VIETNAM NATIONAL UNIVERSITY, HANOI

INTERNATIONAL SCHOOL
***

FINAL REPORT
ADVANCED BUSINESS ANALYSIS

TRAPHACO JOINT STOCK COMPANY

Group 6:
 Chu Thị Quỳnh Ánh - 16071147
 Nguyễn Thị Minh Nguyệt -
16071221
 Trịnh Hà Phương - 17071308
 Phạm Thanh Huyền - 16071190
 Đặng Thị Lộc - 16071204

Hanoi, August 17th,2020

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Contents
PART 1. BUSINESS OBJECTIVE.........................................................................................2
PART 2. OVERVIEW OF THE COMPANY........................................................................2
A. INTRODUCTION..............................................................................................................2
B. MISSION – VISION – CORE VALUE..............................................................................2
I. Mission..............................................................................................................................2
II. Vision...............................................................................................................................2
III. Core value......................................................................................................................2
C. BUSINESS ACTIVITIES..................................................................................................2
D. TRAPHACO’S PRODUCTS.............................................................................................2
E. TRAPHACO’S SUBSIDIARIES.......................................................................................2
F. TRAPHACO’S DISTRIBUTION......................................................................................2
G. SWOT ANALYSIS............................................................................................................2
H. PESTEL FRAMEWORK...................................................................................................2
I. FIVE FORCES ANALYSIS................................................................................................2
PART 3. BUSINESS PERFORMANCE.................................................................................2
PART 4: INFORMATION TECHNOLOGY........................................................................2
A. MANUFACTURING TECHNOLOGY............................................................................2
B. E- BUSINESS MODEL.....................................................................................................2
PART 5: STRATEGIES AND SOLUTION...........................................................................2
A. SOLUTION 1: DEVELOP THE B2C MODEL – ONLINE PHARMACY......................2
B. SOLUTION 2: APPLYING TECHNOLOGY IN PRODUCTION...................................2
REFERENCES..........................................................................................................................2

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 LIST OF TABLES
Table 2.1: Balance sheet of TRAPHACO in 2018, 2019
Table 2.2: Asset Structure and Capital Structure
Table 2.3: Liquidity ratio
Table 2.4: Profitability ratio
Table 2.5: Operation efficiency

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 LIST OF DIAGRAMS
Diagram 2.1: Structure of assets and capital

4
 LIST OF ABBRIVIATIONS
CEO: Chief Executive Officer
BFS: fully sealed technology
GMP-WHO : World Health Organization
GACP: Good Agricultural and Collection Practices
WTO: World Trade Organization
GMP: Good Manufacturing Practices
ROA: Return of assets
ROE: Return of equity
ROS: Return of sales
B2B: Business to business
B2C : Business to Customer
KOLs: Key Opinions Leaders
QR code: Quick Response Code
VND: Vietnam Dong

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PART 1. BUSINESS OBJECTIVE
In recent years, pharmaceutical industry is tend to be more and more developed.
Especially, the Vietnamese pharmaceutical market is on a positive growth momentum.
growth in the next 5 years and maintain at least 14% per year growth until 2025. In
particular, spending on drugs per capita in Vietnam is forecasted to reach $85 per year in
2020 and $163 in 2025. This fact raises a problem that if TRAPHACO still follows the
old ways, the manual production line will quickly fall behind compared to other
competitors in the industry. Therefore, when recognizing the problem related to the main
source of raw materials, which is the traditional medicine that TRAPHACO always aims
at, the issue of environmental pollution, …. We did this project to analyze and come up
with the right strategy to achieve our goal of becoming a pioneer in green
pharmaceuticals in 2021.

Besides, digital technology has impacted and changed rapidly the world businesses, along
with the habits of consumers, ranging from the way they access information and news,
how they make the decision and review products to which channels of purchases they
preferred. With the growing pharmaceutical industry, automation, robotization of
production processes in a closed environment and limiting the intervention of human
being are hot trends in developed countries; they are also the “technology of the future”
that Vietnam’s pharmaceutical industry can’t afford to be margined. In order to keep up
with the times, in the period of 2020 to 2025, in addition to pioneering and perfecting in
green pharmaceutical, TRAPHACO sets the goal of. bringing 4.0 technology into
pharmaceuticals with the slogan “Master the future with pharma trends 4.0”.

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PART 2. OVERVIEW OF THE COMPANY
A. INTRODUCTION
The medicine production group of the Railway Health Department was founded on
November 28th 1972, with 15 employees, the capital of 278 million dong only and the
main task of making drugs under prescription. The group produced serum, fluids,
distilled water serving hospitals of the railway sector during the war. The group was
based at No. 75 Yen Ninh Street, Hanoi, the same place with the Railways Health
Department.
In January 2000, the Transportation Pharmaceutical and Medical Equipment Company
officially operated under the model of a joint stock company. On July 5th 2001 the
company changed its named into TRAPHACO, for the purpose of trading in multiple
industries in line with the new economic trends. Its main business sectors include:
Pharmaceuticals, medical materials, chemical, medical supplies and equipment, food,
wine, beer, beverage, cosmetics, consulting service, scientific and technical services,
transfer of technology in the field of pharmacy and export-import activities.
Over 48 years of operation, TRAPHACO has continuously grown and became one of
the top 10 pharmaceutical companies in Vietnam, offering jobs for more than 1000
workers.

