STRATEGIC DEVELOPMENT HERBAL MEDICINES OF TRAPHACO JOINT STOCK COMPANY

GRIGSS UNIVERSITY GLOBAL ADVANCE MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT TRAPHACO JOINT STOCK COMPANY 2011-2015” Group No: 5 1.. Error: Reference source not fo

CAPSTONE PROJECT REPORT

TRAPHACO JOINT STOCK COMPANY

GRIGSS UNIVERSITY GLOBAL ADVANCE MASTER OF BUSINESS ADMINISTRATION

PROGRAM

CAPSTONE PROJECT REPORT

TRAPHACO JOINT STOCK COMPANY 2011-2015”

Group No: 5

1 Nguyen Thi Muoi

2 Le Thanh Ha 3.Tran Dinh Dong 4.Tran Huong Giang

Class: GaMBA01.M0709

H A N O I , 2 0 1 1

INDEX

CHAPTER I: 6

1.1 The concept and the role of the business strategy to the enterprises: 6

1.1.1 Some concepts of business strategy: 6

Figure 1.2: The process of planning 11

Figure 1.3: The process of planning business strategy 12

Figure 1.5: Macro environment 15

Board of directors and executive directors 20

Members of board of directors: 20

Table 2.1: Remarkable Achievements: 23

Table 2.2: Growth speed 2006-2010 25

Figure 2.1:EPS and Growth of revenue at Traphaco 26

Table 2.3: Products portfolio: 28

Figure 2.2: Revenue of consuming the pharmaceuticals and average 35

Figure 2.3: Traphaco's market share in Vietnam's pharmaceutical industry 38

Figure 2.4: Traphaco's market share in Vietnam's pharmaceutical industry 38

Figure 2-5 Model of value chain 43

Figure 2.6: Structure 44

Table 2.7: PRODUCTION CAPACITY OF THE MACHINE LINE 45

Figure 2.7:Revenuse structure by products 50

Figure 2.8: Cost price structure and the average gross profit of products 51

Table 2.9: Effective criteria 2006-2010 52

Table 2.10:Operation capacity 2006-2010 53

Table 2.11:Capital structure 2006-2010 53

Table 2.12: Solvency 2006-2010 54

Table 2.13: Profitability 2006-2010 54

Table 2.14: Analysis SWOT 57

Table 3.1:SWOT matrix model to determine the product development strategic applied at Traphaco 64

Table 3.2: Specific business plan of the herbal medicine to 2015 66

Figure 3.1:Structure of Gross Profit according to the product 67

c/ Distribution solution 70

- Build a professional distribution system applying the advanced management technology in the whole three regions: Northern, Central and Southern 71

List Figure and table

Figure

Figure 1.1:Three levels of strategy in the business Error: Reference source not

found

Figure 1.2: The process of planning Error: Reference source not found Figure 1 3: The process of planning business strategy Error: Reference source

not found

Figure 1 4: Four blocks create competitive advantage Error: Reference source

not found

Figure 1 5: Macro environment Error: Reference source not found

Figure 1 6 : BCG matrix Error: Reference source not found

Figure 1.7: SWOT Matrix Error: Reference source not found

Figure 1.8: Space matrix Error: Reference source not found Figure 1.9: Basic stages of strategic administration Error: Reference source

not found Figure 2.1:EPS and Growth of revenue at Traphaco Error: Reference source

not found Figure 2.2: Revenue of consuming the pharmaceuticals and average Error:

Reference source not found Figure 2.3: Traphaco's market share in Vietnam's pharmaceutical industry

Error: Reference source not found Figure 2.4: Traphaco's market share in Vietnam's pharmaceutical industry

Error: Reference source not found

Figure 2-5 Model of value chain Error: Reference source not found

Figure 2.6: Structure Error: Reference source not found Figure 2.7:Revenuse structure by products Error: Reference source not found Figure 2.8: Cost price structure and the average gross profit of products Error:

Reference source not found Figure 2.9: BCG MATRIX Error: Reference source not found Figure 2.10: Space Matrix Error: Reference source not found Figure 3.1:Structure of Gross Profit according to the product Error: Reference

source not found

Table Table 2.1: Remarkable Achievements: Error: Reference source not found Table 2.2: Growth speed 2006-2010 Error: Reference source not found Table 2.3: Products portfolio: Error: Reference source not found

Table 2.4: Brands of expanded category Error: Reference source not found Table2.5: System of quality standard applied at TRAPHACO Error: Reference

source not found Table 2.6: The product groups brand extension Error: Reference source not

found Table 2.9: Effective criteria 2006-2010 Error: Reference source not found

Table 2.10: Operation capacity 2006-2010 Error: Reference source not found Table 2.11: Capital struct ur e 2006-2010 Error: Reference source not found Table 2.12: Solvency 2006-2010 Error: Reference source not found Table 2.13: Profitability 2006-2010 Error: Reference source not found Table 2.14: Analysic SWOT Error: Reference source not found

Table 2.15: External Factors Environment (EFE) of Traphaco Company in comparison with competitors (in the Herbal medicine) Error: Reference source not found

Table 2.16: Internal Factors Environment (IFE) of Traphaco Company in comparison with competitors (in the Herbal medicine) Error: Reference source not found

Table 3.2: Specific business plan of the herbal medicine to 2015 Error:

Reference source not found

ACKNOWLEDGEMENTS

like to send our sincerely thanks to:

- The professors, and the doctors of the master training program in Master

of Business Administration (MBA), held by Griggs University collaborating with the ETC, who taught and guided us during the training process

- The academic staff of the Griggs University who guided us in the process of doing the research;

