Bolton Institute of Higher Education And South Westphalia University of Applied Sciences, Division Soest
Chances and Risks of Global Branding: Placing German Medical Equipments on the Near East Market
A dissertation submitted in partial fulfillment of the requirements of Bolton Institute of Higher Education for the degree of Master of Science
1
Abstract Rapid improvement in transportation and communication is shrinking the world. Therefore, making it more and more important for companies to internationalize in order to grow and to survive the tough competition This thesis is covering the area of internationalizing the German medical equipments companies to the Near East market. The focus is on target market selection, motives for entering the Near East countries, timing of entry , entry mode strategy, factors influencing entry mode decision, clustering the Near East, the Near East cultural effect in marketing and finally marketing medical equipments. In order to reach this purpose we had conducted three case studies within the subject area, through interviews. Our main contributions show that the reactive market selection approach is the main characteristic of the German medical companies. The economic growth and demand as well as the saturated existing markets are the main motives to enter the Near East. First mover is not of great advantage over late entry unless the company has technology not available by other competitors. The risk of entering the Near East markets is higher than entering a westernized market. However, this study has shown that the market opportunities are great and for this reason, it is worth to take the risk. The most appropriate strategy to enter the Near East medical markets is through exporting since it decreases the risk. Managers need to consider local customs and values, which include non-westernized business practices and bureaucracy. The main two regional hubs for the area are Emirates-Dubai and Egypt-Cairo.
Key words: Germany, Global Branding, Marketing Medical Equipments, Near East
II
Declaration No portion of the work presented in this dissertation has been submitted in support of another award or qualification either at this institute or elsewhere.
III
Acknowledgment First and foremost, I would like to thank the experienced mind of my supervisor Prof. Dr. Henrik Janzen, without his valuable comments and encouragement, at times I have been exhausted, confused and really desperate, it was not possible to accomplish this study. I also wish to express my deepest gratitude to my dear parents back home for their enormous support during my studies. Finally, I would like to thank my loved ones, friends and fellow students for their support and inspiration ideas. I hope this thesis will be interesting and valuable for further studies and useful reading material for other students, researches and people interested in this area of marketing. Soest, January 2005 Ala’a Moh’d
The ideals that have lighted my way and time after time have given me new courage to face life cheerfully, have been Kindness, Beauty and Truth. Albert Einstein
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Table of Contents 1
Introduction ....................................................................................................................1 1.1 Background of Medical Equipments sector and the technology ...............................1 1.2 Research Problem Discussion .................................................................................1 1.3 Purpose of the study ................................................................................................4 1.4 Process of study ......................................................................................................5 1.5 Structure of the study ..............................................................................................5 2 Review of Literature .......................................................................................................7 2.1 Target Market Selection ..........................................................................................8 2.1.1 Consumer/User Profile ..................................................................................10 2.1.2 Direct Estimates of Market Size ....................................................................10 2.1.3 Indirect Estimates of Market Size ..................................................................11 2.1.4 Accept/Reject Decisions................................................................................11 2.2 Timing of Entry ....................................................................................................12 2.3 Entry Mode Strategies...........................................................................................14 2.3.1 Exporting Entry Modes .................................................................................14 2.3.2 Contractual Entry Modes...............................................................................15 2.3.3 Investment Entry Modes................................................................................16 2.4 Entry Mode Strategy in the Near East....................................................................19 2.4.1 Exporters.......................................................................................................19 2.4.2 Contractors:...................................................................................................21 2.4.3 Investors........................................................................................................22 2.5 Factors Influencing the Entry Mode Decision........................................................23 2.5.1 External Factors ............................................................................................24 2.5.2 Internal Factors: ............................................................................................27 2.6 Factors Influencing Entry Mode in the Near East: .................................................28 2.7 Clustering the Near East........................................................................................32 2.8 Near East Cultural Effect in Marketing..................................................................34 • Doing Business with Arabs ...................................................................................38 2.9 Marketing Medical Equipments.............................................................................47 2.9.1 Defining Distribution Channels .....................................................................47 2.9.2 Market Segmentation.....................................................................................48 2.9.3 The Decision Makers.....................................................................................49 2.10 Near East Medical Market Overview.....................................................................51 3 Conceptualization and Frame of Reference ...................................................................52 3.1 Conceptualization .................................................................................................52 3.1.1 Target Market Selection ................................................................................52 3.1.2 Timing of entry .............................................................................................53 3.1.3 Entry Mode Strategies ...................................................................................53 3.1.4 Factors Influencing the Entry Mode Decision ................................................54 3.1.5 Clustering the Near East ................................................................................55 3.1.6 Near East Cultural Effect in Marketing..........................................................56 3.1.7 Marketing Medical Equipments.....................................................................57 3.2 Frame of Reference...............................................................................................57 4 Methodology ................................................................................................................59 4.1 Purpose of Research..............................................................................................59 4.2 Research Approach ...............................................................................................60 4.2.1 Induction or deduction:..................................................................................60 4.2.2 Qualitative and Quantitative Methods............................................................61 V
4.3 Research Strategy..................................................................................................61 4.4 Data Collection Method ........................................................................................63 • Interview guide: ....................................................................................................67 4.5 Selection of Case-Study Firms ..............................................................................70 4.6 Data Analysis Methodology ..................................................................................70 4.7 Validity and Reliability .........................................................................................72 4.8 Methodology Visualization ...................................................................................73 5 Data Presentation..........................................................................................................75 5.1 Case One: Joimax (Joined Minimal Access) GmbH, Surgical Solutions ................75 5.1.1 Company Presentation...................................................................................75 5.1.2 Target Market Selection, Sequence and Timing of Entry ...............................77 5.1.3 Entry Mode Strategy, the Factors Influencing it and the Near East Cultural Effect in Marketing.......................................................................................................79 5.1.4 Marketing Medical Equipments.....................................................................80 5.2 Case Two: Andreas Fahl Medizintechnik-Vertrieb GmbH (Fahl Medical Technology) .....................................................................................................................80 5.2.1 Company Presentation...................................................................................81 5.2.2 Target Market Selection, Sequence and Timing of Entry ...............................82 5.2.3 Entry Mode Strategy, Factors Influencing it and the Near East Cultural Effect in Marketing .................................................................................................................83 5.2.4 Marketing Medical Equipments.....................................................................84 5.3 Case Three: AMCO Arabian Medical Marketing Co. Ltd. HealthCare Services ....85 5.3.1 Company Presentation...................................................................................85 5.3.2 Target Market Selection, Sequence and Timing of Entry ...............................87 5.3.3 Entry Mode Strategy, the Factors Influencing it and the Near East Cultural Effect in Marketing.......................................................................................................89 5.3.4 Marketing Medical Equipments.....................................................................89 6 Data Analysis ...............................................................................................................91 Part I: Within-Case Analysis ................................................................................................91 6.1 Within Case Analysis, Joimax...............................................................................91 6.1.1 Target Market Selection ................................................................................91 6.1.2 Timing of Entry.............................................................................................93 6.1.3 Entry Mode Strategy .....................................................................................94 6.1.4 Factors Influencing Entry Mode Decision......................................................95 6.1.5 Clustering the Near East ................................................................................96 6.1.6 The Near East Cultural Effect in Marketing...................................................97 6.1.7 Marketing Medical Equipments.....................................................................97 6.2 Within Case Analysis, Fahl ...................................................................................98 6.2.1 Target Market Selection ................................................................................98 6.2.2 Timing of Entry...........................................................................................100 6.2.3 Entry Mode Strategy ...................................................................................101 6.2.4 Factors Influencing the Entry Mode Decision ..............................................101 6.2.5 Clustering the Near East ..............................................................................102 6.2.6 Near East Cultural Effect in Marketing........................................................103 6.2.7 Marketing Medical Equipments...................................................................103 6.3 Within Case Analysis, AMCO ............................................................................104 6.3.1 Target Market Selection ..............................................................................104 6.3.2 Timing of Entry...........................................................................................106 6.3.3 Entry Mode Strategy ...................................................................................107 6.3.4 Factors Influencing the Entry Mode Decision ..............................................108 6.3.5 Clustering the Near East ..............................................................................109 VI
6.3.6 Near East Cultural Effect in Marketing........................................................110 6.3.7 Marketing Medical Equipments...................................................................111 6.4 Part II: Cross-Case Analysis................................................................................111 6.4.1 Target Market Selection ..............................................................................112 6.4.2 Timing of Entry...........................................................................................115 6.4.3 Entry Mode Strategy ...................................................................................116 6.4.4 Factors Influencing the Entry Mode Decision ..............................................118 6.4.5 The Near East Cultural effect in marketing ..................................................121 6.4.6 Marketing Medical Equipments...................................................................122 7 Conclusions and Implications .....................................................................................124 7.1 Conclusions ........................................................................................................124 7.1.1 Target Market Selection ..............................................................................124 7.1.2 Timing of Entry...........................................................................................126 7.1.3 Entry Mode Strategy ...................................................................................126 7.1.4 Factors Influencing Entry Mode Decision....................................................127 7.1.5 Clustering the Near East ..............................................................................128 7.1.6 The Near East Cultural Effect in Marketing.................................................128 7.1.7 Marketing Medical Equipments...................................................................129 7.2 Implications ........................................................................................................130 7.2.1 Implications to Management........................................................................130 7.2.2 Implication for Theory.................................................................................131 7.2.3 Implication for future research.....................................................................132 8 List of References .......................................................................................................133 9 Appendix I Interview Guideline ..............................................................................136 10 Appendix II Interview Invitation Letter.................................................................140 11 Appendix III: The Near East Medical Market Overview..........................................141 12 Appendix IV List of Invited Companies..................................................................157
VII
List of Figures Figure 1:1 The Near East Market Definition ...........................................................................2 Figure 1:2 The structure of this thesis .....................................................................................6 Figure 2:1 Flow chart of the Review of Literature...................................................................7 Figure 2:2 Model to Select Target Market, source: adapted from roo1994, p.56......................9 Figure 2:3 International Entry Mode Choices .......................................................................19 Figure 2:4 Factors Influencing the International Entry Mode Choice ....................................24 Figure 3:1 A Conceptual Fram of Referance, Source:constructed by the auther ...................58 Figure 4:1 Overview of the Methodology Obtained in this Study, Source: Adapted from Foster (1998), p.81 ...............................................................................................................59 Figure 4:2 Relevant Situations for Different Research Strategies, Source: Adapted from Yin (1994), p.6............................................................................................................................62 Figure 4:3 Source of Evidence Strengths and Weaknesses, Source: Yin (1994), p. 80..........64 Figure 4:4 Visualization of the Methodology ........................................................................74
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List of Tables Table 3.1 Entry Mode Strategies...........................................................................................54 Table 6.1 Overview of the Target Market Data-Joimax, Constructed by the Author..............92 Table 6.2 Overview of the influencing theories for the Target Market Selection-Joimax, Constructed by the authuer ...................................................................................................93 Table 6.3 Overview of the Influencing Theories for the Timing of Entry -Joimax, Constructed by the Author .......................................................................................................................94 Table 6.4 Overview of the of the Entry Mode Strategy in the Near East-Joimax, Constructed by the Author .......................................................................................................................94 Table 6.5 Overview of the of the Entry Mode Characteristics in the Near East-Joimax, Constructed by the Author ....................................................................................................94 Table 6.6 Overview of the Factors Influencing the Entry Mode Decision in the Near EastJoimax, Constructed by the Author.......................................................................................95 Table 6.7 Overview of the Problems Experienced with the Company in the Neat East Joimax, Constructed by the Author.......................................................................................95 Table 6.8 Theories Influencing Clustering the Near East: Joimax, Constructed by the Author .............................................................................................................................................96 Table 6.9 Proposed clustering of the Near East: Joimax, Constructed by the Author .............97 Table 6.10 The Near East Cultural Effect in Marketing: Joimax, Constructed by the Author.97 Table 6.11 Overview of Marketing Medical Equipments Characteristics: Joimax, Constructed by the Author .......................................................................................................................98 Table 6.12 Overview of the Target Market Data-Fahl, Constructed by the Author ................99 Table 6.13 Overview of the Influencing Theories for the Target Market Selection-Fahl, Constructed by the Author ....................................................................................................99 Table 6.14 Overview of the Motives for Entering the Near East Countries -Fahl, Constructed by the Author .....................................................................................................................100 Table 6.15 Overview of the Influencing Theories for the Timing of Entry -Fahl, Constructed by the Author .....................................................................................................................100 Table 6.16 Overview of the of the Entry Mode Strategy in the Near East-Fahl, Constructed by the Author ..........................................................................................................................101 Table 6.17 Overview of the of the Entry Mode Characteristics in the Near East-Fahl, Constructed by the Author ..................................................................................................101 Table 6.18 Overview of the of the Factors Influencing the Entry Mode Decision in the Near East-Fahl, Constructed by the Author .................................................................................102 Table 6.19 Theories Influencing Clustering the Near East: Fahl, Constructed by the Author ...........................................................................................................................................102 Table 6.20 Near East Cultural Effect in Marketing: Fahl, Constructed by the Author..........103 Table 6.21 Overview of Marketing Medical Equipments Characteristics: Fahl, Constructed by the Author ..........................................................................................................................104 Table 6.22 Overview of the Target Market Data-AMCO, Constructed by the Author .........105 Table 6.23 Overview of the influencing theories for the Target Market Selection-AMCO, Constructed by the Author ..................................................................................................105 Table 6.24 Overview of the Motives for Entering Near East Countries -AMCO, Constructed by the Author .....................................................................................................................106 Table 6.25 Overview of the Influencing Theories for the Timing of Entry -AMCO, Constructed by the Author ..................................................................................................107 Table 6.26 Overview of the of the Suggested Entry Mode Strategy in the Near East-AMCO, Constructed by the Author ..................................................................................................107
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Table 6.27 Overview of the of the Entry Mode Characteristics in the Near East-AMCO, Constructed by the Author ..................................................................................................108 Table 6.28 Overview of the of the Factors Influencing the Entry Mode Decision in the Near East-AMCO, Constructed by the Author.............................................................................108 Table 6.6.29 Overview of the Problems Experienced with the Company in the Neat East AMCO, Constructed by the Author ....................................................................................109 Table 6.30 Theories Influencing Clustering the Near East: AMCO, Constructed by the Author ...........................................................................................................................................110 Table 6.31 Proposed Clustering of the Near East: AMCO, Constructed by the Author........110 Table 6.32 Near East Cultural Effect in marketing: AMCO, Constructed by the Author .....110 Table 6.33 Overview of Marketing Medical Equipments Characteristics: AMCO, Constructed by the Author .....................................................................................................................111 Table 6.34 Overview of the influencing theories for the Target Market Selection Joimax/Fahl/AMCO, Constructed by the Author ................................................................112 Table 6.35 Overview of the Target Market Data-Joimax/Fahl/AMCO, Constructed by the Author ................................................................................................................................113 Table 6.36 Overview of the Motives for Entering Near East Countries –Joimax/Fahl/ AMCO, Constructed by the Author ..................................................................................................114 Table 6.37 Overview of the Influencing Theories for the Timing of Entry ModeJoimax/Fahl/AMCO, Constructed by the Author ................................................................115 Table 6.38Overview of the of the Entry Mode Strategy in the Near East-Joimax/Fahl/AMCO, Constructed by the Author ..................................................................................................116 Table 6.39 Overview of the of the Entry Mode Characteristics in the Near EastJoimax/Fahl/AMCO, Constructed by the Author ................................................................117 Table 6.40 Overview of the Factors Influencing Entry Mode Decision in the Near EastJoimax/Fahl/AMCO, Constructed by the Author ................................................................118 Table 6.41 Overview of the Problems Experienced with the Company in the Neat East – Joimax/Fahl/AMCO, Constructed by the Author ................................................................119 Table 6.42 Theories Influencing Clustering the Near East: Joimax/Fahl/AMCO, Constructed by the Author .....................................................................................................................120 Table 6.43 Proposed clustering of the Near East: Joimax/AMCO, Constructed by the Author ...........................................................................................................................................120 Table 6.44 The Near East Cultural Effect in Marketing: Joimax/Fahl/AMCO, Constructed by the Author ..........................................................................................................................121 Table 6.45 Overview of Marketing Medical Equipments Characteristics: Joimax/Fahl/AMCO, Constructed by the Author ................................................................122
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Chapter 1 Introduction
1 Introduction In the first chapter of this thesis, we will introduce the reader to the background of our research area, followed by research problem discussion. After that, our actual purpose will be stated, together with the process of the study. Finally, an outline of the thesis will be given.
1.1 Background of Medical Equipments sector and the technology Medical Devices can be broadly defined as any instrument, apparatus, appliance or other article that is used in human beings for the diagnosis, prevention, monitoring and treatment of a disease, injury or handicap and that does not achieve its principal intended action by pharmacological, immunological or metabolic means. In this sense the term ‘medical device’ comprises products ranging from aids for the disabled (e.g. wheelchairs), through to active and non-active implantable (pacemakers, joint replacements), to electro medical and imaging equipment, dental devices, ophthalmic devices, surgical instruments or medical disposables (such as wound care and incontinence treatments). (Eucomed Position on behalf of the Medical Devices Industry in Europe, Markus Siebert, 8 November 2002) The Medical devices industry In Europe is an industry worth in excess of 55.2 Billion Euro. It is employing more than 386,000 individuals. The sector comprises some 7000 business entities, 94 % of which are small and medium sized enterprises. In Germany this sector worth 19 billion Euro and employees 100,000 individuals in more than 1200 companies which exports
more
than
half
of
it
is
products.
(Figures
based
on
http://www.eucomed.be/?x=13&y=29&z=139 , 25-07-2004) Medical devices play a pivotal role in modern health care and patient access to state-of-the-art medical technology saves lives and improves the quality of life.
1.2
Research Problem Discussion
Due to globalization nowadays, products are no longer developed for the local market only. After the product is launched in the local market, sooner or later products will often be launched in the foreign markets even we have now what is called born global products. Day by day the importance of such a launching decision is becoming more important for marketing managers as a result of higher competition due to globalization.
1
Chapter 1 Introduction This means that the international marketing managers have to decide about where and when to release their products in each area based on market influencing factors. These factors change from one market to another, which requires different strategies for the different markets. In this research, we have put the spotlight on the Near East market. Having a closer look, we will find that there are a lot of challenges in this market. The Near East is defined as the areas from Morocco in the west to Iran in the east and from Iraq
in
the
north
to
Yemen
in
the
south
(Definition
based
on
http://www.hyperdictionary.com/dictionary/Near+East, 25-07-2004). See Figure 1.1.
Figure 1:1 The Near East Market Definition Many people think of the Near East as a region of insecurity, political instability and conflicts. A region characterized by socio-economic disparities. Nevertheless, it is clear how in some ways so little has changed for so long in this area. Now, however, there is a sense that the Near East is on the move and this gives the market a lot of Opportunities and challenges. As an example of these political issues, we can look at the Iraqi war, which came and went so fast leaving many changes, which is positively giving fresh trading opportunities in the rebuilding of Iraq and at the top of the list will be the healthcare sector. One more political issue to be taken into consideration is the reformation of the medical services. Many countries in the area now including, Jordan and Saudi Arabia are trying to decentralize and restructure their healthcare sectors. This is due to the heavy healthcare spending on these governments’ revenues. Planning to move it to the private sector means an 2
Chapter 1 Introduction expansion of the infrastructure, a change in the decision makers and this gives more business opportunities. In the Near East market, as in any other market, understanding the culture is also ingredient for business success. 1) Language and communication: Verbal and non-verbal communication is a very important issue in marketing. The context in which a discussion occurs also plays a rule in cross-cultural communication. 2) Religion: “Although there are a significant number of Arab Christians in Lebanon, Syria, the Palestinian Authority, Iraq and Egypt, as well as Jews throughout the Near East, the predominant religion of the region is Islam”. (http://www.worldmarketsanalysis.com/InFocuse2002/articles/health_MiddleEast.html, 28/7/2004) 3) Gender Issues: “There is a preference for segregated male and female in the Near East at different levels, and in some countries, such as Saudi Arabia and Iran, full segregation is mandated by law.” (In Focus 2002). Some other countries are not obtaining segregation like Tunisia and Lebanon but it is still a factor to be considered. This issue can make some conflicts in contacting female decision makers. Macro economic factors including local currencies exchange rate, interest rates, gross domestic product (GDP), and oil prices are also of great importance. Monitoring price developments in the region is obviously of greatest importance, since in addition to exchange rates instability also oil prices has a high degree influence in customers’ purchasing power in this part of the world. Based on the political, economical, geographical and cultural factors the need to compromise countries that share many similarities into clusters shows up, although differences remain. One additional barrier arises from the shortage of the data related to the size and directions of the market. Since there is no exact statistics or market surveys in each country.
3
Chapter 1 Introduction The Near East medical equipments market is a high competition market, based on export with almost no local competitors. It includes different issues like quality, price and up-to-date technology. It is a market, which needs high budget for advertisement through conferences, expos and demonstrations. Investment in the equipment reputation and after sales service is of great value to keep the market up. This situation presents new opportunities, but new opportunities can carry new risks. Understanding those opportunities and risks with a right market strategy introduce a company to the Near East which have $74 Billion estimated value of the healthcare market, and dentistry making up just over $2 Billion. (http://www.osec.ch/0xd417eb28_0x0008af04 , Gulf Marketing Review March 2004, 05/08/2004)
1.3
Purpose of the study
The purpose of this thesis is to give a guideline for international marketing managers of the German medical equipments companies to reach different clusters of the Near East markets successfully. This guideline helps the managers to make a workable strategic marketing plan. It will give suggestions in deciding about issues like choice of the target market, market entry mode, factors that might have an impact on the choice of market entry mode, How to cluster the Near East , Which cluster to enter first, second, etc..? What are the regional Hubs for each cluster? And what factors influence marketing medical equipments? An international marketing manager is a manager responsible for facilitating the exchange of products between the organization and its customers or clients. International marketing managers must be aware of cultural differences. It is very important for managers to recognize the differences as well as similarities in buyer behavior from country to country (http://www.onlineessays.comessaysbusinessbus013.php, 13/8/2004) Clustering will be needed to compromise countries that share many cultural similaritiesalthough differences remain- since we have many countries inside our selected market. Being successful depends on how the company wants to position itself in the market. How do you want your clients, your business partners and your competitors to perceive your product or service?
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Chapter 1 Introduction
1.4 Process of study As a start, a literature review of the available articles and studies will be conducted. This will include the areas of target market selection, motives for entering the Near East countries, timing of entry , entry mode strategy, factors influencing entry mode decision, clustering the Near East, Near East cultural effect in marketing and finally marketing medical equipments. Based on this literature study a conceptual framework will be proposed. This framework will be tested using empirical data from German medical companies that have already introduced a product into the Near East market or planning to do so. Finally, we will provide international marketing managers of German medical equipments companies with reliable suggestions for their launching decisions in the Near East.
1.5
Structure of the study
The thesis is divided into seven chapters as shown in figure 1.2 in the first chapter a short background to medical equipments sector and the technology is presented followed by a problem discussion, which will lead the reader to the purpose of the study. Finally, the structure of the study will be presented. In the second chapter, literature to our selected topic will be reviewed. This will include target market selection, motives for entering the Near East countries, timing of entry mode, entry mode strategy, factors influencing entry mode decision, clustering the Near East, Near East cultural effect in marketing and finally marketing medical equipments. The third chapter presents a conceptualization of the reviewed literature followed by the frame of reference. Chapter four includes the methodology, which will guide the collection of data for this thesis. In chapter five, the empirical collected data obtained from interviews and the documentation is presented. Chapter six include case analysis of the empirical data presented in chapter four and a cross comparison with the reviewed literature from chapter two. Finally, in chapter seven the conclusions and implications regarding the findings of this study are presented.
5
Chapter 1 Introduction
Chapter One Introduction
Chapter Two Review of Literature
Chapter Five Data Presentation
Chapter Four Methodology
Chapter Six Analysis
Chapter Seven Conclusions and Implications
Chapter Three Conceptualization and Frame of Reference
Figure 1:2 The structure of this thesis
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Chapter 2: Review of literature
2 Review of Literature The previous chapter introduced the reader to the research area and ended up with the purpose of this thesis. In this chapter, theories relevant to the stated research area will be presented. First, the target market selection will be studied. This will be followed by the timing decision. Next, Entry mode strategies and factors influencing them will be presented including special focused sections for the Near East. After, we will present the theories related to clustering the Near East, Near East cultural effect in marketing. Finally, we will have a look over the methods used in marketing medical equipments and the Near East medical market, see figure 2.1. These theories then will be used in the next chapter to develop the conceptual framework that will aid us in data collection and the analysis.
Target Market Selection
Factors Influencing Entry Mode in the Near East
Timing of Entry
Clustering the Near East
Near East Cultural Effect in Marketing
Entry Mode Strategies
Entry Mode Strategy in the Near East
Marketing Medical Equipments
Factors Influencing the Entry Mode Decision
The Near East Medical Market Overview (Appendix)
Figure 2:1 Flow chart of the Review of Literature 7
Chapter 2: Review of literature
2.1
Target Market Selection
Many companies have moved to exporting and international marketing in a piecemeal and unplanned manner. However, Albaum states that market selection approach can be reactive vs. proactive. The reactive market selection approach characterizes a situation where the exporter acts passively in choosing markets by filling unsolicited orders or awaits initiatives on the part of foreign buyers, foreign representatives (importers, agents and so on) or other export change agents who indirectly select the market for the company. The selection process then remains very informal, unsystematic and purchase-oriented, making export marketing more or less sporadic. The proactive market selection approach is, in contrast to the reactive approach! Marketingoriented. The exporter is active in initiating the selection of foreign markets and the further customer segmentation of these markets. Since active market, selection is systematic and formalized, rather heavy organizational burdens are put on the exporter requiring personnel with international experience and access to international market information. (Albaum and Strandskov 1994, p.94) Another approach discussed by Albaum is the contractible method. When using a contractible method the optimal market selection starts with the total number, or a large number, of national markets, which are eventually broken down into regional groupings on the basis of political, economic, language, or other criteria. Contractible methods involve a systematic screening of all markets leading to immediate elimination of the least promising and further investigation of the more promising. In doing so, relevant elimination or ' knock-out'factors have to be stipulated. Two sets of factors, as discussed previously, are (1) general market indicators and (2) specific product indicators. Although the overall approach appears to be complex, the procedure involves three stages: 1. Preliminary screening criteria for examining countries are identified. The result is a list of feasible countries. 2. The second stage determines which country characteristics are to be used in evaluating
opportunities
and
how
each
should
be
weighted.
variables are examined: operating risks, market potential, costs, and competition. 8
Four
Chapter 2: Review of literature 3. Countries are evaluated on the basis of the criteria selected in the second stage, and they are rank ordered on the basis of scores derived. The end result of this is an ordering of countries such that a number of these can be selected for further in-depth analysis. (Albaum and Strandskov 1994, p.97). We will discuss the process of deciding on the foreign target market according to the model presented in Figure 2.2. The first phase of the model is a preliminary screening.
Figure 2:2 Model to Select Target Market, source: adapted from roo1994, p.56 The purpose of preliminary screening is to identify country markets whose size warrants further investigation. Preliminary screening tries to minimize two errors: (1) ignoring countries that offer good prospects for a company' s generic product, and (2) spending too much time investigating 9
Chapter 2: Review of literature countries that are poor prospects. To minimize the first error, which is by far the more common, preliminary screening should be applied to all countries. Too often, managers start with assumptions or prejudices that rule out certain countries (or even regions) as possible target markets. Self-imposed constraints, such as "We will consider only markets in Europe," can lead to the choice of an inferior target market. To minimize the second error, preliminary screening should be quick and economical, using quantitative data that are readily available from public sources. At the same time, the data used as screening variables should discriminate among countries with respect to market size. (Root 1994, p.55) In screening foreign markets for first-time entry, managers are most probably looking for an export target market. Nonetheless, it is a mistake to make a first-time screening solely for export markets. To do so could mean the rejection of a country that offers a good market for non-export entry. Instead, preliminary screening should identify prospective target countries without regard to entry mode. Prospects can later be screened for export entry. (Root 1994, p.55) 2.1.1
Consumer/User Profile
Before undertaking preliminary screening, managers should first construct the consumer/user profile of the generic candidate product: the attributes of the individuals and/or organizations that are actual or potential customers. In drawing up the consumer/user profile, managers in companies just entering international business must rely mainly on their experience in the home market. For industrial products, it describes the size, input-output relationships, organization, and other features of typical customers in industries or government agencies that use or can use the candidate product. The consumer/user profile guides managers in the selection of multi-country statistics that are most useful as indicators of market size. (Root 1994, p.57) 2.1.2
Direct Estimates of Market Size
Preliminary screening requires a quick assessment of the market potential facing the candidate product in scores of countries. Estimates of market potential need to be only good enough to identify prospective target countries For most products, multi-country sales statistics are simply not available from published sources nor are managers likely to have access to the statistics needed to calculate the apparent consumption of the candidate generic product in the many countries undergoing preliminary screening, namely, local production plus imports minus exports. Even in the comparatively few 10
Chapter 2: Review of literature instances when they are available, sales and apparent consumption figures may not be good indicators of market potential, because they are historical in nature. As observed earlier, a product is usually in different phases of its life cycle in different countries, and it may not even be present in some countries. When using sales or apparent consumption data, therefore, managers also need to estimate their likely values in the future. To do so, they can project sales or apparent consumption trends (based, say, on figures for the last three years) and check on their agreement with economic and social indicators. Import/export data may also be used for direct estimates of market size. Ideally, managers would have easy access to statistics on imports of the candidate generic product for all countries, as well as on their country origins. They could then construct a global export/import matrix that would identify key import markets and key competitors. International managers, however, are seldom blessed with such data. To conclude, international trade statistics are at best only a partial measure of market potential; their usefulness is limited by a historical bias, distortions created by trade barriers, and broad product categories. Low imports do not necessarily imply a small market potential: import restrictions or local production may be the explanation. In preliminary screening, trade statistics are most useful when combined with economic and social indicators. (root 1994,p.58) 2.1.3
Indirect Estimates of Market Size
Because of the general paucity of multi-country data on product sales, and because of their historical bias, a manager must rely on quantitative economic/social statistics as indicators of market potential. For preliminary screening, these market indicators should be readily available for all countries and be comparable across countries. Many such multi-country indicators appear in publications of the United Nations, the International Monetary Fund, the World Bank, and other international agencies. A partial list of economic and social statistics available from only a few United Nations sources follows. The most commonly used general indicators of market size are GDP (or GNP), GDP per capita, average growth rates of GDP, and imports. Other statistics include: National Account Statistics, Population and Manpower, Production, International Trade, Other Economic Statistics and Social Statistics. (Root 1994, pp.58-60) 2.1.4
Accept/Reject Decisions
The fundamental accept/reject decision rule used in preliminary screening may be expressed as follows: If S > a (where S is the market size for product / in country / and a is a threshold value in 11
Chapter 2: Review of literature dollars, units, rank order, or an index), then accept the country as a prospective target country for further investigation. But since S is estimated by using several indicators, managers can interpret this rule in more than one way. Root 1994 states that an interpretation is to establish minimum values for all the selected market indicators, rejecting those countries whose indicators fall below them. This interpretation assumes that a country' s market size is critically dependent on each indicator and that a high value for one indicator cannot offset a low value for another one. If this assumption is false, then faulty screening is a likely consequence. He further discussed a second interpretation which is to consider one or a few indicators as decisive and reject all countries whose decisive indicators fall below minimum values, regardless of the values of their other indicators. If the indicator or indicators are truly decisive measures of market size, then this approach is defensible, but then there is no need for managers to collect information on any other indicators in screening for market size. In most instances, the most satisfactory interpretation of the accept/reject rule is a weighted average of the selected indicators. The weights assigned to the individual indicators reflect the judgment of managers as to the relative influence of those indicators on market size. To calculate a weighted average, managers need to express the values of the indicators in a common unit (say, as percentages). One approach is the construction of a multiple-factor index. Accept/reject decisions are then made in terms of a minimum index value or in terms of a country' s rank order. (Root 1994, pp.60-61)
2.2
Timing of Entry
Timing is a controversial issue in the literature on entering a new market. The discussion is about whether a company should try to be first on the market and benefit from “first-mover advantages” or whether it should leave the trail-blazing task to others and reap the “free-rider” advantages. Proponents of first-moving believe that firms which enter first acquire better positions on the market because they have an edge over their competitors: first-movers are able to establish themselves on the market while no competitors are around. They are able to create necessary market infrastructure and, being the first to satisfy a customer’s need, attain a large market share, 12
Chapter 2: Review of literature provide for further growth, and enhance revenues. It is claimed that catching-up with the firstmover is problematic for late entrants and rarely brings sufficient results. Bond and Lean [1977], Whitten [1979], Robinson and Fornell [1985], Urban et al. [1986], Robinson [1988] and other authors based on their research concluded on advantages of market pioneering. Lambkin noted in 1988, “…these results confirm the general tendency observed in previous research for pioneers to out-perform all later entrants…” Carpenter and Nakamoto found in 1989 that “…the pioneer occupies a favorable perceptual position that is difficult to imitate and costly to compete against, yielding a powerful competitive advantage.” However, there are a number of authors who, on the contrary, support later entry to a new market. Cooper [1979], Glazer [1985], Schnaars [1986], Sullivan [1991] and Golder and Tellis [1992] are against risks pertaining to early entry and argue that there are no obvious advantages to first moving. Schnaars pointed out in 1994, “Advocates who claim powerful and long-lasting benefits for pioneering often fail to consider the risk inherent in pioneering new and unproven markets.” Cooper [1979] noted that “…the advantages of being ‘first in’ are almost equally balanced by the many pitfalls and disadvantages.” Proponents of later entry compare first-movers with pioneers who explore uncharted lands taking on great risks. They assert that in most cases it is not pioneers who benefit most in terms of better market position, but late entrants, who appear on the market when the trail is already blazed. Makarevitch and Enkel 2002, pp.3-4) Furthermore, David Arnold argues that the first-mover advantage to exist, the following two conditions must apply: First, there must be a scarce resource in the market that the entrant company can acquire. Second, the entrant company must be able to tie in that scarce resource so that it is not available to competitors.