 Company Name: Traphaco Joint Stock Company

 Headquarters: 75 Yen Ninh, Ba Dinh District, Hanoi, Vietnam
 Trading Address: 15 Alley, Ngoi Hoi Lane, Hoang Liet Ward, Hoang Mai
District, Hanoi
 ĐT: 18006612 - Fax: (024) 36814910
 E-mail: info@traphaco.com.vn
 Certificate of business registration No. 058437 issued by Department of Planning
and Investment, Hanoi the first time on 24th of February, 1999 changed on the 11
of February, 2009.
 General assembly of shareholders

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 The Board of Directors:

1. Ms. Vu Thi Thuan Chairwoman of the board

2. Ms. Nguyen Thi Mui Vice Chairman
3. Mr. Nguyen Huy Van Board member
Board member
4. Mr. Tran Tuc Ma
Board member
5. Ms. Hoang Thi Ruoc
Board member
6. Mr. Nong Huu Duc
The Executive Board:

1. Mr. Tran Tuc Ma CEO

Deputy CEO
2. Mr. Nguyen Huy Van
Deputy CEO
3. Ms. Nguyen Thi Lan
Deputy CEO
4. Mr. Nguyen Van Bui
Deputy CEO
5. Mr. Kim Dong Hyu
Functional Directors:

1. Ms. Nguyen Thi Hau Manufacturing Director

2. Mr. Nguyen Duy Vinh Export and Import Director
3. Ms. Dao Thuy Ha Marketing Director
Board of Supervisors

1. Mr. Duong Duc Hung Chairman

2. Ms. Nguyen Thanh Hoa Member
3. Ms. Tran Thi Ly Member
Chief Accountant
Mr. Dinh Trung Kien
 Departments, committees
Human Resource Department
Administration Department
Research and Development Department
Finance-Accounting Department
Sales Department
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 Planning Department
Import-Export & Materials supply Department
Quality Management Department
Marketing Department
Risk Management Committee
Hospital Sales Department
Imported Products Committee
B. MISSION – VISION – CORE VALUE
I. Mission
Our mission is to innovate green product to protect people’s health.
To understand TRAPHACO’s mission, we first need to clarify the concept of “green
products” as well as “green pharmaceuticals”. Green pharmaceuticals - the
pharmaceuticals are produced based on a green supply chain from clean materials to
clean production technology with an environment-friendly distribution system and
services.
II. Vision
To 2025, TRAPHACO is willing to be Vietnam's No. 1 Pharmaceutical Enterprise in
terms of growth - of - revenue - and - profitability.
III. Core value
Right from the first days of its establishment, TRAPHACO has focused on traditional
medicine, prioritizing traditional medicine, instead of producing western medicine from
research that has expired copyright as most of the other companies. Because of trading on
that material, TRAPHACO is determined to pursue a green economy, a business
development path associated with environmental sustainability. Thanks to different
strategies, TRAPHACO went from a small business to the largest traditional medicine
manufacturer in Vietnam.
Although on the path of pursuing a green economy, there have been many difficulties
and challenges, especially in the competitive mechanism of drug bidding in the current
hospitals, with no other option, TRAPHACO will not trading sustainable values for
immediate profits. Ms. Vu Thi Thuan, Chairwoman of TRAPHACO always keeps in
mind "Sustainable development is the trend of the times. Pursuing this path, I am sure
the business will succeed"
C. BUSINESS ACTIVITIES
 Producing and trading pharmaceuticals, chemicals and medical supplies;
 Purchasing, cultivating and processing medicine;
 Preparing prescribed medication;
 Consulting on pharmaceuticals and cosmetics manufacturing;
 Importing and exporting medicine-manufacturing raw materials, auxiliary
materials, medicines;
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  Manufacturing and trading cosmetics;
 Manufacturing and trading food;
 Consultancy on scientific services, technology transfer in the medical and
pharmaceutical field;
 Manufacturing, trading alcohol, beer, beverage (not including bar business);
 Importing and exporting the Company’s trading products.
D. TRAPHACO’S PRODUCTS
TRAPHACO's products are extremely diverse. In addition to manufacturing and
trading pharmaceutical products such as disease prevention products, eye medicine,
vitamins and minerals, herbal supplements, mouth-nose-throat drugs, antibiotics, ...
TRAPHACO also sells cosmetics and other 100% imported products from abroad such as
herbal tea, antipyretic stickers, and so on.
The key products that bring customers the trust of TRAPHACO such as Boganic, Hoat
huyet duong nao, Tottri and Cebraton are made from 100% herbal-derived herbs
according to strict standards to ensure safety for The patient has been studying its
pharmacological effects at Hanoi University of Pharmacy, so it is very benign and
reassuring to use it for a long time. These products are seem to have no rival in the
pharmaceutical market.

