Environment and Strategies of PetMeds Input - Essay Example

PetMeds Critical Inputs Environment PetMed Express, Inc. is a leading nationwide pet pharmacy that offers a diverse selection of products for dogs, cats and horses. It has served 2,500,000 customers in 2008 and 2009 with 60% of which are new customers (PetMed Express Inc, 2009). The broad customer base of the company includes pet owners, pet stores, groomers and traditional retailers in the US. Customers are critical inputs for the company because they are the reason for the company's existence. Without the customers, there will be no demand on the company's products and it will not sustain its business. In view of this, the customers' demands, perceptions and needs shape the different processes of the organization. In the pet medication industry, the buying power of customer is high because of the presence of different competing products, other substitutes and less differentiated products (Porter, 1985). Suppliers are another critical input of the organization. PetMed is primarily a marketer of prescription and non-prescription pet medications, and other health products direct to consumers. It does not manufacture its own product. The company purchases its products from different sources such as manufacturers, domestic distributors and wholesalers. Its goal is to obtain the lowest cost of goods by having multiple suppliers for each product. The bargaining power of suppliers is low for the company because it can switch suppliers quickly at a lower cost (Porter, 1985). However, the threat of forward integration where manufacturers would sell their own products directly to consumers and compete with PetMed's products is high. This threat will not guarantee the supply of the company's products to meet customers' demands. Prescription pet medications are governed by state laws and state regulations. PetMed requires different licenses in different states in order to sell and deliver prescription medications. The company's failure in obtaining or renewing such licenses would hamper its sales and cease its distribution of pet medications. Reprimands, sanctions, probations, fines and suspensions from the regulatory bodies could have material adverse effect on the operations of the company and the reputation of its brands. (PetMed Express Inc, 2009) For most industries, the level of profitability is determined by competition between the firms in the industry (Sadler, 2003). Pet medications industry is competitive and highly fragmented. PetMed's industry rivals include veterinarians, traditional retailers, mail-order and online retailers of pet medications. Aggressive price competition occurs because of the diversity of competitors and largely undifferentiated products. The sales performance of the PetMed will be greatly affected the sales performance of their competition. Resources The resources are the individual assets of the firm which includes human resource, capital resource, technology, information and brand name(Sadler, 2003). PetMed offers its products through the Internet, contact center and direct mail-order catalogues. Customer care representatives and marketing employees are essential to the operations of the company in retaining and expanding the customer base. Effective training sessions of their representatives become a competitive advantage of the company against its rivals. The marketing activities are aimed at building brand recognition, increasing customer traffic and building strong customer loyalty (Best, 1997). As a marketer, PetMed exploits the different technologies available to promote their products. This includes television advertising, direct mail, email and online marketing. The brand is made available to Internet consumers by purchasing targeted keywords and optimizing search engine placement. As a distributor, the company has an in-house fulfillment and distribution system that manages the entire supply chain. As a retailer, it utilizes integrated technologies in call centers, e-commerce, order entry, and inventory control. The technology and information systems provide the customer care representatives and Internet customers with real time product availability information and updated customer information. Organizational History Even in an uncertain economy, PetMed continues to provide solid performance and profitability for seven years, 2003-2009. The company generated $219.4 million in sales for 2009 as compared to $55 million in 2003. The net income of the company reached $23 million for 2009 as compared to $3.3 million in 2003. With this financial performance, the company's business strategies for achieving profitability and growth have been very effective. Under the management of Menderes Akdag, President and CEO, the company has attained market leadership and has become America's largest pet pharmacy. Strategy The corporate strategy of PetMed Express, Inc. is cost leadership with respect to Porter's generic strategies. The company sets out to become the low-cost retailer for the industry and command prices at equivalent or lower than its rivals (Porter, 1985). PetMed's low-cost position translates into higher returns and profit. The cost leadership strategy of the company is well fitted in responding to the environmental inputs identified. With high buying power of customers, the company attracts customer because of its lower prices, higher availability of products and better distribution channels (Sadler, 2003). The allocation of resources of the company is aligned with its business strategy of cost leadership. More than fifty percent of their human resource is assigned in customer care and marketing activities (PetMed Express Inc, 2009). Without physical resources such as retail stores, the company's investment in strategic human resource to expand the customer base created an efficient organization (Armstrong & Baron, 2002). Exploiting the benefits of technology has also made the company lower its costs of operations. PetMed made extraordinary cost savings through the use of the Internet and E-commerce to sell goods direct to consumers and to buy from suppliers (Rayport & Jaworski, 2002). Employing information management systems for their supply chain and distribution have also created an efficient operation for the company (Dickson & De Sanctis, 2000). Using telephone contact centers as customer care hub has lessened the sales force and customer support requirements of the consumers. The effectiveness and efficiency of the call centers created a competitive advantage for the company in creating a responsive customer care while minimizing costs (Strategic Outsourcing, 1995). Without the strong leadership of the CEO, such corporate strategy of cost leadership would not have been possible. With his vision of creating a pet pharmacy online that is easily accessible to the customers, the company has grown to be the market leader. With his business inputs and disciplines, it has attained higher sales and profitability. Bibliography Armstrong, M., & Baron, A. (2002). Strategic HRM: The key to improved business performance. London: CIPD. Best, R. J. (1997). Market-based Management: Strategies for Growing Customer Value and Profitability. New Jersey: Prentice Hall, Inc. Dickson, G., & De Sanctis, G. (2000). Information Technology and the New Enterprise. New Jersey: Prentice-Hall, Inc. PetMed Express Inc. (2009). Annual Report. Pompano Beach, Florida. Porter, M. (1985). Competitive Advantage. New York: The Free Press. Rayport, J., & Jaworski, B. (2002). Introduction to E-commerce. Boston: McGraw-Hill. Sadler, P. (2003). Strategic Management. Sterling VA: Kogan Page Limited. Strategic Outsourcing. (1995). McKinsey Quarterly (1). Read More