G1 00293 CAPSTONE PROJECT DEVELOPING BUSINESS STRATEGY FOR TRAPHACO JSC IN THE PERIOD OF 2012 – 2017 DỰ ÁN CAPSTONE PHÁT TRIỂN CHIẾN LƯỢC KINH DOANH CHO CÔNG TY CỔ PHẦN TRAPHACO GIAI ĐOẠN 2012 – 2017

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CAPSTONE PROJECT

DEVELOPING BUSINESS STRATEGY FOR TRAPHACO JSC IN THE PERIOD OF 2012 — 2017

MEMBERS OF GROUP 2 — CLASS GaMBA.M0410

1 NGUYEN KIM PHUONG

2 LE HONG QUANG - TEAM LEADER

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ACKNOWLEDGEMENTS

Group 2 - Class GGMBA.M0410 would like to express our sincere thank to the officials and employees of TRAPHACO JSC who was enthusiastic to support and make favorable conditions for us to have a chance to meet and talk with the management team as well as a number of other leaders of departments in the company to get more information, to increase understanding and help our groups 2

to complete this assignment

Group 2 — Class GaMBA.M0410 would like to sincerely thank the Professors who were dedicated to teach, communicate and guide us throughout the process so that our group can complete this capstone More importantly, this knowledge will help us a lot in our professional life

We also would like to sincerely thank ETC - Hanoi National University, Griggs University - Andrew has made conditions for us to join this course The course was designed very reasonable, bringing to us knowledge, relationships and

the opportunities to share our experience and to learn from other students in the program

In the process of completing the capstone, our group will not avoid the shortcomings We are looking forward to receiving comments

Sincerely Thank You!

3 C2 Global Advanced Master of Business Administration

Prowran

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TABLE OF CONTENTS CHAPTER 1: OVERVIEW OF STRATEGIC MANAGEMENTI 9 1v1 TIE:EDINWSBT dẾ bia SWRNÍSUYEeensesennneoneỷnnanenroeoooarnroensennrneoeorennnoneorrnnorenosas 9 1.2 Characteristics and roles of business Strate sys cisiscisisicissssssssvenvaicisivscieciesiavnnaveses 9

1.2.1 Basic characteristics of business strafegy: ào chi 10

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1.4.1 The Input SŠtaBe: Ánh HH HH HH rưện 14

1.4.1.1 External Factor Evaluation (EFE) Matrix, PEST, M.Porter’s 5 forces: 14

L.4.1.2 Competitive Proƒftle Matriv (CPM|): - SH ni 19 1.4.1.3 Internal Factor Evaluation, TFE Matrix: 00 0 0cccccccccccccceeseccsseeeesseeeneesensees 19 LAD THẺ NHWHINE SN Eoodaadddeeadaoadaoaogddadgadadddoaboaoiiosioideiilsglosades3cssó 21 L4.2.1 SWOT AnalySiss cccccccccccccccceecccsessccensecsseessscssenecessececeeeeeestaaeeessenaeeeeneceeeeeeses 21 LAZ.2: NHL EncternGl (TE) MACE sic svn scvcccisevivinevoninievevesepssavvassegeignivavitonsertoaastsien 22 1.4.3 The Decission Stage: HH HH TH nhện 23

CHAPTER 2: ANALYZZING TRAPHACO JSC, 5 sgk seserse 24 2.1 Overview of TRAPHACO Joint Stock Company:, ccccctrttiierierried 24

2.1.1 Introduction about TRAFACO Joint Stock Company: oe 24

2.1.2.Vision, mission, core values of TRAPHACO: 25 tt 3112115211111 25 221/2 1 VSHOHE , 5 55151551551121111711111111117111111111111111111111171111111117111 111 25 2.1.2.2, MISSỈOH-: ,Ộ, G9 1ES1E11511171111171171711111111111111711111717111117111111117111 111tr 25 u84, CtữNHEsHöoNátESIFUCHPEEs., ác: sc;ccccccGcc2 2K GGGGiU2220LLAE10Á26642á10404001à06664ã60k4454ãl62a 25 2.1.4.Products and serViC€S: - Qui 27

2.1.5 The major customers atid Sup Pliers? 5 s.issicccssccscassssciessccrasescisoormmmacosonaisies 28

2.1.6.The financial data and Statistics ois: cosssssiesscsssvenscssssnsscaxsoasnasadersenesuscsendscsncaisenaison 29 2.2 external Factors Evalue tins jc cscsssceccosassnessccmenenecseomnencconmananoeeteancnassnnennss 31 2.2.1 Assess the macro environment using PEST modeÌ: - 5555 <<s+2 31

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idk Ls POUCH GRE LCRA CRIPORMIOBTS isis cicscscaiiiaiennnscnsucnsnciiianbineianiicctanaiianictetes 31 2.2.I.I ECOHOIHIC ©HVỈFOHITI€HHÍ+ ST KT KH HH Ko 32

