Business strategy of the organization
Historically, the term "strategy" has its roots in military operations, leading to the emergence of renowned strategists such as Sun Tzu, known for his influential work "The Art of War," Russian General Kutuzov, who executed a strategic withdrawal during the conflict with Napoleon, and Vietnamese General Vo Nguyen Giap, recognized for his tactical brilliance.
One of the most influential military strategists of the 20th century, the concept of "strategy" has evolved significantly in the latter half of the century and into the 21st century, becoming a key term in economic contexts, particularly in "business strategy." Prominent figures in today's market exemplifying strategic thinking include renowned strategists like Michael Porter, Bill Gates of Microsoft, and Steve Jobs of Apple.
Business strategy is defined by various scholars as a framework that guides an enterprise in a market economy It involves evaluating both objective and subjective conditions, as well as the available resources, to establish policies and measures aimed at ensuring the company's long-term survival and growth This strategic approach is essential for achieving the stable development goals set by the enterprise.
- Fred David said that strategy is the means to achieve long-term goals.
Alfred Chandler defines strategy as the process of identifying a business's fundamental long-term goals and establishing the necessary actions and resource allocation to achieve them.
Business strategy has four following basic elements:
+ The current situation of the enterprise+ The strategic goals of the enterprise
+ What products and in which market the enterprise will do its business.
+ Measures that the enterprise will apply to achieve the assigned strategic goals.
- Business strategy is an expression of the competitive position of enterprise.
- Business strategy is the credo of the business activity, the method of using resources as a basis for handling all matters of enterprise.
- Business strategy is an expression of the concept of enterprise value.
- Business strategy is the creation in enterprise management.
- Business strategy is an action plan of the enterprise.
- Long-term vision: A business strategy is considered successful when it was built on the basis of good forecasting trends in economic and technical development of the society.
A successful business strategy must align with the enterprise's developmental trends, guiding all organizational activities It is essential for this strategy to reflect the country's economic, technical, and social advancements during a specific period Additionally, the business approach should be in harmony with the global trend of economic integration, ensuring competitiveness and relevance in the international market.
- Competitiveness: Business strategy researches methods for business get a competitive edge over rivals and win the competition.
- Professionalism and creativity: Specialization and appropriate technical innovation are important measures to ensure survival and growth of the enterprises.
The ever-changing economic environment presents significant risks for businesses As enterprises develop long-term strategies, they face increasing uncertainty due to various external factors Consequently, the longer the timeframe of a business strategy, the greater the potential risks associated with it.
- Relative stability: Business strategy of the enterprise should be relatively stable in certain period If not, it will have no direct significance for the practical operation of the enterprise.
1.1.4 The difference between strategy and tactics, policy, planning and plan
Business strategy and tactics are interconnected, balancing global objectives with local execution A business strategy outlines the long-term goals and plans necessary for an enterprise's growth, while tactics represent the specific actions taken to fulfill these strategic aims.
Strategy and policy are intrinsically linked, with strategy guiding the creation of policies that align with established goals Effective policy should support and adhere to the overarching strategy, as the strategy ultimately shapes and influences the direction of policy decisions.
Future planning can be categorized into short-term (one year), medium-term (3-5 years), and long-term (over 5 years) plans The relationship between planning and strategy is crucial, as strategy serves as the foundation of both A successful plan must align with the assigned strategy, making planning a tangible expression of strategic goals Ultimately, planning and the resulting plans are extensions of the strategy, translating abstract concepts into concrete actions.
Strategic leadership: strategic leader must be able to ensure his organization is on track, need to master two key skills: strategic thinking and strategic planning.
Starting point: In fact, there is no fixed rule for strategic plan, it can occur anytime and anywhere.
Effective mental preparation is crucial for a successful business strategy, enabling organizations to swiftly capitalize on emerging opportunities and make quicker decisions than their competitors This proactive approach ensures that managers can seamlessly adapt to changes in their operational environment, both before and after any shifts occur.
In today's fast-paced business landscape, the rise of risk and uncertainty underscores the necessity for developing effective strategies This proactive approach equips managers to navigate strategic uncertainties while fostering innovative thinking regarding the organization's vision and direction.
Implementing balanced approach to achieve the strategy: the organization's prospects are reached by attaining strategic balance through the following four aspects:
- The conception of the customer (solving the problems relating to customers, competitors, market segmentation, marketing strategy)
- Accumulation of experience and growth (human side of organizations)
- Aspect of the internal process
The strategy targets: A fundamental component of business strategy.
Scope of application: General strategic plans and strategic programs more closely related to the activities of companies in businesses with more stability than in industries with low stability.
SWOT Analysis: Analysis of Strengths, Weakness, Opportunities and
Threats is a strategy development tool combining strong internal resources of the organization with the weaknesses and the opportunities, risks from outside.
The SWOT analysis identifies a company's internal strengths and weaknesses, alongside external opportunities and threats, providing a comprehensive overview of its competitive landscape By utilizing the SWOT matrix, businesses can assess various factors that influence their market position Additionally, integrating SWOT with PEST analysis—focusing on political, economic, social, and technological elements—enhances the evaluation of market potential and external influences.
An effective innovation strategy enables organizations to accurately assess market potential, fostering the development of groundbreaking products and enhancing existing offerings This strategic vision is crucial for driving significant advancements and maintaining competitiveness in the marketplace.
To create sustainable value for both customers and shareholders, organizations must identify their core capacities and implement a balanced approach to their business systems.
1.1.6 Necessary of formulation of business strategy of the organization
Developing a robust business strategy has become a top priority for organizations worldwide An effective strategy not only accelerates business growth but also enhances market dominance and increases the organization's value relative to its competitors.
The process of formulation of business strategy
World strategists recommend a structured approach to developing an organization's business strategy, typically consisting of three key steps: first, analyze and assess both the external and internal environments; second, create various business strategy options; and third, implement, evaluate, and refine the chosen strategy.
Diagram of building and implementing business strategy is presented in Figure 1.1.
1.2.1 Assessing the external environment and inside the enterprise
Assessment of external environmental factors
In today's dynamic business environment, it is crucial for enterprises to evaluate various external factors when formulating strategies, as highlighted by Fred R David This evaluation should encompass economic, social, cultural, demographic, geographic, legal, political, technological, and competitive influences Additionally, organizations must utilize forecasting tools and techniques to identify potential opportunities and challenges in the market.
