VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS
Nguyen Quy Anh Tuan

DEVELOPING BUSINESS STRATEGIES FOR
HAU GIANG PHARMACEUTICAL JOINT STOCK
COMPANY (2012-2015)

MASTER OF BUSINESS ADMINISTRATION THESIS
MASTER OF BUSINESS ADMINISTRATION THESIS
Supervisor: Dr. Vu Anh Dung
Hanoi - 2011

viii

TABLE OF CONTENTS
ACKNOWLEDGEMENTS i
ABSTRACT ii
TÓM TẮT v
TABLE OF CONTENTS viii
LIST OF TABLES xi
LIST OF FIGURES xii
LIST OF ABBREVIATIONS xiii
CHAPTER 1: INTRODUCTION 1
1.1. Necessity of the thesis 1
1.2. Research aim and objectives 3

2.8 Chapter review 37
CHAPTER 3: ANALYSIS ON VIETNAM PHARMACEUTICAL
MARKET 39
3.1. Overview of Vietnam pharmaceutical market 39
3.2. Notable characteristics of Vietnam pharmaceutical market 42
3.3. Forecasts on Vietnam pharmaceutical market in 2012 – 2015 50
3.3.1. Development prospects of Vietnam pharmaceutical market 50
3.3.2. Prescription drug market forecast 51
3.3.3. OTC drug market forecast 51
3.3.4. Patented Drug Market Forecast 52
3.3.5. Generic drug market forecast 53
3.3.6. Pharmaceutical Trade forecast 54
3.4. Synthesis of External Factors – EFAS (External Factors Analysis
Summary) 55
3.5. Chapter review 58

x

CHAPTER 4: ANALYSIS ON DHG PHARMACEUTICAL COMPANY62
4.1 Overview of DHG pharmaceutical company 62
4.1.1 Establishment and development of DHG 62
4.1.2 Scope of business and major products of DHG 64
4.1.3 Vision, mission and core values of DHG 65
4.1.4 Organizational structure of DHG 66
4.1.5 Business performance of DHG 67
4.3 Internal analysis for DHG 69
4.3.1 Value chain analysis of DHG 70
4.3.2 Distinctive competencies of DHG 75
4.4 Competitive position of DHG 77
4.5 Synthesis of internal factors – IFAS (Internal Factors Analysis

Table 4.3: Listed Vietnamese Pharmaceutical Companies 78
Table 4.4: Classification of listed pharmaceutical companies in Vietnam 82
Table 4.5: Weighted Competitive Strengths Assessment of DHG, Imexpharm,
Domesco, Vien Dong Pharma . 87
Table 4.6: Synthesis of Internal Factors – IFAS of DHG 88
Table 5.1: TOWS Matrix of DHG 96 xii

LIST OF FIGURES

Figure 2.1: Corporate Strategies 14
Figure 2.2: The Five Generic Competitive Strategies 15
Figure 2.3: Strategic Management Model 17
Figure 2.4: Porter’s Five Forces Model 18
Figure 2.5: Strategic Group in the Pharmaceutical Industry 22
Figure 2.6: Firm’s Value Chain 27
Figure 2.7: Why Do Control System Fail 36
Figure 3.1: Vietnam Pharmaceutical Market Share 39
Figure 3.2: Vietnam pharmaceutical market’s value and growth rate 43
Figure 3.3: Prescription Drug Market Forecast 51
Figure 3.4: OTC Medicine Market Forecast 52
Figure 3.5: Patented Drug Market Forecast 53
Figure 3.6: Generic Drug Market Forecast 53
Figure 3.7: Pharmaceutical Trade Forecast 55
Figure 4.1: DHG’s Major Products 64
Figure 4.2: Organizational Structure of DHG 66
Figure 4.3: Net Sale and Profit after Tax of DHG 67
Figure 4.4: Growth Rates of DHG 68

VMD Vimedimex Company 1

CHAPTER 1: INTRODUCTION

1.1. Necessity of the thesis
Vietnam's pharmaceutical industry is in a period of substantial growths.
According to the Drug Administration of Vietnam (DAV), the total value of
drugs utilized in Vietnam in 2009 was estimated to be approximately 1.7
billion dollars, an increase of 19 percent against 2008
1
. Total medication
spending per capita in 2009 reached 19.8 dollars, raising 3.3 and 13.7 dollars
with respect to the years 2008 and 2001
2
. DAV also explicitly indicated that
Vietnam pharmaceutical market would continue to grow at a rapid annual rate
of 25 percent, reaching a 2-billion-dollar value in 2012. The figure is subject
to continuous increase over the subsequent years
3
.
Being regarded as the leading company in the industry, Hau Giang
pharmaceutical (DHG) is well known for being voted in 14 consecutive years
by consumers as Vietnamese high quality product. Additionally, it ranked first
in terms of sales volume among all local pharmacies and was third in
revenues after two foreign firms in the Vietnamese market (DHG, 2009).
Delivering a speech at the summation operations ceremony in 2009, the
company's representatives emphasized that business strategy was one key

