(Tiểu luận) business report major international economicsfpt long chau report

It reveals that FRT Long Chau facesstrong competition from established players like An Khang and Pharmacity, as well as newentrants.. Notably, FPT Long Chau Pharmaceutical JSC FRT LongCh

FOREIGN TRADE UNIVERSITY

HO CHI MINH CITY CAMPUS

-*** -BUSINESS REPORT

Major: International Economics

FPT LONG CHAU REPORT

Ho Chi Minh City, December 2023

Figure 1.1. FPT Long Chau Revenue and Growth Rate from

Figure 3.4.6.1 Liquidity Ratio 2020 - 2022

Figure 3.4.6.2 Solvency Ratio 2020 - 2022

Figure 3.4.6.3 Profitability 2020 - 2022

1 Executive summary 1

2 Introduction 1

2.1 Background 1

2.2 Problem and Scope 1

2.3 Purpose and Objectives 1

2.4 Theoretical Framework and Methodology 2

2.5 Limitations 2

3 Findings and discussion 2

3.1 Overview of parent company - FRT 2

3.2 Vietnam Macroeconomics Landscape 6

3.2.1 Current situation and growth potential 6

3.2.2 Consumer purchasing power 6

3.3 The Pharmaceutical Industry Landscape 7

3.3.1 Post-pandemic Landscape 7

3.3.2 Driving Factors of Industry 8

3.3.3 Market potential remarks 9

3.4 Long Chau Understanding 9

3.4.1 Value proposition 9

3.4.2 Products and services 10

3.4.2.1 Fast Medication Consultation 10

3.4.2.2 30-Day Return Policy Support 10

3.4.2.3 Doorstep Delivery Services 11

3.4.3 Pricing strategies 11

3.4.4 Placing strategies 11

3.4.5 Promotion strategies 11

3.4.6 Financial performance 12

3.5 FPT Long Chau SWOT 14

3.5.1 Strengths 14

3.5.2 Weaknesses 14

3.5.3 Opportunities 15

3.5.4 Threats 15

3.6 FPT Long Chau’s Porter’s 5 Forces analysis 15

3.6.1 Competitive Rivalry 15

3.6.2 Supplier Power 16

3.6.3 Bargaining Power of Buyers 16

3.6.4 Threat of Substitutes 17

3.6.5 Threat of New Entrants 17

4.1 Conclusion 17 4.2 Recommendations 18

References 20

1 Executive summary

FPT Long Chau, a subsidiary of FPT Retail, has emerged as a leading player in the Vietnamesepharmaceutical retail market, experiencing remarkable growth in recent years This reportexamines the key factors driving this success and evaluates the company's competitivelandscape, providing insights into its future prospects It reveals that FRT Long Chau facesstrong competition from established players like An Khang and Pharmacity, as well as newentrants Despite its star status in the BCG matrix, generating stable cash flow from its FPT Shopelectronics chain, Long Chau struggles with thin margins due to aggressive expansion andlow-end pricing While this report highlights their achievements, such as rapid store expansionand strong brand recognition, it also identifies areas like profitability improvement, productportfolio diversification, and customer segmentation as key to their future success Limitedresources restrict a full analysis of all contributing factors, including human resources and adetailed business model canvas Overall, FRT Long Chau shows promising growth potential, butmust address profitability concerns and refine its strategy to remain a leader in this dynamicmarket

2 Introduction

2.1 Background

The pharmaceutical retail industry in Vietnam has witnessed significant growth in recent years,particularly during the COVID-19 pandemic This growth has been driven by increased demandfor healthcare products and services Notably, FPT Long Chau Pharmaceutical JSC (FRT LongChau), formed through the 2018 acquisition of Long Chau pharmacy chain by FPT, has emerged

as a key player, achieving a 53% year-on-year growth within three years and operating over1,000 pharmacies nationwide

2.2 Problem and Scope

This report aims to understand the factors behind FRT Long Chau's success and identifypotential challenges and opportunities for its future growth It will analyze the market context,both internally and externally, and investigate the challenges and opportunities for furthergrowth

2.3 Purpose and Objectives

This report has two primary objectives

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Analyze: To gain a comprehensive understanding of the factors contributing to FRT Long Chau'ssuccess and identify potential challenges and opportunities for future growth.

