Blackmores - A Strategic Analysis (Part 1)

INTRODUCTION

Company Background

• Founded in the 1930s by Australia’s pioneering naturopath, Maurice Blackmores.
  
• Goal of the company is to shift the focus of the health system away from treating diseases to one that encourages people to accept responsibility for their own wellbeing
  
• It is a customer-focused company inspiring people to take control of, and invest in, their health and wellbeing. They are “leaders in developing and marketing products and services that deliver a more natural approach to health, based on our expertise in vitamins, minerals, herbs and other nutrients.”

Industry Definition

• Blackmores’ industry is defined as the complementary pharmaceutical industry.
  
• This includes complementary pharmaceutical products, nutritional and health supplements.
  
• Companies in this industry are mainly involved with the purchase of raw materials and the conversion of these raw materials into natural medication products which are then distributed through retail stores, pharmacies and chemists.
  
• More established companies like Blackmores also have a strong sales service where qualified naturopaths and health experts provide advice to customers, in addition to established research & development capabilities to develop newer and better complementary healthcare products.

EXTERNAL ANALYSIS

The Macro-Environment

Demographic and Sociocultural Trends

The ageing population of baby boomers in Australia is perhaps the most significant trend driving growth in the complementary pharmaceutical industry. These baby boomers form a large section of the population, and have had the highest median household incomes of any generation. They are increasingly leaning towards non-prescribed medicine to be the greatest form of treatment for their various physical ailments, as well as natural healthcare supplements to be a source of health and wellbeing. This demographic trend will continue to set the consumer agenda for the years ahead, and especially so in the healthcare industry.

Changing health environments on a national level has meant that people are tending to accept over-the-counter (OTC) products more regularly compared to prescribed medicine. Not only is it sometimes cheaper to purchase OTC products but the feedback from several complementary pharmaceutical companies has demonstrated consumers are more than happy with their results.

Growing acceptance of alternative medicine has dominated mainly the muscle/joint segment of the products produced by Blackmores. More and more people are seeking alternative medicines to combat their muscle/joint soreness, and Joint Formula with Glucosamine and Chondroitin (60 Tabs) continues to be one of their best sellers.

Global Economic Trends

In terms of the global arena there is no doubt that Blackmores is looking to further establish itself in the rapidly growing economies of Asia, which present many growth markets and opportunities for the company. In particular, Blackmores has found the Malaysian and Thai markets to be two of the greatest assets to the company. It has already been in Thailand since 1997, and Blackmores’ products are located in over 1,000 stores throughout Thailand.

Blackmores’ greatest form of overseas expansion lies in Thailand. The company has also made in-roads into Singapore, Hong Kong, Malaysia, Indonesia and New Zealand. However Thailand continues to be the best of the international entities. “The Blackmores business in Thailand has experienced an average growth rate of 20% over the past six years whilst the growth rate in the comparable sub-category is 10%” Further welcome news for Blackmores is that overseas it is not only the expatriates that are purchasing their products but also locals. It is this segment that the company is looking to pursue.

Regulatory Climate & Technological Environment

Regulators were previously quite adversarial towards the complementary healthcare industry. Marcus Blackmore has been actively lobbying for better regulatory conditions. The company also engages in extensive research and development activities. These regulatory and technological factors are discussed in more detail in the analysis of the firm’s internal environment.