Harvard Case - Gu Sheng Tang: Traditional Chinese Medicine in the Age of Internet+
"Gu Sheng Tang: Traditional Chinese Medicine in the Age of Internet+" Harvard business case study is written by Kevin Zhou, Josephine Lau. It deals with the challenges in the field of Strategy. The case study is 15 page(s) long and it was first published on : Dec 6, 2018
At Fern Fort University, we recommend that Gu Sheng Tang (GST) adopts a multi-pronged strategy to leverage the power of the "Internet+" to achieve sustainable growth and solidify its position as a leading TCM brand. This strategy includes:
- Digital Transformation: Modernizing operations, leveraging technology for enhanced patient engagement, and integrating AI and machine learning for personalized treatment recommendations.
- International Expansion: Targeting emerging markets with a strong interest in TCM, utilizing digital channels for market penetration and building strategic alliances with local partners.
- Product Diversification: Expanding product offerings beyond traditional TCM remedies to include wellness products, preventative healthcare solutions, and personalized TCM consultations.
- Strengthening Brand Identity: Building a strong online presence, engaging with consumers through social media, and leveraging digital marketing to enhance brand awareness and loyalty.
- Building a Sustainable Business Ecosystem: Fostering collaborations with other TCM practitioners, research institutions, and technology companies to create a robust and interconnected ecosystem for TCM innovation and growth.
2. Background
Gu Sheng Tang is a leading TCM company in China, facing the challenge of adapting to the rapidly evolving digital landscape. The company enjoys a strong reputation for its traditional remedies and commitment to quality, but it needs to modernize its operations and embrace the 'Internet+' to remain competitive. The case study explores the company's current situation, the opportunities and challenges presented by the digital revolution, and the potential for growth through strategic innovation and expansion.
The main protagonists of the case study are:
- Mr. Li: The CEO of Gu Sheng Tang, who is committed to preserving the company's legacy while embracing digital transformation.
- Ms. Chen: The head of marketing, who is passionate about leveraging the power of social media and digital marketing to reach a wider audience.
- Mr. Wang: The head of research and development, who believes in integrating technology and AI to enhance the effectiveness of TCM treatments.
3. Analysis of the Case Study
To understand the challenges and opportunities facing Gu Sheng Tang, we can apply a combination of frameworks:
1. Porter's Five Forces Analysis:
- Threat of New Entrants: The TCM market is relatively fragmented, with new entrants emerging regularly. However, GST's established reputation and brand recognition provide a strong barrier to entry.
- Bargaining Power of Buyers: Consumers are increasingly demanding transparency and convenience. Online platforms and direct-to-consumer models are empowering buyers, increasing their bargaining power.
- Threat of Substitute Products: Western medicine and alternative therapies pose a threat to TCM, but the growing interest in holistic healthcare and natural remedies creates opportunities for differentiation.
- Bargaining Power of Suppliers: The supply chain for TCM ingredients is complex and subject to fluctuations. GST's strong relationships with suppliers and its focus on quality control provide a competitive advantage.
- Rivalry Among Existing Competitors: The TCM market is highly competitive, with both traditional and modern companies vying for market share. GST needs to differentiate itself through innovation, digital engagement, and brand building.
2. SWOT Analysis:
- Strengths: Strong brand reputation, established distribution channels, expertise in traditional medicine, commitment to quality.
- Weaknesses: Limited digital presence, lack of data-driven insights, traditional business model, potential for disruption from tech-driven competitors.
- Opportunities: Growing demand for TCM, increasing interest in holistic healthcare, potential for digital transformation, emerging markets with strong interest in TCM.
- Threats: Competition from modern medicine and alternative therapies, evolving consumer preferences, potential for regulatory changes, disruption from technology-driven competitors.
3. Value Chain Analysis:
- Inbound Logistics: Sourcing high-quality ingredients and ensuring consistent supply chain management.
- Operations: Manufacturing TCM products according to traditional methods while incorporating modern quality control procedures.
- Outbound Logistics: Efficient distribution channels to reach both traditional and online customers.
- Marketing and Sales: Utilizing digital marketing and social media to engage with consumers and build brand awareness.
- Service: Providing personalized customer service and offering online consultations through digital platforms.
4. Business Model Innovation:
- Direct-to-Consumer Model: Leveraging online platforms to sell products directly to customers, bypassing traditional intermediaries and building stronger customer relationships.
- Digital Health Platform: Developing a comprehensive digital platform that provides personalized TCM consultations, health tracking tools, and educational resources.
- Subscription Model: Offering recurring subscriptions for regular deliveries of TCM products, leveraging data analytics to personalize product recommendations.
- Partnerships with Tech Companies: Collaborating with technology companies to develop AI-powered diagnostic tools, virtual reality simulations for TCM treatments, and personalized health recommendations.
4. Recommendations
To achieve sustainable growth and maintain its leadership position in the TCM market, Gu Sheng Tang should implement the following recommendations:
1. Digital Transformation:
- Modernize Operations: Invest in IT infrastructure, implement ERP systems, and optimize manufacturing processes to improve efficiency and data management.
- Leverage Technology for Patient Engagement: Develop a user-friendly website and mobile app for online consultations, product ordering, and health tracking.
- Integrate AI and Machine Learning: Utilize AI-powered tools to analyze patient data, personalize treatment recommendations, and improve diagnostic accuracy.
- Data-Driven Decision Making: Collect and analyze data from online platforms, customer interactions, and sales records to inform strategic decisions and optimize marketing efforts.
2. International Expansion:
- Target Emerging Markets: Focus on countries with a strong interest in TCM, such as Southeast Asia, Europe, and North America.
- Utilize Digital Channels: Leverage online platforms, social media, and digital marketing to reach a wider audience in international markets.
