Ateneo de Manila University

John Gokongwei School of Management

Project Information Cataloging System (PICS)

Class Project Information and Cover Sheet

Capeding, Jem
Cortez, Danica 2015-2016 Sem: Second

De Ramos, Famie LS10

Duavit, Kianna Philippine Business and Economic Environment

Ramos, Shikayna Mr. Fructuoso T. Sabug Jr.

Santos, Paulo Grade: Call Number:
Velasco, Mark

Project Title: An Industry Study on Functional Area:

Du-Av Trading: An Analysis on its

Internal and Competitive
Environment
Client: Du-Av Trading Comments:

Category: Trading Industry

Abstract
Today’s society is currently experiencing various diseases and sicknesses and with the emergence of new
and deadly ailments comes the need for medicine and pharmaceutical products. A prime distributor of
these products is Du-Av Trading. All the information gathered for the research of the company was taken
from interviews, research, and data sent by the company owner, himself. It is evident that fast distribution
and allocation of medicinal goods and services is needed in order to meet the needs of the public. The
public being consumers that make the existence of industries such as Du-Av Trading possible. In order for
Du-Av Trading and the industry that it belongs to continue growing, the study recommends higher
allocation of funds to marketing efforts to further communicate its existence to other producers so that the
company can efficiently provide its services to a wider range of customers.

Author’s recommended keywords:

Distributing, middleman, pharmaceuticals, enhanced level of technology, efficient trading, supplying,
marketing

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Table of Contents

EXECUTIVE SUMMARY .................................................................................................................... 3

The Research........................................................................................................................................... 4
1. Methodology ................................................................................................................................... 4
2. Significance of the Study ................................................................................................................ 4
II. Du-Av Trading: The Firm and its Internal Environment .................................................................. 5
1. Background History ........................................................................................................................ 5
2. Ownership and Management Profile............................................................................................... 5
3. Mission/Vision/Values, Big Hairy Audacious Goals (BHAGs), if any, of the organization .......... 5
4. The Firm’s Value Chain.................................................................................................................. 6
5. Qualitative description of the firm’s major assets and/or resources ............................................... 7
III. The Industry and its Competitive Environment ................................................................................ 7
1. Industry Definition ..................................................................................................................... 7
2. Background History ................................................................................................................... 7
3. Current industry size in terms of sales and number of firms ..................................................... 8
4. Market Structure ........................................................................................................................ 8
5. Major players, their influence & brief background .................................................................... 9
6. Leading practices & competitive strategies in the industry esp. by the leading players in: ..... 10
IV. The National and Global Environment ........................................................................................... 13
1. Socio-cultural Environment .......................................................................................................... 13
2. Technological Environment .......................................................................................................... 13
3. Economic Trends .......................................................................................................................... 14
4. Political Environment ................................................................................................................... 15
5. Natural Resource Environment ..................................................................................................... 16
6. Global Development ..................................................................................................................... 16
V. Industry Analysis and Recommendations ........................................................................................ 16
1.Analysis of Market Structure ......................................................................................................... 16
2. Analysis of Supply-Demand Conditions....................................................................................... 16
3. Analysis of Industry Life Cycle .................................................................................................... 16
4. Porter’s Five Forces ...................................................................................................................... 17
5. SWOT Analysis ............................................................................................................................ 19
6. Key or Critical Success Factors .................................................................................................... 21
7. Conclusions and Recommendations ............................................................................................. 23
Appendix A ........................................................................................................................................... 24
Bibliography ......................................................................................................................................... 25

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EXECUTIVE SUMMARY

From its establishment in June 2013, Du-Av Trading specializes in providing generic
medicines in IM-IV form to hospitals in the Philippines. Aside from pharmaceuticals, Du-av
is also an accredited distributor of electrical supplies and hospital equipment. It aims to
deliver quality and cost-effective products to both private and public sectors, with the aim of
increasing medical knowledge on the prevention of disease and infection through
presentation.

As a relatively new firm in the market, Du-Av continues to grow in the industry and
maintain its goal of quality service amidst competition of long-established companies. It aims
to take post in target territories namely Region IVA and VI, and then expand to other regions
in the country in order to establish a nationwide distribution system as well as a marketing
arm of the company. In the past three years of business Du-Av displays steady growth with
sales beginning at P350,000.00 on the first year, to P2,400,000.00 as of current 2016 data.
This only proves effective strategic planning and initiatives to generating profit in its early
years. Du-Av exhibits good use of its competitive advantages with strong client partnerships,
regular marketing efforts, low overhead cost, flexible credit terms and political connections to
keep up with the major players in the market.

Although growth and improvement is visible, Du-Av still faces problems regarding
cash flow management and competition. It currently contends with multinational companies
that supply a wide range of products to different kinds of markets, who all seek to constantly
innovate to provide for demand. Considering the huge amount of capital needed for firms in
this industry to flourish, competition levels are still high due to persistent demand from all
areas of the country and the substantial need of the attainment of higher health awareness and
disease prevention.

