Leitch Quality Drug Company Case
Summary: The case study is about the expansion of Leitch Quality Drug Company. The company was originally know and Quality Drug Company and was established 1926. Carl Leitch used to work as an assistant pharmacist in the company and later bought the company with his brother Richard Leitch and two other people Norman Henry and Walter Neds.
The company had difficulties in the early 1940’s. The company was losing on its profits. Leitch brothers were sure that there is an opportunity for the company to be profitable once again and therefore they made an offer to the owners and end up owning the business.
Case Objectives: The main objectives of the case study is to illustrate the growth of Leitch Drug Company to three Drug Stores in Orlando, Florida. The company is owned by four partners. The functioning of the store is if they were independent stores. One of the stores has been expanded while other two are old fashion.
In the case study it has been also stated that why the profits and sales have stated to become steady after 1967. According to Carl Leitch, the main reason is due to the establishment of drug section in the discount superstores.
Key Issues: The key issues are to understand that how a company is run by different partners. How different partners can participate in the organizational functioning of a business. The case study also demonstrates that when it that a business can grow rapidly and what is are the conditions when a business can start to decline in respect to its profit and sales.
The case study also discusses the promotional strategies adopted by Leitch Drug Company. One of the key issues discussed in the case is how can a company be run in a manner that its different parts can operate independently. Another issues discusses is the sale of the drug company to a national food company.
External Threats: In my opinion, the main external threat to the business is the drug sections opened at the superstores. The main issues is that they are offering drugs at lower prices than Leitch Company. The other issue is that a large number of people go to these superstores. So these people would just buy the drugs the need at these stores instead of making an extra trip to Leitch Drug store.
Another External threat (which can also be labeled an opportunity in short term) is that one half of the advertisement cost is paid by Rexel Company. Thy might be dictating the terms of advertisement and might take out their investment at any time if they think it’s not profitable for them.
External opportunities: As earlier mentioned, the investment by the Rexel Company is also a form on an external opportunity for Leitch as a company. They are providing a part of the advertisement costs that brings customers at present. Leitch should take full advantage of this financial assistance and the advertisement opportunity.
Leitch offers credit to its customers. Though it is not said to be a profitable practice, it helps it long time customers stick to the company for their drug needs. This strategy also brings in new customers to the Drug Company and increases the interests of those who do not have cash to offer.
Internal Weakness: The Company is doing advertisement campaigns but they rarely offer special prices packages for their customers. They should offer discounts or some other attractive packages to their customers. These discounts can be negotiated with the manufacturers of the drug companies that Leitch deals with.
Another internal issues that seems to be rising is the deficit of trust that is present due to the fact that the Leitch brothers are over 60 and want to retire. The want to sell the company to a national food chain who made a good offer. Neds, one of the four partners, is opposed to the idea, while Henry has not yet exposed his feelings about the matter.
Internal Strength: One of the major internal strengths is that each store is run independently by one of the partners. This makes it easy to make a person accountable if something goes wrong. There are department heads at different stores are responsible for purchases. Which would make sure that the drugs that are required are purchased.
Each store makes a count of its inventory once a year. This is a good practice which provides an idea of what items are sold at what speed and what is the waste count at each store.
Alternative Strategies: There could be a number of alternative strategies when it comes to the management of the store if Leitch brothers actually decide to sell the store. One of the strategy could be to sell the store to the other two partners and Leitch brothers can have cash at their retirement.
The other strategy would be to offer shares of the company. So the profits are distributed according the number of share owned. This will provide Leitch brothers to remain as shareholders and share the profits. The other partners can also have flexibility if they are not able to buy the whole shares.
Choice of Strategy: In my opinion, the strategy of offering shares would suit the requirement of all the four partners. Each partner can then decides of whatever they want to do with their share. They can then have a continuous flow in the form of the money they get from their share of the profit.
Implementation: The strategy can be implement by deciding the number and worth of the share based on what number of share each partner want to keep or sell in the market. The partners can also decide the function of each partner after share have been sold. They can decide salaries for the partners who would still perform some duties in the companies.
A board of directors can be made to make decisions about the future operations of the company. The duties of each board members can be decided with mutual understanding.