2. Why Vietnam?
Strengths Weaknesses
Vietnam has been one of the fastest-growing Vietnam suffers from substantial trade,
economies in Asia over the past five years, current account and fiscal deficits, leaving
averaging growth of 8.0% a year the economy vulnerable to external shocks.
The economic boom has lifted many The fiscal picture is clouded by considerable
Vietnamese out of poverty, with the official 'off-the-books' spending
poverty rate in the country falling from 58% The heavily managed and weak dong
in 1993 to 20% in 2004 currency reduces incentives to improve
quality of exports and also serves to keep
import costs high, thus contributing to
inflationary pressures
Opportunities Threats
WTO membership has given Vietnam access Inflation and deficit concerns have caused
to both foreign markets and capital, while some investors to re-assess their hitherto
making Vietnamese enterprises stronger upbeat view of Vietnam. If the government
through increased competition fails to curb inflation, it risks prolonging
The government will continue to move macroeconomic instability, which could lead
forward with market reforms, including to a potential crisis
privatization of the state-owned enterprises Prolonged macroeconomic instability could
sector and liberalizing the banking sector prompt the authorities to put reforms on
Urbanization will continue to be a long-term hold, as they struggle to stabilize the
growth driver. The UN forecasts the urban economy
population to rise from 29% of the
population to more than 50% by the early
2040s
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3. PESTLE Analysis
• Politics
• Economics
• Social
• Technology
• Law
• Environment
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4. Pestle - Politics
Strengths Weaknesses
The Communist Party government appears Corruption among government officials
committed to market oriented reforms poses a major threat to the legitimacy of
necessary to double 2000's GDP per capita the ruling Communist Party
by 2010, as targeted. The one-party There is increasing (albeit still limited)
system is generally conducive to short- public dissatisfaction with the leadership's
term political stability tight control over political dissent
Relations with the US are generally
improving, and Washington sees Hanoi as a
potential geopolitical ally in South East Asia
Opportunities Threats
The government recognizes the threat that Vietnamese dissidents are seeking external
corruption poses to its legitimacy and has help, especially from the US. This could
acted to clamp down on graft among party complicate Vietnam-US relations, with
officials Washington having criticised Hanoi over its
Vietnam has allowed legislators to become restrictions on religious freedom
more vocal in criticizing government Although strong domestic control will
policies. This is opening up opportunities ensure little change to Vietnam's political
for more checks and balances within the scene in the next few years, over the
one-party system longer term, the one-party state will
probably be unsustainable
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6. Pestle - Social
Population
88.00 86.16
86.00 85.19
84.15
84.00 83.10
82.03
82.00 80.90
79.72
80.00 78.68
78.00
76.00
74.00
2001 2002 2003 2004 2005 2006 2007 2008
Source: www.gso.gov.vn
In the past 8 years, Vietnam population has grown 1.14% per year.
Currently, Vietnam population is in the top 14th in the world and top 3 in ASEAN
(Indonesia and Philippines ranked 1 and 2 respectively) and is expected to reach 93.7
million people in 2015.
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7. Pestle - Technology
• Vietnam has signed many BTA agreements
with foreign countries such as Indonesia,
Bulgaria, US, Korea…for technology
transfer.
• All pharmaceutical companies required to
meet GMP-WHO
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9. Porter’s 5 forces - entry barrier
• HIGH
• Entry to this industry is extremely
challenging. Expenses for R&D in studying
new product are considerable. Medicines
are of importance, which affect people
health, even life of patients. As a result,
medicines need clinical study and approval
from the government drug administration.
Moreover, the drug registration and patent
protection also set barriers to new comers
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10. Porter’s 5 forces - bargaining
power of supplier
• HIGH
• Most of the local manufacturers do import
semi-finished products then to label with
their brands and distribute to professional
and patients. Most of suppliers are
multinational pharmaceutical companies.
After WTO accession, the power of supplier
will be reduced thanks to multiple
suppliers with competitive price.
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11. Porter’s 5 forces - bargaining
power of buyer
• LOW
• As pharmaceutical products are necessary
products which relate to life and death,
the demand for such products is un-
avoidable and normally not negotiable.
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12. Porter’s 5 forces – substitution
• LOW
• Demand for medicine is in-evitable and
un-substitutable
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13. Porter’s 5 forces - competition
• HIGH
• This means that in the area of pharmaceuticals Vietnam has
been or will be reducing its import tax to an average of 2.5%
within five years of the accession. In addition, the domestic
pharmaceutical industry should also see improvements as
counterfeit activity and intellectual property theft is clamped
down on. This should therefore improve competition in the
local marketplace, with pharmaceuticals expected to become
much more competitive in the long term. Local consumers
should benefit from this competition in terms of product
quality improvements, price reductions and a wider product
choice.
