BBE ASM 1: Business & Business Environment Assignment 1 - Distinction

Assignment 1 của module Business and Business Environment tại chương trình cứ nhân quốc tế IBDNEU, FPT, BTEC (Năm 2019). Bài được điểm Distinction. Mọi thắc mắc và hỗ trợ về học tập xin được gửi về email wondermaxxgmail.com.

Table of Contents

I INTRODUCTION 2

II MAJOR FINDINGS 4

1 Vision, mission, goals, objectives and core values 4

1.1 Vision 4

1.2 Mission 4

1.3 Goals 5

1.4 Objectives 5

1.5 Core values 6

2 Legal forms, Size and scope 7

2.1 Legal form 7

2.2 Size and scope 8

3 Key stakeholders 10

4 Organization structure of Traphaco 15

4.1 The organization chart, advantages & disadvantages 15

4.2 The interrelation of organization’s functions 18

III CONCLUSION 22

REFERENCES 23

I INTRODUCTION

The precursor of Traphaco Joint Stock Company (JSC) was a governmentalmedicine production group established in 1972 After a few decades, TraphacoPharmaceutical & Medical Equipment JSC officially started operating in 2000 as ajoint stock company with 45% state capital In 2001, the company changed its name toTraphaco JSC Traphaco's main business activities include: manufacturing and tradingpharmaceuticals, chemicals and medical supplies; purchasing, cultivating andprocessing medicinal herbs; importing and exporting raw materials and supplements tomake products (Traphaco, 2019)

Picture 1: Logo of Traphaco (Source: Traphaco)

The company currently has 28 branches nationwide, 4 subsidiaries andassociated companies, serving over 27,000 loyal customers In terms of production,Traphaco owns 5 planting and collecting medicinal herbs that meet GACP-WHOstandards, 1 medicinal plant extracting factory and 4 factories meeting GPs - WHOstandards The headquarter of the company is located in Hanoi (Traphaco, 2019)

During the process of development, Traphaco always encountered with manycompetitors in the domestic pharmaceutical market Especially, when Traphacorecently started producing new medicines related to the digestive system, the companyfaced competition from a small but emerging competitor, Tam Binh PharmaceuticalCompany In addition, with the trend of globalization and integration of Vietnam’seconomy, Traphaco will also have to have a good business strategy to compete withforeign pharmaceutical companies that are gradually entering the Vietnamese market,typically Abbott Laboratories from the United States

The Tam Binh Pharmaceutical Company is a very young company It wasfounded by pharmacist Le Thi Binh in 2010 Tam Binh has established its brand in theVietnamese pharmaceutical industry with products made entirely from herbs throughthe construction and development process Tam Binh has a large GMP-WHO standardfactory in the suburbs of Hanoi, equipped with modern machinery and technology Thecompany owns several herbal crops to supply raw pharmaceutical materials directly tothe factory, therefore the company can make sure the medicinal sources are natural andquality (Tam Binh, 2019)

On the contrary, Abbott Laboratories was founded in 1888 and has been known all over the world for producing nutritional and pharmaceutical goods for over

well-80 years The company mainly focuses on research, development, manufacture anddistribution of healthcare and pharmaceutical products and services Abbott

established the first office in Vietnam in 1995 Abbott provides all Vietnamese withfood products, pharmaceuticals and advanced diagnostic equipment (Abbott, 2019) Itcan be seen that Abbott is a major competitor of Vietnamese pharmaceuticalcompanies in general and Traphaco in particular Recently, Abbott is tending to buymany shares of large pharmaceutical corporations, such as Domesco JSC or GlomedJSC This can be considered as an opportunity but also a difficulty for Vietnamesepharmaceutical companies like Traphaco.

