Crafting a business strategy for ha tay pharmaceutical jointstock company for period 2011 - 2015

Specific Business Strategies for the Pharmaceutical products line of Ha Tay Pharmaceutical Joint Stock Company.. Being aware of the key role of business strategy development in the busin

CRAFTING A BUSINESS STRATEGY FOR

HA TAY PHARMACEUTICAL JOINT STOCK

COMPANY FOR PERIOD 2011 - 2015

Nguyen Thi Tuyen Ngo Van Chinh

Le Anh Khanh

Le Thanh Khuyen

Class: GaMBA.X0409

H A N O I 2 0 1 1

HA NOI 2011

CAPSTONE PROJECT REPORT

Nguyen Thi Tuyen Ngo Van Chinh

Le Anh Khanh

Le Thanh Khuyen

Group Number: 09

Student’s name:

CRAFTING A BUSINESS STRATEGY FOR

HA TAY PHARMACEUTICAL JOINT STOCK COMPANY FOR PERIOD 2011 - 2015

Figure 1.1: Michael Porter PEST Analysis Model 12

Figure 1.2: Michael Porter’s Fiver Competitive Forces 15

Figure 1.3: M Porter Value Chain Model 21

Chapter 2 Figure 2.1: Hataphar’s Certificate of Good Manufacturing Practices 34

Figure 2.2: Some of the Awards achieved by Hataphar 35

Figure 2.3: Organizational structure of Hataphar 35

Figure 2.4: Growth Rate of GDP and Sales of the Local Pharmaceutical Industry 46

Figure 2.5: Scope of Local Market of Viet Nam Pharmaceutical Industry 47

Figure 2.6: Pharmaceutical Consumption Market Share 48

Figure 2.7: Annual Per Capita Expenditure on Medicine USD/head/year) 49

Figure 2.8: 2010 CPM and MPI Growth Rate 50

Figure 2.9: Hataphar’s Labour Structure 63

Figure 2.10: Value Chain 65

Chapter 3 Figure 3.1: SPACE Matrix 79

Figure 3.2: The IE matrix of Hataphar 82

LIST OF TABLE

Chapter 1

Table 1.1: Simplified SWOT Analysis 28

Table 1.2: QSPM Matrix 31

Chapter 2 Table 2.1: Competitiveness Matrix in the pharmaceutical business of Hataphar 56

Table 2.2: The matrix for the assessment of external factors 58

Table 2.3: Hataphar’s financial state 59

Table 2.4: Hataphar’s Loan Outstanding 60

Table 2.5: Hataphar’s Key Raw Materials and Countries of Origin 70

Table 2.6: Pharmaceutical Product Line and Financial Indicators 73

Table 2.7: Internal Forces Evaluation Matrix of Hataphar’s pharmaceutical business 75