Recommend: To provide practical recommendations to help FRT Long Chau navigate thecompetitive landscape and maintain its position as a leading player in the Vietnamesepharmaceutical retail market

2.4 Theoretical Framework and Methodology

This report utilizes a combination of theoretical frameworks and methodologies to analyze FRTLong Chau's success Theoretical frameworks include Porter's Five Forces and SWOT analysis,which are used to assess the competitive landscape and identify FRT Long Chau's strengths,weaknesses, opportunities, and threats The primary research methodology involves analyzingindustry reports, company financial statements, and news articles Additionally, secondaryresearch is conducted by reviewing scholarly articles and academic journals

3 Findings and discussion

3.1 Overview of parent company - FRT.

The FPT Digital Retail Joint Stock Company (FRT) is an affiliate company of the FPT Group,operating in the retail distribution of mobile phones, laptops, tablets, accessories, electronicproducts, as well as pharmaceuticals, medical equipment, and functional foods FRT currentlyowns two retail chains: FPT Shop, F.Studio By FPT, and a subsidiary company named FPT LongChâu Pharmaceutical Joint Stock Company The FPT Shop retail chain specializes in mobiledigital products and is the first retail system in Vietnam to be awarded ISO 9001:2000certification for quality management according to international standards The F.Studio By FPTsystem is an officially authorized chain of Apple stores in Vietnam, dealing in premium, genuineApple products Regarding the FPT Long Châu Pharmaceutical Joint Stock Company, it is

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considered a successful M&A deal beyond the expectations of the FRT retail system Withcompetitive prices, standardized product quality, and a team of highly trained pharmacists, LongChâu pharmacies are recognized as trustworthy and reliable addresses for customer health.FPT Retail officially adopted the joint-stock company model in 2012 FPT Retail was listed onthe Ho Chi Minh City Stock Exchange (HOSE) at the end of April 2018, obtaining additionalcapital to expand its retail chains.

Comparing two main products of FRT, which are FPT Long Chau and FPT Shop, the revenue ofFPT Long Chau has experienced remarkable growth in recent years, with an annual growth ratenearly three times higher from 2021 to 2022 In just the first nine months of 2022, the retailchain's revenue reached 6,500 billion VND, making it the highest in the industry despite beingthe second-largest in terms of the number of stores after Pharmacity However, within the sameperiod this year, FPT Long Chau remained the top 1 position in sales and has expanded to morethan 1380 offline stores across Vietnam, surpassing Pharmacity in only one year

Figure 1.1 FPT Long Chau Revenue and Growth Rate from 2021 to 2023 (Source: Group

research)Furthermore, the pharmaceutical retail sector exhibits significant potential, given its fragmentednature, which has yet to be dominated by a few major players as seen in the electronics market.Current statistics showed that the top three players in modern pharmaceutical sectors, whichwere Long Chau, Pharmacity and An Khang, had built around 3000 offline stores in 2023 This

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figure was only accounting for 5% of the total pharmacies in Vietnam with more than 60000offline stores.

On the other hand, FPT Shop's electronics retail chain shows signs of slowing down due tosubstantial market saturation and intense competition within the industry According to Statista,the consumer electronics market in Vietnam is projected to grow 1,98% annually from 2023 to

2028 FPT Shop was experiencing a negative growth rate of -20% in the first 9 months of 2023compared with the same period last year Ultimately, the revenue ratio inside FRT is also rapidlytransforming from FPT shop to FPT Long Chau

Figure 1.2 FPT Shop Revenue and Growth Rate from 2021 to 2023 (Source: Group research)

Figure 1.3 FRT revenue allocation from 2021 to 2023 (Source: Group research)With this evidence, we believe that FPT Shop's position in the BCG evaluation matrix as a "cashcow" market By leveraging this position, FPT Shop is utilizing its stable cash flow to invest inthe Long Châu pharmacy chain, which is in the Star position for FRT.

Figure 1.4 FRT BCG Matrix (Source: Group research)

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3.2.1 Current situation and growth potential

The exchange rate of the Vietnamese Dong (VND) continues to maintain stability following theFederal Reserve's interest rate adjustments The Federal Reserve's interest rate changes have led

to a significant appreciation of the US Dollar (USD), exerting pressure on Vietnam's exchangerate Specifically, the US Dollar Index (measuring the strength of the US dollar against a basket

of currencies) reached 103 points, the highest level in 20 years The strong US dollar hascontributed to an approximately 0.6% increase in the USD/VND exchange rate over the first fourmonths of 2022 Nevertheless, the Vietnamese Dong remains one of the most stable currencies inthe Asia-Pacific region According to VnDirect Research, two fundamental factors, namely asurplus in the current account and higher foreign exchange reserves, have supported the stability

of the Vietnamese Dong in recent times

Overall, the Vietnam economy, as evidenced by a 5.33 percent GDP growth in Quarter 3 of 2023and a cumulative growth of 4.24 percent over the first three quarters, demonstrates a positivemomentum The trade surplus exceeding $21 billion in the initial nine months further bolsterseconomic prospects, indicating a robust balance between exports and imports Notably,household and individual consumption witnessed a climb of approximately 3.5 percent in Q3 and2.9 percent over the first nine months, signifying a strengthening domestic demand Despitegrowth levels remaining below pre-pandemic standards, the economy has experienced positiveshifts, partly mitigating the global market challenges Looking ahead, there is optimism forcontinued expansion, with a projected growth rate of 6.5 percent in 2024 This anticipatedgrowth is attributed to the expected strength in the economies of Vietnam's key export markets,suggesting a favorable trajectory for the country's economic development in the post-2023period

