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Chinese Healthcare Reform Research Proposal



This proposal is elaborating on a step-by- step procedures of a business research work, which aims at analyzing and evaluating that how the new Chinese Healthcare Reform influences the marketing strategies of multinational pharmaceutical companies. In this study, the target company is Beijing Novartis Phama Ltd. In the meanwhile, this research also tries to explore what the company can do innovatively to maximize the benefits of this new system, and how the relevant marketing strategies can be formed and carried out. At the beginning of this proposal, I am willing to rationalize the topic, clarify the objectives and design the research problems. Followed by a series of marketing strategies literature review, an explanation methodology will be applied, and an outline of research methods and data collection will be presumed.


This research will combine exploratory, descriptive and explanatory studies. The objective of using three studies is to describe the current marketing environment from the new medical reform and how it impacts on the marketing strategies of Beijing Novartis Phama Ltd. In this research, I will employ the quantitative investigations to collect the secondary data from the marketing database, the web site of the company and relevant archives. Also qualitative investigations are to be used to get primary data through semi-structured interviews and observation. Therefore, a design of how to interpret these data and the limitation of studies will also be presented in this proposal.


After having gone through the different steps in the research process and research design of both quantitative and qualitative studies, I will to clarify the goal of this research. The goal is to provide the facts and direction to Novartis and they need to make their more important and effective marketing decisions to achieve business excellence. As Uma Sekaran pointed out 'A grasp of research methods will enable managers to understand, predict, and control their environment.'(Research Methods for Business, 2000)





Aims and Objectives


The aims of this investigation are to identify efficient and effective marketing strategies from responding the impact of the new healthcare reform on Novartis, and to ensure sustained profit growth of their marketing project.


The objectives will be achieved through the literature survey of relevant marketing strategies, analyzing the marketing environment of the Pharmaceutical company in China.


Design the Problems


Nicholas Walliman said that one of the first tasks, therefore, on the way to decide on the detailed topic of research is to find a question, an unresolved controversy, a gap in knowledge or an unrequited need within the chosen subject (Your Research Project, 2001). Therefore, I will design five major research questions as below:


· What is the objective and principles of the new healthcare reform?

· What is the current marketing situation for Pharmaceutical Company after the new healthcare reform?

· Which factors impact on the marketing strategies of Novartis?

· How to innovatively maximize the benefits of the reform?

· What effective strategies could be recommended for Novartis to match the new opportunity?


The topic is talking about marketing strategies and opportunities of multinational pharmaceutical companies in China. The target company is facing to the variable marketing environment and this will strongly affected by development in marketing decisions. As Philip Kotler said International marketers encounter dozens, even hundreds, of agencies set up to enforce trade policies and regulations. (Marketing, Fourth Edition)




The 1990s mark the first decade in which companies around the world must start to think globally. Time and distance are shrinking rapidly with the advent of faster communication, transportation, and financial flows. Products developed in one country are finding enthusiastic acceptance in other countries (Marketing, Philip Kotler).


Nowadays China is the most potential market for the foreign investors since China was accepted as a member of WTO. However, the foreign investors should be aware that the understanding the public policy implications of a particular marketing activity is not a simple matter. As Philip Kotler pointed out Marketing decisions are strongly affected by developments in the political environment. Nations vary greatly in their political-legal environments (Marketing, Fourth Edition). He also identified four political-legal factors should be considered in deciding whether to do business in a given country, and one of them is government bureaucracy. The host government runs an efficient system or reform and this will direct influence the corporate strategies of foreign companies.


Beijing Novartis Phama Ltd is a Swiss Pharmaceuticals Company to set joint venture in China in 1984. Novartis has its target products to good selling in China and also has many potential marketing opportunities in every region in China.