Chapter 2 Table 3.1: The SPACE matrix of Hataphar 78

Table 3.2: The SWOT matrix of Hataphar 80

Table 3.3: QSPM matrix for Hataphar 83

Table 3.4: Plans for Capital Sources and Funds for Years 91

TABLE OF CONTENTS

ACKNOWLEDGEMENTS 6

CERTIFICATION 7

EXECUTIVE SUMMARY 8

1.RATIONALE 8

2. SCOPE AND OBJECTIVES 8

2.1 Scope of Study 8

2.2 Objectives 9

3 METHODOLOGY AND STRUCTURE 9

3.1 Data Collection 9

3.2 Comparative Study and Synthesis 9

3.3 Statistical Method via Tables and Charts 9

3.4 SWOT Analysis 9

3.5 Structure of the Thesis 10

CHAPTER I: THEORETICAL PRINCIPLES: BUSINESS STRATEGIES – AN OVERVIEW 11

1.1 BASIC CONCEPTS 11

1.1.1 Strategy 11

1.1.2 Strategic Management 11

1.1.3 The Role of Strategic Management 12

1.2 BUSINESS ENVIRONMENT ANALYSIS 12

1.2.1 Macro Environment Analysis 12

1.2.1.1 Political Factors 13

1.2.1.2 Economic Factors 13

1.2.1.3 Socio-cultural Factors 13

1.2.1.4 Technological Factors 13

1.2.1.5 Global Factors 14

1.2.2 Micro Environment Analysis (Competitive Environment) 14

1.2.2.1 Bargaining Power of the Buyers 16

1.2.2.2 Bargaining Power of the Sellers 16

1.2.2.3 Rivalry among the Existing Competitors 17

1.2.2.4 Threat of New Entrants 17

1.2.2.5 Threat of Substitute Products 18

1.2.3 External Factor Evaluation Matrix (EFE) 18

1.3 CORPORATE INTERNAL ENVIRONMENT ANALYSIS 19

1.3.1 Analysis of Functional Resources 19

1.3.2 Value Chain Analysis 21

1.3.2.1 Key Operations 22

1.3.2.2 Supporting Operations 23

1.3.2.3 Crosswise Objectives – Functions 24

1.3.2.4 Outsourcing 24

1.3.3 Internal Forces Evaluation Matrix 25

1.4.BUILDING AND CRAFTING OPTIMAL BUSINESS STRATEGY 25

1.4.1 SPACE Matrix 26

1.4.2 SWOT Matrix and Crafting an Optimal Strategy 27

1.4.2.1 SWOT Analysis 27

1.4.2.2 SWOT Analysis Matrix 28

1.4.3 IE Matrix 29

1.4.4 QSPM Matrix 30

CHAPTER II: CURRENT STATE OF BUSINESS PERFORMANCE OF HA TAY PHARMACEUTICAL JSC 33

2.1 INTRODUCTION 33

2.1.1 Background 33

2.1.2 Development History 34

2.1.3 Organizational Structure 35

2.1.4 Corporate Vision, Mission and Core Values: 37

2.1.4.1 Vision 37

2.1.4.2 Mission 37

2.1.4.3 Development Viewpoints 37

2.1.4.4 Core Values 37

2.2.BUSINESS ENVIRONMENT ANALYSIS OF THE COMPANY 38

2.2.1 Macro Environment Analysis 38

2.2.2 Micro Environment (Competive Environment) Analysis 46

2.2.2.1 Current State of the Pharmaceutical Industry of Viet Nam 46

2.2.2.2 Michael Porter’s Five Competitive Forces Analysis 52

2.2.2.3 The Matrix for the assessment of external factors 57

2.3 HATAPHAR INTERNAL BUSINESS ENVIRONMENT ASSESSMENT 59

2.3.1 Resources assessment 59

2.3.1.1 Tangible resources 59

2.3.1.2 Intangible resources 62

2.3.2 Value Chain Analysis 64

2.3.2.1 Key Operations 65

2.3.2.2 Supporting operations 69

2.3.3 Internal Forces Evaluation Matrix 75

CHAPTER III CRAFTING BUSINESS STRATEGIES FOR HA TAY PHARMACEUTICAL JSC FOR PERIOD 2011 – 2015 76

3.1 CRAFTING BUSINESS STRATEGIES FOR PHARMACEUTICAL PRODUCTS LINE AT HATAPHAR TOWARDS 2015 76

3.1.1 Vision, Mission and Objectives 76

3.1.1.1 Vision 76

3.1.1.2 Mission 76

3.1.1.3 Objectives 76

3.1.2.Objective-Setting Basis 77

3.2.STRATEGY DEVELOPMENT AT BUSINESS UNIT LEVEL FOR THE PHARMACEUTICAL PRODUCTS LINE 77

3.2.1 Specific Business Strategies for the Pharmaceutical products line of Ha Tay Pharmaceutical Joint Stock Company 77

3.2.1.1 The SPACE Matrix 77

3.2.1.2 The SWOT matrix 79

3.2.1.3 The IE matrix of Hataphar 81

3.2.1.4 The QSPM matrix for focused growth strategies for pharmaceutica products line 82

3.2.2 Assessment of the choice of strategies 84

3.2.2.1 Local Market Penetration 84

3.2.2.2 Product Development Strategy 85

3.2.2.3 Vertical Backward Integration 85

3.2.3 Specific Policies for the Enhancement of the Company’s Essence Values 86

3.2.3.1 Human Resources 86

3.2.3.2 With Regard to R&D 88

3.2.3.3 Maketing 88

3.2.3.4 Management (quality management, financial management …) 90

3.2.3.5 Finance 91

CONCLUSION 92

BIBLIOGRAPHY 93

ACKNOWLEDGEMENTS

First of all, we own deep gratitude to the Griggs International MBA Training Program for its successful organization of the MBA course for us, the students of the class GaMba01.X0409 The different modules delivered in the course have provided us with useful knowledge and practical experience in all the important areas of business administration

Next, we are sincerely grateful to Mr Tony Sanichara and Mr Vũ Thành Hưng

for their interesting lectures, and responsible and warm guidance to us in doing this Master Thesis In the module “Strategic Management” delivered by these two professors, we have been introduced to a great variety of tools for the analysis and development of corporate business strategies and the latest international business administration trends Such tools and knowledge are highly relevant and useful to our current work

Our thesis would not be possible without the invaluable support of Ha Tay Pharmaceutical Joint Stock Company, who have provided us with thorough information of their business operations for our study and arranged our interviews with their key personnel in the leadership

Last but not least, we are thankful to our classmates for their continued support and cooperation They have helped us coordinate the comments on our thesis detailed outline, and continuously encouraged us throughout the process of our thesis writing

CERTIFICATION

It is our certification that the Master Thesis of International Business

Administration titled “Crafting business strategies for Ha Tay Pharmaceutical Joint Stock Company in period 2011 – 2015” is the original research work

produced by Group 9

All the information and data used in the thesis is correct to the best of our knowldge

EXECUTIVE SUMMARY

1 RATIONALE

Viet Nam national economy is experiencing gradual and deep integration with the regional and global economies Such integration is associated, on the one hand, with expanding business environment, but also with more severe competition, on the other hand The regional and global economic integration creates numerous business opportunities, while posing potential threats to the business growth of local firms During the contemporary period, the domestic pharmaceutical industry is one

of the State priorities for investment and development, which is a good opportunity

to the domestic pharmaceutical firms In the market conditions full of changes, and regardless of the coincidental factors, the key to business success of a firm is selecting the right direction and crafting suitable and timely business strategies

