Pharmaceutical company Business Case Study
INSTRUCTIONS
This is the context of the company you will be answering some questions about:
Pharma Zen Company (fake name) is a 40-year-old French pharmaceutical company that is developing a new sales channel through an ecommerce platform for their Para pharmaceutical division. Its turnover is 100 million euros and they are exporting through 30 countries by settling exclusive distribution agreements with distributors. Its domestic offline sales distribution channel is a combination of sales agents, franchises, pharmacies and department stores.
Their range of products includes health products with a manufacturing cost of 15 euros that are sold to the third-party channels to a price of 30 euros, the final retail price being 55 euros. They also have some premium line of products whose manufacturing cost is 80 euros, the third-party channel price 130 and the final retail price 250 euros.
Please answer the following questions:
- They want to enter the promising online Chinese market and they have been greenlighted to sell in this country, since their exclusive distributor have been granted the mandatory certification licences. Pharma Zen would like to include their products in 1688.com (the most important B2B platform in China) and Tmall (the largest in B2C). But their distributor is against this strategy because they feel this would go against their interest by disintermediating them. The same is happening with the domestic ecommerce strategy, since their distribution partners feel also harmed by the ever-growing increase of the online sales of the ecommerce store of Pharma Zen…. Please describe the options to try and mitigate this conflict, both in the domestic market and in China. in the Chinese market, it was the distributor who obtained the necessary certifications to sell the product in this market (prior approval by public authorities is a very common requirement in many markets to enable the sale), but, once obtained, both the distributor and Pharma Zen itself could develop the sale in China.
- They are promoting their products in the domestic market through Google Adwords and Facebook Ads campaigns. One of the campaigns to launch a new cosmetic product has a budget of 5.000 euros for each of both platforms. The average CPC in Google Adwords is 0,5 euros and 0,3 in Facebook Ads. Please calculate the ROI in both campaigns for both the low cost and premium line of products, according to the following conversion rates: 0,3%, 1% and 2%.
- Pharma Zen is also negotiating with a famous blogger an affiliate contract, whereby the blogger will be getting a commission on the leads (CPL – users registered in their newsletter) obtained by the Pharma Zen when user clicks on a promotional link of Pharma Zen in the affiliate website. Given their pricing and margins, and considering a lead-to-sale conversion of 20%, what is the maximum CPL Pharma Zen A would be willing to pay to start getting positive ROI for both pricing ranges (break-even point)?
Maximum extension of the report: 4-5 pages.
