An Evaluation Study of Brand Competitiveness of Chain Pharmacies Based on the Analytic Hierarchy Process

ZHANG Ji-wei, WANG Shu-ling



An Evaluation Study of Brand Competitiveness of Chain Pharmacies Based on the Analytic Hierarchy Process

ZHANG Ji-wei1, 2, WANG Shu-ling1

Objective To build up a scientific and rational evaluation system of brand competitiveness for chain pharmacies so that they can have an effective way to cultivate and manage their brand competitiveness. Methods Literature review and expert interviews were conducted to establish the basic framework for the evaluation system of brand competitiveness. The weight of first-level and second-level indicators was determined by AHP and expert scoring methods. Results and Conclusion After the consistency test, the weight coefficients of each indicator of the evaluation system are acceptable and they can be used as an effective tool to evaluate the brand competitiveness of chain pharmacies. Weight coefficients are also used as

for pharmaceutical retail chain enterprises to make decision in the brand cultivation.

chain pharmacy; brand competitiveness; analytic hierarchy process; weight

1 Introduction

In recent years, with the rapid development of national economy and the improvement of living standards, people’s health awareness has been gradually sharpened. Pharmaceutical retail market is expanding quickly. Due to the separation of clinic from pharmacy, pharmaceutical retail chain enterprises (Hereinafter referred to as “chain drugstore”) will have a bright future. However, in reality, China’s medical and health system reform for the pharmaceutical chain industry is still at the stage of exploration without supporting policy. Many people still believe that the long-term positive trend in short-term twists for the future development of the pharmaceutical chain industry.

Currently, pharmaceutical retail industry’s competition is fierce; the competition mode has undergone profound changes. It is hard to sustain competitive advantage by simply relying on price competition, product competition and service competition. The choice of strategy and how to make it difficult for opponents to imitate become the focuses of the pharmaceutical chain industry concern. More and more enterprises want to enhance their brand competitiveness to achieve the leaping development. Therefore, they should establish a scientific and reasonable evaluation system for the chain drugstore brand competitiveness. Enterprises can compare their brand competitiveness with other in the industry with the help of the evaluation system and discover their strengths and weaknesses in the aspect of brand management. Then they can strengthen the cultivation and use of the brand assets and make more reasonable decisions. Meanwhile, this system can provide a more direct reference for government or industry associations to make policies.

2 The construction of evaluation system of chain drugstore brand competitiveness

Chain drugstore brand is not only for the symbol to distinguish goods or services from others, but the carrier of corporate reputation and market resources. A good brand can constantly improve enterprise image and gain more market share by winning customer support. Chain drugstore is based on the unified brand whose characteristic of wide distribution makes it easy to beat the independent pharmacies. Brand competition is the most viable means of competition for chain drugstore and it is the most fundamental contest among enterprises. Brand competition results from the brand competitiveness which is the embodiment of enterprises strength. In order to make the chain pharmacies brand competitiveness evaluation more systematic and effective, four key modules, namely the basic resources of enterprises, brand management, customer support, market competitiveness were studied in this paper[1,2]by using literature research method. Based on the bibliometrics from the above four aspects, we got the secondary indicators. In the Chinese journal full-text database (CNKI), we used “brand competitiveness” combined with “evaluation” as the keyword, setting the time from 2000 to 2013; we got only 11 literature search results which were meaningless for Literature Metrology. But when we used the article name as the retrieval criteria we got 106 articles. By using bibliometric method[3]we teased out the indicators with higher cited frequency for the evaluation of brand competitiveness under the first level indicators, see Table 1. In addition, the secondary indicators should be fully integrated the characteristics of chain retail industry. So in the Chinese Journal full-text database (CNKI), we used the key words with “chain drugstores” or “chain enterprises” combined with “brand” or “brand competitiveness” as the retrieval criteria to search from 2000 to 2013, a total of 195 articles were found. After studying, 79 references on chain enterprises brand competitiveness were found (including chain drugstores). We used bibliometrics to sort out indicators with higher cited frequency[4-8]which could reflect industry characteristics, for instance, information management was cited 34 times, procurement and distribution was cited 31 times and stores resources was cited 26 times. The three indicators and other 13 general indicators were regarded as the secondary level indicators of the evaluation system. In this paper, the setting of the third level indicator also fully reflected the characteristics of chain pharmacy industry. In the end, 4 first level indicators together with 16 secondary indicators and 45 third level indicators were combined to form a framework of evaluation system of chain drugstore brand competitiveness.

