UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Luc Tuan Tu IMPROVING MARKETING COST-EFFECTIVENESS A STUDY OF MEDTRONIC COMPANY IN HO CHI MINH CITY - VIETNAM MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2020 1 TIEU LUAN MOI download : skknchat@gmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Luc Tuan Tu IMPROVING MARKETING COST-EFFECTIVENESS A STUDY OF MEDTRONIC COMPANY IN HO CHI MINH CITY - VIETNAM MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: Assoc. NGUYEN THI MAI TRANG Ho Chi Minh City – Year 2020 TIEU LUAN MOI download : skknchat@gmail.com EXECUTIVE SUMMARY Recently, the profit and loss of Medtronic has experienced a decrease versus its target. This circumstance is mostly impacted by increased number and amount of marketing activites. The main problems belong to the low efficiency of current marketing activities, reflecting through the low number of customer coverage while the spent marketing budget exceed it limit.
In order to discover the issue that Medtronic facing with, meeting with two sales managers of the Business Unit as well as relevant sales representative has been implemented Through interviewing relevent subjest, using data provided by the company and using related theory, main problem was identified as low-cost effectiveness of marketing activities. Towards main problem, three potential causes have been found are Lack or Low frequency of following up activities, Low competencies of sales team in order to cascade the impacts of the marketing events or Focus on wrong types of promotion activities. After analysis, main cause that chosen to solve is Focus on wrong types of promotion activities. This study will focus on solutions to address the cause in order to help the company to improve their Profits and Loss.
TIEU LUAN MOI download : skknchat@gmail.com ACKNOWLEDGMENT Without the encouragement, guidance and support of Prof. Nguyen Thi Mai Trang and other teachers, the entire master-level project would not be possible. I would like to send my appreciation to my advisors. It has been a pleasure working with you on this project.
I would like to thank my friends and family for greatly supporting me while I was working on my research. Your Patience, understanding and respect were greatly appreciated. TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENTS 1. GLOBAL MEDTRONIC CORPORATION.
VIETNAMESE MEDTRONIC CORPORATION. PINNACLE HEALTH EQUIPMENT CORPORATION .1 OVER-FOCUS ON LONG-TERM ACTIVITIES .2 NOT SATISFY THE CUSTOMERS ACADEMIC REQUIREMENTS.3 INSUFFICIENT KEY HOSPITAL MANAGEMENT .4 LOW COST-EFFECTIVENESS OF REGULAR MARKETING ACTIVITIES. SALES REPRESENTATIVES LOW COMPETENCIES, UNABLE TO CASCADE THE IMPACTS OF EVENTS. TRAINING ARE NOT PRACTICAL.
LACK OF CONTENT-CASCADING MATERIALS. LACK OR LOW FREQUENCY OF FOLLOWING ACTIVITIES – INSUFFICIENT SALES REPS TO COVER. FOCUS ON WRONG TYPES OF PROMOTIONAL ACTIVITIES. FOCUS ON WRONG CUSTOMER SEGMENTATION .2 NOT CLEAR INTERPRETATION ABOUT CUSTOMERS INSIGHTS .1 ALTERNATIVE SOLUTION 1: RE-ALLOCATE EXPENDITURE TO OTHER CUSTOMERS’ GROUP BY DIFFERENT APPROACH .2 ALTERNATIVE SOLUTION 2: CONDUCT A SURVEY WITH DOCTORS TO UNDERSTAND DEEPLY CUSTOMERS’ INSIGHTS .28 TIEU LUAN MOI download : skknchat@gmail.
CHANGE PLAN DESIGN.3 ACTION PLAN IMPLEMENTATION.45 TIEU LUAN MOI download : skknchat@gmail.com ABBREVIATION APV Aortic, Peripheral and Venous CRHF Cardiac Rhythm and Heart Failure CS Cardiac Surgery CVG Cardiac Vascular Group EBIT Earning before Interest and Tax FY Fiscal Year HCP Healthcare Professionals KOL Key Opinion Leaders KPIs Key performance index MITG Minimally Invasive Therapies Group MedEVAR Medtronic Endovascular Aneurysm Repair MedTEVAR Medtronic Thoracic Endovascular Aneurysm Repair PnL Profits and Loss Q3 Quarter 3 RTD Round Table Discussion RTG Restorative Therapies Group T&E Training & Education YTD Year to Date TIEU LUAN MOI download : skknchat@gmail.com LIST OF TABLES Table 1: APV Profit & Loss (PnL) – Actual vs Target Table 2: APV Profit & Loss (PnL) – Gap Table 3: APV FY20 P&L - Marketing report Table 4: Pinnacle Performance Report Table 5: Quota Tender Report Table 6: Financial Report – Spent Budget YTD Q3 FY20 Table 7. Training programs in 2019 Table 8. Quantity of customers and KOLs by portfolio Table 9: Quantity of engaged implanters by sales rep Table 10. Cost & benefits for alternative solution 1 Table 11.