- The officers and staff of the ETC belonging to the Postgraduate Department, Hanoi National University;

We also would like to send our sincerely thanks to Traphaco Corporation, the leader board of the Corporation, especially Ms Vu Thi Thuan, Chairman of Manager Board and CEO of Traphaco Corporation who enthusiastically supported

Group Members:

1 Nguyen Thi Muoi

2 Le Thanh Ha

3 Tran Dinh Dong

4 Tran Huong Giang

OVERVIEW

The 21st century marked the changing of the world in the fields of economy, society, politics, science and technology many new technologies has continuously launched, the regulations on controlling the quality are becoming tighter and tighter, the environment has many unexpected changes, the impact of the spread financial crisis causing severe consequences in many countries, Besides, the economy of the world is shifting to the trend of global integration, so the operations of the enterprises must be suited to the trend of the global economy, and the regional and international integration by searching and promoting comparative advantages to win in an increasingly fierce and intensive competition in the nation, international and global

In that context, each enterprise has new opportunities to exploit; at the same time they have to face much risk should be prevented and limited Therefore, to adapt to business environments with high efficiency and long-term success requiring Vietnamese enterprises in general and the pharmaceutical corporations in particular must have a strategic thinking, which means to have a long-term vision to ensure the survival and development of the enterprises

Besides, the enterprises trading in the pharmaceutical sector - a particular type

of enterprise, doing business in the health and safety of the community must meet a series of GMP - WHO requirements (standard manufacturing medicine as recommended by the WHO) To overcome these challenges and take advantage of opportunities well require the enterprises in the pharmaceutical industry to choose the right orientation, to define an appropriate and timely business strategy

Before the general reality of the pharmaceutical manufacturing enterprises in Vietnam, and with the desire to offer a highly practical business strategy helping to effectively take advantage of the opportunity to bring the pharmaceutical manufacturing industry of Vietnam to grow and expand to the world With the help of the staff in Traphaco Corporation, after a process of doing the research, gathering documents, studying and analyzing, the members of group 5 decided to choose and do the research topic:

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“STRATEGIC DEVELOPMENT HERBAL MEDICINES OF TRAPHACO JOINT STOCK COMPANY 2011-2015”

1 Subject of the research:

There currently are two major kinds of medicine on the market; those are herbal medicine and western medicine However, the proportion of people using the western medicine is much higher The lower proportion of herbal medicine does not means its treating effect is not as good as that of western medicine, but it mainly dues to the medicine using habits of the people, the orientation of the doctors to patients, (because most of doctors can enjoys the commissions from the patient's prescription from the foreign pharmaceutical corporations) Besides, the herbal medicines of the domestic pharmaceutical corporations are limited and lack diversity that does not meet the requirements of the patients

According to the survey of WHO for seven groups of common western medicine used in Vietnam, based on the criteria of the type, the name of specific medicine, producer and supplier showed that medical prices in Vietnam are higher from 5 to 40 times compared with the general prices in the world (according to online dantri on the 26th of June 2010)

Besides, at present, the domestic medicine is only about 652/1.563 of active ingredients, and according to the World Health Organization (WHO), Vietnamese pharmaceutical industry is in development levels between 2.5 to 3 (in the classification scale from 1 to 4), that means it only produces some of certain generic medicines and exports some pharmaceuticals, the pharmaceutical enterprises mainly invest in manufacturing the common and simple pharmaceuticals only, with much overlapping, do not pay attention to invest in production of specialty medicines, or special dosages, and generally the enterprises meeting the requirements of ASEAN GMP and GMP-WHO are low

With orientation to create breakthrough in technology to apply the products from nature into the production creating higher value products with good effect from which discovers and exploits the medicinal resources to serve the protection of public health The Traphaco Corporation - with 39-year experience in the pharmaceutical sector has chosen the main business direction is to trade and manufacture the herbal

medicines

Through understanding the overview of the pharmaceutical industry of Vietnam, the achievements and limitations of the pharmaceutical corporations in general, and Traphaco Corporation in particular, the subject of this research is to focus on activities as well as strategies for developing the herbal medicine at Traphaco Corporation.

2 Scope and Objectives of the Research:

This Capstone Project Report Analysis deeply the current status of Traphaco Corporation by positioning the enterprise with the theoretical model to identify weaknesses and strengths, opportunities and challenges of the enterprise from which help Traphaco Corporation not only have the strategic business plans, but also have solutions to implement those strategies the most effectively

For this purpose, Group 5 - Class M0709 would like to focus on building

Traphaco Corporation.

Through the matrix model of SWOT, our group confirms that the strategy of

SO (the combination of strengths and opportunities) is the optimal strategy for the production of herbal medicines at Traphaco Corporation What is the objective of the strategy? What is the content of the strategy? What solutions are placed for the process of building the strategy? Will these issues be addressed in this Capstone Project Report?

General principle for making any decision, or in other words, to make a conclusion on any issue, we must be based on actual surveyed results combined with the academic theories

This Capstone Project Report mainly uses method of collecting secondary data including:

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- Internal data of Traphaco Corporation;

- Sources from books, internet;

- Using some references, documents specialized in domestic and foreign Strategic Management.

In addition, our group also uses the method of statistical sample, survey, and analyzing the questionnaires.

4 Structure:

Beside the introduction and the conclusion, the Capstone Project Report includes 3 main chapters:

Chapter I: General theory of business strategy

Chapter II: The current business situation of Traphaco herbal medicine

Chapter III: Strategy development herbal medicine of Traphaco Joint Stock Company 2011-2015.