Assessment of internal environmental factors
Every organization has unique strengths and weaknesses that influence its business strategy To effectively develop this strategy, it is essential to thoroughly evaluate internal factors such as capacity, personnel, finance, accounting, marketing, management, operations, production, trading, research and development, and information systems This assessment aims to leverage the organization's strengths while addressing its weaknesses, ultimately enhancing corporate management and driving improvement.
1.2.2 Designing options of business strategy
To effectively guide the production and business activities of an enterprise, it is essential to assess both external and internal environmental factors using analytical tools This evaluation enables the business to make informed decisions regarding its direction, scope, product offerings, and target markets Establishing a clear strategic vision is crucial for aligning all operational efforts towards achieving business goals.
To effectively set strategic targets for the enterprise within a specified timeframe, it is essential to develop various business strategy options These options must be analyzed and evaluated against established assessment criteria to identify the most suitable choice Once the business strategy is determined, it is crucial to create tactical plans for functional departments, ensuring that managers understand their responsibilities and contribute to the overall development of the company's business strategy.
Analysis of objective circumstances of the Organization
Analysis of subjective circumstances of the Organization
Orientation and Scope of business strategic ideas
Design and selection of measures and solutions to achieve targets
The tactics of the functional units
Evaluate and improve business strategy
Analysis of objective circumstances of the Organization
Analysis of subjective circumstances of the Organization
Orientation and Scope of business
Design and selection of measures and solutions to achieve targets
The tactics of the functional units
Evaluate and improve business strategy
Figure 1.1 - Process of formulating and implementing of business strategy (Source: [1, p.43])
1.2.3 Implement, evaluate and improve business strategy
To implement business strategy should introduce measures, implementation plans, need to prepare plans, motivate, encourage and supervise the implementation of business strategies in each section of the organization.
Effective business strategy implementation requires continuous monitoring and evaluation to assess its effectiveness It is essential to identify any discrepancies between the selected strategy and its execution, as well as to uncover the reasons behind these differences By addressing these gaps, businesses can enhance their strategies to better achieve their ultimate objectives.
Tools for analyzing and choosing the business strategy of the organization
According to Fred R.David, there are 3 stages to formulate the business strategies for organization; each stage uses different tools for analyzing:
In this phase, it is essential to summarize and organize the gathered information to develop effective business strategies Key tools utilized in this process include the EFE Matrix, CPM, and IFE Matrix.
In this phase, we must select, organize, and integrate both external and internal environmental factors to develop viable strategies The SWOT matrix, which analyzes strengths, weaknesses, opportunities, and threats, serves as a crucial tool in this process.
The Quantitative Strategic Planning Matrix (QSPM) is a valuable tool for evaluating business strategies In Stage 1, it utilizes relevant information to assess various strategies, while Stage 2 focuses on objectively selecting the most effective conventional business strategies for an enterprise This systematic approach ensures that the best options are identified for optimal decision-making.
1.3.1 The Input Stage - Collecting data and systematizing information
1.3.1.1 EFE matrix (analyzing external factors) and IFE (analyzing internal factors)
EFE matrix and IFE matrix have 05 similar steps in developing a matrix evaluating internal/external factors as follows:
To ensure the success of your company, begin by identifying key internal and external factors that influence its performance This includes assessing strengths and opportunities that can be leveraged, as well as recognizing weaknesses and challenges that may hinder growth By conducting a thorough analysis of these elements, you can develop strategies that capitalize on your advantages while addressing potential obstacles.
In Step 2, each factor is classified on a scale from 0.0, indicating not important, to 1.0, representing very important This classification highlights the significance of various factors in contributing to the company's business success.
Strengths and opportunities typically hold a higher classification level compared to weaknesses and challenges; nevertheless, weaknesses and challenges can also achieve significant classification if they exhibit severe or threatening traits It is essential that the total classification levels assigned to these factors sum to 1.0.
In Step 3, we classify each determinant of success on a scale from 1 to 4, assessing the effectiveness of the company's current strategy in addressing these factors A rating of 4 indicates an excellent response, while a score of 3 reflects an above-average response A rating of 2 signifies an average response, and a score of 1 denotes a below-average response This classification provides a clear overview of how well the company is responding to critical success determinants.
These levels are based on the effectiveness of the strategy of the company- such classification is based on the company.
• Step 4 – Multiply the importance of each variable with its type to determine the importance score.
In Step 5, organizations should summarize the importance scores for each variable to assess their overall significance The evaluation of strengths and weaknesses reveals that the maximum importance score is 4.0, while the minimum is 1.0 A score of 4 indicates that the organization effectively leverages its strengths and opportunities while addressing its weaknesses and challenges Conversely, a score of 1 suggests that the chosen strategy fails to capitalize on strengths or mitigate weaknesses and challenges The average score is 2.5; scores below this threshold indicate vulnerabilities in internal and external factors, whereas scores above 2.5 reflect a strong alignment with these factors.
The Competitive Profile Matrix (CPM) helps businesses identify their main competitors by providing a clear overview of their strengths and weaknesses in comparison By evaluating critical success factors on a standardized scale, the CPM score offers valuable insights that enable organizations to understand their competitive position in the market.
The IFE matrix focuses solely on evaluating internal factors, while the EFE matrix assesses external factors In contrast, the CPM (Competitive Profile Matrix) integrates both internal and external factors to provide a comprehensive evaluation of an organization's overall position relative to its major competitors.
1.3.2 The Matching Stage - SWOT matrix
SWOT matrix is a tool to combine the strengths (S), weaknesses (W), opportunities (O) and Threats (T) to form four types of strategies:
• SO Strategies: To use strengths inside of the enterprise to exploit the opportunities of the external environment.
• WO Strategies: To take advantages of external opportunities to improve internal weaknesses.
• ST Strategies: To use strengths of the enterprise to avoid or reduce the threats from the external environment.
• WT Strategies: This is the defensive strategies aimed to reduce internal weaknesses and external threats.