Ha Tay Pharmaceutical Joint Stock Company (HATAPHAR), was originally established as a State-owned enterprise and went privatized in 2000 During the conversion process, the company has continuously applied strategic business administration approaches in its actual business operations and has gained fruitful results

Being aware of the key role of business strategy development in the business

operations of a firm, we have selected the thesis title “Crafting a business strategy for Ha Tay Pharmaceutical Joint Stock Company for period 2011-2015” to

apply the theories and principles of business administration obtained through our master training course to the actual business practice

2 SCOPE AND OBJECTIVES

2.1 Scope of Study

The scope of the study is to review the business performance of Hataphar over the past time and propose business development strategies for the firm in period 2011-

2015

2.2 Objectives

The study is aimed to verify some key theories and methodology of building and implementing business strategies in Hataphar based on the analysis of its business performance and environment over the past period

3 METHODOLOGY AND STRUCTURE

3.1 Data Collection

Primary data collection: is performed via the study and observations of the

company’s actual performance, and interviews with individuals (mostly employees

of the company under study), and email exchanges

Secondary data collection: secondary data is collected from reports and documents

provided by the company where the group conduct their internship Such data is also retrieved from statistical yearbooks, the information published in newspapers, television, the Internet and other completed studies or research work

3.2 Comparative Study and Synthesis

Comparative study means comparing the achieved indicators of business performance with the baseline indicators The market indicators, the average indicators can be compared via other methods The conditions for comparison is the matching of the space, time, economic issue, measurement unit, calculation method, scope and business conditions

3.3 Statistical Method via Tables and Charts

This method discovers the tendency of common features of the factors under the analysis

3.4 SWOT Analysis

SWOT analysis is used to identify the internal strengths and weaknesses of the a firm, and the opportunities and threats from the external environment This is the core method in strategy development

3.5 Structure of the Thesis

The thesis paper is structured into three Chapters:

Chapter 1: Theoretical Principles – Business Strategies, an Overview Chapter 2: Current state of business operations of Ha Tay Pharmaceutical

Joint Stock Company

Chapter 3: Crafting business strategies for Ha Tay Pharmaceutical Joint

Stock Company in period 2011 – 2015

CHAPTER I THEORETICAL PRINCIPLES: BUSINESS STRATEGIES –

AN OVERVIEW

1.1 BASIC CONCEPTS

1.1.1 Strategy

According to Micheal Porter, “Strategy is research for a suitable competitve position

in an industry, a key scope of operations where competition is taking place.”

William F.Gluek defined “Strategy as a consistent, comprehensive and combined plan designed to ensure that the key corporate objectives be fully achieved”

A corporate business strategy is a choice and combination of different measures (corporate strengths), time, opportunities and space (business areas) that matches the corporate environment analysis and available resources to achieve the oriented business objectives of a firm

Strategies always go forward to gain competitive edges in the business It is necessary that strategies be planned and executed amist the growth of business opportunities and awareness of the competitive advantages of the business for optimal business efficiency

1.1.2 Strategic Management

Strategic management is a continuous process that starts from the study of the existing environment and forecasts, then sets strategic objectives for the organization, executes and monitors the implementation of the taken decisions to achieve the set objectives in the existing and future conditions

Strategic management is considered the art and science of making, executing and evaluating the decisions related to the different fuctions that allow the business to achieve the set objectives in a certain period of time

Strategic management focuses on merging the management of marketing, finances, production, R&D and the information systems of business areas to achieve success

In the Strategic management process, three bacis fuctions of management must be

performed through the three stages of strategic management: strategic planning, implementation of strategies, and monitoring and evaluation of strategies

1.1.3 The Role of Strategic Management

Strategic management is like an orientation that steers organizations to overcome obstacles and hurdles in the business arena and head for future by their own endeavours and competence Strategic management is a science of management because if the governance procedures are well designed, they will be sound foundation for organizations to move forward in their business performances

Strategic management makes an organization more active in its future planning and allows it to become a pioneer and influence others in its areas of operations The organization, therefore, can make full use of its competence to control its operations over the unexpected developments

Strategic management provides individuals with important insight Both the Board and the employees are fully aware of and committed to achieving the corporate objectives Once, each person in the firm is well-aware of what their organization is doing and why, they will have the feeling that they are part of the organization, and will be committed to supporting all the corporate activities

1.2 BUSINESS ENVIRONMENT ANALYSIS

1.2.1 Macro Environment Analysis

Figure 1.1: Michael Porter PEST Analysis Model

olitical Factors (thể chế - luật pháp)

conomic Factors ( Kinh tế)

ociocultural Factors (Văn hóa – Xã hội)

echnological Factors (Công nghệ)

These four factors have direct impact on the different industries They are external

to the firm and industry and their effects on the industry are considered objective The firms, based on the identified effects, will initiate appropriate policies and business activities

1.2.1.1 Political Factors

These factors influence all the businesses in a territory and can be a threat to the existence and growth of any industry When doing business in an administrative area, the firms are obliged to comply with the political factors and regime of the area

