FIALKA PHARMACY 1 Fialka Pharmacy Group Name: MKA Anton Popiy Oleksandr Bragin Alexey Belogolov FIALKA PHARMACY 2 PART 1 Introduction In the modern corporate world, the business environment is experiencing continuous changes that have made its nature unpredictable. As such, the preferences and needs of the customers are changing fast. As a result, the only profitable organizations are the ones that are trying to keep up with the ever-increasing innovations that continue to typify the way business operations are done in a routine basis. Subsequently, this means that businesses are being forced to adapt to the market changes as they strive to win a significant share of the market. For instance, the Fialka Pharmacy Chain is facing increased competition in the Russian pharmaceutical industry. Primarily, the company has identified the use of outdated information systems as an area of concern. As a result, the company's marginal profits have been decreasing thereby requiring an immediate step to be taken. Thus, our paper aims at providing insight into how the Fialka Pharmacy Chain can increase organizational efficiency by using a modern information system such as the Enterprise Resource Planning system. Background Information Company description Currently, the Fialka Pharmacy Chain is accredited with owning and operating approximately 22 pharmaceutical shops in the Russian territory alone. Additionally, the company owns two aesthetic medicine centers as well as five optician stores alongside the 22 pharmaceutical stores. To its credit, the Fialka Pharmacy Chain has recently been focusing on diversifying its operations. In this case, we are referring to the observation that the company has recently started to open various outlets in different parts of Russia. The outlets have been dealing FIALKA PHARMACY 3 with the sale of ecological cosmetics to ensure that the company stops over-relying on its pharmaceutical business. Similarly, we may also state that the management and owners have begun establishing numerous shops in key urban centers aiming at dealing with the sale of organic foodstuffs. It is crucial for us to understand that the management has identified these two areas as beneficial areas that can gain cushion against the drop in profits as experienced in the pharmaceutical industry. It is the hope of the owners that the organic product trade will provide approximately 10% of their total turnover every year. Key players in the Industry Currently, many players are conducting business in the Russian pharmaceutical industry. That is to say that the most famous and popular pharmacy stores are currently occupying the largest portion of the market. However, it is crucial to state that most of these stores are owned and operated as chains as opposed to being independent pharmaceutical stores. For instance, the chain stores account for approximately 55% of the total pharmacies located in Moscow. Firstly, the 36.6 pharmacy chain currently owns and operates about 979 stores in twenty-nine different Russian locations. Similarly, Rigla refers to anther pharmaceutical chain that has been the market leader since the year 2006. The company has been receiving enormous profits from its pharmaceutical warehouse brand. Rigla owns and operates 716 stores in 26 different parts. Likewise, A5 denotes another pharmacy chain with 223 stores. Product and Service Description In the real sense, the Fialka Pharmacy Chain deals with the sale of a wide variety of pharmaceutical products. Firstly, the company manufactures and sells pharmaceutical drugs to its esteemed customers. In this case, the pharmaceutical drugs denote the medicament, medication, FIALKA PHARMACY 4 medicine, or even the medicinal products. Hence, the Fialka Pharmacy Chain sells the drugs that serve the purpose, preventing and curing a given disease to their patients. Additionally, the company employs skilled personnel that can help in drug therapy. In this case, these individuals are entrusted with relying on pharmacology science when dealing with the application of their medical skills. Currently, the Fialka Pharmacy Chain is selling drugs from natural origins such as herbal, mineral, oil-related medicines. Additionally, there are drugs that originate from chemicals such as steroid drugs on sale. Lastly, the firm also sells antibiotics to the Russian public. All antibiotics sold from the twenty two stores are derived from microbial origins. Industry and Market Description The Russian pharmaceutical industry has been growing at unprecedented rate for the last few decades. To be exact, we may begin by stating that the first pharmacy in the entire Russian territory was established and subsequently began operating in the year 1581. However, it is crucial to note that the number had grown to approximately 4,791 by the year 1914. Today, official records show that the number has increased to a staggering 65,000 pharmaceutical stores throughout the country. In particular, the Russian federal government has been supportive of the sector in more than one ways. For instance, the government is accredited with creating a legal environment that is conducive as well as permitting the players to engage in business with the public in a friendly manner. In this regard, the most important aspect is to ensure that the companies involved in the industrial operations pay their taxes both on time and in full. Additionally, the government requires the players to adhere to the pre-set code of conduct at all times. FIALKA PHARMACY 5 Today, the Russian pharmaceutical market is highly dominated by the retailers. In particular, the pharmacy retail market has been accredited with dominating around 73% of the entire Russian pharmaceutical market. In most cases, the retailers have been dealing with a wide range of products. These products include Rx, hygienic products, OTCs, medical devices, as well as para-pharmaceuticals. In addition, it is worth noting that the retail stores have increased the portfolios to include the sale of cosmetics in recent years. More so, it is interesting to pinpoint that the Russian pharmaceutical industry does not have the famous drugstores that are