Analyzing marketing strategies for medicines of the national pharmaceutical company no 2 (codupha)

HCMC UNIVERSITY OF FOREIGN LANGUAGES AND INFORMATION TECHNOLOGY DEPARTMENT OF INTERNATIONAL BUSINESS ADMINISTRATION GRADUATION PAPER • TOPIC: ANALYZING MARKETING STRATEGIES FOR MEDICINES OF THE NATIONAL PHARMACEUTICAL COMPANY No (CODUPHA) Student's name: TRA.N HAl KIEV JULY 2006 Acknowledgement First of all, I wish to express HUFLIT's Department helped and supported my gratitude of International me heartedly to the professors Business Administration and enthusiastically of who so that my research can be completed timely Secondly, I would like to thank Dr Vo Ngoc Nhu Oanh who directly instructed and gave me the helpful recommendations lot of time on assessing and exchanging as well as spent a views during each chapter so that my research can be clearly oriented Also, I am deeply grateful to the Director of National Pharmaceutical Company departments No.2 (CODUPHA) and the staffs at the who provided me with necessary information company's and data so that I can analyze, evaluate and approach practical issues in order to enhance the topic's reliability and possibility Last but not least, I would like to express my great appreciation concerns, encouragement to the and supports from my family and my friends until now TRAN HAl KIEV •• ADVISOR'S ASSESSMENT ~C:.Q For the recent years, the market of medicines Vietnam mostly due to state-owned market is always characteristics a practical has dramatically pharmaceutical and interesting companies topic changed in Research on this owing to customers' in Vietnam In my view, as a student majoring in International Business Administration, the writer chose an absolutely realistic thesis because of its essence For the content and other aspects of the graduation paper, I would please to get the examiners' evaluation As an advisor, consciousness, independence, and competence I only mention to the writers' in scientific research During the course of making the research on the thesis, the writer, all the time proved that she tried her best in data collection from various sources, analyzed in detail, synthesized, Furthermore, had a sharp and was very active in research she strictly ensured regulations of time The final score is determined writer's insights oral presentation by the examiners' However, comments with her working effort, I believe that she deserves to get high grades HCMC, July 5, 2006 Dr VO NGQC NHU OANH • II manner, as well as the capability and ABSTRACT Someone said: "Doing business is an art !" It is right Setting up a business with good facilities and desirable products does not mean that the business can be successful In fact, the customers are normally demanding, and they are willing to stop buying a product when it no longer satisfies their continuously changing needs The business must research business opportunities and carefully apply segmentation, targeting, and positioning so that the business runs smoothly, and then it must consider whether its products meet customers' demand Its price is attractive enough, the products are available in adequate quantities in accessible locations at the right time when they desire them, and whether it plans and implements necessary promotion activities to persuade them to buy its products Such activities are the four strategies in a marketing strategy as a whole Thus, this study is very useful for those who want to know how to determine the right marketing strategies and apply them effectively The purpose of this research is to analyze and evaluate the marketing strategies for medicines of The National Pharmaceutical Company NO.2 (CODUPHA) The datum sources are based on the company's materials, newspapers, "Marketing" books, and Internet The first part is the basic theories of marketing A collection of information from "Marketing" books helps readers have an overview about the roles, purposes, and importance of the marketing in business The second part introduces the National Pharmaceutical Company NO.2 (CODUPHA) such as its establishment and development, labor structure, its purchasing market and values, categories of products In addition, the situation of 111 the company' business activities is briefly referred so that they are used as the basis to evaluate marketing strategies of the company and to help readers have an overview about its operation Finally, basing on the real situation of the business, the matrix SWOT opportunities is set up to analyze the strengths, the weaknesses, the and the threats of the company This is also the basis to put forward the solutions and suggestions to both the company and the government in the third part In the third part, several solutions and suggestions perfecting CODUPHA's marketing strategies are posed to contribute in particular and those who are marketers and for some students who want to study marketing in general The last part presents a brief conclusion of the study and comments on them • IV to LIST OF FIGURES Figure : Segmentation Variables for Consumer Market 08 Figure : Undifferentiated Figure : Concentrated Figure : Differentiated Figure : Components of strategic Marketing 13 Figure : The Four Ps of the marketing mix l7 Figure : Major considerations 22 Figure : Typical Marketing Channels for Consumer Products 25 Figure : The two categories of advertising 27 strategy 10 strategy 11 strategy Figure 10 : Organizational 12 in setting price Chart ofCODUPHA (2005) 39 Figure 11 : The level of education at CODUPHA 42 Figure 12 : Male and female laborers 43 Figure 13 : Import values (USD) 45 Figure 14 : Domestic purchasing values (USD) 46 Figu re IS : Import market (%) 48 Figure 16 : Percentage of product in 2005 (USD) 55 Figure 17 : CODUPHA's total revenues (USD) 57 Figure 18 : CODUPHA's medicine