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Ms Ea to TC 0l FO DI ERNDHGNIDNE 1u da gadgtaatdogGeitotiietrvdcGGii0i30123090436.0044ssu« 38 2.2.2 Industry Environment Assessment by M.Porter 5 forces model: 39 Dedede ds AVRITY QIRORE COINPENRG [TRPHÌGU s.c,¿cc c2 G2202 60266642002 402 0240 0,c5g6 060066 886260688 80 4I 2.2.2.2 Potential entry 0ƒ HeMW COIHD€ÍÏÍOFS: QQ SH HH nghe, 43 Dida Se DAPSONE POWEF OF CUSIOMNEESS sive ccáocccjbiieiLctiDECDCAL180065160008068410016600364566 44 2e i4 BữPGHDIIRB PONEP SHĐHĂGESE vcsscsssisvasaxsviessaicsnsizsnnaddaaxvesnainsixcsesnsencaarcseeseeioens 45 2.2.2.5 Potential Developmenf oƒ Substitute ProdlHCfS: 5 S55 << +2 46 2.2.3 Evaluation of Opportunities and Challenges, the EFE matrix of

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2.3, Competitive Profile Matrix (CPM)‹: : ¡2.02222202220000 000 0á 46466 4Á6666666i 50 2.4 Internal Factors EVvaÌuatIOT + c ĂS 113v 1 KH nọ ngà 55 Disks TAURI VOROUL CONE sssscsiosseasvcisivcrneesntncincanerencmnngumniceiancncuyreibiuneatieuatrncnceussaises 35 2.4.1.1 Training policy, fFdÏHÏH- SH ng gi tt 57 uất: lu thw GÙ TÊN: CHÍ ĐÃ « ocnccc ái B22cG0108006s5661869666g88803lai6080385105s06508W95E0810483080800300061//4205059/88 57

2.4.1.3.Ensure workplace sqƒety, prodHcfioH Sđ4ƒ€fy: - S5 ĂẶẶSĂS se 58

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2.4.2.4 Analyze asset and capital structure 0ƒ tÏe eHfÍeFpFiS€: ĂĂs<<<x+2 61

2.4.2.5 Analysis of the solvency oƒ TRAPHACO: .Ẳ Ặ 11119 Y1 1 ri 64

Kiến, TIONERNYFCH NNU EVCMINDRENE seeeceaeeeeeooeoaneooaocooiaoroenanooneeerrorsaeoseesoarenneesssal 65 2.4.4.Marketing and other operations’ .c cee ceceeeeseeeeeeeeeceneneeseaneeeseneseeneeeeenes 67

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1 For the company L1 SH TH TH nọ TH vn 84

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INTRODUCTION

1 Reasons for choosing the topic

In recent years, the Vietnamese market has become the battlefield Many domestic and foreign companies have invested a lot in developing better products and offering better services for the lower price That is the cause of the fiercer

competition between the businesses together

The world economy crisis started from 2008 is still ongoing and so does the outlook for Vietnamese economy which is not going much better for the next few years We are seeing many companies going out of business or going into losses However there are still many opportunities as our people are young, their incomes are still increasing and they are willing to spend much more in comparison with their parents for all the things

To overcome these challenges and take advantage of opportunities, thereby, improve their competitive position in the market, each firm must make appropriate business strategy for each period, each stage of the development; complying with

global trends on the principle of ensuring the balance of national interests with the

interests of the business Therefore, the business strategy is urgent need for every business in the current situation

From that reason, Group 2 has decided to choose the following topic:

“Developing business strategy for TRAPHACO JSC in the period of 2012-

2017”

2 The object and scope of the study:

The object of this capstone is to develop the business strategy of TRAPHACO in the period of 2012-2017

Scope of study is TRAPHACO’s and competitors business in the area of

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Analyze and study the role of the TRAPHACO’s business strategy in the recent time and the factors affecting the developing the business strategy for TRAPHACO

Analyze and study the status of TRAPHACO’s business strategy in recent years Since then, find out the cause of limiting the development of TRAPHACO from which to come up with timely solutions

Research to provide solutions implement strategies for TRAPHACO to develop rapidly, leading the industry

4 The methods of research:

+ Statistical methods, interviews and data collection

+ Case study approach, theory combining with data collection and processing are used to analyze the cases and propose solutions to apply in practice

5 Capstone structure of Group 2 — Class GaAMBA.M0410:

Beside parts such as: acknowledgments, table of contents, introduction, conclusion, references this capstone is divided into three chapters

Chapter 1: Overview of Strategic management

Chapter 2: Analyzing TRAPHACO JSC

Chapter 3: Selection of the Business strategy for TRAPHACO JSC in the period of 2012-2017

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CHAPTER 1: OVERVIEW OF STRATEGIC MANAGEMENT

1.1 The concept of business strategy:

There are many different views on the business strategy They can be grouped into the following opinions:

+ Opinion that business strategy is the art:

- According to Alain Threlart: Business strategy is the art that companies use

to fight and win the competition

- M.Porter’s view: Business strategy is the art of building solid competitive advantages to the defense

Thus, the authors considered the business strategy is an art to compete in the market and develop business

