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MBA CASE STUDY COMPANY: M-KEM OVERALL DESCRIPTION: An innovative pharmacy in Bellville, Western Cape that runs according to the principles of Conscious Business Conscious Business Case Study CONTENTS EXECUTIVE SUMMARY ................................................................................................................. 2 GENERAL BUSINESS OVERVIEW AND HISTORICAL PERSPECTIVE..................................................... 3 MARKET OVERVIEW ..................................................................................................................... 5 THE IMPACT OF LEGISLATIVE CONTROL ....................................................................................................... 5 MARKET TRENDS IN CONSOLIDATION ......................................................................................................... 5 THE SHAREHOLDER VALUE ........................................................................................................... 6 THE CUSTOMER / STAKEHOLDER VALUE PROPOSITION ................................................................. 6 EMPLOYEES ................................................................................................................................. 7 SUPPLIERS ................................................................................................................................... 9 COMMUNITY AND ENVIRONMENT ............................................................................................. 10 1|Page Conscious Business Case Study M-KEM - CONSCIOUS BUSINESS Executive Summary The purpose of this study is to scrutinize and evaluate the current business model of M-Kem Medicine City, a pharmacy situated in Durban Road, Belville Cape Town. The business model will be unpacked focusing on its key drivers, values, daily operating activities as well as its interactions with external components such as suppliers and customers as well as internal interactions between stakeholders and employees. Once analysed, we will propose a new model focused on the principles of ‘Conscious Business’. Conscious business is defined as a way of thinking about business which is conscious of its higher purpose. It extends beyond the simplistic customer satisfaction model or a profit-centric approach. The Conscious Business model argues that longer term profitability is achieved by driving a ‘win-win’ relationship across the complete stakeholder model; i.e. all entities involved derive purpose and value. M-Kem as an organisation have evolved dramatically over the past 50 years and have during this period aligned their focus and activities in satisfying their vision of being a customer-centric organisation providing exceptional service as a community pharmacy focused on delivering quality at affordable prices. Whilst a highly regarded and successful business, there is always scope for improvement. On concluding the analyses to the “As-is” we will recommend innovative initiatives focusing on the complete stakeholder model; namely shareholder, community and environment, suppliers, employees and customers. The “To-be” model will be recommended on reflecting the aforementioned stakeholders. The result thereof an increase and change to activities which would drive an extended higher purpose to the business. M-Kem’s is uniquely positioned as a leader in its industry, boasting industry leading yearly growth figures. Equipped with a higher purpose model, we believe the result would enhance the business performance for all stakeholder members. 2|Page Conscious Business Case Study General Business Overview and Historical Perspective M-Kem, a pharmacy and wellness centre situated in Durbanville, is the manifestation of one man’s vision to provide an affordable comprehensive pharmaceutical and health-care facility. Mr. M. Mallach, pursued his purpose in founding M-Kem in 1964 after attending a job interview where he asked the interviewer, the business owner, what his career path would be in that company. After hearing the demotivating reply that the only opportunity of advancement and improvement was to replace the manager that was busy interviewing him, he realised that he was wasting time and would rather focus his efforts on pursuing his purpose and start his own business. 6 Weeks later he purchased a property and started M-Kem. Since 1964; 50 years on, Mr “M”, as he is affectionately known by staff, customers, suppliers and the community, worked tirelessly 7 days a week across every function and position at M-Kem, pouring his passion and demonstrable work ethic into every aspect of the business. Mr M. reflects that it was a sacrifice driven by passion and as such has had a large impact on family time, therefore you must ensure those efforts count for something. At age 75, he arrives at M-Kem at 6:00AM, after already having been to the gym and puts in 12 hour day. He still works 7 days a week ensuring that M-Kem’s purpose of providing affordable, quality pharmaceutical and health services to the community. As a consequence of its policy to place the consumers’ needs as paramount, being innovative, to provide consistency and never to compromise on quality or service, M-Kem is acknowledged as being a leader in its field. M-KEM MEDICINE CITY, Cape Town’s only 24 hour pharmacy is conveniently situated next to the N1 highway (R302), on the Bellville side of Durban Road. M-KEM is much more than just a pharmacy. Its offerings and services extend well beyond products and services typically offered and