questionnaire was prepared after considering the important factors
affecting pharmaceutical retailing. We have also taken the help of some

30
Pharmaceutical retailers in deciding the set of questions affecting customer
behaviour in the purchase of medicines and related products. Questionnaire was
sent by email to 50 respondents & printed ones were used for 30 respondents.

Target Audience
We have tried to target a mix of Professionals, Service (Private) & students. The
target audience was in the age group of 25 to 40.Study is restricted to NCR region

Data Analysis
MS Excel, SPSS & Factor Analysis are used for Analysis.

Sample Size
We received the response from 42 persons

Data Analysis & Findings

Occupation of Respondents

S.No Occupation No. of Responses % Respondents

Business 6 14
Professional 8 19
Service (Private/Govt.) 21 50
Student 7 17

Most of the respondents are in Service (50%) followed by professionals (19%),

Business (14%) and students (17%)

Household Income Group

S.No Income Group No. of Responses % Respondents
Above Rs 50,001 3 7
Rs 30,001-Rs 50,000 14 33
Rs 20,001-Rs 30,000 24 57
Rs 10,001-Rs 20,000 1 3

31
In terms of Income, 97% have household income of more than Rs 20,000 with
majority of respondents (57%) in the range of Rs 20,001-Rs 30,000.7% have
income of more than Rs 50,000

Monthly Purchase of Medicines

Monthly Purchase
38
40 29
24
30

20 10

10

0
Rs 200-250 Rs 251-350 Rs 351-450 Rs 451 &
above

S.No Monthly Purchase No. of Responses % Respondents

Rs 200-250 4 10
Rs 251-350 12 29
Rs 351-450 16 38
Rs 451 & above 10 24

Most of the customers in the sample are purchasing medicines and related
products worth more than Rs 251 per month whereas just 10% respondents are
purchasing these products in the range of Rs 200-250.Overall this show a good
trend for the Pharmaceutical retailing and rising incomes and health awareness can
be the probable reasons behind this.

32
Most purchased products at Retail counters

Most Purchased Products

30 26
25
17
20 14 12
15 10 10
7
10 5
5
0
1 2 3 4 5 6 7 8

S.No Purchased Products No. of Responses % Respondents

Health supplements 4 10
Cough Syrups 3 7
Pain killers 6 14
Calcium Supplements 4 10
Prescription Drugs 11 26
Vitamins 5 12
Personal grooming products 7 17
Nasal decongestants 2 5

Prescription drugs are the most commonly purchased products at Medicine shops
followed by Personal grooming products (17%), Pain killers (14%) and Vitamins
(12%), Health supplements (10%). Most of the products other than the Prescription
drugs are purchased for self-medication without the Rx of the doctors. This shows
an increased awareness for health products among the consumers.

33
Effectiveness of Advertising medium in the sales of medicines & related
products

Effectiveness of Advertising Medium

7 TV

17
Print

55 Publicity(Write-ups)
21
Banners/Racks/Card
Board cut-outs

S.No Advertising medium No. of Responses % Respondents

TV 31 7
Print 73 17
Publicity(Write-ups) 88 21
Banners/Racks/Card Board cut-outs 228 55

In terms of effectiveness of Advertising medium in the sales of medicines & related

products at Retail stores, 55% have rated Banners/Racks/Card Board cut-outs as
the most effective followed by Publicity (21%), Print (17%) & TV (7%). No
respondent has given any rating for Radio as a preferred advertising media for
sales of medicines

34
Factor Analysis

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
.542

Bartlett's Test of Sphericity Approx. Chi-Square 144.837

df 78
Sig. .000

Communalities
Initial Extraction
Satisfaction 1.000 .726
Choices 1.000 .721
OTC 1.000 .620
Importance 1.000 .698
Multioption 1.000 .747
Brand 1.000 .804
Retailers 1.000 .842
Display 1.000 .753
Advertisements 1.000 .876
Price 1.000 .851
Location 1.000 .775
Wholeday 1.000 .870
Departmentalstore
1.000 .828

35
 Extraction Method: Principal Component Analysis.

Total Variance Explained

Component Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of VarianceCumulative %Total % of VarianceCumulative %
1 2.954 22.726 22.726 2.954 22.726 22.726
2 2.083 16.023 38.749 2.083 16.023 38.749
3 1.451 11.160 49.909 1.451 11.160 49.909
4 1.338 10.290 60.199 1.338 10.290 60.199
5 1.215 9.346 69.545 1.215 9.346 69.545
6 1.069 8.225 77.770 1.069 8.225 77.770
7 .659 5.070 82.840
8 .555 4.268 87.109
9 .492 3.787 90.896
10 .383 2.946 93.841
11 .343 2.638 96.480
12 .296 2.276 98.756
13 .162 1.244 100.000

Extraction Method: Principal Component Analysis.