13
Chapter 2: Review of literature If there is no scarce marketing resource, then it is clear that later entrants have full and equal access to the market and, conversely, the pioneer has no advantage and that later entrants have full and equal access to the market .(Arnold 2003,pp.54-55)
In addition, Susan Peters concludes some factors, which is affecting the timing of the entry mode as following: •
As firm size increases, entry is earlier
•
The more multinational a firm is, the earlier the entry.
•
The larger the host market size, the earlier the entry.
•
The lower the cost of labor, the earlier the entry.
•
The closer the cultural distance between home and host country, the earlier the entry. (Susan Peters,pp.51-52)
2.3
Entry Mode Strategies
Once a company has decided upon a suitable target country for its operations, it needs to choose an appropriate market entry strategy (Root 1994, p.73). The foreign market entry strategies for both manufacturing and service companies can be divided into exporting, contractual and investment entry modes (Bradley, 1995). 2.3.1
Exporting Entry Modes
To begin with, most companies perform their initial internationalization through exporting modes. Exporting is a low resource commitment entry mode and when the firm later on has gained knowledge and experience it may shift to a high resource commitment entry mode, such as foreign investment (Kwon and Konopa 1992,pp60-76). Exports for manufactured goods can further be divided into direct and indirect export, of which indirect export can be performed through selling to intermediaries such as export agents, whereas direct export is when companies are selling directly to the foreign buyers (Brassington and Pettitt 2000,pp.463-469). However, just as risk is minimized in this approach, so too is opportunity. If the exporting firm does not follow up the contact with a sustained marketing effort, it is unlikely to gain future sales (Mühlbacher, Dahringer and Leihs 1999, p. 456).
14
Chapter 2: Review of literature 2.3.2
Contractual Entry Modes
Contractual entry modes, on the other hand, are long term relationships between companies in different countries that involve transfer of technology or human skills, and include licensing, franchising, and other types of contracts. Contractual entry modes are used when the firm wants to avoid starting up completely new operations in the new market. For this reason, this is the least risky of the entry strategies for service firms. (Grönroos 1999, pp.290-297) Furthermore, contractual entry modes can be separated from the exporting modes since the previous are transfers of knowledge and skills and the latter involve transfers of products. However, contractual entry modes can later lead to export opportunities. (Root 1994, p.137) Licensing is avoiding the risk of product and/or market development by using already established firms in the process. The licensee is, via the licenser, allowed to manufacture the product, use patents, and particular processes and/or use existing trademarks in a specific market in exchange for a fee or royalty. (Brassington and Pettitt 2000, pp.463-469) The main advantage of licensing is the circumvention of import barriers. In addition, licensing helps the firm to overcome the problem of high transportation costs that might occur in exporting. Licensing also implies lower political risk than the investment entry modes. The largest disadvantage of licensing is the licensor’s lack of control over the marketing plan and programmed in the target country. Another disadvantage is the limited amount of income since the licensing contract usually lasts for only five to ten years. The risk of creating a new competitor is also high, since the licensee can use the licensor’s technology after the contract is finished. (Root 1994,pp.108-109) .However licensing allows companies with small capital resources to exploit competitive advantages .Licensing may also be regarded as a source of additional profits if spin-off technologies are not to be used by the firm it self or if the company is not interested in international business (Mühlbacher, Dahringer and Leihs 1999,p.463). The reasons for franchising are similar to those for licensing the organization wants to enter a foreign market quickly with a limited degree of risk and a minimum of a capital involvement (Mühlbacher, Dahringer and Leihs 1999, p.464). Franchising is when an individual or an organization in a country is granted the right to use the company name, trademark and technology. However, the franchisor also assists the franchisee in organization, marketing, and general management under an arrangement that is intended to be permanent. The advantages of franchising are rapid expansion to new markets 15
Chapter 2: Review of literature with low investment, standardized method of marketing with a distinctive image, highly motivated franchisees, and low political risk. The disadvantages of franchising are mainly the same as for licensing. Further, licensing and franchising are suitable modes of entry when the company sells a service that cannot be exported. (Root 1994, p.136) An advantage of franchising over licensing is that the franchising organization tends to be more directly involved in the development and control of the marketing mix, while the franchisee is more involved in the execution of that strategy in the host market. (Mühlbacher, Dahringer and Leihs 1999, p.464). Other types of contracts are, for example, when a company hires another foreign company to perform their production, or when it, for a fee, transfers its management talent abroad to assist a specific company during a period.. The advantages and disadvantages resemble as those in licensing and franchising (Root 1994, p.138). Generally, contractual entry modes are not likely to make a serious impact on the host economy beyond a possible expansion of indigenous undertakings, which already exist (Williams 1997, pp.134-138). 2.3.3 Investment Entry Modes Finally, the investment entry modes include international company ownership of manufacturing plants or other production units in the foreign country in the form of new establishments (Greenfield sites), acquisitions, joint ventures or mergers. These modes have a considerable capability of impacting on the host economy (Williams 1997, pp.134-138). Williams (1997) also claims that arguments that are mounted in favor of foreign direct investments revolve around the notion that it will improve competitiveness, and through this increase employment and the welfare of the host nation. Through foreign investments, the foreign company can gain relatively more control of the market than through exporting, and it implies an expectation of a relatively higher rate of return (Kwon and Konopa 1992, pp.60-76). New establishments are when companies start up completely new operations in a new country .It is preferred when the company has a technology incompatible with already existing firms on the foreign market or if the acquisition price of another company is too high. The largest problems with new establishments are the start-up costs and the associated risks (Root 1994, p.145).
16
Chapter 2: Review of literature An acquisition, on the other hand, is to acquire a foreign company in order to, for example, get access to distribution channels and specific assets, to create product/geographical/financial (portfolio) diversification and the sourcing of raw materials for sale outside the host country. The advantages of acquisitions differ depending on how successful the selection of the acquired company is, and a poor selection can turn any advantage into a disadvantage. (Root 1994, p.165) The first possible advantage with acquisitions is a faster start in exploiting the target market than if the investor would start up as a new establishment. The second is that acquisitions prove a shorter payback period by creating immediate income for the investor. Continually, other possible advantages are that the acquisition might provide a resource (usually managerial, or of a technical nature) that is scarce in the target country and not available on the open market, and that the firm might take over new product lines. (Root 1994, pp.165-166) Drawbacks with acquisitions are, except for the previously mentioned advantages that can turn into disadvantages, firstly the difficulty of locating and evaluating acquisition candidates. Further, it might be expensive to bring up the standard of acquired plants and other facilities. Finally, in some countries, acquisitions of local companies are seen in a less favorable light than other forms of investment. (Root 1994, p.168) In order to avoid these potential problems it is highly important to keep the key people in the acquired firm (Grönroos 1999, pp.290-297). Multinational corporations often prefer acquisitions to other market-entry modes because they help to gain access to new skills or technologies quickly, to move a long the experience curve more quickly, and establish a strong position in a new country-or regional market (Mühlbacher, Dahringer and Leihs, 1999, p.467). Lastly, a joint venture is when two companies share the ownership of a firm in order to complement assets and/or skills .A joint venture occurs either when a foreign and a domestic firm together start up a completely new company within the new market, or through an acquisition or a partial ownership of an existing local company by the foreign firm. (Root 1994, p.171) Investment through joint venture brings advantages such as risk diversification, capital requirements reductions and lower start-up-costs (Williams 1997, pp.134-138). It will also create growth opportunities for the local firm simultaneously as the international firm will gain local know-how (Grönroos 1999, pp.290-297). A joint venture also allows a company with limited human and financial resources to enter a new market, instead of creating expensive foreign 17
Chapter 2: Review of literature subsidiaries. This, together with the fact that the managers in the local establishment have the knowledge of the host country environments facing the company, minimizes the risk. Additionally, the risk is reduced since the local government is less likely to impose adverse action towards the company. (Albaum and Strandskov 1994, p.238) There are a number of problems associated with entering new markets through joint ventures. To begin with, the international company will have less control of the operations and its choice of strategy. (Root 1994, p.177) Additionally, in some countries, the government might be inexperienced in foreign direct investments and therefore subject the joint venture to severe legislation. These often differ depending on the type of international firm and the type of products. Still, this situation creates uncertainty, which further enlarges the risk for the participants in the joint venture. It is further a minor risk that the joint venture creates a possible future competitor. Also, the cost for maintaining the control over the joint venture is high for the international firm. Additionally, the two participating firms can suffer from loss of flexibility and confidentiality, due to an unwillingness to share, (Albaum and Strandskov, 1994) for example, technology and sensitive information, and through disagreements over how profits should be shared. This often relates to a lack of communication between the two parties, both before, during, and after the joint venture is formed. (Czinkota and Ronkainen 2001, p.501) In order to avoid this, the parties have to plan the collaboration carefully and be clear in stating their mutual and individual objectives .The question of loyalty is the greatest human resource challenge for joint ventures, and Czinkota and Ronkainen (2001) argue that “a partnership works on the basis of trust and commitment, or not at all” (page 501). A merger is when combining two or more entities into one, without the creation of a new entity (http://www.investorwords.com/3045/merger.html, 17/09/2004). Merger activity is likely to lead to economies of scale and a rapid expansion of market share. Further, it allows for decisions to be made without having to wait for consensus by another part. In addition, mergers can be used as means to spread risks to various activities, and as ways to achieve managerial prestige, access to brands contracts and networks. Finally, mergers decrease competition in the market place and are therefore best suited in industries where competition is intense. (Floyd 2002, pp.98-103)
18
Chapter 2: Review of literature
Entry mode choice
Investment Entry mode
Exporting
Joint venture
Direct mode
Acquisitions
Green Field (New Establishment)
Indirect mode
Contractual Mode
Mergers
Licensing
Franchising
Figure 2:3 International Entry Mode Choices
2.4
Entry Mode Strategy in the Near East
The type of entry modes the firms chosen in entering Near East markets can be divided into the three basic groups for: Exporters, Contractors, and Investors. 2.4.1
Exporters
Exporting is the dominant mode of entry in the Near East by firms. This does not imply that the same firms were not using other entry modes simultaneously in the same market (Farhang 1987, p.46). In a survey made by Farhang, 27 percent were direct exports as opposed to 73 percent export through local agent. This proportion does not hold for all the markets in the region, however; in markets where foreign trade is managed by the state, as in Iran and Iraq, 70-75 percent of the cases were direct export. In the context of the present survey, direct export means primarily imports by relevant government organizations assigned with foreign procurement/transactions. State buying activities in the Near East can generally be divided into two groups. The first is host countries buying through tenders. This is in the manner in which large international contracts are awarded and for which administrative formalities differ from country to country. The second method is direct purchase, where exporting firms are required to submit bids.
19
Chapter 2: Review of literature • Working with Agents "We had to create him, had he not been there". "Cultural understanding and mutual trust are the Keys to sound relationship". "On the significance of research prior to signing an agency agreement, I quote what a Saudi lawyer said to us: ' It is similar to a Catholic marriage. Do not rush into it. It is extremely difficult to get out' ." "The Japanese are more successful in the GCC markets. They appoint a sole agent, train and upgrade him and then through him appoint sub-agents. Many European and American companies appoint two or more agents who may end up competing with each other." The above are some of the comments made by the executives of sample companies exporting to Saudi Arabia, Kuwait, Oman and the UAE. The response to the questionnaire reveals that export through agent/ representative is the highest in the United Arab Emirates (100%), Kuwait (100%) and Saudi Arabia (85%), followed by Bahrain, Oman and Qatar (75-90%). The obvious reason for the above is that, in these countries, foreign firms are required by law to have a local sponsor/ agent, distributor or partner - in order to carry out any form of activity, including sales to governments. Even though the legal requirement may not be present or as strict, in other Middle East markets, successful marketing requires the use of local intermediaries. Because of market or legal factors (or both), even multinational corporations that usually sell directly in other overseas markets find local partners indispensable in the Middle East. (Farhang 1987, pp.46-49) The agent is supposed to do the following: •
In the state-regulated economies, agents promote products to final customers who in turn place orders through government import organizations. They also spot opportunities for government contracts and project sales.
20
Chapter 2: Review of literature •
The agent can provide information about decisions on new projects and changes in various government requirements including, tender requirements. Without the agent the firm may be unaware of the opportunities as well as the problems.
•
The agent can provide logistical warehousing and service support in addition to solving legal and bureaucratic matters, such as delivery activities, custom clearances, etc.
•
The agent arranges entry into the country and meetings for company managers in a region where good connections stem from personal and family relationships.
•
In a region, where technical know how and marketing skills are undeveloped, the firm may have to provide the agent/distributor with support unnecessary elsewhere. But, in return, the company secures itself "eyes and ears" inside the market.
•
In some Middle East countries, business and governments are closely intertwined. A wellestablished agent in the community can influence decisions vital to success, in Saudi Arabia, and to a lesser extent in other countries of the Arab Peninsula, agents/representatives are not individuals but multi-million dollar companies who may simultaneously represent 50-70 foreign companies, including firms competing within the same industry. On the other hand, a foreign firm can have several agents for different activities and for different geographical areas within the same country. Some of the Arab Government regulations require that relationships with foreign suppliers be on an exclusive agency
basis.
Sometimes,
supply
relationships
can
be
struck
with
local
assemblers/manufacturers who want to complement or supplement their locally-made product line. (Farhang 1987, pp.68-69). 2.4.2
Contractors:
As we mentioned before Contractual entry modes are long-term, non-equity associations between an international company and an entity in a foreign target country that involve the transfer of technology or human skills from the terrier to the latter.
A company may transfer to a foreign
entity the right to use its industrial property in return for a royalty (licensing), marketing and management (franchising), or it can transfer monetary compensation (technical agreement,
services directly
service contract,
can assist
in
in return for
management contract and
turnkey contract), or in return for products manufactured with those services (contract manufacturer, co-production agreement).
21
Chapter 2: Review of literature The use by international firms of contractual arrangements in developing countries has become more wide spread in the last two decades (Dunning & Cantwell 1984).
Although trends have
varied between host countries and firms, the following points summarize the chief motives to select contractual agreements rather than equity investments:
(a)
maintain greater strategic
flexibility; (b) reluctance to increase risk and capital lock-in; (c) exploiting the local partner' s (host country' s)
advantages through cooperation; (d) host countries' legislation preventing
foreign investment;
(e) the small size of the host country market;
(f) inability of firms'
ownership advantages to secure long-term return on investment. (Farhang 1987, p.54-56) 2.4.3
Investors
Investment entry mode refers to ownership by the firm of manufacturing or sales subsidiaries in the target country. The distinctive feature of this mode is in terms of ownership and management control. However, to gain control the company will have to commit more resources and thereby assumes greater market and political risk as we mention before. Farhang also argue that most of the equity investment firms in the Region are in marketing rather than production facilities. In other words, the investment entry mode is in fact an extension of the export mode and that the firms that have undertaken these investments have done so in order to protect company sales or market share (for instance, where product installation or after sales service or both have been required). This has led to the establishment of local organization. The best examples are within the capital goods industry which not only involves installation and after sales service but where sales sometimes take the form of complete systems. Usually the amount of capital invested, in proportion to sales, is low. Local organizations are most common among the biggest firms, and they are, without exception, sales organizations. The Near East accounts for between 0.5 percent and 11 percent of the international sales of the big companies. If establishing local organizations is an indication of the firm' s commitment to the market, then the sample firms (measured by their sales ratio) fall into two categories: those for whom the Middle East, despite high sales figures, is not such a significant market; and those who heavily rely on the Middle East for their international sales. The latter group includes small firms that have chosen the region for their internationalization because of
22
Chapter 2: Review of literature product/market match. The latter group has proceeded from exporting to forming joint ventures in a much shorter time period than the bigger firms. (Farhang 1987, p.49) Joint Ventures Joint venture is an economic marriage in the real sense, because each partner brings into the partnership something that the other needs; production, technical, managerial or financial resources, political connections, and access to markets. The resources provided by the Near East partner and the firm in a typical sample firm can be summarized as follows: the foreign company supplies technology, some capital and often the management. The Near East partner supplies a majority of the capital requirement, knowledge of the local environment (political, social, cultural, as well as business practices) and marketing. Some of the incentives for entering into joint ventures and unique to the Near East are: •
In some markets, including Saudi Arabia, there is no direct relationship between equity and profits. For example, one could have 40 percent of the equity but 75 percent of the profits.
•
Joint ventures with in at least 25 percent of the equity, or more, held by foreign firms are offered a number of preferential treatments; long-term soft loans for up to 70 percent of the initial financing (in Kuwait), up to a five-year abatement of corporate taxes, plus free building site, (in Saudi Arabia).
•
Management control by foreign firms is often ensured either by the articles of incorporation or by a separate management contract. Thus, foreign firms'minority position does not imply lack of control. (Farhang 1987,p.53)
2.5 Factors Influencing the Entry Mode Decision The selection between the entry modes described in the previous section depends on the risk the company is prepared to take and its desired degree of control. According to Root (1994), it depends on whether the managers of the international firm follow the naive, the pragmatic or the strategy rule 23
Chapter 2: Review of literature when deciding which mode of entry should be used when entering foreign markets. (Root 1994, pp.181-182) further states that the naive rule implies that the firm only considers one way to enter foreign markets, no matter of which country the firm is entering. To follow the pragmatic rule means that the company does not set aside time to investigate other modes when a mode of entry that is working has been found. Finally, companies following the strategic rule systematically compare other modes of entry in order to eventually find the most suitable one. Albaum and Strandskov (1994, p.157), on the other hand, argue that the decision can be based on either, or both, of two broad approaches, which are experience or analysis. That is, the company can decide what mode of entry is desirable for its products from its own experience, or from other firms’ experiences. In contrast, the choice can also be made after making an analysis of the marketing task, needs, and buying habits of potential customers, and the competence of marketing organizations to perform various activities. No matter which of these theories is used, the final result is based on needs and capabilities, which implies that the decision of entry mode revolves around both external and internal factors (Albaum and Strandskov 1994, 157). There is a third mixed category of factors, in which internal and external factors are blended. These are factors that derive from both environmental and company specific factors, and some examples are competencies and capabilities, and skills required/available for each firm. (Root 1994, pp.189-190)
External factors Entry mode choice
Decision to internationalize Internal factors
Figure 2:4 Factors Influencing the International Entry Mode Choice 2.5.1
External Factors
The external factors that affect the entry mode decision include market, production and environmental factors in both the target and home countries. As these are external to the company, they can seldom be affected by management decisions. The external factors can further be divided 24
Chapter 2: Review of literature into target country market factors, target country production factors, target country environmental factors and home country factors. (Root 1994, p.28) Target country market factors Target country market factors are the size of the market, the competitive structure and the marketing infrastructure of the target country. In small markets it is favorable to use entry modes that require low breakeven sales volumes (indirect and agent/distributor exporting, licensing, and some contractual arrangements). On the other hand, entry modes that require high breakeven sales volumes (branch/subsidiary exporting and equity investment in local production) can be used in markets with high sales potential. (Root 1994, p.29) Large markets present a great foreign market opportunity, which can strongly determine the choice of foreign market entry mode. Companies usually select a high resource commitment mode of entry when the foreign market opportunity is extensive in order to facilitate a higher rate of return. (Kwon and Konopa 1992, pp.60-76) The competitive structure of a market can range from atomistic (many non-dominant competitors), to oligopoly (a few dominant competitors), and to monopolistic (a single firm). The atomistic market is usually more favorable for export entry than the others, since these often require entry through equity investment modes. If the competition is estimated to be too strong, licensing or other contractual modes of entry might be considered in order to reduce risk. Lastly, when the marketing infrastructure is non-existing or of poor quality, an exporting company may, for example, decide to use a branch/subsidiary entry mode. (Root 1994, pp.29-30) Target Country Production Factors Target country production factors include the quality, quantity and cost of raw materials, labor, energy and other productive variables. It also includes the quality and cost of the economic infrastructure. Low production costs in the target country support some form of local production. High costs, on the other hand, discourage local manufacturing. (Root 1994, p.30) Target Country Environmental Factors To begin with, target country environmental factors that affect the choice of entry mode include the political, economic and socio-cultural character of the target country. Of these, government 25
Chapter 2: Review of literature policies and regulations concerning international business are the factors of greatest importance. They relate to, for example, restrictive import policies such as tariffs, quotas and other barriers that discourage export entry and favor other modes of entry that do not involve these costs. (Root 1994, p.30) .In addition, political risks such as political instability or nationalism affect a company’s mode of entry decision. It is not likely to enter a country through a high resource commitment mode of entry if the political risk is high. (Kwon and Konopa 1992, pp.60-76) To continue with, geographic distance concerns whether the transportation costs of the company’s products are high due to vast distances. If this is the case, non-export entry modes will be in favor, as these do not incur the same costs as exports. (Kwon and Konopa 1992, pp.60-76) Further, whether the economy is a centrally planned socialist economy or a market economy also plays a significant role in the choice of market entry strategy. The reason for this is because equity investment entry modes most of the times only are possible in the latter. (Root 1994, p.31) Other attributes influencing the choice of strategy are the country’s economic development and performance (GDP and GDP/capita) (Kwon and Konopa 1992, pp.60-76). These two are closely intertwined with the market size the company has for its product in the target country (Root 1994, p.31). Another target country environmental factor is the dynamics of the target country’s economy. This includes, among other, the rate of investment in the country, the growth rate of the gross national product and personal income, and, finally, changes in employment. (Root 1994, p.31)
If
a
market
seems
to
be
growing
slowly
but
steadily,
establishing
own
manufacturing/marketing subsidiaries might be the best choice for the foreign firm. On the other hand, if the growth is rapid and does not seem to be sustainable over time, indirect and direct exporting modes might be favorable to use (Koch, 2001). A firm entering a new country also needs to consider the country’s external economic relations, which among other include the trade of balance, the balance of payment, the debt service burden and exchange rate behavior. Often, a weakening balance of trade leads to import and/or payment restrictions, which will discourage export entry modes. (Root 1994, p.32) Finally, the cultural distance between the home country and the target country societies affects a company’s choice of entry mode. Significant cultural differences might create a fear for foreign firms to be able to handle operations in the foreign country and high costs of information acquisition. (Root
26
Chapter 2: Review of literature 1994, p.32) This implies that a substantial cultural distance favors export entry modes as these limits the company’s commitment in the target country (Kwon and Konopa 1992, pp.60-76). Home Country Factors Home country factors that affect a company’s choice of foreign market entry mode are influenced by market, production, and environmental factors in the home country. Firstly, a large domestic market allows a company to grow before it ventures into new foreign markets. Further, large companies are more inclined to use investment entry modes when entering new markets than small companies. Moreover, firms in oligopoly industries tend to imitate other domestic firms within the same industry. In other words, when one firm invests abroad, other rival firms will follow. Continually, high production costs in the home country in comparison to the foreign target country encourage entry modes involving local production, such as licensing, contracting manufacturing, and investment. Finally, governments often favor exporting and therefore offer tax reductions or similar to exporting companies, and at the same time act restrictive on foreign investment. This creates a situation in which there is a bias that supports exporting, licensing and other contractual modes of foreign market entry. (Root 1994, p.31) 2.5.2
Internal Factors:
The way a firm respond to the external factors discussed above depends on a number of internal factors. These can be divided into product factors and resource/commitment factors. (Root 1994, p.33) Product Factors For the reason that highly differentiated products allow for high pricing and therefore can absorb high transport costs and import duties, they favor exporting entry strategies. Further, a product that require pre- and post purchase services is more difficult to market at a distance, and is therefore more suitable to use together with a branch/subsidiary exporting and local production mode of entry. Technologically intensive products give companies an option to license technology in the foreign target country rather than to use alternative entry modes. Continually, products that require considerable adaptation before marketing abroad are most appropriate together with an entry mode that brings the company close to the foreign market, such as branch/subsidiary exporting and a 27
Chapter 2: Review of literature local production mode of entry. Finally, services, such as engineering, advertising, and telecommunication, require that the company finds a way to produce the service in the foreign target country, as these cannot be traditionally exported physically. (Root 1994, p.33) Resource/Commitment Factors A company with limited resources in management, technology, production skills and marketing skills, is constrained to use entry modes that require only a minor amount of resource commitment. Once again, this implies that the company size has a large impact on the choice of entry mode. As an example, establishing fully owned subsidiary often involves very substantial investment and corresponding high risk levels. Also, the entry specific mode depends on industry specific resources and their relevant preferences depend on industry specific resource demands for individual market entry modes. (Koch 2001, pp.351-361) As stated above, resources are an influencing factor in the choice of entry mode. However, it cannot alone explain the final decision. (Root, 1994) Root (1994) further states that “resources must be joined with a willingness to commit them to foreign market development” (page 35). A high degree of company commitment indicates that the entry mode will be chosen from a wider range of alternatives than it will in companies with low commitment.
