Phân tích SWOT và kế hoạch marketing hỗn hợp của công ty CP dược và vật tư y tế THái bình e

Marketing Management 2011
Phân tích SWOT và kế hoạch Marketing hỗn hợp của công ty CP Dược
và vật tư y tế THái Bình
Question: In the context of Pacific Pharmaceutical and Medical Materials Co., present an
analysis of its SWOT and one element of this marketing mix.

A.

VIETNAMESE PHARMACEUTICS

With a pretty long history of foundation and development in more than 29 years,
Vietnamese pharmaceutics has become a large – scale sector of the economy and a
lucrative business of which the growth rate has been always higher than that of the
overall economy.
Vietnamese citizens’ spendings on medicines and healthcare are still low. This
spending rate in Thailand is five times and in India is four times that in Vietnam. To such
developed countries as USA, Germany, etc the rate is even higher. Therefore, it can be
concluded that Vietnamese pharmacy is of high potential market and the demand for
medicines, particularly for products rich in nutrition and good for health remains high
because of the economic growth rate and the increasingly high standards of living.
Although there is a number of large – scale local businesses, the market share of
indigenous products only makes up less than 50%. The medicine preparation industry in
Vietnamese pharmacy is of major market share. In the mid of 2006, the number of
domestic producers of new medicine and foreign invested producers are 174 and 12
respectively. Among those 174 local producers, 42 producers are of GMP – ASEAN
standards and 23 are of the GMP – WHO standards. The 65 producers are of large scale
with the production value counts for more than 85% the total value of Vietnamese
pharmacy sector.

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Marketing Management 2011
Vietnamese pharmaceutical companies only focus on producing ordinary medicines and
have not been able to produce products for special treatments. Of the 1563 active
elements registered for the approval of usage in Vietnamese market, only 652 elements
are registered by local enterprises. The concentration of these domestic companies on
such ordinary medicines as antibiotics or vitamin causes big competition while
developing imported products is still out of local companies’ reach. The imported
products area is both a challenge and an opportunity for the development of indigenous
enterprises.
The distribution activities of domestic pharmaceutical businesses have been
protected after Vietnam joined WTO. Expanding distribution systems widely helps
Vietnamese corporations increase their market share. The biggest advantage of local
businesses is distribution systems which have been further protected since Vietnam’s
WTO membership validates. To distribution systems in Vietnam market, foreign
pharmaceutical companies are allowed to export and import medicines (from 1 of January
2007 on, foreign pharmaceutical companies are permitted to directly import medicines
into Vietnam). Direct distribution activities which are protected in long-term become an
advantage for local companies to improve their presence in the market through
established distribution systems.
Distribution channels have played the most important part in the consumption of
products over the past years. Since most consumers rarely ask chemists about the origin
of medicines except for products for special treatments, medicine sellers gain the upper
hand in distribution practices. This is the main reason for the Vietnamese pharmacy’s
instability prominently reflected by the fact that medicines’ prices have been pushed up at
high level due to high commission to sellers. In short-terms, this fact causes more
disadvantages to consumers than to producers. In addition to the growth rate target,
development of technology is another goal the pharmaceutics industry sets for their
initiative in the material preparation step for producing pharmaceutical industry products

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Marketing Management 2011
and products for special treatments.
According to the assessment of WHO, UNCTAD and UNIDO, Vietnamese pharmacy’s
capability of producing some end pharmaceutical products from imported ingredients is
not really high. The capability is not as high as that of such countries in the same region
as China, India, Korea, etc and developed countries as US, Canada, Germany, Italia, etc.
Accordingly, Vietnamese pharmacy technology, particularly the technology of medical
research and of proprietary medicines development, is considered to be not quite
advanced. Under estimation, local pharmaceutical products meet 60% local needs in
2011, annually increased by 20% and 30 % of these products are made from local
ingredients. This is among strategies for stabilizing the current new medicine market.
The value of imported new medicines is more than USD 1.2 billion, yearly
increased by 9.2% and more than 50% of consumers’ spendings are on imported
medicine. Almost all these imported products are proprietary medicines or ingredients
that are beyond the reach of domestic pharmaceutical companies’ production.
The value of exported medicines is much smaller than the above-mentioned
imported one. Despite the growth rate is pretty high, the value of exported medicines in
2010 is only USD 35 million, equal to 4.03% that of imported one. Up-to-date, some
domestic companies started to export their products but because Vietnamese pharmacy
technology is the same as that of neighborhood markets, the response of these markets for
Vietnamese products is weak. Therefore, domestic medicines are prominently exported to
markets of lower technology. Vietnam is listed among 150 low-tech production countries.
In the aspect of financial evaluation, both growth rate and efficiency of the local
businesses are high. On average, the yearly growth rate is 15 % and the rate of return per
charter capital is 50%. To some companies like Hau Giang Pharmaceutical J.S.C, the later
rate in 2011 is up to 100%. Most of these companies plan to supplement capital for their
further investment and expansion of current scale. This indicates the “attraction” of both

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Marketing Management 2011
the pharmacy industry and its corporations.

