1. Vittorio Masina
614 Hellman Way
Los Angeles, CA, 90007
323 842 1773
masina@usc.edu
March 11th
, 2015
Dr. Mirella Dalla Torre, Co-owner and CEO; Dr. Patrizia Murelli, Co-owner
Farmacia Dalla Torre
47, Via della Libertà
San Giorgio di Piano (BO), Italy 40016
Dear Mirella and Patrizia,
It is with great enthusiasm that I am finally able to present you the results of my research on Farmacia
Dalla Torre and its recent struggles in the newly competitive market. After conducting several
interviews and data analyses, I believe I have proposed a solution that could successfully bring your
pharmacy back to the top of San Giorgio’s medicine market.
As you know, I have spent the past six months studying business administration at the USC Marshall
School of Business in Los Angeles, California. During this time, I have gained the notions of
management, finance, and economics necessary in order to thoroughly analyze Farmacia Dalla Torre
and its particular situation. Moreover, as a World Bachelor in Business student, I have had the
opportunity to meet some of the most influential businesspeople in the world, including the CEO of
Disney International and the CTO of Nestle, opportunities that have allowed me to further expand my
ability to analyze businesses.
For the present project my goal was to analyze Dalla Torre’s situation in the market, identify the habits
that regulate its internal mechanisms, and develop an effectual corrective model that would increase
productivity and profitability. All the data cited in this memo has been collected through numerous
phone interviews and text messages to the managers and employees of the pharmacy.
The present memo is a two-part synthesis of my findings. I first summarize and interpret the data, and
then I elaborate on it to generate the best possible solution. A preliminary financial evaluation, as well as
a brief discussion on some of the solutions I have discarded, is also provided.
As aforementioned, I firmly believe the solution proposed would significantly benefit Farmacia Dalla
Torre and its competitiveness in the changed market. For this reason, I sincerely hope you take into
consideration my suggestions, and I look forward to hearing back from you.
Yours Sincerely,
______________________________
Vittorio Masina

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Farmacia Dalla Torre
Memorandum
To: Dr. Mirella Dalla Torre, Co-Owner and CEO; Dr. Patrizia Murelli, Co-Owner
From: Vittorio Masina
CC: Dr. Lee Cerling
Date: 3/11/2015
Re: Bad Habits in the Workplace: A Robot to Solve our Problems
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Purpose
In the past five years, Farmacia Dalla Torre has proven unable to compete with its new contender,
Farmacia Comunale, losing a constant 4% in revenue every year—a value expected to double within the
next three years. With the present memo, I intend to evaluate the causes of Farmacia Dalla Torre’s
inability to compete with Farmacia Comunale and to propose what I believe is the best possible solution.
Specifically, I will:
! Identify Dalla Torre’s competitive advantages and disadvantages
! List the habits and behaviors that constrain your company’s productivity
! Propose my solution and its implementation model
! Estimate the financial costs of implementation
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Analysis of Relative Advantages and Disadvantages
A good starting point in analyzing Farmacia Dalla Torre’s position in the competitive market is
identifying its competitive advantages and disadvantages in relation to its rival. Such identification was
made possible through the analysis of a citizens’ preferences survey conducted in 2012 by the newly-
elected mayor of San Giorgio di Piano. Here’s what I discovered:
Competitive Advantages: Why People Love Dalla Torre
History: From the survey, of the 276 people who affirmed that they prefer Farmacia Dalla Torre
(versus the 294 who preferred Farmacia Comunale), 207 justified their preference by addressing the
pharmacy’s history. This rationale was particularly widespread among the older demographic of
clientele, as the elder customers are less willing to change their habits. People seemed to choose your
pharmacy over its competitor because they have always shopped there.
Employees’ Friendliness: 43% (119 of 276) of Dalla Torre’s costumers openly declared they
shopped there because they felt connected to one or multiple employees. These people appreciate the

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advice constantly provided by pharmacists and the small talk during and after every purchase. This type
of service is crucial for your business as it compensates for the higher cost of medicine (derived from
being a private business): people must walk out of Farmacia Dalla Torre not only with their prescription
drugs, but also with valuable advice and possibly even a smile on their face.
Monday Market: Another reason why people shop at Farmacia Dalla Torre (as claimed by 41% of
those surveyed) is its proximity to the weekly city market. Due to the fact that the average consumer
purchases medicine no more than twice a week, the location of the pharmacy enables convenient
Monday morning pharmacy visits for consumers.
