Académique Documents
Professionnel Documents
Culture Documents
Proposed by
Brigitta Melvina Winata
Rajinder Deol
Leung Chi Fai
LETTER OF TRANSMITTAL
April 19, 2015
Mr. John Wu, Investment Banking Director
Investment Banking Department
Bank of China
1 Garden Road, Hong Kong
Dear Mr. Wu:
The attached business plan is about MedEx, which will be a new established business in Hong
Kong that provides medication vending machine services. The idea is to provide an efficiency
and accessibility for the public to receive medication.
Basically, our business plan will tackle three significant problems:
The lack of accessibility for medical services
The shortage of doctors in Hong Kong
The inefficiency of travelling experienced by the public
MedEx will have its own unique features and benefits. Those particular features and benefit can
be found in the business model section. Surely, this business will have good strengths and
opportunities. As the demand for medical services keeps increasing we believe that it will keep
growing for consecutive years and will benefit us in terms of the financial aspect
We would be pleased to provide more additional information for further understanding. Should
you have any question regarding to the business plan, Melvina, our Executive Officer will
contact you or come in person at your office if necessary.
The consideration and interest you are demonstrating on behalf of MedEx is greatly appreciated
and we look forward to receiving your response for our proposed business.
Sincerely,
Rajinder Deol
Co-Founder 2
Table of Contents
EXECUTIVE SUMMARY ........................................................................................................................... i
1.
Introduction ................................................................................................................................... 6
1.2
1.3
1.4
Objectives ..................................................................................................................................... 8
2.
3.
4.
5.
3.1
3.2
4.2
4.2.1
4.2.2
5.2
5.3
Retail of Medication.................................................................................................................... 15
RESOURCE REQUIREMENT ...................................................................................................... 15
6.
6.1
6.2
7.
8.
9.
9.2
9.3
Marketing Risk............................................................................................................................. 17
9.4
10.
FINANCIAL PLAN........................................................................................................................ 17
10.1
10.2
10.3
Estimated Cash Flow, Net Present Value and Payback Period ................................................... 19
10.4
11.
CONCLUSION ............................................................................................................................... 20
REFERENCES ........................................................................................................................................... 21
List of Tables
Table 1. Two Sources of Revenue
.. 8
List of Figures
Figure 1. Hong Kong Population from 2004 to 2014.. 10
Figure 2. Market Analysis Using Porters Five Forces Model .. 10
Figure 3. Market Analysis Using SWOT Analysis 12
EXECUTIVE SUMMARY
Business Description
MedEx will be specialized in doing medication vending machine business by building
partnerships with pharmaceutical companies and providing them the platform to sell their
products simultaneously. The aim is to provide express medical services for people in Hong
Kong. MedEx will allow potential customers to obtain healthcare products they need in the
fastest way and at any time.
Our concern is placed on the current issues happening in Hong Kong:
The lack of accessibility for medical services
The shortage of doctor in Hong Kong
The inefficiency of travelling experienced by the public
Vision and Mission Statements
Our vision is to Pioneer a better and improved healthcare support for Hong Kong.
Our missions are to 1) Increase the accessibility of medication and 2) Provide an effective
solution for pharmaceutical firms.
Market Potential
MedEx has primary and secondary targets. Our primary targets are the pharmaceutical
firms and our secondary targets are the general public. We would increase the number of
partnerships in each year of our operation. In fact, the increasing trend of Hong Kong population
over the past ten years (see Figure 1), becomes a good potential for this business to enter the
market.
Revenue Model
There are two sources of revenue. First, we will charge pharmaceutical companies for
service fees, as we provide them a platform to sell their healthcare products. Second, we will
have a charge for providing medical advices to the customers through the feature of our product.
Risks Assessment
When operating this business, we will encounter four concerning risks including operational,
financial, marketing and legal risks. However, we have proposed solutions to overcome these
risks.
Financial Analysis
After assuming several aspects of the business, the calculation showed that our payback
period is 2.26 years, with a 5% discount rate and an increasing of number of sales for 5% each
year.