2.6 Factors Influencing Entry Mode in the Near East: Many executives, business scholars and public policy makers new to the Near East tend to view the region as a monolithic, homogeneous mass market. Of course, this is not a true picture of the region and its people. The Near East market is generally full of ambiguities, beginning with the definition of the area itself, and every country is different in its political philosophy and state of economic development (Erdener Kaynak 1985, p.19). As by Farhang, the successful exploitation of the firm' s advantage requires production technology, management practices, work organization and marketing to be adapted to the host country environment. The problem of adaptation is most acute when the host country environment (economic, political and cultural) is very different from the home country, and thus the cost of adaptation is high, if the 28
Chapter 2: Review of literature firm does not possess the suitable experience, there is reason to look for a local partner and form a joint venture (even if the condition is not already imposed through host country legislation). This raises the question of risk/ownership vs. Control. In a situation where the host country insists on majority ownership of the enterprise, nationalist grounds,
on
but does not have the ability to assume effective control due to lack of
managerial or/and technical expertise,
the firm can assume control and at the same time be
rewarded for it. In this case, one may claim that host country' s control through ownership is a more illusion. Similarly, in so far as risk is inherent in investment, risks are lowest for non-equity contractual arrangements (Casson, 1986, p.76). It is therefore possible for the firm to have effective control without being prone to risk. The firm can, under certain country-specific conditions, market its intangible assets separately and gain more than it would from returns accruing to investment. The strategy of entry through contractual arrangements may not be second best, but one which best optimizes rents from assets. But how did the sample firms view the environment in the Near East, and what are the host countries' expectations of the role of foreign firms? In the course of interviews, managers indicated the following to be the main reasons for preferring export and contractual entry modes over investment: Small size of the market (e.g. Most GCC states). High factor costs (e.g. Labor in Saudi Arabia). Absence of industrial infrastructure/early stage of industrial development. Legal restrictions to wholly-owned foreign enterprise (in most countries of the region). Host country political risk (revolution, war. Iran, Iraq). Low levels of tariffs in the biggest market of the region (GCC countries). It should be reminded here that, contrary to capital-short developing countries, where an increasing rate of investment to achieve industrialization requires increases in the rate of saving. The oil- producing countries of the Near East have been able to carry out large scale investments and import technology (at times the most sophisticated available on the international market) without having to impose the burdens of forced saving and financial sacrifice. 29
Chapter 2: Review of literature In the past, there have been many cases where a project has involved a large volume of capital and since the foreign firm has not viewed the project as a viable investment in its own right, all the risk for the investment has been assumed by the host country. The project, from the foreign firm' s stand point has amounted to a sales package: of combined tangible and intangible assets. In recent years, for major manufacturing and service operations in a country like Saudi Arabia, joint ventures, with the foreign firm holding a minority share, have become the desired official requirement. Although foreign companies'equity contribution have sometimes been so low as to be considered symbolic, the government is of the opinion that it leads to a higher degree of commitment by the foreign firm and increases the effectiveness of technology transfer. For the foreign firm, joint venture entry has prepared the ground to capitalize further its assets and diversify the number of income channels. With a mix of two, three, four or more streams of economic rent, the risk on the firm' s investment is lowered. (Farhang 1987, pp.74-76) Three fundamentally different views emerged during the interviews conducted by Farhang. Managers differed in their perception of the market depending on whether their company was relatively new to the market, seeking to enlarge its market share with new products and services, or whether it had an established position to defend in face of increased competition and growing pressure on profit margins. The first group of managers, whose companies'products/services or strategies were attuned to the "gold-rush" conditions of the 1970' s, had simply written off the region' s opportunities. The second group, looking at the same market signals, adopted a wait and see attitude, pending the upturn of both economic and political conditions in the region. This group, which included some of the major construction and engineering consulting firms with long experience in the region, drew attention to the fact that countries of the Near East are at different stages of development: whereas markets for their services were saturated in countries like Saudi Arabia, there were instead, new markets e.g., in Oman or the Yemen. According to the above two groups, there were four major obstacles confronting foreign companies: market saturation; intense competition; restrictive practices; and political risk. Several companies also singled out specific constraints to their operations, such as absence of market
30
Chapter 2: Review of literature sophistication for the range of company' s products, poor local distribution and manpower problems. The third group of executives, composed mostly of small companies with recent entry to the region, judged the Middle East to be similar to markets in other regions of the developing world, involving similar risks and opportunities. Several of the companies marketed high-technology products, and like others in this group, had entered markets formerly undeveloped in the Middle East. When managers with experience from the region were asked about aspects of market entry that contribute most to a firm' s success in the Middle East, the following comments were made: "We are in 12 Middle East markets and our strategy differs in each. As for capital investment, we don' t invest unless we have to: in order to defend our market share." "We have someone in Saudi Arabia, a local, whom we pay very well. His mission is to find out which decisions are made at various levels regarding new contracts. He knows his way through the Bureaucracy and knows who authorizes payments." "It may take ingenious entry methods into these markets, as well as ingenious financial strategies, including counter trading deals involving third countries." "In the Middle East, companies should invest in people before investing in plants." "In the region as a whole, one should be seen as a local company. It is thus important to have a strong local partner in order to succeed." "Business in the Near East is highly sensitive to a network of personal relationships. So there is no substitute for presence in the country where you decide to do business." Local presence, commitment and investment in human resources are clearly the message contained in the above comments. To that, we can add: market presence becomes essential because it remains difficult for a foreign company to obtain the necessary - accurate and up-to-date - market information from secondary sources. Data on market size, market share, upcoming projects, spending power of the public as well as the private sector, and the general development of various 31
Chapter 2: Review of literature sectors of the economy are not readily available. To assess when, where and why to invest, to respond to financial and after-sales service development, and - most significant of all - to build effective, inter-personal relationships at different levels in different organizations and with people who participate in decisions of interest to the company, can not be accomplished from a distance. Generally speaking, in the Middle East, deals go to companies and people that are "known". (Farhang 1987, pp.77-84)
2.7
Clustering the Near East
The procedure used in market clustering consists of the following steps: 1. Splitting the global product-market into groups of geographic submarkets so that the resulting clusters are more homogeneous than the global market as a whole 2. Describing the ' typical'member in each cluster 3. Evaluating the attractiveness of each cluster 4. Choosing the most attractive clusters for further analysis Country-markets will be most effectively clustered with criteria that consider the specifics of the served product-market. Characteristics often used include the product-related purchasing power of potential customers, the product-market growth rate, profit generation potential, transferability of funds, number and size of competitors (intensity of competition), availability of intermediaries, and local subsidies readily available to the company. For example, Japanese and U.S. companies, such as Dell Computers, entered the markets of the European Community via Ireland. They did so because wages are relatively low and the Irish government offers high subsidies for new industrial plants. Assessment and market selection in such a case depend on strategic considerations, not just on easily accessible, general data about the macro environment of potential markets. The country-markets that fulfill the set conditions will remain in the group of attractive markets to be further investigated. If the number of these markets is still too big to allow a quick and costefficient analysis of details, a scoring procedure can be used to rank the markets according to their relative attractiveness. Only for the best ranked markets will future opportunities and threats be estimated. (Mühlbacher, Dahringer and Leihs 1999, p.294)
32
Chapter 2: Review of literature As per Erdener Kaynak and Metin N. Giirol (210-215) each Middle Eastern and North African country is characterized by specific environmental conditions, such as cultural, socio-economic and technological development, which affect buying patterns and responses (Elbashier and Nicholls 1983). These environmental factors can provide several indicators of overall market response (Wind and Douglas 1972). Markets of the region can be segmented in a two-step process. First, the macro segment composed of individual or groups of countries can be identified, based on national market characteristics. Then, within each macro segment, the market can be further subdivided, based on customer characterization. Through this approach an initial screening of countries and the selection of certain countries on the basis of national market characteristics are undertaken. Once markets have been segmented at the national level, they will then be further subdivided by customer characteristics. Two grounds for segmentation will be used: general characteristics and situation-specific characteristics. The classification of countries on the basis of national characteristics appears to provide only very weak indicators of marketing behavior in the Middle East and North Africa. Thus further investigation of both general and situation specific customer characteristics within each country market is required to identify relevant target segments. One approach, which may prove to be useful, is organization by start market development. A stages-of-market development organization is by dividing the countries of the region into groups, which reflect similar conditions (Schwartz 1977). First group of countries are producing oil but have few other resources. These are small, sparsely populated oil-rich countries. These countries are labeled as Advanced Stage Middle Eastern Arab States. The second cluster includes populous but rich countries. These countries will be labeled as Intermediate Stage countries. Predominantly agricultural countries which posses’ natural resources than oil as well as those countries endowed with poor resources description where the pattern of life style has changed very little. They are labeled as Growing Stage Countries (Schwartz 1977: 4-8). ADVANCED STAGE COUNTRIES: These countries import and are limited only by their absorptive capacity; countries are wide open to foreign marketers and discriminate only doing to speed of delivery, quality, after-sales service, and price, Kuwait, and other Gulf States, and Saudi Arabia private section play predominant role in trading orientation of countries in this group. 33
Chapter 2: Review of literature INTERMEDIATE STAGE COUNTRIES: Although rich in oil and natural gas, these countries give their first priority over private consumer spending to industrial development, infrastructural needs, development of an agricultural base, and defense procurements. Import quotas are set and competitive bids invited for large equipment and many consumer goods. This governmental involvement predisposes them to dealing with state-trading countries (e.g.: Iran and Syria). Public sector plays an important role in these economies. As well, state agencies control exporting and importing of commodities. GROWING STAGE COUNTRIES: In these countries, there are import restrictions of some kind. These restrictions are imposed more from economic necessity than ideology. The countries in this group receive aid from oil-rich countries of the region, for agricultural or industrial production (e.g.: Egypt, Yemen and Jordan). The advantage of the stage of market development organization is its ability to focus the efforts of the decision makers upon strategic problems and opportunities associated with the most significant dimensions of today' s Arab market. Organization by stages of market development would encourage organizational efforts by focusing organizational efforts on market needs. It would also encourage product development, pricing, and communications strategies tailored to Arab-country-market needs. The important question for a decision maker considering a market stages organizational structure is whether the scale of company operations in the Middle East markets at different stages of development is sufficient to justify the creation of separate organizational units. Because of the apparent socio-economic and technological differences among different countries of the region, there will be some time lag in the diffusion of new products. As well, acceptance of new products and their penetration in the market place will again necessitate different marketing efforts depending upon how developed is a particular Middle Eastern country (Erdener Kaynak 1985, pp.34-37)
2.8 Near East Cultural Effect in Marketing Culture may be defined as the standards of beliefs, perception, evaluation and behavior shared by the members of a social group. Some authors even define culture as ' the collective programming of the minds'which distinguishes the members of one group of people from another. (Mühlbacher, Dahringer and Leihs 1999, p.171) 34
Chapter 2: Review of literature As a beginning, we will have a look at the main factors included in culture, which is as following: Religion Religion can be defined as a system of shared beliefs and rituals that are concerned with the realm of the sacred. (Hill 1998, p.92) The dominant religious values in a society determine many other cultural norms and values. Morality, etiquette, gender roles, and attitudes toward individual achievement and social change are all derived from religious values. Thus, Confucianism in China, Shintoism in Japan, Islam in Saudi Arabia, and Judeo-Christianity in Western Europe and North America have a strong influence on norms and values in those societies. Even in societies where active participation in organized religion is declining, the influence of religious values should not be underestimated in assessing cultural viability. Although changes in some norms may create new market opportunities, emerging trends must be balanced against longstanding religious traditions in designing an effective marketing mix. (Dahringer and Mühlbacher 1991, pp.178-179) “Although there are a significant number of Arab Christians in Lebanon, Syria, the Palestinian Authority, Iraq and Egypt, as well as Jews throughout the Middle East, the predominant religion of the region is Islam. Several religious beliefs affect the administration of healthcare services, and some times the decision-making. Devout Muslims will wish to pray five times a day”. Smoking during fasting holy month or asking for something to drink can be considered as insulting by religious people and in some restricted countries like Saudi Arabia it is prohibited by the law. (http://www.worldmarketsanalysis.com/InFocuse2002/articles/health_MiddleEast.html 28/7/2004) Islam it self also has many Branches, Muslims may belong to Sunni, Shi' a (or Shiite), Sufi, or one of several other branches of Islam, and the differences between them are significant. The gulf between the Wahabi sect of the Sunnis and the Sufis is at least as great as the gulf between Southern Baptists and Quakers. Most Saudis are Sunni fundamentalists (a variant called Wahabi Islam), which is a very strict branch. Sufis are considered the mystics of Islam.
35
Chapter 2: Review of literature The branches do not always get along; therefore, it is advantageous to understand your client' s belief system and how it may differ from another Islamic branch. For example, the Sultanate of Oman is one of the most relaxed and open Muslim states in the Gulf. The sexes are not strictly segregated, and western businesswomen sometimes feel more at ease there. The majority of Omanis
belong
to
the
Ibadhi
sector
of
Islam,
a
somewhat
moderate
branch.
(www.realtor.org/IntUpdt.nsf/ Pages/Doing_Business_in_the_Middle_East, 12/10/2004) Language Language is much more than a formal written and oral structure that permits communication. It is an essential element of culture. Understanding another language not only allows one to conduct business in that language but, perhaps more important, it also provides insight into the social organization and values of those who speak it. In addition, because of its obvious connection to advertising and other forms of promotion, language is a central consideration in the execution of a marketing plan. From the global marketer' s perspective, a complicating factor about language is that few nations are monolingual. In most nations, several are used, and in some nations, several languages are used, often reflecting different cultures or subcultures. Switzerland, for instance, has four main language groups: German, French, Italian, and Romanic. Even a single language spoken in more than one nation has differences that may cause problem for a global marketer. (Dahringer and Mühlbacher 1991, pp.179-182) Much of the difficulty with silent languages has to do with how central the context, or setting, is in interpreting .A "high-context" culture relies heavily on contextual clues to round out communication. In Japanese and Arabic cultures, for example, much information is transmitted through context-through the listener interpreting what is meant to be said, rather than through the actual words spoken. "Low-context" cultures, such as Canada, the United States, and Germany, rely more directly on the words themselves; English and German are precise languages with rich and specific vocabularies. In business communications, a person whose home culture is low-context may have to develop skills in "reading" the environment and listening for unspoken messages. Italian managers, used to a high-context culture, where they look for meaning in what is not said, may consider their 36
Chapter 2: Review of literature German counterparts (a low-context culture) "cold," since that culture employs a direct language. In contrast, managers from high-context cultures are trained to examine the entire communication setting for meaning. When such individuals move into a low-context culture, they face the challenge of learning to be precise in their spoken and written messages, to avoid misunderstandings. Thus, Greeks must adjust to the lower-context American culture to avoid being seen as overly emotional. (Dahringer and Mühlbacher 1991, pp.186-187) Near East countries have a High-context culture, which means that the context in which a conversation occurs is just important as the words actually spoken-high value in interpersonal relationship. While, Germanic countries are Low-context culture which means that words used by the speaker explicitly convey the speaker’s message –important are the terms of transaction. This can lead to misunderstanding even when using English (French should be considered in North Africa) which is the preferred language of business in this area. Non-verbal communication is believed to convey 80 to 90% of all information transmitted by means other than language, because of cultural differences this form of communication can lead to misunderstanding. (Based on Griffin, Ricky W., Pustray, Michael W (1998, December) International Business: a managerial perspective) Gender Issues: “There is a preference for segregated male and female in the Near East at different levels, and in some
countries,
such
as
Saudi
Arabia,
full
segregation
is
mandated
by
law.”
(http://www.worldmarketsanalysis.com/InFocuse2002/articles/health_MiddleEast.html,28/7/2004) When you are visiting your Arabian host' s office or home and you are introduced to a female worker or a female relative of your host, in all cases you should not greet her with a kiss. If the woman extends her hand to greet you, you may shake her hand; otherwise greeting with words only is appropriate. (www.traderscity.com/abcg/culture5.htm, 10/10/2004) For example, doing business in Saudi Arabia is somewhat more challenging for women. There is gender separation in the Kingdom. Many public places, like hotels and restaurants, will have family rooms where women are served with their husbands. Women are expected to dress conservatively, with long skirts most appropriate, sleeves at elbow length or longer, and necklines that are unrevealing. It is generally uncommon for a Muslim man to shake hands with a woman or 37
Chapter 2: Review of literature engage in the conversational body contact that is common when speaking to another man, although Saudis who have experience with Western culture may be inclined to do so. (www.thesaudi.net/business-center/ business-etiquette.htm, 10/10/2004) •
Doing Business with Arabs
In a study by Erdener Kayanak investigating the sensitivity of marketing mix to cultural differences, ten British companies exporting to Arab nations were interviewed and profiled. Generally, export managers of the companies surveyed agreed that cultural factors play a key role in international marketing, but not necessarily a greater role than economic and political factors. As a rule, the companies did not analyze cultural differences systematically. Instead, they depended on observation and experience. Export managers regarded Arab consumers as less rational, price-conscious buyers who tend to be conservative and to prefer foreign goods. Exporters responded to cultural problems by: a) adapting advertising and products, b) consulting with local distributors, c) employing local or culturally sensitive personnel, and d) monitoring cultural surroundings with personal observation (Elbashier and Nicholls 1983). Adel I. El-Ansar (Erdener Kaynak, 1985) mentioned that negotiations are a way of life in the Middle East. As such, it is the first and most difficult step in establishing international business relations. At this stage, a number of gaps exist in reference to parties involved, establishing credentials, time frame (Young 1977), need for negotiations, and the need for concessions He added also that dealing with government officials in Middle Eastern nations is a difficult proposition requiring both an understanding of the personalities and leader ship dynamics in these governments and enormous time investment (Wrigh 1981, p.37). The supremacy of the individual over the system in Middle Eastern countries renders management decision making emotional and personal. For example, rejections of budgets submitted may be interpreted as an expression of dislike and personal animosity. The weak and spotty information bases for decision making increases reliance on personal trust and contacts in getting positive decisions, thus, increasing the personal and emotional components of the process. (Kaynak 1985, pp.25-37) When communicating with people from other cultures or subcultures, we are often confronted with languages, rules and norms different from our own. Imagine a meeting between a Saudi 38
Chapter 2: Review of literature businessman representing a Saudi group and two American executives who have gone on their first trip ever to the Near East and Saudi Arabia. Both parties will come to the meeting bringing forth their vastly different customs, expectations and norms of behavior. The confrontation between these two cultures can lead to frustration or conflict (Gudykunst & Kim 1948, p.4) if one or both parties are unaware of the expectations of the other. The Americans’ primary objective will be to establish business ties with the Saudi group, as quickly and as efficiently as possible. The Saudi, on the other hand, will analyze what the Americans say and do to find out whether their business ways and culture clash with his, and to see if they can develop a harmonious business relationship. In the course of that business meeting, the Saudi businessman might answer several phone calls, welcome people visiting him, sign and approve documents presented by his employees. He might also interrupt the meeting to conduct his prayer in either another room or a nearby Mosque (AlSabt 1996, p.37). The American executives, who have never visited Saudi Arabia and have no knowledge of the customs of people there, will be totally shocked by the Saudi’s behavior. They will be offended and think he is deliberately putting them off, ignoring their proposition or not competent. They might even rush to the conclusion that the Saudi is not interested in their offer and react aggressively. This situation will probably lead to a communication breakdown between both parties. The Americans will not know that the Saudi’s behavior is customary for people in this part of the world, and doesn’t mean he is not interested in their business. The Saudi, as well, will not understand why the Americans are offended and might choose not to do business with them if they openly display impatience, frustration, or aggression. This very possible culture clash highlights the importance of investigating the cultures of people when approaching foreign markets, in order to learn their rules and make the required concessions to succeed in the venture. “Effective interaction means giving of yourself–trying to see the world of others and to respect their life ways. It means not forcing your ways on them. Yet at the same time, it means being true to yourself and your ways. To be effective, interaction must be a two-way street... That is, all interacting individuals should be doing so from the basis of awareness, understanding, and knowledge.” Clarence C. Chaffe. (How to Negotiate and Communicate Effectively with Arabs ,www.umassd.edu/cas/english/professional_writing/current /sgameiproposal.htm,13/10/2004)
39
Chapter 2: Review of literature According to Hall, culture provides a “highly selective screen” between outsiders and us. Culture influences what people take in and what they ignore, and presents them with “screens” that influence how they encode and decode messages, which mainly depends on the importance different cultures place on the context of communication (Barnett & Kincaid1948, p. 12). Eastern cultures are considered high-context cultures, where Western cultures are regarded as lowcontext ones. In the East, high-context cultures, people do not use elaborate speech codes (Okabe 1948, p. 35). They rely more on nonverbal actions, such as gestures and tone of voice, as well as the environmental setting to convey meaning (Bovèe & Thill 1999, p.69). In contrast, with the West’s, low-context cultures, often “highly individualized, alienated, fragmented” orientation, Western people tend to verbalize the message clearly and explicitly especially in business negotiations. They rely more on verbal communication and less on nonverbal modes (Bovèe & Thill 1999, p.69). For instance, in the sample meeting between the Saudi businessman and the American executives, the Americans would likely start with a summary of the major points, then present the details of the deal later. They think this is the best approach to establish the main points of the deal up front and verbalize their point quickly, directly and explicitly. They have tried that approach a hundred times before in the US and Europe and so far it has worked very well. But they find that the impression on the Saudi’s face is that of confusion. They cannot understand why. Of course, the Saudi will not appreciate this approach to negotiations; in fact he will regard the Americans as hasty and will become suspicious of their motivations and their deal. Though the Saudi will not openly say he is dissatisfied with the presentation, he will indirectly try to convey that by asking questions and drawing them back to fine details. If they do not get that cue, he will subtly convey his dissatisfaction through the tone of his voice and his body language. For the Saudi details are more important than the end result. He expects the Americans to start from the beginning (not from the end) with thorough discussion of the background of the company, the deal, the general requirements and stipulations, the expected profit and outcome, then work their way up to the more specific details that will be negotiated in order to finalize the deal. This way, he will feel they are thorough in their presentation and will regard them as trustworthy and dependable. (How
to
Negotiate
and
Communicate
40
Effectively
with
Arabs,
Chapter 2: Review of literature www.umassd.edu/cas/english/professional_writing/current_students/sgameiproposal.htm, 13/10/2004) In the East, knowledge comes from intuition, with more emphasis on subjective ideas than objective facts (Okabe, 1984, p.28). Easterners use more subjective and ambiguous forms to support their arguments. The knowledge of the West, on the other hand, comes from postulation, emphasizing “linear” logic, objectivity, specificity, and precision. Westerners rely on facts, figures, and quotations to support their arguments (Gudykunst & Kim 1984, pp. 41-42). “Consider, for example, a business delegation from North America meeting with strangers from the East to decide whether or not their two companies should work together on a joint venture. The North Americans would analyze all the ‘facts’ and would develop a direct argument as to whether or not the two companies should do business together. The strangers, in contrast, would base their decision on a synthesis of all of the data and on their intuition as to whether or not the idea is a good one and, in addition, would discuss the issues in an indirect rather than a direct method. Obviously, if one of the groups does not understand the other’s world view and adapts their communication, accordingly, misunderstanding is going to occur”. (Gudykunst & Kim 1948, p.42) The East places more emphasis on the collective orientation involving the group’s, family’s or relatives’ interests over that of the individual. These values promote conformity, identification with the group, as well as great restrictions in expressing personal opinions and inner feelings in order to maintain harmonious relations with others. These values affect decision-making where people in the East try to subtly arrive at consensus of feeling “in a slow, cumbersome, and roundabout manner” (Okabe 1984, pp.26-32). In contrast, the West values self-orientation where the individual’s or the corporation’s interests are put above anyone or anything else. Western values encourage self-assertion, straightforward expression of opinion and emotions. In Western countries, decision-making policies call for “open conflict of views and the resolution of the differences of opinions through rational discussion and by simple majority voting” (Okabe 1984, pp.26-32). These differences will evidently manifest themselves in the Saudi-American business meeting. The Americans will want the meeting to end on time. But, this doesn’t usually happen with the many 41
Chapter 2: Review of literature interruptions during the meeting, and the great emphasis the Saudi will give to details and discussion. The American executives will want the Saudi to make his decision, if possible, right on the spot. They will probably use incentives and try to end the deal. Naturally, this is not the right course. Arabs make decisions in “slow and cautious steps.” It can take them more than ten meetings to close a deal. The American Executives should be sensitive to this Arabian custom and show patience and willingness to wait and develop a human relationship with the Saudi before establishing business ties (Al-Sabt 1996, pp. 38-39). Eastern cultures place more emphasis on hierarchy. This vertical arrangement of society is quite evident in many organizations, especially government bureaucracies and business firms, where the concept of equality is virtually nonexistent. Ruth Benedict, in The Chrysanthemum and the Sword: Patterns of Japanese Cultures characterizes such cultures as having a “shame” culture, where the fear of the judgment of society or the world governs people’s decisions and not the fear of God (Okabe 1948, p.23). In contrast, in the West we see a horizontal society, typically based on the principles of “assumed equality or egalitarianism.” Benedict characterizes Western cultures as having a “guilt” culture. In these cultures, people are governed by “an internalized conviction of sin,” where the fear of society’s judgment does not play a major role in shaping people’s lives or decisions (Okabe 1984, p.23). However, in Arab countries, which are Eastern cultures, we see a mixture of the “shame” and “guilt” cultures, where sometimes the fear of disobeying God’s commands is stronger than the fear of society’s judgment or breaking social rules and vise versa. These different worldviews shape people’s expectations and decisions and how they view the negotiation process with their partners. For example, “…a very successful Arabian businessman was the middleman between a department in an Arabian defense ministry and an American Manufacturer. The Arabian Businessman had a verbal agreement with the American company for a set commission when the deal was completed. In advanced stages of negotiations, the American company was corresponding directly with all parties including the end buyer. After eight months, the American company started ignoring the middleman. Finally, after many persistent calls and fax messages by the Arabian middleman, the American company responded with a fax promising him with a commission lower than what was 42
Chapter 2: Review of literature originally agreed. The middleman informed his friends at the government office of this development, and started corresponding with another source, and guaranteed that this company will never do business in his country” (Al-Sabt 1996, p.13). Here the conflict rose from the clash between two different cultures. The expectations and code of honor of Arab people were violated because of the American company’s action. As a result, the US Company lost its credibility and probably all possibilities of doing business in that country. In Arab culture, on one hand, a verbal agreement is more valid than a signed contract and has to be honored at all cost. If not, the person breaking that pledge will lose all credibility in front of other members of Arab society and will be regarded as dishonest and untrustworthy. Accordingly, any Arab, for fear of society’s judgment, would rather turn down a very profitable business deal, if he feels his good name will be threatened by his association with a company known for being untrustworthy and dishonest. Because Arabs place more emphasis on personal pledges and less emphasis on the written word, they, like all Easterners, will view a signed contract as a proof of trust and the starting point for further negotiations and changes in the terms between new friends and partners, and not as the finalizing of a deal. The American company, on the other hand, represents a Western culture that puts more emphasis on personal gain and using objective forms of collecting and analyzing information to arrive at truths and conclusions, and less emphasis on society’s views. For the American company, verbal agreements are not binding. In fact, any Western company will negotiate and change the terms and offers until the deal is finalized in writing, then it becomes a binding contract that they have to adhere to. In spite of their reserved attitude, Arabs like to spend time discussing general issues with their business associates even on their first meeting. Arabs regard this non-business-related discussion as part of information sharing between both parties in an effort to break the ice, create harmony, and know each other as people before discussing business. In the sample formal meeting, the American executives will prefer less involvement with their business associates especially on their first meetings. The executives will want to start presenting their offer and discussing the terms of the agreement with their Saudi counterpart after a very brief non-business related discussion. And if the Saudi businessman keeps on coming up with general 43
Chapter 2: Review of literature discussion topics, the Americans might interpret that as a clear indication of the Arab party’s lack of genuine interest in their offer, and might react aggressively or say, “Let’s stop beating about the bush. Let’s get down to business.” But, is this the best approach to deal with the Saudi businessman? Definitely not! This attitude is too straightforward and can be very offensive to the Saudi who expects the American executives to carry on with the general discussion. In this case, the Saudi is the only one who should open the business negotiations. By the end of the meeting, the Americans should never show they are in a hurry to leave. They should join in the discussion that the Saudi starts, and when silence prevails in the room, this is the Americans’ cue to leave (A-Sabt 1996, p.36). The lack of knowledge of the expectations of the other communication party’s needs most often leads to conflict and lack of trust on one or both sides, which “could potentially be a major stumbling block in the negotiations” (Gudykunst & Kim1984,p 71). In contrast, the sensitivity to the needs and expectations of the other party, in this case the Arab businessman, creates trust, credibility, and shows dedication to the potential business partner, increasing the possible success of the venture. A case in point, as high-context communicators, Arabs mostly do not follow time schedules or deadlines and do not strictly adhere to the law. However, how can foreigners cope with this? And how does an Arab get another to do anything promptly? “An Arab businessman whose car broke down explained… First I go to the garage and tell the mechanic what is wrong with my car. I wouldn’t want to give him the idea that I didn’t know. After that, I leave the car and walk around the block. When I come back to the garage, I ask him if he has started to work yet. On my way home from lunch I stop in and ask him how things are going. When I go back to the office I stop again. In the evening, I return and peer over his shoulder for a while. If I didn’t keep this up, he’d be off working on someone else’s car”. (Smith 1966, p.570) Though this method might work with some people in the Middle East, it might backfire with others. This attitude, whether adopted by Arabs or foreigners, might be regarded as offensive. The results will not always be as pleasant. The Arab mechanic or worker might come up with a million 44
Chapter 2: Review of literature excuses to put off working on the car or to not fix it at all as a form of punishment to the nagging customer, whether because of a missing spare part, or a sudden but infrequent fit of illness. However, there are incentives people can use to get their work done, such as paying an extra charge to take other people’s turn and have their work done first or to speed up services or delivery. Despite the presence of laws prohibiting bribery in most Arab countries, clerks, workers, as well as top government officials consider payments to approve government contracts or bank loans, or speed up government procedures as gifts rather than illegal and unethical payments. Many people in the Middle East regard these practices as unethical and arm-twisting, because it is sometimes the only available way to get their work done on time and avoid potential losses. Having to make those payments puts low-income families at the mercy of these clerks, officials or workers. On the other hand, as low-context communicators, Americans follow deadlines and prefer to get their business deals and negotiations over as fast as possible. This hastiness and impatience can reflect negatively on the discussions and can very well convey insincerity and disinterest on the part of the American negotiator, which can prove hazardous to the success of any present or future communications in the Middle East. However, this impatience can prove profitable, but not to the Americans.
The
head
of
a
large,
successful
Japanese
firm
said,
“You Americans have a terrible weakness. We Japanese know about it and exploit it every chance we get. You are impatient. We have learned that if we just make you wait long enough, you’ll agree to anything”. (Smith 1966, p. 568) Americans, as well as other low-context communicators, are more rigid in following the law and avoiding any illegal practices. The US Foreign Corrupt Practices Act governing company payments to foreign officials does not allow bribing officials anywhere in the world. It only allows small payments that speed but do not influence government actions (Bovèe & Thill 1999, p. 69). This shows that what may be considered illegal and unethical in one country may be regarded as legal and ethical in another, highlighting the importance of investigating the rules and laws of other countries before approaching their markets. In intercultural communication, our knowledge of the conditions under which conflicts arise, when dealing with people from different cultures, and our understanding of their attitude toward conflict 45
Chapter 2: Review of literature can increase our ability to interpret and predict other people’s behavior. The more accurate and guided our predictions and interpretations are, the more successful we will be not only in resolving conflicts, but also in avoiding possible, future conflicts. (How to Negotiate and Communicate Effectively
with
Arabs,
http://www.umassd.edu/cas/english/professional_writing/
students/sgameiproposal.htm, 13/10/2004). For example, “Not all cultures observe the Western tradition of reading from left to right, both for text and graphics. Some countries interpret text from right to left or in columns from top to bottom. For instance, a Middle Eastern marketing campaign for (western) detergent showed dirty laundry on the left, clean laundry on the right and box of detergent in the middle between the two piles of clothing. Arab viewers were confused about the marketing message since they read from right to left” (www.webofculture.com, 13/09/2004). In this case, misunderstanding occurred because of lack of knowledge of some of the basic facts about Arab culture. If the dirty laundry had been on the right and the clean laundry on the left, Arab viewers would have easily grasped the marketing message of this campaign. Another example is the Gifts versus Bribery in the Gulf States: When doing business in the Gulf States, it is important that the distinction between gifts and bribes is clearly noted. Presents are frequently given to family, friends, and business contacts as a gesture of thanks for some service rendered. The Arabic people are by nature extremely generous. Bribes on the other hand are completely taboo: they are anathema within both the culture and the law and can, and do, incur stiff penalties. As to the distinction between the two, and why stories should still be told of endemic bribery, the root lies in the disparity between Arabic and Western (European, USA) culture. At heart it is a question of mens rea, the legal concept of a guilty mind without which no crime is possible. A present given with a generous heart is a gift; if it is given to induce favor, it is wrong. Payment for a service is quite different and does not come into the equation. Needless to say, it is only the conscience of the giver that can make the ultimate distinction.
46
Chapter 2: Review of literature When giving a present, it is important that the status of the recipient be reflected in the choice and value of the gift. A company once gave a minister signing a contract worth many hundreds of thousands of dollars the, albeit expensive, pen with which he had signed. This was regarded as an insult. In this difficult area, it is necessary to think carefully before acting, and to take advice. (Cole, S. 1992, p. 86)
2.9 Marketing Medical Equipments Companies in the medical devices and diagnostic sector face a set of challenges that are unique in the history of the industry. Whilst technological development, globalization, demographics and political change have each been market forces for many years, the way in which they are now combining to change markets is exceptional. Traditional business models, involving research-based product development in national and/or product silos are no longer effective strategies for creating shareholder value. In addition, the demands of shareholders and customers are greater than ever. Because of this confluence of market forces, managers in these markets must work more intelligently than ever before. Their central role in the company is to create a sustainable competitive
advantage
in
the
new
conditions
that
now
prevail.
