Building Thanh Cong pharmaceutical companys competititve advantages in Ho Chi Minh city (2008 to 2011)

TABLE OF CONTENTS STUDENT DECLARATION ACKNOWLEDGMENT REMARKS FROM PROJECT TUTOR COMMENT FROM PROJECT MENTOR CHAPTER I: THEORY ABOUT COMPETITIVE ADVANTAGE CHAPTER II: MARKETING ENVIR

Tutor: Dr NGUYEN NGOC HOA

Ho Chi Minh City

2007

STUDENT DECLARATION

I certify that the attached assignment is my own work Material drawn from other sources has been acknowledged according to unit-specific requirements for referencing

Ho Van Hien

wish to acknowledge the debt owed to the following people for their supports and assistance during the preparation and finished with this project

Firstly, I would like to express my gratitude to all the Professors of the Master in Business and Marketing Management (MBMM) program, who delivered invaluable knowledge, experience and assistance The extensive assistance, guidance, advice and encouragement of my guidance Doctor Nguyen Ngoc Hoa, Professor- Doctor Truong Van Tuan throughout the project study are sincerely and gratefully acknowledged, which provided the foundation and knowledge for writing this project

Secondly, I would like to thanks my adoptive parents Dr Hoang Quang Thuan & Phan Thi Kim Thanh, my elder brother and elder sister - Master Nguyen Manh Lam & Ho Thi Tan My, my Lecturer- Master Pharmacist Duong Thi Mai Trang,

Mr Serge, my colleagues: Phr Ho Si Ha, Mr Tran Minh Hieu, Mr Tam, my nephew’s Luong who have created favourable conditions and encouraged me in the work and completion of my study

My thanks also go to my classmates: Loc, Minh and Chi Anh for their supports during the courses

Finally, my special thanks to my beloved wife and my family for their encouragement and contribution in the completion of this project

May 10, 2007

Author

TABLE OF CONTENTS

STUDENT DECLARATION

ACKNOWLEDGMENT

REMARKS FROM PROJECT TUTOR

COMMENT FROM PROJECT MENTOR

CHAPTER I: THEORY ABOUT COMPETITIVE ADVANTAGE

CHAPTER II: MARKETING ENVIRONMENT ANALYSIS AND

THANH CONG PERFORMANCE

3.1 Building Thanh Cong Competitive Advantage

3.2 Building Thanh Cong Competitive Advantage

REFERENCES

APPENDICES

ABBREVIATION

Abbreviation Meaning Page

Table Contents Page

Table 2.2 TCC’s Standards “5T” & TCC Staff’s Standards “5C” 17

LIST OF FIGURES (pix, charts, figures (decimal: USD ‘000))

Figure Contents Page

EXECUTIVE SUMMARY

TCC drugstore was one of the top five biggest drugstores in HCMC where professional and reasonable are encouraged Its frequent clients are from low to middle income, and its brand is well-known for reliable and quality medicine and services at a reasonable price Currently, the appearance of many fierce competitors with lots of drugstores, their drugstores are not only big but also diversified, TCC recedes into the background, it is a medium drugstore, TCC’s turnover is decreasing from 2004-2006 (from 712,810 USD in 2004 to 620,430 USD in 2006)

In view of the above, TCC tries to look into the feasibility of establishing a chain

of many drugstores in HCMC, with an effective marketing strategy to cope successfully with competitive forces and generate superior

TCC itself-question and answer these questions:

̇ Why TCC’s turnover is decreasing in recent years?

̇ What have competitors done to attract customers?

̇ How should TCC do to recover and maintain its business?

̇ Which marketing strategy should be applied for overcoming its current situation?