II MAJOR FINDINGS

1 Vision, mission, goals, objectives and core values.

Traphaco’s vision is to be the number one pharmaceutical company in Vietnam

in terms of revenue growth, profits and market capitalization (Traphaco, 2018).According to Vietnam Report, in 2018, Traphaco ranked second in the ranking of themost prestigious pharmaceutical companies in Vietnam, just behind DHG Pharma.Indicators such as financial score, media coding or survey score of Traphaco arealmost superior to the companies ranked below

On the other side, Tam Binh creates the vision to develop and to be one of the

most successful pharmaceutical companies with the main products made fromtraditional herbs and medicines with good quality and fair prices (Tam BinhPharmaceutical, 2018)

The vision of Abbott is to be the largest healthcare and pharmaceutical

company in the world The company wants to be the best employer, the best provider

of healthcare and pharmaceutical industry, the best business partner and the bestinvestment Abbott aims to become a leading company with the slogan: "Scientificachievement for the quality of life" to offer comprehensive healthcare services based

on scientific achievement (Abbott, 2018)

The mission of Traphaco is to lead the creation of Green pharmaceutical

products to protect and improve human health (Traphaco, 2018) It can be seen that inthe process of manufacturing, circulating and consuming pharmaceuticals, it requiresprocessing a large amount of toxic chemicals Those substances will directly causegreat harm to the environment and indirectly affect human health Thus, to build asuccessful and sustainable business, Traphaco will develop and apply scientificresearch to produce pharmaceutical products with natural ingredients to both preventand cure diseases but also to protect the environment and human

Tam Binh’s mission is committed to providing consumers with high-quality

medicines as well as good service at affordable prices to protect patients’ health Thecompany also wants to make a positive contribution to the healthcare andpharmaceutical industry of Vietnam to create a great social value (Tam Binh, 2018)

For a long time, Abbott has developed with a saying: "Live the best life, now

and in the future" Abbott's mission is to always create solutions to protect customers’

health, to strengthen their body in every moment of their life The company commits

to provide customers with many new knowledge on health issues and medications sothey can better manage their health condition (Abbott, 2018)

1.3 Goals

In the pharmaceutical industry nowadays, the impact of Industrial Revolution4.0 are very huge Thanks to the development of technology and science, the works inproduction and distribution stage of pharmaceutical industry are now becoming easier.Nevertheless, pharmaceutical companies also have to face increasing numbers ofchallenges They are external challenges come from rivals, suppliers of medications,administrators of health care and internal challenges like opting for marketing costs,research and development of new products, product management, and comprehensivereliability

Picture 2: 4.0 Pharmaceutical Industry (Source: ISPE.org)

To follow the general trend of the world pharmaceutical industry, Traphaco has

set several goals to catch up with the trend of industrial revolution 4.0 Specifically,

the company has planned to manage the construction and application of the latesttechnologies for a new "smart" western-medicine manufacturing plant and also aspires

to gradually digitize the management system (Traphaco, 2018)

Tam Binh tries to achieve the aim of prioritizing product quality, along with the goal of developing many new products to meet the health needs of people and

sustainable development (Tam Binh, 2018)

Abbott's goals in the following years are to accelerate the development of

research and discover more ingredients to create more products for medicine andhealthcare The company also wants to develop the healthcare treatment and help thehospital to cure all kinds of diseases (Abbott, 2018)

After the year 2019, Traphaco aims to achieve the revenue of 2,160 billion

VND (growth 15% compared to 2018) and net profit after tax of 205 billion VND(Growth 30% compared to 2018), thereby becoming the number one greenpharmaceutical company in Vietnam (Traphaco, 2018)

In fact, the total net profit after tax of Traphaco has now only reached over 65billion VND after the first 6 months of 2019, equals to 38% In the coming year, it will

be very difficult for the company to approach the set plan without any development inmarketing and business strategy Therefore, the objectives are still achievable ifTraphaco follow the right track

In order to evaluate the objectives of an organization, the popular method is touse the S.M.A.R.T criteria which was created by George T Doran in 1981 It specifies

an ideal objective should be Specific, Measurable, Assignable (later changed toAttainable), Realistic (later changed to Relevant) and Time-bound

Specific The objectives are mainly focus on finance Meet this criteriaMeasureable The objectives provide the detail number of

revenue and profit Meet this criteriaAttainable After 6 months, Traphaco has completed 38% of

Relevant

The objectives were set to fulfill the vision of Traphaco to become the largest pharmaceutical company in Vietnam Meet this criteria

Time-bound The objectives require Traphaco to achieve in theyear of 2019. Meet this criteria

Based on the S.M.A.R.T criteria evaluation, it can be concluded that theobjectives of Traphaco are ideal and smart