Table 1 Summary of the frequency indicator that appears more than 10 times

Indicator nameFrequency Indicator nameFrequency Market capacity44Human resources29 Customer loyalty41Customer satisfaction27 Brand communication38Sustainable development ability20 Brand awareness34Brand operation18 Brand positioning32Brand expansion15 the ability to create benefits30Brand PR10 Enterprise culture29

Scientific evaluation system is the foundation for measuring chain drugstore brand competitiveness, in order to guarantee the reliability, completeness and validity of this system, a study of the evaluation system was made. Structured expert interviews were used in this paper and we chose 30 experts from different industry, among them 5 were government staff, 10 were pharmacy managers, 10 scholars from 8 universities and 5 from other fields. A face-to-face interview survey was conducted to establish the bibliometric evaluation system. And the interview data were classified to amend some indicators. The amendments are as follows:

(1) Highlighting quality control

In recent years, pharmaceutical industry attaches more importance to quality control due to the frequent medical quality accidents; the new version of the GSP (“Good Supplying Practice”) required enterprises should standardize the quality control. Because of the special nature of pharmaceutical industry, quality control including ADR control, storage environment, and effective management was added to the evaluation system.

(2) Modifying some indicators words

Some words or expressions were modified to get rid of the ambiguity, for example: "Brand PR" was changed into “Brand Maintenance”, “the ability to gain benefits” was changed into “profitability” so that the word could reflect the characteristics of pharmaceutical retail chain enterprises. The third-level indicators should show their stronger operability and “distribution efficiency” was used instead of, “distribution quality”, “operating cost effect” took the place of “cost control”.

After confirming, a secondary indicator of quality control and four third-level indicators including ADR control, inventory environmentally appropriate, valid species treatment, and brand age were added to establish the evaluation system of chain drugstore brand competitiveness, as shown in Table 2.

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Table 2 The final drugstore chain brand competitiveness evaluation system

Target layerFirst-level indicatorsSecond-level indicatorsThird-level indicators Chain DrugstoreBrandCompetitivenessAEnterprise Infrastructure Resources B1Human ResourcesC1Managers AverageEducational Level D1 Licensed PharmacistsEvery Drugstore D2 Salary and Welfare D3 Staff Training D4 Quality ControlC2ADR Monitoring D5 Inventory Environment D6 Expiration Processing D7 Procurement and DistributionC3Centralized Procurement Capability D8 Store Distribution Rate D9 Distribution Efficiency D10 Information ManagementC4Level of Network Office D11 Hardware Equipment D12 Store ResourcesC5Store Location D13 Proportion of health Sentinel D14 Membership numbers D15 Enterprise CultureC6Employee Recognition D16 Culture and Education D17 Brand Management B2Brand Positioning C7Market Segmentation Capability D18 Brand Personality D19 Brand Communication C8Brand Identification System D20 Target layerFirst-level IndicatorsSecond-level IndicatorsThird-level Indicators Chain DrugstoreBrandCompetitivenessABrand Management B2Brand Communication C8Brand Influence with Same Name D21 Propaganda Channel Diversity D22 Brand ManagementB2Brand OperationC9Decision Makers Brand Management Enthusiasm D23 Standardized Management System D24 Headquarters Coaching Skills D25 Brand ExpansionC10Own Brand Building D26 Online Pharmacies Extension D27 Chain Scale D28 Brand MaintenanceC11Brand Relationship Capability D29 Brand Social Responsibility D30 Crisis Management Capability D31 Customer Support B3Brand AwarenessC12Non-prompt Recognition D32 Prompt Recognition D33 Customer SatisfactionC13Shopping Environment D34 Pharmaceutical Care D35 Service Attitude D36 Reasonable Price D37 Commodity Satisfaction D38 Customer LoyaltyC14Repeat Purchase rate D39 Customer Referral Rate D40 Market CompetitivenessB4Market CapacityC5Sales D41 Market Share D42 Market Coverage Rate D43 ProfitabilityC16Sales Profit D44 Sales Profit Rate D45 Operational Cost-effective Ratio D46 Sustainable Development Capacity C17Sales Revenue Growth D47 Continuous Profit Years D48 Brand Age D49

Enterprise infrastructure resources are composed of human resources, quality control, procurement and distribution, information management, store resource and enterprise culture. Among them, human resources are the talent guarantee to enhance brand competitiveness and the licensed pharmacists is an important prerequisite for pharmacies to play its role in society. Quality control is the key for chain drugstore management. Procurement with low price and efficient distribution can help the chain enterprises to improve their service quality. And information management can provide strong support for the chain drugstores to share information data. Store resources are the basic guarantee to maximize the market performance. In addition, the corporate culture is the spiritual pillar for any strong brand and it can make the staff to achieve maximum potential. These factors are an indispensable part of enterprise resources.