TCC has been building the competitive advantage strategy by making centralizing purchasing activities and differentiation in customer services For creating quality price and services

MARKETING OBJECTIVES

TCC enjoys current gross sales of 620,430 USD in 2006 Its goal is to increase gross sales by 25% in the first two years and incrementally in subsequent years

PRODUCTS AND SERVICES

TCC focuses on customers services for improving its products, it pays more attention to customers to satisfy their desires TCC thorough understands clients’

middle income people Really, the clients can see TCC’s pharmacists or doctors any times for keeping the prescriptions or the advices Opening drugstore (24/24)

is a differentiation of TCC to diversify its services and to better the relationship with clients

RESOURCES NEEDED

TCC is seeking a capital infusion of 112,000 USD in order to build and implement

a marketing strategy to enhancement and develop its business

The professional staff (both pharmaceutical and business) is an important factor

MARKETING MATRIX COMPONENTS

TCC has the competitive advantage of beginning this project It will be better in relation to current clients and to attract new clients TCC’s marketing program will improve its relationship with customers and to expand its market share

PROJECTED OUTCOMES

TCC expect to increase its turnover by 737,200 USD in the first year (2008) In the second year and beyond, we expect to increase turnover by between 25-28 percent per year The payback schedule for the 112,800 USD is in the end of first year (2008)

(Please see the appendix)

Ho Chi Minh city (HCMC) is the big city in Vietnam, has obtained tremendous achievements since then, thanks to its great potential There are lot of foreign investors coming to HCMC to do business therefore it brings to the city a lot of business opportunities as well as challenges

The author is a pharmacist with more than ten years experienced services as a pharmaceutical retails dealer in HCMC Thanh Cong Limited company (TCC)

is the author’s own company, founded in 1997 It is remarkable to say that TCC has been successful in the pharmaceutical business, resulted by the annual increase of 15% in term of turn-over every year In recent years, the TCC’s turnover has significant decrease because of the fierce competition from its two main competitors: They are My Chau drugstores & Minh Chau drugstores

It is necessary to have a marketing plan focus on creating the competitive advantage through centralizing purchasing activities and differentiation in customer services which are the two key factors for TCC to become one of the leaders in pharmaceutical retailing in HCMC

II SCOPE OF STUDY

The author would like to prepare a marketing plan for TCC to set up a chain of drugstores in HCMC, the first model of this drugstore will be applied on 6/2008

III METHODOLOGY AND SOURCES OF INFORMATION

research to collect necessary data in order to understand customers’ needs and expectations Desk studying is based on the information about pharmaceutical retails system from the reports, plans and forecasts of TCC, to analyze the background, history and trend of HCMC pharmaceutical retailing industry, especially the competition and characteristics of target segment

and interviewing 2151 customers, some companies and drugstores who have been involved in the pharmaceutical retails in HCMC for at least three years

̇ Target audience: The observation and questionnaires used to customers in

order to understand their needs, desires and their perception about performance

of TCC in comparison with main competitors in this segment

IV CONTENT OF CHAPTER

Chapter I : Introduction of the competitive advantage in theory which is the basic foundation to make a marketing strategy for TCC

Chapter II: Introduction of the current situation of HCMC pharmaceutical retails business; TCC’s business performance; SWOT analysis and Strategy to overcome the stated problems in order to success in the market

Chapter III: Introduction of the competitive advantage in practice which is including the implementation plan to set up TCC based on the strategy of centralizing purchasing activities and differentiation in customer services

1

Internal data

CHAPTER I

THEORY ABOUT COMPETITIVE ADVANTAGE.

1.1 COMPETITIVE ADVANTAGE TYPE 1: COST LEADERSHIP 1.2 COMPETITIVE ADVANTAGE TYPE 2: DIFFERENTIATION 1.3 COMPETITIVE ADVANTAGE TYPE 3: FOCUS

CHAPTER I

THEORY ABOUT COMPETITIVE ADVANTAGES

According to the Competitive Advantage model of Porter, a competitive strategy takes offensive or defensive action to create a defendable position in

an industry, in order to cope successfully with competitive forces and generate

a superior According to Michael Porter, the basis of above-average performance within an industry is sustainable competitive advantage

Two basic of competitive advantage:

• Cost Leadership (Low cost)

• Differentiation

Both can be more broadly approached or narrow, which results in the third viable competitive strategy:

1.1 COMPETITIVE ADVANTAGE TYPE 1: COST LEADERSHIP

• Achieving Cost Leadership means that a firm sets out to become the low cost producer in its industry

• Achieving a Cost leader must achieve parity or at least proximity in the bases of differentiation, even though it relies on cost leadership for its competitive advantage

