GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT BÀI TẬP LỚN TỐT NGHIỆP FORMULATING BUSINESS STRATEGY OF XÂY DỰNG CHIẾN MEDIPLANTEX LƯỢC NATIONAL KINH DOANH CỦAJOINT PHARMACEUTICAL CÔNGSTOCK TY CP DƯỢC TRUNG ƯƠNG COMPANY MEDIPLANTEX 2011-2015 PERIOD GIAI ĐOẠN 2011 - 2015 Phung Quang Minh Class: GaMBA01.X0210-Group 5 Vu Van Huy Student: Dang Quang Minh Phung Quang Minh Le Minh Hoang Vu Van Huy Dang Quang Minh Class: Nguyen Minh HoangGaMBA.X0210 Hà nội Hanoi 2011 COMMITMENT In the process of completing this capstone project report, we have received very valuable support from Global Advanced Master of Business Administration Program of Griggs University as well as the staff of Mediplantex National Pharmaceutical Joint Stock Company. We very treasure and are grateful for that valuable support. We would like to commit that the content of this capstone project report is our group’s effort from doing research, studying and selecting the topic to analyzing and formulating strategies. The data and information used in this capstone project report are authentic.
Hanoi, September 17, 2011 Group of authors TABLE OF CONTENTS Page Commitment. i Table of contents.ii List of abbreviations. iii List of figures. iv List of tables.1 Chapter 1: Theoretical background of business strategy.3 The role of strategic management.2 Process of formulating business strategy.1 External and internal environment analysis .1 External environment analysis.2 Internal environment analysis.2 Matrix formulation for selecting business strategy.1 External Factor Evaluation Matrix(EFE).2 Internal Factor Evaluation Matrix (IFE).3 Competitive Profile Matrix.5 Internal-External Matrix (IE).6 Quantitative Strategic Planning Matrix (QSPM).3 Select business strategy.18 Chapter 2: Current state of business performance of Mediplantex National pharmaceutical Joint Stock Company.4 Business result of the company.1 Pharmaceutical products manufacturing .2 Pharmaceutical materials trading and exporting.1 Pharmaceutical products trading.2 Business environment analysis.1 External environment analysis.1 Macro environment analysis.2 Industry environment analysis.4 External Factor Evaluation matrix (EFE).2 Internal environment analysis.2 Analyzing by value chain.5 Internal Factor Evaluation matrix.3 Strategy selection matrix.54 Chapter 3: Selecting business strategy for Mediplantex National Pharmaceutical Joint Stock Company in 2011-2015 period.1 Formulating development objective for Mediplantex National Pharmaceutical Joint Stock Company 2011-2015 priod.1 Vision, Mission, Objective.2 Strategy formulation and selection.1 Basis for selecting strategy.2 Selecting strategy for Mediplantex.3 Solutions for strategy implementation.1 Solutions for maket development strategy implementation.1 The stage of purchasing pharmaceutical materials.2 The stage of preliminary treatment, refining and packing.3 The stage of exporting.2 Solutions on implementing product development strategy.1 Solutions improving product quality.2 Solutions on designing products.3 Solutions on Research and Development.4 Solutions on implementing product development strategy.5 Solutions on finance.74 LIST OF ABBREVIATIONS Mediplantex: Mediplantex National Pharmaceutical Joint Stock Company R&D: Research and Development CPI: Consumer Price Index MPI: Medicine Price Index GDP: Gross Domestic Product LIST OF FIGURES Name of figures Page Figure 1.1 Five Forces Model by Michael Porter 4 Figure 2.1 Organizational structure of the Company 20 Figure 2.2 Proportion of the revenue structure in 2010 21 Proportion of the pharmaceutical product Figure 2.3 22 manufacturing in 2010 Figure 2.4 Growth rates of CPI and MPI in 2006-2010 period 25 Growth rates of GDP and revenue of pharmaceutical Figure 2.6 Market scale of Vietnam’s pharmaceutical industry 29 Figure 3.1 Projected revenue from exports 64 Figure 3.2 Projected output value 66 Figure 3.3 Projected structure of manufactured