A SWOT matrix is illustrated by following cells:
List out the most important strengths from summary of the internal enterprise environment
List out the most important weaknesses from summary of the internal enterprise environment
List out the most important opportunities from summary of the external enterprise environment
To use strengths inside of the enterprise to exploit the opportunities of the external environment
To take advantages of external opportunities to improve internal weaknesses
List out the most important threats from summary of external enterprise environment
To use strengths of the enterprise to avoid or reduce the threats from the external environment
This is the defensive strategies aimed to reduce internal weaknesses and external threats
1.3.3 The Decision Stage - a Quantitative Strategic Planning Matrix (QSPM)
The Quantitative Strategic Planning Matrix (QSPM) is a valuable strategic tool designed to assess various alternative strategies By systematically organizing earlier stage information, the QSPM calculates scores for multiple strategies, enabling organizations to identify the most suitable strategic option.
The Quantitative Strategic Planning Matrix (QSPM) is a crucial component of the third and final stage of strategy formulation, known as "The Decision Stage." This tool effectively merges the intuitive insights of managers with a systematic analytical approach, enabling organizations to determine the most effective strategy for achieving success.
Brief about the National Pharmaceutical Company No 2 (Codupha)
2.1.1 The process of establishment and development:
Full name in Vietnamese: Công ty TNHH Một thành viên Dược phẩm
Trung ương 2 Short name in Vietnamese: Công ty Dược phẩm Trung ương 2
Transaction name in English: the National Pharmaceutical Company No 2
Company Headquarters: 334 To Hien Thanh Street, Ward 14, District 10
Ho Chi Minh city Telephone: (84-8) 3866 3569
Email: codupha@codupha.com.vn
Website: www.codupha.com.vn ; www.codupha.com
The National Pharmaceutical Company No 2, established shortly after the liberation of South Vietnam as the "General Pharmaceutical Depot," is led by legal representative and Chairman Le Van Son The company specializes in distributing pharmaceutical formulations, active pharmaceutical ingredients, chemicals, and medical equipment throughout South Vietnam, specifically from Danang southward.
In 1976, “General Pharmaceutical Depot” was split into 02 companies:
- The Medical equipment and Diagnostic Company Level 1, distributing medical equipments, diagnostics and testing chemicals for South Viet Nam.
Codupha, short for "La Compagnie Du Pharmaceutique," was one of the two state-owned pharmaceutical companies in South Vietnam, specializing in the distribution of pharmaceutical formulations, active pharmaceutical ingredients, chemicals, and medical equipment.
In 1985, the Pharmaceutical Company Level 01 was named after the National Pharmaceutical Company No 2 while keeping its transactional name CODUPHA.
In 1993, CODUPHA became a member of the General Pharmaceutical Corporation of Vietnam (Vinapharm) following Degree No 388/HĐBT from The Council of Ministers and Decision No 409/BYT-QĐ issued by the Ministry of Health Under the direct supervision of the Ministry of Health, CODUPHA was also granted an importation license.
In 1994, Codupha opened its first branch, warehousing system and distribution center in Hanoi covering Hanoi and most of the Northern provinces.
In 1997, Codupha opened its second branch, warehousing system and distribution center in Can Tho, covering most of Mekong Delta provinces.
In November 2007, Codupha opened its third branch, warehousing system and distribution center in Daklak, covering most of Highland and Central provinces.
In March 2008, Codupha opened it’s forth branch, warehousing system and distribution center in Vinh, covering most of North Central provinces.
From August 2010 the company has changed its name to the National Pharmaceutical Company No 2 - a state-owned company
Codupha also met GSP standards (Good Storage Practice) in 2005 and GDP standards (Good Distribution Practice) in 2007
2.1.2 Functions and tasks of Codupha:
- Direct import of pharmaceuticals, cosmetics, functional foods, raw materials, medical equipment
- Distributes directly to hospitals, health centers, pharmacies, pharmaceutical companies in all provinces nationwide.
- National reserves of medicines and national circulation reserves of medicines to ensure supplying a full range of preventive and treatment drugs in all circumstances according to Ministry of Health’s directives.
- Supply quality drugs at the most reasonable prices to serve the community healthcare.
- In charge of various National Drug Programs
- Accountable in the distribution of controlled drugs.
- Official representative of Vinapharm in nationwide drug distribution.
2.1.4 The organizational structure of Codupha
The company’s headquarter is located at 334 To Hien Thanh, HCMC.
The President of the company, appointed by the Vietnam Pharmaceutical Corporation for a term of up to five years, may be reappointed or replaced and also serves as the company’s Director Acting on behalf of the owners, the President is responsible for executing the owners' rights and obligations, as well as the company’s rights and obligations Additionally, the President must comply with the Law of Enterprises and other relevant regulations, ensuring accountability to both the law and the company owners for the execution of assigned duties.
The Board of Controllers is accountable to both the laws and the owners of Codupha for the execution of its rights and responsibilities It has the authority to assess the legality, integrity, and prudence of the company's president, director, and other managers in managing the rights of the owners This includes evaluating financial statements, production and business reports, and management reports prior to their submission to the owners or relevant state authorities.
- Board of Directors: comprises 01 Director and 03 Deputy Directors.
The Director serves as the legal representative of the company, overseeing daily operations in alignment with the objectives and plans set forth in the Codupha Charter They are accountable to the law for the execution of their designated rights and responsibilities.
Le Xuan Hai Deputy Director
Deputy Director Bui Huu Hien
Le Xuan Hai Deputy Director
Deputy Director Bui Huu Hien
Figure 2.1 Organization chart of the National Pharmaceutical Company No 2 (Source: Codupha)
The Deputy Director plays a crucial role in supporting the Director in managing the company by executing assigned tasks and responsibilities This position entails accountability to the Director for all delegated duties and authorizations, ensuring effective operational oversight and alignment with organizational goals.
- Chief Accountant: assisting the Director on direction and implementation of accounting, statistics and has the tasks and powers prescribed by law for financial, accounting and statistics works.