• If more than one company try to achieve Cost Leadership, this is usually disastrous

• Often achieved by economies of scale

1.2 COMPETITIVE ADVANTAGE TYPE 2: DIFFERENTIATION

• Achieving of Differentiation means that a firm seeks to be unique in its industry along some dimensions that are widely appreciated by buyers

• A differentiator can not ignore its cost position In all areas that do not affect its differentiation it should try to decrease cost; in the differentiation area the costs should at least be lower than the price premium it receives from the buyers

• Areas of differentiation can be: product, marketing, service, image

1.3 COMPETITIVE ADVANTAGE TYPE 3: FOCUS

• Achieving Focus means that a firm sets out to be best in a segment or group

of segments

• Two variants: Cost Focus and Differentiation Focus

Three generic competitive strategies

Sources: Michael E Porter, Competitive Advantage

Sustaining Superior Performance, p.12

¬ THE BENEFIT OF COMPETITIVE ADVANTAGE

Competitive advantage provides a business with the ability to create a sustaining position Look at the dynamics of the situation in above exhibit figure

self-1 Cost leadership

3A Cost focus

2 Differentiation

3B.Differentiation focus

1 Cost leadership

3A Cost focus

2 Differentiation

3B.Differentiation focus

The cycle starts with the attainment of competitive advantage-the ability to deliver superior value to customers The competitive advantage may be due to initiating factors such as competitive failure, or luck, or they may stem more directly from the superior skills or resources of the business The interesting result is what happens once the film has gained competitive advantage

Figure 1.2 THE SELF-SUSTAINING NATURE OF COMPETITIVE ADVANTAGE

Initiating Internal Strategic Marketplace Factors Factors Factors Outcomes

In effect, the competitively advantaged business becomes and has all of the advantages of an entrenched competitor It owns the market and earns the resources that allow it to maintain that position

Superior Profit Performance

CHAPTER II

MARKETING ENVIRONMENT ANALYSIS AND

THANH CONG PERFORMANCE

2.1 HO CHI MINH CITY PHARMACEUTICAL RETAILS SITUATION 2.2 MARKETING ENVIRONMENT ANALYSIS

2.3 SUMMARY OF THANH CONG PERFORMANCE

CHAPTER II

MARKETING ENVIRONMENT ANALYSIS & TCC ’S PERFORMANCE

In this chapter the author depict HCMC market, to analyze the competitors, environment, customers and SWOT and performance that is basic for designing a marketing strategy appropriately

2.1 HCMC PHARMACEUTICAL RETAILS SITUATION

HCMC has made great efforts to improve administration reform and create more favorable conditions for investors to do business Until now HCMC has

had 891 pharmaceutical companies with over 4,200 drugstores spreading all

over 24 districts The average of the budgets for medicine per year in HCMC is highest: USD 17-182 is comparing with:

• Flat area: 2-4 USD/ person/ year Hanoi city: 8-10 USD/ person/ year This is a potential, dynamic, attractive, huge pharmaceutical market but be very competitive

2.2 MARKETING ENVIRONMENT ANALYSIS

2.2.1 MARKET ANALYSIS

• Market trend: Medicine is specific goods, the needs about medicine for

treating sickness is an ultimate and essential desire, as we know illness is no respecter of person At the present, according to myself-research, most of Vietnamese patients often visit the drugstores when their health were the problems3 and to estimate 80% budgets4 by themselves, even the people who

has health insurance according to my research over 60% of them have no using their medical insurance

• Market growth: from the analysis of market trend, it is considered that the

market will be grown by it volume The growth rate is expected as 15%-20%5

2.2.2 ENVIRONMENT ANALYSIS

• MACRO ENVIRONMENT ANALYSIS

Ü POLITICAL FACTORS: Stable Policies with clear and unshakeable development plan for the HCMC by the government in order to striving to increase its economic growth by 12.2-12.5%6

Ü ECONOMIC FACTORS: Vietnam economy is growing well, GDP of HCMC three times than one of average of the country and leader