holistically have been combined with the express aim to serve the community as whole. At its nucleus is its health team, pharmacists, pharmacist assistants, nursing sisters as well as specialists in complimentary medicines serve as an useful adjacent to the medical profession. Additionally, dieticians, opticians, podiatrists, audiologist and speech and language therapists extend this nucleus further. Additional value-added services are further in support with departments focused on skin-care, massage therapy, homeopathic and natural treatments, and specialist footwear and sports 3|Page Conscious Business Case Study science supplements. The pharmacy which occupies two floors encompass a variety of specialised departments. Each being managed by experts in their field, able to offer not only product knowledge but also advice. Free parking is available on Durban Road, Raglan Street and mainly at the back entrance of the pharmacy. Helpful security personnel are also on duty to ensure the safety of clientele as well as aiding mobility challenged customers. Mr. M. explained that his nursing Sisters perform a variety of functions from 8 specialised fields at the Orange Cross Clinics; namely Women’s Health, Baby, General, Colostomy, Diagnostic, Diabetic, Wound & a Travel Clinic. Patients are able to obtain a full fasting cholesterol analysis at the time of appointment, diabetic patients are able to have their sugar levels graphically presented in order to maintain control of their condition. This facilitates their own self-management of the condition. Other tests include liver function, uric acid levels and many more. Specialist childrens’ vaccinations include Chicken Pox, Mumps, German Measles etc. M-KEM’s Travel Clinic additionally caters for all travel medication and vaccination requirements for travelling in Africa or abroad. This clinic has become increasingly well known for their expertise of the staff and excellence in service. The Complementary Health/vitamin department (M-KEM Health Zone) is extensive, providing a comprehensive range of the most sought after natural health lines including Solgar, Vital, Solal and Bioharmony. “We have an extensive health foods selection for various dietary requirements and the staff expertise to advise you”, says Mr M. Remarkably, whilst offering an extensive departmental approach to health care, MKem maintains a flat organisational managerial structure in support of reducing bureaucracy. Managerial focus is not only limited to specialist areas, Mr. M. understands and places emphasis of having dedicated managers in the roles of human resources and CSI. These managers ensure these areas of the business are not overlooked as they are central in support of M-Kem’s vision and purpose. In 2000 M-Kem won the coveted pharmacy of the year in S.A. awarded by a pharmaceutical multinational giant, Boeringer Ingelheim. M-Kem’s values and mission 4|Page Conscious Business Case Study are clearly displayed in the open for both customers and staff alike; this transparency and commitment serves to reinforce the customer focus, quality to service, staff empowerment, development and training. As a privately held business competing versus corporate pharmacy chains it manages to compete and offer a unique customer-centric offering which see M-Kem nominated within the top 300 high growth companies via the Department of Trade and Commerce (DTC). Market Overview The impact of Legislative Control The pharmaceutical industry is highly regulated by governmental legislation. Pricing is centrally controlled for scheduled drugs in order to ensure that price collusion as well as affordability is provided to the general public. Whilst on paper this legislation seems valid, it particularly affects smaller independent pharmacies as they struggle to realise the margins required to remain viable as a business. M-Kem anticipated this legislative control and put together a plan in line with its purpose to serve the general community with affordable pharmaceutical and health care services to broaden its service offerings. Within its basket of services and products, M-Kem provides services to assist with weight control, self-medication, illness prevention and wellness, nursing facilities, online shopping via its website, full cosmetics and beauty services, a convenient coffee shop as well as providing highly affordable house branded products which do not compete with suppliers products. Additional innovative services have also been implemented in assisting customers with prescription management and advisory services by qualified healthcare practitioners. The average market performance of pharmacies sees a 3% annual growth. M-Kem experiences an 8% annual growth rate, far exceeding the market average. Additionally the market average for number of scripts processed per day is 600. M-Kem processes in excess of 1000. Market Trends in Consolidation The pharmaceutical market in South Africa continues to be dominated by corporate chains. These corporates continue to consolidate and purchase independent pharmacies to increase market dominance and introduce their own retail offerings. 