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GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM Hà nội CAPSTONE PROJECT REPORT BÀI TẬP LỚN TỐT NGHIỆP FORMULATING BUSINESS STRATEGY OF MEDIPLANTEX NATIONAL XÂY DỰNG CHIẾN LƯỢC PHARMACEUTICAL JOINT STOCK KINH DOANH CỦA CÔNG TY CP COMPANY DƯỢC TRUNG ƯƠNG 2011-2015 PERIOD MEDIPLANTEX GIAI ĐOẠN 2011 - 2015 Class: GaMBA01.X0210-Group Phung Quang Minh Student: Vu Van Huy Phung Quang Minh Dang Quang Minh Vu Van Huy Le Minh Hoang Dang Quang Minh Nguyen Minh Hoang Class: GaMBA.X0210 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 v PREFACE Chapter 1: Theoretical background of business strategy 1.1 Basic concepts 1.1.1 Strategy 1.1.2 Strategic management 1.1.3 The role of strategic management 1.2 Process of formulating business strategy 1.2.1 External and internal environment analysis 1.2.1.1 External environment analysis 1.2.1.2 Internal environment analysis 1.2.2 Matrix formulation for selecting business strategy 1.2.2.1 External Factor Evaluation Matrix(EFE) 1.2.2.2 Internal Factor Evaluation Matrix (IFE) 11 1.2.2.3 Competitive Profile Matrix 12 1.2.2.4 SWOT Matrix 13 1.2.2.5 Internal-External Matrix (IE) 15 1.2.2.6 Quantitative Strategic Planning Matrix (QSPM) 16 1.2.3 Select business strategy 17 1.2.4 Strategy implementation 17 1.2.5 Strategy evaluation 18 Chapter 2: Current state of business performance of Mediplantex National pharmaceutical Joint Stock Company 19 2.1 Introduction 19 2.1.1 Background 19 2.1.2 Development History 19 2.1.3 Organizational Structure 20 2.1.4 Business result of the company 21 2.1.4.1 Pharmaceutical products manufacturing 22 2.1.4.2 Pharmaceutical materials trading and exporting 23 2.2.1.1 Pharmaceutical products trading 23 2.2 Business environment analysis 24 2.2.1 External environment analysis 24 2.2.1.1 Macro environment analysis 24 2.2.1.2 Industry environment analysis 28 2.2.1.3 Competitor analysis 32 2.2.1.4 External Factor Evaluation matrix (EFE) 37 2.2.2 Internal environment analysis 39 2.2.2.1 Resources 39 2.2.2.2 Analyzing by value chain 48 2.2.2.3 Strengths 50 2.2.2.4 Weaknesses 51 2.2.2.5 Internal Factor Evaluation matrix 52 2.2.3 Strategy selection matrix 53 2.2.3.1 I-E matrix 53 2.2.3.2 SWOT matrix 54 Chapter 3: Selecting business strategy for Mediplantex National Pharmaceutical Joint Stock Company in 2011-2015 period 57 3.1 Formulating development objective for Mediplantex National Pharmaceutical Joint Stock Company 2011-2015 priod 57 3.1.1 Vision, Mission, Objective 57 3.1.1.1 Vision 57 3.1.1.2 Mission 57 3.1.1.3 Objective 57 3.2 Strategy formulation and selection 59 3.2.1 Strategy formulation 59 3.2.2 Strategy selection 59 3.2.2.1 Basis for selecting strategy 59 3.2.2.2 Selecting strategy for Mediplantex 62 3.3 Solutions for strategy implementation 63 3.3.1 Solutions for maket development strategy implementation 63 3.3.1.1 The stage of purchasing pharmaceutical materials 63 3.3.1.2 The stage of preliminary treatment, refining and packing 64 3.3.1.3 The stage of exporting 64 3.3.2 Solutions on implementing product development strategy 66 3.3.2.1 Solutions improving product quality 69 3.3.2.2 Solutions on designing products 69 3.3.2.3 Solutions on Research and Development 69 3.3.2.4 Solutions on implementing product development strategy 70 3.3.2.5 Solutions on finance 71 CONCLUSION 73 REFERENCES 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 Figure 2.1 Organizational structure of the Company 20 Figure 2.2 Proportion of the revenue structure in 2010 21 Figure 2.3 Figure 2.4 Figure 2.5 Figure 2.6 Proportion of the pharmaceutical product manufacturing in 2010 Growth rates of CPI and MPI in 2006-2010 period Growth rates of GDP and revenue of pharmaceutical industry Market scale of Vietnam’s pharmaceutical industry 22 25 28 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 21 period Table 2.2 Competitive Profile Matrix 35 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 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 -1- Alternatives N o Weigh t Factors Approach to advanced Market developme nt strategy Product development strategy Backward integration strategy AS TA S AS TA S A S TAS 3 9 2 4 12 12 12 2 2 2 2 12 12 12 technology of the world Weak and lacked human resources Insignificant bargaining power of buyers Inflation rate, exchange rate, interest expense Dependence on materials of suppliers High entry barriers Total attractiveness score 185 179 107 From the Quantitative Strategic Planning Matrix (QSPM), it can be seen that total attractiveness score is market development strategy with the total score of 185 scores, followed by product development strategy with 179 scores and backward integration strategy is less attractive with 107 scores - 65 - 3.2.2.2 Selecting strategy for Mediplantex National Pharmaceutical Joint Stock Company Based on the analyses mentioned