1.2.1.2 Economic Factors

It is essential that firms pay good attention to the economic factors in both short and long terms and the government interventions to the economy It is common practice that the firms make reference of the economic factors to decide their investments in the suitable industries and business areas

Apart from cultural factors, social features are of central interest of firms in their market research The social factors will categorize a society into different groups of customers, bearing their own features, sentiment and levels of income

1.2.1.4 Technological Factors

The whole globe is currently dipped in a technological revolution, in which a great

many new technologies have been invented and incorporated into the different products and services If thirty years ago, computers were solely used for calculation, they are now sufficiently functional to replace a working person

1.2.1.5 Global Factors

It is undeniable that globalization has become a tendency, that do not create opportunities for firms and nations in developing their production and business activities

Globalization creates pressure of competition from competitors all around the world

In the course of the global integration, firms are forced to adapt themselves to the competitive advantages and labor distribution in their respective regions and the whole world

It is also important that in the global integration, trade barriers will be gradually removed and firms will have opportunities to do business with those partners in long-distanced geographical areas There customer base is composed of not only local customers in their home countries, but exotic ones throughout the world

1.2.2 Micro Environment Analysis (Competitive Environment)

An industry is composed of a group of firms that provide those closely substituable products or services This means these products or services can basically meet the customers’ demands in a similar manner

Industry and competitive analysis is a set of concepts and techniques to clarify the key issues:

 The outstanding economic features of the industry;

 The competitive forces opearting in the industry, the nature and power of each of these forces;

 The motives for changes in the industry and their impacts;

 Who to create the next move in the industry;

 The key factors for success or failure in competition;

 The attractiveness of the inustry from the perspective of above-average profitability;

The environment of an industry is influenced by the following issues:

According to M Porter, five competive forces in an industry are: (1) Threat of new entrants; (2) Rivalry among existing competitors; (3) Bargaining power of the buyers; (4) Bargaining power of the sellers; and (5) Threat of substitute products

Figure 1.2: Michael Porter’s Fiver Competitive Forces

(Sources:2009, Le The Gioi,et al., “Strategic Managemen”; M Porter’s Five

Competitive Forces Model, p.106)

It has been indicated by M Porter that the stronger these forces, the smaller the possiblity for the existing firms to increase their prices and profitability The assignment set for business managers is to identify the opportunities and threats created by the changes of these five forces, on which basis they can develop appropriate strategies to turn the power of one or many of these competive forces to their advantages

Bargaining

Power of

Suppliers

Threat of New Entrants

Bargaining Power of Buyers

Threat of Substitute Products Rivalry among Existing Competitors

1.2.2.1 Bargaining Power of the Buyers

The buyers are considered a competitive threat when they bargain for low or average price for better quality services, which leads to increased operational costs

of a firm On the contrary, if the buyers’ bargaining power is weak, it is an opportunity for the firm to increase their prices for higher profits

The pressure from the buyers is determined by the following elements:

- Whether the buyers’are concentrated;

- Whether the firm is a key supplier;

- The buyers’ degree of loyalty;

- The buyers’ power to seek substitute products;

- Converting costs;

- Vertical integration possibility;

1.2.2.2 Bargaining Power of the Sellers

The sellers are considered a threat to a firm if they can increase the prices of their supplies to the firm or reduce quality of the supplied products, change terms of payments, terms of delivery that affect the costs, the product quality and thus the firm’s profitability Firms usually establish good partnership with the suppliers of commodities and other inputs such as labor, materials, equipment and finances The elements that increase the pressure from suppliers are similar to those from the buyers, including:

- Limited number of suppliers, which limits the firms’ choices;

- Limited number of substitutes for the products on request;

- Whether the firm is a key customer of the supplier;

- Whether the supplier is concentrated or not; if yes, the pressure from them will be higher and the firm will be in disadvantaged position;

1.2.2.3 Rivalry among the Existing Competitors

Rivalry among the existing competitors in an industry becomes fierce when a firm

is challenged by the actions of the other firms or when a certain firm in the industry

is aware of the opportunities to improve its market position

The competition in an industry will become fierce when:

- There are many competitors or the competitors have equal power;

- The industry is slowing down or declining;

- The fixed or inventory costs are high;

- There are few opportunities for differentiation or low converting costs;

- The strategic benefits are high;

- There are many obstalces for the firm’s exit from the industry;

1.2.2.4 Threat of New Entrants

New entrants are those firms which are not operating in the industry but potential to enter the business operations in the industry The new entrants to an industry can be

a factor that makes profits of the existing firms in the indistry shrink Yet how the new entrants will affect the existing firms’ operations depends on their competitiveness (business scale, technology ) The entry of these new competitors will also change the competition scenario of an industry Whatever the competition scenario these new entrants create, their entry into the industry makes the competition more intense For these reasons, the existing firms in an industry always seek every measure to limit the new entrants into their business areas

According to M Porter, however, external firms that want to enter an industry may face a number of obstalces, namely:

- Customers’ favour of the existing products which are supported by the advertising, labeling, products’ quality and after-sales services;