3.2.2 Consumer purchasing power

Comparing the two years 2022 and 2021, the growth rate of Vietnam's consumer spending wasapproximately 11.18%, one of the highest annual growth to be recorded (Tradingeconomics.com,2022) This reflects the rapid expansion of Vietnam's economy and a consistent rise in theaverage income of its citizens With higher incomes, consumers are more willing to spend,thereby increasing demand for goods and services

Population scale and social structure are foundational for consumption trends in the retail sector.Vietnam ranks 15th globally in terms of population size, with over 96 million people, and isprojected to maintain an annual population growth rate of 0.67%, according to the WorldPopulation Review In 2020, more than 40% of the Vietnamese consumer was spending onaverage above 11 USD a day and this number is expected to rise to 75% in 2030 (MarketingSoA, 2022) Moreover, Vietnam is also the fastest-growing country in the Asia-Pacific region interms of the middle-class (Marketing SoA, 2022) Currently, Vietnam has already been ranked7th globally in the growth rate of the middle class, with 75.8 million people falling into thiscategory This middle class will significantly influence the consumption trends of the Vietnamesepopulation.

3.3 The Pharmaceutical Industry Landscape

3.3.1 Post-pandemic Landscape

The long-term and profound impact of the Covid-19 pandemic on the entire industry hasaccelerated the overall growth of the pharmaceutical sector, especially modern models such aspharmacy chains According to Kantar, the personal care and healthcare product group, includingpharmaceuticals, experienced a growth rate of approximately 11% during the pandemic period.The healthcare market in Vietnam reached a value of USD 16.2 billion in 2020, accounting for6.0% of GDP Total healthcare expenditure increased from USD 16.1 billion in 2017 to overUSD 20 billion in 2021 and is projected to reach USD 23.3 billion in 2025 and USD 33.8 billion

in 2030, with a CAGR of 7.6% (2020-2030) Along with rapid growth, Vietnam's productioncapacity can only meet 53% of the country's pharmaceutical demand According to the GeneralStatistics Office, in 2021, Vietnam spent nearly USD 4 billion importing pharmaceuticals As aresult, it can be seen that foreign "big players" are attracted to the Vietnamese market due to thepotential for growth and expansion within the country and they are seeking to penetrate themarket through mergers and acquisitions (M&A) of local companies

After the pandemic, the pharmaceuticals market experienced a small price surge Estimates fromSSI Research show that average retail prices of medicines increased by 5 percent in the firstquarter of 2022 compared to the same period in 2021, and by 13 percent since the first outbreak

in 2020 Despite challenges, demand for pharmaceutical products is expected to rise, with totalpharmaceutical revenue in Vietnam increasing by 7 percent in the first quarter of 2022,particularly driven by a 23 percent growth in the pharmacy channel Sales in 2022 are anticipated

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to be buoyed by the strong recovery of hospital channels in the second half of the year Thepharmaceutical industry's revenue in the last six months of 2022 is projected to increase by about

13 percent compared to the same period in 2021, bringing the whole year figure to an 11 percentrecovery, nearly reaching pre-COVID-19 levels The entrance of major drugstore chains likePharmacity, Long Châu, and An Khang into the market is expected to further stimulate revenuegrowth Market research firm IBM predicts that the Vietnamese pharmaceutical market, valued at

$7.7

In terms of competition, Vietnam has around 60000 traditional retail pharmacies, accounting forabout 90% of the market, while the remaining 10% consists of modern pharmacy chains.According to Vietnamnews, the market size is expected to increase from $7.7 billion in 2021 to

$16.1 billion in 2026 Currently, revenue in the OTC Pharmaceuticals market amounts toUS$847.40m in 2023 The market is expected to grow annually by 7.24% (CAGR 2023-2028).The FPT Long Chau pharmaceutical retail chain has recognized this opportunity early and isaccelerating its expansion with the ambition to consolidate market share

3.3.2 Driving Factors of Industry

Drugstores in the OTC channel in Vietnam account for 80% of the pharmaceutical sales That is

to say, the majority of the Vietnamese population opt for traditional pharmacies, which is thecurrent channel that FRT is operating its product

The middle-class and the forecasted population aging are key factors driving healthcarespending According to World Data Lab research, Vietnam is projected to add 23.2 millionpeople to the middle class by 2030, ranking third in Southeast Asia, creating opportunities for thepremium pharmaceutical segment such as vitamin products and dietary supplements to thrive.Spending on pharmaceuticals also increased to over $6.6 billion in 2021 Additionally, the WorldBank predicts that the number of people aged 65 and above in Vietnam will double by 2040,accounting for 18% of the total population, driving healthcare spending The average per capitaspending on drugs in Vietnam is expected to grow at a rate of over 14% per year from 2021 to

2028 According to the Population Forecast for Vietnam for the period 2019-2069, Vietnam willenter a period of aging population in 2026 The aging population, increasing income, andgrowing awareness of health issues present opportunities for FPT Retail to focus on developingthe Long Chau chain