Tuesday, September 19, 2006

Blackmores - A Strategic Analysis (Part 4)

Distinctive Resources/Capabilities Analysis

It is Blackmores’ less recognisable distinctive resources and capabilities that mould the organization into an “industry leader in Australia for more than 70 years.” (Blackmores, 2006). The more significant resources and capabilities that can be identified which provide Blackmores with a sustainable competitive advantage are as follows:
  1. Guaranteed quality
  2. Thriving internal culture, expertly trained staff and industry savvy CEO.
  3. Purchasing power and extensive product range.
  4. Research and Development of existing and new products.
  5. Reputation, brand image and awareness.
(i) Guaranteed quality

It is Blackmores’ primary policy to ensure high quality products, with “ingredients sourced from around the world.” (Blackmores, 2006) Marcus Blackmore, following in his father’s legacy has demonstrated that he has “not been interested in pursuing growth at the expense of quality or control.” (Quinlivan, 2006) This uncompromising effort to be a firm recognised for quality healthcare products was rewarded in 2003, when Pan Pharmaceuticals was closed down. Blackmores never did business with Pan Pharmaceuticals, as Blackmores’ “extremely capable audit team” (Quinlivan, 2006) did not recognise Pan’s products as superior in quality or control. This unflinching standard of quality has filtered through into Blackmores’ reputation as a whole.

(ii) Thriving internal culture, expertly trained staff and industry savvy CEO.

Blackmores has a company culture that has built great relationships amongst both employees and senior management. It is a culture in which effort and quality is recognised with both tangible and intangible rewards, Blackmores recently awarded “50 free shares to all permanent staff.” (ASX, 2006) In addition, the firm lives by the philosophy that “it’s impossible to be an effective organization without satisfied and engaged staff.” (Blackmores, 2006) Furthermore, empowering staff and allowing them to work in teams, has provided Blackmores with a further distinctive capability, “At Blackmores, very little gets done without teamwork and staff taking ownership of projects.” The firm’s expertly trained staff, working together, ‘keep the wheel in motion.’

Training and development of a highly skilled labour force is imperative to Blackmores’ mission. Blackmores is committed to employing “high quality staff… [often] qualified health experts.” Blackmores provides the community with trusted information by not only training their own staff, but by “educating [their] retailers [ensuring that their] consumers are provided with superior information on the Blackmores product.” (Blackmores, 2006)

Finally, it may be argued that it is Blackmores CEO, Marcus Blackmore that is the firm’s most valuable distinctive resource. It is he and his father, Maurice who “had ideas about health way ahead of his time,” (Blackmores, 2006) that have provided the firm with the tacit knowledge of not only how to run this complex organization as a business, but also an unparalleled understanding and passion for complimentary healthcare. It is Marcus’ strong political ties that enable him to spend up to 2 days a week lobbying the government for legislative reform, “we’ve moved over the past six months from a largely confrontational approach to industry to one of collaboration and consultation.” (Quinlivan, 2006) “Blackmores and the CHC (complimentary healthcare council) are currently working to oppose the proposed increase in TGA fees and charges and to have GST removed from complimentary medicines.” (ASX, 2006)

(iii) Purchasing power and extensive range.

With an exceptionally large market share within Australia, and growing market share in the Asian markets, Blackmores continues to grow its leadership strength in buying power. This unique bargaining power enables the brand to maintain its superior standard of quality, while becoming more cost effective.

Blackmores produces products servicing in excess of 20 different matters of health, ranging from weight loss and muscular pain to infections. This extensive range of products allows Blackmores to extend its brand equity into the various nooks and crannies of the industry.

(iv) Research and Development Capabilities

Blackmores is an undisputed leader in complementary healthcare research and development. It continues to refine its seasoned products and develop new ones. Blackmores’ joint venture with a research team at the Southern Cross University places it at the forefront of research and development. The recent appointment of a research manager provides the firm with a further distinctive resource and substantial tacit knowledge not available to competing firms. This innovation has been one of the key factors providing Blackmores with a sustainable competitive advantage.

(v) Reputation, brand image and awareness.

Brand image and reputation is critical to a firm’s success within the complementary healthcare industry. Particularly after the Pan Pharmaceutical debacle, there has been a heightened awareness of the need for quality when it comes to medicines and supplements.

Market research has established that “Blackmores is the most trusted natural healthcare brand in the market place.” (Blackmores, 2006) This brand equity has been established over decades and is extremely difficult for competitors to replicate. It forms perhaps the most important distinctive resource for the firm, and is the result of decades of hard work and is the result of the combination of its unique corporate culture, first-class operations, research and development capabilities, and all the other distinctive attributes of the firm.

In a market that demands the highest quality, Blackmores’ brand gives it a strong, sustainable competitive advantage over its competitors.


Strategic summary

The external market is favourable for Blackmores’ industry, with many growth markets in the Asia-Pacific region. The aging population of baby boomers will also contribute greatly to the demand of complimentary pharmaceutical products.

The company has a strong brand reputation and an established market position in the industry, with strong links to industry suppliers and distributors. Its capabilities in research and development give it valuable intellectual capital and tacit knowledge that is hard for other firms to replicate.

Implications for future strategy

Blackmores has a bright future ahead of it. If it can continue to execute the strategies it has been pursuing and continue to strengthen its branding and relationships with suppliers and retailers, it can expect to see its share price continue to grow as it rides the Asian economic boom.

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