+ In view of category management, business strategy is a form of that planning

- G Arlleret: Business strategy is the determinating the ways and the means

to achieve the goals identified through the policy

- D Bizrell and the authors: Business strategy is as a general planning

guiding or directing the company to the desired target It is the basis for the elaboration of the operational policies and procedures

- According to Gluecl: Business strategy is a consistent, comprehensive and integrated plan; it is designed to ensure that the objectives will be implemented

Thus, there are many different views on strategy We can understand that

“strategy is a complex series of actions to mobilize the entire resources of an organization / individual in that order to achieve a certain purpose” In many companies, business strategy is an art helping to achieve long term goals of the business and have relationship with the transformation of the business environment and competitiveness

1.2 Characteristics and roles of business strategy:

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1.2.1 Basic characteristics of business strategy:

+ Business strategy defines the basic objectives and business directions of the enterprise in each period

+ The orientation of the business strategy is to ensure for the enterprise the continuous and steady development in a constantly fluctuating business environment

+ Business strategy ensures the maximum mobilization and optimal combination of exploitation, using the resources of the enterprise in the present and the future, promoting the advantages and seize the opportunity to gain an advantage

1.2.2 The role of business strategy

+ Business strategy helps an enterprise define its purpose and direction, it is

as a basis, the guideline for all the business activities of the enterprise

+ Business strategy helps an enterprise understand and take advantage of business opportunities, and proactive measures to overcome the risks and threats in the competitive market

+ Business strategy contribute to improving the efficiency of using resource, enhance the competitive position of the enterprise to ensure its sustainable development

+ Business strategy create a solid basis for the formulation of policy and business decisions consistent with the fluctuations of the market

1.3 The basic stages of strategic management:

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1.3.1 Strategy formulation stage

FIGURE 1.1: ACTIVITIES OF THE STRATEGY FORMULATION STAGE

ANALYZE

MAKE DECISION RESEARCH

+ Researching: Researching relates to the collection and processing of

information about the market and the business of the enterprise Implementation

research is to identify the strengths and weaknesses of the enterprise

+ Consolidate intuition and analysis: there are a lot of tools for the strategists

to merge intuition and analysis to make viable alternative strategies such as: matrix

of External Factors Evaluation (EFE), Internal Factors Evaluation (IFE) matrix,

matrix QSPM

+ Making decisions: the decision is extremely important, strategic decisions

have iong-term effects (better or worse than present) to the enterprise

1.3.2 Strategy implementation stage:

FIGURE 1.2: ACTIVITIES OF THE STRATEGY IMPLEMENTATION

STAGE

ANNUAL MAKING

GOAL POLICIES ALLOCATING

RESOURCES SETTING

+ The strategy implementation stage is often called the action of strategic

management It requires dedication and self-sacrifice and discipline of each

individual who make the implementation

+ The strategy implementation stage includes the development of budget of

implementation strategies, programs, and cultural environment, and links with

promoting staff reward system for long-term goals and the annual goals

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+ The biggest challenge of implementation strategies is to stimulate administrators and staff in the enterprise working with the pride and enthusiasm and aiming to the general proposes of the enterprise

1.3.3 Strategy evaluation stage:

FIGURE 1.3: ACTIVITIES OF THE STRATEGY EVALUATION STAGE

+ This is the final stage of the strategic management process

+ Strategy evaluation stage is needed for the successes at the present that do not guarantee success in the future of every business

1.4 The process & tools for business strategy development:

+ Strategic planning process:

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IGURE 1.4: STRATEGIC PLANNING PROCESS

| "mai "` an are no nh nan na ern:

Analyze the internal business Analyze the business

(S,W) (3) environment (O,T) (2)

4 Select the strategy (4) as =

a Company strategy (5) “ as

Pe | Strategic businesses and functions ö

Source: Slide of Strategic management lecture (MBA Program, Griggs University USA)

+ Operating environment of enterprise:

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FIGU 1.5: OPERATING ENVIRONMENT OF ENTERPRISE

INTERNATIONAL ENVIRONMENT

Source: Slide of Strategic management lecture (MBA Program, Griggs University USA)

1.4.1 The Input Stage:

1.4.1.1 External Factor Evaluation (EFE) Matrix, PEST, M.Porter’s 5 forces:

+ The main purpose of the evaluating and controlling external factors is the

development of a list of the limited opportunities that the enterprise should get can

as well as the challenges that enterprises should avoid which are brought by the

external environment

+ The external environment consists of two environments are the macro- environment (PEST model) and the micro-environment or the industry environment (model 5 forces of M.Porter)

1.4.1.1.1 The Macro-environment: According to the open PEST model, the macro- environment consists of the following elements:

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FIGURE 1.6: PEST MODEL OPEN

- For the enterprises of the industry depends heavily on government contracts

or subsidies, forecasts of politic — law may be the most important part of the examination of external factors

- The trend of today's legal environment often pay more attention to protecting the natural environment, consumer rights, protect the healthy competition

of enterprises, more international integration

+ Economic environment:

- The economic environment has a direct impact on the potential attraction of the different strategies

- The economic variables: GDP, GDP / capita, GDP growth, economic

cycles, inflation, trade balance, exchange rates

+ The socio-cultural environment:

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- The socio-cultural environment includes the customs, beliefs, popular opinion in the community

- The socio-cultural changes have a significant impact on products and services, and consumer markets

- The trends of the socio-cultural environment: loyalty to core cultural values more attention to the quality of life, the role of women is increasing, the p:ocurement suddenly increases

+ Demographic environment:

- The demographic environment has a lot of influence on business strategy of tte enterprise By demographic environment, enterprises find opportunities and

threats for businesses

- The demographic environment variables: population, population density, tte natural population growth rate, the gender composition, average age

+ Global environment: including global market related to the ongoing e:onomic phenomena and global change, the worldwide cultural institutions 14.1.1.2 Industry environment:

+ Industry environment Analysis with the “five forces model” of M Porter is

ai effective tool for enterprises to find out the source of profit

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+ A detailed and specific analysis of industry environment will help enterprises identify where the opportunities (O) to be able to develop, and what are the threats (T) enterprises facing and having the strategy to deal with those threats

FIGURE 1.7: FIVE FORCES MODEL OF M.PORTER

POTENTIAL SUPPLIERS r COMPETITORS

+ Customers:

- Analysis of the power of customers

- The power of customers is the ability to change price of the customer and suppliers

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e power of customers depends on: the number of customers, the ability to link of customers (scattered, focusing), the number and value of each sale, the number of suppliers

EVALUATE THE COMPETITORS’ DETERMINE THE COMPETITORS’

CHOOSE COMPETITORS TO FORCAST COMPETITORS’ TYPE

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1.4.1.1.3 EFE Matrix:

+ EFE Matrix is a matrix evaluating the external factors of an enterprise, allowing strategists to summarize and evaluate the information of socio-economic, culture demographic, geographic, political, government, law, technology and competition

+ There are five steps to build the EFE matrix as follows:

- Step 1: Make a list of external factors which play an important role in the enterprise’s success It includes from 10 to 20 factors which are opportunities and threats affecting to the business

- Step 2: Assign weights to each key external factor from 0.0 (not important)

to 1 (very important) for each one

- Step 3: Classify from | to 4 for each factor determining the success to show how the current strategy of the business react to each factor In which: 4 — good reaction, 3- over medium reaction, 2 — medium reaction, | — no reaction

- Step 4: Multiply the weights in step 2 with its type in step 3 to identify the

1.4.1.2 Competitive Profile Matrix (CPM):

Competitive ProfileMatrix (CPM) will help a firm identify its main competitors, the strengths and the weaknesses of competitors CPM will be

constructed through 5 steps similar to the steps building EFE matrix with a list of

about 10 factors

1.4.1.3 Internal Factor Evaluation, IFE Matrix:

1.4.1.3.1 Evaluate the internal factor of an enterprise:

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+ The purpose of the internal environment evaluation is to help businesses can identify the existing and potential resources and core competencies to create a competitive advantage to competitors, which also identifies the obstacles in maintaining sustainable competitive advantages of the enterprise on the market

+ Core competencies of the business is identified based on factors such as: the ability to bring to customers the value having a strong influence on the choice of products and services; provide products and services better than competitors; enter the large potential market

+ Analyzing and evaluating the internal businesse will enable to identify the

strengths (S) and weaknesses (W) Since then, the selected business strategy is

necessary to promote maximum strengths and overcome weaknesses

FIGURE 1.9: THE INTERNAL FACTORS OF AN ENTERPRISE

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[FE matrix constructing is through 5 basic steps similar to the steps of

building the EFE matrix The average of sum total weights is 2.5; If the average

score is less than 2.5, it will show the internal business is weak Conversely, if the

average score is greater than 2.5, it will show the internal business is strong

1.4.2 The Matching Stage:

1.4.2.1 SWOT Analysis:

+ The SWOT matrix is a matrix of Strengths — Weaknesses — Opportunities —

Threats, is an important combination tool which can help administrators implement

and develop four types of strategies: SO Strategies (Strengths — Opportunities

strategies), WO strategy (Weaknesses — Opportunities strategies), ST strategy

(Strengths — Threats strategies), WT strategy (Weaknesses — Threats strategies)

+ Contructing a SWOT Matrix involves 8 steps as following:

- Step 1: List the enterprise’s key external Opportunities

- Step 2: List the enterprise’s key external Threat

- Step 3: List the enterprise’s key external Strengths

- Step 4: List the enterprise’s key external Weaknesses

- Step 5: Match internal strengths with external opportunities, and record the

resultant SO Strategies in the approriate cell

- Step 6: Match internal weaknesses with external opportunities, and record

the resultant WO Strategies in the approriate cell

- Step 7: Match internal strengths with external threats, and record the

resultant ST Strategies in the approriate cell

- Step 8: Match internal weaknesses with external threats, and record the

resultant WT Strategies in the approriate cell

SWOT MATRIX

List the enterprise’s key external List the enterprise’s key

Strengths external Weaknesses

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6 SO Strategies WO Strategies