common in major parts of Europe and America. For instance, players such as Rossman and DM are yet to infiltrate the Russian market. In the real sense, the Russian pharmaceutical industry is not advanced, as is the case in developed areas such as the United States or Europe. The key corporations are still struggling to implement universal standards and equipment as evidenced by the case of the Fialka Pharmacy Chain. Current Situation Over the years, the Fialka Pharmacy Chain has been conducting business in the Russian pharmaceutical industry profitably. However, recent years have seen the competition in the industry increase in an unprecedented rate owing to the ease of entry into the market. As a result, this has meant that the high profitability margins that have become a norm to the business have been placed under a continuous threat. The profit margins have decreased immensely as evidenced by TABLE I. Consequently, this has meant that the company has been forced to rethink their business operational methods. In this case, the crucial threat has manifested itself in the use of crude resource planning methods at the organizational level. In particular, the management has realized that the use of error-prone, outdated, cumbersome, and labor-intensive manual information systems and processes have been draining the organization's money and FIALKA PHARMACY 6 time. For this reason, there is a need for the business to be structured in a manner that allows it to operate in an effective manner through automation. TABLE I Sales Profit Profit Margin 2010 3850000 604450 15,70% 2011 4082000 575562 14,10% 2012 4200000 554400 13,20% 2013 4360000 558080 12,80% 2014 2015 4670000 4895000 509030 460130 10,90% 9,40% Case Questions I. II. III. IV. V. What is ERP system? How can the ERP system foster information sharing? What are the key success factors of an ERP system?I What obstacles will the firm encounter? What is the preferred course of action? PART 2 Options Available to the Managers As mentioned above, the Fialka Pharmacy Chain has been facing the problem of using error-prone, outdated, cumbersome, and labor-intensive manual information systems. These manual processes have been draining the organization's money and time. Hence, the company has been exploring two crucial alternatives that because the current trend has made clear that the firm will not manage to sustain its operations for a long time. Firstly, the company faces the alternative of trying to improve the organizational communication channels and information systems. In this case, the company should try to evaluate and analyze the benefits and FIALKA PHARMACY 7 disadvantages that their current information systems are causing. Subsequently, they will be required to formulate a strategy for improving the systems as they see fit. Alternatively, the management may opt to sell the business to competitors for $5M. The competitors are eager to acquire Fialka chain due to will to expand business and build up market value. Evaluation of the Alternatives Primarily, it is worth noting that the company has been using some information systems that cannot allow the employees to engage in real time communication. As a result, the employees have been sending information from one branch to the other in the form of hard copies thus causing delays in the relaying of important material content. Hence, it is worth evaluating which the benefits and disadvantages that each of the two alternatives will bring forth. Firstly, exiting the business will mean that the business owners will no longer earn anything from their current operations. As such, they will have to consider reinvesting their money in another business field. Additionally, exiting will mean that the company shall lose its market share in Russia and may struggle to regain it even if they reconsider reinvesting in the same market at a future date. More so, they will close all employment opportunities thereby rendering a significant number of individuals and households jobless. Nonetheless, the advantage is that the business owners will exit at a stage where they can save considerable amount of money to invest elsewhere. Comparatively, improving the existing information systems may occur through replacement of outdated systems or modifying the existing ones. In both cases, it is important to state that the company will be required to allocate huge capital outlays towards the projected improvements. For instance, modifying the existing systems will require a sizeable amount of FIALKA PHARMACY 8 money to buy new spare parts. On the other hand, replacing existing systems will require monumental allocations of money to fund the purchasing of advanced equipment that is naturally expensive. Let us remember that these capital allocations will happen at a time when profits have reduced at a great rate. However, this alternative offers better rewards because the company can use the new systems to build their core competitive advantages that the rivals will struggle to imitate for a considerable period. The owners will seize the opportunity to make informed decisions in a timely manner and penetrate the market with the products that serve the needs of the customers before the rivals can know. Hence, they will gain a better return on their investment. Response to the Study Questions The ERP System According to Framinan (2008), the Enterprise Resource Planning systems have developed to become one of the best business information solutions for all business regardless of their size. As such, experts state that the ERP systems are increasingly being used aiming at processing information and other corporate transactions. Additionally, it is crucial to realize that these systems have become integral tools for those interested in fostering integrated planning, production, as well as giving customer feedback. In the real sense, every Enterprise Resource Planning system should have the capability to combine the above system functionalities in different business departments. That is to say, that the ERP system denotes a single integrated program that always operates one database in a way that permits dissimilar business