Cost & benefits for alternative solution 2 Table 12. Action plan (Author synthesis) Table 13. Detailed description & objectives for specific tasks LIST OF FIGURES Figure 1: APV Organization Structure Figure 2: Pinnacle Organization Structure Figure 3: Training & Education Survey Report Figure 4: Cause-and-Effect map Figure 5. Fish bone diagram of main problems and potential causes Figure 6.
Medtronic marketing materials Figure 7. Cause-and-Effect map Figure 8. Gantt-chart for action plan (Author synthesis) TIEU LUAN MOI download : skknchat@gmail. Global Medtronic Corporation Medtronic PLC is a medical device company that generates the majority of its sales and profits from the U.
healthcare system but is headquartered in the Republic of Ireland for tax purposes. Medtronic has an operational and executive headquarters in Fridley, Minnesota in the U. In 2015, Medtronic acquired Irish–tax registered Covidien (a U. tax inversion to Ireland from 2007), in the largest U.
corporate tax inversion in history, which enabled Medtronic to move its legal registration from the U. Medtronic operates in 140 countries and employs over 86,000 people. Medtronic was founded in 1949 in Minneapolis by Earl Bakken and his brother-in- law, Palmer Hermundslie, as a medical equipment repair shop. Through his repair business, Bakken came to know C.
Walton Lillehei, a doctor of heart surgery at the University of Minnesota Medical School. The deficiencies of the pacemakers of the day were made painfully obvious following a power outage over Halloween in 1957, which affected large sections of Minnesota and western Wisconsin. A pacemaker- dependent pediatric patient of Lillehei died because of the blackout. The next day, Lillehei spoke with Bakken about developing some form of battery-powered pacemaker.
Bakken modified a design for a transistorized metronome and created the first battery-powered external artificial pacemaker. The company expanded through the 1950s, selling equipment built by other companies but also developing custom-made devices. Bakken built a small pacemaker that could be strapped to the body and powered by batteries. Work in the new field later produced an implanTable pacemaker in 1960.
The company-built headquarters in the Minneapolis suburb of St. Anthony, Minnesota, in 1960 and the company moved to Fridley in the 1970s. Medtronic's main competitors in the cardiac rhythm field include Boston Scientific and St. In 1998, Medtronic acquired Physio-Control for $538 million.
According to a press release, the fiscal year 2019 revenue increased by 2% to $30. The net earnings in the fiscal year were $4.41 per diluted share. The non-generally accepted accounting principles (non-GAAP) earnings were 1 TIEU LUAN MOI download : skknchat@gmail.22 in diluted earnings per share. The cash flow from operations was $7.
The free cash flow was $5.873 billion compared with $3.616 billion from the year prior, a 62% increase. And Medtronic, currently, is the largest Medical Device Company in the world. Vietnamese Medtronic Corporation Vietnamese Medtronic Corporation was established in 2016 and a subsidy of Global Medtronic. Like global company, Vietnamese Medtronic Corporation focus on 4 therapeutic Areas: Cardiovascular Group (CVG), Diabetes, Restorative Therapies Group (RTG) and Minimally Invasive Therapies Group (MITG).
In each Group, it will be divided into small sub-groups based on Therapeutic Treatment. In CVG, Medtronic has 4 sub-groups as: Aortic, Peripheral & Venous (APV), Cardiac Rhythm and Heart Failure (CRHF), Cardiac Surgery (CS) and Coronary In this thesis, we only focus on Aortic, Peripheral & Venous Group (APV). Figure 1: APV Organization Structure (Source: Medtronic internal structure) For the current group, as above figure, Medtronic has 12 salespeople, including 02 sales managers and 01 national sales manager (Mr. Total other 9 sales representative will cover national wide but mainly focus on Hanoi, Ho Chi Minh, Da Nang and Can Tho.
