Medirich pharmaceuticals Experiences decline in sales and profits

BM004-3-1 BCS Individual Assignment

Letter of transmittalMr. Julius. C. GriffinDesa HartamasKuala Lumpur 5700MalaysiaJulius.Cesar@gmail.com 4, April, 2014

Mr. David HoffmanChief Executive Officer of John pharmaceuticals 5, Madison StreetMalaysia, Kuala Lumpur

Dear Mr. DavidIt has become my absolute pleasure to submit Medirich Pharmaceuticals financial report, indicating and highlighting the drop in company sales and profits, as you requested on the 22nd of April. This report consists of information (which was researched) which coveys to the reasons behind the decline of sales and profits dating from the years 2012-2014. The purpose of this report is to highlight/identify the key areas within the company that are causing a decline in sales and profits. In Addition, attached to this report are suggested recommendations or solutions for the declining of sales and profits. I would like to thank our CEO (Mr. David Hoffman) of Medirich Pharmaceuticals for his support and cooperation towards the accomplishment of this report.This report has been established in the hopes that it will prove beneficial to the company in maintaining and regenerating sales and profits. If they should be any need for further information or inquiry, please do not hesitate to contact me.Yours sincerely

Signature

Financial ManagerTable of Contents

Letter of transmittal11.0 Abstract22.0 Purpose of Report33.0 Methods of research34.0Introduction35.0Findings and discussion46.0Conclusion67.0Recommendations68.0References7

1.0 Abstract

This report is based on the investigations leading to the decline in sales and profits within the company. This report provides information obtained from a series of questionnaires, interviews, surveys, personal experience and overviews of the companys financial annual reports dating from 2012-2014. Interviews and questionnaires were directed to the Chief financial Officer and other personnel in the financial department as well as personal in the logistics, communications, and Information Technology and R&D departments. The annual reports of the company were used to interrogate and analyze previous operations of the company, mainly marketing strategies.Consequently, this report provides information obtained through ratio analysis, regarding the probability and financial stability of Medirich Pharmaceuticals for the years 2012-20114. This report will pay particular attention to identifying the reasons that have resulted to the decrease in sales and profits. The report will comment on the prospects of the company and make recommendations that would improve Medirich Pharmaceuticals current performance. In addition, this report will contain the financial statements from the years 2012-2014 which will be obtained from the companys financial annual reports, based on those years. This will give us projections to demonstrate how drastic are the profit declines as well as the overall financial stability of the company in the upcoming years.2.0 Purpose of Report

The purpose of this report is to outline the reasons leading to a decline in profits and sales as well as providing solutions to these problematic occurrences. It is beneficial to consistently educate the company so these problems do not occur in upcoming years.3.0 Methods of research

The research method used to conduct this report consists of both Qualitative and Quantitative data as well as survey methods and interview methods. By using this research method, we have highlighted several reasons that have led to the decline in sales and profitability within the company. These reasons are categorized into communication, prices, international taxes and marketing. 4.0 Introduction

Medirich Pharmaceuticals has been increasing its sales and profits each year for fifteen (15) years and has become one of the biggest medical distributors in Malaysia. However, in the last past two (2) years, Medirich Pharmaceuticals has experienced a decline in sales and profits, which has led to the deterioration in the companys business. A research team was conducted to pinpoint the reasons why John Pharmaceuticals had experienced such a dramatic drop/decline in profits and sales. The research team consisted of members mostly from the financial department as well as the logistics and R&D (Research and Design) departments. It has come to my attention that, one of the reasons why the company (Medirich Pharmaceuticals) is experiencing a decline in sales due to the lack of communication. Poor communication has turned potential customers away from the medical products and services provided. In addition, the lack of communication has resulted to a loss in faith between the company and its suppliers (Biotech) and partners, which has the potential of them seeking services elsewhere. Communication is one of the main reasons but they are many other factors in this report that outline the reduction in probability and sales within the company itself. Communication is the main reason that has led to the companys deterioration. In all our efforts we are hoping to overcome this situation as quickly as possible in order to become the number one (1) medical distributor in Malaysia. In order to achieve this, dedication and hard work from all employees is required and may take time to accomplish this achievement.5.0 Findings and discussion