The GDP calculating Parity Purchasing Power method (PPP), attained 56 USD7

billion, approximately 3.5 times higher than the country's average

Figure 2.1 HCMC’s PHARMACEUTICAL BUDGET AND TCC’s TURNOVER

Ü SOCIAL FACTORS:The population of HCMC is about 8 billion inhabitants HCMC has attracted more and more immigrants from other Vietnamese

provinces in recent years; therefore, its population is growing rapidly

• MICRO ENVIRONMENT ANALYSIS

Ü THREAT OF SUBSTITUTES

Some people would like to change their attitude for using traditional medicine, due to their safeness, although these medicine are difficult to control the quality

Ü RIVALRY

There are many chain of drugstores in HCMC, the investors invest lots of

money to their projects, so more and more rivalries in HCMC pharmaceutical market

Ü THREAT OF POTENTIAL RIVALS

Now, Vietnam relates to lots of countries on the world, more and more foreign pharmaceutical companies are eager to invest in HCMC, HCMC pharmaceutical market will be more rivalry

2.2.3 SWOT ANALYSIS (See the table TCC’s SWOT analysis)

In order to propose a marketing strategy for TCC at primary segment, the Author used Fred R David model to analyses the S.W.O.T to select the best

strategy for TCC It will be illustrated in next chapter

TCC’s SWOT ANALYSIS

S.W.O.T

STRENGTHS

Ü Understanding about HCMC market

Ü Good relationship with key customers, producers, distributors and suppliers

Ü Professional services

WEAKNESSES

Ü Limited Capital

Ü Limited cost budget for marketing activity

Ü Lack of the feasible marketing strategy

Ü Unstable staff

OPPORTUNITIES

Ü HCMC market is huge, attractive and

potential market

Ü TCC leads the GPP drugstores

Ü Patients are more and more paid attention

to professional

S O STRATEGIES

Ü Develop the market share by set up a chain drugstores of TCC

Ü Add value to products to be attractive client

Ü Enhancement to staff training

Ü Reinforcing relationship with suppliers

W O STRATEGIES

Ü Establishing joints-Stock Company to increase capital to cover HCMC market

Ü Building a comprehensive marketing plan

Ü Enhancement to staff training about marketing skills and professional

THREATS

Ü Appearance local and foreign competitors

Ü Medicare is a foreign brand

Ü Turnover is more and more lower

Ü Foreign terms are attractive to staff

S T STRATEGIES

Ü Strength relationship with customer, supplier for collecting information to avoid threats

Ü Closely work with authorities

Ü Improving marketing skills in client services

W T STRATEGIES

Ü Merging some companies to enhancement the power and reduction the competition

Ü To behave kindly towards staff

Ü Training to staff about marketing skills

TCC drugstores Competitors VIEWPOINT + Most important purpose is Economic

+ Other purpose is bringing to clients the satisfactions:

Professional, sympathetic and good price + “Little eaten by big ”

+ TCC slogan is “Understanding thorough your desires”

+ Economic Purpose

MISSION - Generating profit

- TCC leads into leader in pharmaceutical retailing industry

+ Generating profit

OBJECTIVES + Maintaining and developing a chain TCC– “understanding

thorough your desires”

+ Achieving high net profit after tax + Target to serve middle and low income segment + Set up average 2 new drugstores per year

+ Building a chain of GPP drugstores

+ Medicare targets to serve high income segment

+ My Chau drugstores , Minh Chau drugstores and A Chau drugstores target to serve high and middle income people segments

STRATEGIES - Improving customer’s services

- Maximizing Creating marketing and promotion support

- Expanding TCC network to penetrate potential market

- Established distribution for centralized purchasing activities

SEGMENTATION + Hypersegmentation to define niche and customization + Segmentation or not

TARGETING - Target the segment- Buying medicine according to pharmacist’s

advices

- People are in middle and low income

- Target the segment- Buying medicine according the prescription

- High or middle income people

POSITIONING + With regard: a target segment

To competitors + TCC positioning are product and price + Clear and different proposal

( MVP: Marketing Value Proposal)

+ Not clear and difference

PRODUCTS - Complex set of satisfactions in the clients’ eyes

- Quality: Satisfy all quality criteria: visa number, import stamp,

original invoice

- Total Product (Medicine): generic, expected, augmented and potential products

- the advices are the important part in the total product

- TCC value is greater than competitors

- For reducing price some competitors are selling: counterfeit, medicine without licenses, import stamp…