- The problem in reducing costs at the early stage of entry into a new industry;

- The efficiency of the economies of scale;

1.2.2.5 Threat of Substitute Products

Substitute products are those products produced by the existing competitors, which

is regular pressure and a direct threat to a firm Substitute products are those products produced by the existing firms in an industry or the external firms but all satisfy the demands of the customers

Hence, the existence of substitute products creates tremendously competititve pressure and limits the level of price that a firm can set for its products, and consequently limits its profitability On the contrary, if a firm’s products have few substitutes, the firm can increase its prices more easily and earn higher profits Substitute products can also be found within a firm

1.2.3 External Factor Evaluation Matrix (EFE)

EFE matrix is one of the strategic management tools used to evaluate the contemporary business conditions to identify opportunities and threats of the external environment to a firm The factors evaluated in the EFE matrix include political, economic, social, legal and other external factors The steps to formulate an EFE matrix are:

- To list out the external factors that may influence the operation of the firm These factors are categorized into Opportunities and Threats

- To classify the factors by their degree of importance that reflect the degree

of their influence on the business areas that the firm is dealing in The factors are rated from 0 to 1 point 0 point means that factor is not important to the firm, and 1 point means the factor is of significant importance to the firm The total weighted point must be 1

- To determine the weighted point for each factor in the range of 1 to 4 The weighted point reflects the degree of the firm’s responsiveness to each factor 1 means poor responsiveness, 2 means below average, 3 – above average and 4 – good responsiveness

- To multiply the degree of importance with the classified weighted point of each factor to determin the rating of that factor

- To add up all the sub-ratings of all the factors to determin the overall rating for the firm

- If the overall rating is 2.5, the firm has fairly responded to the external opportunities and threats

If the overall rating is 1.0, the firm has weak responsiveness to the external opportunities and threats The strategies set out by the firm fail to take advantage

of the opportunities or avoid the external threats

1.3 CORPORATE INTERNAL ENVIRONMENT ANALYSIS

The analysis and assessment of the internal environment factors of a firm allows the firm to identify its strengths and weaknesses These factors will empower the firm if

it creates the firm’s competitive advantages (the business areas that the firm can perform better than its existing and potential competitors) The strengths/ weaknesses also allow the firms to identify its goals and steer its future strategies

1.3.1 Analysis of Functional Resources

The resources of a firm are considered “the inputs of a production process” The analysis of these resources shows the level of the reserved resources, the availability

of existing properties for the business operations or the overall assets of the firm The resources of a firm is categorized into tangible and intangible resources

Tangible Resources

- Finances: budget, capital and borrowing potential of a firm;

- Tangible assets: land, equipment, workshops/buildings;

- Organization: reporting system, planning, corporate coordination and

- Initiatives: ideas, scientific competence and innovation;

- Reputation: reputation to the customers; labels; awareness of durability, quality, and reliability of the products; reputation to the suppliers;

In creating core competence, the intangible ones are predominant over the tangible resources In the global economy, “the success of a firm is more reliant on its systematic intellectual and resources than its tangible assets Moreover, the ability

to manage the human intellectual and transform it to products/ services successfully has soon become a basic contemporary managerial skill” Much evidence shows that the content of intangible resources tends to increase fast and become predominant over the tangible resources

As it is hard for the competitors to recognize, identify, acquire, resemble or substitute the intangible resources, firms tend to use more of these resources than the tangible ones as foundation to build their core competency or skills In reality, the harder to observe and recognize a type of resources, the higher the possibility that they become key foundation to develop sustainable competitive advantages of a firm In addition, if compared with tangible resources, the intangible resources are easier to utilize The bigger the network of users of intangible resources, the higher the benefits will be brought to each section or unit Two persons share their different areas of knowledge will initiate new added knowledge to each of them, and this contributes to improved work efficiency of a firm

The resources themselves cannot create competitive advantages for a firm To create differences, the resources should be original and invaluable As the sources creating corporate competency, tangible and intangible resources are the basic elements that lead to the development of competitive advantages A potential is the ability that a firm can make use of the integrated resources on purpose to achieve a desired and targeted position As a close connection organized, the competencies are created via the interactions between the tangible and intangible resource These skills focus on the routine tasks of the organization: how to make a decision, and administer the internal processes to achieve the goals of the organization More generally, the potential competencies of a firm are the products of the organizational structure and control system They determine how and where the decisions are made within the organization, the rewarding behaviours, values and cultural standards of the firm

A firm can have original and invaluable resources, but without potential competence to utilize the resources efficiently, it cannot create and maintain its ability to create differences It is important to be aware that a firm unnecessarily owns original and invaluable resources to develop the ability to create differences as long as it has the potential that its competitors do not have

1.3.2 Value Chain Analysis

Figure 1.3: M Porter Value Chain Model

(Source:http://en.wikipedia.org/wiki/File:Porter_Value_Chain.png )

Via tthe term value chain, each firm is considered as a chain of activities that convert the inputs into valued outputs for the customers The conversion of inputs

into outputs is composed of some key activities and other supporting activities Each of these activities contributes to adding more value to the products