(http://www.the-
infoshop.com/study/pjb17727_m_devices_diagnostics.html). In the following sections, we will discuss the main factors affecting the marketing of the medical equipments. 2.9.1
Defining Distribution Channels
Understanding specifics of distribution channels, for the purpose of marketing, that affect a company' s industry can be a vital step. It is critical to understand how to access potential customers when plotting out market entry strategy. It can also be important to evaluate how the competition constructs distribution channels, with the intention to identify industry standards, comparative advantages, and areas of opportunity. Many elements contribute to defining the distribution channels of the industry. First and foremost is defining the purchasing process and identifying the decision makers that are involved. Understanding the vehicles of communication that are most commonly used by companies to 47
Chapter 2: Review of literature inform potential customers will also contribute to the defining of distribution channels. In the medical field, scientific citations, presentations at conferences as well as traditional advertising play an important role in communicating to potential and current customers. An additional definition is the level of customer service and the resulting customer relations expected by a potential customer. This is particularly relevant in many of the highly competitive segments within the medical field and has a direct implication on the level of presence a company needs to consider. Clearly, all these dynamics and definitions have specific answers and criteria according to the market segment and the product being supplied. (Kouidri 2004, p.74) 2.9.2
Market Segmentation
The medical device industry continues to be supplied by a large number of industries and sectors, including materials, machine tools, electronics and much more. Most of these suppliers however are targeting similar markets such as hospitals, physicians, and other healthcare providers. Therefore, the medical device sector can be segmented into two categories, namely medical technology products, and conventional hospital supply products. . (Kouidri, 2004, p.74) • Medical Technology Products Products that address a new need and create new standards and procedures in the medical field, including surgery, are considered medical technology products. Examples include the implantable cardiac defibrillator (ICD), new orthopedic implants, and drug coated stents. As these new products create new standards, they also demand higher prices and higher margins. Usually the decision to use medical technology products lies in the hands of the medical doctor. Market entry of new medical technology products can be extremely time consuming and expensive due to the need of clinical trials, evaluations and a proactive sales process. This poses a challenge to the small and medium sized firms that may not have the resources, both financially and human resources, to see the complete process through. Therefore, strategies that include partnerships and technology licensing should be included.
48
Chapter 2: Review of literature •
Conventional Hospital Supply Products
Conventional hospital supply products are products that can be considered commodities where bulk purchases are made usually by a hospital procurement officer. Conventional products include bandages, syringes, and similar products. As stated, this is a high volume, bulk purchase type transaction where low margins are the norm and long-term contracts are the key to profitable business. There has been, however, recent debate on such long-term contracts as the industry is now debating whether or not these contracts hinder competition and create unfair monopolies. It is argued that long-term contracts discourage other firms to invest in new developments within that sector simply because they do not have the monetary incentive and revenue. In the US today, conventional hospital products can provide a good revenue stream that helps fund the development of new higher technology products.(Kouidri 2004,p.75) 2.9.3
The Decision Makers
Healthcare providers cover a very broad range of persons and entities providing services in the healthcare sector including general practice physicians, nurses, physical therapists, physicians assistants, surgeons, a multitude of specialty fields, hospitals, hospices, clinics, etc. These persons and organizations are the direct links to the ultimate end-users of medical devices, the patient. In some cases, the patient might have some input regarding medical devices that will be implanted, but for the most part, it is the doctors and health providers that make the decisions about which devices they will recommend or use on patients. Patients generally follow the advice or recommendations given by their physician or healthcare provider. In most cases, when it comes to marketing medical products and devices, the health-care providers should be considered the enduser. This being the case, marketing efforts should be designed to target the healthcare providers. Doctors continue to play a vital role in the purchasing of medical technology products. There are, however, processes where the influence of doctors is secondary to the health insurance companies. It has become common that health insurance companies get the last say regarding certain devices and procedures, due to whether or not the insurance company will reimburse the patient. Nonetheless, it is clear that doctors remain on the front line when it comes to recommending procedures and products to patients. Doctors continue to be instrumental in evaluating and recommending new techniques. 49
Chapter 2: Review of literature Procurement officers at hospitals are important decision makers especially when discussing the purchase of conventional hospital products. Procurement officers also purchase some medical technology products. Purchases by these officers can be done either directly or more commonly, via a Group Purchasing Organization. (Kouidri 2004, p.76) Key factors for medical device purchase consideration •
Price of the medical device (i.e. direct cost comparison to similar devices)
•
Benefits to the patient relative to other commercially available devices or procedures (i.e. size/weight, reduced risk of infection, reduced complications, improved patient quality of life, improved safety, increased survival rate)
•
Time needed for surgery (i.e. reduced surgical time, fewer surgical staff)
•
What is the service life of the device? (i.e. does the device last longer than other products Ease of installation or procedure (i.e. is the new device easier to use or install compared with other available devices).(Kouidri 2004,p.77)
Dr Brian Smith and Lindsay Bruce state in there market report „Successful Marketing Strategies for Medical Devices and Diagnostics “a seven steps guide to produce a workable marketing plane, these steps are: •
An overview of market force trends impacting on medical device and diagnostic markets. These include healthcare demands and expectations, regulatory constraints and trade barrier reduction, economic development and political constraints, technological integration and market maturity, concentrating competition, customer sophistication, and consolidation.
•
Assessment of the market forces acting on medical companies. External forces include regulatory controls and market factors such as customer and competitor consolidation. Internal factors cover areas such as technical expertise, structural cost constraints, market knowledge and cultural inertia.
• Setting realistic and achievable objectives within the constraints of medical device and diagnostic markets. Recognizing market inertia, cascading objectives to specialist medical sales teams and relating objectives to strategy. 50
Chapter 2: Review of literature •
Identifying what strategy options. This is achieved by the application of advanced planning techniques to medical device and diagnostic markets, to highlight common pitfalls and to create a cohesive practical strategy.
•
Developing tactics which work under the special conditions of medical device and diagnostic markets such as uncovering the real market segmentation, choosing attractive and winnable targets and applying total product positioning in a clinical context.
• Communicating effectively to medical device and diagnostic markets: clarifying decision-making units and processes within the industry and tailoring the communications mix around them. •
Controlling implementation in the fluid conditions of medical device and diagnostic markets: using objective cascades, implementing empowerment and creating management information systems which work in medical markets. (Successful Marketing Strategies
for
Medical
Devices
and
Diagnostics,
executive
summery,
http://www.pjbpubs.com/cms.asp?pageid=641#market, 05/12/2004). On more point to be taken in consideration which is that in general, the German companies stated that they are not in direct competition with low-wage countries as the products of these countries occupied a ' much lower quality segment of the market' . Although the German firms are under pressure to reduce costs, they were less concerned about price competition since their strategy was based far more on achieving a consistent quality whilst moving into more sophisticated products. (Anderton and Schultz 1999, p.23)
2.10 Near East Medical Market Overview Refer to Appendix three please.
51
Chapter 3 Conceptualization and frame of reference
3 Conceptualization and Frame of Reference As defined by Miles and Huberman, “a conceptual framework explains, either graphically or in narrative form, the main things to be studied” (p.18). Our conceptual framework is based on the literature review discussed in the last chapter in order to summaries the discussed theories in a logical way. The framework will serve as the basis of our data collection and will help us in drawing conclusions. We will start by conceptualizing our theories and we will end up with a graphical layout of our frame of reference.
3.1 Conceptualization In the following sections we will summeries the discussed theories discussed in the last chapter in a logical way. 3.1.1 Target Market Selection The reactive market selection approach characterizes a situation where the exporter acts passively in choosing markets by filling unsolicited orders or awaits initiatives on the part of foreign buyers, foreign representatives (importers, agents and so on) or other export change agents who indirectly select the market for the company. The selection process then remains very informal, unsystematic and purchase-oriented, making export marketing more or less sporadic. The proactive market selection approach is, in contrast to the reactive approach! marketingoriented. The exporter is active in initiating the selection of foreign markets and the further customer segmentation of these markets. Since active market selection is systematic and formalized, rather heavy organizational burdens are put on the exporter requiring personnel with international experience and access to international market information. Another approach discussed by Albaum is the contractible method. When using a contractible method the optimal market selection starts with the total number, or a large number, of national markets, which are eventually broken down into regional groupings on the basis of political, 52
Chapter 3 Conceptualization and frame of reference economic, language, or other criteria. Contractible methods involve a systematic screening of all markets leading to immediate elimination of the least promising and further investigation of the more promising. This approach is also explained by root. We decided to explain root`s point view more as most researchers are based in his discussion. 3.1.2
Timing of entry
Bond and Lean [1977], Whitten [1979], Robinson and Fornell [1985], Urban et al. [1986], Robinson [1988],Lambkin[1988] and other authors based on their research concluded on advantages of market pioneering. However, there are a number of authors who, on the contrary, support later entry to a new market like Cooper [1979], Glazer [1985], Schnaars [1986], Sullivan [1991] and Golder and Tellis [1992]. Further more David Arnold argues that the first-mover advantage to exist, the following two conditions must apply: First, there must be a scarce resource in the market and second, the entrant company must be able to tie in that scarce resource so that it is not available to competitors. In addition, Susan Peters concludes some factors ,which affect the timing of the entry mode as following: •
As firm size increases, entry is earlier
•
The more multinational a firm is, the earlier the entry.
•
The larger the host market size, the earlier the entry.
•
The lower the cost of labor, the earlier the entry.
•
The closer the cultural distance between home and host country, the earlier the entry.
3.1.3 Entry Mode Strategies The table below shows the entry mode supporting theories sorted by authers. However, for the Near East specifically farhang states that exporting is the dominat mode of entry and that many firms use more than one entry mode simultaneously. Furthermore, he states that Joint venture is the faviourit investment entry mode in the area. See table 3.1.
53
Chapter 3 Conceptualization and frame of reference Entry Mode
Authors Direct & Indirect: (Bradley, 1995), (Kwon and Konopa 1992),
Exporting Entry Mode
(Brassington and Pettitt 2000), (Mühlbacher, Dahringer and Leihs). Licensing: (Brassington and Pettitt 2000), (Root 1994), (Mühlbacher, Dahringer and Leihs 1999),
Contractual Entry Modes
(Williams 1997). Franchising: (Root 1994), (Mühlbacher, Dahringer and Leihs 1999), (Williams 1997). New establishments (Greenfield sites): (Williams 1997), (Kwon and Konopa 1992), (Root 1994),(Grönroos,1999) Acquisitions: (Root 1994)
Investment Entry Modes
Joint ventures: (Root 1994),(Grönroos 1999), (Mühlbacher, Dahringer and Leihs 1999), (Williams 1997), (Albaum and Strandskov 1994) Mergers: (Floyd 2002) Table 3.1 Entry Mode Strategies
3.1.4 Factors Influencing the Entry Mode Decision We selected root 1994 as the basis for this part as most of the researchers are following his foundations. Root states the following as the factors influencing the entry mode decision:
54
Chapter 3 Conceptualization and frame of reference a) External Factors: Target country market factors Target Country Production Factors Target Country Environmental Factors Home Country Factors b) Internal Factors: Product Factors Resource/Commitment Factors Furthermore, we made a closer look at the influencing factors on the Near East using Kaynak 1985 and Farhang 1987. They mentioned some special factors of the Near East like poltical and economical risk instability. 3.1.5
Clustering the Near East
The following two approaches are the main two theories we found through our literature review. First, As per Erdener Kaynak and Metin N. Giirol, Markets on the region can be segmented in a two-step process. First, the macro segment composed of individual or groups of countries can be identified, based on national market characteristics. Then, within each macro segment, the market can be further subdivided, based on customer characterization. The second approach is by Schwartz, which may prove to be useful is organization by start market development. A stages-of-market development organization is by dividing the countries of the region into groups, which reflect similar conditions.
55
Chapter 3 Conceptualization and frame of reference 3.1.6
Near East Cultural Effect in Marketing Religion
“Although there are a significant number of Arab Christians in Lebanon, Syria, the Palestinian Authority, Iraq and Egypt, as well as Jews throughout the Middle East, the predominant religion of the region is Islam. Islam it self also has many Branches, Muslims may belong to Sunni, Shi' a (or Shiite), Sufi, or one of several other branches of Islam, and the differences between them are significant. The branches do not always get along; therefore, it is advantageous to understand your client' s belief system and how it may differ from another Islamic branch. Language Much of the difficulty with silent languages has to do with how central the context, or setting, is in interpreting .A "high-context" culture relies heavily on contextual clues to round out communication. In Arabic cultures, much information is transmitted through context-through the listener interpreting what is meant to be said, rather than through the actual words spoken. "Low-context" cultures, such as the United States, and Germany, rely more directly on the words themselves; English and German are precise languages with rich and specific vocabularies. Gender Issues: “There is a preference for segregated male and female in the Near East at different levels,
and in some countries, such as Saudi Arabia, full segregation is mandated by
law.” These factors and others related to people norms,values and their way of doing buisness should be taking into concederation.
56
Chapter 3 Conceptualization and frame of reference 3.1.7 Marketing Medical Equipments We discussed the main factors affecting the marketing of the medical equipments. 1) Defining Distribution Channels 2) Market Segmentation 3) The Decision Makers After that, we mentioned some key factors for medical device purchase consideration. Finally we discussed an approach by Dr Brian Smith and Lindsay Bruce who state in there market report „Successful Marketing Strategies for Medical Devices and Diagnostics “a seven steps guide to produce a workable marketing plane.
3.2 Frame of Reference As pointed earlier in this chapter,the conceptualization above is what will lead us to our frame of referance. It is showing graphically what are the main things to be studied and will help us in collecting our data. See figure 3.1. in the next page.
57
Chapter 3 Conceptualization and frame of reference
Target Market Selection • •
Reactive vs. proactive. Contractible method
Entry Mode Strategies • Exporting (Direct& Indirect) • Investment (Acquisitions, Green field, Joint venture, Mergers) • Contractual (Licensing & franchising)
Clustering the Near East • •
Macro segment and customer characterization Stage of Market development
Near East Medical Market Overview Short description of market status in each country
A guide line for international marketing managers of German medical equipments companies to reach deferent clusters of the Near East markets successfully.
The Near East Cultural effect in marketing • Religion • Language • •
Gender Issues: Doing business with Arabs
Timing of Entry • First mover-Pioneer • Late comer-free rider • Factors related to company
Factors influencing the entry mode decision • • •
External Factors Internal Factors Near East special factors
Marketing Medical Equipments Main factors: • • •
Defining Distribution Channels Market Segmentation The Decision Makers
Figure 3:1 A Conceptual Fram of Referance, Source:constructed by the auther
58
Chapter 4 Methodology
4
Methodology
In this chapter, we will present the research methods adopted for our study. In order to do this a series of steps will be followed which is presented in figure 4.1, we will provide explanations to our choices of the accepted research methods as we go along with describing the different perspective. Finally, we will discuss what factors have influenced the validity and reliability of the conducted research.
Figure 4:1 Overview of the Methodology Obtained in this Study, Source: Adapted from Foster (1998), p.81
4.1
Purpose of Research
A research can be classified into three basic purposes exploratory, descriptive and explanatory. An exploratory stage is a research that is designed to allow an investigator to just “look around” with respect to some phenomenon, with the aim being to develop suggestive ideas. The research should be as flexible as possible and conducted in such a way as to provide guidance for procedures to be employed during the next stage. The objective of a descriptive stage is to develop careful descriptions of patterns that were suspected in the exploratory research. The purpose may be to develop Inter subjective descriptions (i.e. empirical generalizations). Once such generalizations begin to emerge, they are thus worth, explaining, which of course leads to theory development in the long run.
59
Chapter 4 Methodology The purpose of an explanatory stage is to develop explicit theory that can be used to explain the empirical generalizations that evolved from the second stage. This provides a cycle then of: (1) theory construction; (2) theory testing (attempt to falsify with empirical research); and (3) theory reformulation (back to step one). Explanatory research is a casual research that is used to explain a certain set of events and to indicate how the investigation may apply to other investigations. (Yin 1994, pp.2-5), and (Churchill 1995, pp.145-150) With this discussion in mind and based on the purpose and the research target the overall purpose of this study will be to explore, describe and to a certain degree begin to explain. We are exploring what our purpose brings up; describing what is brought up and is beginning to explain since we are drawing conclusions. This study is more exploratory (Literature search) and descriptive than explanatory.
4.2
Research Approach
The research approach consists of the inductive or deductive way of drawing conclusions, and the qualitative and/or quantitative method of investigating information. The following sections will describe the different approaches and justify the choices I have made. 4.2.1
Induction or deduction:
Two different approaches for drawing research conclusions exist, that is, induction or deduction. Developing a case description (inductive approach): This strategy is to develop a descriptive framework for organizing the case study. This strategy is less preferable than the use of theoretical propositions but serves as an alternative when theoretical propositions are absent. (Yin 1994, p.104) Relaying on theoretical proposition (deductive approach): This strategy is more preferred to follow the theoretical proposition that led to the case
60
Chapter 4 Methodology study. The original objectives and design of the case study presumably were based on such proposition, which in turn reflected a set of research questions, reviews of the literature, and new insights. (Yin 1994, p.103) I have assumed the deductive approach in my thesis, since I have proceeded from existing theories. These theories have been tested empirically, to see if they correspond to the reality. I have chosen this research approach since theories in this area exist. 4.2.2
Qualitative and Quantitative Methods
In the social sciences there are two different methodological approaches, qualitative and quantitative .Both approaches have their strengths and weaknesses and neither one of the approaches can be held better than the other can. The best research method to use for a study depends on that studies research problem and the accompanying research questions. (Yin 1994, p.103) Further more the general picture that qualitative methods can give, makes it possible to get an additional understanding of social processes and relations. One typical characteristic of qualitative studies is that they to a large extent are founded on description, that is, on the involved person’s own description, emotions and reactions. A quantitative research is generally considered to be the only approach that gives an objective truth, because it converts information into numbers. The method is generally used when the researcher conducts a wide investigation that contains many units. The researcher must have a distance to the investigated object to reach a satisfying degree of objectivity. (Yin 1989, p.106-108) We have used a qualitative method when conducting our empirical study since it was the alternative that best suited our research. We found that looking deeper and more in detail at a few companies is better for our research purpose than doing a superficial investigation, as can be achieved when conducting a quantitative approach.
4.3
Research Strategy
According to Yin (1994), there are five primary research strategies in the social sciences. These include experiments, surveys, archival analysis, histories, and case studies. Which one of these five strategies that are most suited for a study, depends on the type of 61
Chapter 4 Methodology research question, the degree of control the researcher has over the study, and whether the study has its focus on contemporary events. Figure 4.2 on the next page shows relevant situations for the different research strategies. An experiment is not appropriate in this study because we have no intention to investigate cause/effect relations, which an experiment often is used for. Another reason for not selecting experiment is that it demands control over behavioral event, which is not possible in a study like this. Archival analysis and Histories considered as secondary data and lack focus on contemporary events. A survey was not suitable since it would have limited the investigation because we would not be able to study the selected area in detail. Further is the character of this thesis to study a large number of variables on a few numbers of units (companies), which a survey would not have enabled us to do. Finally, another reason for not selecting survey as research strategy is that we do not have time to conduct surveys on larger samples.
Figure 4:2 Relevant Situations for Different Research Strategies, Source: Adapted from Yin (1994), p.6 62
Chapter 4 Methodology According to Yin (1994), a case study approach should be used when how or why questions are being posed about a contemporary set of events over which the researcher has little if any control. This study is based on research questions of how character (e.g. how to enter the Near East market successfully) and focuses on contemporary sets of events; Furthermore, case studies can be done by interviews, which is the tool used in this thesis. Therefore, we thought that a case study was the most suitable research strategy for this study. (Yin 1994, pp.6-12) Yin, (1994) states that a study may contains more than a single case. When this occurs, the study has to use a multiple-case design. Multiple-case designs have distinct advantages and disadvantages in comparison with single-case designs. The evidence from multiple cases is often considered more compelling, and the overall study is therefore regarded as being more robust. In this study, we have chosen to use multiple cases in order to be able to generalize and to draw conclusions that are more specific. (Yin 1989, pp.22-23)
4.4
Data Collection Method
According to Yin, (1994) data for case studies can be collected from six sources: documents, archival records, interviews, direct observation, participant-observation, and physical artifacts. The use of these six sources of evidence calls for slightly different skills and methodological procedures. In the figure 4.3, an overview of the six major sources of evidence is presented together with their comparative strengths and weaknesses. (Yin 1994, p.79)
63
Chapter 4 Methodology
Figure 4:3 Source of Evidence Strengths and Weaknesses, Source: Yin (1994), p. 80 Documentation can take many forms and should be the object of explicit data collection plans. There is a variety of documents such as letters, agendas, administrative documents… etc. For case studies, the most important use of document is to corroborate and augment evidence from other sources. Because of their overall value, documents play an explicit role in any data collection in doing case studies. Systematic searches for relevant documents are important in any data collection plan. (Yin 1994, pp.81-82) .In this study, we have used documentation in the form of information such as brochures and other information material, which were handled to us by the interviewed respondents.
64
Chapter 4 Methodology Therefore, documentation is used as secondary data collection method in this study. Yin, (1994) mentioned that for many case studies, archival records often in computerized form may also be relevant. These can be service records, organizational records, maps and charts, lists of names, survey data, and personal records. These and other archival records can be used in conjunction with other sources of information in producing a case study. Unlike documentary evidence, the usefulness of these archival records will vary from case study to case study. This study has character of being a qualitative study, therefore is the use of archival records not appropriate because it has the strength of being precise and quantitative. One of the most important sources of case study information is according to Yin, (1994) the interview. The interview may take several forms. Most commonly, case study interviews are of an open-ended nature in which you can ask key respondents for the facts of a matter as well as for the respondents’ opinions about events. The more that a respondent assists in this latter manner, the more that the role may be considered one of an “informant” rather than a respondent. Key informants are often critical to the success of a case study. The second type of interview is a focused interview, in which a respondent is interviewed for a short period of time – an hour, for example. In such cases, the interview may still remain open-ended and assume a conversational manner, but you are more likely to be following a certain set of questions, derived from the case study protocol. Finally, the third type of interview, the structured interview, involves more of what can be found in survey research, where the interview is guided by a set of predesigned questions. (Yin 1994, pp.83-84) Overall, interviews are an essential source of case study evidence because most case studies are about human affairs. These human affairs should be reported and interpreted through the eyes of specific interviewees, and well-informed respondents can provide important insights into a situation. They also can provide shortcuts to the prior history of the situation, helping you to identify other relevant sources of evidence. The interviews should always be considered verbal reports only, since they are subject to the common
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Chapter 4 Methodology problems of bias, poor recall, and poor or inaccurate articulation. In this study, we have decided to rely on interviews to collect the data. We found that it was the most suitable method to collect data in order to fulfill the purpose of this study. The interview can be classified as a focused open-ended interview since the interviews are conducted by a set of questions derived from a case study protocol (i.e. interview guide) from which the respondents is allowed to open and freely discuss his or her opinions and insights. Direct observations might be made throughout a field visit, including those occasions during which other evidence, such as that from interviews, is being collected. Observational evidence is often useful in providing additional information about the topic being studied. Participant observation is a special mode of observation in which you are not merely a passive observer. Instead, you may assume a variety of roles within a case study situation and may actually participate in the events being studied. Direct observation and participant observation was not of interest because of the lack of time and costs. Another reason for not using direct observation and participant observation is that the character of this thesis is not to focus on events in real time but instead to focus on the respondents views in market entry events. Physical artifacts are a technological device, a tool or instrument, a work of art, or some other physical evidence. Such artifacts have less potential relevance in the most typical kind of case study. However, when relevant, the artifacts can be an important component in the overall case. (Yin 1994, pp.86-87) Yin (1994) states, “a major strength of case study data collection is the opportunity to use many different sources of evidence” (p. 91). Yin calls this use of multiple sources of evidence “triangulation”, which means that the researcher has the opportunity to obtain multiple measures of the same phenomenon, which in turn adds to the validity of any scientific study. The use of multiple sources of evidence in case studies allows an investigator to address a broader range of historical, attitudinal, and behavioral issues. The most important advantage presented by using multiple sources of evidence is the development of converging lines of inquiry that is a process of triangulation. With 66
Chapter 4 Methodology triangulation, the potential problems of construct validity also can be addressed, because the multiple sources of evidence essentially provide multiple measures of the same phenomenon In this study data will be collected from multiple sources in the form of documentation (i.e. the material that were handled to us by the respondents) and interviews. •
Interview guide:
Although much progress has been made, designing questionnaires is still an art and not a science. Much of the progress has come from admonition such as “avoid leading questions” or “Avoid ambiguous questions”. (Churchill 1995, p.396) Generally, questionnaires entail several questions that have structured response categories. The order of the questions should be logical to the respondent. Further, the first questions should not be of sensitive nature, or too demanding to answer. It may be a good idea to arrange the questions in chronological order. (Frey and Oishi 1995, pp.6569) According to Chisnall (1997), five classes of information are generally useful for marketing decisions, that is: 1) Facts and knowledge: The present beliefs, perceptions, and knowledge the respondent holds regarding the research object. 2) Opinions: Existing attitudes towards the research object. 3) Motives: What motives underlie specific types of market behavior? 4) Past behavior: How have the respondents’ beliefs changed over time? 5) Future behavior: What are they planning to do in the future? I divided the interview guide into four parts, which I tried to arrange in chronological order. I also tried to cover the five classes of information, as suggested by Chisnall (1997). The first part contained some general questions about the enterprise and the respondent’s assignment. I asked these questions to confirm that the enterprise fulfilled the 67
Chapter 4 Methodology requirements of the selection criteria. I also believed these questions to be easy to answer, and not sensitive in nature.
e.g. Company Background A. Company name: B. Respondents name and title: C. Number of years you have worked for the company: D. What year did your company first establish operations in the Near East/or planning to?
The second part consisted of questions regarding the target market selection, sequence, and time of entry of the enterprise.
e.g. Target Market Selection, Sequence and Time of Entry Q. How large part of the total sales value derives from the Near East operations? Q. Which are the three biggest markets for your firm in the Near East? Rank 1:
Rank 2:
Rank 3:
Q. Did you cluster the Near East as a part of your marketing plane? What type of clustering you did? Q. Which are the regional hubs for each of these clusters? The third part contained questions regarding the entry mode strategy and factors influencing it.
e.g. Entry Mode Strategy ,Factors Influencing it and the Near East Cultural Effect in Marketing: The Mode of Entry Used to Enter the Near East market.
Exporting: •
Direct mode
•
Indirect mode
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Chapter 4 Methodology Investment Entry Modes: •
New Establishments
•
Acquisitions
•
Joint Ventures
•
Mergers
Contractual mode: •
Licensing
•
Franchising
Other comments The last part is related to marketing medical equipments.
e.g. Marketing Medical Equipments: Q. Your company’s main competitors on the international market/Near East Market. Is it local or global company? Q- Are all the company’s products sold in the Near East? If not, WHY? Normally, case study interviews are based on open-ended questions, in which you can ask the respondent for the facts of a matter, as well as for the respondent’s opinions about events. Closed-ended questions, on the other hand, call for responses that are strictly limited, since the respondent is offered a choice of alternative replies, from which he or she is expected to select an answer corresponding to his or her personal views on a particular subject . Most of the questions I used were open-ended, but somewhere closedended. The closed-ended questions were followed up with an open-ended question in order to give me a deeper understanding of the enterprise’s opinion about the subject. (Yin 1994, pp.56-57) Before I interviewed the enterprises, I tested the questions, on some students of my class, in order to be able to improve them, which was needed in some cases. The full interview guide is attached in appendix I.
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4.5
Selection of Case-Study Firms
This section’s purpose is to present the way in which companies, as well as the individuals within those companies will be selected for this study. The criteria for the selection of the sample companies were: 1) The company should be a German company who is working in the field of medical equipments or a representative of the company in the Near East. 2) The company should be working in the Near East or interested in entering the Near East. 3) The company should agree to make an interview with an executive who is the marketing decision maker. We invited more than three hundred companies, who match our criteria to take part of our study, but we received positive responses only from a few companies, and we were successful in interviewing only two of them. We used the database of the MEDICA exhibition in Düsseldorf to get the contacts of the companies’. Furthermore, these interviews were held there during the Medica exhibition. I was presented in the MEDICA exhibition to invite the companies personally but unfortunately, we got some promises to arrange interviews, which were not fulfilled. The third interview was held based on my personal contacts obtained through my last job in the Near East. We presented in appendix II, the invitation letter used for this purpose. Appendix IV includes a list of the invited companies.
4.6
Data Analysis Methodology
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Chapter 4 Methodology Yin 1994, states that every case study should start with a general analytical strategy. These general analytical strategies with regards to case studies provide the researcher with a system by which she/he can set priorities for what it is they need to analyze and why. As Herriott and Firestone (1983) state in Yin, “The evidence from multiple cases is often considered more compelling, and the overall study is therefore regarded as being more robust”. The way in which the data will be analyzed is very important for any research study. For this study, it will involve the analysis of the interviews conducted, as well as the review of any documentation that the firms handed over. These multiple sources of evidence (i.e. triangulation) are what add to a study’s validity (Yin 1994, p.45). Further Yin states, that before data actually can be analyzed, a researcher using case studies can choose from two general analytical strategies: relying on theoretical propositions and developing a case description. In this study we will rely on theoretical propositions, which is the most common strategy. The result of this is the collection of data based on previous studies that will be analyzed with the empirical findings collected from the interviews. (Yin 1994, pp. 103-104) Specific techniques can be used to analyze the data collected from the interviews. Yin (1994) presents two forms of analysis for the data collected in a case study; within-case analysis and cross-case analysis. When conducting a within-case analysis the researcher compares the data against the theory used (the frame of reference). A cross-case analysis is made by comparing the findings in each case from the within-case analysis with each other. (Yin 1994, pp. 119-122) In our study, we will conduct both a within-case analysis and a cross-case analysis. First a within case analysis within each case will be done and then a cross-case analysis where the different cases will be compared. In writing about qualitative data analysis, Miles and Huberman (1994) define data analysis, “as consisting of three concurrent flows of activity: data reduction, data display, and conclusion drawing/verification” (p. 10) upon first obtaining data during a “data collection period”, Miles and Huberman (1994) explain the three stages of qualitative data analysis as follows:
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Chapter 4 Methodology
Data reduction should not be considered to be separate from analysis, but as part of it. This reduction of the data is analysis that helps to sharpen, sort, focus, discard, and organize the data in a way that allows for “final” conclusions to be drawn and verified. They add that data can be reduced and transformed through such means as selection, summary, paraphrasing, or through being subsumed in a larger pattern. As data reduction, we will conduct a within-case analysis where we will compare the collected data in each case with the theory in order to see if the data either verifies of falsifies previous research. Data display is the second major activity, which the researcher should go through, and this means taking the reduced data and displaying it in an organized, compressed way so that conclusions can be more easily drawn. In conclusion, they state that, as with data reduction, the creation and use of displays is not separate from analysis, but is a part of it. As data display we will accomplish a cross-case analysis in which we will make matrices of various data sets and then compare one case to the others. The cross-case analysis helps us to reduce data in order to be able to draw conclusions. Conclusion drawing and verification is the final analytical activity for the qualitative researcher. It is here the researcher begins to decide what things mean. They do this by nothing regularities, patterns, explanations, possible configurations, casual flows, and propositions. However, Miles and Huberman (1994) also add that the competent researcher should hold such conclusions lightly, while maintaining both openness and a degree of skepticism. First, we reduced the collected data by conducting a within-case analysis, and then we displayed the data, which is done in a cross-case analysis. This will lead us to easily state conclusions.