Use the strengths of the Take advantage of external

internal business to exploit the | opportunities to improve the

1.4.2.2 Internal-External (IE) Matrix:

+ IE Matrix allows to forecast the expected effect of the current strategic

decisions on an organization’s investment portfolio of divisions

+ [IE matrix is based on two key aspects which are the IFE total weighted

scores and the EFE total weighted scores

FIGURE 1.10: THE INTERNAL — EXTERNAL (IE) MATRIX

THE IFE TOTAL WEIGHTED SCORE STRONG

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LOW Vil

1.4.3 The Decission Stage:

+ Matrix QSPM is used for decision-making stage This matrix is a tool that allows strategists evaluate the most objectively the strategies which are likely alternative

+ The matrix QSPM building is through 6 steps as follows:

- Step 1: Make a list of the enterprise’s key external opportunities/threat and internal strengths/weaknesses in the left column of the QSPM This information

should be taken directly from the EFE Matrix and the IFE Matrix

- Step 2: Assign weights to each key external and internal factor These weights are identical to those in the EFE Matrix and the IFE Matrix

- Step 3: Examine the Stage 2 (matching stage) matrices and identify alternative strategies that the organization should consider implementing

- Step 4: Determine the Attractive Scores (AS) difined as numerical values that indicate the relative attractiveness of each strategy in a given set of alternatives

- Step 5: Copute the Total Attractive score Total Attractive score are

defined as the product of multiplying the weights (step 2) by the Attractiveness scores (step 4) in each row The higher the Total Attractive score is, the more

attractive the strategic alternative are

- Step 6: Compute the Sum Total Attractive score It reveal which strategy is

the most attractive in each set of alternatives

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APTER 2: ANALYZING TRAPHACO JSC

2.1 Overview of TRAPHACO Joint Stock Company:

2.1.1 Introduction about TRAFACO Joint Stock Company:

+ Head office: 75 Yen Ninh - Ba Dinh - Ha Noi

+ Website: http://www TRAPHACO.com.vn

+ Listed at HCMC Stock Exchange with stock code TRA from Nov 2008

Traphaco"

+ Logo:

+ The company operates under the Enterprise Law in 2005 and Company’s

Regulations In 2008, it has been granted ISO 9001-2008

+ The process of formation and development:

TRAPHACO Joint Stock Company formerly is Manufacturing Group of Medical Railway Company, established on 28/11/1972 with the main task of serum production, fluids and distilled water for railway hospitals during the war

On 01/06/1993, Railway Pharmaceutical Factory (traded name is Raphaco) was born as a legal company with its own seal, own bank accounts and operates independently under Decree 388 of the Government On 05/07/2001, the Company

officially became TRAPHACO Joint — Stock Company

After 40 years of construction and development, TRAPHACO Joint-Stock Company has grown rapidly and contributed much to the health care and protection

as well as the development of pharmaceutical industry in Vietnam

+ Main areas of activity: Buying, cultivation and processing of medicinal herbs; Manufacturing and trading pharmaceuticals, chemicals and medical material; preparation prescription drugs; Consulting pharmaceutical production and cosmetics;

Exporting and importing of raw materials for manufacturing medical products;

Production and trade of cosmetics; Producing, trading food; Consulting scientific

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and technical services, transferring technology in the field of health and pharmaceuticals;

* High-tech joint-stock company TRAPHACO (CNC TRAPHACO)

* TRAPHACO Sapa is a 100% own subsidiary in Lao Cai

- Branch: Ho Chi Minh City Branch, Vinh Long Branch, Binh Thuan and Dong Nai Branch, Da Nang Branch, Khanh Hoa Branch, Quang Ngai Branch,

Nghe An Branch, Thanh Hoa Branch, Nam Dinh Branch, Hai Phong Branch

2.1.2.Vision, mission, core values of TRAPHACO:

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ARC LITY ACCO

H& ASS UNTI

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2.1.4.Products and services:

TRAPHACO developed many products in a lot of different categories Some more information on the products can be seen in Appendixes

+ Oriental products: In recently year, the revenue structure of TRAPHACO had moved on the Oriental/Traditional products group And increasing sales of Oriental group of products is a goal of TRAPHACO to reduce the dependence on imported raw materials and to replace them by domestic materials resources and by building the medicinal farming areas

According to the Vietnamese Drug Administration, TRAPHACO’s traditional medicines have the largest market share in the North This is the strength of TRAPHACO which is accounting for 58% of company sales and contributes 79%

to the company profits in 2011 The two main traditional products groups are

"Active support blood brain" and "Boganic"

+ Western Pharmaceuticals: the products earned for 16% of total revenue and contributed 18% of the total profit of the company in 2011 which accounted small proportion in comparison with the traditional medicines The product restructuring decreased TRAPHACO’s western pharmaceuticals products that help

it to reduce the pressure of the increasing of exchange rate which affect the product

profitability

+ Generic goods: is a product group of standard/generic formula, having large turnover but low profit margin Therefore, in recent years, the company has not focused on growing of this product group although the potential is still huge