Mike Meldrum pointed out A major concern for any producing organization is how it can best make its products be available to the market place (Key Marketing Concepts, 1995). In China, there are no private physicians, almost no private hospitals and clinics. The majority consumption of an ethical medicine is from state owned hospitals. Every hospital has its own pharmacy. According to government reimbursement policy, ethical medicine in reimbursement list can be reimbursed. However, there is a condition, only the ethical medicine prescribed by hospital doctors and bought in hospital pharmacies can be reimbursed. So that it is critical for any ethical medicine to get into hospital list. Hospital is the battle of competition. The tradition sales practice of a Chinese local pharmaceutics company is to sell its products to distributors without its own hospital sales team. They


do less academic and professional promotion. Every organization needs to audit the environment(s) in which it operates, and for this will require a sophisticated research activity. (Elizabeth Barnes, Marketing, 1997)


In 1998 the State Council formulated the new healthcare policy for employees working in cities and towns, and thus kicked off the reform to the medical insurance mechanism. The objective of the reform is to provide a remedy to the existing ailing medical insurance system. It includes three principles: wider coverage and lower state/employer contribution; shared contribution by state/employer and employee; separation of drug from medical service.

The reform will impact mainly five aspects of the pharmaceutical companies: Financial, Supply chain, End user, Reimbursement and Marketing. The reform is to aim at reducing medical expenses, particularly drug fee. The state very possibly will impose price limit to drugs. Chances of Novartis will be forced to cut the price for some existing products which are the biggest contributors to the sales and bottom line of the company. Also, the price reduction incurred by the reform will bring huge pressure on the financial control of Novartis. Elizabeth Barnes said that Without doubt, a financial objective will be a key objective and this will influence the type of pricing strategies used. (Marketing, 1997) Therefore, Philip Kotler also said Marketers need to know the laws affecting price and make sure that their pricing policies are defensible. (Marketing, Forth Edition) Soon the impact will be felt by other players in the supply chain. Every member of the supply chain will be under tremendous stress in terms of stock management, account receivable and cost management, etc. to protect the shareholder value, operation margin and cash flow.

The level at which the price of a product is set has to be a careful balance between the cost of production and the price that wholesalers, retailers and consumers are prepared to pay(Elizabeth Barnes, 1997). Price will become a sensitive issue after the implementation of the new healthcare reform. Competition among wholesales and retailers will be


intensified. Their margin will fall significantly and this will lead to consolidation in distribution. This trend will lead to the rise of powerful super-wholesalers, which will have bigger national coverage, deeper penetration into retailers and better services. Also, the trend of wholesales consolidation, hospital alliances and retail chain stone operation will result in a smaller voice of Novatis in the supply chain.

The end user -patients also will be motivated to control their medical expenses, and will have higher awareness of health and drugs.

In reimbursement aspect, due to this reform, each province or municipality will only develop one catalog. There won't be city-specific catalog any longer. The good part about it is that pharmaceutical companies will be able to focus resources in their marketing efforts. However, the barrier of entry will be higher. Competition among pharmaceutical companies will be increased, and winning the support of government officials and the recognition of the review committee has been more critical than ever. Therefore, product entry into the catalogs is the key to the survival and future growth of pharmaceutical companies. The biggest involvement in a foreign market comes through direct investment – the development of foreign-based assembly or manufacturing facilities. Generally, a firm develops a deeper relationship with government, customers, local suppliers, and distributors, allowing it to better adapt its products to the local market. Finally, the firm keeps full control over the investment and therefore can develop manufacturing and marketing policies that serve its long-term international objectives. (Philip Kotler, Marketing, Fourth Edition, P544)

Due to the reform, the marketing strategy of Novartis has to be changed to adapt the situation. Managers, of course, need to evaluate the situation, since in certain circumstances the best policy is to keep still, to merge into the background. (Elizabeth Barnes, 1997)







Quantitative research is typically taken to be exemplified by the social survey and by experimental investigations. Qualitative research tends to be associated with participant observation and unstructured, in-depth interviewing. (Bryman, 1998, p.1)


When appropriate, a mixture of quantitative and qualitative research is possible (see Bryman and Burgess, 1994, Charpter 5 for a discussion of linking qualitative and quantitative data analysis). According to mentioned above, this research will combine quantitative and qualitative approach on investigating of the marketing strategy of Beijing Novartis Phama Ltd. The approach will be descriptive, explanatory and exploratory.


Enquiries can be classified in terms of their purpose as well as by the research strategy used. The classification most often used is the three folds, exploratory, descriptive and explanatory. In the same way as you may employ more than one strategy in your research project, so you may have more than one purpose. (Research Methods for business students, Saunders et al., 1997) In this research, I will combine the descriptive, explanatory and exploratory studies.