above, we have selected a common strategy for Mediplantex National Pharmaceutical Joint Stock Company in the 2011-2015 period as follows: Table 3.4 Strategy selection Name of strategy Market development strategy Description Developing the available strength on capacity, experiment and good relationship in the field of exporting pharmaceutical materials and drugs combined materials with and mechanism pharmaceutical drugs encouraging the Government; of developing pharmaceutical materials and drugs export markets Product development strategy Concentrating on investment in developing product in order to create high-quality products with differentiation, high value-added 3.3 Solutions for strategy implementation 3.3.1 Solutions for market development strategy implementation: 3.3.1.1 The stage of purchasing pharmaceutical materials - 66 - The company has co-ordinated with the National Institute of Medicinal Materials and provincial departments of agriculture to evaluate the potential of sources of available medicinal materials in the Northern mountainous provinces, Central region and Central Highlands region Estimating the volume of pharmaceutical materials that can be purchased in regions by harvest season Establishing collectors in localities via agents, households with high volume of pharmaceutical materials and cooperatives in localities Basing on the harvest season of pharmaceutical materials to make good plan for purchasing, setting up appropriate prices and encouraging farmers Organizing training on harvesting, preserving, packing and transporting to the places for preliminary processing before transporting to the Company for refining and packing 3.3.1.2 The stage of preliminary treatment, refining and packing Using available technological lines to carry out preliminary treatment and refining products purchased based on the standards of export or requirements of customers; using storage system with GSP standard to well preserve the product quality and quickly satisfy the customers’ demand if needed 3.3.1.3 The stage of exporting The objectives are promoting the existing advantages of the Company, enhancing export of some pharmaceutical materials which are strength of Vietnam and some medicine to other countries The projected revenue of the Company by 2015 is as follows: Figure: 3.1 Projected revenue from exports - 67 - * Strengthening and expanding relation with foreign partners Sustaining and promoting exports to African customers purchasing Astemisinin, Southeast Asian countries like Laos and Myanmar purchasing normal medicine like Paracetamol, Dexametazol, Diclofelac and antibiotic medicine like Lincomycin, etc Expanding exports to some countries like Russia, Demark, Spain, Japan that have demand for purchasing attar like peppermint, cinnamon, garlic powder, and some pharmaceutical materials like Rutin, Rotundin, Actiso glue, Crinum latifolium L., Ngoc Linh Ginseng, etc Taking advantages of representatives and foreign partners currently cooperating with the Company to promote available pharmaceutical materials Cooperating with partners to evaluate demand of foreign customers for natural pharmaceutical materials that are strength of Vietnam Participating in international trade fairs to seek for new customers Enhancing promotion of products via international specialist magazines, etc - 68 - Enhancing exports among ASEA countries The Company has an advantage of having exporting medicine into neighboring counties like Laos and Myanmar and it will export medicine to Cambodia in the coming time because these countries have not been able to develop modern pharmaceutical plants At present, these countries are importing medicine from Thailand and some pharmaceutical firms in Europe, India, etc However, Vietnam has many advantages in terms of geographic location and politics, the Company is recommended to expand relations with health ministries of these countries in order to register to circulate more products in these countries Implementing policies well to compete when penetrating in above markets 3.3.2 Solutions on implementing product development strategy At present, the Company is manufacturing many types of products in above-mentioned groups; however, the production situation and sale plan making have not been proactive; therefore, production and consumption plan in the coming years will be divided into clear proportions and the projected plan to 2015 is as follows: Figure 3.2: Projected output value - 69 - - 70 - Figure 3.3: Projected structure of manufactured products Based on the groups of products currently traded and have market share mentioned below, the Company is essential to improve pattern and quality to renovate and raise value of existing products At the same time, the Company - 71 - should also manufacture more products in these groups, especially focusing on Oriental