Business Sales Strategy - Report Example

Running Head: [short [institute of affiliation] I. Introduction This paper aims to examine three geographic market prospects for MH Co. The selection criteria is based on the size of the market relative to the worlds total global industry for technical aids, a sub-market under the health care equipment and supplies market. The selection leads to Japan, China and Germany, three of the largest markets for the companys line of products after the US. By analyzing the market by the PEST framework, implications on the companys entrance strategy is determined. Factors like these as well as smaller cultural factors all have an effect on the companys entrance strategy, as part of its sales strategy in the end. II. Body A. Selection criteria In order to more effectively select countries where the company will expand its operations, the process has to be strategic. From a global marketing viewpoint, this can be done by looking at the overall market, the global market and determining the most profitable market where the company can capitalize on the opportunity. There are other ways to segment the global market and determine how the countries will be selected, but the most fundamental is to segment according to the size of the market because this has an effect on the profitability of operations. The table above illustrates the data gathered from Data Monitors Health Care Equipment & Supplies Industry Profiles for respective countries which are all published on May 2009 (DataMonitor 2009). The largest geographic markets in the world include the following: UK, Canada, China, Japan, Germany and France—aside from the United States. Therefore, in order to measure the sub-market for the technical aid category, the revenues in 2008 in the respective countries are multiplied by the percentage breakdown of sales for technical aids. The results show that the top three countries in terms of market size for the technical aids include Japan with US$4.66 billion, China with US$2.15 billion, and Germany, with US$1.87 billion. These are the three countries that comprise the companys main selection in terms of segment size. Aside from these data, according to OECD, Europe and Japan has a larger aging population than the US (Pearson 2009, 3). Because Germany has the largest percentage of share in Europes total market for health care equipment and supplies (Germany, DataMonitor 2009), as well as Japan having the largest percentage of share in Southeast Asias total market for health care equipment and supplies, with China following it (China, DataMonitor 2009), these three markets are the best prospects for MH Co. B. Country A: Japan Japan is the biggest spender in terms of health care in Southeast Asia. Because the Japanese market is the second largest in the world, after the US market, Japan is a very attractive prospect for MH Co. This increase in spending is due to Japans aging population (Japan, DataMonitor 2008). The countrys government has allocated a huge sum to its social and health care services in order to support this aging population (Japan, DataMonitor 2008). Although Japan is a good prospect, there are still risks associated with operating in the country. As for political risks, the political instability due to the conflicts between the countrys two parties have started to bottleneck many bills in the parliament (Japan, DataMonitor 2008). Because of political instability, there could be unexpected things that may benefit or harm MH Co., depending on the political landscape. Although Japan is one of the industrialized countries with high per capita income, the countrys economy has been declining due to issues of foreign debts, which are 150% of the countrys GDP (Japan, DataMonitor 2008). The deflation has also been an issue in the country. The decrease in tariff for health care products as well as increase in the approval process for health care goods that enter the country is also favorable to MH Co (Anast 2001). As for the social landscape of the country, the short-term looks good as for MH Co.s future operations in the country because the aging population of the country will boost the demand for the companys products (Japan, DataMonitor 2008). However, because the countrys growth rate has been negative for quite a while, the declining population is a major issue, which can hamper the companys prospects for growth in the future. On the other hand, Japans technological landscape is one of the most advanced in the world (Japan, DataMonitor 2008). The major concern about MH Co.s pursuit of venture in Japan is the apparent differences in language, religion, and other cultural factors such as a way of doing things. Japanese, like many Asian cultures are at the high-context end of the spectrum, which means that nonverbal and contextual communication is given more importance. Also, because the health care system in Japan is centralized, the company will have to deal more with government agencies instead of dealing with individual and institutional customers like in the US (Japan, DataMonitor 2008). C. Country B: China The attractiveness of the Chinese market is due to its fast-growing economy that expands by double digit during the past decade. Having a population of 1.3 billion (China, DataMonitor 2008), China as the most populous country in the world is definitely an attractive market for MH Co. It is also the second largest spender in terms of technical aids in Southeast Asia, next to Japan (China, DataMonitor 2009). Chinas political landscape is relatively stable, because the party that holds the power starting way back the 1940s has made continuous political improvements to the country (China, DataMonitor 2008). However, foreign investors are still wary of getting into the country by means of foreign direct investments due to rampant corruption in the government as well as weak corporate law. The countrys judicial system is also weak because of the scarce number of qualified judges (China, DataMonitor 2008). This can be a significant factor to MH Co.s decision. As for the countrys economic landscape, the significant economic policies of the government have enabled China to grow by double-digit during the past year. The increase in FDIs have also helped expand the countrys economy. The negative side to this is that the economy becomes overheated, which leads to destabilizations such as higher inflation rates (China, DataMonitor 2008). As for the countrys social climate, the countrys population has been in a constant growth due to the governments one child policy (China, DataMonitor 2008). However, the income disparity among rural and urban inhabitants is increasing, which has caused increased urban migration in the past decades. The companys health care system requires people to pay a premium higher than that of the government, and most of its hospitals are government-funded (China, DataMonitor 2008). This can have an impact with the MH Co.s future prospects; also because the countrys aging population constitute a huge percentage of the countrys total population which is in effect, an opportunity for the company. As regards its technological landscape, China has been spending a lot on infrastructure constructions. However, because of