Vinh Nguyen The: mekonginsight@gmail.com
14. Vietnam Pharmaceutical And
Healthcare
Industry
• Significant growth potential, given a population of - S
SWOT
approximately 87.4mn
• Domestic manufacturing facilities operated by multinationals
offering a base on which further sector development could be
built
• The government’s commitment to developing the health sector
• Sizeable local generics sector
• Strong traditional medicines segment with potential to improve
the nonprescription drugs market in the longer term
• Domestic companies being forced to comply with international
manufacturing standards (GMP), at a considerable expense
• Underdeveloped primary care services continuing to hamper
access to medicines and improved product market penetration
• Multiple market barriers including the lack of freedom for
foreign companies to operate freely in Vietnam
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15. Vietnam Pharmaceutical and
Healthcare Industry SWOT – W
• One of the least-developed pharmaceutical markets in Asia,
with low per capita spending on drugs
• Patent law notably below international standards
• Counterfeit drugs account for a significant amount of market
consumption
• Little distinction made between prescription and over-the-
counter (OTC) drugs, with most medicines available without a
prescription
• Complex drug pricing policy biased towards local drug
producers
• Import-reliant market, especially in terms of high-tech
products and active pharmaceutical ingredients (APIs), which
makes it vulnerable to international currency movements
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16. Vietnam Pharmaceutical and
Healthcare Industry SWOT – O
• The ASEAN harmonization initiative, including the adoption
of Western regulatory standards such as ICH and WHO
guidelines
• Introduction of five-year exclusivity for clinical dossier data
encouraging research-based multinationals
• The end of the price freeze has the potential to boost
values despite a possible fall in volumes
• Radical restructuring of the pharmaceutical industry with an
emphasis on foreign investment and biotechnology
• Improvements in pricing and regulatory environments to
boost foreign company interest and investment in the
country
• Recently ratified WTO membership to improve the trading
climate and potentially, in the longer term, redress some
pharmaceutical trade issues
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17. Vietnam Pharmaceutical and
Healthcare Industry SWOT – T
• Government resistance to aligning patent law fully with
international standards deterring multinational sector
expansion
• The government increasingly interfering in the industry,
protecting indigenous firms through the use of legal trade
barriers
• With a notably fragile regional economy, Vietnam is
increasingly susceptible to regional and global economic
fluctuations
• The legalization of parallel imports negatively impacting
performance of patented drugs
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18. Market size
Value of domestic supply and demand
Supply Demand
1,600
1340
1,400
1,200 1,114
1,000
Million USD
1,000 818
726
800 625
520 561
600 422 451 395
475
400 305
200 241
170
200
0
2001 2002 2003 2004 2005 2006 2007 2008e
Source: Vietnam Department of Pharmaceutical Management
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19. Market Segmentation
Source: Business monitor
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27. Market summary
• pharmaceutical market is underdeveloped and suffers from poor
regulatory and intellectual property (IP) standards
• Low-cost, locally produced generics – as well as counterfeit
products – account for a sizeable proportion of drug consumption
due to low consumer purchasing power and an under-funded
healthcare system.
• patients are responsible for financing much of their medical needs
• pharmaceutical consumption represents only 1.56% of Vietnam’s
GDP (1.18% in 2012).
• The country’s pharmaceutical is estimated at US$1.1bn in 2007
and US$2bn in 2012
• Prescription medicines will remain dominant, with the biggest
focus on drugs for the treatment of infectious and chronic
diseases
• Market figures will remain distorted by the lack of a distinction
made between prescription and OTC drugs, with most medicines
available without a prescription Vinh Nguyen The: mekonginsight@gmail.com
28. Key growth factors –
Distribution
• Vietnamese pharmaceutical distribution channels are divided
into two main channels: treatment and commercial, with a
ratio of 37:63. Bidding and selling through hospitals is
considered a treatment channel, while selling through
distribution centers and pharmacies is considered a commercial
channel.
• Currently, some firms are building up their distribution systems
through establishing distribution centers, pharmacies and
through co-operation with regional pharmaceutical firms. Some
companies, moreover, also try to penetrate hospital precincts
through bidding. However, the profit margin in this channel is
not high because the bidding prices are, in most case, much
cheaper than market prices.
• In the future, the distribution system within the industry will
be the key competitive factor. Those companies that can
establish and manage their distribution systems effectively will
be those who lead the market. Vinh Nguyen The: mekonginsight@gmail.com
29. Key growth factors –
Macroeconomics
• Remains an attractive outsourcing destination for many
Japanese, South Korean and Taiwanese firms seeking to
maintain their cost competitiveness vis-à-vis emerging
Chinese rivals. The interest in Vietnam is still strong among
foreign groups – such as banks and retailers – looking to
get an early foothold on the emerging Vietnamese
consumer market. This will lay the ground for a continued
rapid economic expansion over 2012-2017, as Vietnam
takes its place on the regional stage
Vinh Nguyen The: mekonginsight@gmail.com
31. Why to invest in Vietnam
Pharmaceutical companies
• High growth rate 16-17%
• High population and high birth rate
• Products are essential given any crisis
• Local pharmaceutical companies performance in
2008 exceeds yearly target
• Sustainable EPS growth >< other industry
• Entry barrier is high => Profit margin is high
• Low Corporate income tax (20%)
• Restriction to foreign pharmaceutical companies
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32. Thank you
• Need:
– Research about Vietnam Pharmaceutical industry
– Research about Vietnam specific target company,
– Due diligence
– Business development
• Contact
• Email: mekonginsight@gmail.com
• Phone +84 9 14 29 39 79
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