Based on research, interviews and data analysis, it is recommended that Du-Av

trading continue to strategize on improving marketing efforts with cost-efficient methods.
The continued existence of its established competitors and the constant possibility of new
small scale generic players pose a high threat on operations, especially when the latter does
not require as much capital to be able to enter the industry. Lastly, flexibility and resilience in

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methods of innovation and strategizing will allow Du-Av to further increase profitability and
maintain a good stature in the industry.

The Research
1. Methodology
A. Scope and Limitations of Study
The study shall mainly be focused on and limited to the chosen company, Du-Av
Trading. Included in the study is the background of the company, as well as its operations,
logistics, and other external factors that affect the company’s overall status. It shall also
include data from pharmaceutical companies to further allow the group to compare the
chosen company with other companies in the same industry.
B. Type of Data Gathered
The study shall present graphs that show the trend of how the Philippine
Pharmaceutical Market has been over the years. Moreover, it shall include data tables
indicating the quantity and total amount of the different medicines sold, along with the
respective information of the company, and tables showing the percentages of how much the
company sells to different areas in the country. Lastly, it shall compare that with the amount
of shares in sales of other pharmaceutical companies to further aid the research and to help
compare and determine the stand of the company in relation to others.
C. Research Methods Used
The data gathered shall be sourced straight from the company’s files and from
questions addressed by the company’s President, PJ Duavit. Aside from this, other
supplementary information shall be coming from research.
D. Resource Utilized
The resources utilized shall include the internet and information from the company
itself.

2. Significance of the Study

The study shall help its readers understand the company’s business operations and
how it influences the country’s economy. This in turn provides opportunities to understand
the industry and how it works, and to also determine the factors that affect the economic
value of different pharmaceutical companies and how their systems work.

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II. Du-Av Trading: The Firm and its Internal Environment
1. Background History
Du-Av Trading was formed in June 2013 and is currently led by its president PJ
Duavit. The company is engaged in the distribution and trading of general merchandise such
as generics in injectable form, electrical machines and medical equipment among others to
hospitals all over the country.
An incident of incomplete manpower on August 2013 was a challenge for the
company, as well as delayed payments from several accounts impeded cash flow. Despite
this, production per proposed territories as of Aug-Dec 2013 for all 8 territories in Luzon area
were as follows: 14,000 units costing P7,527,000 for Luzon; Gross Profit of P7,822,000 and
and Net Profit of P1,594,620 as of July 2013.
There is competition between the prices offered by Du-Av and the already instituted
local companies and so being a relatively new player in the market, there is higher expense
for promotions. Du-Av seeks to establish bases in two regions and once successful, proceed
with expansion to other regions in the country.

2. Ownership and Management Profile

A. Key Owners and Decision Makers
The company was started by its President, Mr. PJ Duavit in June 2013. The business
came to be after Mr. Duavit saw a feasible business opportunity following 17 years of
experience in the pharmaceutical industry. He graduated with Bachelor of Science in
Marketing Management in San Beda College, and worked as a district manager at Pfizer
Philippiners from 2003 to 2006. He also worked for CNS from 2006 to 2009, and as sales
manager of Novartis from October 2009 to June 2013. Following these work experiences,
Du-Av was started and now distributes imported medicines and medical equipment from
countries such as Korea and Germany to different parts of the Philippines.
B. Connections with Government agencies/Other Industries
The company chose not to disclose this information.

3. Mission/Vision/Values, Big Hairy Audacious Goals (BHAGs), if any, of the

organization
The short term goal of the company is to target at least 5 accounts on a per region
basis, specifically Region 4A and Region 6. Once sales and operations are stabilized in these

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regions, operations will expand to other regions in the Philippines to establish a nationwide
market coverage.

4. The Firm’s Value Chain

A. Primary Activities
Since the company is merely a distributor of products and services rather than a
producer, the value added for each step of the value chain is not entirely applicable since it is
in the producer’s side where the value is added for each step in production. What Du-Av
Trading has that can give value to its services is the efficient and fast way of distributing its
goods to the companies it is supplying. The edge that the company has against other
companies is that it is able to locate the demographic best suited for its products and adjust
their marketing strategies accordingly to it.

B. Inbound Logistics
The company has sourced its medicines from 3 different Pharmaceutical companies
along the years namely:
a. Daewoong Pharma Phils.
Daewoong Pharma Phils. was established during 1945 and as of today, has 16 local
distributors and 39 existing products with CPR.

b. Shin Poong Pharmaceuticals Company

Shin Poong Pharmaceuticals Company was established during 1962 and produces
various kinds of pharmaceuticals and doing research and development for more than 30
years. It synthesizes raw materials using a self-developed technology (ex. mebendazole).

c. Samjin Pharmaceuticals Co., Ltd.

Samjin Pharmaceuticals Co., Ltd. is a South Korean-based company engaged in the
manufacturing of a wide array of pharmaceuticals such as antihistaminic agents, circulatory
system drugs, gastrointestinal agents, osteoporosis treatments, hepatic disease agents,
respiratory agents, and antibiotics agents among others.