1. Vietnam’ s Outstanding WTO Commitment
Tax: the import tax rate on medicines reduces from 1 – 10% to 0 – 0.5%. The average
rate is 2.5%, valid for 5 years, from 1 Jan 2007 on.
Regulations on quality control: all Vietnamese pharmaceutical enterprises must have met
the GMP – ASEAN standards and GMP – WTO standards by January 2007 and January
2008 respectively.
Production right: Foreign businesses are allowed to branch out in Vietnam from January
2007.
Right to conduct export – import business: From 1 January 2008 on, enterprises of less
than 51% foreign investment have the right to import and export medicines.
Foreign invested companies or any branch of foreign enterprises in Vietnam are allowed
to directly export and import medicines from 1 January 2009 on.
Right to directly distribute medicines: Pharmaceuticals directly imported by foreign
invested companies or any branch of foreign enterprises in Vietnam are resold to local
distributors. The regulation that foreign pharmaceutical enterprises are not granted the
right to directly distribute medicines is the permanent commitment made by Vietnam.

2. Development trend and risks
a. Development trend:

Vietnamese government schedules to develop the pharmacy sector into one key
industry in Vietnam. Local products meet 60 % of the domestic demand; the average
annual spending on medicines is $12 -15 per capital.

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Marketing Management 2011
The restructure of the pharmacy industry shall direct in expanding the production
of imported medicines which are well consumed. Hi-tech production lines shall be
invested in order to produce pharmaceuticals for such special treatments as cancer, heart
diseases, diabetes, etc.
It’s estimated that the total revenue of domestic pharmaceutical production and the
value of potential market in 2012 can reach VND 8000 billion any USD 1.5 billion
respectively. Those figures reflect the increasing domestic demand that creates
development opportunities for local pharmaceutical enterprises.
Competition with foreign enterprises has strong impact on the existence, development
and function differentiation of domestic companies. Pushing up the distribution function
of Vietnamese corporations and giving foreign enterprises no right to distribute medicines
as per the Vietnam’s WTO commitment shall be the obvious trend of the pharmacy
sector.
b. Risks:
The regulations on patent rights and distribution rights applied to domestic enterprises
have been more stringent since Vietnam became a member of WTO. In case of being
taken to court and losing, Vietnamese enterprises that produce pharmaceuticals or are
entrusted parties to import medicines can be required to stop their production or
importing sued medicines.
The fact that foreign companies have the right to directly import medicines from 1
January 2009 forces the domestic ones to fiercely compete in import activities.
Import tax reductions on 47 pharmaceuticals items (the average reduction rate is
3%) shall become an obstacle on the competition way of Vietnamese enterprises.
Besides, the brain drain from domestic companies to foreign ones becomes a

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Marketing Management 2011
common practice.

3. Competitiveness inside pharmacy sector
Although to new companies, pharmacy is considered to be a super profit industry
and a “delicious cake” at the present, there exists fierce competition among domestic
enterprises. The competition is indicated through the followings:
Non – price competition
Pharmaceutical enterprises apply such methods to compete with each other as
establishing or controlling distribution channels and expanding them to bring more
convenience to consumers. Since the direct customers of producers and whole-sale
companies are distribution channels or brokers, not citizens, non – price competition
utilizing the method of attracting distribution channels is increasingly applied to improve
enterprises’ competitive power. Moreover, companies launch such brand promotion
activities as giving the poor medicines, implementing free advisory services to citizens,
building charity house (like Mekophar), opening clubs for customers (like Hau Giang
Pharmaceutical J.S.C), sponsoring races (like Domesco race). In addition, local
enterprises get their products advertised on mass media. However, advertisements on
pharmaceuticals are stringently supervised and managed by the government.
Price competition: An indispensable element in the competitive pharmaceutical
industry is price competition. In the context that domestic pharmaceuticals are not
enough for consumer, we have to enter many foreign medications. This results in
different prices among domestic companies, between internal and foreign medicines. The
number of pharmaceutical companies involved are quite large. Each of them represents
only a small market share compared to the industry. The demand curve of every business
usually more elastic than the industry demand curve. A clear proof is that domestic
pharmaceutical companies often sell their products at lower prices than foreign ones.

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Marketing Management 2011
Large firms in the industry: 10 leading pharmaceutical companies in term of
revenue have generated total revenue of 2.680 billion VND, accounting for 40% of the
whole industry.

B.