The net present value presented is HK$295,930. The positive net present value means
that the future benefits can cover the start-up and future costs in present value
5i
1. BUSINESS DESCRIPTION
This business will specifically be in Hong Kong to provide the public with express healthcare
service through our products. In this section, further descriptions about the companys
background, vision, missions, business model and objectives are provided.
1.1
Introduction
How MedEx achieves its vision is with its two missions. First is to Increase the
accessibility of medication. Second is to Provide an effective solution for pharmaceutical
firms.
1.3
Business Model
1.3.1 Products
MedExs vending machine will have 4 important features, which are:
Medicines
MedEx will sell over-the-counter drugs, in which they do not require pharmacists or
doctors prescriptions. The commonly used medicines will be placed in the machine for
curing generic diseases. The categorizations of the products are as the following:
o
o
o
o
o
Authentication
Having the authentication feature is especially used to prevent excessive purchases made
by the customers. Basically, MedEx will also make partnership with the Octopus Card
Company to make a system which will be able to count and limit customers purchases.
1.3.2 Benefits
MedEx will provide a differentiated service than the services offered by the existing local
drugstores in Hong Kong. There are three key benefits that MedEx offers to the customers
through the vending machine business, which are:
MedEx operates the business for 24 hours and 7 days. It means customers will
know they can obtain their needs at any time, at their convenience, with discretion, and
without queuing. Since then, MedEx will minimize the first background problem which is
the lack of accessibility for medical services.
MedEx saves customers money. By running vending machine business, MedEx
does not employ additional staffs like salesperson and pharmacists. Therefore, there is a
reduction in the total cost because of having no salaries expense.
MedEx saves customers time. Recalling the first and third background problems
that have initiated our business, it took time for customers to get medicated because of
travelling as well as experiencing long waiting hours. Thus, the presence of MedEx will
provide an easiness and convenience for the customers.
Charge
10% of the total sales
amount
5 dollar for each time
1.4
Objectives
Our companys objectives are divided into two parts, which are the short-term objectives
and long-term objectives.
Short-Term (Year 1-3)
Place 15 vending machines in high traffic places in Hong Kong
Build partnerships with 9 pharmaceutical companies
Build brand awareness and credibility
Breakeven point will be reached if at least there are 10 customers each day
Increase sales by 5% each year
Long-Term (Year 4 onwards)
Expand our business by placing at least 20 vending machines
Build partnerships with at least 15 pharmaceutical companies
Strengthen brand image
2.
MARKET POTENTIAL
Understanding the market potential is important to run a start-up business. In the following
section, a brief explanation about our target partners and customers are given which then will be
explained in the marketing plan. More information is also provided about how customers behave
in the market and how large our target market is.
Who
a. Targeted Partners
Our target partners are the pharmaceutical companies in Hong Kong.
Pharmaceutical companies that produce non-prescription medicines or other
healthcare products such as vitamins, supplements and first aid kits, will become
our suppliers.
b. Targeted Customers
Our target customers will be the general public of Hong Kong which need express
medication, especially those who suffer from common illnesses.
3.
MARKET ANALYSIS
The competitiveness of our business will be examined using Porters five forces model
and SWOT analysis.
3.1
Threat New
Entry
Moderate
Need funding to use new
technology
Supplier Power
Threat of
Existing Rival
Threat of
Substitution
Moderate
A lot of substitute
Low switching cost
Differentiated service
10
High
Custom-made vending
machine
A lot of suppliers
Medium
A lot of substitutes
Price sensitive
SWOT Analysis
Strengths
MedEx has an advantage in terms of the cost because of not having salaries expense.
Although this business might exist in some other countries, we are the pioneer in
Hong Kong and it becomes one of our strengths. Moreover, as technology is getting
more advanced nowadays, we are trying to make use of that and implement it in our
business.
Weaknesses
There are two weaknesses that our business has which are low recognition and low
brand loyalty from the customers. These two weaknesses can occur because MedEx is
a new business idea in Hong Kong. The effort of overcoming the weaknesses is to
have more power in the sales and marketing.