C. Operations
Du-Av Trading is engaged in the trading of generic IM-IV medicine and electrical
supplies. The company obtained a general trading license which allows them to trade both

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pharmaceutical products and electrical equipment. They source materials from manufacturing
companies abroad and purchase them from wholesalers who complete the packaging process.
Du-av then trades these products under the labels of the wholesalers. The IM-IV vials are
then sent to subdistributors or franchises still under the company. It is then the responsibility
of these franchises to supply the hospitals with the medicines on a quota basis.

D. Outbound Logistics
The company distributes its own products to other locations by finding the market
potential-respiratory where it states what locations where it states what locations can provide
the most contribution to their market. Some examples include: 9% contribution in Cavite,
Batangas, and Lipa; 4% contribution in Nueva Ecija and Nueva Viscaya; 8% contribution in
Laguna and Bicol; 7% contribution in San Fernando, Bat-Zam, and Bulacan; 5% contribution
in Pangasinan, Angeles, and Tarlac.

5. Qualitative description of the firm’s major assets and/or resources

The company chose not to disclose this information.

III. The Industry and its Competitive Environment

1. Industry Definition
Du-av Trading engages in the distribution and trading of general merchandise, and
can be classified as part of the trading industry. Products include medical equipment as well
as security solutions materials such as street lighting and CCTV. However, it is also able to
cater to many other clients and operations such as those that supply medicinal products and
equipment which implies its involvement in the pharmaceutical industry. This paper aims to
explain the circumstances that allow the company to exist and function locally and globally.

2. Background History
The world is currently in a state of constant change and these changes eventually lead
to people needing to adapt in order to survive. As multiple ailments and new diseases emerge
from varying sources, the situation calls for an effective way of being able to cope with the
circumstances in order to keep up with the ever changing world. Individual changes such as
changing one’s consumerist lifestyle may be able to temporarily suppress the damages it
might do but in the long run, institutional changes will be the one that triumphs. This is the
primary reason why Du-av Trading was created. It serves as the middleman between traders

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that serve as a quick and efficient way of transferring goods from one firm to another. Du-av
Trading serves as a “messenger company” in the sense that it markets these medical-related
properties and ensures smooth transfer between the manufacturer and the consumer.
It is essential that Du-av Trading be studied even further since in a world full of
consumerist desires, the only way to satisfy the unlimited wants and needs of the people is to
deliver to them what they desire and, as stated in the preceding paragraph, the current needs
and wants of the people is to be able to acquire medicinal goods in order to adapt to the
changes that is currently happening, not only in our country, but in the entire world. Du-av
Trading emerged from the needs of the consumers in order to supply the smaller retail
markets the goods that they sell sourced from the manufacturers themselves.
3. Current industry size in terms of sales and number of firms
Currently, only 30% of the population can afford medicine and health care. This in
turn suggests a greater opportunity for significant growth and improvement. In fact, the
Philippines shows an annual average increase in pharmaceuticals demand of 11.34% from
2005-2010. However, due to a fast growing population, the market is expected to grow to Php
320.57B by 2020.
The Pharmaceutical Industry has total sales of Php 126.04B (US$ 2.91B) in 2011.
Meanwhile, in 2012, this rose to Php 129.96B (US$ 2.89B), increasing by 3.1% in the local
community, and an increase of 3.3 in US dollars’ terms. In addition, the company’s 2011
total sales for healthcare is Php 364.95B (US$ 8.43B), and Php 408.26B (US$ 9.25B),
showing an increase of 11.9% in local terms, and 12.1% in US dollar terms.
4. Market Structure
In the trading industry here in the Philippines, it is observed that it follows a mixed
economic structure as a portion is run by the free market while the rest is run by the
government. In this industry, the firms determine the value of their products as sellers while
the government sets a standard on how such products should cost. The government also
intervenes through the imposition of tariffs, other restrictions and policies that govern the
trading industry. Meanwhile, the supply and demand condition is dependent on the type of
products being traded due to the fact that these business firms offer a variety of products.
With regards to the industry life cycle, the cycle would begin at the embryonic stage
of this industry. In the embryonic stage, the trade industry just began to develop when people
found out that trading was a good way of being able to sell to the other people. After, the
industry underwent the growth stage wherein the number of firms engaged in such industry
rose and are continuously rising until now. Rivalries are formed during the shakeout stage

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when companies that sell similar products, such as equipment, compete for the market by
adjusting their prices. Next to the shakeout stage is the maturity stage. In this stage, the
control of the buyers become stronger because they determine whether the firms would be
experiencing decline wherein the behavior of the market would tell if the companies would
thrive or lose profits due to numerous factors that affect such as the economic status of the
different countries around the world.
In the pharmaceutical industry, there is a mixed economy in our country but the
perfectly competition type of market structure is more clearly evident because there are a lot
of firms that sell and engage in medical supplies, equipment or medicine wherein they
compete for.
In the Philippines, it can be observed that the demand for medicinal and
pharmaceutical products has been very substantial. It has continuously grown as our country
has continued to import more with a yearly average of 11.34% from the years 2005-2010
based on the data given by the company. As the years continue to pass by together with the
growing population we have, there is a huge possibility that the demand for pharmaceutical
products would continue to increase. Local manufacturers would have the opportunity of
bringing in generic versions of the drugs whose patents have already expired in the past
years. In this way, there would be more available drugs that would be catered to the market
which would benefit our country as the demand for such products is always increasing due to
the rising population of the country.
For its industry life cycle, the embryonic stage begins when the medicinal companies
start to develop and become known in the market by drugstores. Next, the growth stage
occurs when their medicinal products have become more in demand by different medical
facilities and stores. Shake-out occurs when companies begin to experience the intensity of
competition so the market would be divided differently depending on which brand has
attracted the customer’s mind. Rivalries begin in such stage. Next, they would experience
maturity depending on the people’s decisions on which products to buy and if they tend to not
purchase some, there is a possibility that the firms would experience the decline stage
wherein they would lose profits.
5. Major players, their influence & brief background
a. Unilab
Considered the biggest pharmaceutical company in the Philippines being founded way
back 1945, Unilab carries the biggest prescription, consumer healthcare and personal care