COMPANY PROFILE

1. Company history
September 15th 1962: Pacific Pharmaceutical and Medical Material Co. was established.
Currently, the company operates 6 branches in Ho Chi Minh City, Hanoi, Thai Binh, Hai
Phong, Can Tho, and Da Nang.
Number of employees: March 31st 2013, the company employs 624 workers (20.83% are
graduates and post-graduates, 36.86% are those who finished colleges or intermediate,
and the rest 42.31% are unskilled).

2. Charter capital and the process of capital increase
July 2001: The charter capital was 22 billion VND
March 2005: increased to 44 billion VND
Early 2006: Increased to 70 billion VND
December 4th 2011: Increased to 84 billion VND
In 2012 the company plans to increase its charter capital from 84 billion VND to 116.61
billion VND in phases
+ Phase 1: Increase the capital from 84 to 92.4 billion VND by paying a dividend of 10%
by shares (which were issued from April 2007)

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Marketing Management 2011
+ Phase 2: Increase the capital from 92.4 billion to 101.64 billion VND by issuing new
shares to the existing shareholders in proportion 10:1, and at a favor price of 60.000
VND/share
+ Phase 3: Increase the capital to 115 billion VND by issuing 198.000 new shares to the
company’s employees at 60.000 VND/share, and the rest to major individual investors.
+ Phase 4: Issue 161.200 shares to State shareholders (Vietnam Pharmaceutical
Corporation).

3. Business/ Industry
3.1 Production; sales and purchase; and import and export of pharmaceuticals, medical
instruments & equipments, and packaging materials for manufacturing pharmaceutical
products
3.2 Manufacture, sales and purchase; and import and export of traditional medicines,
cosmetics, foodstuff, functional foods, beverages, hard and soft drinks, antiseptics for
human.
3.3 Provision of storage services for medicine and raw materials.
3.4 Aquaculture, processing, and sales and purchase of pharmaceutical materials.
5.3 Tourism & resort business.
3.6 Financial investment and real estate business
However, the core business of Pacific Pharmaceutical and Medical Material Co. is
to manufacture medicines and traditional medicines, purchase and sell medicines,
pharmaceuticals, pharmaceutical chemical, pharmaceutical raw material, and medical
devices. The company has currently produced over 190 kinds of products, including over

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Marketing Management 2011
30 franchise products of large overseas corporations or companies such as Sandoz
(Biochemie), Union pharma, DP pharma, Innotech (France), etc.
The company’s products and services include:
Medicines produced by the company: the antibiotics, pain medications, proprietary
medicines, anti-allergic drugs, and functional foods.
Medicines non-produced by the company: those are imported or purchased by the
company from other entities for distribution
The company’s revenue structure comes from both the medicines produced by the
company, which accounted for over 90%, and those purchased from suppliers, and other
profits.
The company’s profit coming from its production accounts for 100% (in 2010),
94.03% (in 2011), and 100.07% (first quarter in 2012). The proportion of revenue by
region: Northern Delta (51%), HCM City (20%), Central Vietnam (7%), northern
mountain area (5%), Hanoi (7%), Mekong Delta (10%).

4. Development Strategies in 2012
Studying new products under the brand of Pacific Thaibinh Pharmaceutical of
which revenue and profit growth increased by 55% over 2011
Expanding the distribution network throughout the country (such as the Western
Highlands, Central Area, and South Area) and exporting to countries in Asian and Africa
(such as France, Moldova, South Africa, Cambodia, etc.)
Expanding and developing the production of franchise products
Building a factory producing Cephalosporin injectable antibiotic at Vietnam-

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Singapore Industrial Park in the Pacific Industrial Park
Increasing investment to enhance high-tech equipments for the existing plants and
to reserve more materials

C.

SWOT ANALYSIS

1. Strengths
According to statistics in 2011, there are 10 domestic pharmaceutical manufacturers
which have the highest turnover. Among them are DHG (373 billion VND), Sanophi
Aventis Vietnam (the largest with 340.7 billion VND), Mekophar Pharmaceutical
Chemistry JSC (332 billion VND), Imexpharm Pharmaceutical JSC (301 billion VND),
Domesco Medical Import-Export JSC (259 billion VND), Pacific Pharmaceutical and
Medical Material Co. (180 billion VND)
The company quality management system meets the standard ISO 9001:2000 in
both production and pharmaceutical business in 2008.
Pacific Pharmaceutical and Medical Material Co. is one of the leading
pharmaceutical manufacturers in Vietnam which can fully meet the GMP standards in all
parts from production to storage.
In addition, the company also has elements facilitating its business activities such
as:
-

The company is located in material area, which helps the company very much with
its raw material purchasing.

-

The company has a standard management process and norm on production and
processing seafood for export purpose.