revenues (USD) 57 Figure 19 : CODUPHA's net profits (USD) 58 Figure 20 : An example of packing regulation 61 Figure 21 : An example of labeling regulation 61 Figure 22 : Distribution channels of CODUPHA 62 Figure 23 : Distribution channels' 63 Figure 24 : New organizational revenues (USD) chart of the Marketing-Sales v division 76 LIST OF TABLES Table 1: Educational levels at CODUPHA (2005) 41 Ta ble 2: Import values (USD) 44 Table 3: Domestic purchasing values (USD) 46 Ta ble 4: Import markets (USD) 48 Table 5: CODUPHA's total revenues (USD) 56 • vi TABLE OF CONTENTS ACKNOWLEDGEMENT i ADVISOR'S ASSESSMENT ii ABSTRACT iv LIST OF FIGURES v Figure : Segmentation Variables for Consumer Market Figu re : Undifferentiated Figure : Concentrated Figure : Differentiated Figu re : Components Figure : The Four Ps of the marketing mix 17 Figure : Major considerations 22 Figure : Typical Marketing Channels for Consumer Products 25 Figure : The two categories of advertising 27 Figure 10 : Organizational Figure 11 : The level of education at CODUPHA 42 Figure 12 : Male and female laborers 43 Figu re 13 : Import value (USD) 45 Figure 14 : Domestic purchase (USD) 46 Figu re 15 : Import market (%) 48 Figure 16 : Percentage of product in 2005 (USD) 55 Figure 17 : CODUPHA's total revenues (USD) 57 Figure 18 : CODUPHA's medicine revenues (USD) 57 Figure 19 : CODUPHA's net profits (USD) 58 Figure 20 : An example of packing regulation 61 Figu re 21 : An example of labeling regulation 61 Figure 22 : Distribution channels of CODUPHA 62 Figure 23 : Distribution channels' 63 strategy 08 10 strategy ll strategy 12 of strategic Marketing 13 in setting price Chart of CODUPHA (2005) revenues (USD) VII 39 Figure 24 : New organizational chart of the Marketing-Sales LIS T F TAB LE S division 76 07 Table : Educational levels at CODUPHA (2005) Table : Import val ues (USD) 44 Table : Domestic purchasing values (USD) 46 Table : Import markets (US D) 48 Table : COD UPHA' s total revenues (USD) 56 TABLE F CONTENTS 41 viii INTRODUCTION I Research paper obj ecti ves 0I Scope of research 02 Research method 03 Contents 03 CHAPTER 1: Basic theories 6'concept, 04 role, and functions of Marketing 04 1.1 I Marketing concepts 04 1.1.2 Roles and functions of Marketing 05 I 1.2 Roles 05 1.1.2.2 Functions 05 1.2 Target market 05 1.2.1 Market 05 VIII 1.2.1.1 Definition 05 1.2.1.2 Requirements for a Market 1.2.1.3 Types of Markets 06 1.2.2 Target consumers ~ 06 06 1.2.2.1 Market segmentation 06 1.2.2.2 Market targeting 09 1.2.2.3 Market positioning 12 Breaking into a market strategy 13 1.3.1 Forces that influence marketing strategies 1.3.1.1 Competitive forces 13 13 1.3 1.2 Economic forces 14 1.3.1.3 Political forces 14 1.3.104 Legal and Regulatory forces 15 1.3.1.5 Technological 15 1.3.1.6 Sociocultural forces forces 15 1.3.2 Methods of breaking into a market 1A Marketing-Mix strategi es 16 16 104.1 Products 17 104.1.1 Managing Existing Products 18 104.1.2 Developing new product 18 104.1.3 Product Positioning and Repositioning 19 104.104 Product Deletion 21 104.1.5 Organizing to Manage Products 21 I 04.2 Price 21 104 2.1 The cost-based approach 22 104.2.2 Demand-based 24 Pricing 104.2.3 Competition-Based 1.4.3 Place Pricing 24 24 104.3.1 Marketing channel IX 24 Tr~n Hai KiSu medical product of CODUPHA is medicines that belong to the ETICO group because its sales are always of 50 percent of the total medicine sales So, in order to make sure that the business activity will be better and better, the company should concentrate on developing this market, the hospitals, and set up plans to develop and maintain it 3.1.2 Perfecting the marketing - mix strategy of the company: 3.1.2.1 Products: Up till now, because the company has been applying the strategy of supplying the domestic market with the desirable medicines by basing on the market research, it means that the company supplies what the market orders The image of the company has not been built effectively yet So, in order to establish an effective product strategy, the company should position itself in the customers' minds by concentrating on supplying a certain key type of medicines Because the key medical product of CODUPHA is medicines of the ETICO group, the product strategy of CODUPHA should focus on improving the ETICO group It includes looking for the suppliers who offer the good medicine quality with popular brand name, being packed and labeled in the regulated ways Specially, at present, in order to increase the reputation of the company and help customers purchase medicine at the right prices under the situation of unstable price increase, the company should label the price on its medici cal products Furthermore, if the company spent 100 percent of its expense in developing the market as a whole before, now with this key product, 50 percent of the expense should be shared for it The last but not least, inside the company, employees should all be encouraged to be proud of the company's product This is also the best way that contributes to conducting the product strategy effectively - 72 - Analyzing marketing strategies for medicines of CODUPHA company 3.1.2.2 Price: Price is a vital factor that customers consider before deciding to purchase the company's products Although the price strategy restricted by the policy of the government, of the company is partially there are several solutions that may be more flexible and useful for the company so that they can support the strategy: I Setting price based on the bulk of inventory purchased price will be more competitive, By doing this, the the selling activities as well as the pricing will be more flexible, and customers will be encouraged to buy more Setting price according to the real competitive situation to keep customers, or reduce the price to break into the market Applying