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brands in the country. It has been a steady provider for Filipinos since operations have
commenced, making it a huge influence on its competitor companies.
b. Ritemed
A local, independently owned pharmacy, RiteMed distributes affordable medicines to
the Filipino community.
c. GlaxoSmithKline
Coming from a merger of GlaxoWellcome plc & SmithKline Beecham plc, operations
started in 2001 for GlaxoSmithKline. With a network of more than 150 countries, 89
manufacturing sites and prominent Research & Development, GSK is currently known as one
of the biggest names in commercial healthcare.
d. Pfizer
Founded by German-American cousins Charles Pfizer and Charles Erhart in 1849; an
american global pharmaceutical;
e. Roche
Established in 1896 in Switzerland, Roche ventures in innovative pharmaceuticals and
diagnostics and is now considered the world’s largest biotech company. It has also been in a
major player in the field of cancer treatments. Two-thirds of their Research and Development
is working on putting together treatments and their corresponding diagnostics, making them
pioneers of personalised healthcare.
6. Leading practices & competitive strategies in the industry esp. by the leading
players in:
a. Market Development

The trading industry is a vast market wherein companies within it may trade and
distribute the same good but their approaches could be as different as two industries. Trading
can be done within the country or internationally, and can either be at wholesale or retail.
Nearly any commodity can be traded, may it be stocks, clothing, drugs, electronics.

Market Development has three main goals: to always strive to expand the total market
for a new product or a new company by entering new segments of the market, to create new
users out of nonusers, and ultimately increasing the usage of the existing users of the product.
It shall depend on the type of market that the trading company has as strategy results may
vary and hence, must be objective since each market has different trends, and needs that must
be met.

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 For example, in the drug trading business, the vast number of medicines available,
both newly-created and the tried and tested, could make it very hard for the traders to market
them to doctors and consumers. So as a trading company, a strategy may be to start with
researching what new medicines are available. Are the pharmaceutical companies that created
these medicines reputable? What illnesses seem too need the most efficient medication at the
moment? What are prices ranges of these medicines? How will the trading company prove
which of the medicines is the most efficient? And finally, how will the company be able to
pitch said medicines to the doctors? Will the usual door to door work? What about discounts?
Should freebies such as pens, prescription pads, umbrellas, and the like be thrown in?

b. Industry Innovations

No matter how vast the reach of the trading industry is in terms of markets, some
innovations needed by the industry are shared by most of the markets that the industry works
with. Innovations such as pricing, consumers, product distribution, quality check, work
distributions (to name a few) are very much required to keep a trade company up and running
no matter the market they handle.

Trading relies heavily on operations and the pre-produced goods that they source out
to retailers. Hence it is the company’s job to buy and sell it at a profitable price to check if the
goods meet the quality specified and maintain them in top quality for the duration of the
transaction, not to mention how they should allocate the work among their workers, have
foolproof plans for distribution, contingency and even company improvements. The company
should also be able to gauge if they have to make adjustments or even changes in their
operations if they think they are not able to reach the client’s standards or if there were any
feedback given.

The key point of having innovation is that they should continue on improvements and
repairs as soon as it is needed. As long as the company knows its strengths, they can put more
work on lessening its weaknesses. The company who finds single solutions to multi-level
problems will be able to do more and get more hindrances out of the way. No company will
have the perfect way to innovate, but they should be able to find one suited to itself.

c. Varieties Offered
This industry offers a variety of products ranging from medical products and
equipment, rescue equipment and security equipment. They offer products such as medicines,

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CCTV, Street Lighting among many others. With regards to the main product that they
engage in trading, it is the medicines and the equipment which they tend to focus on. They
gather good quality and highly dependable brands from Korea and here in the Philippines and
distribute products such as CCTV, street lighting and rescue equipment since they see that it
is a necessity for the protection of the people and the good of their welfare. Through this,
they enable themselves to cater to different needs of the society and at the same time, assure
the people of great quality in their products.
d. Packaging, Advertisement and Promotions
In the case of the trade industry, this matter is more for the developer than the trade
company itself. The trade company is more supplier than maker. They are already dealing
with pre-produced products, products which come in packagings created in the research and
development sector, advertised by the PR Unit and promoted mostly by the developer itself.
e. Distribution Strategies
Regarding the distribution of their products particularly the medicines and medical
equipment, the company has planned an effective strategy which would help them expand
gradually until they become known around the country. They distribute their products from
Korea and the local brands to the smaller hospitals within our country as a distribution
strategy since they have observed that big companies aim to distribute their products to
bigger and more popular hospitals in the country. From this, the company focuses on smaller
markets in order to establish themselves and to eventually become known in the markets of
the bigger hospitals.
f. Credit Extensions
Since we deal with distribution, reasonable credit extensions may be offered since
supply works on a quota basis.
a. Operations and Logistics