In fact, as a limited liability company, Tam Binh does not provide muchinformation about their objectives to the public However, according to Dr Le ThiBinh (2018), the owner of the company, Tam Binh always aims to increase revenue,profit and market share in the following years but also to contribute more to thesociety

In recent years, Abbott is very successful in selling its products in Vietnam

market, the revenue For the following years, the company will set a new objectives to

hit $1.5 billion in total revenue at Vietnam market, which is 30% increased compared

to the last period (Abbott, 2018)

The core values of Traphaco can be listed in 4 words (Traphaco, 2018):

● Pioneer: Taking the lead in green value management, creating and applyingnew technologies and knowledge

● Creation: Creating perfect quality products and services bearing the pride ofTraphaco's knowledge

● Responsibility: Committing and fulfilling the responsibilities to society,shareholders, customers, partners and employees on the principle of mutualbenefit

● Identity: Representing Traphaco's culture and people in three ways:Aspiration, Passion and Dedication.

The core values of Tam Binh is contained in 4 sentences (Tam Binh, 2018):

● Having a heart for the production

● Having a heart for the patients

● Having a heart for the employees

● Having a heart for the society

Abbott's core values are expressed in 5 things (Abbott, 2018):

Traphaco nowadays are joint stock companies JSC is a business entity where

shareholders can buy and sell shares of the company's stock Every shareholder owns aproportionate share of the company, as evidenced by shares In the past, many of themwere state-owned, but for the following reasons, they were equitized

The first reason is due to the state's policies on divesting from companies tocollect budget After 1986, under the impact of economic reform policies,pharmaceutical companies that were previously wholly state-owned would have todivest their state capital by listing on the stock exchange to expand the scale ofproduction as well as enhance stability in organizational structure Linked to the vision

of Traphaco to become the largest pharmaceutical company in Vietnam, the

equitization is necessary for the company to achieve it and Traphaco actually did this

in 2000 However, this is only a partial divestment, it can be seen that at the moment

State Capital Investment Corporation (SCIC), which is a state agency that isresponsible for investing with the government budget, still holds a large number ofshares in company at 35.7%

Secondly, the pharmaceutical industry is a specific industry that needs to followthe standards and update the research trends of the world in order to find medicines,especially in the integration stage of Vietnam as well as the globalization trend of theworld The Government of Vietnam has set an ambition to make Vietnam a majorcenter for manufacturing generic medicine in Southeast Asia by 2020 with manysupportive policies

The cooperation with foreign companies will bring more capital, technologyand high quality human resources to domestic pharmaceutical companies, aiming toproduce higher standards products (such as EU-GMP, PIC/S ); the connection withmajor retailers will help improve the distribution chain and expand the productconsumption network (Scherer, 2000) For Traphaco, with the goals to catch up withthe Industry 4.0 technology, this is a great opportunity to develop and finish theobjectives

In the opposite direction, the purpose of foreign companies entering theVietnamese market is to take advantage of cheap labor, thereby reducing productcosts, setting up facilities in Vietnam to produce medicine and then deliver to othermarkets ( Therefore, the trend of purchasing stocks of domestic pharmaceuticalcompanies by foreign companies is becoming more popular This is also the strategythat Abbott is applying in Vietnamese market

The Abbott Laboratories did initial public offering (IPO) in 1929 for the firsttime in the USA According to the USA Government, Abbott’s legal form is aCorporation which is pretty similar to the JSC in Vietnam Although there are manydifferences between American and Vietnamese pharmaceutical background, the mainreason why Abbott turned into public is to raise the capital to invest in research anddevelopment

On the other hand, Tam Binh is a limited liability company (LTD) and it onlyhas one owner is pharmacist Le Thi Binh This company doesn't want to share itsinformation to the public in order to ensure the confidentiality of the medicineformulation that Mrs Binh has been researching with many scientists for years

