VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS * master of business administration thesis Nguyen Quy Anh Tuan DEVELOPING BUSINESS STRATEGIES FOR HAU GIANG PHARMACEUTICAL JOINT STOCK COMPANY (2012-2015) MASTER OF BUSINESS ADMINISTRATION THESIS * Nguyen Quy Anh Tuan 2011 Hanoi - 2011 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS Nguyen Quy Anh Tuan DEVELOPING BUSINESS STRATEGIES FOR HAU GIANG PHARMACEUTICAL JOINT STOCK COMPANY (2012-2015) Major: Business Administration Code: 60 34 05 MASTER OF BUSINESS ADMINISTRATION THESIS Supervisor: Dr. Vu Anh Dung Hanoi - 2011 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS ACKNOWLEDGEMENTS.v TABLE OF CONTENTS .viii LIST OF TABLES.xi LIST OF FIGURES.xii LIST OF ABBREVIATIONS. xiii CHAPTER 1: INTRODUCTION. Necessity of the thesis.
Research aim and objectives. Scope of the research. Significance of the research. Suggestions for future research.7 CHAPTER 2: LITERATURE REVIEW.2 Hierarchy and types of strategy .2 Strategic management process .3 External scanning: macro environment and industry environment analysis.1 Macro environmental analysis: P.2 Industry environment analysis.
18 viii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.3 Synthesis of external factors – External Factors Analysis Summary (EFAS) .4 Internal scanning: organization analysis.1 Resource-based view of the firm .2 Value chain of the firm.3 Synthesis of internal factors – Internal Factors Analysis Summary (IFAS) .7 Strategy evaluation and control.37 CHAPTER 3: ANALYSIS ON VIETNAM PHARMACEUTICAL MARKET. Overview of Vietnam pharmaceutical market. Notable characteristics of Vietnam pharmaceutical market. Forecasts on Vietnam pharmaceutical market in 2012 – 2015.
Development prospects of Vietnam pharmaceutical market. Prescription drug market forecast. OTC drug market forecast. Patented Drug Market Forecast.
Generic drug market forecast. Pharmaceutical Trade forecast. Synthesis of External Factors – EFAS (External Factors Analysis Summary) .58 ix LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 4: ANALYSIS ON DHG PHARMACEUTICAL COMPANY62 4.1 Overview of DHG pharmaceutical company.1 Establishment and development of DHG.2 Scope of business and major products of DHG .3 Vision, mission and core values of DHG.4 Organizational structure of DHG .5 Business performance of DHG.3 Internal analysis for DHG.1 Value chain analysis of DHG.2 Distinctive competencies of DHG .4 Competitive position of DHG .5 Synthesis of internal factors – IFAS (Internal Factors Analysis Summary) .91 CHAPTER 5: STRATEGY DEVELOPMENT FOR DHG IN 2012 – 2015 93 5.1 Orientations and objectives of DHG in 2012-2015 .2 Strategy development for DHG.1 International experience on strategy development .2 TOWS Matrix of DHG .3 Strategy development of DHG in 2012 - 2015.3 Recommendations for implementing and controlling DHG’s strategies.109 x LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLES Table 2.1: Ten schools of strategic thought .2: Types of strategy .3: External Factors Analysis Summary (EFAS): Maytag Example .4: Internal Factors Analysis Summary (IFAS): Maytag as Example 28 Table 2.6: Corporate Governance Mechanisms .1: Vietnam Pharmaceutical Industry SWOT.2: Revenues and Profits of listed Vietnamese Pharmaceutical Companies in 2009.3: Synthesis of External Factors – EFAS of DHG .1: Milestones of DHG.2: Evaluation of DHG’s Competencies .3: Listed Vietnamese Pharmaceutical Companies.4: Classification of listed pharmaceutical companies in Vietnam.5: Weighted Competitive Strengths Assessment of DHG, Imexpharm, Domesco, Vien Dong Pharma .6: Synthesis of Internal Factors – IFAS of DHG.1: TOWS Matrix of DHG. 96 xi LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF FIGURES Figure 2.2: The Five Generic Competitive Strategies .3: Strategic Management Model.4: Porter’s Five Forces Model .5: Strategic Group in the Pharmaceutical Industry.6: Firm’s Value Chain .7: Why Do Control System Fail .1: Vietnam Pharmaceutical Market Share.2: Vietnam pharmaceutical market’s value and growth rate .3: Prescription Drug Market Forecast.4: OTC Medicine Market Forecast .5: Patented Drug Market Forecast .6: Generic Drug Market Forecast .7: Pharmaceutical Trade Forecast.1: DHG’s Major Products.2: Organizational Structure of DHG .3: Net Sale and Profit after Tax of DHG.4: Growth Rates of DHG.5: Profitability Ratios of DHG.6: Chain value of DHG.7: DHG Distribution System.