As mentioned earlier in the Industry Innovations section, the trade industry is all
about operations, therefore it is vital that the company has enough provisions, staff, with the
required skill set that both the clients and the trading company requires, and procedures to be
able to be handle operations with all of the company’s clientele. It should also be flexible
enough if operations need changing, people need reprimanding or replacing and overall
company output pacing.

b. HR Management

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 Human Resource Management, or HRM, is very important in keeping a company
secure because it covers responsibilities such as: determining the nature of employee
positions, arrange employee development and training, organizing, utilizing, assessing and
maintaining the workforce that they currently have, and ultimately, creating reward systems
for the employees of the company. The workers are the ones who make the company run and
get the job done. There will be times when the company cannot provide best actual pay for
all, but at least the HR should be able to assess what the workforce needs the most, be able to
give them benefits such as Health Insurance, and be able to gauge if certain employees are
due for promotions. HR is one of the most important branches of the company because if they
muck up their job of taking care of the people who create the company’s worth, what happens
to the company itself?

IV. The National and Global Environment

1. Socio-cultural Environment
A large factor as to why trading services for products such as pharmaceutical supplies
are needed is the goal of achieving a wider coverage for healthcare in the country. Trends in
recent demographics reflect a rising demand in affordable medications, with the prevalence
of infections and other diseases brought about by current weather situations and lifestyle
practices. This is also encouraged by the development of cures to conditions once thought
incurable through innovations in medicinal formulations. Renowned companies sell these
products at exorbitant prices, which therefore leads to limited accessibility that in turn
prevents these medicines from fully serving its purpose. To be able to have providers of
generics administered through IM-IV, market demands are met and product purpose is
maximized.
2. Technological Environment
Businesses have been and continue to be at the forefront of technology. Infrastructure
that can speed up overall production will draw in more business but to be able to have an
advanced technological environment, investments made on infrastructure would be very
expensive. The ability of a company to be competitive includes access to high speed
communications. With the technological advancements today, it has benefitted business.
Trading services must, however, learn how to effectively adapt to new technology that are
being introduced to society. Companies may have made major investments in equipment and
training only to see a more innovative and effective technology emerge. The technological
environment also covers the staff commitment of the company, community relations, media

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coverage, and product quality. All these being part of the internal environment, companies
have direct control over them. Technology in trading businesses have proved to be very
beneficial. Because of technology, we can easily communicate with other countries, and thus trade
goods more efficiently.

3. Economic Trends
a. Business Cycle
The Business Cycle is best described as the “economy-wide fluctuations in
production, trade and general economic activity”. It is also referred as the upward or
downward movements of the Gross Domestic Product, or GDP, and “the period of
expansions and contractions in the level of economic activities around a long-term growth
trend”.
It is comprised of four phases, Expansion, Peak, Contraction and Trough. Expansion
is when there is a steady increase in the economy’s employment rates, economic growth and
upward pressure on prices. The peak is reached when the economy is producing at its highest
allowable output, employment rates are at its highest or even beyond. But a peak normally is
followed by a contraction, where economic growth slows, employment declines and
pressures on prices decrease. Finally, when growth ultimately stops at the trough and the
economy hits bottom, the cycle starts again and another expansion is reached.
In the case of Du-Av trading, it is still currently in the expansion phase, since it is still
a new competitor in the market of pharmaceutical companies. The company aims to have at
least five accounts per region, initially targeting regions such as Region 4A (Rizal, Quezon,
Batangas, Cavite and Laguna) and Region 6 (Iloilo, Aklan, Guimaras, Negros Occidental,
Capiz). It has yet to reach its peak and its long-term goal of establishing a nationwide system
of distribution and the establishment of a marketing branch of the company.

b. Analysis of Supply-Demand and Industry Capacities

In the Philippines, foreign drug firms dominate the market, accounting for three
fourths of the pharmaceutical industry. However, profits for domestic firms, such as Du-Av,
are more present in the generics market. The demand for generic medicine is less than the
demand for branded medicine as most doctors prescribe branded drugs. This is also partly
due to some incentives being offered to medical firms such as hospitals and doctors for
issuing prescriptions for branded medicine. However, new legislations have made it a
requirement for public hospitals to use generic drugs, benefiting companies such as Du-Av,