The functional departments of the company: advising the Director in the management of the company, including:
• Department of Finance and Accounting
• Sales and import-export Department
+ CODUPHA Hanoi Branch – at 60B Nguyen Huy Tuong Street, Thanh Xuan District, Hanoi
+ CODUPHA Vinh Branch – at 71 Tran Phu Street, Vinh City, Nghe An Province + CODUPHA Dak Lak branch – at 74/20 Nguyen Khuyen Street, Buon Ma Thuot city, Dak Lak Province
+ CODUPHA Can Tho Branch – at 132A Nguyen Van Cu Street, An Binh Ward, Ninh Kieu District, Can Tho City
+ Pharmacy No 1 – at 334/1 To Hien Thanh Street, Ward 15, District 10, Ho Chi Minh city
+ Pharmacy No 2 – at 334 To Hien Thanh Street, Ward 14, District 10, Ho Chi Minh city
+ Pharmacy No 3 – at 940 Road 3/2, Ward 15, District 11, Ho Chi Minh City
- Distribution Center: at 334 To Hien Thanh Street, Ward 14, District 10, Ho ChiMinh city
Analyzing the external environment of the organization
The pharmaceutical industry in Vietnam is significantly influenced by state administration, with various legal documents established to regulate it, including the Pharmaceutical Law No 34/2005/QH11 and related circulars These regulations address key aspects such as pharmacy policies, drug pricing management, and the conditions for drug business operations Notably, the Ministry of Health's Decision No 27/2007/QD-BYT, effective from July 1, 2008, mandates compliance with Good Manufacturing Practice (GMP) and Good Storage Practice (GSP), requiring producers and traders to adhere to World Health Organization standards or cease operations Additional regulations like Good Laboratory Practice (GLP) for vaccines and biologicals, Good Distribution Practice (GDP), and Good Pharmacy Practice (GPP) further ensure the quality and safety of pharmaceutical products in the country.
Effective pharmacy management practices are essential for companies to thrive and grow in the competitive landscape By adhering to new standards, Vietnamese small businesses can enhance their potential for mergers and acquisitions, ultimately fostering improvement and encouraging a focus on deep development This strategic approach will empower local companies to better compete with multinational corporations.
Current legal documentation in pharmaceutical management, particularly the Circular guiding drug purchase tenders, is inadequate and fails to address specific medication criteria, posing challenges for bidders and investors Additionally, the Circular on drug price management is insufficient, complicating overall management in the sector.
The Government and Ministry of Health plan to enhance support for domestic pharmaceutical companies through favorable policies, fostering collaboration among entrepreneurs, scientists, and farmers This initiative aims to create sustainable and effective medicines while ensuring a closed-loop distribution chain that prioritizes quality and public health By doing so, the country can strengthen its pharmaceutical sector and reduce reliance on imported raw materials, which currently account for 90% of the inputs used in the production of pharmaceuticals and traditional medicines.
The global financial crisis has significantly affected Vietnam's economy, leading to a decline in economic growth In 2007, the GDP was 8.44%, but it dropped to 6.5% in 2008 and 6.6% in 2009 The five-year average growth rate from 2005 to 2009 was 7.6% per year By 2010, the ongoing financial crisis continued to complicate the situation, resulting in a GDP growth of only 6.8%.
The growth rates of GDP of Vietnam in recent years are reflected by the following table:
Table 2.1: GDP growths of Vietnam Unit: %
On 8 th November 2011, National Assembly of Vietnam has approved development goals for country: From 2011 to 2015 GDP growth will be from 6.5 ÷7% / year; real incomes of people in 2015 increase from 2 to 2.5 times higher than in 2010 So, along with the development of the economy, health care needs of the people is higher and making impact on the development of the pharmaceutical industry as well as business activities of CODUPHA Moreover, in comparison to other industries, the pharmaceutical industry is one of the less affected by the crisis, because this is one of the essential items for people.
A significant portion of Vietnam's population resides in rural areas, where low living standards and a high demand for affordable medications create opportunities for the expansion of local pharmaceutical companies As living standards improve, the Vietnamese population increasingly prioritizes healthcare, leading to a growing demand for pharmaceuticals These factors collectively contribute to the favorable conditions for the development of Vietnam's pharmaceutical industry.
From 2001 to 2010, Vietnam achieved significant progress, notably through the establishment of a Fund for the Development of Science and Technology This fund aims to support organizations in developing and applying local research, transforming research outcomes into viable commercial products, and promoting the application of scientific research and technological advancements Additionally, it facilitates technology transfer, innovation, and technological improvement The growth of information technology has created numerous opportunities for the pharmaceutical industry, especially for CODUPHA.
The increasing integration of information technology (IT) in everyday life and business operations has transformed how companies operate, particularly in the pharmaceutical sector Websites serve as vital platforms for product introduction, while electronic mail and online delivery enhance communication and distribution efficiency The advancement of IT systems has streamlined distribution processes, benefiting both wholesale and retail pharmacies By promoting high-quality products at competitive prices online, pharmaceutical companies can effectively introduce new offerings to the market, ensuring quicker and more convenient access for consumers.
The advancement of science and technology enhances our understanding of pharmaceutical products, making them more accessible to consumers, including those in remote areas like islands and mountainous regions.
Vietnam, with a population exceeding 86 million, ranks 13th globally, presenting both opportunities and challenges for its economy and social security As living standards improve and healthcare services expand significantly, these factors create favorable conditions for Codupha's pharmaceutical distribution network to grow throughout the country.
Vietnam's elderly population, currently around 6.3 million people over 60, represents more than 7% of the total population and is expected to rise due to improved living conditions and healthcare In 2005, the average life expectancy in Vietnam was 72 years, and experts project that by 2059, the elderly will constitute 28.31% of the population, with 28 million individuals reaching retirement age Over the next decade, the country must prioritize social security to support this growing demographic.
With 10 million individuals aged 60 and above, including those receiving pensions and health benefits, health care is a critical concern for the elderly Recognizing the market demand for health care tailored to this demographic presents a valuable opportunity for CODUPHA to innovate and develop essential products and optimal health care services.
Vietnam's equatorial climate, characterized by high temperatures and humidity, fosters a rich diversity of botanical plants and mushrooms, which serve as vital raw materials for the pharmaceutical industry However, rapid industrial development has led to significant environmental pollution, with increasing amounts of municipal and factory waste contributing to the rise of toxic gases Monitoring data from 2002 indicates that the annual average concentration of PM10 dust in Vietnam exceeds international standards by 2.5 to 3.5 times This alarming pollution, coupled with global climate change, poses serious threats to human health, leading to respiratory, cardiovascular, and digestive diseases These challenges underscore the urgent need for advancements in the pharmaceutical sector.