CHAPTER I : GENERAL THEORY OF BUSINESS STRATEGY1.1 The concept and the role of the business strategy to the enterprises:

1.1.1 Some concepts of business strategy:

The term of "strategy" comes from the military field In military, the strategy is known as: the art to coordinate the military, political, spiritual, economic forces mobilized to win the enemies, and the basic argument is one can crush its opponents, even a bigger and more powerful one, if one can lead the game and put the opponents

on the favorable battle-field for deploying the capabilities (advantages) Today, the businessmen consider the market as the battlefield, so the term of "strategy" has been used so much in business

Although the term of business strategy has appeared for a long time, there has no really an accurate and complete concept According Michael E Porter professor of Harvard University: "Business strategy is the art to create the competitive advantages" Thus, business strategy is one of the means to compete among the enterprises, it is a measure for the enterprises to achieve business goals by creating and building the competitive advantages meaning to create or build up the strengths, opportunities, risks and challenges then find out appropriate solutions to win in the business (Source: Curriculum of Strategic Management, MBA, Griggs University).

But according to the consulting staff of Boston Consulting Group (BCG):

"the business strategy is the allocation of available resources for the purpose of changing the balance of available resources of the enterprise, and gain the competitive advantage", that means the enterprises from analyzing their resources, and their departments to allocate the resources the best from which give out the goals, and measures to achieve goals with the highest efficiency creating the competitive advantage (Source: Curriculum of Strategic Management, MBA, Griggs University).

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In the definition of Mintzberg's 5 Ps generalizing the aspects of Strategic Management as follows:

+ Plan: series of the consistently planed actions.

+ Pattern: Consistency of behavior over the time, it may be planned or not + Position: Match between the organization and its environment.

+ Perspective: the ways to be aware of the world deeply.

+ Ploy: specific way to assess the opponents.

Quinn introduced the concept: "strategy is a pattern or a plan integrating the major objectives, policies and sequence of actions into a closely cohesive group" (Source: Quinn J B (1980)

Thus, the strategy is aimed at outlining the future image of the enterprise, and to

consistent actions to achieve fixed goals In other words, the business strategy is an art

to coordinate activities and control them to achieve long-term goals of the Company.

1.1.2 Kinds of strategy

Classify the strategy according to the level of strategy

There are three levels of strategy in the business those are: the strategy or general strategy; corporate strategy and competitive strategy

Figure 1.1:Three levels of strategy in the business (Source: Text book of “Strategic Management”- Global Advanced Master of Business Administration, Hanoi, 2010)

- Sort by strategic-level strategy:

+ Corporate strategies (general strategy) level strategy towards corporate objectives and overall scope of the organization The objective of this strategy is that the targets that the company wants to achieve a quick overview of the entire area where the company operates

+ Competitive strategy: regarding how to successfully compete in specific markets

+ Functional strategy (or operational strategies) is strategies to help the competitive strategies and implement the company offers an effective way to remember the components in terms of resources, processes, the people and the skills needed

So, though there are many definitions and classifications of strategies, in general all of them are in 4 main categories: plans, models, position and perspective To say in other way, the strategy is:

- Where the enterprise tries to achieve in long-term (the orientation)

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- What are the markets in which the enterprise has to compete and the operations the enterprise carries out in those markets (market, scale)

- How the enterprise operates better than the competitors in those markets (advantages)?

- What are the resources (skills, properties, finance, relationships, technology, facilities) the enterprise needed to compete effectively (resources)?

- Which of the external environment factors affect the competitiveness of the enterprise (environment)?

- Which value and expectations the bosses in and out of the enterprise need (investors)?

1.1.3 The role of business strategy.

Business strategy identified means that the enterprise has to locate itself in the industry map by answering the questions:

Where is

Through this, the enterprise can find its strengths and promote them to create the advantages and also find the weaknesses to reduce and overcome By locating where the enterprises currently, planning the business strategy will tell us where the enterprise wants to get to and how will the enterprise get there The business strategy offers goals and orientations for the enterprise to operate effectively

Strategy is the factor which helps to develop the enterprise Thus, it will be better

if we start a strategy with the offering of the future perspective on the basic of correct assess of the internal, identifying advantages and potentials to locate the enterprise correctly and how to achieve the goals with a carefully planned strategy With the features of business strategy reflected in the process, business strategy always has the spirit of offensive and winning in the market and usually planned in long term of 3, 5,

10 years or more, the decision to choose a suitable model will mark the changes from the starting steps to success

1.1.4 The models of business strategies:

1.1.4.1 Linear strategy model:

Linear strategy model focuses on the planning activity This model is called linear because it consists of the scheduled, oriented operations which follow logical order in the planning process

Linear model is less used since the strategic factors become increasingly complex, not only because these factors relate to many different management aspects but also because of the changes of technology, economy, and information variables

1.1.4.2 Adaptation strategy model

Adaptation strategy model is defined as focusing on the ability to combine opportunities and threats of the business environment with the enterprise's resources and ability of the enterprise to exploit those opportunities

Adaptation strategy is base on suppositions The relation between the enterprise and the enterprise is closer and stronger than in the linear model Adaptation strategy model is used more popularly than linear model

1.1.4.3 Interpretive strategy model.

Interpretive strategy model is mainly based on factors of social relations According to this view, the social relationships consider the business as a combination

of commitment of individuals to cooperate with the spirit of volunteerism The existence of businesses depends on their ability to attract personnel with appropriate benefits for all parties

The strategy in the interpretive model can be identify as a metaphor with orientation or instructing frame allowing the important elements of the organization to understand the organization and the surrounding environment On this basis, the important elements are encouraged to believe and operate in the direction of creating beneficial results for the enterprise