Disadvantages: What Keeps Consumers Away
Higher Prices: 70% (206 of 294) of those who prefer Farmacia Comunale do so because of the lower
prices. These people choose to sacrifice the friendliness and the health advice of Dalla Torre’s
employees for financial incentives. Unfortunately, there isn’t much you can do about this, as its
decentralized position and lower rent tax (resulting from its being a public entity) allow Farmacia
Comunale to offer prices Dalla Torre cannot afford.
Poor Location: Approximately 63% (185 of 294) of those surveyed stated the main reason for their
shopping at Farmacia Comunale is its location’s convenience: the pharmacy is in the same building as
the village’s main shopping complex, making the six block walk to Dalla Torre the considerably less
appealing option.
Longer Lines: 32% (94 of 294) of the people who expressed preference towards Farmacia Comunale
justified their choice by claiming that Dalla Torre’s lines were too long, especially on Monday
mornings. Longer lines are a direct consequence of the pharmacy’s emphasis on consumer service, as
extensive conversational practices lengthen the delivery process. This, however, should not get in the
way of Dalla Torre’s other competitive advantage: its proximity to the weekly market. Whenever people
choose to avoid your pharmacy on Monday mornings because “it’s too busy” or “it would take too
long,” a problem arises.
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Negative Habits: Stuck in the Past
With the opening of Farmacia Comunale in 2009, Dalla Torre entered a competitive market for the first
time. Due to the novelty of the situation, however, the pharmacy was unprepared to face the
transformation and consequently, unable to adapt. Here’s a list of all the habits that, although harmless
in the monopoly era, are detrimental to the business’ competitiveness today.
Lack of Professionalism
Since they are not used to working in a competitive environment, employees at Dalla Torre tend to take
advantage of the organization’s friendly environment and lenient behavioral rules. Patrizia reported that
her workers waste 1 hour a day on average engaging in unproductive activities such as snacking,
smoking cigarettes, and chatting with fellow employees. She also complained that employees spend too

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much time mingling with clients, resulting in longer lines: the average transaction time is 6 minutes per
customer in contrast to the 3.5 minute average at Farmacia Comunale.
Before 2009, this lack of professionalism was not an issue worth considering—clients had to wait
patiently in line if they wanted to get their medicine, and many costumers even appreciated the
employees’ friendliness and less formal approach. Today, however, people have a choice, and they often
decide not to wait.
Lack of Business Management Knowledge
Although your pharmacology degrees were sufficient to effectively run the pharmacy during the
monopoly era, they are no longer enough in the competitive market. The challenges of competition, in
fact, require a solid knowledge of not only medicine, but also of business management.
Due to the lack of pressure, the company could previously afford to fall behind on the utilization of
updated technology and almost completely disregard methods of maximizing limited resources.
Contrastingly, when solving management problems in the present market, Farmacia Dalla Torre’s
administration should shift from relying solely on common sense to relying on a more formalized
approach.
Tension Between Managers
Although Dalla Torre’s façade is characterized by positivity and harmony, behind the scenes, the
situation is drastically different. From interviewing the employees, in fact, I discovered that the number
of fights between the two managers has increased considerably since the opening of Farmacia
Comunale. This is a very serious issue as it undermines both the credibility and the authority of the
managers.
After discovering this trend, I interviewed both managers individually in order to analyze the issue. I can
admit that I was positively impressed by the candor of your responses. Here is a summary of my
findings:
! Mirella: She has extremely strong people skills, and employees are genuinely willing to follow her
instructions. However, as she admitted, Mirella is no longer up to date with the pharmacy’s latest
technology (especially in the case of IT), something currently managed by Patrizia. The problem is
that Mirella still wants to be informed on the operations Patrizia executes, yet she opposes any type
of innovation/program she doesn’t understand, fearing Patrizia might single-handedly take over
pharmacy management .
! Patrizia: Patrizia’s ability to keep track of the pharmacy’s resources and administrate its finances is,
extraordinary, to say the least. However, her people skills need improvement. Patrizia—as she
confessed in the interview—has a hard time trusting employees, consequently causing her to
micromanage their actions. In addition, she hardly ever informs Mirella of her decisions. This lack of
transparency is one reason for Mirella’s unwillingness to trust her daughter.