E. TRAPHACO’S SUBSIDIARIES

TRAPHACO has 4 big subsidiaries:

 TRAPHACO SAPA CO., LTD.
o Charter capital: VND 25,000,000,000.
o Main functions: Toll-manufacturing raw materials, input medicine, GACP
research practice of TRAPHACO. At the same time, it is the center for

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 developing the medicinal plantation zones to supply raw materials for
TRAPHACO.
o 100% TRAPHACO's ownership proportion.
 TRAPHACO HIGH TECH JSC (TRAPHACO CNC)
o Charter capital: VND 113,643,250,000.
o Main functions: Toll-manufacturing products and finished products of
TRAPHACO.
o 51% TRAPHACO's ownership proportion.
 TRAPHACO HUNG YEN CO., LTD.
o Charter capital: VND 250,000,000,000
o Main functions: Manufacturing drugs, pharmaceuticals.
o 100% TRAPHACO's ownership proportion.
 DAKLAK PHARMACEUTICAL - MEDICAL MATERIALS JSC
(BAMEPHARM)
o Charter capital: VND 19,415,880,000.
o Main functions: Specializing in distribution of pharmaceutical products -
medical supplies in 02 provinces of Daklak and Dak Nong.
o 58% TRAPHACO's ownership proportion.

F. TRAPHACO’S DISTRIBUTION

Since 1972, TRAPHACO has expanded the market nationwide with 28 branches such
as: Thai Nguyen branch, Hai Phong branch, Vung Tau Branch, ... as well as 40 agency
spread across 64 cities such as: Khanh Hoa, Ha Noi, Hung Yen, .... Not only that, up to
this moment, there are over 27000 retail clients around Vietnam.

G. SWOT ANALYSIS

 Strengths
o Prestigious brand name, trusted and loved by customers.
o Strong, wide, deep, modern and professional distribution system.
o Visionary and enthusiasm leaders by generations.
o Good, high quality, popular products.
o Sound and stable financial foundation.
o Dedicated and highly-qualified staff.
o Advanced technology, governance based on information technology (IT).
o Reputable and profitable key products.
 Weaknesses
o The strategy for developing key product lines is not clear.
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 o The ownership rate of employees is still low.
o The system is bulky, and there is poor coordination among parts/units - not
good enough to turn into unified strength.
o The process of deploying new products is still slow, not meeting the needs.
o Accessibility to technology, foreign language and integration knowledge is
still weak.
o Managers lacked aspirations, unwilling to change, and preferred stability.
o Chain management: The system of collecting and processing feedbacks from
customers and consumers has not been effective, failed to create products and
services that best meet the needs of the market;
o Untapped facilities (green value chain, system of 4 factories).
 Opportunities
o Consumers tend to prefer green-health, environment-friendly products of
natural origins.
o The domestic resources of medicinal herbs can be developed.
o Information technology can be applied to all areas to create a high efficiency.
o The growth rate of the industry is high, averaging approximately 14.6%/year.
o Spending on medicines per capita in Vietnam is forecasted to reach 85
USD/year by 2020 and 163 USD/year by 2025.
 Threats
o Trends in Pharma 4.0, and the challenge of ensuring job-takers are
correspondingly competent to his/her job requirements, take time to handle.
o Customers in each target group are more demanding.
o The market of raw materials is dependent on foreign ones, mostly on the
Chinese market.
o The development strategy of the industry is expected to face plenty of
changes; the state regulations applied to the industry have not been encouraging
for pioneers.
o The development strategy of the industry is expected to face plenty of
changes; the state regulations applied to the industry have not been encouraging
for pioneers.
o The market is full of chaotic competition caused by small-sized companies
who pursue a chasing strategy (especially in the market for traditional
medicines.

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H. PESTEL FRAMEWORK

Political

Legal Economic

TRAPHACO

Environment Socio - Culture

Technology

 Political
 Taxation policy: Import medicines from 0-5% down to 0% for all kinds of
medicines, encourage to research and develop new products, intellectual rights
protection.
 Government stability
o Policy of government in the pharmacy industry is encouraging and stable.
The Pharmacy industry is the industry which have been imposed many
rules and regularities by Government.
 Foreign trade regulations
o Import 50% of machines and mass productions, most of the machines
from Europe.
o High import tax (150%) which is higher than average  discouraging
imports from countries outside of Vietnam.
o Tax fee to encourage foreign mobile phone manufacturers to FDI (local
plants)

 Economics
The growth rate since 2009 has been reduced to the impact of the global economic
recession. This has adversely affected production and business activities of enterprises.
Specifically, the revenue growth of the company over the years is as follows:
 Interest rate: High interest rate from banks and the implementation of tight
monetary policy led to difficulties in raising capital and revolving capital of
enterprises.
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  Exchange rate: The Vietnamese dong depreciates relatively relative to foreign
currencies, leading to relatively expensive imports of materials and machinery.
 Inflation rate: High inflation rate in recent years. In addition to the impact of the
global economic recession that lead to increase production costs.