A notable difference between interpretive model and adaptation model is the approach of each in complexity The adaptation strategy tries to solve the complex problem in the aspect of structure; most notable are the conflicts and changes of demand for the enterprise's products The interpretive strategy emphasizes the complex problem in the aspect of attitude and awareness of relating parties to the enterprise

1.2 The process of planning the overall business strategy

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Functions, missions and strategic goals of the enterprise (1)

Analysis of the business environment (O, T) (2)

Analysis of the internal

environment(S, W) (3)

Select the strategy (4)

Strategy of the whole enterprise level (5) Strategy of business and functional departments

Deploy the strategies (6)

Chec

k an

d as ses

s th

e r esu lts (7)

Business strategy is planned base of the vision of the enterprise, and orienting for all of the enterprise's operations and thus is long-term strategic It consists

Figure 1.2: The process of planning

(Source: Text book of “Strategic Management”- Global Advanced Master of Business Administration, Hanoi, 2010)

1.2.1 Strategic planning (choosing missions and major targets of the enterprise)

The enterprise's missions and major targets offer a context to build the strategy The missions describe the reason to exist of the organization and points out what it will do The major targets identify what the enterprise hopes to offer in medium and long term

The process of planning business strategy above can be summarizing in this figure:

STRATEGIC CHOICE

STRATEGIC

N

11

Figure 1.3: The process of planning business strategy

(Source: Text book of “Strategic Management”- Global Advanced Master of Business Administration, Hanoi, 2010)

1.2.1.1 Vision:

Vision is a message embodying the corporate core value Represents what is important to the company, and the contribution in terms of business and life, the

corporate business principle, corporate position in the world and commitments which

the company will comply

1.2.1.2 Mission:

Mission is a message specifying the Mission as an encouraging target It

describes necessity of the survival improvements for the corporate, creating the

corporate future confidence and orienting to make the impossibility become

possibility

1.2.1.3 Business goals:

The identification of goals was developed from the mission of the enterprise, but

is set up separately and in more detail Goals are identified in medium-term, long-term

or short-term

Usual long-term goals are: profitability, productivity, competitive position, employee development, technique leading or social responsibility, etc

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Short-term goals (within 1 year) often are separate and specifically limited on time Requirements of short-term goals are detailed, measurable, available, and, most basically, aiming towards long-term goals

1.2.2Analysis and evaluation

1.2.2.1 External environment:

The goal of analyzing the external environment is to realize the opportunities and challenges from the external environment to the enterprise The three types of external environment linked together are: micro-environment, national environment and industry environment in which the enterprise is operating

The enterprise identifies the opportunities and challenges through the analysis of data about changes in the environments where the enterprise is operating or intending to enter Opportunities are market development potential, market space, close to material resource, cheap and qualified human resource, etc Challenges are narrowed market, fierce competition, policy changes, political instability in major markets or the new technology development making the enterprise's facilities and production line become out-of-date

1.2.2.2 Analysis of the enterprise's internal environment:

The goal of analyzing the internal environment is to find the strengths and weaknesses of the enterprise

The analysis of internal environment is for identifying the basic of competitive advantage and explains why in an industry there are some corporations which operate better than the others Competitive advantage is the result of one of these factors: the superiority in effectiveness, quality, improvement and customer satisfaction To achieve the superiority the enterprise has to develop the abilities to create the favorable differences Abilities to create the differences are the result of resources and capacity of the Corporation

The four blocks create competitive advantage are: Effectiveness, quality, improvement and customer satisfaction

Figure 1.4: Four blocks create competitive advantage

(Source: Text book of “Strategic Management”- Global Advanced Master of Business Administration, Hanoi, 2010)

Abilities to create the difference of an organization are formed from its resources and capacity Resources consist of: financial properties, material, personnel, technology and organizational structure The analysis of the enterprise's internal environment and the strengths and weaknesses helps the enterprise to identify the basic capacity to promote and the limits to overcome So the enterprise can built the suitable strategies to its capacity, to develop its strengths and overcome its weaknesses, exploit the different ability

General summary: The results of the analysis of internal and external

environment of the enterprise are the results which study and evaluate the business environment on a whole They include the geographical (or political, economical, social, environmental, cultural) business environment, trend of the industry (or technology, science, supply source), the situation of the market (demand, consumption, trend forecasting), the situation of the competition (major opponents, potential opponents, advantages and disadvantages, current position and the pursuing strategy)

Superior effectiveness Superior customer

satisfaction

Competitive advantagelow cost different

Superior improvementSuperior quality

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Figure 1.5: Macro environment

(Source: Text book of Strategic Management PGS.TS Lª ThÕ Giíi, TS NguyÔn Thanh“ ”

Liªm, ThS TrÇn H÷u H¶i-Statistical Publishing house 2009 Page 97)

1.2.3 Choosing the business strategy:

The enterprise's strategy is to orient the development and to build the competitive advantage base on the studies and evaluations done above The enterprise can choose one of M.Porter's three groups of strategies:

- Cost leading (lowest cost)

- Centralization ( Focus in a specific market sector or in a specific group of products)

- DistinguishingThe choice of strategy can be done through one of the following methods axis is the relative market share

Rivalry among competing firms

Potential entry of new competitors

Potential development of substitute products

society Global

This matrix has two axes: the column is the market's ability to grow and the horizontal axis is the relative market share

Figure 1.6: BCG matrix

(Source: Text book of “Strategic Management”- Global Advanced Master of Business Administration, Hanoi, 2010)

Base on the BCG figure with each position we have the following strategies:

Group 1: The enterprise in this group has the leading advantage of market share

and has high growing ability so that it has opportunity to grow well and has stable high profitability