1.3.2.1 Key Operations

It is necessary that the key operations be performed along with the design, creation and delivery of the products, as well as the marketing, after-sales and other supporting services In the value chain described in Figure 3-5, the key operations are R&D, production, marketing, and services

Research and Development (R&D)

R&D is related to the design of the products and production processes Although R&D is often associated with the design of tangible products and production processes in manufacturing firms, it is also performed in the service firms

With outstanding product designs, R&D can add more functions to a product and make it more attractive to the customers R&D contributes to more efficient production processes, and thus to reduced production costs In both ways, R&D function in a firm creates values

Production

Production is related to the creation of products or services The production function

of a firm creates values by performing its function efficiently and thus helps reduce the costs Production can create values by performing its activities in connection with high quality products This creates differentiation and reduces costs, all of which bring value to the firm

Marketing and Sales

Marketing and sales in a firm also helps create values in some activities Through the determination of labels and advertising, marketing function can create values which are recognizable to the customers via the firm’s products In addition, these

activities provide pleasant impression of the products to the customers, which also brings added values

Marketing and sales can create values by discovering customers’ demands and communicate them back to the R&D function of the firm to create products that adapt more to the identified demands

Human Resource Management

The HR function ensures that the firm owns the needed skills to perform the tasks

of increasing its values in an efficient way The HR function also ensures that the personnel of the firm are trained, coached, motivated and paid sufficiently to perform the tasks of increasing their own values

Information System

Information system is the term used (commonly) for an electronic database to monitor inventories, sales, to price and sell products and meet the requirements of customers’ services The information system, when combined with the communicative feature of the Internet, will likely change the managerial mode of different activities efficiently and effectively to create added corporate values

Infrastructure

The infrastructure of a firm is slightly different from other supporting operations The infrastructure is the context where the operations that create other values are

taking place The infrastructure is composed of the organizational structure, the control systems and the corporate cultural values As senior managers in a firm can use their power to influence these operations, they are considered part of the firm’s infrastructure In deed, with strong leadership, managers can consciously steer the infrastructure of a firm, with which they can perform all the activities that can create other values in the firm

1.3.2.3 Crosswise Objectives – Functions

The overachievement of efficiency, quality and customer satisfaction requires that the strategies cover a number of activities that create values In deed, these objectives are considered to cross-cut the functions that create different values in a firm To perform this function, it is required that there exist a crosswise combination of different functions

1.3.2.4 Outsourcing

Outsourcing or the exploitation of external forces is the procurement of the activities that create values from external sources In those highly globalized industries, the trend of outsourcing is on rapid increase

In some industries, almost all the existing firms can find values for themselves via efficient outsourcing The industries such as auto manufacturing, and recently the electronics are good examples of this tendency Outsourcing can be efficient as few,

or almost no firms have sufficient resources to perform all the key or supporting operations to create values In addition, by outsourcing the jobs which are the firm’s non-core competence, the firm can focus more on its strong areas

It is also noted from other studies that outsourcing is inefficient in the absence of the internal competence to combine the external resources with the firm’s core competences

To identify the supporting and key operations for suitable outsourcing, four essential skills that managers should own are: strategic thinking, idea generation, partnership management, and management of changes It is necessary that managers are aware of

whether to conduct outsourcing or not and how to do it to create competitive advantages for their firms, and thus they need to have strategic thinking To efficient accomplish outsourcing transactions, managers need ideas to ensure the internal managers make full use of the benefits brought about by the external suppliers Managers should be capable of foreseeing and managing the relations between their firms and the external services Finally, outsourcing can change the operational approach of a firm, which enables their managers to have the ability to manage changes

1.3.3 Internal Forces Evaluation Matrix

IFE matrix is often used in building the business strategies of a firm to identify its strengths and weaknesses The analysis of the IFE matrix helps the firm to be aware and take advantage of its strengths, and find ways to overcome its weaknesses to enhance its business efficiency Five steps to build the IFE matrix are:

- To list out 10 – 20 factors, including basic strengths and weaknesses that can influence the firm’s operation;

- To classify the factors by their degree of importance, ranging from 0 to 1 for each factor The overall rating of each factor is 1

- To determine the weighted point for each factor, ranging from 1 (weak) to

internal business environment

1.4 BUILDING AND CRAFTING OPTIMAL BUSINESS STRATEGY

To establish a SPACE matrix, the steps to be taken are:

• Step 1: select a group of factors that reflect the financial strengths (FS), comparative advantages (CA), environmental stability (ES), and internal strengths (IS) Below are some indicators to be presented in the axis of SPACE matrix

• Step 2: fix value +1 (for the worst) to +6 (for the best siutation) for each of the factor among the FS and IS, and fix value -1 (for the best) to – 6 (for the worst) for each factor among ES and CA

• Step 3: calculate the average rating for FS by adding up the fixed values for the factors and divide the aggregate rating with the number of selected factors to present in the FS Similar calculation is applied to the IS, ES and

CA

• Step 4: mark the average rating for the FS, IS, ES and CA in the corresponding axis of the SPACE matrix