4.7
Validity and Reliability
A case study basically involves an inference every time an event cannot be directly
72
Chapter 4 Methodology observed. External validity deals with the problem of knowing whether a study’s findings are generalisable beyond the immediate case study. The external validity problem has been a major barrier in doing case studies. Critics typically state that single cases offer a poor basis for generalizing. Such critics are contrasting the situation to survey research, in which a “sample” readily generalizes to a larger universe. According to Yin (1994), a good guideline for doing case studies is to conduct the research so that an auditor could repeat the procedures and arrive at the same results. The goal of reliability is to minimize the errors and biases in a study. It means that if a later investigator followed exactly the same procedures as described by an earlier investigator and conducted the same case study all over again, the later investigator should arrive at the same findings and conclusions. (Yin 1994, pp.95-98) To minimize the errors in this study the interview guide was carefully read through and tested on some students before it was sent to the respondents, in order to let the respondents prepare themselves for the interviews. Resulting-questions were asked during the interview to be sure that the respondents surely had understood the questions. The interviews were conducted by one researcher in order to make the interviews as similar as possible. Further, the interviews were recorded on tape and were listened through carefully by the researcher before the compiling of the interviews was conducted. The random errors were minimized since the same interview guide was used in all the interviews. In order to improve the external validity we decided to conduct three case studies (multiple case studies). During the data collection multiple sources of evidence in the form of documentation and interviews, were used which also adds validity to this study.
4.8
Methodology Visualization
The next figure presents the summarization of this chapter, which will give the reader a better understanding of this chapter.
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Chapter 4 Methodology
Figure 4:4 Visualization of the Methodology
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Chapter 5 Data Presentation
5
Data Presentation
In the previous chapter, the methodology used when performing the research was presented and in this chapter, the empirical data collected from our case studies will be presented. To begin with, the first section introduces the company, and thereafter the data from the interview will be presented.
5.1 Case One: Joimax (Joined Minimal Access) GmbH, Surgical Solutions
The interview was conducted with Mr. Wolfgang Ries, Managing director of Joimax .Mr. Wolfgang is the finder of the company, and he is holding many responsibilities. He is working in the medical field since 1987, he started with endoscope systems, and then he worked nine years for Baxter Group in the business development department. Mr. Wolfgang was a consultant during the period 1999 to 2001 when he established joimax. The data is complemented with data available in the web page of Joimax: (www.joimax.com , 08/12/2004) 5.1.1
Company Presentation
Joimax, „Surgical Solutions“, is a young innovative medical devices organization within the medical technology environment which develops, manufactures and markets „joined minimal access technologies“. The Company was founded in November 2001 in Karlsruhe / Germany. At present Joimax concentrates its activities mainly on the following business areas: •
Image and video data archiving systems e.g. “Vitegra™”, with touch monitor, voice- and camera head-key control, especially for all endoscopic applications
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Chapter 5 Data Presentation •
Endoscopic spinal access technologies, e.g. “Thessys™”, which ensures via the transforaminal postero-lateral access a precise and safe removal of the sequester of a herniated disc
•
In development: Resorbable Clips for a variety of new applications (e.g. hernia, trauma)
Joimax
is
a
perform
joined
leader
in
minimal
integrated access
surgical
procedures
on
solutions the
enabling
base
of
new
users
to
platform
technologies for superior outcome. •
Joimax is focusing all efforts on integrated endoscopic imaging systems, atraumatic surgical cutting technologies and next generation suturing implants, methods and devices.
•
joimax as a world driven marketing organization is playing a leading role for the design and development of new minimal access procedures, leading to the so called „Soft Surgery“ with highly improved patient outcome.
•
Joimax is exploring new technical opportunities to perform Solo-Surgery, which´ll empower the surgical operator to maneuver more independently and efficiently, always leading to superior cost benefit/outcome.
The company is certified due to EN ISO 9001:2000, EN ISO 13485 as well as to the European Council Directive 93/42/EWG. The company has 10 employees here in Germany plus three consultants in marketing and medical technology. The company has two development groups, one for electronic software, and the other for medical instrumentation. These groups are out sourced and are not employed but almost working exclusively for the company. Internationally the company has two consultants in Holland for marketing and clinical applications. Furthermore, a consultant is working for the company in the U.K.
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Chapter 5 Data Presentation 5.1.2
Target Market Selection, Sequence and Timing of Entry
According to Mr. Wolfgang, around 8% of the company’s total sales are coming from the Near East. The company started working in the Near East in Israel and almost in the same time in turkey, which is considered in some definitions as a part of the Near East .Recently the company started in Lebanon. The company is now negotiating with expected distributors in Emirates - Dubai, Egypt and Qatar but nothing is established in the Magreb area (Morocco, Algeria, Tunisia and Libya). Furthermore, Mr. Wolfgang mentioned that the internationalization was not a strategic decision. He adds, it was due to participating in the MEDICA exhibition in Düsseldorf mainly, we are taking part of the exhibition since the first year of the company’s´ establishment and there people from different countries were showing interest in the company’s products .The company is participates in other medical exhibitions too. One more gate is through spin medical meetings where the company is active and is getting to know the doctors as well as the suppliers. About the selection of his distributors, Mr. Wolfgang mentioned that some times it is based on the doctors’ recommendation. In these cases, a doctor gets in touch with the technology the company has. He contacts the main office in Germany and the company asks him to propose a preferred and reliable medical distributor through his network of personal relationships. According to Mr. Wolfgang after these contacts comes the analytical part of the marketing process were the company has to check the following market characteristics: •
Is it easy to enter
•
Is there any barriers like certification, registration …etc
•
Market Size
•
How much interest in the product exist in this market
•
Is the distribution partner financially solid?
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Chapter 5 Data Presentation Having a look at motives to enter the Near East Mr. Wolfgang confirmed again that it was not a strategic decision based on a market study and that his strategic decision will be to go after the American market, which is more interesting for his company. Mr. Wolfgang mentioned that his company finds Egypt, Saudi Arabia and Iran the most attractive markets in the area in order to expand .Iraq can be considered as soon as the political situation stables there. Mr. Wolfgang told us that one more problem in internationalization in the German medical industry is the absence of international management culture and consultants in the small and medium size companies in Germany. Regarding clustering the Near East Mr. Wolfgang proposed the following: 1. Magreb countries, due to the Arabic-French culture in these countries and this part is to be operated by the company’s French distributor through an office in Marseille for example. 2. Gulf area countries and Iran in a cluster that can be operated through Dubai. Dubai is the trade hub for this area and has Dubai Healthcare city. (http://www.dhcc.ae) 3. The rest is to be entered opportunely based on market chances and relations. 4. Israel to be treated alone and not mixed with the Arab countries due to the conflicts in the area. Another option that was mentioned in the interview is to hire a local with a good experience in the culture and business and who is a native speaker to over come the idea of clustering the area. Regarding the timing of launching the product Mr. Wolfgang mentioned that since the Near East is not of great priority for his company he prefers to be a late comer even
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Chapter 5 Data Presentation though he prefers to get the first mover advantage in countries inside Europe, U.S. and the far east. 5.1.3 Entry Mode Strategy, the Factors Influencing it and the Near East Cultural Effect in Marketing Concerning the entry mode, Mr. Wolfgang said that exporting (direct/indirect) is the preferred entry mode for his company to the Near East. The reason for this is the instability of the Political and economical systems which make it risky to invest there and because of the availability of safer chances in countries like east Europe and the Far East. Furthermore, Mr. Wolfgang mentioned that there are many barriers in entering the Near East. For example, the CE mark and the ISO are not enough to let the product enter the market. Another issue is the non homogeneity of the trading system for these countries which leads to problems like e.g. the product has to be registered separately in each market before it can be launched there which is time and money consuming. Private sector in the Near East is the main clients of Joimax as per Mr. Wolfgang. About the cultural issues, Mr. Wolfgang mentioned that he is not having any problems in the verbal language since English is the medical and business language in the area. Furthermore, Mr. Wolfgang was in the Near East for business and in hospitals many times. He has a deep vision and can feel the sensitivities in other cultures through his international experience with Baxter. This also applies to religion, Mr. Wolfgang already knows it is sensitivities and has respect for it and he can understand if someone will interrupt the meeting to pray for example. Regarding the Gender issue Mr. Wolfgang thinks that women should take more places in business because they have different talent ,emotional intelligent and view of the things in business and can see things that men can’t see some times which in the end is for the benefit of the business.
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Chapter 5 Data Presentation 5.1.4
Marketing Medical Equipments
Regarding competition Mr. Wolfgang mentioned that the competitors are global companies and most of them already exist since long time. The only local company working in this field is an Israeli company and they are only developing some pieces but they do not have a full production line. According to Mr. Wolfgang, all the company’s products are sold in the Near East and nothing or any technology is limited from there. Mr. Wolfgang mentioned that from the marketing point of view the Near East differ from other world segments with the barrier of obtaining a separate registration procedure for each country. Being part of the telecommunication industry before joining the medical equipments industry Mr. Wolfgang finds that, marketing medical equipments differs because we are not addressing the end user (the patient) but to the expert, the doctor. It is a business-tobusiness marketing and not a business to consumers marketing. Another issue is that advertising is not of great importance, instead a company should participate in exhibitions and medical meetings and build up it is reputation.
5.2 Case Two: Andreas Fahl Medizintechnik-Vertrieb GmbH (Fahl Medical Technology)
The interview was conducted with Mr. Jan-Eric Bialek, General Sales and Marketing Manager of Fahl. Mr. Jan is working for the company since ten years. The data is complemented with data available in the web page of Joimax: (www.fahl.de , 09/12/2004), Data was translated from German to English.
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Chapter 5 Data Presentation 5.2.1
Company Presentation
The enterprise Andreas pale medical technology was created in the year 1992 by the large and foreign trade buyer Andreas pale. The subjects of the enterprise Andreas pale medical technology was first the large and retail trade with medical-technical instruments, medicine products and accessories, in particular the selling of aids for Laryngeal and Tracheal in the entire federal territory. Here the enterprise expanded relatively fast. The field of activity of the enterprise expanded since the ranges in and export as well as the production of medicine products. In the year 1995, the Andreas' s created pale medical technology GmbH and up to then the single commercially led enterprise was brought into the GmbH. The company’s main products are: •
Suction units and equipments
•
Inhalation and air moistening
•
Tracheal of suction apparatuses
•
Accessories for suction apparatuses
•
Inhalation/air humidification
•
Tracheostoma protection
•
Tracheal cannula
•
cannula accessories
•
cannula cleaning and care
•
Electronic speech assistance
•
Shunt Ventilate
•
Aid for the emergency
•
Aid for children
•
Water therapy
The company has 70 employees, the head office is in Köln–Germany, and there is a branch in Austria. The rest of the markets are covered through distribution partners.
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Chapter 5 Data Presentation 5.2.2
Target Market Selection, Sequence and Timing of Entry
According to Mr. Jan, around 1% of the company’s total sales is coming from the Near East. The company started working in the Near East three years ago. Mr. Jan thinks that the biggest markets in the area are Emirates (Dubai), Iran and Egypt Furthermore, Mr. Jan mentioned that the internationalization was a management decision taken by him due to the high competition in the German market. Internationalization was his goal since he entered the company 10 years ago continues Mr. Jan. Entering the Near East was through connections obtained when participating in the MEDICA exhibition in Düsseldorf mainly. One more gate was the Arab Health care Fair in Dubai, which the company attended, last year for the first time and is planning to be part of in the coming years. About the time of entry Mr. Jan mentioned that his first order from the Near East was three years ago. Even though entering the Near East was not a strategic decision Mr. Jan finds the following as motives to go for it: •
The close geographical distance
•
The financial power
•
More potential and growing market
Until now as per Mr. Jan, no market study, or estimation was done, and the decision of going to the Near East was his personal decision. Furthermore, Mr. Jan mentioned that he is the manager for the national and international market. Since the company is expanding in both it is of great difficulty for him to concentrate in the Near East market. Mr. Jan is using the personal contacts and opportunities coming to the company to enter the Near East market .
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Chapter 5 Data Presentation Having a look at the sequence of entering the different countries in the Near East, this was as following: 1. Kuwait 2. Oman 3. Emirates-Dubai Mr. Jan thinks that it is early for his company to start clustering the area, and the company is not obtaining this idea for the time being. According to Mr. Jan he believes that Emirates-Dubai and then Egypt-Cairo can be the regional hubs for the area, but in the end it is depending on the personal relationships and if the right partner will appear somewhere else in the area. Concerning the timing of launching the product Mr. Jan mentioned that he prefers to be a late comer because of the high quality of his product, which is making the deference in the market, and not the time of launching argues Mr. Jan. 5.2.3
Entry Mode Strategy, Factors Influencing it and the Near East Cultural Effect in Marketing
Regarding the entry mode, Mr. Jan said that exporting (direct/indirect) is the preferred entry mode for his company to the Near East. The reason for this is that the company is still new adds Mr. Jan. But since the company is exporting to new markets this is increasing the sales yearly with higher percentage compared to the local market in Germany where the company is fighting for it is share adds Mr. Jan. About the factors, influencing the entry strategy decision said Mr. Jan, the main things are to check if there is a potential for his product in the market and finding a good partner who is interested and powerful. Once this partner appears in any country the company will give him the support and enter that market. Furthermore, Mr. Jan mentioned that he did not face any problems or barriers until now in entering the Near East. 83
Chapter 5 Data Presentation Private sector in the Near East is the main clients of fahl as per Mr. Jan Mr. Jan personal relationship over the Near East came through exhibitions, but he would like when he will have time to go to the distributors to visit them ,check the size of the business and the way they are doing business in order to support them. Concerning the cultural issues, Mr. Jan mentioned that he is not having any problems in the verbal language since English is the medical and business language in the area. Furthermore, Mr. Jan was in the Near East for business before and has an experience with international business and different cultures .This applies to the gender issue where Mr. Jan has contacts with female doctors e.g. in Kuwait and is facing no cultural problems with them too. 5.2.4
Marketing Medical Equipments
Regarding competition Mr. Jan mentioned that the competitors are global companies and there is no local companies working in this field in the Near East. According to Mr. Jan, all the company’s products are sold in the Near East and nothing or any technology is limited from there. Mr. Jan mentions that from the marketing point of view the Near East differ from other world segments because it needs more patient to work there. People are not punctual in their work and always need some time e.g. if some one said he will call, he will not call you direct instead he will need some time but this does not mean that he is not interested. Mr. Jan worked for Siemens Nuclear Power division before being part of the medical equipments industry. From his point of view marketing medical equipments differs because the product is there from different companies and you have to take some one else’s share and put them out of the market to grow up. This can be done through having a higher technology than the others have and close personal contacts and not through advertisement.
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Chapter 5 Data Presentation Mr. Jan adds that advertisement can be used in a limited zone as memory refreshment. It makes people know and remember that your there but what is helping more is teaching them what is your product, making demos and personal contacts.
5.3
Case Three: AMCO Arabian Medical Marketing Co. Ltd. HealthCare Services
The interview was conducted with Mr. Ramiz M. Atallah, a product manager in AMCO. Mr. Atallah is working for the company since two years and he is holding Sales/Marketing responsibilities. His main products are from DornierMedTech (Germany) and HMT (Switzerland) .He is working in the medical field since 2000. Before joining the medical field Mr. Atallah worked as a sales area manager with an Intel distributor based in Saudi Arabia. The data is complemented with data available in the web page of AMCO. (www.amcomideast.com , 26/12/2004) 5.3.1
Company Presentation
Arabian Medical Marketing Co. Ltd. (AMCO) - HealthCare Services is the adopted name of the company previously operating under the name Saudi Trading and Services International Co. Ltd. (STS) - Healthcare Services. Due to the exponential growth of the Nazer Group of companies in the past five years, the Nazer Group made a strategic decision to appoint the HealthCare Services Division as an independent subsidiary with its own name - AMCO-HCS. AMCO have two business Divisions, namely Projects and Medical Products. Projects Division acts as a technical sub-contractor to prime contractors providing turnkey systems and solutions. In addition, AMCO enjoys a wide network of commercial agencies and distributorships in their areas of interest to support the turnkey system' s activities.
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Chapter 5 Data Presentation The Medical Products Division is working since 1980 and is dedicated to marketing, selling, servicing and maintaining capital medical equipment and specialty medical products and technology to hospitals. The following manufacturers, represented by AMCO, are leading international companies with long histories and successful records of accomplishment in their respective disciplines: •
Hill-Rom (USA)
•
Hard Manufacturing Company (USA)
•
Executone (USA)
•
Gambro (Sweden)
•
Steris-AMSCO (USA)
•
Metro International (USA)
•
Diagnostica Stago (France)
•
Macopharma (France)
•
Isotrol/Bender (USA)
•
DornierMedTech (Germany)
•
HMT (Swiss)
AMCO HealthCare Services is unique in the Middle East in its capabilities and diversity in all sectors of healthcare. The stated objective is to be the reference standard for patient care expertise and medical technology in the region and is well on the road to achieving this. To accomplish this, the company have fully adopted the standards of the International Standards Organization, (ISO-9002) and successfully passed the agency assessment on December 3, 1995. AMCO continues to be an ISO 9002 quality accredited company. It gives high importance to providing the customer good quality products and services at a good price. The company has 60 employees in Saudi Arabia with a head office located in Riyadh.
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Chapter 5 Data Presentation 5.3.2
Target Market Selection, Sequence and Timing of Entry
According to Mr. Atallah the companies represented by AMCO are getting around 3% to 9% of their company’s total sales from the Near East, this depends most of the time in the selection of the right distributor. The company started working in the Near East in Saudi Arabia in 1980. The biggest markets in the area add Mr. Atallah is Saudi Arabia, Iran and Egypt in sequence. Furthermore, Mr. Atallah mentioned that from his point of view internationalization is not a strategic decision made by the management for most of the German medical companies. These companies are welling to export to the Near East normally, but they are waiting for the Near East companies to come and meet them through the exhibition (Düsseldorf, Arab HealthCare recently) or direct contacts. Mr. Atallah said, as a distributor we look at the market demands through the feedback from the sales representatives or the doctors’ requests and then, we try to find the suitable supplier through the exhibition or direct contacts. After that, the negotiations start where we have to convince the supplier. We have to show them the market size and that their product is interesting in the Near East. A more important issue is to prove that we are a well-established and reliable firm. Finally, this leads to a contract adds Mr. Atallah. Having a look at motives to enter the Near East Mr. Atallah believes the economical growth and the high demand are of great importance. This high demand is based on the fact of almost the absence of local medical equipments manufacturers in the Near East and the high population growth. One more thing adds Mr. Atallah is the reformation of the medical services. Many of the countries in the area are trying to move it to the private sector. This means an expansion of the infrastructure, a change in the decision makers and more business opportunities Regarding expanding, Mr. Atallah thinks that the expansion will depend in where did you start in the Near East but he considers that any company working in the Near East should expand to Egypt, Saudi Arabia, Emirates and Iran if it is not already represented there.
87
Chapter 5 Data Presentation Talking about the sequence of entering the Near East countries, Mr. Atallah believes that for most of the companies it is not a strategic decision and that they are entering the markets opportunely. From his point of view a new company should start from EmiratesDubai and then expand or from Egypt-Cairo as a second option. As per Mr. Atallah, the company estimates the market through the economic/social statistics and the direct feedback from it is sales force.
Talking about clustering the Near East Mr. Atallah suggests the following: 1-
Gulf area countries ,Iraq and Iran in a cluster which can be operated through Dubai-Emirates
2-
Magreb countries and Israel to be operated from the head office in Germany. The French/Arabic culture and the geographical closeness stand behind this in the Magreb countries while the conflicts with Arabs are the reason in the case of Israel.
3-
Less developed Arab countries (Egypt, Jordan, Lebanon, and Syria) in a cluster, which can be operated through Cairo-Egypt, Mr. Atallah thinks that even Libya can be included in this cluster.
Hiring locals was proposed by Mr. Atallah in an area deals are finished most of the time based on personal relations. Focusing in the timing of launching the product, Mr. Atallah mentioned that being a first mover could be an advantage for a small cluster of customers, the leading private hospitals trying to give its patients the latest technology. For the rest of the customers in the private and the governmental sector the purchasing decision is a combination of the technology, quality and the price where being a first mover or a later comer is equal.
88
Chapter 5 Data Presentation 5.3.3
Entry Mode Strategy, the Factors Influencing it and the Near East Cultural Effect in Marketing
Regarding the entry mode, Mr. Atallah said that exporting (direct/indirect) is the preferred entry mode for the German medical companies to the Near East. The reason for this is the low cost, and the bureaucracy. Another reason is the small and fragmented markets in the Near East, which needs a lot of effort. The main disadvantage says Mr. Atallah is less control from the mother company, which can affect the product reputation if the wrong distributor is assigned. Furthermore, Mr. Atallah mentioned that the barriers in entering the Near East are normally the political instability and the legal problems related to registration (the FDA approval is required and the CE mark is not enough). Another barrier comes from the different cultural norms and values. For German companies adds Mr. Atallah one of new rising problems is the exchange rate of the euro, which is giving a price advantage to non-European competitors . Public as well as Private sectors are clients of AMCO as the company’s policy is to expand in both sectors. The network of relationships is one of the most important things in the Near East adds Mr. Atallah since it creates the knowledge and the interest in the product for the new customers. Regarding the cultural issues, Mr. Atallah considers it as an advantage for him since it is his culture. As a fluent English speaker, traveling frequently to the western world, Mr. Atallah is having good relations with his suppliers. Furthermore, Mr. Atallah says that the revolution in communication and transportation made this world a small village and made it easier to feel the other cultures sensitivities and deal with it. 5.3.4 Marketing Medical Equipments Regarding competition Mr. Atallah mentioned that the competitors are global companies and there is no local companies working in this field in the Near East.
89
Chapter 5 Data Presentation According to Mr. Atallah, all the companies’ products are sold in the Near East. Mr. Atallah mentions that from the marketing point of view the Near East differ from other world markets with the importance of the relationships with customers and decision makers. Another issue is the marketing data, which you have to obtain your self through the feedback from your customers, key persons in the hospitals and ministry of health in the absence of other data sources. Mr. Atallah worked in the IT industry before being part of the medical equipments industry and from his point of view, marketing medical equipments differs since you have to convince an expert, the doctors, and this can be done only through training, demos, seminars and exhibitions that are time and money consuming.
90
Chapter 6 Data Analysis
6
Data Analysis
In this chapter, an analysis of the collected data will be presented. We are conducting a within case analysis of each case study where the gathered data is compared to previous research and existing theories discussed in the conceptual framework. Finally, a cross case analysis is done to compare the cases.
Part I: Within-Case Analysis In the within-Case analysis the gathered data is compared to previous research and existing theories discussed in the conceptual framework.
6.1
Within Case Analysis, Joimax
The data in this analysis is based on the information collected during the interview with Mr. Wolfgang Ries, Managing director of Joimax, which is presented in section 5.1 6.1.1
Target Market Selection
According to theory (Albaum and Strandskov 1994, p.94) there is the reactive market selection approach characterizes a situation where the exporter acts passively in choosing markets by filling unsolicited orders or awaits initiatives on the part of foreign buyers, foreign representatives (importers, agents and so on). The proactive market selection approach is, in contrast to the reactive approach! Marketing oriented. The exporter is active in initiating the selection of foreign markets and the further customer segmentation of these markets. According to Mr. Wolfgang Joimax used the reactive approach since the internationalization to the Near East was not a strategic decision. It was through relationships obtained when participating in the MEDICA exhibition in Düsseldorf mainly.
91
Chapter 6 Data Analysis Furthermore, the contractible method where the optimal market selection starts with the total number, or a large number, of national markets, which are eventually broken down into regional groupings based on political, economic, language, or other criteria was not used also. In Joimax the market estimation is not used as a criteria for the market selection, It is used as a decision making tool for a certain market which is already approached reactively. For market estimation, the company is using direct and indirect market estimation methods. The Accept/Reject Decisions of the theory is used to decide about entry of a certain market and not to select the target market. The following two tables show the target market data, the target market selection theories compared to empirical data. The Target Market Data Total Sales Part from the Near East The Biggest Existing Markets in the Near East Attractive Markets in the Near East(to expand ) Who Influenced starting the Internationalization operation Market Estimation Methods
8% Israel Turkey Lebanon Egypt Saudi Arabia Iran Management decision but not as a strategic decision Network Relationships through Medica Exhibition-Düsseldorf Both Direct/Indirect Israel Turkey Lebanon Private
Sequence of countries Entered in the Near East The Main Customers are the Public/Private sector Table 6.1 Overview of the Target Market Data-Joimax, Constructed by the Author
92
Chapter 6 Data Analysis Target Market Selection Theories Influencing Theory/Procedure Consist with theory Reactive/Proactive market selection Yes, Reactive Contractible Method Not used Accept/Reject Decisions No, Used as Accept rejection for a market and not for selecting the market Hiring locals to help in the market selection Addition to Theory strategy The absence of international management Addition to Theory culture and consultants, in the small and medium size medical companies in Germany Table 6.2 Overview of the influencing theories for the Target Market Selection-Joimax, Constructed by the authuer Having a look at motives to enter the Near East Mr. Wolfgang confirmed again that it was not a strategic decision based on a market study, which leads us to say that there were no certain motives.
6.1.2
Timing of Entry
Bond and Lean [1977], Whitten [1979], Robinson and Fornell [1985], Urban et al. [1986], Robinson [1988],Lambkin[1988] and other authors based on their research concluded on advantages of market pioneering. However, there are a number of authors who, on the contrary, support later entry to a new market like Cooper [1979], Glazer [1985], Schnaars [1986], Sullivan [1991] and Golder and Tellis [1992]. Regarding the timing of launching the product Mr. Wolfgang mentioned that since the Near East is not of great priority for his company he prefers to be a late comer even though he prefers to get the first mover advantage in countries inside Europe, U.S. and the far east. See Table 3.2.
