Mercer, K. (April 8, 2010).

¶ … Mercer, K. (April 8, 2010). "Sigma Ready to Revise Trading Terms." the

Australian Financial Review. Cited in: www.afr.com

Sigma Pharmaceuticals Ltd. is an Australian company, founded in 192, that produces over-the-counter drugs and prescription medications. It has just under 2,000 employees, and posted 2008 revenues of $2.6 billion (AU). Recent issues, however, have not been quite as positive. At the end of February (2010), Sigma shares were placed on hold due to a profit warning. Since then, the company has been under investigation concerning accounting irregularities, price-fixing, and preferential treatment and pricing given to certain pharmacy chains. The general view is that Sigma was price fixing towards their own chains: Amcal and Guardian, and other very large chains at the expense of the mom-and-pop, smaller independent pharmacy (See: Collins, 2010).

Issues

Comments

An article in the Australian Financial Review concerning Sigma Pharmaceuticals focuses on the issues of (a) positioning and (b) price considerations.

Sigma Pharmaceuticals has a series of major marketing and pricing problems that threaten to severely impact their cash-flow, ability to compete fairly, and engender public confidence.

Sigma realizes that it must quickly change its image with smaller, non-chain pharmacies in order to both glean their business and change public perception.

Sigma must reposition its image -- not so much its product lines. The issue centers around the company giving preferential treatment to its own chains and large pharmacy/drug chain stores (e.g. larger credit lines, deeper discounts, and better terms). The object of positioning is to find the appropriate niche market for the company and use every available means with which to promote that position. In this case, most analysts agree that it needs to adopt a more family-friendly, less top heavy, "we care" corporate image.

Sigma is challenged with cash-flow issues, largely due to extended credit terms with large chains and must reverse that trend.

Price considerations are driving the company into fiscal ruin. In fact, unless this turns around, they have been ordered to sell several million dollars in assets. Pricing policies must change to reflect a fair treatment in the market -- with defined discounts, terms, and lines based on definable factors.

The issue is now far more serious for Sigma as governmental scrutiny, coupled with consumer distrust, places its position as a market leader in jeopardy.

Sigma now has a major marketing and public relations problem that must be attacked using more than just positioning and pricing tools; in fact, their situation is so serious, that they will likely need to utilize every aspect of marketing to turn the company (and its image) into a positive paradigm.

Appendix a

Sigma's trading suspension was lifted on March 31, 2010, but stocks have continued to perform poorly:

Speculation regarding the extent of the company's problems will only intensify as more days pass without news - one certainty is that the auditors should be looking hard at the carrying value of $1.3 billion of intangible assets on the Sigma books, but that is unlikely to be the primary cause of the suspension. An information vacuum persists in relation to the company's profitability yet there is no shortage of advice being offered from high street pharmacists on Sigma's business practices. It seems that in a grab for market share, Sigma has sponsored the rapid growth of the MyChemist and Chemist Warehouse chains, offering them six-month payment terms - five months more than the 30-day payments that Sigma expects, and enforces, from smaller operators.