• Expenditure for drugs per capita still very low
In recent years, Vietnam has significantly increased its spending on health services, particularly in the pharmaceutical sector From 2001 to 2007, the country's medicine consumption grew at an average annual rate of 19.9%, surging to 25.5% in 2008 compared to the previous year This trend indicates a substantial expansion of the market size, resulting in higher drug sales revenue.
Analysis of internal environment of the enterprise
Human resources (HR) are crucial for the success of organizations, as they shape business activities At CODUPHA, the HR department is dedicated to achieving the company's objectives Table 2.4 illustrates the staff numbers and income levels at CODUPHA, highlighting the importance of HR in aligning workforce capabilities with organizational goals.
Table 2.4: Number of staff and income level in period 2006-2010
Total number of staff Men 294 346 370 399 435
According to type of works:
Income/man/month Mill. dong
Increase of average incomes Mill. dong
Source: The National Pharmaceutical Company No 2
The company's workforce has been steadily increasing each year, particularly among employees with university and college degrees This growth indicates the company's expansion and its commitment to enhancing job quality by incorporating more management personnel and highly qualified professionals.
In condition of international economic integration, improvement of quality of human resources is a very important for Codupha This is reflected by the recruitment and training works:
Codupha has streamlined its recruitment process by establishing clear criteria and specifications to enhance efficiency The organization places special emphasis on hiring graduates from prestigious institutions such as the Hanoi University of Pharmacy and Ho Chi Minh City University of Medicine and Pharmacy, prioritizing candidates with relevant work experience in similar roles.
To enhance professional skills and meet evolving requirements, employees undergo regular training, particularly with the implementation of the ISO 9001-2008 management system and adherence to international standards for drug distribution and reservation, such as GDP and GSP.
Despite the challenges posed by the global crisis and domestic economic difficulties, Codupha remains committed to supporting its workers by consistently creating new job opportunities The company's workforce has grown significantly, increasing from 294 employees in 2006 to a larger number today.
In 2010, the company employed 435 individuals, reflecting a workforce equivalent to 141 full-time employees During this period, the average monthly income of workers saw a remarkable increase, rising from 6.211 million VND per person in 2006 to 9.561 million VND in 2010, marking a 1.54 times growth This notable income surge positioned the company as having the highest average monthly salary within the Vietnam Pharmaceutical Corporation and surpassing the average earnings in various other economic sectors.
Since Vietnam's Liberation Day on April 30, 1975, CODUPHA has emerged as a leading enterprise in the pharmaceutical industry, achieving remarkable business results that significantly contribute to the growth of both the sector and the national economy The company consistently ranks among the top 500 largest companies in Vietnam, showcasing its vital role in the industry.
Table 2.5 Results and effectiveness of business operations at the National Pharmaceutical Company No 2 in period 2006-2010
Source: the National Pharmaceutical Company No 2
Codupha's revenue structure is divided into two main segments: treatment sales to hospitals, which account for 67% of total revenue, and OTC sales to pharmacies, making up 33% As a direct drug importer, Codupha enjoys competitive advantages in pricing, organizational reputation, product diversity, and distribution capabilities, enabling it to meet the comprehensive needs of hospital treatments Additionally, the company has established offices and affiliates in key cities, including Ho Chi Minh City, Hanoi, Can Tho, and Haiphong, as well as in populous regions like Vinh City (Nghe An), Dak Lak, and Quang Ngai.
In 2007, profit growth surged by 11.804% compared to 2006, amounting to 1,746 million VND By 2010, the profit growth rate slightly decreased to 11.495% from 2009, translating to an increase of 2,219 million VND Notably, 2009 experienced the lowest profit growth during this period, with a rate of only 5.961%, equating to 1,086 million VND.
Sales revenue and profit have shown consistent growth year after year However, the profit-to-revenue ratio reveals a modest effect As illustrated in Table 2.5, the profit/revenue ratio was 1.156% in 2006, but despite increasing revenue over the years, this ratio slightly declined to 1.025% by 2010 This indicates that while the business is growing and generating more profits through increased sales revenue, the effectiveness measured by the profit-to-revenue ratio is decreasing.
There are limited results, partly due to characteristics of the company specializing in importation and distribution of pharmaceutical products, having not so high rate of return:
CODUPHA is dedicated to implementing various national programs, including national reserves, circulation reserves, and drug price stabilization The company specializes in the distribution of drugs that require special control, such as toxic and psychotropic substances These initiatives prioritize the health care community's needs over the organization's business performance.
Codupha, as an importer, is significantly impacted by global economic fluctuations and government policies that restrict imports Recent challenges faced by major economies have led to price variations in imported goods To promote exports and stabilize foreign currency flows, the government has been frequently adjusting exchange rates, resulting in higher costs for imported products Consequently, organizations often incur additional service charges when purchasing foreign currency from banks.
The company generates 67% of its sales revenue from pharmaceutical treatments, relying on a bidding process that locks in prices for 12 months This pricing stability has significantly affected business efficiency, particularly as the costs of imported products continue to rise.
The pharmaceutical industry is beginning to integrate with global standards, with Codupha leading the way in implementing essential distribution and drug testing principles (GDP, GPP, GSP, GLP) However, this adherence to world standards increases operational costs that cannot be reflected in product pricing due to inconsistencies in the business environment among organizations Many pharmaceutical companies have yet to adopt or implement new regulations aimed at cost-saving measures.
In comparison with the 100% state-owned companies under Vietnam Pharmaceutical Corporation, CODUPHA always leads in sales revenue, as shown in table 2.6.
Table 2.6 Sales revenue of the 100% state-owned companies under Vietnam Pharmaceutical Corporation in period 2009-2010
Source: Vietnam Pharmaceutical Corporation 2.3.3 Distribution System
CODUPHA boasts extensive distribution experience in Vietnam, having achieved Good Distribution Practice (GDP) certification in 2007 The company is actively expanding its warehouses and branches to enhance coverage for pharmacies, health facilities, and pharmaceutical companies across the nation This strategy aims to minimize intermediate distribution, ultimately lowering product prices for consumers.