medicine, obstetrical medicine and anti-biotic medicine - Group of products originated from natural herbs such as Influenza medicine Comazil, diarrhea medicine Antesik, AntiRheumatic medicine Tuzamin, Sinusitis medicine Esha, Oriental tonic (cordyceps roberti, ganoderma lucidum, and ginseng), etc - Group of obstetrical products such as birth control pill, gynecological anti-inflammatory - Rosegynal, supplement for pregnant women – Uniferon, etc - Group of antipyretic, analgesic, anti-inflammatory medicine such as Paracetamol, Meloxicam, Diclofelac, Anphachymotrisin, Dexametazol - Group of anti-biotic medicine such as Azithromycin, Lincomycin, Cephalexin, Cefixim, Cefuroxim, etc - Besides, there are many other types of medicine like immune enhancement medicine - Mediphynamin, digestive medicine - Omeprazol, lansoprazol, Silymax, supplements, vitamin, acid amin, etc Research & Development Department studies new products and register to manufacture with the Ministry of Health to product new products in the coming years According to surveyed data of the Ministry of Health, the number of people contracting diabetes and cardiovascular diseases and blood fat is surging and will continue to increase rapidly in the coming years According to surveyed data, Vietnam has about 4.5 million people contracting diabetes and Vietnam is also the country with highest pace of disease development The number of patients in the coming ten years will be doubled The number of respiratory patients also tends to increase owing to weather changes and environmental pollution As surveyed, the - 72 - rate of contracting respiratory diseases in Vietnam is the highest among diseases; therefore, the Company will invest in developing two new groups of products in the coming year - Group of diabetes medicine, cardiovascular medicine, high blood fat medicine with products containing active elements like Glyglazid, Trimetazidin, Simvastatin, Gemfibrozil, etc - Groups of respiratory medicine such as anti-asthma medicine, antibronchospasm medicine like sabutamol, anti-allergic medicine like fexofenadin, respiratory function enhancement medicine like thymomodulin, and medicine for treating obstructive pneumonia To manufacture products with high quality, differentiation and high added value, the Company is recommended to implement following solutions: 3.2.2.1 Solutions improving product quality - Selecting high-quality input materials from prestigious suppliers Using suitable production technology with each type of medicine, machine and equipment to check quality of each production process, removing tablets, packages, bottles of medicine that not ensure standards in production process Products are researched, prepared and tested carefully, meeting the industry’s as well as International standards (such as solubility, bioequivalence, safety, etc.) There must be appropriate formula and forms of preparation for each object and improvement of some disadvantages for users such as sell, taste and stable quality depending on temperature, humidity and lifespan of products Product quality ensures high-effective, quick and safe treatment 3.3.2.2 Solutions on designing products - 73 - Package designing and packing method are also important process to make customers feel convenient and have good impression on products right when they touch them Image of products help distributors and customers recognize product maker? Avoiding similar designs and packages Building consistent image on packages regarding logos, color, instruction, manufacturing standards, telephone number, website, etc Creating good image, easy to recognize and reliable in the eyes of customers Differentiating the Company’s products with others’ 3.3.2.3 Solutions on Research & Development Research & Development is the key Department to make market ideas into products in a near future, work out alternatives in terms of preparation, formula, quality and pattern of products After manufacturing and testing formula successfully a new product, the product should be manufactured at a large scale and launch in the market To well perform this task, the Company needs enhance investment in technological equipment and modern machine to make research and trial production quicker and more accurate At the same time, the Company also needs to cooperate with scientists at institutes and universities; foreign experts; or send cadres to study abroad to make research, management and production organization more effectively Expense for Research & Development Department is projected at 5%-6% of annual revenue Investing in to researching trends of new diseases and diseases with increasing infection rate such as cardiovascular medicine, diabetes medicine, respiratory medicine; and treatment trend of hospitals in the coming time to cooperate to manufacture or selling production ideas to foreign firms 3.3.2.4 