Group 2: The enterprise has potential and good competitive ability The solution

for the enterprise is to regularly strengthen the investment efforts to maintain the leading position

Group 3: The enterprise has slow grown speed but still has the advantage of

market share The solution is to avoid investing too much and to predict when to retreat

Group 4: The enterprise has no advantage in market share and grows speed The

solution is to quickly retreat by avoiding using resources or resell to the other enterprises

BCG's approaching has many advantages so that it's used popularly

1.2.3.2 - SWOT analysis method:

The basic aim of SWOT analysis is to identify the strategies it orients, bringing relevance or proportionality between the enterprise's resources and capabilities with the demand of the environment in which the enterprise is

SWOT matrix

Opportunities (O)

Threats (T)

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Strengths(S) Combination

(S/O)

Combination (S/T)

Weaknesses (W)

Combination (W/O)

Combination (W/T)

Figure 1.7: SWOT Matrix (Source: Text book of “Strategic Management”- Global Advanced Master of Business Administration, Hanoi, 2010)

The strategy combining S/O is the result of the combination between the main strengths and the opportunities The important thing is that the enterprise has to use its strengths to exploit the opportunities

The strategy combining ST is the result of the combination between the main strengths and the threats In this strategy the enterprise uses its strengths to overcome the threats

The strategy combining OW is the result when the enterprise uses the opportunities to improve its weaknesses

The strategy combining WT is the result when the enterprise tries to improve weaknesses to avoid threats

Moreover, we can combine using this method with scoring to assess strengths, weaknesses, opportunities and threats of the enterprise correctly

1.2.3.3 – SPACE matrix method

Figure 1.8: Space matrix

(Source: Text book of “Strategic Management”- Global Advanced Master of Business Administration, Hanoi, 2010)

1 3 The stage of checking the strategy

Checking the strategy is the last stage of the strategy management process Strategy management is the process in which the managers supervise the operation of the organization as well as its staff to assess the operations that whether they are carried out continuously and effectively or not, from which the enterprise will have adjustment decisions to improve for better efficiency The management contents

include: Effectiveness management, quality management, improvement management, and customer satisfaction management

1.4 Using the strategy analysis techniques to Analysis the current situation of the enterprise

Because time is limited so that in the analysis of the enterprise's current situation group 5 - M0709 will use some of the models and methods mentioned above

in the process of analyzing the situation, locating the enterprise and planning management strategy for Traphaco Corporation, specifically are:

- PESTLE model in analyzing the macro environment

- Michael Porter's five competitive factors in analyzing the business industry environment

- SWOT matrix in summary analysis of internal environment ( strengths and weaknesses) and external environment (opportunities and threats) of the enterprise (using score)

- Analysis the basic value chain so that the enterprise can locate its position and identify the means usable to deploy the business strategy

- BCG matrix to assess the enterprise attractiveness (relative market share and the grow capacity)

- SPACE matrix method.

In short, the process of strategic management consists of the basic stages like in the following figure:

Plan strategies

to achieve the goals

Deploy and administrate the chosen strategies

Assess, supervise, improve 18

Figure 1.9: Basic stages of strategic administration.

(Source: Text book of “Strategic Management”PGS.TS Lª ThÕ Giíi, TS NguyÔn

Thanh Liªm, ThS TrÇn H÷u H¶i-Statistical Publishing house 2009 Chapter I)

Conclusion: A good strategy is a strategy which has high feasible Each enterprise with different organizational structure has the different strategy deployment, but the importance is that whether the enterprise can administrate well the chosen strategy and deploy effectively the strategy and bring high values

- Base of the function and mission as well as the analysis of the factors of the internal and external environment, the enterprise can choose the suitable strategy to itself The analysis process use various analyzing models, tools and predictions will help the enterprise to realize the strengths, opportunities, weaknesses, threats, and then have the right strategic solutions

-In the process of deploying strategy, the theoretical basic of strategy will be applied in reality, but because of the usual change of the environment and other hidden factors which cannot be predicted, assessed and Analysis So, mistakes will occur in the process of planning strategy Then, we have to change and improve to suit the real situation

Change/

improve if necessary

Change if necessary

Redo 1,2,3,4 if necessary

2.1 Overview of Traphaco joint stock Company:

2.1.1 General introduction about the company

� Name: Traphaco Company

� English name: Traphaco Joint Stock Company

Board of directors and executive directors

Members of board of directors:

1- Ms Vu Thi Thuan: Chairman of the board

2- Ms Nguyen Thi Mui: Deputy of chairman

3- Mr Nguyen Huy Van: Committee member

4- Mr Tran Tuc Ma: Committee member

5- Mr Hoang Thi Ruoc: Committee member

6- Mr Nong Huu Duc: Committee member

Member of executive directors:

1- Ms Vu Thi Thuan: General Director (awarded KOVALEVSKAIA)2- Ms Nguyen Thi Mui: Deputy of general director

3- Mr Nguyen Huy Van: Deputy of general director

4- Mr Tran Tuc Ma: Deputy of general director

5- Ms Hoang Thi Ruoc: Deputy of general director

6- Ms Pham Thi Phuong: Deputy of general director

Members of supervisors:

1- Mr Nguyen Tat Van: Head of supervisor

2- Ms Nguyen Thi Hau: Committee member

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3- Ms Nguyen Thi Kim Hoa: Committee member

Traphaco Company formerly was medicine producing department belonging to the Railway Medical Company founded in 1972 with the capital of 278 million dong only, after more than 39 years of operation, TRAPHACO has continuously grown and became one of the top 10 pharmaceutical companies in Vietnam, offering jobs for 1,000 workers The company is traded on the HOSE with the charter capital of 102,000,500,000Vnd

The company has three strategic shareholders those are State Capital Investment

percentage of ownership in turn is 36,67%, 5% and 6,16%

Ownership structure of the company includes 36.67% of state ownership, 12.85% of foreign ownership and 50.48% of the other ownership.