14
which imports and trades generic medicine. For these reasons, the segment with the most
rapid growth is in the generics market. The supply for medicine is mainly branded medicine.
In terms of the medical trade industry in which Du-Av is also involved in, the Philippines is
highly dependent on imports from manufacturers from other countries. Projects of the
Philippine Department of Health has little impact on the growth of this industry as it is the
upgrading of private hospitals that drive demand. Almost 100% of the supply for equipment
is imported while half of disposable equipment are imported.
c. Abilities
Du-Av Trading was already able to go past its original purpose of distributing generic
IM-IV injectable medicines and was even able to breach the market of trading electrical
supplies and hospital equipment. The company has a greater ability since it is known as a
distributor and at the same time it has the license of the trading company. Therefore, it has a
greater reach both in the trading and distribution markets.
The company will be able to even breach more markets, should it want to, if it
distributes other types of medicines besides injectables as long as they acquire the rights to do
so. And should they want to trade other goods besides the ones that they do at the moment,
their trading license will allow them to do so as long as they comply with the set standards of
trading.

d. Restraints
Since Du-Av Trading is a company that specializes on being a distributor of
pharmaceutical products such as medicines and hospital equipment, it is only limited to the
trading and supplying of these products. It cannot produce its own supplies and distribute it to
the companies it is supposedly only supplying and become the direct suppliers themselves. It
shall act only as the middleman between the producer and the consumer.
4. Political Environment
Du-av trading, being an enterprise involved in trading generic medicine, is governed
by various laws regarding drug and device distribution, importing and trading. One of which
is the REPUBLIC ACT No. 3720 which ensures the purity of drugs made available to the
public through the formation of the Food and Drug Administration, which in effect will
establish standards and quality measures for said drugs. In general, these restrictions prevent
any injurious substance from being sold by Du-Av for the consumption by the public and
prevents any potential legal liabilities that the said company may incur. The company follows
these standards mandated by the FDA which allows it to continue its operations. In addition,

15
the company is also involved in importing these medical products from Korea and Germany,
therefore the Commissioner of Customs also plays a part in the insurance of quality of
inbound products to Du-Av by delivering samples to the FDA for approval. REPUBLIC ACT
No. 426 also disallows the company from importing from their overseas sources without
proper import license.

5. Natural Resource Environment

Pollution and climate change may affect the trading industry in such a way that it
increases cost. It may cause delays in operations due to extreme weather conditions and
equipment malfunctions caused by such, and also calls for added cost in requiring utilities
that can cope with the continuous threats posed by these circumstances.
6. Global Development
There are different factors in the global environment that can affect how the
industry functions. The most common global force is the advancement of technology. This
event can drastically change how the players in the medicine trading industry function and it
can have positive and negative effects on the business. Its effect on the business depends on
whether or not it can adapt to the changes in technology and if it can provide the necessary
equipment and materials for the business to compete against its rivals and competitors in
regards to their technological use. Another global force that can affect the industry is the
emergence of markets. Since all business are interconnected in some way, the emergence of
new business would mean competition over customers and even resources. If the
globalization that is currently occurring would shift the economy towards international
commerce, then more competitors would arise and therefore would mean higher marketing
efforts and quality control for the industry.

V. Industry Analysis and Recommendations

1. Analysis of Market Structure
The type of Market Structure of the industry Du-Av is involved in is perfect
competition as the said company is one of the many firms in the country which import
medicine and medicinal equipment. Given that there is a steady demand for the products
traded by Du-Av, as medicine is a constantly used item in public and private health, the firm
is not deficient in this area. However, due to factors such as benefits offered by competition,
Du-Av’s performance is edged out by other firms despite offering cheaper generic products.

16
2. Analysis of Supply-Demand Conditions
Du-Av trading strictly supplies only to hospitals. This in turn ensures that Du-Av
trading's supply and demand conditions are in a state of market equilibrium because of the
continuous demand of these hospitals for medicines. This constant need for pharmaceutical
drugs would lead for suppliers to keep supplying. Because the company deals with products
considered as basic necessities, suppliers are ensured that there is a consistent need for supply
as there would always be a demand for these products. This high demand would mean that
production is also high, giving suppliers confidence that there would always be income
generated.
Given the change in environment however, market demand and supply can suffer
from fluctuations as well. Certain factors can lead to a decrease in both. As a solution, Du-Av
predicts and classifies the demand into groups or seasons and from here the company adjusts
and segregates the supply in a year into quarters. An application of this strategy is when the
company adjusts the supply and marketing depending on which season projects the higher
demand. During the months of January to March where there is a high demand, Du-Av does
full blast marketing in order to save up for the bad seasons in which they garner lower sales.
Moreover, another strategy that Du-Av trading does is to form contracts with their
distributors, ensuring them 60% of the sales and 40% for these distributors.
In addition, with new technological advancements made in the medical field, suppliers
like Du-Av are able to keep up with the demand of the consumers. Advancements made in
research and development has come up with new medicines that are affordable and are more
effective, leading suppliers to produce more because they believe that it would prove to be
beneficial to the public.
People are not aware of these new medicines that are available in the market. Not
knowing that there is a cheaper and more effective product, consumers would continue
buying medicines they usually buy. To be able to solve this problem, suppliers must invest in
strategic marketing to provide consumers with knowledge regarding these new products
being introduced to the market. This is needed for demand to keep up with supply. Providing
customers with extensive knowledge on these products would definitely give them more
choices to choose from that would properly fit their needs. With this, demand and supply
would be able to remain stable.
3. Analysis of Industry Life Cycle
As mentioned previously, Du-Av Trading is still currently in the infant or embryonic
stage since it is entering as a new competitor in an old market. Since it was formed in June

