TABLE OF CONTENTS INTRODUCTION 1 CHAPTER 1 THEORETICAL BACKGROUND OF DISTRIBUTION CHANNELS MANAGEMENT OF PHARMACEUTICAL ENTERPRISES 7 1 1 DISTRIBUTION CHANNEL OF PHARMACEUTICAL ENTERPRISES 7 1 1 1 Con[.]
i TABLE OF CONTENTS INTRODUCTION CHAPTER 1: THEORETICAL BACKGROUND OF DISTRIBUTION CHANNELS MANAGEMENT OF PHARMACEUTICAL ENTERPRISES 1.1 DISTRIBUTION CHANNEL OF PHARMACEUTICAL ENTERPRISES .7 1.1.1 Concept of distribution channel 1.1.2 Role of distribution channel 10 1.1.3 Functions of distribution channel .11 1.1.4 Flows in distribution channel 12 1.1.5 Structure of distribution channel 13 1.1.6 Members of distribution channel 15 1.2 MANAGEMENT OF DISTRIBUTION CHANNEL OF PHARMACEUTICAL ENTERPRISES 16 1.2.1 Concept of distribution channel management 16 1.2.2 Objectives and criteria of distribution channel management 17 1.2.3 Content of product distribution channel management 21 1.2.4 Elements impact on distribution Channel Management 28 CHAPTER 2: CURRENT MANAGEMENT OF DISTRIBUTION CHANNEL OF TRUONG GIANG COSMETIC PHARMACEUTICAL CO., LTD 34 2.1 INTRODUCTION OF TRUONG GIANG COSMETIC PHARMACEUTICAL CO., LTD 34 2.1.1 Historical development of Truong Giang company 35 2.1.2 Business activities of Truong Giang company 36 2.1.3 Organization chart 36 2.1.4 Operational results of Truong Giang Cosmetic Pharmaceutical Co., Ltd from 2011 to 2014 37 2.2 ACTUAL STATE OF DISTRIBUTION CHANNEL STRUCTURE OF TRUONG GIANG PHARMACEUTICAL CO., LTD 41 2.2.1 The company distribution management apparatus 41 2.2.2 Structure of current distribution channels 42 2.2.3 REAL STATE OF DISTRIBUTION CHANNEL POLICIES 50 ii 2.3 EVALUATING THE MANAGEMENT OF PHARMACEUTICAL DISTRIBUTION CHANNEL OF TRUONG GIANG COMPANY 62 2.3.1 Evaluation by criteria 62 2.3.2 Evaluation based on content of distribution channel management 64 CHAPTER 3: RECOMMENDATIONS TO IMPROVE DISTRIBUTION CHANNEL MANAGEMENT OF TRUONG GIANG COSMETIC PHARMACEUTICAL AND TRADE CO., LTD .68 3.1 RECOMMENDATIONS ON THE DEVELOPMENT MANAGEMENT OF DISTRIBUTION CHANNEL OF TRUONG GIANG COSMETIC AND PHARMACEUTICAL CO., LTD 68 3.1.1 Forecast of pharmaceutical market in Vietnam by 2020 68 3.1.2 Plans to improve distribution channel management of Truong Giang Cosmetic and Pharmaceutical Co., Ltd by 2020 69 3.2 SOLUTIONS TO IMPROVE DISTRIBUTION CHANNEL MANAGEMENT OF TRUONG GIANG COMPANY .69 3.2.1 Solutions to improve distribution channel management apparatus 69 3.2.2 Solutions to improve structure and organizational form of distribution channel 71 3.2.3 Solutions to improve the policies of distribution channel management 73 3.2.4 Other solutions 80 3.3 SOME PROPOSALS .85 3.3.1 Some proposals to the State 85 3.3.2 Proposing to Vietnam Pharmacy Corporation and the Ministry of Health.86 CONCLUSION 88 LIST OF REFERENCES .90 iii LIST OF TABLE Table 2.1 Business results of Truong Giang Co., Ltd (Pharmaceutical) 39 Table 2.2 Qualification of staffs of distribution channel 42 Table 2.3 Revenue of Channel Type of Truong Giang Co., Ltd in 2012-2014 45 Table 2.4 Geographic distribution of intermediaries (up to 01/09/2015) .47 Table 2.5 Revenue of distribution channel type of Truong Giang Company in 20122014 47 Table 2.6 Revenue of distribution channel type of Truong Giang Company in 20122014 49 Table 2.7 The selection criteria of the channel member of Truong Giang Company .52 Table 2.8 Results of selecting distribution channel members in 2011-2014 53 Table 2.9 Policies of encouraging distribution channel member of Truong Giang Company 54 Table 2.10 Member’s evaluation of incentive policies in Truong Giang Company in 2014 56 Table 2.11 Conflict in distribution channel of Truong Giang Company in2011-2015 60 Table 2.12 Survey result on policies of solving distribution channel’s conflict of Truong Giang Company in 2014 61 Table 2.13 Market share of pharmaceutical products of Truong Giang Company in some major markets (in terms of revenue) 62 Table 2.14 Market Coverage of Truong Giang in 2011-2014 63 Table 2.15 Evaluating the satisfaction of members of distribution channel in Truong Giang Company in 2014 63 iv LIST OF FIGURE Figure 1.1 Structure of distribution channel 14 Figure 1.2 Benefit of Intermediaries .19 Figure 1.3 Process of evaluating activities of channel members 27 Figure 2.1 Organization chart 37 Figure 2.2 Growth of total drug consumption and average for pharmaceutical products in Vietnam 38 Figure 2.3 Business results of Truong Giang Co., Ltd (Pharmaceutical) 40 Figure 2.4 Organization chart of the distribution channel .41 Figure 2.5 Structure of pharmaceutical distribution channel of 43 Truong Giang Co., Ltd 43 Figure 2.6 Revenue of channel type in 2012-2014 .45 Figure 2.7 Revenue of channel type in 2012-2014 .48 Figure 2.8 Revenue of channel type in 2012-2014 .49 Figure 2.9 Selection procedure of distribution channel members 50 in Truong Giang Company .50 Figure 2.10 Results of selecting distribution channel member in 2011-2014 .53 Figure 2.11 Member’s evaluation of incentive policies 56 Figure 2.12 Survey