Here is case study of a small medical device company considering expanding globally
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1. Diagnosis Lack of a favorable channel in the US High
bargaining power of buyers through group purchases High regulatory
costs Startup mode: limited resources
2. The paradox Bubble size = Margin60% 40%Market
3. Tough US Market
4. And costBubble size = Margin / Cost
5. Lookelsewhere
6. Is Goliath weak there
7. What else is good for a startup? Disorganized channel Low
public contribution (govts usually have high bargaining power; may
prefer local) Easy regulation
8. Case Information Economy Health Care situation Regulation
Medical Device Industry
9. Brazil- Qualifiables Positives Government committed to
expanding access to essential healthcare10% GDP. Regulation:
International Standards generally accepted Swift registration
process (takes 10 mo., valid 5 years) Few large-scale domestic
manufacturers Large, rapidly growing market U.S. accounts for 50%
import market Unlike many other emerging markets- Low import
tariffs No import duties No value-added taxes
10. Brazil- Qualifiables Negatives Medical device distribution
highly fragmented 3000 importers/distributors Expected to
consolidate creating greater market access
11. Russia- Qualifiables Positives The $1.98 Billion Medical
device sector displayed robust long term growth Public and Private
Healthcare spending could be 3.8 percent of GDP which could reach
$97.4 Billion by 2013 The Russian economy is expanding and so are
healthcare investments By 2013 a CAGR of 7.74 percent was expected
with for the medical device market and is predicted to have a
market valuation of $2.88 billion Imports contribute to 75% of the
market in spite of the economic crisis giving local manufacturers
an opportunity as the price of imported products rose sharply
starting in 2005
12. Russia- Qualifiables Negatives Potential changes to
legislation could worsen Tariffs on medical devices are expected to
drop to an average of 5% with Russia potentially entering the WTO
Government could seek methods to increase the market share of local
producers using methods like increasing tariffs Local manufacturers
have sales of about $1.98 billion
13. India- Qualifiables Positives Regulations Improving
Continually; becoming more transparent $2.35 billion market for
Medical Device Technology Private sector accounts for ~75% of
Health Care Spending Imported High end Goods increase its share
Reduction of levies & Increase of foreign firms Medical Devices
rise by 23% expected YOY(2005-06)
14. India- Qualifiables Negatives Poor, (but emerging)
population Intellectual Property Laws are lacking Shortage of Staff
in Private and Public sector Private sector accounts for ~75% of
Health Care Spending
15. China- Qualifiables Positives Medical device market
accelerating by 12.87% YOY Population = 1.3 billion (ageing
population), although population is highly segmented Foreign
medical device manufacturers are expected to increase their
presence
16. China- Qualifiables Negatives Heavy resistance to foreign
imports Although Population = 1.3 billion (ageing population), its
highly segmented foreign competition gaining presence The
regulatory framework is hindering the path toward efficient
operations in the medical industry, but improvements expected in
the next couple of years
17. How do we decide? Regulation / Compliance Brazil:
international accepted! Fast process Import resistance Russia: weak
teeth/ political; Brazil: zero tariff! India: somewhat hopeful
Russia: 75% potential but strong push for local China: uncertain,
seems difficult and slow India: Moderate; China : High Bargaining
power of buyers Political Russia : Indirect govt. funding Russia,
China unfavorable Brazil: heavy direct govt spending Brazil looks
much better China and India: favorable privatization trend Size and
Growth Local competition / Saturation/Price pressure Cost advantage
China Local players, price pressures how about geography Russia:
local encouragement Early entry advantage India: nothing mentioned
(better) Market similarity
19. Barrier to entry Brazil Russia India China Regulation
Import-resistance Local-C/S Buyer power
20. Finalists Brazil China Regulation Import-resistance
Local-C/S Buyer power
21. How about Europe? A startup can easily make a small dent
Hard to expand Margin/Cost information not available for BRIC
22. Recommendation Enter Brazil Keep an eye on China Maintain
status-quo in high Margin/Cost countries like Spain and Greece
Consider exiting low Margin/Cost countries like Italy (sorry
Professor)