5|Page Conscious Business Case Study The larger of these chains being Clicks and Disc-hem. Additionally, traditional retailer outlets look to dabble in dispensing and pharmaceutical as they increasingly compete with chain corporate pharmacies for the consumers’ retail spend. Mr. M. maintains his independence and has no wish to sell his business. As he describes, his investment has been his own people, his loyal customers and he will not be held ransom to the demands of the corporate chains drive for profits at all costs. At one stage he had 3 pharmacies and had sold 2 of them to these corporate chains. Both of the sold off business units are no longer trading. Mr M. believes in his purpose as does his staff and as such, refuses to sell M-Kem. The Shareholder Value Mr. M. premises his complete engagement with suppliers, customers, staff and partners on traditional values and trust. 3 Shareholders own M-Kem, Mr. M., Gillian, Watson and Nicky Schlolten. Up to 2 years ago, there was no written agreement or contract and the shareholding had been based only a handshake. Realising the risk this would pose to his partners due to his age, 75, this was formalised 2 years ago. Mr. M. smiled widely when he further shared with us that the outsourced coffee shop within his store is still based on a handshake agreement and he places more value on that than formal written agreements. The shareholders not only share, but have the same vision, values and purpose as Mr. M. The Customer / Stakeholder Value Proposition M-Kem is the only 24Hour, 365 days a year pharmacy in the greater Cape Town region. It attracts customers not only from the surrounding areas but increasingly from regional and rural areas that wish to take advantage of its accessibility. Accessibility is not the only determinant factor that sees customers returning and providing their loyalty M-Kem, its wide variety of certified advisory professionals in various medical and wellness areas are easily accessible and provide an invaluable customer service. M-Kem services a staggering 57,000 customers a month, almost 2,000 customers per day. On interviewing a few of the customers on site, they stated that M-Kem was not just a dispensing and usual pharmaceutical retailer; for many, M-Kem served as the first port-of-call for any wellness or illness related family issues. Many remarked that they knew of Mr. M. personally and he actively walked and chatted to patrons on a regular basis, but it wasn’t only Mr. M…they had built a longstanding relationship of 6|Page Conscious Business Case Study trust and caring with staff as well. It was the little personal touches that were endering to them, such as the ability to log onto M-Kem’s internet site and have a conversation on a personal basis with a trained advisor. It was like they were speaking to Mr. M. personally. Prepacks of on-going scripts were readily organised for the elderly dispensed into individual day and time slots to assist in the uptake of medicine, customers are approached on the floor itself and asked if assistance is needed, guiding them to the relevant personal or areas of interest. Staff is visible and in-touch with the requirements of the customers. Trust is also developed over time and personal relationships formed, a no easy feat considering the amount of customers they service monthly. M-Kem also prides itself in ensuring it is well stocked at all times, ensuring the medicinal products are readily available and holding an extensive range across its healthcare departments. As well as having its own loyalty program which is quite rewarding in its own right, Mr. M. ensures products are priced fairly in line with his vision of providing quality healthcare at affordable prices. This “win-win” relationship with his customers, viewed as partners, has established his unprecedented growth from R40 Million rand a year in 2000 to R13Million rand a month, R156 Million rand a year turnover business from a single pharmaceutical and healthcare store. Employees The business comes across as truly committed to its employees, with various active projects aimed at keeping the employees engaged and motivated. Every three months, there are achievement awards for employees where they are recognised for going the extra mile for both customers and the business. The awards are posted on notice boards, visible for everyone to see. Of particular interest is the use of an “Employee dreams notice board”. Here, employee’s are encouraged to fill the notice board with their dreams. Various magazine cut-outs are posted of aspirational luxury items, holidays, family plans, houses etc. M-Kem utilises a 360 degree feedback mechanism for all its employees. All staff are empowered to give both constructive initiatives as well as openly critique operational issues. This feedback is integral to a central performance management system developed and managed by M-Kem which provides extensive visibility to all its people. 7|Page Conscious Business Case Study Personal development and training is central to M-Kem. Staff at all levels are encouraged to continuously upskill and develop themselves. There is a dedicated training room on premise in support of this initiative for not only specialised training areas such as pharmacy but for every role within the organisation. Additionally, MKem makes extensive use of online training programmes which are specifically adapted to suit M-Kem’s requirements. Both completed and ongoing training programmes are tracked through the use of training dash boards, which are posted on various notice boards throughout the business. Business performance is also tracked, using a tracking board shaped as the map of Africa. Two markers are clearly visible on the board, one showing where the business is and the other showing where it should be based on elapsed time. This allows the workers to see at a glance how the business is performing at any given time. The business performance tracking board is strategically placed next to the “employee’s