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We cart see that the main product of TRAPHACO is the traditional

(Source: TRAPHACO internal report)

2.1.5.The major customers and suppliers:

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+ Most of the raw material producing tradition medicine line of TRAPHACO

is planted in local and from domestic companies (about 65%) The main domestic

supplier of TRAPHACO are: Binh Luc Pharmaceutical Corporation, Joint Venture

BV Pharma, TRAPHACO (100% Lam Dong

Company Sapa owned),

Pharmaceutical Company, TW2 Company

+ For the remaining 35% raw material , TRAPHACO have directly imported

from abroad such as: Southern Anhui (China), Jingdezhen Kamenzi (China),

Andenex-Chemie (Germany), Linnea (Switzerland), Yuhan (South Korea),DSM

(Switzerland), BASF (Germany, Japan)

2.1.6.The financial data and statistics:

(Source: TRAPHACO internal report)

Year 2007 Year 2008 Year 2009 Year 2010 Year 2011 Net income

from sales and offer | 933:220.851,499 | 780,183,033,638 | 747,041,085,152 | 859,762,172,200 | 1,062,793, 118,734

TH 32,168,106,873 | 31291566476 | 39046083826 | 46.986.026.190 | 72.564.866.267

Profit before - 47.204.060.774 | 58.795.588.450 | 69556994674 | 91420722485 | 124,240,138,825 Income tax | 8955623841 | 12.757.211.817 8626847235 | 25,140,236,698 | 34.856.620.994

Profit

sie 38,248,436,933 | 46,038,376,.633 | 51,047,163,781 66,248,067,953 | 90,698,650,300

X

Equity 236,504,881,839 | 252,597,691,351 | 285,750,880,115 | 349,096,519,711 | 399,280,111,678 Total assets | 403,798,848.203 | 359.319.540.045 | 407,370,727,531 | 578,868,118,141 | 838,443,497,734

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Year Year Year Year Year

2011, TRAPHACO’s revenue has increased 23.6% compared to 2010 Along with the growth of sales, profits increased

(407,370,727,531 VND) Total assets of the company in 2011 is 838,443,497,734

VND which increased 259.575,379,593 VND compared to 2010 for 44.84% This shows that in 2011 the company has invested in assets and it made the Company's

total assets increased

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2.2 External Factors Evaluation:

2.2.1 Assess the macro environment using PEST model:

2.2.1.1 Political and legal environment:

+ Political Environment:

Political stability is one of the indispensable elements helping Vietnam to have

a persistent economic development policy Political stability plays the role in keeping Vietnam to be a peace and prosperity country From 1990 onwards, most of the countries in Asia area, except for Singapore have experienced coups or political crisis Meanwhile, Vietnam's political is always stable; this is a guarantee to make consistent economic policies Political stability will reduce the risk of terrorism, strike, etc so that will reduce company’s risks Political stability of Vietnam has a positive impact on the development of TRAPHACO, creating a stable business

environment for TRAPHACO

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+ Law:

The pharmaceutical industry is one of the sectors having been strongly

affected by the management policy of the state The government has issued many

legal documents to manage the pharmaceutical industry such as: state policy in the

field of pharmacy, state management of medicine prices, condition to make business

with medicine, quality standards, drug testing norms

The business operations of TRAPHACO need to follow pharmaceutical law,

corporate law, securities law and other laws The pharmaceutical law that takes

effect from 01/10/2005 has created the highest legal basis for production and

business activities of the pharmaceutical industry in general and of TRAPHACO in

particular

On the other hand, Vietnam's joining to the World Trade Organization- WTO

has opened up so many opportunities and challenges for Vietnam's pharmaceutical

business Understanding the knowledge of the law as well as international rules is a

necessary requirement for the development of every business Foreseeing this,

TRAPHACO always focused on research and cultivate new up-to-date knowledge

of international environmental law to minimize the risks in the production process

International business and integration

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Looking at this graph we see Vietnam's GDP growth rate in recent years

significantly reduced Vietnam's GDP growth rate peak in 2007 is 8.46% and then

fell sharply in 2008 is 6.31% to only 5.32% in 2009 and then increased to 6.78% in

2010 and by 2011 dropped to 5.89%; GDP fell also makes social investments

decrease

In the early months of 2012, the global economy is facing a lot of difficulties

Economics of a number of Asian countries fall into the loss of growth momentum

Vietnam's economic growth has declined sharply compared to the previous years,

the business has continued to weaken Meanwhile the increasing inventory means

the backlog of capital and increasing bank debt

The poor growth of GDP has made a huge impact on the business situation of

the industry Compared with other industries, Pharmaceutical industry is less

affected by these factors as these are the necessities of the people

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High inflation has huge impact on |!RAFACO because almost all the costs of