 Social
 Culture: Nowadays, when society develops, living environment also changes in a
bad way, people are at risk of suffering from common to dangerous diseases.
Vietnam is an Eastern country so culture has been deeply rooted in people ’s live.
The influence of Eastern culture tends to favor the use of traditional medicine
products.
 Social:
 Population: Population of Vietnam is nearly 90 million people. This is a
great advantage to create big markets for TRAPHACO.
 Population growth rate: Each year, the population of Vietnam has
increased by about 1 million people. This is favorable for businesses to
expand the market in the future.
 Population structure: old people make up 16, 8% of the population This is
a potential market and the main consumer of TRAPHACO.
 Living standards: Increased income leads to higher living standards of
people  Giving the company the opportunity to develop high-quality
products to serve the needs of a well-off population with high
requirements in health care.

 Technology
The development of technology leads to:
 Product innovation, replacement: Technology segmentation includes institutions,
the activities that involve the creation of new knowledge, shifting that knowledge
to new outputs, products, processes and materials. So far, the company has
researched and successfully applied new technologies to many dosage forms such
as tablets, film capsules, sugar capsules, hard capsules, soft capsules, medicine
nuggets, powdered pills, pellet, ointments, cream, cosmetics, eye drops, nose
drops, tan tea, dip tea, medicine mixed powder.
 Appearing many new modern technologies: Biotechnology and a series of new
inventions that are appearing, reshaping the competitive structure in most
industries and countries. The continuous development of biotechnology in the
world and modern machinery and technology help the Company to select suitable
technology to improve product quality, service quality and productivity.
mobilizing and modernizing traditional medicine, promoting the national essence
on the basis of technical machinery modern.
 Many new materials appear, alternative materials: a source of abundant materials
for drug manufacture.

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 Environment
 Climate and weather: This is an environment often difficult to forecast because its
changes are unusual. The phenomenon of ELINO makes the average temperature
of the earth increase. The climate is increasingly harsh, leading to the production
of input materials for TRAPHACO sometimes facing difficulties because of the
company's products, the products of natural origin account for 70%.
 Environment: Environment contains more risks for human health such as air
pollution, water pollution, stimulants in food, radioactive substances, etc.
 Resources: For the pharmaceutical industry, non-timber forest products are one of
the sources Abundant medicinal materials for research and production of drugs.
TRAPHACO SAPA Company Limited in Lao Cai on the total area 10,000 m2,
supplying clean and quality raw materials from highland SaPa to serve the creation
of products for human health care, with a capacity of 1, 000 tons of medicinal
herbs per year.
 The strategic direction of the Company is to continue to create technological
breakthroughs to apply natural products to production to create high-value
products and good efficiency such as string tea. Since then, discovering and
exploiting the true value of Vietnam's medicinal resources for the care and
protection of human health.
 Vietnam is a fertile land of medicinal herbs with more than 4,000 medicinal plants.
This is the foundation for TRAPHACO towards the research and development
natural products with high-value and good efficiency.

 Legal
In 2016, the National Assembly voted to approve the Pharmaceutical Law (amended)
with 14 chapters and 116 articles regulating the State's policy on the pharmaceutical
industry. The content of the Pharmaceutical Law 2016 was considered more favorable by
professionals and added more points compared to the 2005 Pharmacy Law.

I. FIVE FORCES ANALYSIS

 Threats of New Entrants

The big payoffs available in the pharmaceutical industry lead to a steady flow of new
companies being created. These smaller companies pose no serious threat to big company
like TRAPHACO JSC.
Some company such as FPT – Retail, Vingroup, Mobile World (The gioi di dong)
suddenly invested in the pharmaceutical industry will be the threat to TRAPHACO
because of their advantage in E – business, technology, and marketing. It might become
the potential competitors of TRAPHACO in medicine distribution field.
For the whole year 2016, the number of established enterprises reached a record of
110.1 thousand enterprises, an increase of 16.2% over 2015. Total registered capital was
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VND891.1 trillion, increased 48.1%. The average registered capital of a new
establishment in 2016 was VND8.1 billion, rose 27.5% compared to 2015. Total
registered labor force of newly established enterprises in 2016 was 1,268 thousand
people, equaling 86.1% in 2015. This year, there were 26,689 enterprises returning to
operation, a growth of 24.1% against 2015, bringing the total number of newly registered
enterprises and businesses back to operation in 2016 to 136,800 enterprises.