• Step 5: add up the ratings in the X axis and mark the aggregate rating in the

X axis Do the same to Y axis, and determine the intersection of the two new points on the XY axis

• Step 6: draw a vecto from the starting point of SPACE matrix that crosses the new intersection This vector provides two opposite strategies for the firm of either to attack and compete, or defense and caution

1.4.2 SWOT Matrix and Crafting an Optimal Strategy

SWOT is an abbreviation of the initials of the following English words: Strengths; Weaknesses; Opportunities; and Threats SWOT analysis is a useful instrument for any business organizations to take and make decisions in any circumstances

SWOT provides a strategic analytical tool to review and assess the position and orientation of a firm or a business scheme SWOT is suitable for group work and

analysis, and used in business planning, strategy development, competitor assessment, marketing and products and services development

1.4.2.1 SWOT Analysis

Albert Humphrey has specified SWOT Matrix into six following sets of actions:

i Products (What will we sell?)

ii Process (How will we sell?)

iii Customers (Who will we sell to?)

iv Distribution (How will we approach the customers?)

v Finances (What are the prices, costs and invesetment?)

vi Management (How can we manage all these activities?)

In a certain circumstance, a SWOT analysis model can follow several out of the six foregoing steps In any circumstances, the SWOT model will basically determin which is good or bad in the current business operations or in a future business proposal

If the subject of the SWOT analysis is the business operation with the objective to improve a firm’s business performance, the model can be interpreted in the following way:

 S: Strength (which should be maintained, developed and used as the impetus)

 O: Opportunities (optimistic assessment)

 W: Weaknesses (the remedy to repair or get rid of the weaknesses)

 T: Threates (obstalces)

If SWOT analysis is used to assess an idea or a proposal, it can point out the weaknesses of the proposed idea or proposal (especially in comparison with the anlysis of other proposals) and that investments should not be made in it In this case, the planning of follow-up actions is not needed

1.4.2.2 SWOT Analysis Matrix

SWOT analysis matrix can be interpreted briefly via the table below:

Table 1.1: Simplified SWOT Analysis

S-O:the strengths are

promoted to make use of the available opportunities and steer business operations

S-T: the strengths are

promoted to curb and avoid the threats

W- Weaknesses

W-O: the weaknesses are

overcome to make use of the available opportunities

W-T: internal constraints are

handled and careful preparation is made to overcome external challenges

(Sources:2009, Le The Gioi,et al., “Strategic Managemen”; SWOT Model)

SO Strategy –“pro-growth” strategy: a firm’s opportunities and strengths

are combined for its expansion and diversification The firm needs to use its strengths and opportunities to compete with other firms and continuously expand its markets

WO Strategy: the weaknesses outweigh the strengths but the external

opportunities are prevalent and correspond to the “competition” This combination provides the firm with a chance to overcome its weaknesses by making use of the available opportunities

ST Strategy: this is the case where the firm has strong internal power to confront

with the external threats This strategy is called “protest” strategy

WT Strategy- “Protective”: The firm is no longer capable of handling with

the external threats and deprived of opportunities for growth In this case, the firm has only two options – of either going bankrupt or getting merged with another firm This combination requires that the firm seeks measures to mitigate its weaknesses and avoid the threats by setting a protective strategy

In short, the aim of using the SWOT matrix to analyse the environment factors is to create different approaches to combine the firm’s internal factors with its corresponding external environment factors and steer responsive oriented, scientific and feasible measures This is one of the vital foundations for the firm to craft the most effective competitve strategies

1.4.3 IE Matrix

The Internal-External (IE) matrix is another strategic management tool used to

analyze working conditions and strategic position of a business The Internal

External Matrix or short IE matrix is based on an analysis of internal and external

business factors which are combined into one suggestive model

The IE matrix is a continuation of the EFE matrix and IFE matrix models

The IE matrix is based on the following two criteria:

 Score from the EFE matrix this score is plotted on the y-axis

 Score from the IFE matrix plotted on the x-axis

The IE matrix works in a way that you plot the total weighted score from the EFE matrix on the y axis and draw a horizontal line across the plane Then you take the

score calculated in the IFE matrix,

plot it on the x axis, and draw a

vertical line across the plane The

point where your horizontal line

meets your vertical line is the

determinant of your strategy This

point shows the strategy that your

company should follow

On the x axis of the IE Matrix, an

IFE total weighted score of 1.0 to 1.99 represents a weak internal position A score

of 2.0 to 2.99 is considered average A score of 3.0 to 4.0 is strong

On the y axis, an EFE total weighted score of 1.0 to 1.99 is considered low A score

of 2.0 to 2.99 is medium A score of 3.0 to 4.0 is high

1.4.4 QSPM Matrix

QSPM matrix uses the input data from the analysis done in the earlier steps to help strategists to decide objectively the strategy potential to replace the existing strategy and become the most attractive strategy that the firm should pursue to achieve its set objectives The process to create QSPM matrix has six steps (see table):

- List out the key external opportunities/ threats and key internal strengths/ weaknesses in column (1) of the matrix In column (2) of the matrix, fill in the respective rating of each factors classified in the EFE and IFE matrixes