17
2013 and started operations only in November of the same year, Du-Av Trading has yet to
catch up to it’s bigger rivals such as Unilab, Cathay Drug, Pfizer and GlaxoSmithKline. The
company is still an unknown to the market compared to its competitors who have become
household names in terms of medicinal drugs.
Despite the company’s being in the infancy stage, it is able to already distribute
electrical supplies such as LED lights, communication and hospital equipment since it is also
licensed as a trading company.
4. Porter’s Five Forces
Porter’s five forces of analysis aims to analyze the different factors that are in play
when it comes to the industry’s competitive nature against its other competitors and rivals in
the market. It also aims to further develop an industry’s business strategy to make room for
adjustments to the constant change in the global market. It derives five forces from the
Industrial Organization economics that ultimately determine a company’s “attractiveness”
and competitiveness. The five forces are: threat of new entry, threat of substitutes, bargaining
power of buyers, bargaining power of suppliers, and current rivalry.
Threat of new entry refers to the capacity of new competitors to enter a specific
industry. Threat of substitutes refers to the capability of new products to replace the principal
product with respect to the costs of switching and brand loyalty. Bargaining power of buyers
refers to the extent to which the buyers can control the market with regards to their decisions.
Bargaining power of suppliers refers to the control of the supplier to the company it is
supplying with raw materials and components necessary for business operation. Lastly,
current rivalry refers to the increasing level of competition when the business industry
undergoes economic recession.
a. Competitive Rivalry
Given established competition with companies such as Unilab, Cathay Drug, Pfizer
and GSK, entering the market as a new player is visibly a huge hurdle for Du-Av Trading to
endure. Although it is not yet as big and recognizable like its competitors, Du-Av’s strategic
marketing efforts and operations will allow it to flourish in the market and provide its
customers with cheaper generic alternatives at lesser cost value.
b. Supply Power
Du-av is advantaged in terms of supplies, given they are sourcing medicines from
well-known manufacturers who distribute quality products. Aside from this, another key
resource for the company would be its previous exposure in its assigned territories. This
allows a faster entry into the market even as a new player since the familiarity of the area

18
already permits easier operations and lesser costs incurred when a new business tests the
waters of the market.
c. Buyer Power
Even with the advantages carried by Du-av, buyer power still isn’t that high given
hospitals comprise most of its market. The company already provides cheaper substitutes as
to what its competitors offer, but the latter would already have established connections and
transactions in the market with the medical field constantly needing medication and utility
supplies.
d. Threat of New Entry
Multinational companies, even with established client bases with years of transactions
are still posed with the threat of new entrants. In Du-Av’s case, small generic competitors get
a substantial amount of market shares regardless of their firm size therefore affirming a high
level of new entrant threat on the company.
e. Threat of Substitution
When looking at current events and lifestyle patterns of modern-day society, for the
prevalence of medical conditions and diseases to decrease to a close would be a far-fetched
idea. Demands for medical supplies and equipment will always continue. There will always
be a need for medicines especially the rather affordable ones provided through generics,
therefore the threat of substitution does not impose any dangers for the pharmaceutical trade
industry.

5. SWOT Analysis

STRENGTHS WEAKNESSES
1. Familiarity within
assigned territories
2. Promotes quality
brands and reputable
drug manufacturers
3. Cost of goods at
minimal 20%
4. Strategic marketing
& sales operations
1. New player in the
market, entails more
expenses for marketing
efforts
2. No existing client base
using the brands
3. Unavailability of
bioequivalence studies
for some brands

19
 approach 4. Still building
5. Confirmed organizational structure
competitive pricing 5. Limited distribution
against competition access to other parts of
6. High margin the Phils.
business 6. Must establish
7. Supported by structured training &
government with the development team for
presence of employees
Generics Act Law

OPPORTUNITIES 1. Quality products 1. Being a new player

1. Limited programs for
multinational
companies due to tight
restrictions
2. Advertising & 2. Lessened cost for
Promotions is on the
average dwindling to
high operating cost
and specific product
charge
3. Generic brands from 3. Sales not
reputable sources are
well accepted by the
market
4. Exposure among
general
practitioners/internal
medicine among
MNC’s getting limited
due to high demands
from specialists sitting
made affordable mostly focusing on
through generics generic brands can
offer a higher reach garner a huge market
(5,3) due to affordability
(1,3)
expansion 2. Exposure to experts of
marketing due to the medical industry
implicit government would mean that it
endorsement of would be able to
generics (7,5) allocate funds for
research and
compromised due to development and
quality of products expect a desirable
even with entrance outcome (3,4)
of merging 3. The industry has to
MNC’s(6,5) juggle between
marketing itself to the
public and providing
quality service in order
to improve its client
base (2,2)

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 in influential board
(MD groups)
5. Expand distribution in
Visayas and Mindanao