2.3.3.1 Warehousing system at headquarters and branches
The long-term development of Codupha
3.1.1 Determining the position and the common goal of Codupha
By 2016, Codupha aims to establish itself as a premier pharmaceutical distributor in Vietnam, maintaining its position among the top 500 largest enterprises in the country As a key player within the Vietnam Pharmaceutical Corporation, Codupha focuses on nationwide drug distribution while leveraging its strengths to support national programs, including drug price stabilization and the management of controlled substances The company is committed to enhancing societal value, bolstering the reputation of Vietnam's pharmaceutical industry, and contributing to the national budget.
Between 2006 and 2010, Codupha demonstrated significant growth in the pharmaceutical industry, which is expected to continue Through a thorough analysis of the macro, micro, and internal environments, the authors have established clear business objectives for Codupha during this period.
Stable annual increase of revenue 15% -17%, in 2016 strives to achieve sales revenue of 4,000,000 million VND, in which, the annual earnings rate at least 1%.
Table 3.1 The business goals of Codupha in 2012-2016
Increase of revenue Bill VND 360.00 414.00 476.10 547.52
Profit after taxes Bill VND 24 27.6 31.74 36.82 43.08
Increase of profit Bill VND 3.60 4.14 5.08 6.26
Ratio between profit and revenue
Average income of staff per month
To achieve specific targets, Codupha needs to:
- Develop and improve the network of branches, storages, professional distribution network throughout all the provinces of the country Open branches and drug warehouses in other key locations.
- Cooperate with major partners in production and supply to meet demands of special medicaments for treatment and health systems and pharmacies, pharmaceutical companies in all provinces across the country.
To enhance customer satisfaction and drive business success, it is essential to foster an environment where employees can fully develop their skills and talents By investing in human resources and providing incentives such as increased income and other rewards, organizations can create optimal conditions for staff growth and excellence.
To enhance production development and boost business capacity, it is essential to attract long-term investment capital from various firms and investment funds, as well as secure bank loans By leveraging the commercial potential of the property located at 334 To Hien Thanh Street, Ward 14, District 10, Ho Chi Minh City, in alignment with the city's land use planning, the company aims to significantly increase its annual profits.
The Ministry of Health and the Vietnam Pharmaceutical Corporation are implementing a policy to establish a pharmaceutical distribution center in Ho Chi Minh City This initiative aims to attract and concentrate enterprises involved in the production, import, and export of pharmaceuticals, thereby enhancing the drug distribution network The project is expected to improve the management of quality medicines, stabilize prices, and create approximately 500-600 new jobs in the region.
Choice of business strategy for CODUPHA in period 2012-2016
To achieve the assigned targets, we can use various analytical strategic tools; our team has decided to use two main tools: the SWOT matrix and QSPM matrix.
√ A stable political environment creates favorable conditions for development of all economic sectors, improves people's lives and leads to increase the demand for health care for people.
√ Most of Vietnam's population lives in rural areas, no focusing yet on health care, so the potential market for Vietnam's pharmaceutical industry is very huge.
√ Economic integration and globalization creates opportunities for local businesses to learn on technique, management for their self- renewal.
√ The development of information technology brings applications in advertisement of the products, helping people understand more about drugs, stimulates consumer demand in the pharmaceuticals.
√ Large population and the average age has been increased, more demand for health care for the elderly people.
√ Hot and humid tropical climate, environmental pollution, world climate changes affect human health, hence the demand for pharmaceutical products for health care increased.
√ Expenditure for drugs per capita is still low while GDP growth rates are high shows the tendency to increase expenditure for health care.
CODUPHA stands out in the pharmaceutical industry due to its established brand reputation and long-term presence, giving it a competitive edge over domestic rivals Additionally, when compared to foreign competitors, CODUPHA benefits from a comprehensive nationwide distribution system and favorable state policies that enhance its market position.
√ Integration and globalization create conditions for foreign firms entering the local market, forcing local companies to compete with rivals having higher financial capability, technological level, and the management level.
√ Because almost products are imported so the company is dependent on fluctuations of exchange rates and world pharmaceutical market.
√ There are too many firms having the same products and service, it creates competition for market share, human resources, disrupts the business strategy of organizations.
√ The world economic crisis makes people's lives more difficult, cutting expenditure in general, affecting also expenditure for drugs.
Assessment of strengths and weaknesses
√ Highly qualified, well trained leadership.
√ having brand name as a leader in pharmaceutical distribution in Vietnam, including hospitals and pharmacies, drug dealers
√ Cover 40/63 provinces and cities throughout Vietnam, distribution network is developing to the remote areas.
√ As a State-owned enterprise, the company has the support of the banks, receives loans with preferential reasonable interest rates, stable finance.
Organizations involved in national drug programs and the distribution of controlled medications for community health operate on a non-profit basis, resulting in minimal overall profits.
The company specializes in sales for treatment through a bidding process, offering a fixed contract duration of 12 months without price adjustments This approach significantly affects business performance, as the rising costs of imported pharmaceuticals are not adequately addressed through effective risk management strategies.
√ The staff is outstanding and the staff level is uneven in many regions affecting business performance The training needs proper attention and synchronous development throughout the entire system.
Effective human resource management is crucial for organizations involved in drug distribution Currently, the staff management and control systems are underdeveloped, leading to challenges in monitoring employee working hours across extensive areas.
1 Stable political environment and tight state management.
2 Foreign enterprises are not allowed yet for direct drug distribution.
3 Development of informa- tion and science technology.
4 Big population, increasing living standards, average expenditure for drugs per capita is low and tended to increase.
5 Tropical monsoon climate creates rich sources of medicinal raw materials as well as structural diversity of pathology.
6 Foreign suppliers propose diversity and many choices of drugs for customers.
7 Potential competitors are not significant due to large entry barriers.
8 There is no substitute negligible goods
1 Viet Nam joined the WTO, to compete with multinational corporations.
4 Domestic suppliers depend on foreign raw materials and finished products.
5 Documentations of state management are still inadequate.
6 Customers-hospitals used to ask for commissions.
1 High professional leadership and staff.
2 High reputation and position of the enterprise.
3 National-wide distribution system and high coverage, especially in residential important areas.
5 Reachable big loans without mortgage and with preferential terms and interest rates
6 Adequate product categories and functional distribution of medicines under special control.
Take advantage of existing distribution system to expand the coverage throughout the country, attracting more partners to enhance revenue and reputation, develop the market
Leadership needs regular training to improve management, profession, services to harness the maximum advantages of the enterprise and market potential
Product differentiation and make up the difference in quality of products and services compared to competitors.