2 TIEU LUAN MOI download : skknchat@gmail. Pinnacle Health Equipment Corporation According to Pharmaceutical & Medical Device Regulation, a foreign company is not allowed to join in Supply & Distributing sectors in Pharmaceutical Industry. Only a Vietnamese Corporation with 100% Vietnamese Capital can participate and conduct customer’s selling. Therefore, the potential market for Vietnamese Distributor is annually growing.
Pinnacle Health Equipment Corporation is a young distributor established in 2013 and work in pharmaceuticals and medical device. Although the time length of establishment has been a short time but the leadership teams has had over 20 years of experience in Pharmaceutical Business Operations. Pinnacle Strategy for 2020-2025 and the vision to 2030 is to continue to develop as a distributor for multi-national companies and develop on two areas: Trading and Services (To supply and distribute high-quality products with reasonable price to all Vietnamese Customers) and Imports & Exports (Exclusive import and distribution of World-class medical equipment and Supplies) Figure 2: Pinnacle Organization Structure (Source: Pinnacle internal structure) For the collaboration with Medtronic Vietnam, currently, Pinnacle is the distributors dedicated to managing the Medical Device Business in the Middle (18 Provinces) & The South (17 Provinces) of Vietnam. The total workforce is 13 labors which sales team have 8 staff, focusing mainly in the South of Vietnam 3 TIEU LUAN MOI download : skknchat@gmail.
SYMPTOMS To explore the possibilities of this FPS project. We conduct Intake and External exploration. Base on theory, the intake meeting needs to be prepared by a comprehensive external exploration. According to the internal data, the total target for this Fiscal Year (FY) 2020 is 4.3 MUSD, Growth rate at 7.4% and the Profit and Loss (PnL) or Earnings Before Interest and Tax (EBIT) is 2.
The objectives from the company will have two Key Performance Indexes (KPIs) that includes The Ratio between actual Revenue versus Target (Performance) and the ratio between the actual Profit and Loss (PnL) versus the targeted one. Based on the Figure 1, the result of Revenue Performance seems to be on-track where the running rate is 117% (Quarter 1 & Quarter 2). For the second KPI, we see the reduction between the actual figures and the targeted one. The profits and loss is the most paramout importance for Medtronic APV Vietnam.
Since Vietnam Company is a independent branch of Medtronic Global, Vietnamese Leaders are allowed to control budget spending as well as the revenue, but the PnL have to meet the target, especially the Operationg Profit with Allocations. Therefore, althought Vietnamse Medtronic Branch achieved its target in terms of Revenue, they actually did not get incentives due to the negative gap of Profits. which reflected through the Budget overruns in the analyzed Fiscal Year (FY2020). Vietnam Actual Target $K @ Y19 AOP FX Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Aortic and Peripheral Vascular (APV) Revenue 1,043.0 Net Trade Std.5 Total OPC Gross Margin 752.7 Operating Income without Allocations 289.8 Total Other Operating (Inc)/Exp 6.0 Operating Profit without Allocations 283.7 Operating Profit with Allocations 252.1 Table 1: APV Profit & Loss (PnL) – Actual vs Target (Source: Medtronic internal structure) 4 TIEU LUAN MOI download : skknchat@gmail.com Vietnam GAP-Y2019 $K @ Y19 AOP FX Q1 Q2 Q3 Q4 FY Aortic and Peripheral Vascular (APV) Revenue 201.5 Net Trade Std.3 Total OPC Gross Margin 122.4) Operating Income without Allocations (132.1) Total Other Operating (Inc)/Exp 6.0 Operating Profit without Allocations (138.4) Operating Profit with Allocations (131.7) Table 2: APV Profit & Loss (PnL) – Gap (Source: Medtronic internal structure) The number of this table belongs to FY20 (Feb 2019-Jan2020), therefore, the data was not impacted by COVID 19 situation.
Potential problems In order to deeply analyze, the internal data is used to calculated the gaps, so, as you can see in the above Table, the Profit and Loss or the Operating profit with allocations is lower than target in the first quarter (-131.0KUSD), which followed by a positive number in the second quarter (+122.3KUSD) but cannot fulfill the gap. Total Quarter 1 and Quarter 2, the Profit and Loss is still miss 8. Table 1 shows the data in Q3 &Q4 when the Operating Profit with Allocations still went down to minus 11K and minus 143K respectively.