Growth Strategy of Pharmanet Group Limited

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Growth Strategy
Darweesh Al Qubaisi – 21250995 Ms. Yen Nguyen
Corporate Treasury Management AFF5250
10/11/2011
Pharmanet Group Limited

Letter of Transmittal

11th October 2011

Ms. Yen Nguyen
Room 4.27, Building H
Monash University
900 Dandenong Road
Caulfield East, VIC 3145, Australia

Dear Yen Nguyen,

Please find attached the report as you requested on the growth strategy for Pharmanet Group Limited.

This report provides a summary of research and findings on the company, as well as a proposed strategy to enable Pharmanet Group Limited to grow via acquisition by Blackmores Limited. The recommendation was provided after extensive internal and external analysis, which proved to be highly useful in determining the basis for the proposal.

Please don’t hesitate to contact me should you have any questions. Yours Sincerely,
Darweesh Al Qubaisi
ID: 21250995
Contact Number 0423211190

Table of Contents
Letter of Transmittal2
Executive Summary5
1. Introduction6
1.1 Objective:6
1.2 Scope:6
1.3 Assumptions and Limitations:6
2. Summary Of Findings7
2.1 Business Description7
2.2 Corporate Governance7
2.3 External Environment Analysis8
Major Competitors8
PEST Analysis8
Porter’s 5 Forces9
2.4 Company Financial Analysis10
Time Series Analysis10
Cross Sectional Analysis14
2.6 SWOT Analysis15
3. Growth Strategy Options16
3.1 Scenario A16
Strategy16
Cost of Capital18
Funding Strategy18
Project Evaluation19
3.2 Scenario B20
Strategy20
Capital Structure21
Valuation22
3.3 Recommendation22
References:23
Appendix 1.1- Company Profile25
Appendix 1.2 – Product Reviews26
Appendix 1.3 Target Market27
Appendix 1.4 - Corporate Governance Analysis:31
Appendix 2.1 - Competitor Analysis:35
Appendix 2.2 - PEST Analysis37
Political Factors:37
Economic Forces38
Social Forces38
Technological Forces38
Appendix 2.3 - Porter’s 5 Forces:38
Competitive Rivalry39
Bargaining Power of Suppliers39
Bargaining Power of Buyers39
Threat of Substitutes39
Threat of New Entrants:39
Appendix 3.1 - Financial Analysis40
Appendix 3.2 - Cross Sectional Analyisis45
Appendix 4.1 – WACC Calculations – Scenario A56
Appendix 4.2 - Advertising Invoices59
Appendix 4.3 - Forecasted Balance Sheet62
Appendix 4.4 - Forecasted Income Statement63
Appendix 5.1 - WACC Calculations– Scenario B64
Appendix 5.2 - Discounted Cash Flow Valuation66

Executive Summary
The purpose of this report is to evaluate Pharmanet Group Limited with the aim of providing a future strategy for growth. After extensive qualitative and quantitative research of the company, findings have been summarised to provide an understanding of Pharmanet Group Limited’s current performance. Research into the company’s operations and main product, ThermaLIFE®, shows that the company have a potentially excellent product. With a large target market and initial good reviews amongst consumers, there is a possibility of future profitability should the product gain awareness in the market. An external environment scan is conducted to provide perspective into the surrounding forces which act on the company, using Porter’s 5 forces and a PEST analysis. An internal scan mainly focusing on the company’s financial performance over the past 5 years has also been conducted, providing insight into the current financial weakness of the firm using time-series analysis as well as a cross-sectional ratio analysis.. Following on, a SWOT analysis was established using both external and internal analysis. With two potential growth scenarios provided, it is suggested that the best strategy for growth would be through a merger acquisition by competitor Blackmores Limited. Blackmores Limited is the most successful competitor in the industry, and has the potential to allow Pharmanet Group Limited and major product ThermaLIFE® to excel in the market with...
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