Opportunities
There are three opportunities that work as external factors which will help the growth
of our business. First, the opportunity of building strategic agreements with
pharmaceutical companies will support us in terms of the share profits that we will
receive from the sales of their products. Second, as the fact shows that the market
keeps growing over the past ten years (refer to Figure 1), we will have the opportunity
11
to expand our market. The expansion can be done by placing more vending machines
and targeting more partners and customers. Lastly, the increasing demand for medical
services is also a good opportunity to grow our business.
Cost
advantage
Innovation
Use of
emerging
technology
Have strategic
agreements
with
companies
Market
expansions
Increasing
demand
Strength
Weaknesses
Opportunities
Threats
New idea
Not much
recognition
Brand loyalty?
A lot of
substitutes
Governmental
regulations (LSP
License)
Threats
Our first threat is the numerous substitutes that we have. Drugstores are selling the
same products like MedEx will do. People will have choices to buy from our vending
machine or from the drugstores directly. Second, we have to deal with governmental
regulations for registering our business. The procedure is to take the LSP (Listed
Seller of Poisons) license, in which it is for retailers who are only allowed to sell
medicines without the supervision of pharmacists (Category 3 medicines).
After examining the competitiveness of our business through its internal and external
factor, MedEx is still a lucrative business. Specifically, it is because MedEx is a newly start-up
business in Hong Kong that serves its customers with a differentiated medical service than the
existing substitutes. Despite all of the weaknesses and threats, MedEx still have its own
strategies to overcome those challenges as well as huge opportunities to grow its business.
4.
MARKETING PLAN
In this section, we discuss about our two target markets and our formulation about the
marketing strategies in terms of the 4Ps will be elaborated.
12
4.1
Target Markets
Since MedExs positioning is as the middleman between the pharmaceutical firms and
general public, thus, we have two target markets. Firstly, the medication vending machine is a
cost-effective solution provided to pharmaceutical firms. Therefore, they are our primary targets.
Secondly, MedExs secondary targets are the general public. Since there are two target markets,
the marketing strategy for both parties would be different.
4.2
Marketing Strategies
To formulate and implement marketing strategies, they are divided into different parts
corresponding to the two target markets. The marketing strategies would be assessed in terms of
the 4Ps which are product, price, promotion and place.
4.2.1
Product
The product offered is the service of MedExs Vending Machines.
Price
In term of price strategies, market skimming and premium pricing would be used. The
rationale behind this is due to unique differentiated product that we have. Since the service is
relatively new in the market, it is best to use a higher price.
Promotion
In terms of promotion for the pharmaceutical firms, only push strategy would be
implemented, since the relationship with pharmaceutical firms is mainly served as niche
marketing. With this focused target group, the tactics in push strategy includes personal selling
and direct marketing. Personal selling includes directly having a meeting with firms and
delivering keynote speeches or presentations. Personal selling is used due to its interactive
nature. Using customized message delivery to each different firm would be a beneficial way to
have an effective relationship building. Moreover, in direct marketing, MedEx would send direct
email or place cold calls as well as using online sales platform such as LinkedIn. In this sense,
direct marketing is useful to reach more potential customer.
Place
In terms of the place, direct distribution would be better, since it is best if MedEx directly
communicates with pharmaceutical firms.
13
4.2.2
Product
The product offered to general public is the medication itself as well as the
recommendation service.
Price
For customer, market penetration pricing would be used. This is because in order to
differentiate from the market, MedEx offers low priced medicines.
Promotion
To capture customers, only pull strategy would be used such as advertising and sales
promotion. Advertising is used to grab their attention and increase our reach to a high number of
customers, as well as providing first-hand information and to have an effective brand building.
Second, for sales promotion, MedEx will hold seasonal discounts and provide the target market
with coupons. The rationale behind this is to offer incentives to customer to buy our products,
also to gain public recognition.
Place
In terms of place, direct distribution would be used, since MedEx vending machines are
the first hand providers for medication.
