Friday, October 19, 2012

Strategic Action in a Global Market

International market is an opportunity for business growth. Enterprises become more profitable and competitive once they have to face global market and foreign competitors.  In the 21st century, companies can’t escape from internationalization or the effects that it causes in national economies. The health industry is no different. In 2009, the sales in this sector reached U$289 billion worldwide and it is expected to reach U$487 billion in 2016, with an annual growth of 7%; there are more than 27 thousands enterprises around the world, employing more than one million people.

Since it is an industry that requires new technologies, high investments in R&D and a highly qualified team, most of medical devices production concentrates in developed countries.


As shown in the graphic, the global top 5 exporters[1] of “Instruments, appliances for medical, etc science, nes concentrate more than half of exports, which reached more than U$40 billion in 2011.

Once an enterprise decides to internationalize, it has to consider: if its country belongs to any free trade area or bilateral agreement (it is usually easier to export to these countries); size and growth rate of the market, national and international competitors in the destination country, as well as national taxes of imports, definition of a strategy, logistics of exports. One important detail one shall consider, when deciding to export, is the non-tariff barrier. Even when there is no significant tariff barrier or national taxes of imports, there might be a barrier like quotas, technical or sanitary standards, administrative and bureaucratic delays at the entrance. Due to a strong international regulatory system about tariff barriers, countries are adopting non-tariff barriers as a way to protect their national industry and, in the same time, not “disobey” standards and rules in international trade.

The strategy for enterprises in this sector has had to be reviewed after what happened to the global economy in 2008 and 2009. Big medical devices companies are now paying attention to China, India and Brazil. Looking at the size of the population and the way they are gaining higher buying power, companies are trying to learn and understand how to approach these markets.

But, like in any other sector, selling a medical device in a developed country is not the same as selling it in a developing country. The different scenarios and culture complicate the sale of a standard product. Therefore, products are been created specifically for these emerging markets. Instead of selling the same product to developing and developed countries, companies are creating products for emerging markets. We have to consider that not all the companies are taking this step. Most of them are wary and skeptical about the returns they will obtain taking this strategy. There are a few enterprises that are already doing business in these countries, especially the European ones.

Like in any other company that has to customize their product according to the different countries or areas, there has to be two (or more) strategies and two (or more) lifecycles working in the same organization. So, it is important to have a good marketing team that deeply studies and examines the target market.


[1] One shall consider that Mexico belongs to the North America Free Trade Agreement (NAFTA); the USA is the biggest importer in the world representing 20% of the world’s demand and Mexico is its biggest provider.