the balanced scorecard of traphaco a pharmaceutical company

To clarify this issue, taking Traphaco Joint Stock Company TRAPHACO - a pharmaceutical company - as a practical example for analysis, this article will analyze business strategy and buil

HANOI UNIVERSITY FACULTY OF MANAGEMENT AND TOURISM

THE BALANCED SCORECARD OF TRAPHACO - A PHARMACEUTICAL COMPANY

Course: Advanced Management Accounting Teacher: Mrs Do Van Anh

Group 18 — Tut 3:

TABLE OF CONTENT 1 Introduction

2 Background of the company 2.1 History

2.2 Vision, mission, and core values 3 Analyze the firm strategy 3.1 Pharmaceutical market analysis in Vietnam

3.1.1 Competitor 3.1.2 Potential entrants into the market

3.1.3 Equivalent products 3.1.4 Bargaining power of customers 3.1.5 Bargaining power of input suppliers 3.2 Company strategy analysis

4 Balanced scorecard 4.1 Strategy map

4.2 Structure analysis of strategy map

4.2.1 Strength of ties 4.2.2 Orphan Objectives

4.2.3 Focal points 4.2.4 Trigger points 4.2.5 Distinctive objectives 5 Challenges faced by the company in implementing the balanced scorecard 5.1 Financial perspective

5.2 Customer perspective 5.3 Internal business process perspective 5.4 Learning and Growth perspective 6 Conclusion

References

1 Introduction

Businesses today need to have a proper strategic management model and implement it effectively in the setting of the market's ongoing change To monitor the implementation of their strategies and track progress, several firms have implemented a balanced scorecard approach, which not only emphasizes accomplishing financial goals but also draws attention to non-financial goals To clarify

this issue, taking Traphaco Joint Stock Company (TRAPHACO) - a pharmaceutical company - as a

practical example for analysis, this article will analyze business strategy and build a balanced scorecard to support the company's strategy

2.Background of the company

2.1 History Traphaco Joint Stock Company, formerly known as the railway medical company, was established on November 28, 1972 The organization supplied serum, fluids, and distilled water for the railway sector's hospitals throughout the war The organization's headquarters were located at No 75 Yen Ninh Street in Hanoi, the same building as the Railways Health Department

Traphaco continuously developed and refined its industrial structure throughout the equitization, which lasted from 1972 to 1999 Under the business name RAPHACO, Railway Pharmaceutical Enterprise was established in 1993 and granted a unique identity, a seal, a separate account, and the authority to manufacture and distribute medications The transaction name in pharmaceutical and medical equipment joint-stock company changed its name to TRAPHACO joint-stock company with the intention of conducting business across several industries to conform to the new economic trend Since the year 2000, the company has made investments, developed, grown, and made a number of noteworthy accomplishments The company operated under the model of a joint-stock company in the year 2000 The company's stock code, TRA, started being publicly

traded on HOSE in 2008 and Traphaco won the Vietnam Gold Cup for Kindness The next stages

see the implementation of restructuring initiatives and the issuance of new organizational models by businesses

2.2 Vision, mission, and core values Traphaco strives to be the most successful pharmaceutical company in Vietnam in terms of revenue, earnings, and market value Traphaco continually considers the desire to improve quality while also giving society products and services that are both cutting-edge and anchored in history

as it creates pharmaceutical items for the general population Benefiting customers, staff, and shareholders is the ultimate goal of sustainable development Along with the ever-increasing added value to society, Traphaco is constantly concerned with the quality of the products and services that determine the company's continued existence

3 Analyze the firm strategy

3.1 Pharmaceutical market analysis in Vietnam

3.1.1 Competitors

The pharmaceutical industry in

PME

of the country's market share is

DHG

imported In contrast to indigenous

other domestic firms like Traphaco, Hau Giang

Pharmaceutical, PME, etc., which make up a minor fraction of the industry, Vietcap estimates that

imported medications make up around 65% of the market According to SBSC figures, Vietnam's pharmaceutical industry confronts significant challenges since locally manufactured medications only fulfill 47% of market demand, forcing the country to import a significant amount of drugs in 2020—more than $3.3 billion 9% or such for the compound annual growth rate from 2018 to 2020 In which the market share for antibiotics, which ranks first among pharmaceutical groups in terms of turnover, represents around 48.5% of all import sales The primary import markets are from the following nations: India, the US, France, and Germany As a result, in addition to contending with a sizable number of domestic medication manufacturing firms, Vietnam's pharmaceutical sector must also compete with businesses that import medicines from other countries