- Study SWOT and SPACE matrixes to identify the replaceable strategy under the firm’s consideration and write down the strategy in the top line of the QSPM matrix The strategies will be categorized into different groups (if available)

- Determine the attractive rating (in column A): unattractive = 1, slightly attractive = 2, fairly attractive = 3, very attractive = 4 These ratings show the

degree of comparative attractiveness of each strategy over other strategies in one group of replaceable strategies

- Calculate the overall attractiveness rating of each separate strategy to the important success factors indicated in column (1) by multiplying the classification point with the attractiveness point in each line (to be presented

in column B)

- Add up all the attractiveness rating to get the aggregate attractiveness rating for each strategy The higher the rating, the more appropriate and worth of choice for implementation the strategy

Selected Strategies

Basis of attractive rating Strategy 1 Strategy 2 Strategy 3

In principle, a QSPM matrix can be composed of any number of replaceable strategies In a certain group of strategies, it can comprise any number of strategies Only those strategies in the same group can be compared to each other For instance,

a group of diversification strategies can be composed of centered diversification strategies, grouping diversification strategies while another group of strategies can

be made up of vertically aligned strategies (from forward or backward) and horizontally aligned strategies These groups of strategies are different, and QSPM matrix can evaluate the strategies in the same group

CHAPTER II CURRENT STATE OF BUSINESS PERFORMANCE OF HA TAY

PHARMACEUTICAL JSC

2.1 INTRODUCTION

2.1.1 Background

 Company Name: Ha Tay Pharmaceutical Joint Stock Company

 International Transaction Name: HA TAY PHARMACEUTICAL JOINT STOCK COMPANY (called short as HATAPHAR)

 Logo:

 Slogan: Quality for Existence and Growth

 Head office: No 80 Quang Trung Street, Ha Dong City, Ha Noi

2.1.2 Development History

 1965: established as Ha Tay Pharmaceutical Enterprise

 1985: merged with Ha Tay Pharmaceutical Company and Hoa Binh Pharmaceutical Material Company to establish Ha Son Binh Pharmaceutical Joint Enterprise

 1991: Ha Son Binh Pharmaceutical Joint Enterprise split up into Ha Tay and Hoa Binh Pharmaceutical Companies

 2000: Ha Tay Pharmaceutical Company transformed to Ha Tay Pharmaceutical Joint Stock Company with the registered capital of VND 8,410,800,000

 2008: The Company’s business registration was updated for the sixth time at a new registered capital of VND 41,226,020,000

Amidst the fierce competition of the market economy, the Company is well aware

of the importance of strategic orientation of its existence and growth The Company

is among the few firms which has invested and met the requirements of Good Manufacturing Practices (Good manufacturing Practices) It has a GLP standard laboratory, and GSP standard warehouse system

Figure 2.1: Hataphar’s Certificate of Good Manufacturing Practices

(Source: Prospectus of Ha Tay Pharmaceutical JSC)

Figure 2.2: Some of the Awards achieved by Ha Tay Pharmaceutical JSC

Control Committee

Board of Executives

Board

Branches / Agents Production Units

Functional

Divisions

 The General Stakeholder Committee: is composed of all the stakeholders

of the company, all of whom have the right to vote on the company’s operations

 The Board: comprises of 05 members who are leaders of the company and have full right on its behalf to make decisions, and to perform the rights and obligations of the company;

 The Control Committee: is made up of 03 members and operates independently from the Board and the Board of Executives

 The Board of Executives: is composed of 01 Director and 02 Vice Directors – one is in charge of production and quality assurance, and the other is in charge of sales and logistics

 The Functional Divisions are:

 04 production units are: tube medicine, tablet/ pills, soft capsules, and liquid medicine

 Branches and agents include:

- Ha Tay Pharmaceutical JSC, Ha Noi branch: Hoang Ngoc Phach Street, Dong Da district, Ha Noi

- Ha Tay Pharmaceutical JSC, Nghe An branch: Vinh City, Nghe An province

- 14 branches in the respective 14 rural districts of Ha Noi, which are 14 rural districts of former Ha Tay province

2.1.4 Corporate Vision, Mission and Core Values:

- Product orientation: investment be made in new technology to improve product quality for export substitution and towards export to other countries

- Markets: to maximize satisfaction of local demands to contribute to the implementation of the national medicine strategy and towards export;

- Multifunctional growth, with strong focus on research work, and human resources training and development;

2.1.4.4 Core Values

- Quality of products and services is decisive to the existence of the company;

- Value addition for the society, customers, employees and stakeholders are the objectives and motive for sustainable growth;

- Innovative labor is the foundation for growth;

- Partnership, sharing, commitment and execution of commitments are the foundation for the corporate culture

2.2 BUSINESS ENVIRONMENT ANALYSIS OF THE COMPANY

2.2.1 Macro Environment Analysis

socio-Pharmaceutical industry is one of those industries under strict control of the Government The Government has issued many legal documents governing its control and management of the industry These regulations govern issues such as the State management of the pharmaceutical industry, of the medicine pricing, of the conditions for the trade of medicine, the management of the medicine under the State strict control, regulations on the quality of medicine, medicine testing units