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An Innovative Solution
With my solution, I want to maintain Dalla Torre’s customer-friendly reputation, avoid long lines on
Monday mornings, reduce internal conflict among management, increase competitiveness, and lower
prices. I propose two solutions to be implemented simultaneously:
! The introduction of a robot for the stocking and delivering of medicine
! A new management model to formally split competencies between Patrizia and Mirella
I will now analyze them individually, evaluate their consequences, demonstrate how they would be
beneficial to the pharmacy, and provide cost estimations.
Solution #1: A Robot Increases Efficiency
What is it? An automatic warehouseman is a device offered by German company Mach4 Pharma
Systems that replaces traditional shelves with a hi-tech system of stocking and delivery. The robot not
only keeps track of all the medicine stored by the pharmacy, but it also saves pharmacists from the
tedious and time-consuming process of leaving the front desk locate the drugs, increasing time-
efficiency (Stea, 4,5). The robot is composed of two parts:
! The Shelves: This part of the robot is identical to the traditional shelves, except it includes a
system that identifies boxes and keeps track of where everything is stored.
! The Transportation System: Composed of an electronic arm and a system of treadmills, this
part is responsible for finding the products and delivering them directly to the pharmacists.
Positive Assets: I believe the adoption of the robot will improve Dalla Torre’s ability to compete
with its rival. Here are its main assets.
! Faster Service and Enhancing Dalla Torre’s Competitive Advantage: The Mach4 robot
would solve Dalla Torre’s problem of long lines while reinforcing its emphasis on employee-
client friendliness.
" Without the robot the average transaction time is about 6 minutes: 1 minute for the
client to place the order (phase 1), 3 minutes for the pharmacist to locate the products
ordered (phase 2), and 2 minutes to pay, chat with the client, and provide health advice
(phase 3).
" With the robot the pharmacist never has to leave the front desk. This way, phases 2 and
3 happen simultaneously, cutting the average transaction time from 6 to 3 minutes
without compromising Dalla Torre’s competitive advantage of customer friendliness
(PALF, 3).
! Reduction of Time Wasted: The machine keeps track of the expiration date of every box and
uses this data to decide which product to sell: between two identical boxes, it will always sell
the one that is closer to expire (Colombo, 9). This way the pharmacy can reduce wastes (cutting
costs) and stock less medicine, all more efficiently.

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! Fewer Workers: Mach4 Robot is completely automatic and replaces the role of the
warehouseman (Colombo, 8). The benefits of reducing personnel include a significant decrease
in cost (approximately 40,000€ every year due to warehouseman’s salary + taxes + social
security costs + retirement plans) and a smaller team easier to manage and less likely to engage
in social loafing, as Ringelmann discovered (Duhigg).
! Improved Usage of Space: The adoption of the robot eliminates the need for drawers, normally
storing common drugs, in the front desk area, as all products can be delivered directly from the
warehouse. Dalla Torre would gain approximately 50 sq. meters of space that could be used for
exposition (IRELS, 6-7). In addition, an increase in available space can benefit employees, as it
creates a more comfortable work environment.
! Public Image: A pharmacy that employs this type of service adopts the image of a high-tech,
innovative business—and image known to attract clients and consequently, increase revenue.
Solution #2: Splitting up Competencies to Avoid Conflict
I have come to the conclusion that the management system at Farmacia Dalla Torre is extremely
inefficient. Roles are not clearly defined, managers often compete with each other, and daily operations,
such as placing orders and calculating daily revenue, are often carried out twice. In the next paragraph, I
propose a new management system that splits competencies and emphasizes each manager’s strengths.
Description and Application
Mirella is excellent at working with people, while Patrizia excels in dealing with finance and customer
orders. Based on these fundamental skills, I suggest that the two managers arrange their work in the
following manner:
! Patrizia: Takes care of resources and finances, manages investments in new technology, and
places orders according to the pharmacy’s needs. Free from the burden of having to direct and
organize employees’ shifts, Patrizia could instead focus all her energy on what she does best:
administration.
! Mirella: Takes care of human resources: manages shifts, holidays, pays, and solves conflict
among employees. She would also take care of daily revenue calculations—an operation she
really enjoys doing. She will be free from the burden of trying to keep up with latest technology
and placing orders.