2.1.2 Development process

2.1.2.1 Major lines of business:

- Producing and trading in medicine, food, cosmetics, chemicals and medical equipments;

- Consulting and producing the scientific and technical services, technology transfer in the medical, pharmaceutical, cosmetics;

- Researching, collecting, growing and processing medicinal herbs

- Trading in, importing and exporting the medicines, the products of medicine;

- The other lines of business as registries

2.1.2.2 Operational status:

TRAPHACO formerly Medicines production Group belonging to the Railway Health Service was established on 28.11.1972, with the task of producing plasma, fluids, distilled water for Railway Hospital in the period of resistance against American

- 01/06/1993, Pharmaceutical Factory Railway (trading as Raphaco) was born, has legal status, own seal, its own account, and operates independently under the Government's Decree 388 Number of initial capital is 278 million VNĐ and a team of over 100 employees Enterprises began to invest and implement policies to attract human resources with high quality; labor recruitment is pharmacist University graduate with good, well at the Hanoi University of Pharmacy, along with the signing

of many contract technical staff, collaboration in scientific research, exploration of market research and business organizational structure.

In 1994, the organizational structure of medical Railways Department was converted into the Health Department of Transport, Rail pharmaceutical factory was renamed pharmaceutical company and medical equipment, supplies and Transport Ministry (name transaction is TRAPHACO) The company added functionality, increasing the sales counter in the center of Hanoi and began building a distribution system in the Northern provinces

After years of preparation workshops as well as personnel training, in 1998, the Company completed pharmaceutical factory in Phu Thuong, Tay Ho, Hanoi and Drug Administration recognized ASEAN GMP (Good Manufacturing Practice ASEAN) - the first line in the north GMP ASEAN

- 27/09/1999, the Company received Decision 2566/1999/QD - BGTVT of the Minister of Transport transfer State-owned enterprises - Pharmaceutical companies and medical supplies and equipment into TRAPHACO-stock companies After 3 months of preparation, on 01/01/2000, Pharmaceutical Corporation and Equipment Medical Equipment TRAPHACO officially began operations in the form of joint-stock company with 45% state

-05/07/2001, Pharmaceutical Corporation and Medical Equipment supplies TRAPHACO renamed TRAPHACO Joint stock company( TRAPHACO)

-01/2004, TRAPHACO completed construction of pharmaceutical manufacturing plant in Hoang Liet , Hoang Mai, Hanoi and Drug Administration is recognized as the standard system of GMP / GSP / GLP -ASEAN

-01/2007, Hoang Liet plant was officially recognized GMP-WHO standards 27/11/2007, TRAPHACO was the 35th anniversary of establishment of the company and proud to receive second-class Labor Medal by the President of Socialist Republic

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Table 2.1: Remarkable Achievements:

Young Entrepreneur Association

of Vietnam

2007

Top 100 leading brand names of high-

+ JSC tech TRAPHACO (TRAPHACO CNC)

+ Company Limited Traphaco Sapa in Lao Cai

- Branches:

- Ho Chi Minh City Branch: 3 / 2 Street, District 10 - Dist Ho Chi Minh

- Da Nang Branch: No 255 Ton Duc Thang - Lien Chieu - Da Nang Branch - Nam Dinh Truong Han Sieu Street, urban Hoa Vuong Str Nam Dinh, Nam Dinh province

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- Thanh Hoa Branch: Lot K1 + K2, Zone 4, New Town North Avenue Le Loi, Dong Huong, Thanh Hoa

- Nghe An Branch: Urban Tan Vinh, Ward Tan Vinh, Nghe An City

2.1.3 Summary results of operations TRAPHACO

Traphaco is the pharmaceutical business with many years of experience in the industry and is one of the leading companies in the popularization and development of medicine in Vietnam Traphaco be circulated more than 230 licensed products, distributed in various groups such as the nervous system, liver and gastrointestinal, cardiovascular, analgesic - antipyretic, ear, nose and throat, eyes The products are distributed Traphaco wide distribution throughout the country

Traphaco are factory management drug GMP in Hanoi and is a shareholder of

a factory manufacturing GMP other drugs in Hung Yen Traphaco factories built by modern design, with systems installed in most advanced equipment imported from Germany and South Korea, Italy and China

Table 2.2: Growth speed 2006-2010

(Source: Annual Report of Traphaco Joint stock Company 3/2010)

EPS and Growth of revenue at Traphaco

Figure 2.1:EPS and Growth of revenue at Traphaco

(Source: Annual Report of Traphaco Joint stock Company 3/2010)

2.1.3.2 Public investment

- In Business:

We adjust the project to build 75 Yen Ninh offices under the plan to repair the three-tiered distribution system in Hanoi, convenient for the investors Finished office and warehouse in Nam Dinh went into operation in April 01/2010 Investment decisions offices and warehouses in Nghe An, Thanh Hoa, home office and warehouse to form the Southern branch sales Carried purchase land in Hai Phong

to prepare construction branch in Hai Phong Total investment is 36.6 billion VNĐ

Have carried out the procedures for land allocation and implementation of compensation and leveling of land 4.6 ha in Tan Quang, Van Lam, Hung Yen to be invested to expand production scale

Company has deployed applications internal network system Initially used for management and exchange of documents within companies Ongoing updates to standardized data sharing in production systems