73 xii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF ABBREVIATIONS BMI Business Monitor International DAV Drug Admistration of Vietnam DCL Cuu Long Pharma Company DHT Ha Tay Pharma Company DMC Domesco Pharma Company DVD Vien Dong Pharma Company EFAS External Factors Analysis Summary GDP Good Distribution Practice GLP Good Laboratory Practice GPP Good Pharmacy Practice GSP Good Storage Practice GSK GlaxoSmithKline IMP Imxepharm Company LDP Lam Dong Pharma Company MKP Mekopharm Company OPC OPC Pharma Company PMC Pharmedic Company WHO World Health Organization R&D Research & Developement RBV Resource-based view of the firm SPM SPM Pharma Company TRA Traphaco Pharma Company VMD Vimedimex Company xiii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 1: INTRODUCTION 1. Necessity of the thesis Vietnam's pharmaceutical industry is in a period of substantial growths. According to the Drug Administration of Vietnam (DAV), the total value of drugs utilized in Vietnam in 2009 was estimated to be approximately 1.7 billion dollars, an increase of 19 percent against 20081. Total medication spending per capita in 2009 reached 19.7 dollars with respect to the years 2008 and 20012.
DAV also explicitly indicated that Vietnam pharmaceutical market would continue to grow at a rapid annual rate of 25 percent, reaching a 2-billion-dollar value in 2012. The figure is subject to continuous increase over the subsequent years3. Being regarded as the leading company in the industry, Hau Giang pharmaceutical (DHG) is well known for being voted in 14 consecutive years by consumers as Vietnamese high quality product. Additionally, it ranked first in terms of sales volume among all local pharmacies and was third in revenues after two foreign firms in the Vietnamese market (DHG, 2009).
Delivering a speech at the summation operations ceremony in 2009, the company's representatives emphasized that business strategy was one key element to its success in recent years4. 1 “Vietnam pharmaceutical market increases 25%”. Retrieved from http://www.vn/Home/kinhdoanh/thuongmai/35284/ 2 Ibid. 4 “DHG’s profit: twice as high as that of the last year period”.
Retrieved from http://vneconomy.vn/20091201051952243P19C9915/dhg-dat-loi-nhuan-gap-doi-cung-ky.htm 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com However, challenges that DHG is facing in the coming years are likely to be fierce, not only from competitions of strong domestic pharmaceutical companies but also from competitions of foreign pharmaceutical companies. Many leading multinational pharmaceutical companies have established their representative offices and have been operating in Vietnam since long time ago such as Pfizer (USA), Bristol Mayer Squipp (USA), Jasen Cilag (subsidiary company of Johnson & Johnson, USA), Stada (Germany), Bayer (Germany), Boehringer (Germany), Sanofi-Anventis (France), GlaxoSmithKline - GSK (UK), Gedeon Richer (Hungary), Roche (Swiss), United Pharma (Phillipines). Many international pharmaceutical companies have begun to expand their operations in Vietnam market through investing on building their own factories or outsourcing domestic pharmaceutical companies to manufacture their drugs. In November 2010, Acitivis, the fifth largest generic drug manufacturer, held a press conference to introduce cooperation opportunity between it and other Vietnamese pharmaceutical companies and express its ambition to penetrate Vietnam’s drug sector through cooperation with them5.
In December 2010, GSK signed cooperation contract to appoint SaviPharm to manufacture drugs for GSK in Vietnam market6. Together with commitments of Vietnam to WTO, foreign pharmaceutical companies will have the rights to open branches in Vietnam and directly import pharmaceuticals. After 5 years since joining WTO7, Vietnam will also have to reduce tax of imported pharmaceutical to 2. 5 “Pharmaceutical market and moves of foreign investors”.