It is very certain that the company is experiencing a downfall in profitability, despite its ability of maintaining its thirteen years of success. It has come to our astonishment that our profits have decreased severely in only a limited amount of time. Net profit margins have drastically declined this year including a decline in all medical sectors as shown in figure 1.0. By observing the sectors which experienced a decline, it was clear on what caused these declines. Figure 1.0

It was analyzed that most of these sectors shared one thing in common, oil. Most of these sectors use oil for medical instruments and suppliers, medical appliances and equipment, drugs delivery etc. The price increase has been having a trickle-down effect on this company. It is becoming more expensive for us to provide patients with the treatment they need, due in a large part to the rising cost of fuel. The cost of medical supplies like gloves, syringes and tubing made of PVC, polypropylene and other oil based products are going up. Figure 1.0 shows the product costs have increased five (5) to seven (7) percent on a wide variety of product categories, with some rising as much as fifteen (15) percent. This has led the company to pass along those increases to customers. We are experiencing extreme increases in the cost of doing business right now. This has resulted to a drop in sales due to our products being so expensive; therefore the company has received no profitability. This is an environmental force that the business cannot control. It would be common sense to reduce the prices of our products to achieve and increase in sales, however, it was founded that the company had done this in 2012. Even though the company had achieved an increase in sales, its gross profit started decreasing. A decrease in the selling price that is not accompanied by a decline in the cost of goods sold causes a decline in gross profit. When revenues go down while cost of goods sold stays the same, you will see a decrease in gross profit margin. Through my research, I have seen that communication between the company and its consumers and suppliers and partners is not fully established. This is a very serious matter as it has the potential to lose our most trusted supplier and consumer. This would mean no raw materials and no consumers to buy our end product which would lead to the closure of this company. Many of the employees in this company have failed to ask clients and partner questions to establish if our products and services are beneficial. 6.0 Conclusion

This report has highlighted the reasons leading up to the decline of sales and profit for the company Medirich Pharmaceuticals. Decline in profits and sales have been cause by the external increase of oil prices which has drastically increased company expenses. It has been recommended to reduce other company expenses as the company cannot reduce oil prices. It was recommended that the company increase product prices reasonably. Second issue was that the company lacked communication between its suppliers and customers and partners. This has the potential to result to a deterioration of loyalty by which the company could lose customers and supplies. It has been recommended to make suppliers feel like they are part of the company, building a strong relationship and for the company to provide support for e-commerce and communicating with their consumers online as well as physically; we have conducted this report in the hopes that it will help the company overcome this situation of declined sales and profits. 7.0 Recommendations

It is recommended that the company, increases it product prices to a descent amount so that it achieves sales and also covers operating expenses for the company. The company should also start reducing costs, probably by negotiating lower prices with our suppliers, reviewing processes and systems to minimize wastage, or the company becoming more virtual, minimizing travel costs. It is recommended to build strong relationships with our partners, consumers and suppliers and get their feedback. Make them feel like they are a part of the company. I would also recommend e-commerce for consumers and clients to interact with the business. The company should also provide online health diagnosis so consumers feel valued. By doing so, the company will start to become noticeable by the market through word of mouth and through advertisements, resulting to an increase in consumers. 8.0 References8.1.1.1 8.1.1.2 Raul Avenir (2012) What Causes the Decline in Gross Profit Margin?, Available at: http://yourbusiness.azcentral.com/causes-decline-gross-profit-margin-5298.html (Accessed: 24 April 2014)

LANGWORTHY COMPANY (2013) Top Reasons Why A Small Business Loses Sales, Available at: http://www.langworthycompany.com/why%20sales%20decrease.htm (Accessed: 24 April 2014)

Pat O'Connor (2014) Reasons for Revenue Slippage, Available at: http://smallbusiness.chron.com/reasons-revenue-slippage-34302.html (Accessed: 25 April 2014)