units to engage in free sharing of information. Similarly, the database allows the units to engage in a well-organized and timely communication with one another (Chung and Skibniewski, 2007). It is FIALKA PHARMACY 9 worth pinpointing that the optimization of resources and information in a business system can only be attained when the underlying information system is integrated. For this reason, experts have studied and established that the ERP system offers a setting where the program is integrated while also covering all aspects of operating an underlying business entity. Realistically, ERP may constitute of numerous modules that may include quality management, marketing, material management, sales and distribution, and purchasing management. Additionally, other module may include the human resource management as well as production management. However, this does not mean that the list of the applications associated with the Enterprise Resource Planning systems ends with the above list. On the contrary, Merkuryev and Tambovcevs (2009) argue that it is crucial to state that any organization can formulate and install other extensions that may be beneficial to the running of their routine functions. For instance, Fialka Pharmacy Chain can opt to formulate and install extensions such as the customer relationship management, supply chain management, as well as a business data warehouse. Hence, this would mean that the Fialka Pharmacy Chain would be automating almost all aspects of their operations. Using the ERP System to Foster Productivity and Efficiency Typically, the ERP system takes four core levels in a business setting. Firstly, the highest level consists of the network level where the main responsibility involves ensuring that the company transitions to experiencing a smooth flow of the external and internal information in the organization. The network level is vital because the system's infrastructure is based on it. Secondly, the ERP descends to the resource level where the core responsibility involves the storing of the data, software, and hardware components that are necessary for a smooth running FIALKA PHARMACY 10 of the ERP program. The resource level stores the web servers, database, and other applications. The third level of the ERP system consists of the application level. Here, the main aim is to host all subsystems that different organizational departments use to perform a broad variety of tasks. Managers usually use this level to obtain or populate the program with necessary information. Lastly, the decision support level is entrusted with processing resources such as information and data aiming at providing essential information to support the decision-making process. Currently, it is common knowledge that the implementation of an ERP system stands to foster an underlying firm's productivity while also increasing its efficiency. According to Bingi et al. (1999), the improvement concerning the performance of an organization may be attained through diverse benefits that may be either visible or invisible. Additionally, the benefits may tend to be measurable or assumed. For instance, there is a wide range of competitive advantages that the Fialka Pharmacy Chain can obtain using the ERP system. These include the hastening of commercial connections, quick response to clients, and the minimization of corporate costs. In other areas, the ERP system is said to have simplified the existing work processes while also hastening corporate responses to the needs of stakeholders such as suppliers, partners, debtors, and the shareholders. In addition, we cannot ignore the fact that these systems can help the Fialka Pharmacy Chain increase the timeliness and validity of their data. More so, experts propose that any company currently using the ERP system is reducing delegated work processes because most of the processes or tasks are automated. Realistically, the ERP system is expected to help the Fialka Pharmacy Chain undertake better management of information aiming at enabling the employees become more efficient. According to Davenport (2000), the efficiency brought about by the implementation and proper usage of the ERP system is accredited with forming the ground for the achievement of numerous FIALKA PHARMACY 11 benefits. In the real sense, companies are increasingly failing to realize and maintain the core sources of organizational benefits. In this case, we are referring to the fact that managers are the primary source of benefits because their functions and decisions form the basis upon which the company operates. Secondly, the users of the company are another source of benefits because the activities that they do serve as the inputs of a given firm. Therefore, improving the working conditions of the employees has become one of the most vital aspects of business management. With this understanding, it is worth highlighting that the implementation of the ERP system stands to serve as a viable way of improving the underlying working conditions in the workplace. Key Success Factors of an ERP System Successful implementation of the Enterprise Resource Planning program will require the support or rather the existence of various factors within the internal organizational environment. Firstly, the support of the top management will be crucial because it will be the duty of the executives to develop and comprehend the capabilities and limitations of the proposed system. Additionally, the top management will be required to set the organizational goals to be satisfied by the use of the proposed system. More so, we cannot forget that they will also need the ERP system to foster their communication with the employees regarding the underlying corporate IT strategies. Secondly, it is essential to incorporate proper project management where the project manager will be entrusted with managing the lifecycle of the system. He or she must follow the entire process beginning with its initiation until full implementation is met. Hence, the project manager shall oversee the planning, implementation, and control of the project scope aiming at meeting the deliverables as stated by the budget and work