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DHG Pharmaceutical JSC Assignment

   

Added on  2021-02-05

15 Pages5683 Words417 Views
DHG PHARMACEUTICAL JSCDHG Pharmaceutical JSCFinancial Modeling ProjectGROUP1.Nguyễn Ngọc Trường30%2.Nguyễn Khánh Huyền20%3.Nguyễn Tiểu Hà25%4.Lưu Trần Minh Phương20%5.Nguyễn Trọng Nghĩa 5%

I)IntroductionDHG Pharmaceutical Joint Stock Company is a Vietnam-based company engaged in the Field of Manufacture and Trade pharmaceutical industry. The Company Manufactures and trades in pharmaceuticals, dietary supplement and cosmetics. Via its subsidiaries, the Company is also involved in packaging printing, herb cultivation, medicinal supplies trading, as well as domestic travel tour and medical clinic operation. DHG’s mission is toprovides high quality products and services to satisfy the aspiration for a more beautiful and healthier life.In 1996, DHG Pharma’s products was elected as “Vietnam High Quality Goods” by customers (15 years consecutive). The company equitized in 2004 and

“DHG” was being listed on HOSE in 2006. With outstanding achievements, the companyhas been honored with many prestigious awards and titles: Labor Medal I, II, III and Independence Medal II and III. For more than 30 years of formation and development, DHG Pharma is now recognized as a company leader of Vietmam Pharmaceutical industry. These are essential factors that help DHG Pharma have a steady position in the path of integration. II) Industry analysis 1)Porter’s five forces frameworkCompetitive Force 1: Rivalry Among Existing Firms – HIGH•Industry growth: Recently, pharaceutical industry has a very positive growth rate with10% per year and forecasted to maintain the growth rate in next 5 years. The increaseof GDP per capital leads to the demand of using drugs is higher.•Product differentiation: With increasing technical level, the life cycle of drugs isdeveloped. Even essential items, drugs can be sophisticated easily. Therefore, lackingof product differentiation, the pressure of price competition is not high.•Industry concentration: DHG is leading in this industry but other competitors aregrowing fast. The largest competitor of DHG is Traphaco, which the goal is tosubstitute DHG to be leader of pharaceutical industry in Vietnam. Besides, theindustry has participation of big companies like MGW, Nguyen Kim, FPT Retail,... inthe future so the pressure of DHG is high.Competitive Force 2: Threat of New Entrants – LOW•Economy of scale: DHG factory with capacity of 9 billion products per year. Besides,other local companies enhance the capicity by constructing more factories lead tobarriers to entry is high. •Brand loyalty: Pharacies and medical institutions are familiar with their old supplier.New entrants may have big troubles to gain market share, to create trust fromcustomer. They have to spend so much costs to make people change their minds.•Legal barrier: Pharaceutical business is controlled by the government. New entrantsmust be checked rigorously by Ministry of Health before infiltrating into Vietnam.•Distribution channels: DHG is holding largest distribution channels of the industry.The best way for foreign rivals to access into the industry is to invest into domesticpharmaceutical companies to use their channels and bring their products intoVietnam’s pharmaceutical market. Abbott Corporation (USA) holds 51.69% stake inDomesco Medical Import Export JSC; Tashio, top 4 Pharmacy Coporation in Japan,became major shareholders of the acquisition 24.5% stock in Hau GiangPharmaceutical.Competitive Force 3: Threat of substitute products – HIGH•Nowadays, the economy is more and more integrated. Vietnam’s pharmaceuticalindustry may have opportunities to access high technology. Therefore, domesticcompanies spend more R&D expenditure, develop products with highest quality andeffectiveness. DHG’s products must meet higher quality to avoid replacing by rivals’ products and maintaining the loyalty of customers.Competitive Force 4: Buyer’s power - LOW

•Pharmaceutical is one of the essential items, there is no bargain on the price becausebuyers have to buy prescription drugs by intruction of the doctor, so the individualcustomer power is weak.•Entities with negotiating power are the pharmacies and medical institutions that fulfillthe medical patients’ prescriptions. Even these entities have little power over newerdrugs under patent or drugs with only one manufacturer. Pharmacies focus on theirprofit margins and have little incentive to provide patients with the lowest price.Competitive Force 5: Supplier’s power-HIGH•DHG will be in a stronger position if there are fewer manufacturers and distributors.•Cost of seeking and changing supplier is high when company want to amend othersuppliesr because materials are primally provided by foreign sources. Raw materialsis almost imported from another countries so COGS is affected by the input factorslike as exchange rate, fluctuations or import tax policy.2)Value chain analysis Pharmaceuticals industry value chain can be broadly segregated in to 5 major steps.Research and developmentThe initial stage of the value chain constitutes the research and development of a newmedicinal molecule. This step takes a lot of time to implement and throughout thedevelopment of the company. Strong financial resources, efficient business, DHG Pharmahas conditions to implement modern strategies, attract good personnel, invest R&D,mobilize capital and implement M&A / joint venture. Economic integration opens upopportunities for R&D development from cooperative relationships, joint ventures,technology transfer, scientific research projects, research hire.LicensingThis stage involves getting patents for the new medicines and licenses in variouscountries where the new drug will be manufactured or sold.Raw Materials & Inbound logisticsThe main production materials of DHG as well as other enterprises in the industry aremainly imported (80-90%) so they are influenced by inputs such as foreign exchangerates, fluctuations in raw material prices and tax policies,...Pharma manufacturingThis stage, new medicine is manufactured. This is done using either in-housemanufacturing facilities or contract manufacturing methods.DistributionDHG Pharma is considered the largest and largest distribution system in the country, with36 branches distributing goods across the country from urban to rural areas with 27,000customers. The most value added of the firm is is stage, because almost revenue of DHGPharma comes from distribution, concentrate in southern of Vietnam. DHG does not haveretail stores but mainly distributes to dealers, so that profit comes mainly fromdistribution activities.Research & DistributionLicensingRaw Materials & Inbound logisticsPharmar manufacturing

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