An assessment of strategies which influence the profitability of retail pharmacies in South Africa

Abstract

The objective of this study is to assess the functional strategies of retail pharmacies in South Africa with a view to identify and evaluate variables which universally and significantly influence their profitability. The study devoted attention to both external, uncontrollable variables and internal, controllable variables. The functional strategies were assessed by means of management audit criteria. A sample of 800 retail pharmacies was selected from the 2 755 retail pharmacies in South Africa at the time of the study. A response rate of 32% was achieved. Multiple regression analysis was used in this study and the influences identified may be summarised as follows:

Positive influences: General management : Written mission statement; Strength and weaknesses analysed. Marketing management: Location in a medical centre; Trading hours; Number of prescriptions dispensed. Personnel: Number of management courses attended. Purchasing: Purchase ratio. Financial management: Single proprietorship; Partnership.

Negative influences: General management : Lack of a written mission statement. Marketing management: Location in a shopping centre; Location on the street front; Pricing by means of percentage mark-up (Pricing may be regarded as a variable related to both marketing and financial management.) Personnel: -. Purchasing: -. Financial management: Discounts afforded to medical schemes; Close corporation

In order to enhance and improve their profitability, retail pharmacists should capitalise on those variables which influence profitability positively and modify those variables which were found to influence profitability negatively. Recommendations are made on how the above variables should be used to influence the profitability of retail pharmacies positively.