Solutions on marketing and distribution - 74 - The most important stage in market is selecting product to trade or promote Right at the stage of forming ideas about products, there must be clear plan for market segment of product, disease treated by the product, buyers, users, payers, etc After determining the market segment, positioning the product to determine customers The next task is making plan and estimating expense for deploying marketing and sales including promotion plans, building image, sale and distribution policy, program progress management and evaluation on effective of the program by period As financial situation of the Company remains limited, it is recommended to considered carefully before making decision on selecting products for marketing and expense to reach effectiveness The projected annual expense for marketing products accounts for about %-10% revenue To make marketing activity successful, the Company is recommended to make policies for distribution system such as agents, pharmaceutical companies in provinces, hospitals; well manage pharmacists at stores; promote human resources inside and outside the Company in order to create breakthrough in consumption when well cooperating push-and-pull policy in marketing 3.3.2.5 Solutions on finance According to the income statement of the Company, the current profit of the Company is quite low compared to the industry average owing to following results: - The Company’s banks’ loans at present are about VND 100 billion with the interest rate of 18% - 21 % per year; therefore, the interest expense is very high - 75 - - Investment in machine and equipment is high; therefore, the current depreciation is significant In the coming years, the Company is recommended to raise chartered capital (equity), keep loans stable, and distribute dividend at low level to accumulate capital and ensure growth for the Company in the coming time - Setting out selling price for groups of products reasonably to raise gross profit margin by 13% -18% year by year - Well managing costs to reduce selling expense by 2%-4% and general & administration expenses by 1% - 2% compared to the current level - Well forecasting on export to purchase products and keep inventories at a rational level and exploiting imported material well to manufacture products with competitive prices Table 3.5 Projected financial criteria in 2011-2015 period Unit: VND billion No Content 2011 2012 2013 2014 2015 Charter capital 75 100 125 150 200 Net sales 500 550 610 720 830 Gross profit 65 77 88.5 108 132.8 Selling expense 18 18.5 19.1 22.8 28.7 Marketing expense 12 14 16.4 19.2 23.2 - 76 - R&D expense General & administration expenses 7.5 8.8 10.2 12 14.5 15 16.5 18.3 21.6 24.9 Earnings before tax 12.5 19.3 24.4 32.4 41.5 Profit after tax 9.38 14.5 18.3 24.3 31.2 10 Dividend 8% 10% 10% 10% 12% Financial targets are formed set out based on current ratios and analyses mentioned above are the set targets to implement business strategy of the Company in 2011 – 2015 period - 77 - CONCLUSION It is important to have right orientation for a strategy of a company to help the company with a firm direction in a period It helps the company know what it is, where it is, what it wants and how to realize its expectations In the stage of tough competition, along with the sharp changes to external environment, the implementation of planned strategies also encounter difficulties; therefore, a revised process of strategy implementation is also a very important part With the topic of the capstone project repot “Formulating business strategy for Mediplantex National Pharmaceutical Joint Stock Company in 20112015 period”, we hope that the given solutions will help the Company enhance its competitive capacity and develop sustainably This is a difficult topic requiring a broad knowledge both in terms of theory and practice Our group has made a lot of effort in conducting this capstone project report; however, due to limited time and lack of practical experience, the report certainly still contains shortcomings, we hope to receive contributed ideas from teachers and classmates Thank you very much! - 78 - REFERENCES Vietnamese: Le The Gioi – Nguyen Thanh Liem – Tran Huu Hai (2009), Strategic Management, Statistical Publishing House, Hanoi GaMBA (2010), Textbook on Strategic Management Data and reports of Mediplantex National Pharmaceutical Joint Stock Company Sources from the Internet, Financial Magazine, Trade Magazine, Foreign Trade Magazine, Vietnam Economics Source of information from internal pharmaceutical industry English Fred R.David (2011), Strategic Management concepts and cases, Pearson - 79 - ... capital for its business and production (Source: The Sai Gon Giai Phong newspaper http://www.vietcombank.com.vn, http://vneconomy.vn/) c, Social-cultural environment: At present, Vietnam population