--Descriptive and Explanatory studies


Research is only concerned with 'what is' and, sometimes, 'what might be'. 'what is' includes both description and explanation. The objective of descriptive research is to portray an accurate profile of persons, events or situations. I will use this approach to collect data and describe the current pharmaceutical marketing situation from the New Chinese Healthcare reform, and the extent to which factors might be impact on the marketing strategies of pharmaceutical company. Then, I will explain the reason from those factors.




Exploratory Studies


The objective of this research is to explore what existing theories and concepts might be used or adapted and to discover whether or not a problem exists. In this research, I am willing to explore whether Novartis has many problems in marketing strategies after the new healthcare reform formulated and how they can do innovatively to maximums the benefits of this new reform.




The major designed data collection methods will be applied as below:


Primary Data Collection


n Semi-structured and in-depth interviews: I want to use this type of interviews to explore topics and explain other findings about marketing strategies of the company from the new reform. In an exploratory study, in-depth interviews can be very helpful to 'find out what is happening [and] to seek new insights' (Robson, 1993:42). Interviews will be scheduled and pre-designed to be conducted among employees at different levels, including the vice-president, marketing and sales director and some sales representatives. Also, face-to-face interviews can be carried out in a variety of situations-in at home, at work, outdoors or while traveling. The other reason of choosing interviews is that I have found that managers are more likely to accept interesting and relevant to their own current work interviews rather than complete a questionnaire.

Questionnaire: Questionnaire can therefore be used for descriptive or explanatory research (Dr Mark Saunders, Research Methods for Business Students). In this research, I will use personally administered questionnaires to collect all the completed responses from the marketing and sales department within a short period of time. Through the questionnaire I hope to collect the information about how


Novarits faces to the new healthcare reform and what are they doing after reform.


This kind of information collecting is not specified with detailed coding but serving as a quick base establishes for semi-structured interview preparation.


Secondary Data Collection


Secondary data are indispensable for much of organizational research (Uwe Flick, 1998, p255) Secondary data include both quantitative and qualitative data and can be used in both descriptive and explanatory research. (Dr Mark Saunders, 1997, p159)


The web site of the company: On-line searches provide a number of advantages such as saving enormous amounts of time. The internet, sometimes describes as the information superhighway, is a worldwide network of computers which can provide access to a vast range of literature and other resources stored on computers around Some of the resources may be of use either for your literature review or as secondary data.(Dr Mark Sounders, 1997, p56) I can find many useful information from the website of Novartis and also can get quantitative data such as the annual report, database of the financial department or relevant marketing research of the marketing department. It's convenient for me to analyze the current marketing situation and to knowing what they have done since the new reform formulated.

n Organizational internal archives: Most organizations collect and store a variety of data to support their operations, such as copies of letters, minutes of meetings and other business related documents. All these are very wealthy data for reading and analyzing the real marketing situation of the company.

n Official statistics: to understand the principle of the new reform, industrial overview, and competitive market trend.

n Books, newspapers and journals: I will read some books and journals relevant to business news, marketing information, and regional development such as Harvard Business review, Academy of Management journal and some journals in China,


because I need get some information about The New Healthcare Reform. These books and journals will help me to collect the background and supportive data and they are helpful to answer my research questions.



Little sense can be made of a huge collection of data; therefore an essential part of research is the analysis of the data. This data must be carried out in relation to the research problem. (Nicholas Walliman, 2001) Because research is not a linear process, the only way to help us to judge the type of and amount of data is to decide on the methods which we will use to analyze them to obtain a feel for the data, establish reliability and to understand how the results are interpreted.

Quantitative Data Analysis

The features of quantitative data are: based meanings derived from numbers; collection results in numerical and standardized data; analysis conducted through the use of diagrams and statistics. (ibid.)

Because I will find some secondary data, most of quantitative data have been interpreted and analyzed by the authors, but I still need to analyze some quantitative raw data. Before undertake quantitative data analysis, I need consider the type, format of the data.

n From China government and industrial journals and reports for marketing development and changing trend.

n From the company archives for marketing, sales and financial records in 3 years, I will analyze the marketing quantification, market share and growth, products price, etc.

n From the company website to find the data that in 3 years about the quantitative objective of the company, then compare the data and to get the result which aspects in marketing situation had become better or still have problems after the New Healthcare Reform.