3.1.2 Potential entrants into the market

The pharmaceutical industry in Vietnam has a lot of potential for growth due to its huge population and strong economic growth potential The average medicine expenditure in Vietnam is now substantially lower than the global average, at only approximately 75 USD (2019) The population is becoming older, money is rising, and health concerns are receiving more attention from the

general public, leading to a rise in the cost of healthcare Drug expenditures per person were $9.85 in 2005, $22.25 in 2010, and $75 in 2019 Between 2010 and 2019, the average growth rate was 14.8%, reaching $85 in 2020 and $248 in 2028 with an average growth rate of at least 14% The pharmaceutical sector in Vietnam has a lot of room for growth in 2022, but there hasn't been much money invested in business expansion, efficiency improvements, updating GMP-compliant plants, or R&D operations To achieve their development objectives as well as the development trends of their industry and global economic integration, businesses in the pharmaceutical industry must, in this context, develop an appropriate business strategy, strengthen risk management, particularly the storage of raw materials, and apply information technology to their operations 3.1.3 Equivalent products

Many domestic and foreign businesses are active in Vietnam's expanding pharmaceutical sector Traphaco, DHG Pharma, Sanofi Vietnam, AstraZeneca Vietnam, Roche Vietnam, Novartis Vietnam, and GlaxoSmithKline Vietnam are a few of the most well-known pharmaceutical firms

in Vietnam

These businesses manufacture a variety of goods, such as dietary supplements, over-the-counter medications, and prescription medications They may make the same or comparable goods, including generic copies of name-brand medications For instance, Traphaco manufactures a variety of goods, such as antibiotics, antivirals, cardiovascular medications, and treatments for the digestive system Other businesses could create comparable goods using the same active ingredien

or a different medication formulation

In addition to these businesses, Vietnam is home to other smaller generic medication manufacturing firms These companies often produce equivalent products to brand-name drugs ata lower cost However, the quality of these products can vary, and it's important to consult a healthcare professional before using them

3.1.4 Bargaining power of customers Numerous top retail organizations have made significant investments in the pharmaceutical sector in quest of development prospects after realizing the tremendous potential of this sector Leaders in retail are starting new competition in the pharmaceutical industry Mobile World Investment Joint Stock Company increased its stake in the An Khang Pharmacy chain from 49% to 100% in November 2021 by purchasing 1,294 million An Khang Retail Joint Stock Company (An Khang Pharmacy) shares with a value of $52.2 billion Each pharmacy's monthly sales are currently

approaching the break-even point at roughly 500 million VND To boost sales and reduce expenses per shop, Mobile World Investment Joint Stock Company creates a variety of innovative An Khang models, and the company will quickly grow the number of stores in 2022 Drugstores are receiving significant investment from retailers, including FPT Digital Retail Joint Stock Company (FPT Retail), a subsidiary of FPT Corporation With the goal of dominating the pharmaceutical retail sector, FPT Retail invested in the Long Chau pharmacy chain in 2017 Many Long Chau pharmacies' current sales have surpassed VND 10 billion In 2022, FPT Retail will quicken the opening of 200-300 new outlets Retail enterprises are currently engaged in a vigorous "war" for market share with the trademarks of the existing pharmaceutical corporations in addition to competition with their rivals

The rapid growth of a large number of retail stores will increase the revenue as well as the number of customers in the pharmaceutical industry

3.1.5 Bargaining power of input suppliers The demand for pharmaceutical raw materials in Vietnam is mostly dependent on imports, according to the April 2020 Pharmaceutical Update Report of FPT Securities Joint Stock Company (FPTS) which more than 80% of the supply came from China and India

Numerous API factories in these two nations have either stopped operations or restricted exports as a result of the Covid-19 epidemic

Leading pharmaceutical firms like Hau Giang Pharmaceutical Joint Stock Company, Domesco

Medical Import-Export Joint Stock Company, Co Traphaco Joint Stock Company, and

Imexpharm Pharmaceutical Joint Stock Company have more or less seen their short-term prospects impacted by the supply disruption and Covid-19 epidemic developments

Overall, the bargaining power of input suppliers in the pharmaceutical industry in Vietnam is moderate While there may be some limited sources of raw materials and equipment, there are also multiple suppliers available such as suppliers from the domestic Additionally, with the growth of the industry in Vietnam, new suppliers may enter the market, reducing the bargaining power of existing suppliers However, the cost of switching suppliers can be relatively high, which may give some suppliers greater bargaining power

3.2 Company strategy analysis

Strategy means how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives In other words, strategy describes how an organization can create value for its customers while differentiating itself from its competitors