This organization of tasks would enhance productivity by eliminating the root cause of the conflicts
between managers: competition. With the proposed system, every task/practice/operation will instead be
overlooked by just one manager: the one whose strengths match the challenge. The benefits of this
system, besides a significant reduction in the number of conflicts, also include a gain of 1-2 hours a day
for each manager (the time previously employed in repeated operations), and an increase in Patrizia’s
and Mirella’s credibility in front of the employees, as well as in opportunities to specialize in their
respective fields.
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Financial Evaluation
Considering the cost of the robot and all the aforementioned costs and benefits, I’ve concluded that
Mach4 Robot is a great investment for Farmacia Dalla Torre. Its cost, equal to $140,000, would be
amortized in 10 months (Fantoli, 14). After the first 5 years, profit—and revenue—will increase by
24.8% (from $729,278 to $910,062). I’ve show my calculations in the following tables:
With Robot
Cost of Robot $140,000
Cost With Leasing $156,800 (+12%)
Robot Management Costs $11,200
Robot’s Yearly Added Cost $42,560
Annual Revenues $1,320,000 (+10%)
Increases in Sales 1%
Variation in # of Workers -1
Final Profit per Year $189,440
Expected Profit in 5 Years
(with 2% annual losses)
$910,062
The cost of leasing the Mach4 robot (which is the most feasible option) is an extra 12% on the price.
The 10% increase in revenue is the sum of the partial increases due to to the new way of advice giving
(+7%) and the new exposition space available (+3%). In our calculations, I ignored the robot’s cut in
medical wastes (estimated to lower costs of 5%). In calculating the Expected Profit in 5 Years with the
robot, moreover, I considered a 2% annual loss from competition: this figure is an approximation for
defect, as the implementation of the robot should give Dalla Torre a competitive edge.
We considered the implementation costs of the management system proposed above to be equal to zero,
as it requires no external intervention or increase in resources.
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Discussion of Other Possible Solution
The Mach4 Robot would enable Dalla Torre to cut time wasted, emphasize its competitive advantage,
and significantly increase profits. For these reasons, I believe it is the best solution. Here is, however, a
short list of other possible solutions, along with a brief explanation of why the robot is better for your
business:
! A Sales-Based Reward System to Motivate Employees: Although this strategy
Without Robot
Revenues $1,200,000
% Profit per Unit 30.0%
Costs of Products $840,000
First Profit (R-C) $360,000
# of Workers 4,0
Cost per Worker $38,000
Management Costs $50,000
Final Profit per Year $158,000
Expected Profit in 5 Years
(with annual 4% losses)
$729,278

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would solve the problem of employees’ lack of professionalism, it would also promote
competitiveness among colleagues and discourage any type of advice-giving practices,
undermining Dalla Torre’s most important competitive advantage.
! Rigid Policy Against Time Wasted: This system would certainly reduce the number of
hours employees waste chatting with each other, snacking, etc. but at the same time it would
disrupt Dalla Torre’s friendly and informal environment. Employees would waste a lot of energy
coping with the harsh new environment and, consequently, be less friendly to the costumers, as
Charles Duhigg explains in his book on Habits (Power of Habits).
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Conclusion
In order to improve Dalla Torre’s competitiveness, I must emphasize its competitive advantage—its
superior customer service. The introduction of a competitive reward system and a rigid internal policy to
motivate employees would be, as seen in the previous section, ineffective. The solution I proposed,
instead, guarantees that the pharmacy maintains its points of strengths, increases sales, and cuts both
costs and wastes for a price that can be amortized in 10 months. I firmly believe that the Mach4 Robot
and the new tailored management system could bring Dalla Torre back to the top of San Giorgio’s
medicine market within 5 years after implementation.
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Works Cited Page
Colombo, Giuseppe. “Il robot e lo spazio / che cosa cambia per il magazziniere? / che
cosa cambia per il banco?”, Io Punto Su L’automazione, 6-10, 2010.
Duhigg, Charles. The Power of Habit: Why We Do What We Do in Life and Business.
New York: Random House, 2012. Print.
Fantoli, Andrea. “Facciamo due conti”, Io Punto Su L’automazione, 13, 2010.
Posa, Nicola, and Rizzato Gianluca. “Perchè automatizzare la farmacia”, Io Punto Su
L’automazione, 1-3, 2010.
Stea, Alessandro. “Robot per tutte le esigenza”, Io Punto Su L’automazione, 4-5, 2010.