 Bargaining power of buyers

Pharmaceutical industry is unique among industries because the medical patient has an
absolute lack of power regarding pricing. The prescriber of the drugs, the physician,
ethically is not allowed to profit from the sale of drugs. The patents pay for the drugs and
only can ask how much it will pay to the distributor of the drugs, meaning it has little
power with the drug manufactures. The patients can refuse to pay for treatments it
believes are overpriced. Therefore, it can be concluded that individual customer has
little power of bargaining.
The only entities with any negotiating power are the pharmacies and medical
institutions that fulfill the medical patients’ prescriptions. Even these entities have little
power over newer drugs under patent or drugs with only one manufacturer.

 Threat of Substitutes
After joining the WTO, Vietnam has many opportunities to interact with abundant
capital and high technology. Many businesses seize opportunities for improvement. As a
result, more and more new drug products replace old ones, improving both quality and
functionality. The appearance of substitute products is increasingly popular to satisfy
customer demand.
At present, consumers are interested in nutritious foods such as calcium, vitamins A, B,
E... but forgetting about the supply of these nutrients through food and drink. Therefore,
competition takes place mainly among competitors in the industry.

 Bargaining power of Suppliers

Suppliers have very moderate power with TRAPHACO. The raw materials for
manufacturing drugs are commodity products in the chemical industry, which are
available from numerous sources. Most of the equipment used in manufacturing and
research is available from multiple manufacturers. Suppliers usually offer multiple
products to the TRAPHACO and also other pharmaceutical companies, which moderates
pricing on rarer materials and unique equipment.

 Competitors
In term of pharmaceuticals, there are some big domestic competitors such as: Hau
Giang Pharma, Imexpharm, Domesco Pharma and so on.
Vietnam has 178 companies in the pharmaceutical industry: 100 companies produce
new drugs, 78 companies focus on traditional medicine. In addition, it has about 300
small companies which also produce traditional drugs and nutritious foods. For example,
Imexpharm, Vimemex… Moreover, there are some companies specialize on distribution
of drugs.

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 Major competitors in the industry such as Hau Giang, Bao Long, and Phuc Vinh
pharmaceuticals have an approach to the competitive market similar to that of
TRAPHACO:
 Enhancing research, development, and product quality improvement.
 Learn advanced techniques in drug production.
 Natural raw materials and have high responsibility to the community.
So the challenge for TRAPHACO is how to make a difference in a market with such
great potential for growth while the market is undivided.
Direct Competitors: Hau Giang Pharmatical (DHG):
Hau Giang pharmaceutical company approaches the market with strategic groups:
 For products: quality, safety and efficiency are the highest commitment.
 Marketing: with a team of young, creative, dynamic, qualified and willing to
contribute to the company.
 Distribution: the distribution system spreads across the country from Lang Son to
Ca Mau.
 Research and development: investment and construction of a research and
development department and a research center
Researching science and technology to serve the company's long-term development
strategy is always considered as DHG's primary and key mission. exploit effectively
existing resources, develop new potentials.
The huge importance of intellectual property results in strong competition for high-
level workers and leading researchers. Even strong nondisclosure and non-compete
clauses cannot prevent the leaking of competitive information.
TRAPHACO should focus on R&D to increase the position compare to other
companies in the industry.

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PART 3. BUSINESS PERFORMANCE
Table 2.1: Balance sheet of TRAPHACO in 2018, 2019
Unit: Million dong

Balance Sheet 2018 2019

Current assets 859,394 888,025
Cash and cash equivalents 316,134 297,466

Short-term investments 9,400 14,500

Short-term receivables 153,573 163,014

Inventories 337,533 364,251
Other current assets 42,755 48,794

Non-current assets 730,468 683,487

Fixed assets 656,016 619,527
Long-term investments 500 500
Total assets 1,589,862 1,571,512
Liabilities 482,648 453,482
Short -term liabilities 312,184 343,493

Long-term liabilities 170,464 109,990

Owner's equity 1,107,214 1,118,030
Charter capital 414,537 414,537
Share premium 133,022 133,022
Retained earnings 95,763 95,212

Total owner's equity and liabilities 1,589,862 1,571,512

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 Table 2.2: Asset Structure and Capital Structure
Unit: %

2018 2019
Asset Structure
Total assets 42.13 40.34
Total assets 54.05 56.51
Capital structure
Liabilities/Total assets 30.36 28.86
Equity/Total assets 64.20 65.64

Diagram 2.1: Structure of assets and capital

The current assets structure over the total assets in 2019 increased by 2.46% compared
to 2018, because the Company actively handled the inventory at the end of the year.
Meanwhile, accounts receivable and other short-term assets were kept at a stable level,
showing that the Company's sales– cash collection policy has been improved and the
management of receivables in recent years is quite good, with no bad debts arising.
Liabilities and owner's equity over total capital decreased slightly over the same period in
2018, in which the structure of the owner's equity over total capital reached 65.64%,
reflecting the company's financial structure transparent and sustainable.