5.
OPERATIONAL PLAN
MedExs operational flow is divided into 3 sections. First is the sourcing of medication.
Second is the logistics of medication. Last is the retail of medication.
5.1
Sourcing of Medication
For getting medication to supply MedEx vending machines, liaising and partnering up
with pharmaceutical firms is the first step. The first operational item is to do sales, then to
arrange company meeting with potential customers and finally to sign agreement and contract.
5.2
Logistics of Medication
In terms of logistics of medication, pharmaceutical manufacturer will directly ship the
stock of medication to our warehouses. MedEx warehouses located near shipping ports will stock
the medications. Since the demand varies among different district, MedEx vending machines
include a technological intelligence system that will notify MedEx system about the shortage of
certain drugs or medicine in certain vending machines. After the alerting our computers, MedEx
van will ship and refill the stock in those vending machines.
14
5.3
Retail of Medication
The retail of medicines will be done through MedEx vending machines.
6.
RESOURCE REQUIREMENT
6.1
We will require three essential actions to start this business. First is to have the license
of Listed Seller of Poisons. Second is to get permission from MTR to install vending machines
near the stations area. Third is to build partnership with Octopus Card Company.
6.2
Initial Investment
The initial investment for this business is HK$ 380,000 for ten vending machines that are
purchased from a vending machine company. The initial cost of each machine is HK$ 33,000.
Due to machine customization and MTR rental contract, the cost for each machine becomes
HK$ 38,000.
7.
MANAGEMENT TEAM
The following table shows the management-level staffs that MedEx requires for its
business.
Title
Name
Chief Executive Officer Co-Founder 1
Chief Operating Officer Co-Founder 2
Chief Financial Officer Co-Founder 3
Role
Partnership and liaison responsible
Operation and logistic responsible
Financial and legal affairs
responsible
The first one is the Chief Executive Officer. The main responsibility is for the person to
find and form partnership with pharmaceutical firms as well as being in charge of
marketing in MedEx.
The second is Chief Operating Officer. For this position, the person is responsible for
all operation and logistics flow as well as the job also requires equipping MedEx with
information systems.
The last one is Chief Financial Officer. The main job duties include handling finance
and legal related tasks, as well as being in charge of human resource management.
15
8.
IMPLEMENTATION PLAN
No
VM - Vending Machines
Task
Target Number
1.
2.
Partnering with
Octopus Card
Company
3.
4.
Marketing
5.
Partnering with
pharmaceutical
companies
3(PC)
Year
0
6(PC)
9(PC)
12(PC)
15(PC)
6.
Placing additional
machines
10(VM)
15(VM)
20(VM)
16
Year
1
Year
2
Year
3
Year
4
Year
5
9.
RISK ASSESSMENT
9.1
Operational Risk
Since the vending machines will be installed in the public area near MTR stations, the
risk of suffering from intentional damage can be high. To avoid this risk, we will use a strong
glass and metal as the materials of the vending machines. Thus, we also prevent some criminals
to steal the medicines. Another risk that we might have is a machine breakdown. It will increase
the day of out of service. Indeed, one machine breakdown will cause loss in our revenue while
our fixed cost will remain the same.
9.2
Financial Risk
In terms of the financial risk, bank may not process our loan application or they may
charge us with a high interest rate to compensate the high default risk. High interest rate implies
that our business have to bear a huge interest payment in the future. Under our estimation, this
business has a sufficient cash inflow to pay the interest and loan. If the economy faces a sudden
downturn, the sales volume may drop significantly and we will suffer from a tremendous loss.
9.3
Marketing Risk
Although there is no exact business providing similar service like MedEx, our indirect
competitors such as Watsons or Mannings have drugs advisors and more types of drugs
available. Consumers will prefer buying medicines from those stores rather than from us since
they have not trust us yet. As a way to reduce this risk, a simple description about the medicines
can be listed on the machines, as a reminder for the customers to read before they purchase.