TRAFACO have been increased such as: input raw material, electricity, water, gas, etc., while the price of the products does not increase as the increase of the CPI due

to the strict control of the pharmaceutical industry Moreover, the increase of CPI makes people take more careful on their spending Therefore, the increase of CPI has negative influence on Vietnamese firms in general, Traphaco in particular

+ Interest rate:

In early 2008, the State Bank has pursued tight monetary policy to limit its negative impact on the economy It was not until late 2010 and early 2011, the new policy tightening implemented powerful synchronization These policies have affected all aspects of the economy with a series of changes in interest rates, exchange rates and credit growth Interbank interest rates continued to raise makes

business difficult to access loans

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Decree 11 of the Government and the tight monetary policy reduces aggregate demand and direct impact on reducing overall spending and purchasing power of the pharmaceutical products in particular

+ Import and Export:

Exports in 2011 reached U.S $ 96.3 billion, an increase of 33.3% over 2010, much higher than the 25.5% increase in 2010 compared to 2009 World commodities prices are the main reason pushing exports in 2011 of Vietnam increased

Imports in 2011 reached 105.8 billion U.S dollars, up 24.7 % from a year earlier, higher than the 20.1% growth in 2010 Import group has statistics that the increasing price factor contributing to 97.8% of imports

Import and export situation of increased mainly due to price factors adversely affect the Company's raw material input Input prices increase the cost of products, but the price increase did not profit and influence the planning of the company + Exchange rate:

Due to high inflation in 2011, even though the nominal rate has been

increased, but Vietnam actually increased 3.2% in 2011, continuing xu direction increase gia execute since Nam 2004 Upturn in prices increases the expected discounted nominal VND, making the situation increasingly popular speculation of foreign currency and foreign exchange reserves of the State reduced

An increase in the exchange rate for exchange rate losses can significantly reduce or even eliminate the entire profit of the Company An increase in the exchange rate for exchange rate losses can significantly reduce or even eliminate the entire profit of the Company For TRAPHACO 35% of the Company's raw material is imported Therefore to limit the impact of the exchange rate, TRAPHACO active in import sourcing at competitive prices and use the advantage

of the group of companies producing essential drugs for health care community health Therefore, not affected by the exchange rate of the payment process

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2.2.1.1 CulturalVsocial environment:

Vietnam is an agricultural country: most people are concentrated in rural areas Their living standards are low and the demand for drugs is usually cheap drugs This is one of the favorable conditions for Vietnamese pharmaceutical companies generally and TRAPHACO in particular

Much of Vietnamese consumers will buy medication without doctor's prescription for common ailments such as: headache, runny nose, abdominal pain they buy drugs or drink according to the whisperings of the others Knowing the habits of consumers, the pharmaceutical company in general and TRAPHACO particular have used the promotion staff who will affect pharmacies in the form of sales commissions The pharmacist will advise and prescribe directly to customers and this will have great impact on the patient's decision-making process

Currents, the increasing rate of urbanization led to the restructuring of the

population to urban areas with a young population structure makes the demand for health care products is increasing

Moreover, the standard of living of the Vietnamese people is increasingly improving the growth rate of the economy and health issues are increasingly interested So, the demand for quality medicines to protect health tends to increase This is a favorable condition to develop the pharmaceutical industry in general and the development TRAPHACO in particular

2.2.1.3 Technology environment:

+ Currently, the technical level and production of low-tech and not the right investment, Ongoing investment status lines overlap in the pharmaceutical industry + Most drug manufacturers focused on simple preparation technology, low technical content, duplication of product lines that have not focused on the development of pharmaceuticals, little attention to investment on specialty drugs, cure as well as the special dosage forms Therefore, domestic production only meets 40% of market demand for these drugs

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According to the regulations in 2008, if businesses do not upgrade production lines, production narrow and only allows processing of products for businesses with GMP standards Of the 174 pharmaceutical production facilities in the country, with

59 new GMP facilities and TRAPHACO is one of the first business done GMP standards

Environmental treatment technology in the pharmaceutical manufacturing business has not been interested in technology and packaging manufacturers are still backward With business perspective "Taking science and technology as the center”

so technology issues always be TRAPHACO interest relevant to an investment in modern technology and quality standards

2.2.1.1 Demographic environment:

+ Population size and population structure:

In recent years, although the population growth rate of Vietnam has decreased but in the absolute scale there is still an annual increase of about | million people -

an average population size of | province

With nearly 86.2 million people, Vietnam is the third most populous country

in Southeast Asia and ranked 12" in the world

Vietnam's population density is 260 people per km2, ranked 41% /208 in the world; Vietnam's natural population growth rate is now at 1.2%, the eighth highest

in Southeast Asia, 32™ in Asia and 114" in the world Average life expectancy is 72

age (male 70, female 73), ranked 4" in Southeast Asia, 20" in Asia and 83“

worldwide, comparable to some much more developed country like Czech Republic

With the growing and started to aging population, the demand for health care tends to increase This is a favorable condition for development of TRAPHACO + Geography:

TRAPHACO products are distributed across the country; however the company is strongest in the North, especially Hanoi, Hung Yen