93
Chapter 6 Data Analysis Timing of Entry
Influencing Theory/Factor Consist with theory First Mover (Pioneer) No Late Entry Yes (Market is not of great Priority) As firm size increases, entry is earlier Yes The more multinational a firm is, the earlier Yes the entry The larger the host market size, the earlier Yes the entry. The lower the cost of labor, the earlier the No entry. The closer the cultural distance between Does not apply to our case home and host country, the earlier the entry Table 6.3 Overview of the Influencing Theories for the Timing of Entry -Joimax, Constructed by the Author 6.1.3
Entry Mode Strategy
Regarding the entry mode strategy the following tables show a comparison between the theories and the empirical data obtained from this interview and the entry mode characteristics. Entry Mode Exporting Entry Mode
Type Fits with Theory Direct Yes Indirect Yes Contractual Entry Modes Licensing Not Used Franchising Not Used New establishments Not Used Investment Entry Modes (Greenfield sites) Acquisitions Not Used Joint ventures Not Used Mergers Not Used Table 6.4 Overview of the of the Entry Mode Strategy in the Near East-Joimax, Constructed by the Author Entry Mode Characteristics Characteristics Notice Main advantages with the chosen mode of entry Low risk (instability of the Political and economical systems) Procedure to take care of the advantages Main disadvantages with chosen mode of entry Procedure to compensate for the disadvantages Table 6.5 Overview of the of the Entry Mode Characteristics in the Near East-Joimax, Constructed by the Author 94
Chapter 6 Data Analysis 6.1.4 Factors Influencing Entry Mode Decision Mr. Wolfgang said that exporting (direct/indirect) is the preferred entry mode for his company to the Near East. The reason for this is the instability of the political and economical systems, which make it risky to invest there, and because of the availability of safer chances in countries like East Europe and the Far East Regarding the factors influencing the entry mode strategy, we can see the following table which summaries them: The Factors Influencing the Entry Mode Decision Factor Influence Local Governmental Attitudes Yes Bureaucracy Yes Local Infrastructure No Desired Degree of Control No Level of Technology Needed No Capital Intensity of the Industry No Commitment to the Market No Costs Yes Legal Frame work Yes Table 6.6 Overview of the Factors Influencing the Entry Mode Decision in the Near EastJoimax, Constructed by the Author The problems experienced by the company in the Near East are summarized in the following table: Problems Experienced by the Company in the Neat East. Problem Exist Economical, Political and Legal Problems Yes Corruption --Bureaucracy Yes Bottlenecks in Production and Distribution --Non-westernized Business Practices --Infrastructure --Communications --Environmental Issues --Living Conditions --Cultural Norms and Values --Addition to Theory : Non homogeneity of Yes, the product has to be registered the trading system for the Near East countries separately in each market. Table 6.7 Overview of the Problems Experienced with the Company in the Neat East Joimax, Constructed by the Author
95
Chapter 6 Data Analysis 6.1.5
Clustering the Near East
First, As per Erdener Kaynak and Metin N. Giirol, Markets of the region can be segmented in a two-step process. First, the macro segment composed of individual or groups of countries can be identified, based on national market characteristics. Then, within each macro segment, the market can be further subdivided, based on customer characterization. The second approach is by Schwartz, which may prove to be useful is organization by start market development. A stages-of-market development organization is by dividing the countries of the region into groups, which reflect similar conditions Regarding clustering the Near East Mr. Wolfgang proposed the following: 5. Magreb countries, due to the Arabic-French culture in these countries and this part is to be operated by the company’s French distributor through an office in Marseille for example. 6. Gulf area countries and Iran in a cluster that can be operated through Dubai. Dubai is the trade hub for this area and has Dubai Healthcare city. (http://www.dhcc.ae) 7. The rest is to be entered opportunely based on market chances and relations. 8. Israel to be treated alone and not mixed with the Arab countries due to the conflicts in the area. Another option mentioned in the interview is to hire a local with a good experience in the culture and business and who is a native speaker to support/ overcome the idea of clustering the area. Theories Influencing Clustering of the Near East Influencing Theory Consist with theory Macro segment/customer characterization Not Used Market selection A stages-of-market development Not Used Table 6.8 Theories Influencing Clustering the Near East: Joimax, Constructed by the Author 96
Chapter 6 Data Analysis Proposed Clustering of the Near East Cluster Regional Hub(Cluster Head Office) Magreb countries(Arabic-French culture) France- e.g. Marseille Gulf area countries and Iran Dubai The Rest (Egypt, Jordan, Syria…) Head office-Germany or Dubai Israel Head Office-Germany Table 6.9 Proposed clustering of the Near East: Joimax, Constructed by the Author 6.1.6 The Near East Cultural Effect in Marketing The main three factors we discussed through our study are religion, language and gender issue. About the cultural issues, Mr. Wolfgang mentioned that he is not having any problems in the verbal language since English is the medical and business language and the area. Furthermore, Mr. Wolfgang was in the Near East for business and in hospitals many times and he has a deep vision and can feel the sensitivities in other cultures through his international experience with Baxter. This also applies to religion where Mr. Wolfgang already knows it is sensitivities and has respect for it and he can understand if some one will interrupt the meeting to pray for example. Regarding the gender issue Mr. Wolfgang thinks that women should take more places in business because they have different talent ,emotional intelligent and view of the things in business and can see things that men can’t see some times, which in the end is for the benefit of the business. The following table shows these factors and their effect. The Near East Cultural Effect in Marketing Factor Positive/Negative Religion + Language + Gender issue Table 6.10 The Near East Cultural Effect in Marketing: Joimax, Constructed by the Author 6.1.7
Marketing Medical Equipments
The interviewed company has no workable marketing plane for the Near East to test the existing theories. The following table shows some characteristics and specialties of the Near East market and the medical equipments market from other high technology sectors. 97
Chapter 6 Data Analysis Characteristics of Marketing Medical Equipments Factor Discussion Are the main competitors on the International Global /Near East Market local or global companies? Are all the company’s products sold in the Yes Near East Special Characteristics of Marketing Medical Obtaining a separate registration Equipments in the Near East procedure for each country. 1) Not talking to the end user (the patient) but to the expert, which is the How do marketing medical equipments differ doctor. It is a B2B marketing and not a from marketing other high technology sectors? business to consumers marketing. 2) Advertisement is not of great importance, instead a company should participate in exhibitions and medical meetings and build up it is reputation Table 6.11 Overview of Marketing Medical Equipments Characteristics: Joimax, Constructed by the Author
6.2
Within Case Analysis, Fahl
The data in this analysis is based on the information collected during the interview with Mr. Jan-Eric Bialek, General Sales and Marketing Manager of Fahl, which is presented in section 5.2 6.2.1
Target Market Selection
According to theory (Albaum and Strandskov 1994, p.94) there is the reactive market selection approach characterizes a situation where the exporter acts passively in choosing markets by filling unsolicited orders or awaits initiatives on the part of foreign buyers, foreign representatives (importers, agents and so on). The proactive market selection approach is, in contrast to the reactive approach! Marketing oriented. The exporter is active in initiating the selection of foreign markets and the further customer segmentation of these markets. According to Mr. Jan Joimax used the reactive approach even though that the internationalization was a management decision taken by him but entering the Near East was also through connections obtained through participating in the MEDICA exhibition in Düsseldorf mainly and the Arab Health care fair in Dubai 98
Chapter 6 Data Analysis Furthermore, the contractible method where the optimal market selection starts with the total number, or a large number, of national markets, which are eventually broken down into regional groupings on the basis of political, economic, language, or other criteria was not used also. In Fahl no market estimation of the Near East market is done, the main things are to check if there is a potential for the product in the market and finding a good partner (Agent) who is interested and powerful. The Accept/Reject Decisions of the theory is not used. The following two tables show the target market data, the target market selection related theories. Finally, a table showing the motives for entering the Near East is presented. Target Market Data Total Sales Part From the Near East Biggest Existing Markets in the Near East Attractive Markets in the Near East(to expand ) Who Influenced starting the Internationalization operation Market Estimation Method The Sequence of Countries Entered in the Near East
1% Kuwait Oman Emirates-Dubai Emirates Egypt Iran Management Decision
Not used (Checking Product Potential Kuwait Oman Emirates-Dubai Private
The Main Customers are the Public/Private sector Table 6.12 Overview of the Target Market Data-Fahl, Constructed by the Author
Target Market Selection Influencing Theory/Procedure Consist with theory Reactive/Proactive market selection Yes, Reactive Contractible Method Not used Accept/Reject Decisions Not Used ( Powerful Agent is enough) Table 6.13 Overview of the Influencing Theories for the Target Market Selection-Fahl, Constructed by the Author
99
Chapter 6 Data Analysis Motives for Entering the Near East Countries Factor Effect Economic Growth (present and expected) Positive Demand Positive Closeness Positive Size of the market No Effect Stable Economy No Effect Communication Improvements Positive Improving Legislation No Effect General Attitude No Effect Flexible Workforce No Effect Positive Addition to Theory (Saturated Existing Markets) Table 6.14 Overview of the Motives for Entering the Near East Countries -Fahl, Constructed by the Author 6.2.2
Timing of Entry
Bond and Lean [1977], Whitten [1979], Robinson and Fornell [1985], Urban et al. [1986], Robinson [1988],Lambkin[1988] and other authors based on their research concluded on advantages of market pioneering. However, there are a number of authors who, on the contrary, support later entry to a new market like Cooper [1979], Glazer [1985], Schnaars [1986], Sullivan [1991] and Golder and Tellis [1992]. Concerning the timing of launching the product Mr. Jan mentioned that he prefers to be a late comer because of the high quality of his product, which is making the deference in the market, and not the time of launching argues Mr. Jan. Timing of Entry
Influencing Theory/Procedure Consist with theory First Mover (Pioneer) No Late Entry Yes (high quality product) As firm size increases, entry is earlier Yes The more multinational a firm is, the earlier Yes the entry The larger the host market size, the earlier Yes the entry. The lower the cost of labor, the earlier the No entry. The closer the cultural distance between Does not apply to our case home and host country, the earlier the entry Table 6.15 Overview of the Influencing Theories for the Timing of Entry -Fahl, Constructed by the Author 100
Chapter 6 Data Analysis 6.2.3 Entry Mode Strategy Regarding the entry mode strategy the following table shows a comparison between the theories and the empirical data obtained from the interviews. Entry Mode Exporting Entry Mode
Type Fits with Theory Direct Yes Indirect Yes Contractual Entry Modes Licensing Not Used Franchising Not Used New establishments Not Used Investment Entry Modes (Greenfield sites) Acquisitions Not Used Joint ventures Not Used Mergers Not Used Table 6.16 Overview of the of the Entry Mode Strategy in the Near East-Fahl, Constructed by the Author Entry Mode Characteristics Characteristics Notice Main advantages with the chosen mode of entry Increasing sales without adding additional costs Procedure to take care of the advantages Main disadvantages with chosen mode of after some time of exporting to a entry certain market normally the sales reach a limit that forces the company to move to another entry mode Procedure to compensate for the disadvantages Table 6.17 Overview of the of the Entry Mode Characteristics in the Near East-Fahl, Constructed by the Author 6.2.4 Factors Influencing the Entry Mode Decision About the Factors Influencing the Entry Strategy Decision said Mr. Jan that the main things are to check if there is a potential for his product in the market and finding a good partner who is interested and powerful and once this partner appears in any country the company will give him the support and enter that market. Regarding the factors influencing the entry mode strategy, we can see the following table which summaries them:
101
Chapter 6 Data Analysis Factors Influencing the Entry Mode Decision Factor Influence Local Governmental Attitudes No Bureaucracy No Local Infrastructure No Desired Degree of Control No Level of Technology Needed No Capital Intensity of the Industry No Commitment to the Market No Costs Yes Legal Frame work No Addition to theory: Finding the right Partner Yes Table 6.18 Overview of the of the Factors Influencing the Entry Mode Decision in the Near East-Fahl, Constructed by the Author The company is experiencing no problems in the Near East. 6.2.5 Clustering the Near East First, As per Erdener Kaynak and Metin N. Giirol, Markets of the region can be segmented in a two-step process. First, the macro segment composed of individual or groups of countries can be identified, based on national market characteristics. Then, within each macro segment, the market can be further subdivided, based on customer characterization. The second approach is by Schwartz, which may prove to be useful is organization by start market development. A stages-of-market development organization is by dividing the countries of the region into groups, which reflect similar conditions Mr. Jan thinks that it is early for his company to start clustering the area, and the company is not obtaining this idea for the time being. Theories Influencing Clustering of the Near East Influencing Theory Consist with theory Macro segment/customer characterization Not Used Market selection A stages-of-market development Not Used Table 6.19 Theories Influencing Clustering the Near East: Fahl, Constructed by the Author
102
Chapter 6 Data Analysis 6.2.6
Near East Cultural Effect in Marketing
The main three factors we discussed through our study are religion, language and gender issue. Concerning the cultural issues, Mr. Jan mentioned that he is not having any problems in the verbal language since English is the medical and business language. Furthermore, Mr. Jan was in the Near East for business before and has an experience with international business and different cultures .This applies to the gender issue where Mr. Jan has contacts with female doctors e.g. in Kuwait and is facing no cultural problems with them too. The following table shows these factors and there effect. Near East Cultural effect in marketing Factor Positive/Negative Religion + Language + Gender issue + Table 6.20 Near East Cultural Effect in Marketing: Fahl, Constructed by the Author 6.2.7
Marketing Medical Equipments
The interviewed company has no workable marketing plane for the Near East to test the existing theories. The following table shows some characteristics and specialties that the Near East market and the medical equipments market from other high technology sectors. See the following table.
103
Chapter 6 Data Analysis Characteristics of Marketing Medical Equipments Factor Discussion Are the main competitors on the International Global /Near East Market local or global companies? Are all the company’s products sold in the Yes Near East Special Characteristics of Marketing Medical needs more patient to work over there Equipments in the Near East since people are not punctual How do marketing medical equipments differ 1) The product is there and from from marketing other high technology sectors? different companies and you have to take some one else share and but them out of the market to grow. 2) Advertisement can be used in a limited zone and as memory refreshment. what is helping more is teaching what is your product, making demos and personal contacts Table 6.21 Overview of Marketing Medical Equipments Characteristics: Fahl, Constructed by the Author
6.3
Within Case Analysis, AMCO
The data in this analysis is based on the information collected during the interview with Mr. Ramiz M. Atallah, a product Manager in AMCO, which is presented in section 5.3 6.3.1
Target Market Selection
According to theory (Albaum and Strandskov 1994, p.94) there is the reactive market selection approach characterizes a situation where the exporter acts passively in choosing markets by filling unsolicited orders or awaits initiatives on the part of foreign buyers, foreign representatives (importers, agents and so on). The proactive market selection approach is, in contrast to the reactive approach! Marketing oriented. The exporter is active in initiating the selection of foreign markets and the further customer segmentation of these markets. According to Mr. Atallah German medical companies are using the reactive approach; this is because these companies are open to export to the Near East normally but they are waiting for the Near East companies to come and meet them through the exhibition (Düsseldorf, Arab HealthCare recently) or direct contacts Furthermore, the contractible method where the optimal market selection starts with the 104
Chapter 6 Data Analysis total number, or a large number, of national markets, which are eventually broken down into regional groupings based on political, economic, language, or other criteria was not used also. The distributors initiate the negotiation process as per Mr. Atallah. Generally speaking Mr. Atallah mentioned that the distributor have to convince the supplier by showing the market size and that their product is interesting in the Near East and more important that he is a will established and reliable firm . The Accept/Reject Decisions of the theory is not used. The following two tables show the target market data, the target market selection related theories. Finally, a table of the motives for entering the Near East is presented. The Target Market Data Total Sales Part From the Near East The Biggest Existing Markets in the Near East Attractive Markets in the Near East(to expand ) Who Influenced starting the Internationalization operation Market Estimation Methods
3% to 9% Egypt Iran Saudi Arabia-Emirates(Dubai) Egypt Iran Saudi Arabia-Emirates(Dubai) Management non strategic Decision Network relationships Not used (Checking Product Potential He suggest : Emirates(Dubai) Egypt-Cairo Both
Sequence of countries Entered in the Near East The Main Customers are the Public/Private sector Table 6.22 Overview of the Target Market Data-AMCO, Constructed by the Author Target Market Selection
Influencing Theory/Procedure Reactive/Proactive market selection Contractible Method Market Estimation Method Accept/Reject Decisions
Consist with theory Yes, Reactive Not used Both Direct/Indirect No, Used as Accept rejection for a market and not for selecting the market Hire locals to help in the market selection Addition to Theory strategy Table 6.23 Overview of the influencing theories for the Target Market Selection-AMCO, Constructed by the Author
105
Chapter 6 Data Analysis Motives for Entering Near East Countries Factor Effect Economic Growth (present and expected) Positive Demand Positive Closeness No effect Size of the market No effect Stable Economy No effect Communication Improvements Positive Improving Legislation No effect General Attitude No effect Flexible Workforce No effect Addition to Theory (Reformation of the Positive medical services to depend more on the (This means an expansion of the private sector) infrastructure, a change in the decision makers and more business opportunities) Table 6.24 Overview of the Motives for Entering Near East Countries -AMCO, Constructed by the Author 6.3.2
Timing of Entry
Bond and Lean [1977], Whitten [1979], Robinson and Fornell [1985], Urban et al. [1986], Robinson [1988],Lambkin[1988] and other authors based on their research concluded on advantages of market pioneering. However, there are a number of authors who, on the contrary, support later entry to a new market like Cooper [1979], Glazer [1985], Schnaars [1986], Sullivan [1991] and Golder and Tellis [1992]. Focusing in the timing of launching the product, Mr. Atallah mentioned that being a first mover could be an advantage in a small cluster of customers, the leading private hospitals trying to give its patients the latest technology. For the rest of the customers in the private and the governmental sector the purchasing decision is a combination of the technology, quality and the price where being a first mover or a later comer is equal.
106
Chapter 6 Data Analysis
Influencing Theory/Factor First Mover (Pioneer) Late Entry
Timing of Entry
Consist with theory an advantage normally in a small cluster of customers Yes (purchasing decision is a combination of the technology, quality and the price) Yes Yes
As firm size increases, entry is earlier The more multinational a firm is, the earlier the entry The larger the host market size, the earlier Yes the entry. The lower the cost of labor, the earlier the No entry. The closer the cultural distance between Does not apply to our case home and host country, the earlier the entry Table 6.25 Overview of the Influencing Theories for the Timing of Entry -AMCO, Constructed by the Author 6.3.3
Entry Mode Strategy
Regarding the entry mode strategy, the following table shows a comparison between the theories and the empirical data obtained from the interviews. Entry Mode Exporting Entry Mode
Type Fits with Theory Direct Yes Indirect Yes Contractual Entry Modes Licensing Not Used Franchising Not Used New establishments Not Used Investment Entry Modes (Greenfield sites) Acquisitions Not Used Joint ventures Not Used Mergers Not Used Table 6.26 Overview of the of the Suggested Entry Mode Strategy in the Near EastAMCO, Constructed by the Author
107
Chapter 6 Data Analysis Entry Mode Characteristics Characteristics Notice Main advantages with the chosen mode of entry Low Cost Less effort in small fragmented markets Procedure to take care of the advantages Main disadvantages with chosen mode of Less Control entry Risking product reputation Procedure to compensate for the disadvantages More effort in selecting the distributors Table 6.27 Overview of the of the Entry Mode Characteristics in the Near East-AMCO, Constructed by the Author 6.3.4 Factors Influencing the Entry Mode Decision Regarding the entry mode, Mr. Atallah said that exporting (direct/indirect) is the preferred entry mode for German companies to the Near East. The reason for this is the low cost, and the bureaucracy in a small and fragmented market in the Near East, which needs a lot of effort. The main disadvantage says Mr. Atallah is less control from the mother company, which can affect the product reputation if the wrong distributor is assigned. Regarding the factors influencing the entry mode strategy, we can see the following table which summaries them: Factors Influencing the Entry Mode Decision Factor Influence Local Governmental Attitudes No Bureaucracy Yes Local Infrastructure No Desired Degree of Control Yes Level of Technology Needed No Capital Intensity of the Industry No Commitment to the Market No Costs Yes Legal Frame work Yes Addition to theory: Finding the right Partner Yes Table 6.28 Overview of the of the Factors Influencing the Entry Mode Decision in the Near East-AMCO, Constructed by the Author The problems experienced by the company in the Near East can be summarized in the following table:
108
Chapter 6 Data Analysis Problems Experienced with the Company in the Neat East. Problem Exist Economical, Political and Legal Problems Yes Corruption --Bureaucracy Yes Bottlenecks in Production and Distribution --Non-westernized Business Practices Yes Quality of Job Applicants --Social Legacy --Infrastructure --Communications --Environmental Issues --Living Conditions --Cultural Norms and Values Yes Addition to theory: The exchange rate of the Yes euro which is giving a price advantage for nonEuropean competitors Table 6.6.29 Overview of the Problems Experienced with the Company in the Neat East AMCO, Constructed by the Author 6.3.5
Clustering the Near East
First, As per Erdener Kaynak and Metin N. Giirol, Markets of the region can be segmented in a two-step process. First, the macro segment composed of individual or groups of countries can be identified, based on national market characteristics. Then, within each macro segment, the market can be further subdivided, based on customer characterization. The second approach is by Schwartz, which may prove to be useful is organization by start market development. A stages-of-market development organization is by dividing the countries of the region into groups, which reflect similar conditions Talking about clustering the Near East Mr. Atallah suggests the following: 1.
Gulf area countries ,Iraq and Iran in a cluster which can be operated through Dubai-Emirates
2.
Magreb countries and Israel to be operated from the head office in Germany. The French/Arabic culture and the geographical closeness stand behind this in the Magreb countries while the conflicts with Arabs are the reason in the case of Israel. 109
Chapter 6 Data Analysis 3.
Less developed Arab countries (Egypt, Jordan, Lebanon, and Syria) in a cluster, which can be operated through Cairo-Egypt, Mr. Atallah thinks that even Libya can be included in this cluster.
Hiring locals was proposed by Mr. Atallah in an area deals are finished most of the time based on personal relations. Theories Influencing Clustering of the Near East Influencing Theory Consist with theory Macro segment/customer characterization Not Used Market selection A stages-of-market development Used Partially Table 6.30 Theories Influencing Clustering the Near East: AMCO, Constructed by the Author The Proposed Clustering of the Near East Cluster Regional Hub(Cluster Head Office) Gulf area countries ,Iraq and Iran Dubai-Emirates Magreb countries and Israel Head office - Germany. Less developed Arab countries (Egypt, Jordan, Cairo-Egypt Lebanon, and Syria) Table 6.31 Proposed Clustering of the Near East: AMCO, Constructed by the Author 6.3.6
Near East Cultural Effect in Marketing
The main three factors we discussed through our study are religion, language and Gender issue. Regarding the culture issues, Mr. Atallah considers it as an advantage for him since it is his culture. As a fluent English speaker, traveling frequently to the western world, Mr. Atallah is having a good relation with his suppliers. Furthermore, Mr. Atallah says that the revolution in communication and transportation made this world a small village and made it easier to feel the other cultures sensitivities and deal with it. The following table shows these factors and there effect. Near East Cultural Effect in marketing Factor Positive/Negative Religion + Language + Gender issue + Table 6.32 Near East Cultural Effect in marketing: AMCO, Constructed by the Author 110
Chapter 6 Data Analysis 6.3.7
Marketing Medical Equipments
The interviewed company has no workable marketing plane for the Near East to test the existing theories. The following table shows some characteristics and specialties that the Near East market and the medical equipments market from other high technology sectors Characteristics of Marketing Medical Equipments Factor Discussion Are the main competitors on the International Global /Near East Market local or global companies? Are all the company’s products sold in the Yes Near East 1) Importance of the relationships with customers and decision makers. 2) Shortage of marketing data ,which Special Characteristics of Marketing Medical you have to obtain your self through the Equipments in the Near East feedback from your customers, key persons in the hospitals and ministry of health in the absence of other data sources. 1) You have to convince the doctors How do marketing medical equipments differ and this can be don e only through from marketing other high technology sectors? training, demos, seminars and exhibitions that are time and money consuming. Table 6.33 Overview of Marketing Medical Equipments Characteristics: AMCO, Constructed by the Author
6.4 Part II: Cross-Case Analysis The meaning of the cross case study is that gathered data from the different cases will be compared .This analysis will make it possible to drew conclusions about similarities and dissimilarities between the different cases.
111
Chapter 6 Data Analysis 6.4.1
Target Market Selection
Investigated Item Reactive/Proactive Market Selection Contractible method for Market Selection Market Estimation
Accept/Reject Decisions
Target Market Selection Theories Joimax Fahl
AMCO
Reactive approach
Reactive approach
Reactive approach
Not Used
Not Used
Not Used
Not used to select the market instead is used to decide about a certain market Used as Accept/ Reject for a market and not for selecting the market Hiring locals to help in the market selection strategy
No Market Estimation Not Used ( Powerful Agent is enough)
Done By the agent to convince the German company to enter the market Used as Accept/Reject for a market and not for selecting the market
Hiring locals to help Addition to Theory Absence of international in the market management culture selection strategy and consultants in the small and medium size medical companies in Germany Table 6.34 Overview of the influencing theories for the Target Market Selection Joimax/Fahl/AMCO, Constructed by the Author Joimax, Fahl and AMCO are using the reactive approach, the sample companies prefer to wait for orders or agents to come to them instead of using an active marketing plan. The three companies agreed that the contractible method is not used since they are not selecting their markets in the Near East according to a marketing plan. When it comes to market estimation, Joimax and AMCO said that it is used to decide about entering a certain market where some one offered to take care of this market or a sales order arises there. It is not used to select a certain market out of a group of markets while Fahl is not doing market estimation and is relaying in its agent to do that. 112
Chapter 6 Data Analysis Joimax and AMCO added an important issue to our knowledge, which is hiring locals to take part of the market selection strategy. Another addition by Joimax, which leads to problems in selecting the right target market, is the absence of international management culture and consultants in the small and medium size medical companies in Germany Investigated Item
Target Market Data Joimax Fahl
AMCO
Total Sales Part from the Near East The Biggest Existing Markets in the Near East
8%
1%
3%-9%
Israel Turkey Lebanon
Kuwait Oman Emirates-Dubai
Attractive Markets in the Near East(to expand )
Egypt Saudi Arabia Iran
Emirates Egypt Iran
Egypt Iran Saudi ArabiaEmirates(Dubai) Egypt Iran Saudi ArabiaEmirates(Dubai)
1)Management decision but not as a Who Influenced strategic decision 1) Management non starting the 2)Network of Management strategic Decision Internationalization relationships through Decision 2) Network of operation Medica Exhibitionrelationships Düsseldorf Market Estimation Both Direct/Indirect Not used (Checking Not used (Checking Product Potential) Product Potential Method Israel Kuwait Emirates(Dubai) Sequence of countries Entered in Turkey Oman Egypt-Cairo the Near East Lebanon Emirates-Dubai The Main Private Private Both Private/Public Customers are the Public/Private sector Table 6.35 Overview of the Target Market Data-Joimax/Fahl/AMCO, Constructed by the Author From our sample, we can say that German medical companies working in the Near East are drawing 1% to 9% of their total sales from this area. Regarding the biggest markets for each company, we can see that it is very different. This is realistic since these companies are entering the market opportunely.
113
Chapter 6 Data Analysis All three companies agreed that Egypt and Iran are the most attractive markets in the Near East followed by Saudi Arabia and Emirates-Dubai. Furthermore, our sample showed that the internationalization to the Near East was a management decision even it was a non-strategic decision. One more reason as per Joimax and AMCO is the relationship network obtained through exhibitions and direct contacts. Joimax mentioned that they do market estimation while Fahl and AMCO confirmed that no market estimation is done. Looking at the sequence of entering the Near East we can see that each company had a different sequence since they are entering the market opportunely. Joimax and Fahl agreed that their main customers in the Near East are from the private sector while AMCO mentioned that they come from both sectors. Investigated Item
Motives for Entering the Near East Market Joimax Fahl
AMCO
Economic Growth Demand
No effect No effect
Positive Positive
Positive Positive
Closeness
No effect No effect No effect No effect
Positive No effect No effect Positive
No effect No effect No effect Positive
No effect
No effect
No effect
No effect No effect
No effect No effect
No effect No effect Positive (Reformation of the medical services to depend on the private sector.)
Size of the market Stable Economy Communication Improvements Improving Legislation General Attitude Flexible Workforce
Addition to Theory
Positive (Saturated Existing Markets)
Table 6.36 Overview of the Motives for Entering Near East Countries –Joimax/Fahl/ AMCO, Constructed by the Author
114
Chapter 6 Data Analysis In terms of motives to enter, the Near East joimax mentioned that they have no effect since it is not a strategic decision. Even it is not a strategic decision Fahl and AMCO thinks economics growth, demand and communication improvement are the greatest motives to enter the Near East, fahl adds also the closeness of the Near East to Europe. In addition to the existing theories, Fahl thinks that the saturated existing markets are a motive to enter the Near East. Another motive as per AMCO is the reformation of the medical services to depend on the private sector. This means an expansion of the infrastructure, a change in the decision makers and more business opportunities 6.4.2
Timing of Entry
Investigated Item First Mover (Pioneer) Theory
Late Entry Theory
Timing of Entry Joimax Fahl No
No
Yes (Market is not of great Priority)
Yes (high quality of his product)
AMCO an advantage in a small cluster of customers Yes (purchasing decision is a combination of the technology, quality and the price)
As firm size increases, Yes Yes Yes entry is earlier The more Yes Yes Yes multinational a firm is, the earlier the entry The larger the host Yes Yes Yes market size, the earlier the entry. The lower the cost of No No No labor, the earlier the entry. The closer the cultural Does not apply Does not apply to Does not apply to distance between home to our case our case our case and host country, the earlier the entry Table 6.37 Overview of the Influencing Theories for the Timing of Entry ModeJoimax/Fahl/AMCO, Constructed by the Author
115
Chapter 6 Data Analysis Both Joimax and Fahl do not support the first comer theory, while AMCO thinks that it can help with a small cluster of customers. All the companies in our sample support a late comer theory but due to different reasons. Joimax prefer it because the Near East market is not of great important to it .Fahl relays in the quality of it is products more than time of launching. Finally, AMCO Argues that purchasing decision most of the time is a combination of the technology, quality and the price. All the interviewed companies think that as firm size increases, entry is earlier, the more multinational a firm is, the earlier the entry and the larger the host market size, the earlier the entry; but they agreed that the labor cost has no effect on this. Culture closeness effect cannot be tested all the markets in the Near East come almost from the same culture. 6.4.3
Entry Mode Strategy
Entry Mode Direct Export
The Entry Mode Strategy Fits with Theory Joimax Yes
Fahl Yes
AMCO Yes
Yes Yes Yes Indirect Export Not Used Not Used Not Used Licensing Not Used Not Used Not Used Franchising Not Used Not Used Not Used New establishments (Greenfield sites) Not Used Not Used Not Used Acquisitions Not Used Not Used Not Used Joint ventures Not Used Not Used Not Used Mergers Table 6.38Overview of the of the Entry Mode Strategy in the Near EastJoimax/Fahl/AMCO, Constructed by the Author According to the above table, we can see that exporting direct/indirect is the preferred mode of entry for the German medical companies in the Near East.
116
Chapter 6 Data Analysis
Characteristics Main Advantages with the Chosen Mode of Entry Procedure to Take Care of the Advantages Main Disadvantages with Chosen Mode of Entry
Entry Mode Characteristics Notice Joimax Low risk (instability of the Political and economical systems)
Fahl
AMCO
Increasing sales with out adding more labor and cost
Low Cost Less effort in small fragmented markets
-
-
-
When company’s sales reach a limit and stop increasing through exporting the company will think a new entry strategy
Less Control Risking product reputation
More effort in Procedure to selecting the Compensate for the distributors Disadvantages Table 6.39 Overview of the of the Entry Mode Characteristics in the Near EastJoimax/Fahl/AMCO, Constructed by the Author According to the table above the companies used the exporting as an entry mode strategy because it has low risk, low cost, less effort and in the same time it is increasing the total sales volume. Non of our sample companies applied a procedure to take care of the advantages of the preferred entry mode. Fahl Argues that the main disadvantage will happen when the company will reach saturation through exporting and the sales will not grow any more. At that time the company has to find another entry mood. AMCO finds this option also risky especially for the product reputation since the mother company is having less control. AMCO thinks that more effort should be invested in selecting the right distributor since there is less control from the mother company.
117
Chapter 6 Data Analysis 6.4.4
Factors Influencing the Entry Mode Decision Factors Influencing the Entry Mode Decision Influence Factor Joimax Fahl
AMCO Yes No No Local Governmental Attitudes Yes No Yes Bureaucracy No No No Local Infrastructure No No Yes Desired Degree of Control No No No Level of Technology Needed No No No Capital Intensity of the Industry No No No Commitment to the Market Yes Yes Yes Costs Yes No Yes Legal Frame work Addition to theory --Yes Yes (Finding the right partner) Table 6.40 Overview of the Factors Influencing Entry Mode Decision in the Near EastJoimax/Fahl/AMCO, Constructed by the Author All three companies agreed that local infrastructure, level of technology needed, capital intensity of the industry and commitment to the market have no influence in the entry mode decision. Joimax, Fahl and AMCO mentioned that the cost was an important factor effecting the entry mode decision. Joimax thinks that the local governmental attitudes are influencing its entry mode decision. Joimax and Fahl agreed on the problems of bureaucracy and legal framework as influences of their entry mode decision. Fahl and AMCO add a new factor, which is finding the right partners. The problems experienced by the companies in the Near East can be summarized in the following table: 118
Chapter 6 Data Analysis Problems Experienced with the Company in the Neat East. Exist Problem Joimax Fahl AMCO
Economical, Political and Legal Problems Corruption
Bureaucracy Bottlenecks in Production and Distribution Non-westernized Business Practices Quality of Job Applicants Social Legacy Infrastructure Communications Environmental Issues Living Conditions Cultural Norms and Values Addition to Theory : Non homogeneity of the trading system for the Near East countries
Yes
---
Yes
--Yes ---
-------
--Yes ---
---
---
Yes
---
---
---
-------------
-------------
----------Yes
Yes, product has to be registered separately in each market before it can be launched / time and money consuming.
---
---
Addition to theory: problems is the exchange rate of the --Yes euro which is giving a price advantage for non-European competitors Table 6.41 Overview of the Problems Experienced with the Company in the Neat East – Joimax/Fahl/AMCO, Constructed by the Author Fahl is facing no problems in the Near East. Joimax and AMCO think that there is economical, political, legal problems and bureaucracy. Joimax have an additional problem due to the Non-homogeneity of the trading system for the Near East countries since the product has to be registered separately in each market before it can be launched and this is time and money consuming. 119
Chapter 6 Data Analysis Theories Influencing Clustering of the Near East Consist with theory Influencing Theory Joimax Fahl
AMCO Macro Not Used Not Used Not Used segment/customer characterization Market selection Not Used Not Used Used Partially A stages-of-market development Table 6.42 Theories Influencing Clustering the Near East: Joimax/Fahl/AMCO, Constructed by the Author Our sample showed that the Macro segment/customer characterization market selection is not used. The stage of market development theory is used partially as per AMCO and is not used by the other companies. The next table shows the clustering scheme proposed by Joimax and AMCO while Fahl thinks it is still early for it to cluster the market. Cluster/ Regional Hub(Cluster Head Office) Cluster
Joimax
Magreb countries(ArabicFrench culture) Gulf area countries and Iran The Rest (Egypt, Jordan, Syria…)
Fahl ---
Cluster
France- e.g. Marseille
---
Gulf area countries ,Iraq and Iran
Dubai
---
Regional Hub
Head officeGermany or Dubai
Israel
---
AMCO
Magreb countries and Israel Less developed Arab countries (Egypt, Jordan, Lebanon, and Syria)
Regional Hub Dubai-Emirates Head office Germany. Cairo-Egypt
Head Office--Germany Table 6.43 Proposed clustering of the Near East: Joimax/AMCO, Constructed by the Author Regarding clustering the Near East, we got almost the same proposal from both Joimax and AMCO.