the special price policy for the frequent customers, high-volumepurchased customers and the customers who have reputation in the business Cooperate with competitors who are in the same size to set the price By using this method, the company can reduce the competition in setting price and focus on supplying the good products In summary, price However, the company can choose or combine above methods in setting a principle that the company should comply is to make sure in complying the "Stabling medicine prices" policy of the government, customers, increasing the turnover and profits, and impossibility keeping the of any financial issue 3.1.2.3 Place: CODUPHA improving because is right in applying the direct distribution of its profitability, distributed the distribution channel strategy In business, in fact, it is the potential It is to focus on it is very important market not The product directly and quickly to the hospitals and pharmaceutical is stores The company can listen to the feedbacks of the customers and the users Furthermore, it is easy to create the durable demands for the company's indirect distribution channel However, products as well as its in term of the macroeconomic - 73 - vision, if Tr5n Hili Ki~u the company just sell their products through this channel without developing it, the selling activities will no longer be effective under the more and more competitive situation The problem given to the company is to consider the best retailers and to find the ways to attract them In addition, the company should maintain the good relationship among them The company should establish the sub-networks among them so that the several purposes can be obtained They are such things including informing the retailers about the products, easier possibility of the circulation from the ordering, supplying to the making payment Furthermore, because of the limited capital, the company should choose the small and medium retailers to be more conveniently get back the capital Also, in order to control the situation of delaying making payments of several state-owned hospitals, the company should convince them to obey the payment policy of the company For example, all of them must guarantee their financial conditions by opening an account at the bank and be forced to deposit 30 percent of the total purchasing are difficulties and restrictions value Although there found in this form of channel, the company should not ignore the indirect distribution channels, because they will become necessary and effective when the company wants to fill the holes on the market and does not have enough warehouses directly Nevertheless, as well as enough human resources in order to supply the two channels to make sales of the good quality medicines, the company should make its suppliers believe that it can establish the channels that they require such as: I The coverage on the market The qualified pool of salesmen, the transportation as well as the delivery The periodical reports for the revenues, inventory The clear plans for understanding products and perception so that the suppliers are not passive in monitoring acti vities - 74 • the target markets of their selling Analyzing marketing strategies for medicines of CODUPHA company 3.1.2.4 Promotion: Any type of business needs this strategy because it plays an important role in helping the distributors collect information from the market and the desire of the customers, especially, an effective promotion strategy can increase the turnover However, at present, the promotion strategy of CODUPHA is not concerned about any more Thus, in order to obtain these such things, firstly the company should spend more money on this strategy Secondly, determining the type of effective promotion should be focused on Finally, the company should determine media and methods to use To the type of operation of the company, it does not need to pay so much money on advertising because their advertising activities are partially limited by the government For example, according to the government's regulation, only 10 percent of total expenses are allowed to be used on the promotional activities Moreover, because its products are western medicines which must be under the government's control Another reason is that the company's key products are ETICO category whose target customers are doctors Therefore, it should spend the most of expenses on sales promotion, public relations, and personal selling •: Advertising: The company should increase the density of advertising on the magazines such as Pharmaceutical Journal, Medicine and Health, and so on These media may suitable to the company's products and regulations of the government .: Sales promotion: In this type of promotion, in addition to the available sale promotion policies, several policies that the company should apply to encourage the selling efforts, for example, to the sales force promotion, bonuses should be offered to the salespersons; to the trade promotion, buying allowance and free transportation - 75 - Tr~n H:'liKi~u services, satisfactory levels of commISSIOn should be provided so that the wholesalers and retailers feel respected and content .: Public relation: Annual customer conventions should be regularly organized to notify customers about the intention and business activities of the company This is also a chance for the company to build its image and listen to their remarks about the strong points and weak points of the company in setting price as well as the quality, payment, logistics services, especially the distribution channels and rewarding policies Furthermore, through this convention, the relationship between the company and the customers will be better In addition, the company should celebrate the scienticfic researches for ETICO category so that