Investment in infrastructure and technical facilities for the distribution system and the Vietnam Drug Administration certification practice good medicine distribution (GDP)

- Outside the enterprise

Performed transfer of SAPA TRAPHACO Co Ltd a member of SAPA on TRAPHACO July of 2009, charter capital is 3.35 billion VNĐ

Revenue ue

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2.1.3.3 Work Management

In 2009, the Board has made the administration as closely supervise the activities of the General Manager in the implementation of the resolutions of the board of directors, supervisory work directing and managing activities estate business,

to ensure they reach planned targets in 2009

Also, the Board and Board of Directors also have research and application of more advanced management methods in the operations of the Company

2.1.3.4 The listing and share issuance

In 2009, the Board has conducted the company consulted the General Council

on plans for shareholders to issue shares to increase charter capital-funded from retained earnings The plan was adopted by the shareholders through bonus shares at a rate of 25% Under the authorization of the Shareholders, the Company Board has completed the procedures for issuing shares, and additional listing and registration of additional securities to the number of shares issued.Implementation of treasury stock bonuses to workers and excellent staff in 2008, namely: completed 32,480 bonus shares distributed to officials and employees from

VND on 31/12/2009

2.1.3.5 Other work

Successfully organized the 10th anniversary ceremony of equalization is a milestone model evaluation activity of the company after 10 years of equalization, the opportunity for members to understand the TRAPHACO herbal companies

2.2 Status of active pharmaceutical product development east of the Corporation Traphaco

2.2.1 Current situation of Marketing:

- Product Policy: High quality, differences

- Pricing policy: prices high

- Policy distribution: Distribution by the width and depth in the provinces with high income

* Promotion Policy:

+ Join-sponsored conferences, construction facilities for hospital

+ Participate in ad, introducing products, the company specialized magazines, television and fairs

+ Apply the discount policy stability and reasonable for intermediate distribution + Apply policies for Hospital - Medical Center

+ Looking to expand markets to countries in the region and the world

2.2.2 Development of herbal medicines:

Herbal medicine plays an important role in the business strategy of Traphaco The company is currently focusing the main resources to develop this product line, take advantage of Vietnam is available divertive species of herb

2.2.2.1.Phamaceutical products portfolio:

Table 2.3: Products portfolio:

(Source: Website of Traphaco Joint stock Company: Traphaco.com.vn )

(including VAT)

1 Ampelop, blister of

10 soft gels Box 9 blisters* package of 48 boxesblister of 10 soft gels *box of 72.000

8 Boganic, box of 5

blisters Box 5 blisters* package of 60 boxesblister of 20 soft gels *box of 45.000

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film coated tablet 5 blisters* package of 60 boxes

5 blisters Box 5 blisters* package of 60 boxesblister of 20 soft gels *box of 55,000

2.2.2.2. Product category

Strategy of expanding the category: This strategy is applied by TRAPHACO regularly with the reputed brands and high profit Application of category expanding strategy is used to diversify kinds of chemist from the initial products of those brands,

as the result in the table below.

Table 2.4: Brands of expanded category

(Source: Marketing of Traphaco Joint stock Company)

nao tablet, fluid

tablet, Soft capsule

Film coated tablet

2.2.2.3 Quality and Indications of the product:

Quality and indication of the products are good and supervised strictly according

to the following system of quality management

Table2.5: System of quality standard applied at TRAPHACO

(Source: Traphaco Joint stock Company)

products, materials and ancillary materials

2007) Van Lam Herbal medicine Factory

TRAPHACO is currently applying the standard of GMP ASEAN for the factories manufacturing tablet, capsule, powder, atopic, liquid, for the kinds of products do not belong to the group of beta lactam GMP ASEAN has been applied by TRAPHACO since 1997 (as the first enterprise in the North)

The company is planning and applying the ISO 9001:2000 for the system of quality management

2.2.2.4 Packaging, labels

The design and management packages are always focused and companies willing

to invest, especially the packaging, though high cost but good quality and nice design Use of trade names (also known as names of specific drugs) is applied to the products that companies want to develop the brand within a brand Traphaco Trademark protection is used to shape the overall protection of designs, styles, colors and forms of packaging with the product name Trademark protection to combat the

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counterfeit design forms causes confusion to consumers Traphaco used to expand the brand to a group of products with the same group action Using brand new application for new drug effects new headings.

Table 2.6: The product groups brand extension

(Source: Marketing of Traphaco Joint stock Company)

Tranausea TranauseaTranausea plus

2.2.3 The advantages and difficulties in product development activities of large pharmaceutical companies shares Traphaco:

2.2.3.1 Advantages:

- The company achieved growth at a high level is sustained for many years

- Brand and product business reputation and consumer confidence

- The company is financially sound, low-interest loans to

- Production capacity of the enterprise together with a good quality management system and system manufacturing practices of the business is completed over the years to apply continuous improvement

- The company has high credibility with its partners

With the strength of the medicine known brand, production capacity, research and development, independent source of herbs, extensive distribution systems to customers and especially the continuous trend of using medicine use, Traphaco will have the opportunity to strong revenue growth in the coming years and become a pioneer in the medicine market in Vietnam

2.2.3.2 Difficulties:

- Be the joint impact of the economy and markets pharmaceutical products in Vietnam, making goals, strategies, planning requires coordination with the overall situation and the enterprise itself

- As the leading enterprises of Vietnam's pharmaceutical industry, especially an Eastern brand of medicine, TRAPHACO always chasing the target of acts of unfair competition such as counterfeit goods, which appeared under the tail edge products competition with new products, the effectiveness of TRAPHACO