Brand management refers to the system which is formed in a series of corporate brand management activity, including brand positioning, brand communication, brand operation, brand expansion and brand maintenance. These factors are not independent but a joint force. They are essential for the formation of brand competitiveness and is the enterprises brand culture rely on them.

More customer means having a good brand. Meeting customers’ needs and obtaining customers’ support is a key indicator to measure enterprise brand competitiveness. After all, without customers, there is no operation and profits. Customer support includes brand awareness, customer satisfaction and customer loyalty. Brand awareness is used to measure the breadth of brand communication, but it does not distinguish good impression from bad impressions. Chain drugstore should pay more attention to the customers’ satisfaction, including shopping environment, service attitude and prices. Customer loyalty is the concept which not only reflects the accumulation of past marketing results but at the same time, it is an indication of the brand’s future earnings. It is characterized by customers’ repeat purchases and brand recommendations, and high-level customer loyalty plays immeasurable role for future development.

Market competitiveness is the most visible manifestations of a brand and it is the product of a brand after competing with other brands in the market which includes market capacity, profitability and sustainable development ability. Market capacity reflects the current brand’s market condition and market shares. Profitability reflects the viability and profitability of the enterprise brand; Sustainable development capacity reflects the coherence and consistency of customers consuming behavior which is essential for nurturing brand.

3 The AHP method was applied to construct indicator judgment matrix

Analytic Hierarchy Process（AHP）is a structured technique for organizing and analyzing complex analysis, based on mathematics and psychology and it was developed in the 1980s in the Pittsburgh University by Professor T.L.Saaty[9]. The users of AHP first decompose their problem into hierarchy of more easily comprehended sub problems; then experts score the importance of indicators based on the objective reality and finally the judgment matrix can be made. Excel software will be applied to calculate the weights value for all indicators. The weights value can provide a quantitative basis for enterprises to make assessment, decision and forecast.

Judgment matrix can show the relative importance of the various indicators for the upper level, 1~9 scale method is generally used to quantify the indicators in the same level[10]. Suppose the number of indicators is n which belong to certain level, and these indicators can constitute the judgment matrix E=(e)n×nby comparing one another two together, Table 3 lists the value and meaning of 1~9.

Table 3 The meaning of 1~9 scaling method

Eij ValueMeaning 1Two indicators contrast, having the same importance，具有相同重要性 3Two indicators contrast, the former is slightly more important than the latter 5Two indicators contrast, the former is more important than the latter 7Two indicators contrast, the former is strongly more important than the latter 9Two indicators contrast, the former is extremely important than the latter 2, 4, 6, 8Represent the intermediate values of adjacent judgment CountdownIf the importance of A relative to B is Eij,Then the importance of B relative to A will be Eij= Eji

30 experts were invited to compare various indicators and sort out the data, among them 10 were pharmacy managers, 10 research scholars about drugstore competitiveness, 5 suppliers and others 5 were drugstore managers. The comparison judgment matrix of the first-level and second-level layers were shown in Table 4 and Table 8.

Table 4 First-level indicators’ judgment matrixes of chain drugstore brand competitiveness evaluation system

AB1B2B3B4 B111/31/31/2 B2311/21/2 B33211 B42211

Table 5 Second-level indicators’ judgment matrixes of enterprise infrastructure resources

B1C1C2C3C4C5C6 C111/71/311/31 C2713152 C351/2171/51 C411/71/511/21 C531/21/2211/3 C611/71/5131

Table 6 Second-level indicators’ judgment matrixes of brand management

B2C7C8C9C10C11 C711/31/51/71/5 C8311/31/21 C95211/31 C1072211/4 C115111/21

Table 7 Second-level indicators’ judgment matrixes of customer support

B3C12C13C14 C1211/71/9 C13711/2 C14921

Table 8 Second-level indicators’ judgment matrixes of market competitiveness

B4C15C16C17 C15131 C161/311/5 C17151

4 The weights of evaluation indicators

(1) Making the normalized process for each column of elements in the judgment matrix E, elements’ general item is as follows:

(2) Averaging the sum of each column of judgment matrix and normalizing them, we can get the weight value of lower indicators to higher level indicators.