products 67 LIST OF TABLES Name of tables Page Table 1.1 External Factor Evaluation (EFE) Matrix 10 Table 1.2 Internal Factor Evaluation (IFE) Matrix 11 Table 1.3 Competitive Profile Matrix 12 Table 1.4 SWOT Matrix 14 Table 1.5 Internal – External (I-E) Matrix 15 Table 1.6 Quantitative Strategic Planning Matrix (QSPM) 16 Table 2.1 Business results of the Company in 2008-2010 period 21 Competitive Profile Matrix Table 2.3 Opportunities and threats 36 Table 2.4 External Factor Evaluation Matrix 38 Table 2.5 Balance sheet in 2008-2010 period 43 Table 2.6 Income statement in 2008-2010 period 44 Table 2.7 Financial ratios 45 Table 2.8 Internal Factor Evaluation Matrix 52 Table 2.9 Internal-External (I-E) Matrix 53 Table 2.10 SWOT Matrix 54 Table 3.1 Revenue in the period 2011 to 2015 58 Table 3.2 Profit in the period 2011 to 2015 58 Table 3.3 Quantitative Strategic Planning Matrix (QSPM) 59 Table 3.4 Strategy selection 63 Table 3.5 Projected financial rations in 2011-2015 period 72 PREFACE 1.
Reason for selecting the topic: Most of Vietnamese enterprises, especially small and medium-sized ones, often spend a lot of time on daily arisen work such as finding customers, selling and delivering products, collecting money, managing inventories and debts, etc. Most of these activities are settled unintentionally rather than being planned methodically, managed systematically or evaluated scientifically. The determination of objective, orientation, rational roadmap and optimal resource allocation to reach the set target has not been paid due attention; therefore, business performance is not high. As operated in the field of manufacturing and trading pharmaceutical products, Mediplantex National Pharmaceutical Joint Stock Company often has to cope with the changes in socio-economic environment and fierce competition from companies in the industry; therefore, it is very essential and decisive for the Company to formulate a rational business strategy to serve its sustainable development.
With above reasons, the group of author would like select the topic: “Formulating business strategy for Mediplantex National Pharmaceutical Joint Stock Company in 2011-2015 period” to apply the learned theory into real business situation. Objective of the study Applying theory on business strategy to analyze environmental factors having influence on the Company to recognize strengths, weaknesses, opportunities and threats in order to determine the vision and mission of the Company and suggest solutions for the Company in 2011-2015 period. Methodology of the study: Systematic method Logical method Data processing and analyzing method Generalizing and comparing method based on statistics 4. Structure of the capstone project report: Chapter 1: Theoretical background of business strategy Chapter 2: Current state of business performance of Mediplantex National Pharmaceutical Joint Stock Company Chapter 3: Selecting business strategy for Mediplantex National Pharmaceutical Joint Stock Company in 2011 – 2015 period -2- CHAPTER I: THEORETICAL BACKGROUND OF BUSINESS STRATEGY 1.1 Strategy Strategy is a coordinated series of actions which involve the deployment of resources to which one has access for the achievement of a given purpose.2 Strategic management Strategic management can be defined as “the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objective.3 The role of strategic management Guiding all activities of a company; Helping the company grasp and utilize advantages of business opportunities; Enhancing the company’s competitiveness and ensuring its sustainable development; Creating a firm base for selecting appropriate business strategy that matches the market changes.2 Process of formulating business strategy 1.1 External and internal environment analysis 1.1 External environment analysis The objective of external environment analysis is recognizing external opportunities and threats of an organization.