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 Table 2.3: Liquidity ratio
Unit: times

Liquidity ratios 2018 2019 Industry average

Current ratio 2.75 2.58 3.81

Quick ratio 1.67 1.52 2.78
Debt ratio 0.3 0.28 0.41

First, the current ratio decrease from 2.75 to 2.58 >1, which means TRA has the ability
to pay the debt however it is smaller than the Pharmaceutical industry average (3.81).
Secondly, the quick ratio falls from 1.67 to 1.52 and is smaller than the industry
average (2.78). We can imply that TRA focus on using assets to pay long term debt and
decrease in paying short-term liabilities because the Company had long-term goals when
making investments, building the first 4.0 pharmaceutical factory in Vietnam with
modern technology transfer line and the pharmaceutical extracting factory of GMP
standard in Sapa - Lao Cai medicinal plant area, building factories, equipment, new
factories, etc., all meet GMP standards with high capacity to fulfill business plans in the
coming years.
Lastly, debt ratio fall from 0.3 to 0.28 and smaller than the industry average (0.41) that
means businesses borrow less, has high financial autonomy.
 TRA has ability to pay debts, borrow less, has high financial autonomy, focus on
using assets to pay long term investment: building factories, equipment, new factories,
etc., all meet GMP standards with high capacity to fulfil business plans in the coming
years. Cash collection policy has been improved and the management of receivables in
recent years is quite good, with no bad debts arising.

Table 2.4: Profitability ratio

Unit: %

Profitability ratios 2018 2019 Industry average

ROS 9.7 9.9 0.96
ROE 14.04 13.79 -95.5
ROA 10.08 9.71 -49.5

 The ROS index fluctuated and increased slightly in 2019 ( ROS increase from 9.7%
to 9.9% and is bigger than the industry average (0.96%). That means the company has a
profitable business. This are positive signs when focusing lines of goods with high
economic efficiency.

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  The ROE and ROA ratio decreased with a very small proportion compared to 2018.
ROE decrease from 14.04% to 13.79% and is bigger than the industry average (-95.5%)
and ROA decrease from 10.08% to 9.71% and bigger a lot than the industry average (-
49.5%).
 In general, the ROS and ROA of TRA are on the average level in the industry,
proving the stable business operations, but the Company still needs appropriate business
policies to raise the ROE in the next few years.

Table 2.5: Operation efficiency

Unit: Times

Operation efficiency 2018 2019 Industry average

Account Receivable 14.33 13.26

Turnover

Days of AR 25 28 55

Inventory Turnover 2.58 2.19

Days of inventory 142 166 153

 Days of account receivable increase from 25 to 28 days and are smaller than the
industry average (55 days) => showing the ability to effectively recover receivables and
debts from customers and businesses operating mainly on cash, being cautious in
granting credit.
 The receivable turnover increased gradually over the years, showing that the
Company's policy of sales - cash collection was effective, the Company has well-
managed customer debts, minimized bad debts, and has the funding for the Company's
production and business activities.
 The inventory turnover has been stable in recent years because the Company has
proactively planned its production and business activities, and reserved inventories
appropriately. Inventory turnover in 2019 decreased slightly compared to 2018 because
the Company took the initiative in stocking goods to ensure there was no shortage of
goods in the next years.
 Days of inventory increase from 142 days to 166 days and nearly equal industry
average (153 days) shows that the company sells fast and inventory is not stagnant in the
business.
 Traphaco has the revenue ranks top 5 among the sales domestic medicine
manufacturing industry. Beside, Traphaco has a high fixed asset structure compared to
other pharmaceutical companies, because the Company had long-term goals when
making investments, building the first 4.0 pharmaceutical factory in Vietnam with
modern technology transfer line.

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 The current assets structure over the total assets in 2019 increased by 2.46%
compared to 2018, because the Company actively handled the inventory at the end of the
year to ensure in-stocks goods.
 To sum up, showing the ability to pay short-term debts immediately, ensure
capital for debts, maintain the payment term following the contract. Proving that
the Company has strong and stable finance.

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PART 4: INFORMATION TECHNOLOGY
A. MANUFACTURING TECHNOLOGY

Hung Yen TRAPHACO Factory was built on an area of more than 46,000 m2, with a
total investment of 477 billion VND. Applying modern technology to meet the good
production standards of the World Health Organization (GMP- WHO), TRAPHACO
Hung Yen factory has a capacity of 1.2 billion product units per year, reducing the
number of participants by. production operations compared to the old process but the
productivity increased 3 times.