-

The company’s product quality has been trusted by customers in most of the

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Marketing Management 2011
markets.
-

The market is relatively stable.

2. Weaknesses
-

Risk of law: Transferred from an SOE to a joint stock company, Thaibinh pharm’s
activity is influenced by the legal documents on equitiation, securities and stock
markets, as well as laws and sub-laws in this area which is in the process of being
completed. Government policies may change and once it happens, they will more
or less affect the company operations.

-

Economic risk: Economic growth is the factor which directly affects the drug
demand. The more the economy develops, the more people care for their health.
Thus, the demand increases for pharmaceutical products in general and for

Thaibinh in particular. Moreover, economic growth will also affects business
performance of the company.

-

Exchange risk: To ensure its product quality, the company uses imported materials
to produce them. The materials’ prices of the company may be affected by
exchange fluctuation. This requires companies to be flexible in setting the time of
entry and storage to minimize the impact of exchange fluctuation.

-

Risk of human resources, management capability: The company needs to retain
skilled workers and fully equips modern production facilities.
+ Quality Management System GMP is proving to be more effective and generates
positive effects on many aspects of the company operations.
+ The brand Thaibinh is highly appreciated and many doctors trust Thaibinh
products.
+ The market still has strong demand for the company pharmaceutical products.

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Marketing Management 2011
The potential of development of new products, thus, is very high. On the other
hand, the company staffs are all qualified, basically trained, and can master the
technology and have experience. The company which is developing at high speed
always needs a workforce to develop its distribution network and to well-manage
its activities. The skilled labor force in the market is now failing to meet the
demand, especially in the pharmaceutical industry. Therefore, the risk of

manpower shortage will always be standing if the company has no personnel
policy and proper policies to attract talents. However, the company is always
prepared to minimize this risk by providing its employees with good working
conditions and benefits; regularly training to improve their skills; and recruiting,
detecting, fostering and training of middle management levels. In addition, most of
the senior managers in the company are longtime staff with extensive experience
in the industry. They often self-train or are professionally trained in management
capacity. This source of labor is less volatile. Therefore, it helps to lower the risk
of loss of senior managers.
-

Other risks: Due to the nature of the pharmaceutical industry, the cost of sales item
affects inventory and profit accounted at each time the balance sheets are drawn.
As the costs of the products are also counted in the cost of goods sold, when they
are consumed and calculated in the company’s revenue, the profit (equal Revenue
minus Cost of goods sold) is not affected. Otherwise, they are still in the inventory
item. In this case, their cost of sales are counted in their costs as explained above,
which makes inventory value as well as profit increase instead of being listed in
the cost of goods sold item. Pacific Pharmaceutical and Medical Material Co.
owes overlapping debts of tax and other obligations to the State from the prior
period financial statements. However, Thaibinh always make the declaration and
payment according to current regulations, it has no overdue tax debts. In addition,
other risks such as natural disasters, enemy sabotage, fires, etc. are also cases of
force majeure. If they occur, damage to property, people and general operational

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Marketing Management 2011
status of the company is possible.

3. Opportunities
The pharmaceutical industry’s current annual average growth rate is 18-20%. In
recent years many domestic pharmaceutical manufacturers have made great efforts
to win market shares. A number of new pharmaceutical companies and enterprises
built each year. Till now there are about 100 production lines meeting standards
and well-practicing manufacturing. However, the current domestic drug
production only meets nearly 49% of market demand in term of value; the
remaining 50% is satisfied by import activities. According to the Treatment
Department-Ministry of Health, in 2011, people’s medical expenses reached about
$630 million/year. Thus, due to the consumption of $10-12/person/year in 2012,
the market size will reach $1 billion. Domestic pharmaceutical market is still
potentially huge for domestic enterprises, especially those with GMP. However,
there is remarkable that the domestic pharmaceutical market is huge potential for
development of domestic enterprises, especially enterprises with GMP. However,
the domestic pharmaceutical industry is also faced with following challenges
which easily lead to loss of market share and even the market as Vietnam joined
the WTO: has little understanding of global market and international law, weak
management capacity, backward technology, weak business efficiency and
competitiveness. Many enterprises are predicted to go bankrupt due to their
impossibility to compete imported products.

4. Threats
-

Prices of pharmaceuticals increased due to the scarcity of supply shortages. As
fluctuations in oil prices, diseases, especially bird flu in many countries and areas,
terrorism, political security around the world occurs as a result, many nations

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Marketing Management 2011
increase their storage of pharmaceutical raw materials to be ready for possible
risks.
-

Intense price competition of generic products among domestic pharmaceutical
enterprises.

-

Funds for storage of raw materials, investment for development of consumption
system and construction of new plants, etc. are limited from banks.

-

Lack of human resources to meet development needs.

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