Investing in Marketing to compete with rivals in the industry and promote the strengths of large distribution systems.
Based on longtime relationship with the credit institutions to perform the term purchase contracts to limit risks due to fluctua- tions of exchange rates.
The Vietnam Pharmaceutical Corporation, alongside the National Pharmaceutical Association and relevant state agencies, is focused on enhancing state management documentation They are committed to actively combating commission payments in drug sales to promote transparency and integrity within the pharmaceutical industry.
2 Risk management has not been focused.
3 Revenues depend on treatment sales through bidding.
4 Lack of special treatment drugs.
5 The staff is outstanding and the staff level is uneven in many areas.
6 No effective monitoring yet of employees working time.
Building reputation in drug distribution activities to improve profit margins by attracting new distribution partners, concentrated growth with advantages of existing distribution and warehouse system.
Better care customers in treatment block, while develop number of custom- ers - pharmacies, companies to reduce dependence on the bidding results
Enhancing importation of drugs under special control for treatment of diverse of diseases cause by characte- ristics of our country.
Promoting IT applications in management and internal administration as well as risk management.
COMBINATION W/T W1+W2+W3+W4+T1+T2 +T4: To form an alliance with foreign companies to improve the competitiveness of the organization to create position in the domestic and foreign markets.
Create pressure at work, contracting revenue targets for teams and individuals to reduce inertia in staff and leadership.
Because the opportunity to increase revenue and market share is high, so the enterprise should focus on human resource development and manpower training to meet job demands.
Leverage existing distribution systems and preferential rate loans to invest in expanding your business's market presence and increasing market share in Vietnam's pharmaceutical sector With the previous exclusivity of certain pharmaceutical products and a limited number of licensed distributors no longer a factor, enhancing marketing efforts and utilizing established distribution networks to boost inventory turnover and revenue is crucial for success.
Highly qualified and experienced leadership has to create reasonable plans, taking advantage of the strengths of the business to meet the needs of the Vietnam potential pharmaceutical market.
Product differentiation and service quality compared with foreign competitors, attracting more customers to enhance sales revenues and reputation.
Investing in marketing to compete with rivals in the industry and promote the strengths of large distribution systems.
Establishing long-term relationships with reputable credit institutions can help mitigate risks associated with foreign currency purchase contracts amid current exchange rate fluctuations By engaging in future contracts with well-established banks such as VCB, BIDV, CTG, and Eximbank, businesses can effectively manage and stabilize their foreign currency transactions.
The Vietnam Pharmaceutical Corporation, in collaboration with the National Pharmaceutical Association and relevant authorities, aims to enhance the currently inadequate state management documentation They are also actively advocating against the issue of commission payments in drug sales.
Building confidence in drug distribution activities to improve profit margins by attracting new distribution partners, concentrated growth with advantages of existing distribution and warehouse system
Better care about treatment customers, in parallel to strongly develop customers from pharmacies, companies to reduce dependence on the bidding results.
Enhance the exploitation of importation of special drugs specializing for treatment of specific and diverse diseases in our country.
Enhancing IT applications in internal management and administration is crucial due to the uneven skill levels among staff, which complicates team management Implementing effective IT solutions can streamline operations and improve overall organizational efficiency.
Because the opportunity to enhance sales revenue, market share is very high,therefore the company must focus on human resource development and manpower training to meet job demands.
To form an alliance with foreign companies to improve the competitiveness of the enterprise, creating position in the domestic and foreign markets.
To enhance productivity and motivate dynamic staff, it is essential to implement work assignments based on revenue performance for both individuals and teams While this approach is not new and has been adopted by various organizations, it is relatively uncommon in former state enterprises like CODUPHA Nevertheless, implementing this strategy is crucial for CODUPHA's success.
Based on the analysis of the External Factor Evaluation (EFE) and Internal Factor Evaluation (IFE) matrices presented in Chapter 2, our team has compiled the IE matrix to assess CODUPHA's current position in the business environment, specifically highlighting the area of "Development and Growth."
3.2.3 Quantitative Strategic Planning Matrix (QSPM)
Based on the Opportunities and Threats identified in the EFE Matrix, along with the Strengths and Weaknesses highlighted in the IFE Matrix, CODUPHA has the potential to implement strategic developments during the period from 2012 to 2016.
• Promote development of warehouses, branches in key localities.
• Increase market share of the organization in domestic market, step by step towards foreign markets.
• Retraining and improving efficiency of the staff
• Development of human resources to meet growing demand in the period.
• Development of infrastructure, equipment, transportation
• Stepping up marketing to retain and develop the indirect market (supply medicines for the hospital, the medical centers )
• Development of drugs distribution to final consumers, improve the efficiency of the sales of medicines over the phone and internet.
• Application of information technology on management and product distribution
• Strengthen alliances and cooperation with domestic and foreign companies to develop drug sources
• Act as an distribution agent for multinational companies based on strong advantages of wide coverage and warehouses
• Act as distribution agents and forward to be a exclusive supplier of special and rare medications on the market
• Expand cooperation with other suppliers to take advantage of using their facilities, improve market share for the company.
• Sending staff abroad to study, improve, study management and distribution methods of multinational companies.
• Based on the strength of information technology to find, select and import newest invented drugs
• To consider a strategic cooperation with big foreign partners.
• Provides all the drugs according to market demand
• Exploiting the potential sources of local pharmaceutical materials to produce common drugs
• To invest and develop drug factories
• To produce expire-protection drugs for domestic market, to reduce importation costs
• Production of drugs under license from foreign companies
• To retain the existing scale, invest to repair and upgrade equipments, warehouses, transport means to meet the needs and requirements under the new standards
• Retraining and improving abilities of existing management staff and technical staff
• Stepping up marketing works in hospitals, health centers to expand market share in the supplying of treatment drugs.
• Continue to promote strengths of network coverage and warehouses in the implementation of the agency contracts to distribute medicines for foreign companies.