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According to the General Statistics Office of Vietnam in 2011, 2010, Hanoi has 650 health care facilities under the City Health Department, which has 40 hospitals 29 clinics and 575 areahealth Along with the state's health system, Hanoi also has a system of hospitals, private clinics are being developed In 2007, the city has eight private hospitals with approximately 300 beds Under the scheme is being implemented, to 2010, Hanoi will have eight to 10 private hospitals Meanwhile, the total number of private hospital beds to about 2,500 beds This is advantageous to TRAPHACO market distribution of its products

In Hung Yen, Co CNC TRAPHACO the workshop with an area of 10,000 m2 factory with main function is produced traditional medicines Public company CNC TRAPHACO in Hung Yen has convenient traffic location to the east pharmaceutical products produced where distribute to other provinces

2.2.1.1.The global environment:

Currently, the pharmaceutical industry in the developing countries in Asia Pacific, Latin America still potential, especially for generic drugs With income

population, constantly improving per capita growth of the pharmaceutical industry

in the country will reach 12% - 15% of the World's only 6% - 8% (predicted

RNCOS)

+ Moreover, Vietnam has attended WTO, International integration doors open many competitive challenges for the pharmaceutical industry in Vietnam in general and for with famous TRAPHACO Reduction roadmap will certainly attract more foreign pharmaceutical companies entering the market with the financial resources and technology WTO according to the tax rate schedule applies to pharmaceuticals only from 0% - 5% (instead of 0% - 10% as before) Average tax rate would be 2.5% after 5 years from the date of Vietnam's accession to the WTO, this is a huge challenge for the pharmaceutical industry in general and particular TRAPHACO The integration and opening puts TRAPHACO in the situation increasingly fierce competition with rivals This was the main driving force for TRAPHACO as well as other pharmaceutical enterprises to further improve production capacity,

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product quality with improved technology and product diversification to survive and development on their own domestic market

Conclusion: As it can be seen that the pharmaceutical industry is an industry

of essential products whether they have money or not, people still have to use, a sector not affected much by the economic factors affectingGDP / capita But it is clear that the macro environmental factors also have a certain impact on the development process of TRAPHACO

2.2.2 Industry Environment Assessment by M.Porter 5 forces model:

With the attention of the Party and the State in recent years, the pharmaceutical industry has achieved sustainable development, ensuring the strong supply of medicines for prevention and treatment for people Development of Vietnam's pharmaceutical industry in the right direction is an important factor to ensure the security of health care, social welfare in the current period and the long term

+ Domestic production and supply of drugs

It is estimated that the domestic production value of the industry in 2011 was $

1,140,000 thousand, increased by 24.04% compared to 2010 In 2010, the domestic

drug production value reached 919.039 thousand dollars (an increase of 10.57% compared to 2009 is $ 831.205 thousand), satisfying 48.03% of the domestic demand for drugs Expense for drug per capita in 2011 was 27.6 dollars, increased

(Source: General Department for Pharmaceutical Management)

Value of Value of Drug expense

Year domestic drugs imported drugs per capita

(x1000 USD) (x1000 USD) (USD)

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+ Pharmaceutical Development Plan of the Government:

According to the 10-year plan, the government plans to invest $ 1.5 billion to develop the industry in which the goal is to upgrade the quality of and share internal medicine placed top priority Under the plan, the market share of the domestic pharmaceutical companies will increase from 40% to 60% by 2015 and increase the use of domestic raw materials for production First of all the government plans to invest $ 241 million to build four factories producing drugs in the next four years

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2.2.2.1 Rivalry among competing firms:

Pharmaceutical industry is one of the highly competitive industries in

Vietnam When Vietnam joined the WTO all items are subject to fierce

competition Pharmaceuticals are special and important products Therefore, the

market competition is always the interest of the whole society

Currently, we have 178 pharmaceutical manufacturing enterprises, from them

98 produces western-pharmaceuticals and 80 enterprises are producing drugs from

oriental materials There are also more than 200 individual households producing

traditional medicines There are also many Chinese companies selling supplemental

oriental foods/goods, sometime without licenses

The main competitors with companies in industries such as: Hau Giang

Pharmaceutical (stock code: DHG), Imexpharm (stock code: IMP), DOMESCO

(stock code: DMC), MEKOPHAR (stock code: MKP), OPC (stock code: OPC)

Compared with the five main competitors in this industry, the TRA just behind

DHG, DMC TRA is always higher than the IMP, MKP and OPC expressed through

graph revenues follows:

TABLE 2 2: REVENUES OF THE COMPANY IN THE INDUSTRY

Unit: Billion dong

Tiêu đề	Capstone Project Developing Business Strategy for Traphaco JSC in the Period of 2012–2017
Tác giả	Nguyen Kim Phuong, Le Hong Quang, Le Thi Thuy, Le Cong Tuan, Bui Xuan Truong
Trường học	Vietnam National University, Hanoi
Chuyên ngành	Master of Business Administration
Thể loại	Capstone project
Năm xuất bản	2012
Thành phố	Ha Noi

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