dreams board’. As the business performance tracking is financially incentivised by rewarding performance, this is a direct way of linking aspirational dreams to performance. Currently M-Kem is undergoing a “Good-to-Great” program. The central message and the development vision is visible and central to M-Kem. On completion of training programmes, employees write a test. Achieving a score of 80-90%, a green sticker is awarded, for 100% a gold sticker. These stickers are placed on notice boards by toilets and staff change rooms. The visibility is not only internal, but customers alike can see and understand the programs that M-Kem are subscribing to and tracking the progress thereof. The central focus is on personal growth and customer service improvement. As staff complete units, they get points which contribute to their performance appraisal. Both the stickers and the completion of programs has a direct effect on their earnings and prospects for promotion. As the HR manager explains, promotions happen from within. It is easier to upskill an employee to a new more challenging role than it is to find an employee that shares in our values and beliefs. This is illustrated by 4 point-of-sale tellers that have qualified and gone on to be pharmacists within M-Kem; all initiated through internal training 8|Page Conscious Business Case Study programs. The employees feel valued and empowered and believe that they individually can make a difference in the business and to each customer. M-Kem realises that mistakes are costly, yet companies do not acknowledge or reward employees when no mistakes occur. Specific incentives have been designed so that staff seek excellence such as: • R500 incentive paid to cashier staff if they balance their tills faultlessly over a 3 month period • Incentives for salespeople if they achieve their targets over a 3 month period • Further interesting and innovative reward schemes The average tenor for employees is 13 years, as explained people don’t ever resign. Employees see Mr. M. as a father figure that motivates and encourages them to improve and develop through learning. Employees are not just involved, they are truly committed. Finally, Mr. M. explains that even in economically challenging times, there have never been and never will be any retrenchments. All of his employees are like family to him and he believes that you lead by example. “My people are my business, all my employees’ inputs and initiatives are considered. Even the new ‘Over-thecounter’ service area was a direct result of an employee’s recommendations. They trust me to ensure I am looking after their interests as strongly as I trust them with my business. Suppliers “There must be a mutually beneficial relationship”, comments Mr. M. “Trust is a key component. I will not do business with a company that I do not trust”. M-Kem supports local business, believing in the community development principle. Smaller suppliers are as valued as are larger ones. An example of this was a local dried fruit supplier where the owner would deliver the fruit personally. M-Kem’s continued support and trust has seen the supplier flourish where staff have been appointed to perform the delivery duties and even a hand-written invoice has been replaced with an electronic invoice via email. M-Kem forms a deep and long-lasting relationship with their suppliers that values the relationship over the transaction. Monthly, Mr. M. still frequents local markets looking to source new and innovative products to add to his flagship store. Suppliers additionally have direct access to him, there is no red-tape. 9|Page Conscious Business Case Study Community and Environment M-Kem supports many initiatives, both from a personal philanthropic and a business perspective. As M-Kem is now in its 50th year of trade, this year, they have challenged their suppliers to match their pledged donation of R50,000 in support of a school feeding scheme. M-Kem has a long history of community improvement programs, most directed at the support of our children. They believe that if they can directly make a difference to the wellness of a child, they are supporting the family as a whole. MKem is also a Blisters for bread sponsor. Staff additionally participates in these walks. The SAPS rape unit in Belville has also been a recipient of on-going community assistance programs. Blankets and supporting materials including a structure to house rape victims has been donated. The blankets donated to the rape unit have been knitted directly by the staff. In-store, the Western Cape feeding associations donation boxes are quite prominent. Staff readily talk to customers about the program and how it is changing peoples’ lives directly. Year to date, the cashiers alone have raised a sum of R30,000 in support of the organisations vision to assist the local communities. Additional support in the form of donations can be made directly from M-Kem’s website. Environmental impact is very prominent at the stores featuring segregated disposal areas specific to recycling. Everything in-store that gets disposed is recycled. Mr. M. does not believe in landfills. Even if it costs the business more to process any form of waste through recycling, he does it. The program is also visible in-store to customers to encourage them to subscribe and partake in such practices. For a small business, there are even energy saving schemes such as sensors for lighting in toilets. Mobility accessibility, is a key focus area, not just in parking areas and the entrance to store but throughout the store. 10 | P a g e