Besides, TRAPHACO can supply 90% of medicinal herbs for production by organizing
medicinal plant areas that meet GACP-WHO standards in many localities. The
application of auto care and irrigation technology helps the medicine to achieve good
quality and greatly reduces labor costs.
Affirming the No. 1 position in traditional medicine, pioneering in the development of
high quality medicinal herbs. TRAPHACO has developed a model for the development
of sustainable medicinal herbs. Up to now, there have been 05 medicinal herbs (Dinh
Lang, Dat bitter greens, Artichokes, Conifers, Tea strings) certified by the Ministry of
Health to meet GACP-WHO standards. From the success of TRAPHACO, a number of
pharmaceutical enterprises have continued to invest in building medicinal plantations,
contributing to the sustainable development of traditional medicine in the country.
In Vietnam, closed technology eye drops are having great prospects, especially at a time
when the world is speeding up the application of industrial revolution 4.0 achievements,

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creating breakthroughs in pharmaceutical production technology in Vietnam. In
particular, the success in deploying eye drops also shows: Vietnam's pharmaceutical
industry has full investment capacity and mastery of the most advanced pharmaceutical
technologies in the world to create pharmaceutical products. has a high therapeutic effect.
Moreover, TRAPHACO's scientific and technological products are evaluated by the
Council as products of eye drops and drops manufactured under fully sealed technology
(BFS).
BFS technology is considered as the most advanced aseptic technology in the world,
being used by leading eye drop manufacturers. In Vietnam, TRAPHACO is a pioneer in
applying this technology to the production of eye drops, making TRAPHACO be one of
the leading eye drops manufacturing companies in the world.
Achieving the certification is a recognition of TRAPHACO's efforts in investing in
science and technology to bring consumers safe and quality products. Contribute to the
mission of "Pioneering the creation of Green pharmaceuticals to protect human health".

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B. E- BUSINESS MODEL

Currently, TRAPHACO company still mainly operates under the wholesale channel
(about 80%), very little retail. Therefore, the technology is also mainly applied on the
wholesale model. With the use of high technology in the management of the distribution
system, the company has direct access to and care for more than 23,000 pharmacies
nationwide. According to experts, the strong and drastic steps of this policy have made
TRAPHACO become the pharmaceutical company with the strongest distribution system
in Vietnam's pharmaceutical industry.
Traphaco has successfully built and implemented an effective corporate governance
system, applied scientific and technological advances in business management and
administration such as: Distribution system (DMS) in management. sales, independent
monitoring system (TNS), KPI (performance evaluation index) ...
The synchronous implementation of the new sales policy together with promoting the
application of information technology in sales management has contributed to improving
the efficiency of corporate governance. Traphaco has applied high technology in
distribution system management (DMS), equipped with tablets for sales staff. Thereby
every day, every hour to update and accurately analyze sales data. At the same time,
managing customer information, detailed data for each customer, helping leaders make
accurate decisions when analyzing the data of each pharmacy without the need for a
reporter system of salespeople. row. On the other hand, sales staff can be monitored such
as: route, visit quality, detailed sales ... This policy also makes Traphaco's sales staff
become more professional. Through that, corporate governance has been improved
markedly through the following indicators: days of inventory, days of collection, capital
turnover ... Thus, contributing to the company's profit growth by minimizing spending.
financial fees, commodity storage costs, increased labor productivity and more
importantly, the production system meets the GMP principle, there is no inventory in the
factory.

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PART 5: STRATEGIES AND SOLUTION
A. SOLUTION 1: DEVELOP THE B2C MODEL – ONLINE PHARMACY

As we mentioned above, although the current distribution system has been helping
TRAPHACO grow rapidly over the years. But Wholesale prevents TRAPHACO's
policies from reaching the final customers, distorting market prices. TRAPHACO applied
B2B business which is no longer bringing about many benefits, on the contrary, it brings
many harms to the company such as drug price dilution, loss of control on quantity and
quality, and price. We refer to the expansion of another business model, B2C combined
with science and technology:
 Target customers: Final customers who need to buy medicines and do not need to
go out (online shopping)
 Mission: create a habit of buying genuine drugs online, create differences with
other enterprises and values for the company

Campaign
Stage 1: Design
We create a new website and an application as an online pharmacy which have:
 Full of products and related information such as ingredients, manufacturing units,
specific instructions ...for customers can choose easily.
 Have qualified pharmacists, always online to answer questions, give advice and
consult
 Create an application to keep a record of the medication history and reminders to
take pills so that patients can track the status of medication usage, remember to
drink medicines, and doctors also can look at it to facilitate follow-up monitor the
patient's condition because so many people forget or lose their medical records,
and forget to take medicines, which make the treatment process take longer.
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 Stage 2: Testing
 Our application is available and free in App store and CH play, suitable for IOS
and Android.
 We testing our website and application in many kinds of smartphones, iPad, Mac-
book, laptops, Computer…
 Check the status of the website: products are updated not, the suitability in form
of payment-master card, debit, credit card, cash => check if have any bugs, fix
immediately, and upgrade systems.

