Contents ? Introduction ?I ssue identification ? Problem analysis ? External ? 5 force model ? PEST ? Internal ? VRIO ? Vertical integration ? Diversification ? mendations I ntroduction 1999-2003 1902-1955 1956-1998 ? Vertical integration ? Research & development reforms ? Organizational restructuring ? Establish new strategies ? Qu zhanghuan panacea ? State-pany ? IPO in 1993 ? Integrate to a group in 1996 ? Fist step to pany Problem identification Should YB diversification into health care products such as toothpaste? Should YB cooperate with 3M in the area of transdermal products and internalization? Was it feasible to pursue both? Threat of new entrants ( low ): Economic of scale Capital inputs High standard of quality control Industry rivalry(strong): panies occupy more than half of the market share Threat of substitute products ( weak): Healthcare products, medical instrument , limited substitution Bargain power of suppliers ( low ): decentralized upriver market petition , resources is not scarce Bargaining power of buyers ( high ): Hospitals, wholesalers Relative high bargaining power due to low differentiation products Chinese pharmacy Industry analysis Porter ’s five forces model PEST Analysis Factors Political New standard and medicine work established by the government Economic China joined WTO in 2011 Giant pany enter China Increasing raw material cost Rising demand especially in the rural market Social Strong affinity to herbal medicine Increasing conscious about environment protection Tech Western pharmaceutical methodology introduced into the herbal medicine system R&D ability is weak Market development skills Resource and C apabilities Analysis Resources Capabilities Evaluating Value-chain approach VRIO Framework Resource classification Firm Resource classification ? Tangible resources ° financial advantage: listed on A share market, brought much needed funds (1993) ° corporate governance: pany have standardized operation ° formula and man