government interference, R&D has been slow in the country, which makes technological progress slower in the process (China, DataMonitor 2008). This can impact MH Co.s decision to enter China through FDI because of the slower technological progress. The major cultural factors that can impact MH Co.s include the differences in language, as well as some norms. China, like most Asian cultures is also a high-context culture where nonverbal communication and contextual meanings play a huge part in its culture. The companys entrance strategy to China will depend on these factors, whether it pursues FDI or only strategic alliances who are more attuned to the market and the culture, in order to minimize the risks in terms of its operations. D. Country C: Germany Germany has the largest percentage in terms of the health care equipment and supplies market in Europe (Germany, DataMonitor 2009). Being the fourth largest market in the world for MH Co.s products, Germany is an attractive prospect. The countrys political landscape is relatively stable for years, as well as good social policies to balance with steady economic growth. The countrys successive parties have maintained “one of the worlds best provision of social welfare, health care and educational services (Germany, DataMonitor 2009, 3).” As for the countrys economic climate, although Germany has experienced relatively steady economic growth during the past years, the countrys GDP is in a constant decline (Germany, DataMonitor 2008). This can have future implications on the operations of MH Co. in the country. As for the Germanys social landscape, the country has one of the most advanced health care systems in Europe, where health insurance is fully commercialized and highly decentralized (Germany, DataMonitor 2008). This is more similar to the health care system in the US, thus this will have an impact on the companys entrance strategy in the country. As for its technological landscape, Germany is one of the most advanced countries as it spends 2.5% of its GDP in research and development. This is intended to be increased by the government up to 3% in the coming years (Germany, DataMonitor 2008). Among the three countries, Germany being a western nation has more similarities to the US than Japan and China. Differences in language is also an issue, but some Germans are also trained to speak and understand English. The aging population is also majority in the country, therefore this implies a huge opportunity for the company (Germany, DataMonitor 2008). The similarities in many cultural norms such as being a low-context culture, as well as the capitalist structure of its health care industry is favorable to the company as some norms it has practiced in its US operations may be applicable when it pursues its operations in the country. III. Conclusion The global market is much more complicated that a single geographic market. Differences in many external factors such as political, economic, social and technological, as well as cultural factors can play a huge role when a company determines its entrance strategy in a country. In MH Co.s case, it is not just about selling the products. The PEST framework has given an insight to the differences between the individual countries and the US, and the implications on the future operations of the company. When deciding on the entrance strategies, the company can choose from plain exporting, strategic alliances, as well as foreign direct investments as its strategy. The strategy differs with each country. For the Japanese market for example, the company can pursue foreign direct investment, so that it can utilize the advanced level of technology in the country. However, the differences in structures of the health care industry in Japan, which is centralized will only make it less cost effective. Therefore, licensing strategy can be utilized instead of a direct investment in the country. For China, the major concern is the differences in the culture which can result in conflicts and can affect the workforce productivity of the subsidiary if the company chooses to enter through foreign direct investments. Also, the level of technology in China is not yet at par with the US, which can be a problem in its manufacturing operations. The corruption in the government, especially in the health care industry is also rampant. With all these, the company can instead choose to have a strategic partner or joint venture with a local player, where the company can get through its products to the Chinese market. These players know the cultural landscape better, know how to deal with corruption in the public sector, and has better access to distribution systems in the country. At the very least, MH Co. will only have to deal with the people of the partner company. Foreign direct investments can work in Germany. With the presence of a strong manufacturing capability, advance technology and some similarities in the ways things are done in the US, FDI can be a good strategy. This has also been the strategy of other US-based multinational firms in that country. Because of the similarity in the structure of its health care industry with that of the US, MH Co. will have an easier time setting up its operations in Germany than setting up in the other two countries. On a global perspective, these factors definitely affect MH Co.s sales strategy. The companys sales strategy should embody its entrance strategy as well as relations to other parties involved in the other geographic markets it intends to operate in. Reference List (2008). DATAMONITOR: Japan. Japan Country Profile, 1-95. http://search.ebscohost.com (2008). DATAMONITOR: China. China Country Profile, 1-94. http://search.ebscohost.com (2008). COUNTRY ANALYSIS REPORT: Germany. Germany Country Profile, 1-79. http://search.ebscohost.com (2009). Health Care Equipment & Supplies Industry Profile: Canada. Health Care Equipment & Supplies Industry Profile: Canada, 1. http://search.ebscohost.com (2009). Health Care Equipment & Supplies Industry Profile: China. Health Care Equipment & Supplies Industry Profile: China, 1. http://search.ebscohost.com (2009). Health Care Equipment & Supplies Industry Profile: France. Health Care Equipment & Supplies Industry Profile: France, 1. http://search.ebscohost.com (2009). Health Care Equipment & Supplies Industry Profile: Germany. Health Care Equipment & Supplies Industry Profile: Germany, 1. http://search.ebscohost.com (2009). Health Care Equipment & Supplies Industry Profile: Global. Health Care Equipment & Supplies Industry Profile: Global, 1. http://search.ebscohost.com (2009). Health Care Equipment & Supplies Industry Profile: Japan. Health Care Equipment & Supplies Industry Profile: Japan, 1. http://search.ebscohost.com (2009). Health Care Equipment & Supplies Industry Profile: United Kingdom. Health Care Equipment & Supplies Industry Profile: United Kingdom, 1. http://search.ebscohost.com Anast, D. (2001). Marketing and regulatory requirements in some emerging medical device markets. International Journal of Medical Marketing, 2(1), 13. http://search.ebscohost.com Pearson, Mark. (2009 September 30). Written Statement to Senate Special Committee On Aging. OECD. http://www.oecd.org/dataoecd/5/34/43800977.pdf Read More