-3- a, General environment: is composed of dimensions in the broader society that influence an industry and the firms within it such as political, economic, socio- cultural, technological and global. b, Industry environment: is the set of factors that directly influence a firm and its competitive actions and responses. Porter, there are five competitive forces in the scope of an industry, namely: (1) Threat of new entrants; (2) Rivalry among existing firms; (3) Bargaining power of buyers; (4) Bargaining power of suppliers; (5) Threat of substitute products.1 Five forces model by M. Porter Threat of new entrant s Bargaining Bargaining power of power of Rivalry among suppliers buyers existing firms Threat of substitu te product s (Source: Le The Gioi, 2009, Strategic Management, Five Forces Model by Porter, p.106) (1) New entrants -4- New entrants are enterprises that have not existed in an industry, but may have influence on the industry in the future.
Existing companies in the industry try to prevent new entrants from joining the industry. High threat of new entrants poses a threat to profitability of existing companies. In contrast, weak threat of new entrants shows that existing companies can use this opportunity to raise prices and earn more. The number of new entrants and their influence on the industry will depend on following factors: - Attractiveness of the industry - Entry barriers (2) Rivalry among existing firms Existing enterprises in the industry will directly compete with each other, generating pressure on the industry and creating a competitive intensity.
In an industry, following factors will enhance competitive pressure on competitors: - Situation of the industry: Demand, growth rate, the number of competitors, etc. - Structure of the industry: Whether the industry is concentrated or scattered. - Exit Barriers: Similar to entry barriers, exit barriers are factors making the exit of an enterprise out of the industry difficult: Barriers related to technology and invested capital Binds with laborers Binds with the government and related organizations Binds with strategies and plans (3) Bargaining power of buyers -5- Buyer is a competitive pressure that can directly affect all business and production activity of an industry. Buyers can be classified into two groups: Retail buyers and distributors.
Both groups can put pressure on enterprises in terms of price as well as quality of products and associated services. They are the controllers of competition in the industry via purchasing decisions. Similar to bargaining power of suppliers, let’s consider the bargaining power of buyers to an industry. Scale Importance Buyer switching cost Buyer information (4) Bargaining power of suppliers Suppliers can be considered as a threat when they can raise prices of materials or reduce requirements on inputs that they supply to a company; thus, reduce profitability of the Company.
In contrast, weak suppliers can bring about an opportunity for the company to require a price cut and high quality. Bargaining power of suppliers to a company depends on the relative power between them and the company and relies on: - The number and scale of suppliers - Substitute products - Information about suppliers (5) Threat of substitute products Substitute products are goods or services from outside a given industry that perform similar or the same functions as a product that the industry produces. -6- The existence of close substitute products shows a threat of competition, limiting the ability to set high price; thus, limiting profitability. c, Competitor analysis Competitor analysis is collecting necessary information with ethics to deeply understand: - Orientation of competitors (objective for the future) - Capacity and intention of competitors (current strategy) - Thought of competitors about the industry (their supposition) - Capacity of competitors 1.2 Internal environment analysis Internal factor analysis and evaluation allows the determination of strengths as well as weaknesses of an enterprise.
a, Analysis of resources Resources, in a broader sense, include a series of factors like orientation, technology, human resources and financial capacity of a company. Resources can be divided into two types: Tangible and intangible resources. Tangible resources are visible and qualitative, including financial resource, organization, materials and technology. Intangible resources consist of human resources, innovative capacity and reputation.
Intangible resources have more effective and outstanding influence on creating core capacities compared to tangible resources. In the global economy, the -7- success of a company depends on the systematic intellectual and resources rather than its material assets. b, Value chain analysis The term value chain indicates the idea considering a company as a chain of activities transforming input into output and generating value for customers. The process of transforming inputs into outputs includes primary activities and support activities.
Each activity can add value for products. - Main activities: Main activities must be implemented with designing, creating, delivering products as well as marketing and providing post-sale or supporting services. Main activities are divided into: R&D, production, marketing, and service. Research and development (R&D) relates to designing products and planning production process.
Production relates to creating products or services. Production function of a company is to generate value by implementing its activities effectively; thus, lowering cost. Production can also generate value by implementing its activities with the method associated with high-product quality, leading to differentiation and low cost that both create value for the company.