Putting the matrix corresponding values into the formula based on the above method and the result is shown in Table 9.

Table 9 The weight value of indicators in the chain drugstore brand competitiveness evaluation system

First-level indicatorsThe weight of First-level indicatorsSecond-level indicatorsThe weight of Secondary indicators relative to the levelCombined weight Enterprise Infrastructure ResourcesB10.11Human Resources C10.070.01 Quality Control C20.380.04 Procurement and Distribution C30.230.03 Information Management C40.070.01 Store Resources C50.130.01 Enterprise Culture C60.110.01 Brand ManagementB20.22Brand Positioning C70.050.01 Brand Communication C80.170.04 Brand Operation C90.240.05 Brand Expansion C100.310.07 Brand Maintenance C110.220.05 Customer SupportB30.35Brand Awareness C120.060.02 Customer Satisfaction C130.350.12 Customer Loyalty C140.600.21 Market competitivenessB40.32Market Capacity C150.410.13 Profitability C160.120.04 Sustainable Development Capacity C170.480.15

In addition, the sum & product method should be used to compute the maximum characteristic root for each pair of comparison judgment matrix to prepare for the consistency test, the formula is as follows:

(4) Computing maximum feature root of judgment matrix:

5 Consistency Test

Due to the complexity of objectives and the subjectivity of policymaker, the paired comparison matrix does not have strict consistency,contradictory judgment may arouse from the matrix. We must make a consistency test to ensure the inconsistency of the judgment matrix is within certain range. Consistency test should be conducted in three procedures:

(1) The consistency index of the judgment matrix

(2) To find out the average random consistency index RI, as shown in Table 10;

(3) Calculating the consistency ratio.

Generally speaking, when the consistency ratio CR is 0, the consistency is 100 percent; when CR is less than 0.1, the consistency is satisfying, namely, the weight distribution is reasonable; when CR is greater than 0.1, the consistency ratio is not acceptable, we should adjust and amend the judgment matrix elements until we get satisfactory consistency or give it up.

Table 10 The average random consistency indexes

n12345678910 RI000.580.901.121.241.321.411.451.49

Put first-level indicator matrix A into formula, the calculation results are: λ max value equals to 4.12, CI value equals to 0.04, CR value equals to 0.04. CR value is ​​less than 0.1, obviously, Matrix A has good compatibility, and its weight is satisfactory. For matrix B1, matrix B2, matrix B3 and matrix B4, similarly, the CR values are 0.05, 0.05, 0.02 and 0.03 respectively. We can acknowledge the matrices B1, B2, B3 and B4 are qualified and their weights coefficient is also acceptable. Thus, we get the complete evaluation system of chain drugstore brand competitiveness.

6 Conclusions

This article establishes the evaluation system of chain drugstore brand competitiveness based on four modules, namely the basic resources of enterprises, brand management, customer support and market competitiveness through empirical study, With the method of AHP and expert scoring, we can assign the weights of evaluation indicators of chain drugstore brand competitiveness and have the consistency test, which indicates that the weight of each index is acceptable. They can be used as an effective tool to evaluate enterprise brand competitiveness and provide a more comprehensive reference for chain drugstores brand development.

From these weights of indicators, we can see that the first-level indicators of customer support accounts the most, namely 0.35 in the formation of brand competitiveness, which shows that the brand is based on customer and customer resource is always a strong support to the development of brand. If the customers’ need is alienated by the enterprises, their market competitiveness will become unstable. In particular, the weight of customer loyalty in the third-level indicators ranks first which means that enterprises should improve their service to meet the customers’ need constantly. Enterprises should attach importance to the relevant data from the first-level indicators as well for they reflect market competitiveness and their weight is 0.32, ranking second. The weights of sustainable development capacity and market share rank second (0.15) and third (0.13), which indicates that the market status of the enterprises has the most direct effect on brand competitiveness. Although the weights of other two first-level indicators, namely the brand management and enterprise infrastructure resources rank third (0.22) and forth (0.11), they are the foundation of brand competitiveness and enterprises should not ignore them.

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Author’s information: WANG Shu-ling, Associate professor. Major research area: Pharmaceutical business and management, human resource management. Tel: 024-23986543, Email: lingyi50@163.com.