Interpretation of Data
The first step in Interpreting data the output is to look at the factors extracted, their
Eigen values and the cumulative percentage of variance.

We see from the Cum.Pct Column of Table 1.1 that the four factors extracted
together account for 77.77 % of the total variance.

This is pretty good bargain, because we are able to economize on the number of
variables (From 13 we have reduced to 6 factors), While we lost only 22.33% of the
information content.

36
The second Column shows the communality values. Communality can be defined
as the portion of variance in any one of the original variables, which is captured by
the extracted factors.

The second Task is interpreting what these six extracted factors represent.

We can use rotated and unRotated Factor Matrix.

Component Matrix (a)

Component
1 2 3 4 5 6
Satisfaction -.497 -.030 .380 .403 -.176 -.375
Advertisements .506 -.525 .249 -.131 -.123 .307
OTC .518 .505 -.189 -.228 -.093 .028
Importance .751 -.052 -.088 .265 .047 -.226
Multioption .740 .125 .197 -.252 -.066 -.278
Brand .178 -.834 -.031 .016 .130 .240
Retailers .846 .062 .121 .304 -.022 -.125
Display .360 .239 -.591 .141 .443 -.031
Choices .225 .318 .459 .084 .203 .683
Price -.323 .176 .072 -.261 .800 -.055
Location .018 .589 .442 -.445 -.179 -.039
wholeday -.200 .404 -.536 .185 -.438 .391
departmentalstore
.004 .365 .313 .744 .188 .087

37
Rotated Component Matrix (a)

Component
1 2 3 4 5 6
Satisfaction -.196 .059 -.466 .607 -.303 .078
Advertisements .403 -.470 -.303 -.368 .331 .026
OTC .413 .458 .321 -.271 .154 -.199
Importance .782 -.153 .239 .061 -.050 -.013
Multioption .758 .254 -.033 -.273 .039 .175
Brand .071 -.835 -.109 -.262 .067 .130
Retailers .885 -.055 .117 .128 .155 -.040
Display .215 -.022 .839 .003 -.046 -.022
Choices .055 .099 -.002 .126 .920 .020
Price -.422 .165 .379 .038 .118 .698
Location .044 .774 -.277 -.149 .252 .111
wholeday -.288 .188 .251 .027 .046 -.828
departmentalstore
.124 .065 .090 .831 .330 -.038

Analyzing the Rotated Factor Analysis we notice that variables like Importance and
Multi option store have maximum loadings at factor 1. Similarly for Factor 2, Price
and whole day and so on for rest of the factors.

Naming of Factors

FACTOR VARIANCE ATTRIBUTE

1 Retailer Importance and Multi
Retailer image
option store
2 Location Price and Whole dayAffordability and accessibility
3 Choices Display Visibility
4 Departmental store Satisfaction , Retailer
Customer service
and choices
5 Display Advertisements and
Variety and promotion

38
 Choices
Multi option store and
6 Whole day (24 x 7) Prices Customer eccentricity

Findings of Factor Analysis

We derive that following Six Factors which are most relevant while doing feasibility
analysis for Health Point-Well-Being Store in India:

1) Purchase of OTC medicines from Retailers– It depends upon, Customer’s

awareness , Retailer’s location and Image

2) Location of Medical Plaza - It depends upon affordability and accessibility

3) Choices given to customers -It depends upon the Visibility of Brands and range of
products

4) Departmental store– It depends upon Customer Service and awareness

5) Display- It depends upon Variety and promotion

6) Whole day (24x7) – Customer eccentricity

Other points that comes out from the analysis are Brand of medicine is not very
important for most of the respondents as compare to the above 6 parameters.

39
Conclusion
Our study clearly shows that customers will look forward to have Pharmacy
Retail chain that offers them convenience of shopping medicines and related
products with choice under one roof.