120
Chapter 6 Data Analysis In these proposals, the Magreb area is s in a cluster ruled from Europe (France or Germany), Israel to be managed separately, from the head office in Europe, due to the conflicts between Arabs and Israel. Another cluster is the gulf area plus Iran and Iraq when it stables and is ruled from Emirates-Dubai. The other countries in a cluster ruled from a local office in Cairo suggest AMCO while Joimax argued that it could still be managed from the head office or from the gulf area cluster in Dubai. 6.4.5 The Near East Cultural effect in marketing
Factor
Near East Cultural Effect in Marketing Positive/Negative effect
Religion
Joimax +
Fahl +
AMCO +
+ + + Language + + Gender issue Table 6.44 The Near East Cultural Effect in Marketing: Joimax/Fahl/AMCO, Constructed by the Author Our sample shows that the companies have an understanding of the religion and do not consider it of negative effect in marketing on the Near East. As long as English is the main language of business and medical sector, the sample confirmed that there are no problems based on this factor. Fahl and AMCO considered that the gender issue is of positive effect for them; in the other hand, Joimax finds it a negative factor.
121
Chapter 6 Data Analysis 6.4.6
Marketing Medical Equipments
Factor Are the main competitors on the International /Near East Market local or global companies? Are all the company’s products sold in the Near East Special Characteristics of Marketing Medical Equipments in the Near East
Marketing Medical Equipments Characteristics Discussion Joimax
Fahl
AMCO
Global
Global
Global
Yes
Yes
Yes
Obtaining a separate registration procedure for each country
Needs more patient to work over there since people are not punctual
1) Importance of the relationships with customers and decision makers 2) Shortage of marketing data ,which you have to obtain your self through the feedback from your customers, key persons in the hospitals and ministry of health in the absence of other data sources.
1) Not talking to 1) The product is the end user (the there and from patient) but to the different companies 1) You have to convince expert, which is and you have to the doctors and this can be take some one else done only through How do marketing the doctor. It is a B2B marketing share and but them training, demos, seminars medical equipments and exhibitions that are differ from marketing and not a business out of the market to to consumers grow. time and money other high technology marketing. 2) Advertisement consuming. sectors? 2) Advertisement can be used in a is not of great limited zone and as importance, memory instead a company refreshment. what is should participate helping more is in exhibitions and teaching what is medical meetings your product, and build up it is making demos and reputation personal contacts Table 6.45 Overview of Marketing Medical Equipments Characteristics: Joimax/Fahl/AMCO, Constructed by the Author 122
Chapter 6 Data Analysis Joimax, Fahl and AMCO mentioned that the main competitors are global companies. They also confirmed that all their line of products is sold in the Near East. When asked about the special characteristics of marketing medical equipments in the Near East, Joimax said it is obtaining a separate registration procedure for each country. Fahl thinks that the near needs more patient to work over there since people are not punctual. AMCO points the importance of the relationships with customers and decision makers and the shortage of marketing data, which you have to obtain your self through the feedback from your customers, key persons in the hospitals and ministry of health in the absence of other data sources. When investigating how marketing medical equipments differ from marketing in other high technology sectors, Joimax said that you are not addressing the end user (the patient) but to the expert, which is the doctor. It is a business-to-business marketing and not a business to consumers marketing. In addition, advertisement is not of great importance, instead a company should participate in exhibitions and medical meetings and build up it is reputation Furthermore, Fahl thinks the deference comes from the fact that the product is there from different companies and you have to take some ones else share and but them out of the market to grew. In addition, Advertisement can be used in a limited zone and as memory refreshment. You should introduce your product; make demos and personal contacts. Finally, AMCO believes that you have to convince the doctors and this can be done only through training, demos, seminars and exhibitions which are time and money consuming.
123
Chapter 7 Conclusions and Implications
7
Conclusions and Implications
In this chapter, we will start by presenting the main findings and conclusions drawn from the comparison between the three case studies and the theories included in the frame of reference. Lastly, these theories will come to its end with implication for management, theory and future research will be recommended.
7.1
Conclusions
This section will focus mainly on the most commonly given answers from our sample of companies, as a try to generalize our findings .However, we are aware of the fact that the conclusions are based on a sample of three companies, which limits the possibilities to make generalization. Nevertheless, the conclusions can be used as valuable insight into the area of research.
7.1.1
Target Market Selection
We found that the reactive market selection approach is the main characteristic of the German medical companies, the companies are acting passively to the foreign buyers and representatives (Importers, Agents and so on), but they are not initiating the selection of foreign markets in the Near East. Due to the fact of using a reactive market selection approach, we found that these companies are not using the contractible method for market selection. Furthermore, our sample shows that no market estimation is normally done and if it is used this will be to decide about entering a certain market proposed by the agent. It is not used to select the preferable market for the German Enterprises. Our study indicates an absence of international management consultants in the small and medium size medical companies in Germany. In addition, hiring locals to help in the market selection strategy was a proposal given by our sample to overcome this problem.
124
Chapter 7 Conclusions and Implications When investigating the total amount of sales percentage coming from the Near East we found that it varies between 1% up to 9%. By collecting information about the existing biggest markets of each company in the Near East the answers has varied. This can be explained by the fact of these companies presented in some parts in the Near East and not in all countries and that, they entered these markets reactively. Investigating the attractive markets in the Near East for the German companies has led us to a better vision. All interviewed companies said that Egypt and Iran are the most attractive markets followed by Saudi Arabia and Emirates/Dubai. Our sample indicates that starting the International operations to the Near East is normally a higher management decision. This decision is not a strategic decision and is influenced by the network of relationships. Looking at the sequence of entering the Near East markets we cannot find any homogeneity between the different companies. This is again due to the reactive market selection approach. The German medical companies confirmed that the private sector is the main customers, while the Near East agent in our sample indicates that the main customers are coming from both private and public sectors. Our explanation for this is that the public sector does not initiate orders to foreign companies. Normally, the public sector is buying through tenders or direct purchase from local distributors. Concerning Motives for Entering the Near East Countries, the following consists with the existing theories: •
Economic Growth
•
Demand
•
Communication Improvements
•
Closeness
125
Chapter 7 Conclusions and Implications Our investigation has shown two more motives for German medical equipment companies: •
Saturated Existing Markets
•
Reformation of the medical services in the Near East in order to depend more on the private sector. This means an expansion of the infrastructure, a change in the decision makers and more business opportunities
7.1.2
Timing of Entry
We concluded that being a market pioneer (First Mover) is not of great advantage over a late comer. We find this quite realistic since the purchasing decision is normally a combination of the technology, the quality, and the price. One more reason is the MADE IN GERMANY reputation, which gives the German companies a quality competitive advantage. Our empirical findings show that the following factors related to the firm consist with theory: •
As firm size increases, entry is earlier
•
The more multinational a firm is, the earlier the entry
•
The larger the host market size, the earlier the entry.
Our empirical findings do not correspond to theory regarding labor (The lower the cost of labor, the earlier the entry). According to our opinion, this comes from the fact that the agent in the Near East is responsible for this part and not the German companies. We could not investigate the cultural distance effect (The closer the cultural distance between home and host country, the earlier the entry) since all investigated markets come from almost the same culture. 7.1.3
Entry Mode Strategy
The best way to enter the Near East market is through the exporting mode (direct/indirect). This is the case since this option is a low cost option that needs no effort in a market combined of many small fragmented markets. Furthermore, it is a low risk 126
Chapter 7 Conclusions and Implications mode against instability of the Political and economical systems in the present of other more stable markets. Our research shows that this option has some disadvantages due to the law control of the mother company, which can affect the reputation of the product in some cases. Also, after some time of exporting to a certain market normally the sales reach a limit that forces the company to move to another entry mode e.g. joint venture. To overcome these disadvantages having a local partner (Agent) might also be the only way. We believe German medical companies should spend more time in selecting their local partners. 7.1.4
Factors Influencing Entry Mode Decision
The factors influencing the choice of the entry mode in the Near East are many. The most influencing factor is the cost where many companies are trying to get more sales without additional cost .This factor is followed by legal framework effect, which should be investigated thoroughly. We believe the legal framework is related to the heavy bureaucracy and the local governmental attitude, since the legal framework is built up on these two factors. Another revealing issue, which became evident is finding the right local partner in the Near East and hiring locals, In order to cut the costs and to simplify contacts with governments and public healthcare sector. There are a number of explicit problems when entering the Near East. Legal framework is a significant problem for the medical equipments marketing where the product has to be registered separately in each country. This can be difficult and costly due to heavy bureaucracy. Furthermore, there are macro economic problems like the currency exchange rate with the euro zone. Non-westernized business practices are another issue, e.g. businesses are based on personal contacts.
127
Chapter 7 Conclusions and Implications 7.1.5
Clustering the Near East
Our findings show that the German medical companies used neither macro segment/customer characterization, market selection theory, nor a stages-of-market development in clustering the Near East. After reviewing the existing theories, the clustering scheme proposed by our sample of companies and the author’s experience and vision in the area we suggest the following clustering scheme, clusters are numbered based on entry priority: 1. Gulf area countries ,Iraq and Iran in a cluster with a regional hub in EmiratesDubai 2. Less developed Arab countries (Egypt, Jordan, Lebanon, Syria and Libya) in a cluster with a regional hub in Egypt-Cairo 3. Magreb countries accept Libya in a cluster served from a French distributor if available or from the head office in Germany 4. Israel to be served from the main office in Germany. 7.1.6
The Near East Cultural Effect in Marketing
We have found that religion factor in the Near East has been understood by the German medical companies; these companies know these sensitivities through the international experience of it is managers with other cultures. Furthermore, our sample show that effect of the different language is neglected and it is considered positive even since English is the language of the business and medical companies in the Near East area. Moreover, the fact of gender issue sensitivities in the Near East is not complex to handle by the German medical companies, despite some believes that the women should take more place in business in the Near East.
128
Chapter 7 Conclusions and Implications 7.1.7
Marketing Medical Equipments
Our research discloses that the main competitors in the Near East Market are global companies. The main reason for this phenomenon is the absence of any local competitive medical industry. Our findings show that all companies’ products are sold in the Near East. Some issues considered special characteristics of marketing medical equipments in the Near East. These are listed below: •
A separate registration procedure should be obtained in each country.
•
Non-westernized working habits which needs more patient to work over there, e.g. people are not punctual
•
Relationships with customers and decision makers are of great Importance.
•
Shortage of marketing data, the feedback from your customers, key persons in the hospitals and ministry of health have to be obtained in the absence of other data sources.
The major differences regarding marketing medical equipments differ from marketing other high technology sectors as per the respondents are: •
You are not addressing the end user (the patient) but to the expert, which is the doctor. It is a Business to business marketing and not a business to consumers marketing.
•
Advertisement is not of great importance; instead, a company should participate in exhibitions and medical meetings and build up its reputation.
•
The product is there from different companies and you have to take someone else’s share and put them out of the market to grow.
•
You have to convince the doctors and this can be done only through training, demos, seminars and exhibitions ,which are time and money consuming
129
Chapter 7 Conclusions and Implications
7.2
Implications
In this final section, our recommendations will be given. This will be based on the conclusions that have been made in the previous section. Implication for the different fields where this study can be useful will be presented. These are implications for management, theory, and future research regarding Placing German Medical Equipments on the Near East market. 7.2.1
Implications to Management
Several issues can serve as implications for management these are listed below: •
Entering the Near East market should be a strategic decision taken by the marketing managers based on a market study and careful planning.
•
Marketing managers should use a proactive market strategy and invest more effort in initiating the selecting of foreign markets. Contractible market selection method is one of the suggested approaches.
•
When it comes to motives to enter the Near East countries, managers need to consider mainly the economic growth and demand as will as their saturated existing markets. One more motive is the reforming of the medical services on the area to depend more on the private sector creating more opportunities. We believe the most attractive markets are Iran, Egypt, Saudi Arabia, and Emirates-Dubai.
•
First mover is not of great advantage over late entry unless the company has technology not available by other competitors. Furthermore, The German companies should keep the reputation of the MADE IN GERMANY products since it gives them a great competitive advantage.
•
The risk of entering the Near East markets is higher than entering a westernized market. However, this study has shown that the market opportunities are great and for this reason it is worth to take the risk. The most appropriate strategy to enter the Near East medical markets is through exporting since it decreases the risk.
•
Managers need to consider local customs and values, which include nonwesternized business practices and bureaucracy. Managers need also to know the
130
Chapter 7 Conclusions and Implications legal framework, which defer from one country to another. All this favor a company to have a local partner and local knowledge. •
Results from our research motivate us to believe that clustering the Near East is of great importance to get markets that are more homogeneous. The main two regional hubs for the area are Emirates-Dubai and Egypt-Cairo.
•
Marketing medical equipments considered business-to-business marketing. Furthermore, Advertisement is not of great importance, instead a company should participate in exhibitions, medical meetings and demos in hospitals to build up it is reputation. Moreover, sufficient budgets should be planed since this procedure is time and money consuming.
7.2.2
Implication for Theory
The purpose of this thesis was to gain a deeper understanding of global branding risks and chances based on the case of placing German medical equipments on the Near East market. Previous research has provided us with theory from which we have formed our purpose. Explorations have been made on placing German medical equipments on the Near East. Additionally, descriptions have been made of target market selection, entry mode strategy and special aspects of marketing medical equipments in the Near East. Furthermore, we have initiated an explanation of how placing German medical equipments on the Near East can be done. In general, our findings seem to be more extensive compared to previous research. As far as this, we found that our research revealed some aspect lacking on this topic in previous studies. Hence, our research supplements theory by updating issues and investigating cases in placing German medical equipments on the Near East market, which were not studied before. The thesis contribution to theory is based on empirical studies of the investigated phenomenon in three specific cases and can serve as basis for further research.
131
Chapter 7 Conclusions and Implications 7.2.3
Implication for future research
While working in this topic we found a lot of different and interesting topics, which we did not include in this research. The following are some recommendations for further research: •
A quantitative comparison between different German medical companies entering the Near East with different entry strategies, sequence and timing will be of great interesting.
•
Conducting the same study but after dividing the German medical equipments companies into two sectors. High technology medical equipments manufacturers (MRI,
CT,
Ultrasound…etc) and low technology medical equipments
manufacturers (Surgical Instruments, Accessories…etc). •
Another interesting field of study will be a research about how German companies select their foreign distributors.
•
Conducting a study where cases come from different high technology sectors entering the Near East market / other markets will give a great addition to the existing theories.
•
The electronic entry mode strategy is becoming a more popular choice of companies. Currently, theories existing in this part are limited therefore any research in this area will be a contribution to the theory
•
One more interesting field of study is a quantitative study about the quality of after sales technical service effect in sales.
•
To perform the same study in a large sample of companies. This will enable greater generalization.
•
To conduct a study to test the hypothesis based on the conclusions of this study.
132
List of References
8 List of References 1. Albaum, G., Strandskov, J., Duerr, E., Dowd, L. (International Marketing and Export Management). Cambridge: Addison – Wesley Publishing Company. (1994). 2. Alexei Makarevitch and Ellen Enkel, Edited by Prof. Dr. Andrea Back and Prof. Dr. Georg von Krogh No 46, published as a discussion paper in July 2002 3. Al-Sabt, Mohammad. Arabian Business & Cultural Guide: Your Guide to Do’s & Don’ts in the Arabian Culture & Market. Seattle: International Export Connections, 1996. 4. Anderton, B. Siegfried, Discussion Paper No. 185. Explaining Export Success in the UK and German Medical Equipment Industry. German Institute of Economic Research (DIW), Berlin, April 1999 5. Arnold, the Mirage of Global Markets, Prentice Hall, 2003 6. Barnett, A. George and D. Lawrence Kincaid. “Cultural Convergence: Mathematical Theory”. Intercultural Communication Theory: Current Perspectives. USA, SAGE Ltd, 1984. 7. Bovèe, Courtland, and John V. Thill. (Business Communication Today). 6thed. Jersey: Prentice Hall, 1999. 8. Bradley F. International Marketing Strategy. Hertfordshire: Prentice Hall ,1995. 9. Brassington, F. & Pettitt, S. Principles of marketing. Harlow: Pearson Education Limited , 2000. 10. Cole, S. The Gulf States: a Business Handbook, Oxford: Blackwell Publishers, 1992. 11. Churchill, JR. , marketing research methodological foundations. Sixth edition: The Dryden press ,1995. 12. Czinkota, M.R. & Ronkainen, I.A. International Marketing. Sixth edition. Orlando: arcourt College Publishers, 2001. 13. Dahringer and Mühlbacher, International Marketing a global perspective, Wesley Publishing Company, 1991
133
List of References 14. Floyd, D. Investment Decisions in Eastern Europe: Choosing the Optimum Investment – the Case of Poland. European Business Review. Vol. 14, No. 2, pp.98-103,2002. 15. Foster, T. Industrial marketing communication: an empirical investigation the use of marketing communication tools, 1998. 16. Grönroos, C., Internationalization Strategies for Services. Journal of Services Marketing. Vol. 13, No. 4/5, pp. 290-297,1999. 17. Gudykunst, William B., Young Yun Kim. Communicating with Strangers: An Approach to Intercultural Communication. USA: Addison-Wesley,1984. 18. Hill, chales W.L, Global Business today. McGraw-Hill 1998 19. Kaynak, Erdener. Comparative Study of Marketing and Management Systems in the Middle East, 1985. 20. Kaynak, Erdener .International business in the Middle East / ed.:. - Berlin New York: de Gruyter, 1985. 21. Koch, A.J., Factors Influencing Market and Entry Mode Selection: Developing the MEMS Model. Marketing Intelligence & Planning. No. 19/5, pp.351361,2001. 22. Kwon, Y-C. & Konopa, L.J. Impact of the Host Country Market Characteristics on the Choice of Foreign Market Entry Mode. International Marketing Review. Vol. 10, No. 2, pp. 60-76, 1993. 23. Manucher Farhang. Market Entry in the Middle East. Stockholm School of economics. Institute of International Business, 1987. 24. Mühlbacher, Dahringer and Leihs .International Marketing a Global Perspective. Thomson Business Press: Second Edition 1999. pp.463-469 25. Okabe, Roichi. “Cultural Assumptions of East and West: Japan and The United States.” Intercultural Communication Theory: Current Perspectives. USA: SAGE Ltd, 1984. 26. Peters, Susan. Culture and entry timing of FDI: Results from central Europe. California State Polytechnic University, Pomona. 27. Phillip Kotler and Gary Armstrong, Principles of Marketing, 9th ed. Upper Saddle River, NJ: Prentice Hall, 2001, p.245.
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List of References 28. Root, F.R., Entry Strategies for International Markets. San Francisco: JosseyBass, Inc., Publishers, 1994. 29. Smith, Alfred G. Communication and Culture. USA: Holt, Rinehart and Winston, 1966. 30. Williams, D., Strategies of Multi National Enterprises and the Development of the Central and Eastern European Economies. European Business Review.1997. Vol. 97, No. 3, pp. 134-138. 31. Yin, R. K., Case Study Research, Design and Methods. Second Edition Thousand, Oaks, CA: Sage Publications, 1994. 32. Yin, R. K., Case Study Research, Design and Methods. Third printing, Sage Publications 1989.
135
AppendixI Interview Scheme
9 Appendix I Interview Guideline 1- Company Background A. Company name: B. Respondents name and title: C. Number of years you have worked for the company: D. What year did your company first establish operations in the Near East/or planning to? E. How many employees are currently employed at your company? In Germany In the Near East Worldwide
2- Target Market selection, Sequence and Time of Entry Q. How large part of the total sales value derives from the Near East operations? Q. Which are the three biggest markets for your firm in the Near East? Rank 1: Rank 2: Rank 3: Q. Who influenced you to start international operations in/to Near East?
Internal Change factor: • •
Someone within the management New employee
External Change factor: • • • • •
Unsolicited order Network relationships Trade council, Chamber of Commerce, etc. Government measures (tax reduction etc) Other
136
AppendixI Interview Scheme Q. Motives for Entering Near East Countries • • • • • • • • •
Economic Growth (present and expected) Demand Closeness Size of the market Stable Economy Communication Improvements Improving Legislation General Attitude Flexible Workforce
Other comments Q. What markets in the Near East are currently the most attractive for your company to enter/expand and why? Q. Did your made a market estimation of the Near East? How? • • •
Trade statistics Economic/social statistics GDP
Other comments
Q. What was the sequence of entering for your firm in the Near East? Rank 1: Rank 2: Rank 3: Q. Did you cluster the Near East as a part of your marketing plane? What type of clustering you did? Q. Which are the regional hubs for each of these clusters? Q. When launching your products in the Near East do you prefer to be the first mover or a late comer? Why?
Q. which of the following factors affected the timing of the entry mode: • Size of the firm • Your internationalization policy • Host market size • Cultural distance
137
AppendixI Interview Scheme
3-Entry Mode Strategy , Factors Influencing it and Near East Cultural Effect in Marketing: The Mode of Entry Used to Enter the Near East market.
Exporting: • Direct mode • Indirect mode Investment Entry Modes: • New Establishments • Acquisitions • Joint Ventures • Mergers Contractual mode: • Licensing • Franchising Other comments Q. Which were the main advantages with your chosen mode of entry? Q. Did you do anything to take care of the advantages? Q. Which were the main disadvantages with your chosen mode of entry? Q. Did you do anything to compensate for the disadvantages? Factors Influencing the Entry Strategy Decision Local Governmental Attitudes Bureaucracy Local Infrastructure Desired Degree of Control Level of Technology Needed Capital Intensity of the Industry Commitment to the Market Costs Legal Framework Other comments
138
AppendixI Interview Scheme Q- Problems Experienced with the Company in the Neat East. Economical, Political and Legal Problems Corruption Bureaucracy Bottlenecks in Production and Distribution Non-westernized Business Practices Quality of Job Applicants Social Legacy Infrastructure Communications Environmental Issues Living Conditions Cultural Norms and Values Other comments Q. Please describe if your company is faced with specific laws and regulations. Q. Who are your customer’s public/private sectors? Q. Did network relationships have any impact on your international market development in the Near East? How?
Q. What was the effect of the following culture factors positive/negative? • • •
Language and communication Religion Gender issues
Comments and/or any personal experiences with intercultural problems in the Near East.
4-Medical Equipments Marketing: Q. Your company’s main competitors on the international market/Near East Market. Is it local or global company? Q- Are all your products sold in the Near East? If not, WHY? Q. Is there any special strategies that you are using for marketing you equipments in the Near East that differ from other countries. Q. If you were working in other parts of industry, can you describe how marketing medical equipments differ from marketing other high technology sectors?
139
AppendixII Invitation to Interview Letter
10 Appendix II Interview Invitation Letter Date Name of respondent «Address» Dear Name of respondent, The center of marketing research University of Bolton and South Westphalia University of Applied Sciences joint program is doing a study under the title Global branding of German medical equipments to the Near East. The purpose of this study is to give a guideline for international marketing managers of the German medical equipments companies who entered the Near East or planning to enter the market to reach different clusters of the Near East markets successfully. In order to get correct information about this we will be pleased about your cooperation. In return, partner companies will get a copy of this study result, which will be helpful in improving your business in the Near East area. A Team member will come to your stand during the MEDICA exhibition, your office, or some other place if you prefer to ask some questions. The interview should take about half an hour of your time. I am assigned to do some of these interviews as a part of my master degree requirements. I was born and raised in the Near East region, which gave me the ability to provide an accurate look inside its culture. I was working in the Near East in the field of medical equipments for several years. Please confirm your interest in the study and your preferred place for the interview for further arrangement. If you have any questions, please feel free to contact me at Tel. 017624062135 E-mail:
[email protected] Alternatively, the director of the study, Prof. Dr. Henrik Janzen at: Prof. Dr. Henrik Janzen +492921-378-465 +49170-2859969
[email protected] Sincerely, A. Mohd, BEng. Center of Marketing Research 140
AppendixIII Near East Medical Market Overview
11 Appendix III: The Near East Medical Market Overview ALGERIA The health requirements of the Algerian population are very large. The Algerians spend 140 billion DA per annum in health care (2 billion Euros). The difficulties of the public health system have led to the opening of the sector to the private domain in recent years. The renovation and construction of public establishments, as well as the creation of private clinics, are multiplying in Algeria. The new health map of the Ministry of Health provides in particular for three private hospitals, each with 250 to 500 beds, for the treatment of serious pathologies. The opening up to the private domain has also been observed in the distribution of pharmaceuticals. The medicine market is estimated at more than 700 million Euros per annum, with 80% provided by imports. (http://www.animaweb.org/pays_algerie_marketingterritorial_en.htm, 23/08/2004) BAHRAIN Bahrain depends on suppliers for medical equipment from U.S.A., Germany, Britain, and Japan in the health sector. The Government of Bahrain continues to give budgetary priority to health services with $363 million allocated to the Ministry of Health in the budget. The Government of Bahrain is encouraging the private sector to enter the health care market and thus share the cost of services in this vital area. It is also drawing up plans to attract international hospitals in a move to further promote health tourism in the country. One new private hospital, the Ibn Nafees Medical Complex opened in December 2000. Two more private hospitals, Bahrain Specialist Hospital and the Al Hayat Hospital, are scheduled for opening this year. The largest hospital in Bahrain, state-run Sulmaniya Medical Complex, has budgeted $3.7 million for replacement of medical equipment in 2002. They are looking to replace patient vital sign monitors, infant incubators, ventilators, infusion pumps, and acquire a deep X-ray therapy machine. (CENTER FOR INTERNATIONAL
TRADE
DEVELOPMENT,
http://elcamino.citd.org, 29/08/2004) 141
California
90250
USA,
AppendixIII Near East Medical Market Overview EGYPT In Egypt, with the exception of a few large hospitals in Cairo or Alexandria, the whole of the medical system suffers from a relatively low level of equipment. The demand for medical
equipment
is
high
and
depends
on
imports
(90
%).
(http://www.animaweb.org/opportunites_pharmaciesante_en.htm, 23/08/2004) There is at present very little medical equipment manufacturing in Egypt. The use of sophisticated medical equipment is growing, but total expenditures are still small for a country of nearly 70 million. The government has ambitious plans to upgrade more than 40 general hospitals, clinics and laboratories in rural areas and to build ten new hospitals in the coming two years. The most promising sub-sectors include dialysis equipment and lasers, medical, laboratory equipment, and MRI and ICU monitoring equipment. . (CENTER FOR INTERNATIONAL TRADE DEVELOPMENT, California 90250 USA, http://elcamino.citd.org, 29/08/2004) IRAN The right of all citizens to health care is embodied in the Constitution of the Islamic Republic of Iran which recognizes the rights of all citizens to health as well as an equitable distribution of health services based on Islamic religious principles. In practice this has resulted in a strong focus on basic public health financed from the public budget and delivered to all Iranians through a public primary health care (PHC) delivery system run by the Ministry of Health and Medical Education (MOHME), while secondary and tertiary level curative care is financed (and sometimes directly provided) through the compulsory Social Security Organization (SSO) for formal sector employees and their dependents, the Armed Forces Medical Service Organization for members of the military and their dependents, and the Medical Service Insurance Organization (MSIO) for government employees, rural households, the self-employed, and "others" (e.g., students). In addition, there is the Imam Khomeini Foundation that provides insurance coverage for the poor. Private insurance generally is supplemental to these public programs. The MOHME is responsible for overall management of the public health system, regulates the provision of private health services as well as NGOs.
142
AppendixIII Near East Medical Market Overview
However, with health spending currently accounting for almost 6 percent of the economy, a 10 percent of the population lacking formal insurance coverage, with significant nearterm cost pressures from the health transition and advances in medical technology, with ever growing consumer expectations, with serious problems of efficiency, quality, and access for certain groups, and with the lack of transparency, solvency and sustainability of
current
health
financing
arrangements,
reform
is
essential.(
http://www.who.int/nha/docs/en/Health_financing_reform_Iran_principles_next_steps.pd f ,24/08/2004). IRAQ The Iraqi health care system suffers from a lack of equipment, depletion of trained professionals (many of whom left the country), and poor standards. Some of the areas that are particularly lacking are cardiovascular treatment capability, general hygiene products, dialysis, and a lack of functional laboratories. There are approximately 240 hospitals and 1,200 primary health care clinics operating in Iraq. Most equipment is broken, outdated or inadequate. Services and quality of the healthcare system vary by region, with better services available in and around Baghdad and the northern areas. The Ministry of Health has around 100,000 healthcare professionals and staff, of which over 80 percent are women. Iraq tends to have a relatively high number of specialists but lacks an adequate number of primary health care workers. The country has very few first tier pharmaceuticals available. The PMO Public Buildings, Housing, and Health RFP can be found on the Program Management Office website at www.rebuilding-iraq.net. In addition, the Iraqi Ministry of Health website can be found at http://www.mohiraq.org/. UNICEF has been active in delivering basic vaccines, and the Ministry of Health currently promotes a monthly “Vaccine Day,” delivering over 1.4 million doses of vaccinations since July 2003, with another 30 million procured with the help of USAID and UNICEF. Almost one-third of children in the south and central regions suffer from malnutrition. Women suffer from
143
AppendixIII Near East Medical Market Overview high rates of anemia (estimated to be as high as 60-70 percent). Low breastfeeding levels, low birth weights, diarrhea, and acute respiratory infections all contribute to high child mortality rates (125 per 1,000). Over 8,000 Iraqi workers have begun training to screen and manage malnourished children. (The World Health Organization contributed $10 million.) Prior to 2003, the highly centralized Iraqi health system tended to concentrate more on curing illnesses rather than prevention. The Ministry of Health is placing decentralization of the management structure as one of its highest priorities in the coming year. Currently, there is a great need for the development of a system of standards, and the need to license health care professionals to ensure that these standards are enforced. There is little existing health legislation in Iraq, and the legislation that does exist needs to be strengthened. Also, up-to-date training and education programs are needed, along with new professionals in the fields of healthcare management, planning, and finance.( http://www.export.gov/iraq/pdf/sector_overview.pdf, 24/08/2004). ISRAEL The Israeli medical equipment market continues to present significant opportunities to exporters. Estimated at $520 million annually, over three-quarters of this market is imported. U.S. industry holds a strong position, accounting for over 50% of total imports. Israel' s mandatory National Health Insurance (NHI) provides a basic package of health services to all Israeli citizens regardless of age or medical condition. It defines a comprehensive list of medical services to which each citizen is entitled. Demand for high-end medical equipment and supplies have been growing due to advances in medical practices and the constant addition of new procedures to the NHI. This market is considered stable with a natural annual growth of 4%. Israel presents good opportunities in diagnostic equipment, reagents and kits, computerized health care systems, imaging systems, cardiology equipment, and various disposable products. INTERNATIONAL
TRADE
DEVELOPMENT,
http://elcamino.citd.org, 29/08/2004)
144
California
(CENTER FOR 90250
USA,
AppendixIII Near East Medical Market Overview JORDAN Jordan is striving to become a medical hub for the Middle East, attracting patients from many parts of the Arab world who travel to Jordan for relatively high-quality care at comparatively inexpensive rates, and is constructing modern state-run and private hospitals and other medical facilities. In 2002, the number of private hospitals rose to 62 with 3 other hospitals to be registered with the Ministry of Industry and Trade. Sales of medical equipment and services by foreign suppliers are expected to continue to increase during 2002-2006. The MOH plans to continue to invest on hospital infrastructure throughout the country with a variety of equipment including sophisticated laboratory diagnostic, laboratory reagents, testing equipment, cardiology equipment, hospital furniture as well as other laboratory equipment. In 1999, the size of the market for medical upgrades was estimated at $7.7 million, while the Jordanian market for medical equipment and supplies was estimated to be $80 million. Note: in Jordan, the length of the replacement cycle for medical equipment is relatively long (approximately 12-15 years), compared to Western countries, which partially explains the low market-size estimate. Attractive projects expected to come on line within the next five years in the private and public sector include Prince Hamzeh Hospital/ MoH - 450 beds, Drugs Quality Control Laboratories/ MoH, Queen Alia Heart Institute extension/ Military - 70 beds, Al-Bashir renovation and remodeling/ MoH - 850 beds, Pediatric Children’s Hospital-National One/ Military, and Wadi Saqra Consulting Hospital/ Private - 105 beds. (CENTER FOR INTERNATIONAL
TRADE
DEVELOPMENT,
California
90250
USA,
http://elcamino.citd.org, 29/08/2004) KUWAIT The Government of Kuwait provides free medical service to its citizens. It operates 7 regional hospitals, 17 specialized hospitals, and more than 54 infirmaries throughout the country. Naturally these hospitals and medical centers offer a wide range of services, from preventative care to operations. In April 2000, the National Assembly passed a
145
AppendixIII Near East Medical Market Overview health insurance requirement for expatriates, charging minimal fees for medical services. In order to contain costs, the Ministry of Health granted three licenses to the private sector to build hospitals dedicated to the treatment of expatriates. This activity will offer excellent opportunities for companies that supply medical equipment and supplies, hospital management, and specialists. . (CENTER FOR INTERNATIONAL TRADE DEVELOPMENT, California 90250 USA, http://elcamino.citd.org, 29/08/2004) LEBANON Lebanon has an active health sector that employs 20,000 people and 4,000 doctors. 135 private hospitals and 24 public hospitals compete for the provision of the best equipment to the extent that some are over-equipped. . (CENTER FOR INTERNATIONAL TRADE DEVELOPMENT, California 90250 USA, http://elcamino.citd.org, 29/08/2004) LIBYA The crude death rate was estimated at 7.0 per 1000 population in 1996, and in the same year, the crude birth rate was estimated at 40 per 1000 population. In 1995, infant mortality was 24.4 per 1000 live births, maternal mortality was estimated at 4.0 per 10 000 live births, the total life expectancy was 66 years and the under-five mortality rate was estimated at 30.1 per 1000 live births. The motto of Libyan health policy is "health for all by all". The goal of this policy is to create a society in which every member can play a active role, both socially and economically, and in which services are equally distributed among the whole population. The five-year development plan reflects the health strategy during this period and can be summarized as follows: Restructuring of medical and paramedical human resources through redistribution of human resources and training of necessary cadres. Improving, updating, and developing health facilities, including developing some health delivery points into health centers.