All these data will be collected and analyzed based on relevant corporate strategies and marketing strategies. Attentions will also be paid on the reliability, validity and the goodness of the data.

·Qualitative Data Analysis

Qualitative data are based on meanings expressed through words. It results in the collection of non-standardized data which requires classification, and is analyzed through the use of conceptualization.'(Dr Mark Sounders, 1997) In this research, I also need to get some qualitative data through a number of the process of qualitative analysis, including in-depth interview, document and interim summaries, self memos, etc.

n To find the primary data from semi-structured interviews to different levels of staffs in the marketing department and to ask them which aspects of the new reform they do not like and why. What (if anything) they might have been done to prevent the problem arising after reform? Then, I will classify the data into meaningful categories. The identification of these categories will be guided by the purpose of my research, as expressed through my research questions and objectives. The categories, which I devise, will be part of a coherent set so that they provide me with a well-structured, analytical framework to pursue my analysis.

n To find the primary data from case study such as successful and failed emergent strategy formed of similar situations in other organization. Uma Sekaran stated that case studies are also qualitative in nature and are useful in applying solutions to current problems based on past problem-solving experiences.(Uma Sekaran, 2000)

n To get some information from company archives as secondary data will be analyzed for understanding the changing in marketing strategy of Novartis.


After data have been collected through the above-mentioned ways, and through sources, they will edit first. Then, the blank analysis, if any, will be handled and noted. Moreover, I also need to study some relevant business theories and applied to certain conditions, and to achieve a good research result from analyzing the target company.

Therefore, the dependent variable is the variable of primary interest to the researcher. The researcher's goal is to understand and describe the dependent variable, or explain its variability, or predict it. Through the analysis of the dependent variable, it is possible to find answers or solutions to the problem.(Uma Sekaran, 2000). Here again, she also said an independent variable is one that influences the dependent variable in either a positive or a negative way. So, I will use a systematic explanatory and exploratory research and focus on those dependent variables. The relationships of the variables will be designed in detail, based on the understanding the independent variables of the company.



Feasibility and practicability need to be taking into account when formulating research questions and these questions also have to be feasible in terms of time and resources available for the research. Therefore, there will have some limitations during the research, for example, when I do face-to –face interviews, there are the geographical limitations if such survey needs to be done nationally or internationally, and the respondents might feel difficult about the anonymity of their responses when they interact face to face with me. And, if I do personally administering questionnaires, it can collect the questionnaires immediately after they are completed, but administering questionnaires personally is expensive.




As Uma Sekaran pointed out business research can be described as systematic and organized effort to investigate a specific problem encountered in the work setting, that needs a solution (Uma Sekaran, 2000)


This research proposal is a primary work of an in-depth investigation of the marketing strategy development after a new reform in the target company-Beijing Novartis Pharma Ltd, and to illuminate the marketing circumstance through Chinese New Healthcare Reform according to perceptions of views and interpretations.


A rationalization of research topic presents research aim and objectives, and well-designed the research questions also provided. A series of literature review to be focused on relevant business studies, marketing strategies and operational system management area. Through review those current marketing situation to achieve an actual research for the target company. Also, as defined and decided by the process of this research, both quantitative and qualitative research methodology and related data collection and analysis are designed and presented. Finally, limitations of study also addressed after structure and outline of the research. The more objectives the marketing situation analyzed, the more critical and effective the research processes are about to approach.


To sum up, this proposal provide an appropriate research framework to achieve a systematic investigation in marketing strategy after reform for Beijing Novartis Company , and try to find answers to a problem through investigation.







Bryman, "Research Methods and Organization Studies"

Robert B. Burns, "Introduction To Research Methods", SAGE Publications

Uma Sekaran, "Research Methods For Business", John Wiley & Sons, Inc

Nicholas Walliman, with Bousmaha Baiche "your research project", SAGE Publications

Dr Mark Sauders, Philip Lewis, Dr Adrian Thornhill, "Research Methods for Business Students", Pitman Publishing

Philip Kotler & Gary Armstrong, (1997) "Marketing", Fourth Edition, An introduction

Elizabeth Barnes & Bob McClelland, "Marketing", An Active Learning Approach, Blackwell Business Publishing

Mike Meldrum and Malcolm McDonald, "Key Marketing Concepts", Macmilian Business Publishing


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