- Lack equipment for preserving medicine 11

PRICE + Reasonable Price

+ Having pay attention to four key factors

- Target’s to people who are sensitivity to price

- Profitability

- Positioning

- Competition:

+ High price + Be unreasonable price

PACKAGING - Meticulously, not only careful covering but also sufficient for

information for using medicine

- Have not recognized to the importance

of packaging MVP

occupation…

PUBLICITY - Using every form in TCC’s drugstores to advertise to save budget

and easier for protecting and changing

- Using USP (Unique Selling Proposition) + Awareness + Behaviorist + Information + Rational

+ Persuasion + Psychosocial + Suggestion

- Having some programs on Television screen in the drugstores for :

* Introducing new medicine every week

* Medical Developments

* Current Price List on the panel Board

- Some of them lack of experience and knowledge in this sector

PLACEMENT + Appropriate to location of drugstores according to market’s needs

and its developing

+ Assortment is corresponding:

- Easier for seeing

- Easier for taking

- Easier for controlling

+Be lacking experience in choosing the locus

+ Is not sensible of assortment

PERSONNEL + A most important part of TCC

+ Recruitment: Careful of recruitment staff, all of them have to overcome the first examination including written, draw, and interviewing examination

+ Treated: - Well treated ( High income )

- Consider staff as my siblings

+ Training: Week tests and training every week giving staff knowledge, experience and to know how to be human behavior

+ Pay more attention to be professional but lack for be moral

+ Have not enough initiative in their work + Have no the test every week for training staff or not regular

DELIVERY - A Destination, TCC - Diversity which satisfying all clients needs

- Home Delivery: Company, Drugstores, School, Firms, Private house (Value is over USD 20 ) within 12 hours in the urban of HCMC

- Have not home delivery

SERVICES + Free consultant by pharmacists and doctors

+ Detailed invoice for every customers + Has computerized clients information, medical record + E-commerce is both online and offline

+ Measuring weight, press blood + Security: Security guards are protecting customers’ motorbikes and assets

+ Having mineral water for taking medicine + Sending medical developments to clients by email + Using foreign languages for treatment to foreigners

- Have not professional in customers services

LOGISTICS - Having specialized vehicle for delivery goods - Have not

2.2.4 COMPETITORS ANALYSIS (See table Differentiating TCC from competitors)

The TCC’s can be divided into groups: foreign, local and potential competitors

• FOREIGN COMPETITORS :

Ü Medicare is an international brand, it is present at some countries in

the world, Medicare plan has 8 branches, it satisfies all needs about health care such as medical examination, medicine, medical equipments, milk, cosmetic, baby goods

• LOCAL COMPETITORS 10 :

Ü My Chau drugstores is the largest medicine chain in HCMC, its has

been setting up very early over past 30 years, It has 4 drugstores spreading some urban districts, My Chau drugstores’ market share and turnover are very large, It’s current leader, It satisfies most of clients needs, Brand and diversity in products are main advantages of My Chau drugstores

Ü Minh Chau drugstores is quite large chain, with 4 drugstores in

HCMC, main actions is selling medicine according to doctors’ prescriptions, its advantages is big market share and diversified goods

Ü A Chau drugstores is a new chain, established in 2005 with 2

drugstores, it’s market share and turnover are medium, its material facilities is beautiful and attractive

better than the information on which they are based Marketing research is concerned with the provision of information that can be used to reduce the level

of uncertainty in decision making

Figure 2.2 UNDERSTANDING CUSTOMERS

Figure UNDERSTANDING CUSTOMERS

Source: Marketing Strategy and Competitive Positioning

attitudes level and income level “TCC- understanding thorough your desires”

thanks to the answers for the questions:

X What are their choice criteria as pharmacies, pharmacists, medicine?

X Why do you buy/ use the medicine?

X How do you use medicine?

X Where do you buy medicine?

X When do you buy/ use medicine?

X Who are involved in buying and consuming medicine?

He also combined the Hooley chart of customer analysis below to further