146
AppendixIII Near East Medical Market Overview Improving the management of hospitals and forming specialized bodies to support health services such as a technical centre for environmental protection. Focusing on public health programs. The main pillars which support primary health care are health education, maternal and child health services and school health services, nutrition programs and environmental protection programs and programs on control and prevention of communicable and endemic diseases. Supporting the health infrastructure to meet the needs of the increasing population. The health system operates on several levels. The first level consists of the basic health care units, which each provide curative and preventive services for 5000 to 10 000 citizens. The second level comprises the basic health care center, which serve from 10 000 to 26 000 citizens. The third level consists of the polyclinics, which play an important role in cities. Staffed by specialized physicians and containing laboratory as well as radiological services and a pharmacy, these polyclinics serve approximately 50 000 to 60 000 citizens, and there are 18 of them throughout the country. At the fourth level, are the hospitals in rural areas and the central hospitals in urban areas? The fifth level comprises the specialized hospitals. Per capita health expenditure of US$ 274,000 is among the highest in the Eastern Mediterranean Region. In 1990, there was a total of 39 369 health professionals working in the country, including 7234 physicians and 13 849 nurses. The rates per 10 000 population of physicians and nurses were 12.8 and 36.0, respectively in 1996. In 1990, there were 726 basic health centers, 138 maternal and child health centers and 18 urban Polyclinics. At the end of 1990, there were 99 hospitals, 75 of which were functioning, 14 of which were still under construction and 10 of which were newly built and not yet functioning. Of the 75 which were operational, 28 were rural hospitals. The overall number of functioning beds at the end of 1990 was 18 503, giving a rate of 38 beds per 10 000 population. The distribution of beds is more or less equitable, with the highest rate per 10 000 populations being only less than twice the lowest rate. (http://195.166.37.12/ite-
147
AppendixIII Near East Medical Market Overview group/og/AfricanEvents/LIHE_2004/documents/LibyaHealthcareBrochure.pdf, 23/08/2004) MOROCCO Although Morocco’s economy continues to suffer from an over-reliance on agricultural production, which is vulnerable to drought, the country has enjoyed four years of consecutive economic growth since 2000. This should allow the government to honor its commitment to begin implementation of a long awaited universal health insurance scheme from January 2005. Meanwhile, the government has embarked on a major overhaul of the health sector, following two decades of under-funding and mismanagement, which left the public hospital network run down and 40% of the population without access to health services. The medical market has seen an erratic pattern of growth, although the trend is upward with considerable potential for further expansion, the local medical manufacturing industry remains at an embryonic stage, leaving most sectors of the market reliant on foreign imports, the bulk of
which
are
supplied
by
France.
(http://www.prweb.com/releases/2004/3/prweb112328.htm, 23/08/2004) The private medical and pharmaceutical sectors are rapidly increasing in size. In fact, if current growth trends were to continue, Morocco would have nearly 10,000 private physicians in the year 2007. The number of private doctors per 1,000 people would increase from 0.21 to 0.30, and the percentage of the Moroccan population receiving health care in the private sector would
increase
from
the
current
40
percent
to
57
percent
by
2007.
(http://www.poptechproject.com/pdf/98147ese.pdf, 23/08/2004) OMAN The Omani market also offers good prospects for exports of health care products. Having completed major regional hospital construction in the last five year plan, Oman’s current emphasis is on upgrading facilities, including diagnostic abilities and operations theaters,
148
AppendixIII Near East Medical Market Overview rationalizing services provided at its principal hospitals while continuing to extend its rural clinic network. The current five-year plan contains 39 major projects in this area and 151 new rural clinics. The five-year plan includes $56.6 million development expenditure for the health sector. Nearly 12% of the Omani government’s budgeted expenditure is in the health sector. The two main projects for this year are a state of the art oncology center and a video network that links operating theaters in Oman’s major hospitals together. It also indicates that the Omani government expenditure in this sector is around $360 million. The Omani national population is growing at around 3.8% annually and the existing system is overburdened and in need of expansion. The Government’s determination to provide its citizens with basic health care means that the demand for health care products and health-related expenditures will continue to grow. It seeks to shift expatriate care to private hospitals and clinics, which also are beginning to compete with the almost Free State hospitals and prestigious foreign hospitals for the upper middle Omani market. . (CENTER FOR INTERNATIONAL TRADE DEVELOPMENT, California 90250 USA, http://elcamino.citd.org, 29/08/2004) QATAR Before it began processing its oil and natural gas resources, Qatar was a poor country where disease and early death were common. By the 1970s, however, Qatari citizens enjoyed one of the highest standards of living in the world, and their health had improved dramatically. Today, average life expectancy for men in Qatar is 70 and for women, 76. Qatar provides free medical and dental care to citizens and residents. The health care system covers the entire spectrum of services, from primary care to specialized hospital procedures. The Ministry of Health runs hospitals, health centers and quarantine clinics and issues medical certificates. A system of well-equipped public clinics and hospitals is staffed mainly by foreign doctors and nurses; however, Qatari’s are gradually starting to fill medical positions at all levels. Services at government clinics and health centers are free, but foreigners must pay for a health card and for certain treatments, such as dialysis.
149
AppendixIII Near East Medical Market Overview Citizens and foreigners also pay for some dental procedures. Some Qatari’s who can afford the fee prefer to receive medical treatment at private clinics in Doha. Youth welfare is currently a high priority for the Qatari government. About 30% of Qatari’s are under the age of 15. The government sponsors recreational and cultural clubs and facilities for young people, and offers incentives for young Qatari’s to complete their education. (http://www.settlement.org/cp/english/qatar/health.html , 24/08/2004) SAUDI ARABIA Saudi Arabia’s health care market is large and growing. This growth is influenced by an increasing number of hospitals and clinics, as well as hospital expansions and upgrades, and the constant need for advanced equipment for both diagnostic and therapeutic applications. Currently, there are 314 hospitals, both general and specialized, with a total capacity of 46,000 beds in Saudi Arabia. The Ministry of Health is the largest provider of health care services with more than 185 hospitals and more than 1,700 health care centers. The Ministry of Health invited bids for the management, operation, and refurbishment of the King Fahd Medical City, which encompasses four major hospitals (General, Pediatrics, Obstetrics and Gynecology, and Rehabilitation). The City has an inpatient capacity of 1,095 beds. The latest figures reveal that there has been a drop in patient visits to public hospitals, suggesting a clear shift to private health care facilities. The private sector has heavily invested in the country’s health care sector benefiting from shortages and delays at the MOH health care facilities. In addition, many patients also travel abroad for treatment. . (CENTER FOR INTERNATIONAL TRADE DEVELOPMENT, California 90250 USA, http://elcamino.citd.org, 29/08/2004)
150
AppendixIII Near East Medical Market Overview SYRIA The demand in Syria for advanced medical equipment is growing rapidly, particularly for the supply of high-tech equipment for hospitals and universities. The Ministry of Health, (MOH) recently signed an E100 million loan agreement with the European Investment Bank (EIB), to equip 15 new 120-bed capacity public hospitals, according to European standards. Efforts are underway to equip 34 out of 63 planned new hospitals, within the next two years. The Ministry plans to expand its national facilities such that there will be one medical center for every 10,000 persons in rural areas, and one for every 20,000 in cities by the year 2020. The Ministry has also adopted measures to expand the Syrian medical industry by promoting creation of a well-trained labor force, developing standards for appropriate medical care, and promoting administrative development with a special emphasis on the integration of information technology with medical care. For the second consecutive year, an international exhibition for medical, pharmaceutical, dental, and laboratory equipment, and for hospital services was held June 12-16, with the participation of many European and Arabic countries. Equipment on display included: dialysis equipment, diagnostic tools such as X-ray, ultra-sound, MRI (Magnetic Resonance Imaging); CAT scanners, ECG and EEG equipment; laboratory analysis equipment; intensive care units (ICU) and monitors; laser equipment for micro surgery (laparoscopes for minimally invasive surgery) and dermatology; surgical and other instruments; cardiology equipment (color Doppler, monitors, etc.), and specialized equipment for interventional therapy (catheter, cardiac recorders, stents, etc). Disposable medical supplies (gloves, plastic tubing, sutures, needles, syringes, etc.), which are also in demand, were displayed, as well as oxygen cylinders, masks, pressure-measuring instruments, etc. U.S. products are highly sought after, but only make-up 6-7% of total imports, largely because of price considerations. European companies have also been highly effective in marketing their products and the role of agents/distributors is important. Used medical equipment is not permitted in Syria, but reconditioned equipment that is warranted as if it is new may be imported. However, the government has recently eased these measures by
151
AppendixIII Near East Medical Market Overview allowing expatriate doctors returning permanently to Syria to bring back their used hospital and medical equipment. .
(CENTER FOR INTERNATIONAL TRADE
DEVELOPMENT, California 90250 USA, http://elcamino.citd.org, 29/08/2004) TUNISIA Tunisia’s public health system provides free or highly subsidized health care to 40 to 50 percent of the population. Public health services, however, are under-financed, and the organization of the health sector and health insurance mechanisms are fragmented and financially
non-viable.
(http://lnweb18.worldbank.org/mna/mena.nsf/Countries/Tunisia/046B431E5C5E7372852 567EE0068D626?OpenDocument , 23/08/2003) Tunisia’s health system is dominated by the public sector, in terms of both the health services infrastructure, consisting essentially of hospitals, and financing. In this public health sector infrastructure, the bed: population ratio has held relatively constant at about 2 beds per 1,000 inhabitants; 90% of these beds are found in public health facilities throughout the territory. The private sector has always existed alongside the public sector. Its infrastructure has developed relatively rapidly in the past decade, especially its hospital component. Nevertheless, it should be noted that private hospitals represent only one tenth of the country’s total hospital capacity and that the number of paramedical personnel in private practice is relatively low, constituting barely 2% of the total paramedical personnel. Health expenditures quintupled in current dinars soaring from D249 million in 1958 to 1,255 million .In terms of financing, there has been a decrease in the share financed by the State and an increase in that financed by social security. Here it should be noted that the private and mutual insurance systems contribute very little to the coverage of health expenditures,
and
its
share
is
included
in
the
household
(http://www.paho.org/English/HDP/HDD/25Acho.pdf, 23/08/2004).
152
expenses
AppendixIII Near East Medical Market Overview TURKEY The Government’s healthcare services needs to cope with a rapidly expanding population (currently about 67 million and growing by nearly two% annually). Health expenditures represent approximately 4% of GNP. The private sector is actively expanding its role in the health sector. Capital-intensive medical technologies, such as magnetic resonance imaging (MRI), computed tomography (CT), and megavolt radiation therapy will continue to be purchased by Turkish hospitals. Major suppliers are the United States, Europe, and Japan. Demand for used, refurbished equipment (traditionally low), has increased over the last few years and is becoming an alternative supply source. Turkish import regulations permit the importation of used equipment, no more than five years old. Equipment between five and ten years old is technically subject to a 50% import duty. The importation of anything over ten years old is prohibited. All medical equipment imports are subject to the Turkish Standards Institute (TSE) approval. USFDA approval is regarded as a seal of quality. UNITED ARAB EMIRATES UAE has seen remarkable progress in health care and comprehensive health programs have been adopted to meet the needs of UAE society. Currently the UAE has a comprehensive, government-funded health service and a developing private health sector. The Ministry of Health (MOH) budget has increased from $274 million in 1991 to $435 million in 2002 with an average increase of 5.2% per year. The MOH spends approximately 1.5% of its annual budget on treatment abroad. Approximately 5.5% are spent on medical machines, tools and supplies. Health care infrastructure has kept pace with other health care developments to ensure that adequate services are provided in the Emirates. In 1971, there were only seven hospitals and 700 beds in the UAE. By year 2001 the number of hospitals had risen to 51, the number of physicians had also risen to 1,535 and nursing staff to 4,664. The number 153
AppendixIII Near East Medical Market Overview of clinics and health centers had also increased from 21 to 115 well-equipped modern centers. Twenty-five of the hospitals with 3,260 patient beds are run by the MOH. Four hospitals with 1,236 beds are run by the General Authority for Health Services for Abu Dhabi. Another four hospitals with 1,524 beds are run by Dubai’s Department of Health and Medical Services. The Department of Defense runs 4 hospitals. Moreover, there are three private non-profit hospitals with 148 beds, twenty-one privately owned hospitals with 827 beds, 1019 privately owned clinics, and 1 hospital with 36 beds run by Abu Dhabi National Oil Company. The Government plans for expansion and upgrading of its health care system is ongoing. The construction of 17 public hospitals including extensions to existing hospitals will add 1,800 beds in various medical outlets and nearly doubling the bed capacity of public hospitals in the UAE over the next 10 years. The MOH has actually allocated $58 million from its 2002 budget for new projects that include health centers, hospitals, a cardiology center, a dentistry center, and upgrading of current hospitals facilities and service. Moreover, the MOH has granted licenses for the establishment of five new private hospitals in Abu Dhabi and Al Ain with a capacity of 250 beds. The UAE Government provides its nationals with a relatively free healthcare system administered by its Federal Ministry of Health. For expatriates, which currently comprise 80% of the population a payment of $82 per year is required to obtain health cards, which entitles the holder to relatively free medical services at all MOH facilities. The health card is a mandatory requirement for each expatriate and without it expatriate workers will not get a work permit in the UAE. Temporary visitors to the UAE were also able to get free health services during their stay in the UAE. These costs comprise of approximately 80% of the MOH budget. The MOH spends annually on medical services five times more that what it collects in medical fees it. In lieu of the above and to ease its burden, the MOH decided that its clinics will no longer provide medicines to expatriate cardholders, but they will have to purchase them from private pharmacies. It also decided that visitors to the UAE and
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AppendixIII Near East Medical Market Overview residents without health cards or with expired ones would have to pay fees for hospital beds and surgical operations. In fact, just recently the UAE Cabinet approved a memorandum of understanding by MOH, which obligates all federal and local ministries and departments, as well as the private sector to insure their employees, nationals and expatriates, with recognized insurance companies. These new policies would effectively reduce the government’s role in offering subsidized healthcare, as well as abolish the current health card system for expatriates. The Health insurance business will grow by at least a 1000% for two or three years compared to about 30% now. There are few insurance companies that provide comprehensive medical insurance in the UAE. Major players are: Alico, Alliance Insurance, National General Insurance, BUPA Health Service, HealthNet, and Al Sagr National Insurance Co, which has recently won a big contract in association with Nextcare from Etisalat covering more than 22,000 beneficiaries. Insurance companies interested in operating in the UAE are recommended to review Chapter 6 of this guide. In 2001, the UAE market for medical equipment and supplies was estimated at $390 million. Local production accounts for only 6.7% of the market for medical and pharmaceutical supplies. 3% of imports and locally produced medical supplies are reexported. The UAE imports medical equipment and pharmaceuticals from U.S.A., France, Germany, Italy, UK, Italy, Sweden and Japan. Companies that wish to export medical equipment to the UAE are required to have a local agent registered with the MOH. Medical equipment carries a 4% import duty. The MOH, in addition to introducing new services and building new hospitals, is moving towards privatizing hospital management in a number of government run hospitals. The General Authority for Health Services (GAHS) is the new entity, which is currently managing 4 hospitals with near-future plans to manage all of Abu Dhabi’s Hospitals. GAHS is heading towards privatizing the management of all hospitals under its authority. In fact, one of its hospitals, Khalifa Medical Center a new 325-bed, is being managed by Inter-Health Canada. Al Conrnich Maternity Hospital, which is also a GAHS hospital, is
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AppendixIII Near East Medical Market Overview being managed by a UK firm, Allied and the contract is due for re-bid. . (CENTER FOR INTERNATIONAL
TRADE
DEVELOPMENT,
California
90250
USA,
http://elcamino.citd.org, 29/08/2004) YEMEN Yemen' s Ministry of Public Health cannot cope with increasing demand for modern health services, so it has encouraged the private sector to establish hospitals and clinics. Statistics indicate that Yemen has over 107 government hospitals, 210 private hospitals, over 760 health care centers and clinics, and 3,000 drug stores, representing a significant market. Yemeni expatriates and businessmen are planning to invest in larger hospitals. More than 60 private companies are importing and trading in medical instruments, supplies, and pharmaceuticals. . (CENTER FOR INTERNATIONAL TRADE DEVELOPMENT, California 90250 USA, http://elcamino.citd.org, 29/08/2004)
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AppendixIV List of Invited companies
12 Appendix IV List of Invited Companies 1. MAICO Diagnostic GmbH 2. Sentronic GmbH 3. CARE diagnostica Deutschland 4. Acto GmbH 5. medicap clinic GmbH 6. Armeda Medizintechnik GmbH 7. AESKU.DIAGNOSTICS 8. AID GmbH 9. Blazejewski MEDI-TECH GmbH 10. allgaier instrumente GmbH 11. Dimeda Instrumente GmbH 12. ABT GmbH 13. EKF diagnostic GmbH 14. W. Bender GmbH & Co. KG 15. Dräger Medical AG & Co. KGaA 16. gbo Medizintechnik AG 17. Medizintechnik Berlin GMBH 18. SIGMA Medizin-Technik GmbH 19. Helmut Hund GmbH 20. AID Diagnostika GmbH 21. Pulse Biomedical, GmbH 22. Cosmedico Medizintechnik GmbH, 23. Curatec Services GmbH 24. medac GmbH 25. ENDOMED, Endoskopie und Video-GmbH 26. Apparate- und Maschinenbau GmbH 27. MAP Medizin-Technologie GmbH 28. E&L GmbH 29. Belimed GmbH 30. Dr. K. Hönle Medizintechnik GmbH 31. PAJUNK GmbH Medizintechnologie 32. Wero-medical Werner Michallik GmbH & Co. KG 33. ITD GmbH 34. mepro Medical Production GmbH 35. EnviteC-Wismar GmbH 36. Fahl Medizintechnik-Vertrieb 37. Memmert GmbH+Co.KG 38. CLONDIAG chip technologies GmbH 39. Greiner Bio-One GmbH 40. Vogel GmbH & Co. KG 41. DAVITA® GmbH & Co. KG 42. Haynl-Elektronik 43. HNO- Medizintechnik 157
AppendixIV List of Invited companies 44. GANSHORN MEDIZIN ELECTRONIC GMBH 45. Geratherm Medical AG 46. Gimmi GmbH 47. Gründler medical 48. Barkey GmbH & Co. KG 49. Hans o.MAHN&CO 50. Hansen Med 51. Mindworld GmbH 52. Compumedics Germany GmbH 53. MERIOPLANT Medical GmbH 54. Elektrotechnische Geräte Vertriebs GmbH 55. vitaphone GmbH 56. Meyer-Haake Medical Innovations 57. Elcat GmbH 58. ESCHWEILER GmbH & Co. KG 59. Olympus Europa GmbH 60. schwarzer GmbH Medical Equipment for Diagnosis 61. inomed Medizintechnik GmbH 62. Greiner International GmbH 63. CTVOPtimum GmbH 64. funeralia 65. IPS InterMedical Promotion Services 66. ENDO-TECHNIK Wolfgang Griesat GmbH 67. limmer laser GmbH 68. MPV-TRUMA 69. Martin Gruber Medizintechnik GmbH 70. Innovationszentrum Therapeutische Medizintechnik GmbH 71. Slee Mainz 72. Happersberger Otopront GmbH 73. ulrich GmbH & Co. KG 74. BANDELIN electronic · GmbH & Co.KG 75. aap Implantate AG 76. Oculus Optikgeräte GmbH 77. Sense Lab 78. DRG Instruments GmbH 79. 3B Scientific GmbH 80. TROGE MEDICAL GmbH 81. Herrmann Apparatebau GmbH 82. Bernd Richter GmbH 83. MediTECH electronic GmbH 84. Dr. Osypka GmbH Medizintechnik 85. nopa instruments Medizintechnik GmbH 86. TROGE MEDICAL GmbH 87. Dr. Langer GmbH 88. Weisig Maschinenbau GmbH 89. VISIPLEX Medical Systems GmbH
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AppendixIV List of Invited companies 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100. 101. 102. 103. 104. 105. 106. 107. 108. 109. 110. 111. 112. 113. 114. 115. 116. 117. 118. 119. 120. 121. 122. 123. 124. 125. 126. 127. 128. 129. 130. 131. 132. 133. 134. 135.
Medset Medizintechnik HOFFRICHTER GmbH Berthold Detection Systems Barkey GmbH & Co. KG B·R·A·H·M·S FRANK OPTIC PRODUCTS GmbH Karl Heck GmbH Medizin- und Sauerstofftechnik Berger & Schilling Medizintechnik GmbH Heinz herenz GmbH Franz Jakoubek Medizintechnik GmbH RICHARD WOLF GmbH SCHLEICH GmbH SONOACE GmbH Heinen + Löwenstein' s Elcat GmbH KARL STORZ-Verwaltungsgesellschaft mbH KD Medical GmbH Kimetec Medizintechnik GmbH Kohlen-Medizin-Technik OHG HUM Gesellschaft für Homecare und Medizintechnik mbH Corscience GmbH & Co. KG Beatmungstechnik GmbH Accura Medizintechnik GmbH Uniphy Elektromedizin Beteiligungs-GmbH ORGENTEC Diagnostika GmbH Provita GmbH Medizintechnik LAWTON Medizintechnik Metallform GmbH & Co. KG Polymed GmbH SonoSite GmbH arewus Informationsanforderung Primed Halberstadt Medizintechnik GmbH MMM Munchener MedizinMechanik GmbH A.R.C. Laser GmbH Asclepion Laser Technologies GmbH joimax GmbH PEGASUS® GMBH Kröber GmbH Medicon LEISEGANG Feinmechanik-Optik GmbH LRE Medical GmbH DEMEDITEC Diagnostics GmbH Somatex GmbH Mammendorfer Institut für Physik und Medizin MIPM GmbH MAVIG GmbH MELAG Medical technology
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AppendixIV List of Invited companies 136. 137. 138. 139. 140. 141. 142. 143. 144. 145. 146. 147. 148. 149. 150. 151. 152. 153. 154. 155. 156. 157. 158. 159. 160. 161. 162. 163. 164. 165. 166. 167. 168. 169. 170. 171. 172. 173. 174. 175. 176. 177. 178. 179. 180. 181.
quartett GmbH inomed Medizintechnik GmbH Nessler Medizintechnik GmbH & Co KG MediTrade Medical Trading GmbH OPTEC Endoscopy Systems GmbH PENTA GmbH PFM AG PicoMed GmbH Metrax GmbH Günter Bissinger Medizintechnik GmbH MAHE-Barthelmes Medizintechnik GmbH WEYER MEDICAL GMBH ROBERT RIELE GmbH & Co KG Schmitz u. Söhne GmbH & Co. KG Sutter Medizintechnik GmbH Shimadzu Deutschland GmbH SMT Medical S.P.L. Elektronik GmbH Medical EcoNet GmbH Osartis GmbH & Co. KG biolitec Getemed AG LISA laser products OHG SPEAD-DOPPLER-SYSTEME GmbH waeco Tricumed Medizintechnik GmbH MAT PlasMATec GmbH WORLD OF MEDICINE AG Buck Elektromedizin GmbH FAROMED GmbH Medizintechnik Haux-Life-Support GmbH Schwind Medizin Medlab medizinische Diagnosegeräte GmbH WaveLight Laser Technologie AG NORMED Medizin-Technik GmbH medis. Medizinische Meßtechnik GmbH Advanced Medical Systems GmbH (AMS) beurer Dornier MedTech Europe EB Medical MGB AJZ Engineering GmbH mtr plus Vertriebs GmbH Diagramm Halbach GmbH & Co. KG custo med GmbH Phillip kirsch GmbH
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AppendixIV List of Invited companies 182. 183. 184. 185. 186. 187. 188. 189. 190. 191. 192. 193. 194. 195. 196. 197. 198. 199. 200. 201. 202. 203. 204. 205. 206. 207. 208. 209. 210. 211. 212. 213. 214. 215. 216. 217. 218. 219. 220. 221. 222. 223. 224. 225. 226. 227.
Gutmann Medizinelektronik Ackermann Instrumente GmbH heckel medizintechnik Medela Medizintechnik GmbH & Co Handels KG weinmann IT-med GmbH Medical index Airnergy Happersberger Otopront GmbH clinico Biegler GmbH Brain Products GmbH Abbott GmbH & Co. KG ATMOS MedizinTechnik GmbH & Co. KG TRACOE medical GmbH FRANK OPTIC PRODUCTS Greggersen Gasetechnik GmbH LEA Medizintechnik GmbH DISCHER Technik GmbH CORTEX Biophysik GmbH RADiMED WISAP mbH PAUSCH technologies NTTF - new technologies in thin films GmbH tic MedizinTechnik GmbH & Co. KG Mechatronic medical solutions custo med GmbH DUFNER Instrumente GmbH Rudolf Medizintechnik GmbH & Co.KG Peter Brehm GmbH ASSKEA GmbH Deutsche Nemectron GmbH LaserVision GmbH CBC (Deutschland) GmbH Siemen medical Olympus DEUTSCHLAND GMBH Mora med GmbH B.Braun Melsungen AG Eppendorf AG Geuder AG Heine optotechnik GmbH& Co.KG kendro labrotary products GmbH karl otto braun KG LEICA Microsystems maquet komet medical GmbH & Co.KG
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AppendixIV List of Invited companies 228. 229. 230. 231. 232. 233. 234. 235. 236. 237. 238. 239. 240. 241. 242. 243. 244. 245. 246. 247. 248. 249. 250. 251. 252. 253. 254. 255. 256. 257. 258. 259. 260. 261. 262. 263. 264. 265. 266. 267. 268. 269. 270. 271. 272. 273.
Bankgesellschaft Berlin AG Bioscientia GmbH Gebr. Martin GmbH Kendro KSG Sterilisatoren GmbH Meyra Wilhelm Meyer GmbH & Co. KG ORGA Kartensysteme GmbH PHYSIOMED Elektromedizin AG Vogel & Halke GmbH & Co. VVA Health Marketing GmbH aap Implantate BLANCO GmbH & Co KG Kallmeyer Medizintechnik GmbH & Co. KG Ormed GmbH Karl Otto Braun KG Leica Microsystems Wetzlar GmbH MEIKO Maschinenbau GmbH & Co. KG Müller-Instrumente + Medizintechnik GmbH Schölly Fiberoptic GmbH Joh. Stiegelmeyer GmbH & Co. KG Unbescheiden GmbH Viasys Healthcare GmbH Eppendorf AG richard wolf GmbH AS Medizintechnik GmbH mtp gmbh belimed AG AID Autoimmun Diagnostika GmbH Andreas Hettich GmbH & Co. KG Karl Hecht KG Martin Medizintechnik Bioserv Analytik und Medizinprodukte GmbH Carl Zeiss Meditec AG´ Drager Medical systems ADE GmbH & Co. trilux-lenze GmbH & Co. KG Dlouhy GmbH Visiplex Europe Jaeger Viasys Healthcare GmbH Berchtold GmbH & Co. KG ANTOX Verwaltungs GmbH ERKA GmbH & Co. KG Chemische fabrik Dr.Weigert GmbH & Co. KG Berchtold GmbH & Co. KG Pajunk GmbH Ganshorn Medizin Electronic GmbH
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AppendixIV List of Invited companies 274. 275. 276. 277. 278. 279. 280. 281. 282. 283. 284. 285. 286. 287. 288. 289. 290. 291. 292. 293. 294. 295. 296. 297. 298. 299. 300. 301. 302. 303. 304. 305. 306. 307.
Destroject GmbH, Medical Devices Acto GmbH laservision GmbH Erbe Elektromedizin GmbH Erler-Zimmer GmbH & Co. KG Schultes medacata GmbH & Co. KG A.R.C. Laser GmbH Ecolab GmbH & Co. oHG DMI GmbH & Co. KG Abbott GmbH & Co. KG Diagnostika Heckel Medizintechnik GmbH Pulsion Medical Systems AG Berger & Schilling Medizintechnik GmbH FMI Föhr Medical Instruments GmbH Ergo-Fit GmbH & Co. KG KSG Sterilisatoren GmbH Ardo medical AG Microlife AG infoplus GmbH & Co. KG argus Medical AG Prisma Diagnostika GmbH Hamilton Medical AG SIGMA Medizin-Technik GmbH Medicine Devices GmbH & Co. KG Medical Imaging Systems GmbH & Co. KG Mechatronic GmbH Homoth Medizinelektronik GmbH & Co. KG Rudolf Medizintechnik GmbH & Co. KG Sunnex GmbH Stratec Biomedical Systems AG TMP Tüshaus Medical-Produkte GmbH Genekam Biotechnology AG WaveLight Laser Technologie AG RFQ-Medizintechnik GmbH & Co. KG
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