- The South is a potential market but is not interested TRAPHACO trade promotion

- Distribution system depends on the distribution intermediary should recover debts

2.3 Facility development strategy of herbal medicines Corporation Traphaco: 2.3.1 Analysis of external environmental factors:

2.3.1.1 Macro environmental analysis PESTLE model

a/ Law

Pharmaceutical industry is one of the sectors affected the strongest by the management of the state The government has promulgated many legal documents to manage the pharmaceutical industry including documents relating to the issues such as:state policy in the field of pharmacy, state management of drug prices, conditions drug business, medicine management under the specially controlled list, quality standards of drugs, drug-testing facility

On 19/04/2007, Ministry of Health issued Decision No 27/2007/QD- MOH on the schedule on the principle of "Good Manufacturing Practice (GMP) and" Good Storage Practice"( GSP) carried out According to this decision, since 01/07/2008, the manufacturing enterprises do not meet the GMP as recommended by the World Health Organization (GMP WHO), and the import-export enterprises and pharmaceutical trading enterprises do not have the storage as the standard of GSP will have to stop producing, importing and exporting directly Besides, there are also regulations such as GLP: "Good Laboratory Practice” of vaccines and biological," GDP: "Good Distribution Practice" of medicine, GPP "Good Pharmacy Practice” of medicine management Those enterprises that meet the standards can exist and develop These regulations will make increasing trend of purchasing and merging the small pharmaceutical companies into larger companies from which enhance the competitiveness of the pharmaceutical companies in Vietnam through focusing on developing under deep way to compete with the multinational companies

The international commitments when integrating into WTO also affect the pharmaceutical industry of Vietnam such as: the tax will reduce from 0 to 0.5%

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compared with the tax rate from 0 to 10% as before After 5 years, when Vietnam became an official member of WTO, the tax rate will drop to 2.5%;

b/ Economy

Vietnam is one of the countries with high GDP growth rate in the world (GDP growth rate average period from 1990 to 2010 reached 7.38%) and per capita income increased more than 6 % per year from 1991 to level 123USD/person 1200 USD per person in 2010 put Vietnam ranks of middle income countries Additionally, Vietnam's population of over 86 million people, the average growth rate is quite high, 1.25% per year in health spending per capita is lower 18.5USD/person/year again, rising an average 7.4 % years (average expenditure of developing countries to pharmaceutical and medical 40USD/person each year) and health care needs of the people of Vietnam have been increasingly interested in forecasting the pharmaceutical industry so much potential ability to grow

Foreign pharmaceutical firms to manipulate the domestic pharmaceutical market, drug prices, especially the kind of brand-name drugs can not be produced domestically are pushing prices up and make difficult to control the lives of the patients even more difficult more difficult

On the other hand, despite the global financial crisis and high inflation rate in Vietnam recently has strongly influenced the economy of Vietnam, especially the processing industry import and export, financial banking, real estate investors make people more cautious and in investment and consumption However, the pharmaceutical industry is one of the less affected by the crisis than most other industries, because drugs are considered one of the essential commodities to the people

in rural areas, who have a habit of using folk medicines as the tradition On the other hand, in the world currently, the trend to come back to the nature through using the

herbs and drugs derived from the herbs in the health care Therefore, this is a good opportunity for the development of pharmaceutical industry not only in Vietnam, but also reaching out to the world.

pharmaceuticals, the Vietnamese pharmaceutical companies have invested in advanced technology to ensure the best quality of the medicines to compete with foreign medicines.

2.3.1.2 Environmental sector analysis

Scale pharmaceutical Vietnam today are small, industry growth rate is always high In the period 2000-2009, industry average growth rate of 16% and is forecast to continue growing revenue strongly Growth speed of the pharmaceutical industry is estimated to grow 17% per annum during from 2010 to 2015 In 2008, sales of pharmaceuticals at 1:36 billion, accounting for 1.78% of GDP, up 22% compared to

2007 In particular, domestic production value reached 749 million, up 33.8% compared with 2007, 50.3% meet national needs Estimates for 2009, sales of pharmaceutical products can reach over 1.6 billion dollars, up 17.6% over 2008 Drug expenditure per capita increased from 3.16 dollars to 18.05 dollars

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Figure 2.2: Revenue of consuming the pharmaceuticals and average

(Source: Vietnam Pharmaceutical Association)

As assessed by the World Health organization (WHO), Vietnam's pharmaceutical industry in the developing world Vietnam has a domestic pharmaceutical industry, but most have to import raw materials Like neighboring countries, the pharmaceutical industry of Vietnam is subject to poverty Health insurance is not enough and people should not have patients pay more for the drugs they need So until 2009, health spending in Vietnam is only 1.6% of GDP

Under WTO commitments, the end of 2010 Vietnam's pharmaceutical enterprises are required to meet WTO standards on product quality (GMP-WHO), after that period the enterprise does not meet standards will be forced to stop production As at the end

of 2008, there were 52% of pharmaceutical companies (including new and medicine)

to achieve GMP-WHO standards, in which some enterprises achieve GLP and GSP standards, respectively, 51% and 63%

In recent years, the number of domestic pharmaceutical production is increasing, demonstrating growing industry has invested heavily Most pharmaceutical companies have accumulated large funds from the rise in consumption and partly from the issuance of shares to raise capital, so that domestic enterprises can afford to continue the private production capacity

Country currently has about 180 pharmaceutical manufacturing companies, 84 pharmaceutical manufacturing companies, 89 drug export business, 900 bases of drug distribution and retail stalls 57.000 Vietnam's pharmaceutical businesses operations

Revenue of consuming the pharmaceuticals and average drug money per person