• Improve abilities and capacities of drug supply of branches, of existing pharmacies, restructure human resources, scheduling to use transport vehicles to fully meet the customer's requirements.
The aforementioned strategies will be compared in Table 3.3 - a QSPM forCODUPHA below to help us get the best selection of business strategies of the company for the period 2012-2016.
From the results of SWOT and QSPM matrices, we find down that there are
2 strategies with highest Total Attractiveness Score, which are the Market
From 2012 to 2016, CODUPHA will implement a Development Strategy and Strategic Alliance as its primary business strategies These strategies aim to optimize facility utilization and coverage, leverage qualified management staff, and meet high revenue standards As a result, CODUPHA expects to enhance market share, boost profits, and improve the living standards of its employees.
3.2.5 Estimated Budget for chosen strategies
Table 3.4 shows a provisional calculation of costs for the implementation of chosen business strategies in the period 2012-2016.
Strategy implementation solutions
The Vietnam pharmaceutical market offers significant growth opportunities; however, CODUPHA faces intense competition from both domestic and international firms While the company's strong reputation and financial stability mitigate pressure from local competitors, the primary concern lies with large global companies that possess substantial financial resources and extensive distribution experience To effectively navigate these challenges, CODUPHA's market development strategy must focus on several key solutions.
Leveraging its established product distribution network and accessible warehouses, CODUPHA is well-positioned for market development While foreign competitors possess significant financial resources, they encounter substantial challenges, such as restrictions on direct distribution to pharmacies and fragmented distribution networks that fail to reach all provinces In contrast, CODUPHA's cohesive distribution channels remain a key competitive advantage.
To enhance its operations, CODUPHA should focus on expanding its branch network and drug warehouses, alongside developing a robust national distribution system This includes establishing new branches and warehouses in strategic locations, particularly in the Northwest, Northeast, and Central regions of Vietnam.
In today's fast-paced technological landscape, developing an online sales system through internet and telephone networks is essential for businesses The growing trend of online shopping allows customers to fulfill their needs with just a click or a phone call, making it crucial for companies to invest in online ordering software By transitioning all treasury and sales tasks online, businesses can save transaction time and enhance convenience for both direct and indirect shoppers Furthermore, effective online sales and product management can improve operational efficiency, enabling dealers and warehouses to collaborate and reduce unnecessary costs Additionally, enhancing phone sales not only facilitates product inquiries but also allows for order placements, tapping into the increasing connectivity of consumers This approach holds significant potential for CODUPHA, particularly in the market for over-the-counter medications that do not require a prescription.
CODUPHA must effectively manage its customer relationships by implementing a comprehensive customer strategy that addresses both immediate needs and long-term goals This strategy should encompass key elements that ensure customer satisfaction and loyalty.
• To Classify target customers and establish a good and long time relationship with them
CODUPHA primarily focuses on direct customers, while also catering to indirect customers such as distributors, companies, agents, and pharmacies By identifying these target customer groups, the company aims to build strong, long-lasting relationships that will ultimately enhance its business outcomes.
Getting all information relevant to the customer, rightly assessing customer quality, save the cost of evaluation and monitoring.
Setting out strategies, policies, operational plans for each period and the development trend of the business activities in the future.
Establishing long-term relationships with customers fosters close cooperation and yields mutual benefits for both the enterprise and consumers To achieve this, companies should implement tailored mechanisms and policies that cater to the unique needs of each customer.
• Implementing policies to attract customers by encouraging by material benefits
To boost sales in the residential area through incentives and reasonable discount for pharmacies / hospitals
Conducting thorough research on competitors through regular product comparisons, advertising strategies, and sales networks is essential Based on these insights, businesses should formulate and execute strategies that align with competitors while avoiding direct confrontation This approach enables companies to capture market share and foster sustainable development.
• Increase advertising propaganda through the mass media
Enhancing public communication through easy-to-understand leaflets and concise product descriptions enables customers to stay informed about the company's offerings This approach helps customers learn how to use the products effectively and understand their benefits.
Through the company staff to attract customers to use products provided by the company
CODUPHA regularly hosts customer conferences to gain insights into customer needs and assess the quality of its services and products This direct engagement allows the company to identify areas for improvement, enabling them to enhance customer satisfaction and strengthen their reputation in the market.
Organize short and effective distribution channels These distribution channels settle actual needs locally
Invest in the development of the Drug and Cosmetic Center in Ho Chi Minh City to transform it into a leading wholesale and direct-to-consumer retail hub Host major conferences and exhibitions at the center to effectively showcase domestic medicine to potential customers.
• Improving the quality of staff
To enhance business performance, it is essential to continuously select, train, and strengthen the workforce, including both executives and production staff Training programs should be tailored to actual conditions to ensure effectiveness Proper staff nomination and organization are crucial for placing the right individuals in suitable positions, optimizing human resource utilization, and improving process management and supervision Additionally, fostering individual accountability and flexibility is important Alongside fair material rewards, a strict system of incentives and penalties should be implemented Improving facilities and working conditions, along with providing robust support throughout production and business processes, will further drive success.
• Develop plans for human resources training
To enhance professional skills and overall knowledge in the pharmacy field, our training strategy focuses on both internal and external training programs, including hiring outside experts We prioritize retraining existing staff on new technologies and practices, such as ISO and GDP, to ensure we meet business demands with a qualified workforce By systematically assessing and classifying younger officers, we aim to quickly develop a robust team of managers, technical staff, and skilled pharmaceutical workers, ultimately reducing training costs while fulfilling immediate and long-term staffing needs.
Send staff to national training facilities and to study in the advanced countries Combining the training and retraining in schools and in practice.
To ensure compliance with international standards, it is essential for companies to provide updated knowledge and compulsory training for staff, fostering a culture of continuous learning Regular assessments of existing employees' skills should be conducted to evaluate their qualifications, with results shared to highlight individual strengths and weaknesses for personal development This proactive approach not only aids in the improvement of technical staff and experts but also helps identify potential leaders for managerial roles, ensuring the organization remains dynamic and forward-thinking.
To effectively assess the current workforce, we categorize employees into two groups: the qualified and the unqualified This classification is based on job descriptions and work standards for each position Consequently, we will develop a targeted training plan for the unqualified group, outlining specific timelines for skill enhancement and self-improvement.