Traphaco's business strategy is to focus on producing quality products Traphaco always tries to provide products from nature with the motto of efficient production, regeneration, and

conservation of natural medicinal resources This business strategy helps Traphaco win the hearts of consumers The use of natural resources helps the brand proactively find raw materials, adjust prices reasonably, and reduce consumers’ worries about medical costs After more than 2 years of the Covid-19 pandemic, Traphaco has had more opportunities to develop and launch many pharmaceutical products to support the fight against the disease

Basic strategies have two strategies such as product differentiation and cost leadership Product

differentiation is an organization’s ability to offer products or services its customers perceive to be

superior and unique relative to the products or services of its competitors Cost leadership is an

organization’s ability to achieve lower costs relative to competitors through productivity and

efficiency improvements, elimination of waste, and tight cost control In Traphaco's case, Most of the product lines of Traphaco are not differentiated from other medical products but they focus on the quality of their product and selling price The sales product of Traphaco is medium or low level

or especially lower than other firms’ products Traphaco uses Vietnam's natural medicinal herbs

which have a lot of benefits for health and are easy to find and buy at a low price Besides, Currently, the retail pharmacy system is the sales channel that Traphaco has the leading strength in the market while many other pharmaceutical manufacturers only focus on taking advantage of wholesale agents to reduce costs In 2014, Traphaco pioneered the application of distribution system management (DMS) technology - managed by unified software for each pharmacist and collected information about the market and customers After 8 years of implementation, that big data warehouse allows Traphaco to forecast the extent to which sales will be affected, and the level of inventory in each place to have the plan to move goods to areas with high demand, and not leave the drug shelf empty In addition, a strong distribution system with a dense network across the country has helped to continuously replenish goods to the general warehouse as well as branch warehouses, ensuring sufficient goods and timely supply to pharmacies and agents.Hence, these factors show that Traphaco uses a cost leadership strategy to achieve success in competing with competitors that provide the same medicinal products

4 Balanced scorecard 4.1 Strategy map

CUSTOMER PERSPECTIVE

as) Ce Renee

Develop and expand distribution channels

a econ]

INTERNAL monufocturing & D innovation processes

BUSINESS PROCESS business processes PERSPECTIVE '

In Traphaco’s case, there are three strong ties Traphaco’s managers believe that to improve

manufacturing quality and productivity, the organization must improve manufacturing and business processes To improve these, the organization must develop employee process skills Employee satisfaction is also one of the quite important factors for improving manufacturing and business processes but this effect is moderate so the effect is a moderate tie

Where a tie is moderate or weak, managers anticipate that implementing the respective strategic objective will not have a strong impact on accomplishing the strategic objectives linked to it There

are many moderate ties and one weak tie on the map Traphaco’s managers believe that even if

they were to achieve the develop online channels objective, it will only have a weak effect on developing and expanding distribution channels because Traphaco focuses on OTC and ETC

4.2.2 Orphan Objectives

An orphan objective is a strategic objective with only weak ties leading out of it to other strategic

objectives In Traphaco’s case, managers still decide to conduct the develop online channels strategy

because this objective strategy still has a few benefits for the larger strategy 4.2.3 Focal points

A strategic goal that receives several connections from other goals is Known as a focal point The focal points of this map are Improve manufacturing and business processes and Improve Customer satisfaction To achieve the objective Improve manufacturing and business processes need to achieve all of the three objectives below: Satisfaction of employees, Develop employee process skills and Improve the information system Moreover, to reach customer satisfaction, the company needs to improve manufacturing quality and productivity, reduce operating cost, and improve post-

sale service

4.2.4 Trigger points A strategic goal with numerous connections to other goals that stem from it is known as a trigger point From one objective, the company can achieve many goals such as Improve manufacturing and business processes They will help Traphaco to improve manufacturing quality and productivity, reduce operating cost, improve the marketing process, develop and expand distribution channels and improve post-sale service

4.2.5 Distinctive objectives Distinctive objectives are those that set a company apart from its rivals and are seen as essential to implementing the firm's strategy Recall from the Strategic analysis of the company, the

management of Traphaco decided to pursue Cost leadership-Strategy, lowering cost and price instead of producing more advanced products and charging higher prices The management accountant of Traphaco chooses to reduce operating costs, improving manufacturing quality and productivity as the distinctive objectives compared to other competitors

Financial

Perspective

Operating income

Income rom proesciw'Y | Manage costs and VND 65 VND 170

ain

Operating income

relationships Revenue growth

Increase Shareholder Value

Revenue Growth=(Revenue 2022 — Revenue 2021) : Revenue 2021