THREATS 1. Strategic marketing 1. Regulate prices so as to

1. Price battle from and operations can establish a client base
established local still win over clients with the marketed
companies even with already brands
2. Delayed payments established 2. Enforce payment
from accounts could companies (5,1) schedules to keep cash
impede cash flow 2. Quality brands flow schedule intact to
3. Integration and always sell stabilize operations
convergence of multi- regardless of price (1,2)
nationals when demand calls 3. Maintain control over
for it (6,1) marketing efforts
3. With the right without compromising
market strategy, the quality control (1,1)
company would 4. Maximize productivity
know when delayed in terms of human
payments would be resource with the threat
passable or would of strong competition
be a deterrent to the (6,3)
company’s profits.
(5,2)

6. Key or Critical Success Factors

Du-Av Trading is a firm primarily involved in providing generic medicines and
secondarily distributes electrical supplies as well as medical equipment for hospitals and
other healthcare institutions. This company which belongs to the trading industry and
specializes its involvement in the pharmaceutical industry faces a lot of competition in the
market. On the local scale, this industry can be considered big, wide and highly competitive

21
due to the various business firms that operate and compete against each other. In order to
keep its business successful amidst competitions, Du-Av Trading enables itself to prosper in
spreading health awareness and maintenance due to its four critical success factors which are
expansion, employees, strategic planning and the buyers which are covered by the following
types of factors namely industrial, strategic, environment and temporal factors.

Critical success factors refer to the various pivotal occurrences which are necessary
for the success of one business firm. The pharmaceutical trade industry, in particular, there
are different activities that are and must be stressed upon in order to attain success in their
business operations.
In the first type, industrial critical success factors arise from the different qualities of a
particular industry. These factors from this kind would be critical in order for them to be
successful in the industry they belong to. In the case of Du-Av Trading, they are able to show
it through their expansion. They continue forming partnerships with different businesses such
as hospitals and other health institutions as well as perform regular marketing activities.
Through this, they help expand and widen the coverage for their pharmaceutical products.
This means that they would gain more success when they widen the market of their products
since more people would be able to avail of their products more conveniently and
comfortably.
Secondly, the strategic critical success factors would determine what position the
business wants to take in the market in order to use it as a strategy. In this type, they first look
at how the market behaves and then plan how they would market their products and services
to gain an advantage over the other competitors. Since the pharmaceutical industry already
involves many business firms which compete with one another, strategizing is one critical
way for them to actually keep in step with the others. Based from the information given by
the company, Du-Av strategizes and operates with low overhead cost. Instead of getting
people who will get their products introduced to the market which would result to high
overhead costs, their company links the end user which include the government institutions
and hospitals to the supplier. From there, they will ensure a sale or transaction is
accomplished. It would help them reduce their expenses and earn bigger profits for
themselves. Through this strategic planning, they are able to determine what they need to do
in order to gain more shares in the market.
Next, environment critical success factors are those that arise from macro-
environmental factors of the business firm. These are the economic factors which include the

22
laws and policies enforced on the industry which could affect them. In the case of Du-Av
Trading which is an SME, having flexible credit terms would help them gain easier access to
loans. They could make use of their movable assets to incur in loans for the company. In
relation to this, the buyers have the power to control the market of this industry. In our
economic status, it is evident that medicines serve as an essential product to us. Buyers are
the people who help develop this company in order to gain more profit and thrive as one of
the possible dominant medical companies which are still arising from where they are now.
Lastly, the temporal critical success factors refer to those internal factors such as
specific barriers, challenges and the management of its affairs. For the company’s case, they
build their internal affairs mainly through the employees as well as the executives who help
plan and lead the aspirations and goals of the business. The executives serve as the building
foundation of the company that could influence the employees of the company to keep its
stability throughout the challenges and success they face as a company. Through their
employees, they are able to assure the people of good quality healthcare which would help
sustain one’s living. They are the ones that help research for new medicines as well in order
to continue developing their products and compete with others.
7. Conclusions and Recommendations
It is a factor to consider that the current situation of the society calls for a fast
distribution of medicine and other equipment used by hospitals. This further increases the
importance and need for Du-Av Trading. Du-Av Trading can be easily called a dominant
player in the trade industry especially in the pharmaceutical sector, but with the arrival of
new competitors in the market and the continued existence of the company’s rivals, Du-Av
Trading has to maintain resilience in adapting to the changes in the demand of the public and
the ever increasing rate of the level of technology. With this adaptation, the company also
needs to improve its marketing efforts since the arrival of new competitors would mean that
the majority of their funding would go to its marketing sector and Du-Av Trading has to find
a way to keep up with the amount of presence the other companies show in order to maintain
its position as to being a top and highly efficient distributor of pharmaceutical goods.

23
APPENDIX A:

PJ-Operations
Head

Finance- BPA and Gen. Sales and Marketing

Accounting Assistant

Team South-1
DM Team North Sales

Team North-1 Team South-2

Sales Sales

Team North-2 Team South-3

Sales Sales

Team North-3 Team South-4

Sales Sales

Team North-4

24
 Sales

APPENDIX B: Organizational Chart

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