implementation plan. FIALKA PHARMACY 12 The project manager cannot manage the ERP program alone. As such, he or she will be mandated to build a project team to support in the running of routine or special operations. According to Umbe et al. (2003), it is essential to ensure that the members of the project team are individuals who are technologically competent to ensure that they do not compromise the quality and standards desired. Additionally, the members must know the key processes that define the pharmaceutical industry as well as the departments that are likely to be affected by the changes. Nah et al. (2003) recommends the best performing employees to constitute the project team while the process should be done in a cross-functional manner. Lastly, the individuals responsible for the ERP implementation must ensure that they choose the appropriate package to enable the organization optimize and function efficiently. In this case, the appropriate software package is selected as per the managerial decisions. Besides, choosing the right packages ensures that the desired outcomes are not compromised because only minimal modifications are necessary. Obstacles facing the Implementation of an ERP System Multinational corporations are increasingly allocating a huge amount of capital outlay towards the implementation and maintenance of the enterprise resource planning systems on a large-scale basis. However, most of them have discarded the core stepping stones that make these systems a success. That is to mean that most firms are ignoring the pillars of business management such as the setting of performance objectives, cash flows, benefits analysis, as well as risk assessment strategies. Realistically, these firms are substituting the expenses associated with the above activities on the nave assumptions that the use of computers will transform their organizations magically. They hope that the computers are bound to transition their operations and processes into an effective and smooth running model. These are the misguided approaches FIALKA PHARMACY 13 that are setting up a sequence of occurrences that lead to the failure to achieve the pre-set objectives. Ultimately, this leads to the formulation of conclusions stating that the ERP systems are bad. Nonetheless, it is our hope that the Fialka Pharmacy Chainwill avoids such a trend. Recommendation In the real sense, we recommend the implementation of the Enterprise Resource Planning system not only in the mother branch, but also in all pharmaceutical chains that are under the management of Fialka Pharmacy Chain. Our recommendation stems from the realization that continued persistence on using conventional communication and resource planning methods will threaten the profitability of the firm. We also recommend that the management of the Fialka Pharmacy Chain to consider investing in the training and education of their workforce. In this case, we have realized that poorly trained workers have the capability to derail the quality implementation of the ERP system because they lack the capacity to operate using this advanced technology. Hence, it is our hope that the management of Fialka Pharmacy Chain will consult and seek help from experts in the field concerning the training of their employees. Resultantly, they will gain knowledge on how to operate the ERP system and ultimately improve their organizational information systems and processes. Conclusion Typically, business specialists argue that the importance of information systems in the modern corporate world has increased tremendously. As such, this view is supported by the realization that managers all over the world have come to realize the various benefits that could be derived from the application of information systems. Such is the case that has recently happened in the case of Fialka Pharmacy Chain. Here, the company has noticed that the FIALKA PHARMACY 14 application of an Enterprise Resource Planning system could benefit the company in more than one ways. In particular, the company is bound to replace their outdated and error-prone information system that has made the company incur huge costs. Additionally, the company stands to benefit from the implementation of an ERP system through the realization of increased efficiency resulting from the ability to make informed and timely decisions. For this reasons, it is innocuous to say that the application of an ERP system would be the best course of action to guarantee future profitability and sustainability for the Fialka Pharmacy Chain. References Bingi, P., Sharma, M., & Godla, J. (1999). Critical issues affecting an ERP implementation. Information System Management , 16 (5), 7-15. FIALKA PHARMACY 15 Chung, B., & Skibniewski, M. (2007). Cost-Benefit analysis of ERP Modules in Construction Firms, in Proceeding of the ASCE/CIB Construction Research Congress. Newport, Bahamas, 1-10. Davenport, T. H. (2000). Mission Critical: Realizing the Promise of Enterprise Systems. Boston, MA: Harvard Business School Press. Framinan, J. M. (2008). Book review. International Journal of Production Research , 46 (1), 297-298. Merkuryev, Y., & Tambovcevs, A. (2009). Analysis of ERP systems implementation in the construction enterprises. Computer Science , 40, 16. Nah, F., Lau, J., & Kuang, J. (2001). Critical factors for successful implementation of enterprise systems. Business Process Management Journal , 7 (3), 285-296. Umble, E., Half, R., & Umble, M. (2003). Enterprise resource planning: implementation procedures and critical success factors. European Journal of Operational Research , 146 (2), 241-257. Final project Marketing campaign Deliverables Marketing campaign (in class) Video commercial + make Design & company brochure + Written paper about the final project - Design a marketing campaign for the same company previously analyzed - Campaign should help the firm address the current challenges identified - for example, introduction of a new product, new service, new offer, ... - Written paper should detail the marketing campaign developed Objective of the campaign Target audience Idea and script for the video Brochure to back-up marketing campaign 1 \f