Guardian can keep a wide range of products in its retail chains from
Medicines to personal care products to related products like Glucometers,
Heating pads, Belts, weighing machines so that customers can get all these
products under a single roof with a choice.

Location is an important aspect as customers do not want to travel more to

purchase the medicines so Guardian continuously need to scout for a
strategic location either in the main markets or near big hospitals for its
expansion.

Brand names in medicines are not a very important criterion while purchasing
medicines as usually customers purchase medicines either on the prescription
of a doctor or on the basis of recommendation by the chemist. This offers
good opportunity for Guardian to increase its own share of private labels for
most commonly sold medicines and other related products.

Guardian can invest in online retailing, social networking, providing online

promotions, events and games to increase its visibility in the market and
compete effectively from its rival brands like Apollo and Religare.

To achieve its target of increasing its pharmacy stores to 400by 2013 and
expand further subsequently, it has to look for acquisitions all over the country
of neighbourhood chemist shops and Greenfield projects.

40
References

1. Berry Berman, Joel R Evans, “Retail Management- A Strategic

Approach, 9th Edition, 2007

2. J.D Lindquist, M Joseph Sirgy,” Shopper, Buyer & Consumer

behavior, 2nd edition, 2006

3. Philip Kotler, K Keller,” Marketing Management” (468-485), 2006

edition

4. Sanjeev Mittal,” How to win over customer” Sameeksha, Apr-Sep, 09

5. http://www.pharmabiz.com/article/detnews.asp?articleid=24974
&sectionid =50

6. Simulating consumer behavior: a perspective by Wander Jager,

7. Department of Marketing, University of Groningen (NL)

8. Ricky W Griffin, Ronald J Ebert,” Business” 7th edition

9. http://www.docstoc.com/docs/10233456/?ct=40&utm_source=email&ut
m_medium=email&utm_campaign=46&utm_content=587&alt=7c2cc3ef
-67a0-4582-a915-4f40e871310c

10. http://www.franchiseuae.com/business-opportunities/Health-Care-
Fitness/guardian-lifecare/

11. http://www.expresspharmaonline.com/20101231/pharmacistforbetterhe
althcare10.shtml

41
12. http://www.growthinstitute.in/emagazine/apr11/behind-the-scene.html

13. http://www.guardianlifecare.com/

14. http://www.guardian.in/

15. www.wikipedia.org

16. www.facebook.com

17. http://retailforum.org/

18. www.walgreens.com/

19. www.walgreens.com/pharmacy/

42
Questionnaire
Q.1. Please rate the following statements on a scale of 1 to 5.Please tick one number
that best represents your opinion.

1= Strongly Agree
2=Agree
3=Neutral
4=Disagree
5=Strongly Disagree

1. You are satisfied with the service of your chemist.

1 2 3 4 5

2. You will like to have choice while selecting a particular medicine.

1 2 3 4 5

3. You are aware of many OTC brands

1 2 3 4 5

4. Chemist plays an important role in dispensing of medicines.

1 2 3 4 5

5. You will like a Medicine store that offers you many alternatives.

1 2 3 4 5

6. Brand of a medicine is an important factor in your final selection.

43
 1 2 3 4 5

7. You purchase OTC medicines from retailers.

1 2 3 4 5

8. Medicines displayed in a shop can help you to make a better choice.

1 2 3 4 5

9. Advertisements of Medicines affect buying decision.

1 2 3 4 5

10. Price of medicines affects your buying decision.

1 2 3 4 5

11. Location of a Medical store is important for you.

1 2 3 4 5

12. You will like to have a 24 X 7 Medicine plaza.

1 2 3 4 5

44
13. You will prefer a Medicine Shop like a Departmental Store

1 2 3 4 5

14. You purchase Medicines OTC

1 2 3 4 5

15. Your monthly purchase of medicines & related products is

Rs 200-250 Rs 250-350

Rs 350-450 Rs 450 and above

16. Which types of products you purchase from Medicine shops?

Cough Syrups Calcium Supplements

Vitamins Anti-obesity drugs

Prescription Drugs Personal grooming products

Pain killers Health supplements

Chocolates Diagnostic kits

Surgical products Nasal decongestants

17. Rank 1 to 5 according to their relative importance for increasing sales of

Medicines at retail stores

TV

45
 Radio

Print

Publicity (Write-ups)

Banners/Racks/Card Board cut-outs

46