Download M-Kem Case Study for LDP 1 Conscious Business

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
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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.
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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
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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
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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.
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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
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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.
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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
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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.
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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.
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