9.4
Legal Risk
In legal aspect, MedEx will become the Listed Seller of Poisons which can only sell
Category 3 drugs. Although the ownership of drugs belongs to the local pharmacies, the
consumers may sue the business for careless drug prescriptions. Despite the low possibility of
legal charge, the chance is still exist. The action to reduce the risk is by recommending
consumers to consult to doctors and refrain from discriminate self-medication if in doubt.
10.
FINANCIAL PLAN
10.1
Source of finance
The source of finance for MedEx comes from the purchase of the machines and the MTR
contract. In the first year of the operation, ten machines are planned to be purchased from
vending machine company, in which the total cost will be up to HK$360,000. Since MTR
17
Company will require us to pay HK$20,000 for a one month deposit rental contract, the initial
investment becomes HK$380,000.
10.2
MedEx will generate its revenue from 1) Service charges on the pharmaceutical company
and 2) Sales from customers. According to MTR statistic census, there are approximately 80,000
passengers in every station each day. Relying to the information provided by MTR, we have
made several assumptions which are as the following:
There will be 40 customers who will purchase one item from the vending machine in
each station every day.
The growth rate that we expect is 5% per annum based on the growth rate of MTR
passengers.
The average selling price of our products is around HK$30.
There are 25% of the customers that will use the online advice service.
Apart from the revenue, the fix cost will be mainly constituted by rent and repair costs. The
monthly rent will be HK$2,000 for each MTR station and HK$5,000 for the warehouse. In
addition, there will be monthly HK$ 8,000 repair cost and HK$3,000 logistic cost which will be
used to employ third party service providers. For the depreciation, the machines are expected to
have 5 years useful life and depreciated by HK$72,000 each year. Moreover, this business is
subject to 16.5% corporate tax and the interest expense will occur at the end of year 4 until the
repayment of the loan (refer to Table 4).
18
10.3
Regarding to the cash flow of the business, first, there will be 5 additional machines that will
be purchased in the third and fifth year (refer to Table 5). Second, the bank loan payment will be
settled at the end of year 4. Third, we assume that the payback period of the business is 2.26
years.
Payback period = 2 + (53615.1/203346.54) = 2.26 years
NPV=150239.5/1.05+176145.4/1.052 +23346.5/1.053-129054/1.054+100935.1/1.055
= $295930
As the inflation rate recorded in January 2015 is 4.1%, we assume that the discount rate is
5% (refer to Table 5). The positive net present value of HK$295,930 means that the future
benefits can cover the start-up and future costs in this present value.
10.4
Basically, MedEx will have two assets which are the vending machines and the bank. The
absence of inventory is due to the ownership that is not belong to MedEx rather it belongs to the
local pharmacies (refer to Table 6).
19
11.
CONCLUSION
MedEx is not only a choice for investors to make money, indeed it is also a business
which can deliver value to the society. MedEx has an ambitious vision as well as a feasible
development plan. Our business deserves your support because of our comprehensive analysis,
effective and sustainable operation plan. The reliable financial and market analysis give potential
investors an understanding and insight in this industry. Additionally, consumers and
pharmaceutical companies will be benefited from our service in terms of saving time and money.
MedEx will gives you a better return, more importantly, a better society.
20
REFERENCES
Public or Private? An Insider Guide to Healthcare in Hong Kong. (2013, August 19). Retrieved
April 3, 2015, from http://hk.localiiz.com/public-or-private-a-comprehensive-guide-tohealthcare-in-hong-kong/#.VSY_fk903cs
Tsang, E & Wong, O. (2015, March 3). Hong Kong's Doctor Shortage will not Ease until 2020:
Government Report. Retrieved April 3, 2015, from http://www.scmp.com/news/hongkong/article/1728880/plan-increase-medical-school-places-beat-chronic-doctor-shortage
Hong Kong Population. (n.d.). Retrieved April 3, 2015, from
http://www.tradingeconomics.com/hong-kong/population
.
21
Group Members
Brigitta Melvina Winata
53798987
Rajinder Deol
54044849
53018477
22