doctors' demand can be met This is also the way that informs them about the medicines' fuctions •: Personal selling: This activity needs a lot of investment because the products that the company offers are medicines Thus, the company should recruit more professional salespeople and train them periodically However, under the protection of the State, the employees feel smug and depended passively on the State Thus, to me, especially under the competitive market mechamnism, the company should apply the new method in doing business That is assigning the responsibilities to each salesperson so that they try their best to obtain the assigned goals By doing this, the salespeople will be more active and responsible 3.1.3 Restructuring the Marketing-Sales Division: 3.1.3.1 The new organizational chart From the difficulties that the company faces and weaknesses of the MarketingSales Division, the new organizational chart of the Marketing-Sales Division can be suggested as follow: - 76 - Analyzing marketing strategies for medicines of CODUPHA Figure 24: The new organizational company chart of the Marketing-Sales Division Manager of Marketing-Sales Division East market Product research group Personal selling-sales promotion group Advertising -Public relation group Market research group South market North market West market Central Mekong 3.1.3.2 Mission of each group: Although each responsibility, group and each employee have his own miSSIOn and all of them serve the same goals of the company to attract more and more customers and to gain more and more profits So, in order to conduct the marketing activities effectively, the manager of the Marketing-Sales division must know how to define the duty of each group The manager of Marketing-Sales He is a person who is totally responsible activities This is a complicated are diversified Division: for the whole marketing and difficulty job because the marketing activities He has to point out the marketing strategies and monitor selling activities for the company Moreover, he must systhesise information the marketing and selling collected by and selling groups to find out methods have the business activities run correspondently to the real market situation - 77 - Tr~n Hai Ki~u Market research group: This group is responsible to collect necessary information from the market and researches for the trend of the market for what kinds of products Significantly, it must consider the strong distributors who are able to affect the company's products sales, and then, provides them to the product research group to determine the kind of medicines that need to be imported Product research group: After receiving information as well as desirable medicines from the research market group, the product research group concentrates on considering the predominant characteristics among medicines to sugguest importing Advertising and Public relations group: To build the image as well as the medical products of the company, this group IS assigned to design the suitable advertising programes based on the proposed plan, to maintain, and develop good relationships between the company and its partners Personal selling-Sales promotion group: After importing the required products, the pool of salesmen will be allocated according to the suitable markets to make sales They are people who directly contact with and persuade them to buy the company's medicines through several attractive forms of sales promotions Futhermore, they must tell the customers about the medicines' chacracteristics and functions In addition, this group functions as any other sales departments of any other corporations in receiving feedbacks from customers, monitoring debts, planning and conducting attractive after sales services - 78 - Analyzing marketing strategies for medicines of CODUPHA company 3.1.4 Improving management skills of the pool of managers and human resource's qualification: During the stage of positioning and developing market shares, in order to stay abreast and develop along with the limited potentials under the tough competition, the managerial ability and the qualified pool of personnel are very important This is a basis to implement any other business plan and strategy Thus, the company should periodically organize the short term courses for training them on the professional levels and expertises, and give them the opportunities to study aboard in a short term period In addition, when the domestic economy is gradually integrating into the world's economy, improving English skills is very necessary Therefore, the company should encourage its employees to brush up on their English 3.2 Suggestions to the State: Firstly, at present, one of the reasons for the unstable pricing in the Vietnam • pharmaceutical market is that the government delays to subsidize capital for the state-owned hospitals Up to now, when explaining for the reason of setting high medicine price, pharmaceutical companies normally claim for the state-owned hospitals' low payments Thus, they are forced to increase the medicine price to compensate for losses H'ww.cucquanlyduoc.com) when their capital is detained (Source: To me, the government needs to quickly apply the solution of supplying the hospitals money in advance Advancing money not only helps supplying enough medicines for patients but also contributes to stabilizing the medicine prices in our country Moreover, at the same time, supplying the hospitals money in advance domestic pharmaceutical companies as well as CODUPHA who are trading with the stated-owned hospitals will find it is easier for them in setting more competitive price and circulating their capital Secondly, in order to avoid writing out a prescription of doctors for commissions of several foreign and limited companies that can affect the sound - 79 - • Tr5n H