factories or outsourcing domestic pharmaceutical companies to manufacture
their drugs. In November 2010, Acitivis, the fifth largest generic drug
manufacturer, held a press conference to introduce cooperation opportunity
between it and other Vietnamese pharmaceutical companies and express its
ambition to penetrate Vietnam’s drug sector through cooperation with them
5
.
In December 2010, GSK signed cooperation contract to appoint SaviPharm to
manufacture drugs for GSK in Vietnam market
6
.
Together with commitments of Vietnam to WTO, foreign
pharmaceutical companies will have the rights to open branches in Vietnam
and directly import pharmaceuticals. After 5 years since joining WTO
7
,
Vietnam will also have to reduce tax of imported pharmaceutical to 2.5%.

5
“Pharmaceutical market and moves of foreign investors”. 30/11/2010. Vneconomy. Retrieved from
/>ngoai.htm
6
“SaViPharm manufactures medicine for GlaxoSmithKline”. 16/12/2010. SaigonTimes Online. Retrieved
from />GlaxoSmithKline.html
7
“Vietnam pharmaceutical market increases 25%”, op cit. 31/5/2010. SaigonTimes Online

3

Consequently, from 2012 onwards, the challenges to Vietnamese

strategy.
1.3. Research questions
In order to propose suitable business strategies for DHG in 2012-2015, the
thesis is going to find answers for the following research questions:
1. Major research question:
 Which business strategies will be suitable for DHG in 2012-2015?
What should be done to successfully implement the proposed
strategies?
2. Minor research questions:
 What are some external factors affecting DHG? What are the effects
of these factors on DHG? Opportunities and threats that DHG will
confront with in the period?
 What are internal factors affecting DHG? What are the impacts of
these factors on DHG? Strengths and weaknesses that DHG will
confront with in the period?
 What are the competitions in Vietnam pharmaceutical industry like
at the present and in the future? In order to succeed in the industry,
what factors should be taken into consideration?
1.4. Research methodology
There are three ways to classify research in term of perspectives (Kumar,
2005):
 Application of the research (pure or applied research).
 Objectives in undertaking the research (descriptive, correlation,
explanatory or exploratory research).
 Inquiry mode employed (qualitative or quantitative research).

5

These classifications are not mutually exclusive since one research can be a
combination of several types of researches.

The thesis focuses on:
1. Studying macro environment and pharmaceutical industry
environment with P.E.S.T.E.L and Porter’s Five Forces Model.
Studying Strategic groups and Key Success Factors (KSF) in
Vietnam pharmaceutical industry.
2. Studying and analyzing different aspects of DHG such as: business
orientations, business result, value chain as well as operational
activities. Summarizing strengths, weaknesses of DHG.
3. Proposing suitable business strategies for DHG in 2012-2015.
Proposing activities and solutions for the implementation of its
strategies.
1.6. Significance of the research
The thesis has both theoretical and realistic significances, and it could
be useful for a number of target audience such as (1) leaders and strategy
planning managers of pharmaceutical companies, (2) researchers of strategic
management such as professors and students in university and research
institutes.
The thesis reviews theories on strategy and strategic management, and
utilizing contemporary strategies such as resource-based view of the firm,
core competencies, distinctive competencies, sustainable competitive
advantages and so on to provide readers with the most up-to-date knowledge
of strategic management.
The thesis also provide deep analyses on Vietnam pharmaceutical
industry in the period of 2012-2015, relying on trustworthy secondary source
of Drugs Administration of Vietnam - a unit under Ministry of Health, and

7

Business Monitor International - an international and prestigious market
research. Combining them with the information generated from the interviews

describes overview of Vietnam pharmaceutical market and its notable
characteristics as well as market forecasts in 2012-2015.
Chapter 4: Analysis on DHG pharmaceutical company. This chapter
introduces the establishment and development, products, and business
performances of DHG. This chapter also gives assessments of internal and
external environment of DHG to identify and evaluate strengths, weaknesses,
opportunities, and threats of DHG.
Chapter 5: Strategy development for DHG in 2012-2015. This chapter
develops business strategies and recommendations for strategy
implementation for DHG from the year 2012 to 2015. 9