result on solving conflict in distribution channel 61 Figure 3.1 Proposed vertical link in pharmaceutical distribution 71 of Truong Giang Company .71 Figure 3.2 System of Identify Internal Conflict .77 INTRODUCTION Rationale of the research In operation activities of each enterprise such as manufaturing and trading, product distribution process is one of the most important steps to achieve their business goals In the era of globalization associated with high competition, enterprises now more focus on strengthening the capability of distribution channel management which creates differences in competitive advantages Pharmaceutical industry has many special characteristics leading to differences in distribution channel management compared to the other sectors Globalization and economic integration has strong influence over business, especially pharmaceutical enterprises, creating many opportunities and challenges as well Currently, Vietnam drug market is mainly supplied by two main sources including domestic and imported drugs In recent years, the pharmaceutical industry in Vietnam has made significant progress Domestic production could meet 50% of demand of drug users, however, foreign drugs still account for 60% of the market share The local firms are not able to produce specific drug except conventional ones In the context of market expansion, Vietnam has made great progress in expanding pharmaceutical market as committed while joining World Trade Organization (WTO), there are more and more foreign medical enterprises entering the market According to the commitments of Vietnam to WTO, since st September 2009, foreign pharmaceutical companies are entitled to establish branches in Vietnam and engaged directly in importing drugs In addition, Vietnam has continued to reduce % and 2.5 % of tariffs to medical products and imported products respectively within five years after joining WTO Therefore, foreign companies now have more chance to access medical market in Vietnam In the past, most of the enterprises with foreign direct investment (FDI) invested in medical factories; however, 70% to 80% of such companies switched to pharmaceutical distribution field This caused huge pressure on Vietnam pharmaceutical distribution enterprises Truong Giang Cosmetic Pharmaceutical and Trade Co., Ltd is now specializing in distribution of cosmetics and pharmaceutical products in Hanoi and some provinces /cities nearby In fact, the highly competitive pressure from both domestic and foreign enterprises has borne heavily on company’s operation In recent years, the operation of medical distribution channel of the company has been slowing down, the profit is not as high as expected Thus, company needs to improve the management of distribution channel in order to improve the effectiveness and efficiency of the business activities From the above analysis, along with the desire to contribute to the operational efficiency of pharmaceutical product distribution of the company, the author chooses the topic “Enhancing distribution channel management of Truong Giang Cosmetic Pharmaceutical and Trade Co., Ltd” for the study Literature Review There are many researches on distribution channel management including a number of researches such as: - "Managing distribution channels" (Truong Dinh Chien, 2012) systematically mentioned the content of distribution channel management from the perspective of manufacturing enterprises The thought and content of the book is consistent with Phillip Kotler’s views and approaches of distribution channel management; moreover, it can be considered as a guideline for Vietnamese manufacturing companies to establish and manage the distribution channel Scientific research projects at ministerial level, "Assessment of the status and organizational orientation of distribution channels of some major items in our country in 2015" Code: 2005-78-009 Ministry of Commerce ( now the Ministry of Industry and Trade), of Dr Dinh Van Thanh The overall assessment of some major items, organizational models of distribution channels, distribution management policies and solutions to the limitation of some major items in Viet Nam was conducted by the author - The Article: "pharmaceutical distribution market in Vietnam" published in the E-Commerce newspaper dated Jan 29, 2012 According to the article, pharmaceutical distribution in Viet Nam pharmaceutical market comprises of two segments: wholesale distribution and retail distribution For the wholesale distribution, the majority of the product are supplied by foreign wholesale suppliers, as a result, the domestic wholesale distributors can hardly compete with As commitments of Vietnam to WTO, foreign firms have rights to import directly medical products but they cannot enter the retail market in Vietnam; thus, Vietnam companies can occupy exclusively this market At present, the pharmaceutical retail market can be divided into segments: manufacturers operating distribution activities, pharmacy