According to Decree 39/2018/ND-CP, the Government of Vietnam regulatesthat large-scale industrial enterprises are enterprises having more than 200 employees,over 200 billion VND in total revenue and over 100 billion VND in total capital.According to the 2018 Annual Report of Traphaco, which is an industrial companyspecializing in manufacturing and processing pharmaceutical products, with about1,000 employees, the company has a total capital of 1560 billions VND and has a net

revenue of 216 billions VND Thus, it can be concluded that Traphaco is a large-scale

industrial company in Vietnam market

The market share of Traphaco in Vietnam pharmaceutical market is now

accounting for 1.3% (IMS Health Vietnam) Traphaco's main market is totally in the domestic market, with a special focus on the market in the South Traphaco's main

customers are pharmaceutical distributors, hospitals and nearly 23,000 pharmacies

nationwide (Traphaco, 2018) In addition, Traphaco also has its own distribution

channels to directly sell its products to customers who have the interest In order toachieve the objectives of profit and revenue, the large number of distribution channels

is necessary

Currently, in Vietnam market, Abbott owns more than 3,400 employees with ahuge revenue of more than half a billion USD per year (equivalent to more than 12,000billion VND) and holds many shares in major pharmaceutical companies (Abbott,2018) Although there is no exact figure of the company's profits, it can also be partly

seen that Abbott is really a large-scale company in Vietnam.

Abbott is an international company so it has many markets, including Vietnam.This company is on the way to achieve a dominant market share in Vietnam It can bedenied that the Vietnam market contribute a lot for the total global revenue of AbbottLaboratories The company sells the products to customers via numerous retail storesacross the countries Similar to Traphaco, Abbott needs many branches anddistribution channels to reach its goals

Because Tam Binh is Limited Liability Company so they do not provide muchinformation about their revenue and profit They only public the information abouttheir workforce with nearly 200 employees (Tam Binh, 2018) Therefore, there is notenough information to identify the size of Tam Binh

Also due to the lack of information, the scope of Tam Binh cannot be exactlydefined The only thing may be true about the scope of Tam Binh are: it totally focuses

on the domestic market and it sells the products via many pharmacies and also on itsown website

3 Key stakeholders

Stakeholders are people, communities, or organizations that are influenced by thecompany's outcome They are involved in the company's business from inside oroutside and may be benefited from the business result (Freeman, 1999) To analyzeand evaluate the stakeholders of pharmaceutical companies, it is common to use theStakeholders Mapping, which divides the key stakeholders into 4 groups with differentlevels of interest and power Each of the stakeholders has different interests andexpectations, which lead to several conflicts between the stakeholders Therefore, thecompanies have to take responsibility to reduce those conflicts in reasonable ways

Group 2: Keep Satisfied

Initially, in the first group with the lowest level of power and interests,stakeholders such as factories, suppliers, insurers, and retailer stores are almost alwaysfocused on making a profit from the products of Traphaco Similarly, patients as well

as hospitals and clinics desire to purchase products with good quality and reasonableprice Therefore, to meet the interests of these stakeholders, Traphaco needs toenhance the quality of the products and create suitable price

In the second group having more powerful stakeholders with low interests thatTraphaco need to satisfied, the Vietnam Ministry of Health is responsible formanaging the pharmaceuticals quality, pharmaceutical information, pharmaceuticalprices and pharmaceutical business The media can bring very serious consequencesfor Traphaco if any unfavorable information is leaked Thus, Traphaco must have goodstrategies to maintain relationships with both of them

Picture 3: Scientists take part in the R&D (Source: Vietnamnet)

In the third group of stakeholders which Traphaco need to keep informed,scientists take part in the R&D (Research and Development) and they are interested innew technology and drugs formula of the company However, they cannot manage thebudget to do research or run projects Employees work to get paid and want thecompany to grow so they can increase the salary

The key players of Traphaco’s stakeholder analysis in the fourth group include

shareholders, management boards, and government The most important factors are themajor shareholders In general, the shareholders mostly care about the profit and howmuch they can earned from the business activities The largest shareholder ofTraphaco is State Capital Investment Corporation (SCIC) with 35.7%, which the mainreason explains why government is included in the key players of this company Inmost of pharmaceutical companies in foreign countries, government is only put in thesecond group of stakeholders because they are only responsible for monitoring andcollecting taxes, not really involving in the companies' business However, whenrunning business in Vietnam with a different economic system, Traphaco received adeeper involvement of the state, typically SCIC's presence as a major shareholder