Going it Alone is a Poor Strategy in Trying to Break into Emerging Markets 8368

 As growth slows in mature markets like the U.S., Europe and Japan, medical technology companies are looking toward emerging markets as the messiah.

After all, a booming middle class and growing disposable incomes in countries like Brazil, China and India  make for an attractive mix.

But multinational companies who jump in head first without developing local relatioships will quickly realize it is folly indeed.

"MNCs need to employ a strategy that allows them to have closer strategic ties and create partnerships with the locals much earlier in the process in order to have an ideal win-win situation,” says Priya Radhakrishnan, a Senior Analyst covering Medical Devices at research and consulting firm GlobalData, in a news release.

One big reason to team up with local companies is because of cheap labor.

"Local players employ a much larger sales force and expand much more rapidly due to lower labor costs. They are also able to work better with local government agencies to bring about policy changes in the regulatory environment," Radhakrishnan says.

Implicit in this view is the fact that locals know the culture of the place and what makes regulators tick, something that an outsider is not typically privy too.

The other factor that medical device companies need to bear in mind is cost. Pricing the product appropriately will play a big role in adoption.

"To compete in the long run and maintain market share, the MNCs must learn to keep costs low from the start,"Radhakrishnan says. "Local firms have learned to utilize the much lower labor costs in these markets and to reduce development cycles, as well as better navigate the local distribution networks."

While that may be true, it's imperative for device firms to recognize that cheaper does not mean lower quality.

- By Arundhati Parmar, Senior Editor, MD+DI

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