chains and private retail pharmacies - "The solutions to improve the system of distribution of pharmaceutical enterprises in Vietnam in the context of international economic integration" (Nguyen Thanh Tung, 2010) Study subjects were identified as the theoretical issues, actual state of the distribution system and the activities of formulation and development of pharmaceutical distribution channels in some pharmaceutical enterprises in Vietnam Based on the study of basic theoretical issues about the system of pharmaceutical distribution and assessment of the distribution system in a number of pharmaceutical enterprises in Vietnam, thesis has offered solutions to improve the distribution channels of pharmaceutical enterprises in Vietnam in the context of international economic integration The above researches, especially the micro perspective studies have contributed to the management of drug distribution channel Therefore, the topic of medical distribution channel management has not been a new issue; however, there are no studies which have been carried out in Truong Giang Cosmetic Pharmaceutical and Trade Co., Ltd Objectives of the research The main objective of this study is to analyze theories and current state of distribution channel management in Truong Giang Cosmetic Pharmaceutical and Trade Co., Ltd in order to provide appropriate solutions to improve the company’s distribution system To achieve these above objectives, the thesis identifies several specific tasks as follows: - Determine the theoretical framework on the management of enterprise distribution channels - Analyze and assess the real state of distribution channel management of Truong Giang Company; identify strengths, weaknesses and possible causes of such weaknesses in the management of distribution channel - Proposed a number of measures in order to improve management of distribution channels in Truong Giang Cosmetic Pharmaceutical and Trade Co., Ltd Object and scope of the study - Research object: Distribution channel management of Truong Giang Cosmetic Pharmaceutical and Trade Co., Ltd - Research scope: + Content: Analyze management activities of the pharmaceutical distribution channel of Truong Giang Cosmetic Pharmaceutical and Trade Co., Ltd, the cosmetic distribution system is not included in this research + Location: Truong Giang Cosmetic Pharmaceutical and Trade Co., Ltd + Time period: Data is collected in the period of 2011-2014; and solutions to be proposed up to 2020 Research Questions To accomplish the goals, the following questions must be answered: - What are the roles, structure and organization of distribution channels of pharmaceutical businesses to ensure efficiency and business goals? - What are the contents of the distribution channels management of the pharmaceutical business enterprises? - What is actual state of medical distribution channel management in Truong Giang Cosmetic Pharmaceutical and Trade Co., Ltd? What are weaknesses and its causes? - What should company in order to enhance the efficiency of managing pharmaceutical distribution channel? Research Methodology 6.1 Methodology Thesis uses the methodology of dialectical materialism and historical materialism of Marxism - Leninism as a key research methods throughout the entire thesis Thesis also uses systems approaches during the study 6.2 Methods of collecting and processing data Thesis uses the following methods: - Statistical method to investigate, collect data on the operations management of Truong Giang Company - The method is used for analysis including: summarizing methods, compare, interpret, logic, history Elements affect distribution channel Elements of macro environment Objectives of managing distribution channel Management of enterprise’s distribution channel Increase revenue, market share Elements of sector Set –up policies of distribution channel Elements of enterprises Improve relationship, and profits for members in chanel Reduce cost of distribution channel Thesis structure The thesis is composed of three main chapters: Chapter 1: Rationale for distribution channels management of pharmaceutical enterprises Chapter 2: Real state analysis of pharmaceutical distribution channels management of Truong Giang Company Chapter 3: Recommendations on the development of distribution channel management in Truong Giang Cosmetic Pharmaceutical and Trade Co., Ltd ... Pharmaceutical and Trade Co. , Ltd Object and scope of the study - Research object: Distribution channel management of Truong Giang Cosmetic Pharmaceutical and Trade Co. , Ltd - Research scope: + Content:... efficiency of pharmaceutical product distribution of the company, the author chooses the topic ? ?Enhancing distribution channel management of Truong Giang Cosmetic Pharmaceutical and Trade Co. , Ltd”... distribution channels management of Truong Giang Company Chapter 3: Recommendations on the development of distribution channel management in Truong Giang Cosmetic Pharmaceutical and Trade Co. , Ltd 7 CHAPTER