Stage 3: Advertising
 Run ads on TV, original website, Youtube,…
 Invite KOLs: Hot-mom Minh Trang, Chau Bui – young- generation KOLs. These
influencers will share their experiences and review our website and application.
Reason to invite young KOLs: Young people are more receptive to new things,
KOLs have more influence on young people => take advantage of this to attack
the young people market. In addition, TRAPHACO also invited celebrities of the
previous generation: Hong Van, Quang Thang... who will attract customers at a
higher age.

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  Promotion: Give customer vouchers, promotion codes when they install our app
and order through the website. For example, Free-ship codes, discount codes
when paying through Airpay, Momo…; 10% promotion code when installing our
application and buy through our website, etc.

B. SOLUTION 2: APPLYING TECHNOLOGY IN PRODUCTION

Bring 4.0 to the production process to get green pharmaceutical with the slogan:
“Green TRAPHACO - Modern TRAPHACO”.
Based on the principle of “No touch, No dust” in production (no human impact, no dust
generation), the whole line is limited to the lowest level of human intervention in
production, no infection Cross, the optimal technology to improve product quality.
All steps in the production process are strictly produced and censored based on the
criteria of the “green health path”, with the initiative of clean input materials, strict
quality control and contribution to development Vietnam pharmaceutical industry.

Products:
 Raw materials: we organize GACP-WHO medicinal growing areas in many
localities, this strategy helps TRAPHACO to be proactive in raw materials and
ensure product quality despite market fluctuations. Especially, creating jobs for
local workers in each region, solving employment issues of regions, proactive in
raw materials to avoid dependence on market fluctuations, especially in the
Chinese market which are threats in Trend Pharma 4.0.
 Products: Moreover, each product will have its QR code so that consumers can
easily check the ingredients, planting locations, growers, and date of planting to
avoid buying fake medicines to ensure greenness, cleanliness, and peace of mind
for consumers.

Production: With the growing pharmaceutical industry, automation, robotization of

production processes in a closed environment, and limiting the intervention of human
beings are hot trends in developed countries; they are also the “technology of the future”
that Vietnam’s pharmaceutical industry can’t afford to be margined.

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 As we mention in the previous part, in Vietnam, TRAPHACO is a pioneer in
applying this technology to the production of eye drops, making TRAPHACO one of the
leading eyes drops companies in the world.
We also build all tablet line with automatic and continuous technology equipment
system operated by European-standard robot arm. The lines of liquid, syrup with large
capacity are completely synchronized and connected automatically. TRAPHACO has
received the certificate for the automatic eye drop production line, we will invest in
research into other production lines to obtain more certification, thereby creating
confidence for users in our products company.
As an analysis of business performance, TRAPHACO has strong and stable finance,
the company’s orientation is also towards green technology, so we believe that our
investment in construction is feasible.
About IT management, this department operates, maintains, analyzes, and synthesizes
data. From these data, the company can understand customer shopping habits, response,
productivity… Then researchers find strategies to develop strengthens and dismiss
weaknesses in the production process and also online website and application.

Distribution:
 Affiliate with major sales channels: Lazada, Sendo, Tiki, Shopee…
We can see the boom and growth of online shopping recently with the participation of
big companies like Shopee, Lazada, Sendo, Tiki ...which are companies with a relatively
large background in product distribution with thousands of customers as well as suppliers
and sellers. Recently, due to the influence of COVID 19, consumers' shopping habits
have also changed, they gradually turn to online shopping, which is both convenient and
secure. From the habits of customers and the availability of sales platforms of Shopee,
Lazada, Sendo, Tiki, ... the cooperation of TRAPHACO with distribution partners to
create sales channels, selling genuine products will be welcomed by many people and
easier to entry online market.
 Cooperate with carrier partners: Grab, Now, Go Viet, Lala Move, Giao hang tiet
kiem,…
Along with the growth of online shopping, the shipping industry has also developed.
Instead of hiring people to transport in the traditional way that requires a lot of
manpower, expenses,... Nowadays, there are major transport partners with branches
across the country such as Grab, Giao hang tiet kiem, Ninjavan at reasonable prices.
Cooperating with these carrier partners makes deliveries faster and saves more time and
costs.

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 REFERENCES
1. TRAPHACO Joint Stock Company –Annual Report 2018
2. TRAPHACO Joint Stock Company –Annual Report 2019
3. TRAPHACO Joint Stock Company – Sustainable Development Report 2017
4. TRAPHACO Joint Stock Company – Sustainable Development Report 2018
5. http://www.traphaco.com.vn/en/home.html
6. https://www.brandsvietnam.com/19516-Chu-tich-Traphaco-va-muc-tieu-
dong-duoc-xanh
7. https://finance.vietstock.vn/TRA-ctcp-traphaco.htm
8. https://finance.vietstock.vn/TRA-ctcp-traphaco.htm

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