Retrieved from http://vneconomy.vn/201011300153616P0C19/thi-truong-duoc-va-chuyen-dong-tu-phia-nha-dau-tu- ngoai.htm 6 “SaViPharm manufactures medicine for GlaxoSmithKline”. Retrieved from http://www.vn/Home/kinhdoanh/thuongmai/45031/SaViPharm-cung-ung-thuoc-cho- GlaxoSmithKline.html 7 “Vietnam pharmaceutical market increases 25%”, op cit. SaigonTimes Online 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Consequently, from 2012 onwards, the challenges to Vietnamese pharmaceutical companies in general and DHG in particular will become fiercer and fiercer. In this context, it is absolutely vital to develop suitable business strategies for DHG over the next period 2012-2015.
Research aim and objectives The aim of this thesis is to propose suitable business strategies, which fit between internal resource and external enviroments, in order to create sustainable competitive advantage for DHG in the period of 2012-2015. To realize this aim, the thesis recognizes the key following objectives: 1. To summarize specific characteristics of Vietnam phamarceutical market (size, growth rate, market segment, medicine spending, market shares of drug companies) and forecasts on future development of the market in 2012-2015. To identify Strategic groups and Key Success Factors of the market.
To carefully evaluate the market with P.L Model and Porter’s Five Forces Model. To identify opportunities and threats that DHG will confront with to construct EFAS Matrix (External Factors Analysis Summary) for DHG. To introduce and analyze business performance of DHG in recent years in comparison with its major competitors. To carefully analyze DHG with Value chain and Resource-based view, core competencies.
To identify strengths, weaknesses of DHG in order to construct IFAS (Internal Factors Analysis Summary) Matrix for DHG. To construct TOWS Matrix and propose suitable business strategy for DHG to take full advantages of strengths, opportunities and eliminate weaknesses, threats of the company in order to create sustainable competitive advantages for DHG. 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. To give recommendation to implement the proposed business strategy.
Research questions In order to propose suitable business strategies for DHG in 2012-2015, the thesis is going to find answers for the following research questions: 1. Major research question: Which business strategies will be suitable for DHG in 2012-2015? What should be done to successfully implement the proposed strategies? 2. Minor research questions: What are some external factors affecting DHG? What are the effects of these factors on DHG? Opportunities and threats that DHG will confront with in the period? What are internal factors affecting DHG? What are the impacts of these factors on DHG? Strengths and weaknesses that DHG will confront with in the period? What are the competitions in Vietnam pharmaceutical industry like at the present and in the future? In order to succeed in the industry, what factors should be taken into consideration? 1. Research methodology There are three ways to classify research in term of perspectives (Kumar, 2005): Application of the research (pure or applied research).
Objectives in undertaking the research (descriptive, correlation, explanatory or exploratory research). Inquiry mode employed (qualitative or quantitative research). 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com These classifications are not mutually exclusive since one research can be a combination of several types of researches. The thesis researches theory on strategy and strategic management in order to apply them to develop business strategy for DHG in 2012-2015 (applied research).
In the process of developing strategy for DHG, the thesis describes, analyzes Vietnam pharmaceutical industry as well as DHG and its competitors in the industry. Case study method was utilized (in qualitative research method) in the thesis. The case of DHG was researched in comparison with major competitors of DHG (Vietnamese pharmaceutical companies which were listed and produced generic drugs). Data used in the thesis were taken from both reliable secondary data of prestigious market research (Business Monitor International – BMI) and state agency of drugs and healthcare (Drugs Administration of Vietnam – DAV, Ministry of Health) as well as from audited financial reports of listed Vietnamese pharmaceutical companies.
Future forecasts of Vietnam pharmaceutical industry are extracted from Vietnam Pharmaceuticals and Healthcare Report which was conducted by BMI and published in the fourth quarter of 2010. Analysis used in the thesis was gathered from the self-evaluation of the author on the current situation of the industry, combined with knowledge generated from the interviews with numerous experts in the field. Scope of the research The thesis strives to propose business strategies for DHG during the years 2012-2015, and it involves analyzing two crucial time frames. For instance, statistics and information gathered over the years 2007-2011 are used to achieve better understanding of recent activities of Vietnam pharmaceutical industry, and predictions for the subsequent years (2012- 5 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.