CHAPTER 2: LITERATURE REVIEW

This chapter reviews the literature of strategy and strategic
management. Firstly, various definitions and schools of thought of strategy
are summarized. Next, hierarchy and types of strategy are presented. Finally,
strategic management process and specific implementation method in the
process such as internal and external scanning, strategy formulation, strategy
implementation and strategy control, are pointed out.
2.1 Strategy overview
2.1.1 Strategy definition
Hunger and Wheelen (2000) define strategy as “a master plan stating
how the corporation will achieve its mission and objectives. It maximizes
competitive advantage and minimizes competitive disadvantage.” (p.8).
According to Thompson, Strickland and Gamble (2005), an
organization’s strategy “consists of the competitive moves and business
approaches that managers employ to attract and please customers, compete

each component part as specified, assemble them according to the blueprint,
and strategy will result.
Positioning School: Suggests that only a few key strategies (positions in
the economic marketplace) are desirable. Much of Michael Porter's work
can be mapped to this school.
Entrepreneurial School: Strategy formation results from the insights of a
single leader, and stresses intuition, judgment, wisdom, experience, and
insight. The "vision" of the leader supplies the guiding principles of the
strategy.

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Cognitive School: Strategy formation is a cognitive process that takes
place in the mind of the strategist. Strategies emerge as the strategist filters
the maps, concepts, and schemas shaping their thinking.
Learning School: Strategies emerge as people (acting individually or
collectively) come to learn about a situation as well as their organization's
capability of dealing with it
Power School: This school stresses strategy formation as an overt process
of influence, emphasizing the use of power and politics to negotiate
strategies favorable to particular interests.
Cultural School: Social interaction, based on the belief and understanding
shared by the members of an organization, lead to the development of
strategy.
Environmental School: Presenting itself to the organization as a set of
general forces, the environment is the central actor in the strategy making
process. The organization must respond to the factors or be "selected out".
Configuration School: Strategies arise from periods when an organization
adopts a structure to match to a particular context that give rise to certain
behaviors.

Operating area
 Domestic strategy
 International strategy
 Global strategy
4.

Competitive position
of the company
 Leader’s strategy
 Challenger’s strategy
 Follower’s strategy
5.

Development stage of
the company
 Growth strategy
 Stability strategy
 Rechenment strategy
6.

Stage of the industry
 Strategy in emerging industry
 Strategy in high-velocity market
 Strategy s in maturing industry
 Strategy in stagnant or declining industry
Source: Adapted from Hunger et al. (2000), Hitt et al. (1999), Thompson et
al. (1998), Porter (1980). 13


Figure 2.1: Corporate Strategies
 Growth
Concentration
Vertical Integration
Horizontal Integration
Diversification
Concentric
Conglomerate
 Stability
Pause
Proceed with Caution
No Change
Profit
 Rechenment
Turnaround
Captive Company
Selling Out/Divestiture
Bankruptcy
Liquidation
Source: Hunger et al. (2000, p. 82)

In business strategy level, there are 3 generic strategies suggested by M.
Porter in his book Competitive strategies (1980): (1) Cost leadership strategy
(2) Differentiation strategy (3) Focus strategy.
Criteria to classify 3 generic strategies are (1) price of the product, (2)
differentiation of the product, and (3) market range.
In a broad market range, competitive strategy will have 2 generic
strategies: (1) Cost leadership strategy, and (2) Differentiation strategy. A
company which follows cost leadership strategy will produce cheaper

by trying to meet budgets.
Phase 2. Forecast-based planning: seeking more effective planning
for growth by trying to predict the future beyond the next year.
Phase 3. Externally oriented planning (strategic planning): seeking
increased responsiveness to markets and competition by trying to think
strategically.
Phase 4. Strategic management: seeking a competitive advantage and
successful future by managing all resources effectively.
Besides the planning as in phase 3, implementation, evaluation and control
phases should also be taken into consideration.
Strategic management is the process of consecutive steps. According to
Hitt et al. (1999), strategic management process as a process of two major
groups of activities:
1. Identifying strategic inputs: the first step is conducting internal and
external analyses, then identifying the strategic intent and strategic
mission of the company.
2. Implementing strategic actions: includes strategy formulation and
strategy implementation.
Similarly, Thompson (2005) proposed 5 steps in crafting and executing a
company’s strategy: (1) develop strategic vision, (2) establish objectives, (3)

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develop strategies to realize vision and objectives, (4) implement strategies,
and (5) measure, evaluation and adjust strategies when needed.
Byars, Rue and Zaira (1996) divided strategic management process into
4 steps: (1) Environmental scanning (2) strategy formulation, (3) strategy
implementation, and (4) strategy evaluation and control. (See Figure 2.3)
Figure 2.3: Strategic Management Model