- Build Strategic Alliances: Partner with local distributors, retailers, and healthcare providers to facilitate market entry and build brand awareness.
- Adapt Products and Services: Tailor product offerings and marketing messages to meet the specific needs and preferences of international consumers.
3. Product Diversification:
- Expand Product Offerings: Develop new product lines beyond traditional TCM remedies, including wellness products, preventative healthcare solutions, and personalized TCM consultations.
- Leverage Technology for Product Development: Utilize AI and data analytics to identify emerging trends in consumer demand and develop innovative products that meet evolving needs.
- Create a Holistic Wellness Ecosystem: Offer a range of products and services that address different aspects of health and well-being, creating a comprehensive TCM experience for consumers.
4. Strengthening Brand Identity:
- Build a Strong Online Presence: Develop a user-friendly website and social media channels to engage with consumers, share educational content, and build brand loyalty.
- Leverage Digital Marketing: Utilize targeted advertising, influencer marketing, and content marketing to reach a wider audience and build brand awareness.
- Create Engaging Content: Develop high-quality content that educates consumers about TCM, shares stories of successful treatments, and promotes the company's values.
- Foster Community Engagement: Encourage user-generated content, host online events, and build a community around the brand.
5. Building a Sustainable Business Ecosystem:
- Collaborate with TCM Practitioners: Partner with other TCM practitioners, research institutions, and healthcare providers to share knowledge, develop new treatments, and expand the reach of TCM.
- Foster Innovation: Encourage research and development, invest in technology, and create a collaborative environment for innovation in TCM.
- Engage with Government and Regulators: Work with government agencies to promote the development and adoption of TCM, address regulatory challenges, and ensure the quality and safety of TCM products.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of the TCM industry, Gu Sheng Tang's strengths and weaknesses, and the opportunities presented by the 'Internet+' revolution. They are consistent with the company's mission to preserve the legacy of TCM while embracing innovation and growth.
- Core Competencies and Consistency with Mission: The recommendations leverage Gu Sheng Tang's core competencies in TCM knowledge, product quality, and brand reputation while aligning with the company's mission to promote the benefits of TCM and contribute to public health.
- External Customers and Internal Clients: The recommendations prioritize customer satisfaction by providing personalized experiences, convenient access to products and services, and educational resources. They also empower employees by providing them with the tools and training they need to thrive in a digital environment.
- Competitors: The recommendations address the competitive landscape by focusing on differentiation through innovation, digital engagement, and brand building. They also leverage strategic alliances and partnerships to create a competitive edge.
- Attractiveness ' Quantitative Measures: The recommendations are expected to generate positive returns on investment through increased sales, improved efficiency, and enhanced brand value. The use of data analytics and AI will provide insights into customer behavior and market trends, enabling more effective marketing and product development strategies.
6. Conclusion
By embracing digital transformation, expanding internationally, diversifying product offerings, strengthening its brand identity, and building a sustainable business ecosystem, Gu Sheng Tang can position itself for sustainable growth and solidify its leadership position in the TCM market. The company's commitment to quality, innovation, and customer satisfaction will be key to its success in the digital age.
7. Discussion
- Alternative Options: Gu Sheng Tang could also consider pursuing a more focused strategy, such as focusing solely on online sales or partnering with a larger TCM company for distribution. However, these options might limit the company's growth potential and could lead to a loss of control over its brand and operations.
- Risks and Key Assumptions: The success of these recommendations depends on several key assumptions, including the continued growth of the TCM market, the effectiveness of digital marketing strategies, and the company's ability to attract and retain talent. Potential risks include the emergence of disruptive technologies, regulatory changes, and competition from other TCM companies.
- Options Grid: A comprehensive options grid can be used to evaluate the risks and benefits of each recommendation, considering factors such as cost, feasibility, time horizon, and impact on the company's core competencies.
8. Next Steps
To implement these recommendations, Gu Sheng Tang should:
- Develop a comprehensive digital transformation strategy: This strategy should include a detailed roadmap for modernizing operations, developing digital platforms, and integrating AI and machine learning.
- Identify target markets for international expansion: Conduct market research to identify countries with high potential for TCM growth and develop tailored marketing and distribution strategies for each market.
- Develop a product diversification plan: This plan should include a clear vision for new product lines, a timeline for development and launch, and a strategy for marketing and distribution.
- Build a strong brand identity online: This includes developing a user-friendly website, engaging social media channels, and implementing a comprehensive digital marketing strategy.
- Foster partnerships and collaborations: Seek out strategic alliances with TCM practitioners, research institutions, technology companies, and government agencies to create a robust business ecosystem.
By taking these steps, Gu Sheng Tang can successfully navigate the challenges and opportunities of the 'Internet+' era and secure its future as a leading TCM brand.
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Case Description
Traditional Chinese medicine (TCM) and big data seem at odds with each other, but with the Healthy China 2030 blueprint and China's Internet Plus action plan announced in March 2015, the ambition of Gu Sheng Tang to integrate the two is not too far-fetched. GST's vision is to become a central intelligence unit for Chinese medicine, mining the extensive medical data it harvested toward building a big-data-driven TCM solution. Since inauguration in 2010, the Group has reinvented TCM's outpatient service with its Chinese Medicine Practitioner Partner Scheme, enabling experienced practitioners in the public sector to enter private practice. It has also developed an institutionalized supply chain integrating procurement, processing, testing, and prescription of herbal medicine. It operates an online platform for appointment scheduling and healthcare support services. In August 2017, the company successfully raised CNY1.1bn funding. How should the company use this cash injection to optimize its business strategy to take advantage of China's state mobilization of the Internet Plus strategy?
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