Mckesson in Angola - Research Paper Example

 McKesson in Angola Name Institution Date Abstract This proposal focuses on Angola as a potential market for McKesson’s products and services. It also considers Angola as a potential Foreign Direct Investment (FDI) opportunity. Consequently, the proposal will take a close look at both the prospective market for possible investment and the company. Foreign Direct Investment (FDI) provides the easiest way of entering the Angolan market. This proposal will also focus on other methods of foreign investment. These alternative methods of foreign investment include licensing, franchising, merge and acquisition. The proposal will also provide additional information on the status of the market in Angola. In addition, it will provide the benefits and limitations that may arise. Consequently, based on thorough analysis, a recommendation will be given. McKesson in Angola Healthcare Overview The healthcare business is undoubtedly one of the biggest industries in the U. S. This is owed to the fact that a significant percentage of the economy is comprised of medical care facilities. Consequently, the government has to invest hugely in the efforts of making healthcare both affordable and available to the citizens. McKesson, a Fortune 500 global company, is one of the largest pharmaceutical distribution companies in the U. S. This is in accordance to McKesson’s website. However, the company also faces stiff completion from many others in the market. Consequently, there is need for expansion into other emerging markets. Africa offers a potentially viable target. Analysis of the Company McKesson is one of the largest healthcare companies in the U. S. It was founded in 1833 and its headquarters is located in San Francisco, USA. The company specializes in pharmaceutical distribution and healthcare IT systems and software. The company boasts of an expansive impact on the market, employing over 32,000 people. Its products include pharmaceuticals, household products, healthcare IT systems and healthcare services. Its annual revenue is approximately US$ 108.702 billion. Its vision is to create a more efficient and affordable healthcare system. Consequently, the company is confident of attracting potential investors due to its unrivalled status in the industry. Strengths of McKesson McKesson Company is the largest pharmaceutical distributor in North America. The company distributes a third of the medicines used in North America on a daily basis, supplying over 40,000 healthcare locations. McKesson is also America’s leading healthcare IT Company. Consequently, its software and hardware technologies are installed in over 70 percent of the hospitals found in the U. S. The company also offers advanced clinical decision support system. The company also boasts of an electronic health record system. This provides the physicians with better and efficient healthcare systems. The company is also proactive in the prevention of medical errors. This is made possible by the use of patient and medication safety technologies. Through this process, over 330,000 medication errors are prevented weekly. This efficiency and effectiveness in healthcare services makes it an attractive investment partner for other pharmaceutical companies. Weaknesses of McKesson Being one of the leading pharmaceutical companies in the world, McKesson is faced with the daunting task of always being the best as far as the pharmaceutical industry is concerned. Consequently, the company has to constantly come up with innovative and unique healthcare systems in order to maintain a high level of service production. Opportunities of McKesson Since McKesson is one of the largest pharmaceutical companies in the world, it enjoys the advantage of being an already accomplished and established company in the industry. McKesson is an esteemed multinational company with unique products that are available to large numbers of people all over the world. Boasting of a huge annual revenue turnover, the company is at an advantaged position of penetrating any market due to the vast resources at its disposal. Threats for McKesson The only threat to McKesson’s investment in other markets is the ability to protect its brands and trademarks. Being in a highly competitive industry, McKesson stands a huge risk of losing its trademarks to its competitors. Consequently, caution has to be exercised in the event of venturing into anew foreign market. Angola as an Emerging Market From an analytic point of view, Angola offers favorable conditions as a potential prospective target for invention. Being located in Africa, its healthcare system is not properly developed. Consequently, this creates a need for better and efficient healthcare systems. In addition, due to the high cost involved in the research and development of the healthcare systems, most of the African countries can not afford an efficient and effective healthcare system. However, there is an increase in efforts by the government and private sector for better healthcare services (Woods, 2006). This trend, coupled with the political goodwill and stability makes Angola a significant potential investment prospect. Angola is a country located to the South West of the African continent, bordered to the West by the Atlantic Ocean (Birmingham, 2006). Its official language is Portuguese and it has a population of about 18.5 million people as per the 2009 census. Unlike most African countries, this population is composed of only three main ethnic groups. This offers a suitable business environment because of various reasons. First and foremost, these ethnic groups enjoy a peaceful coexistence supported by a stable government. In addition, a large percentage of this population is also literate making it easy to business in Angola. However, like many other African countries, the country also struggles with high rates of inflation. The country also enjoys vast fertile agricultural plains of lands and a favorable climate. Like most of the other African countries, the country does not experience extreme climatic conditions like winter. The country also boasts of a huge Atlantic Ocean coastline to its West. Its infrastructure is quite developed and its capital city, Luanda, offers favorable conditions for business operations. Angola’s economy has been on a steady growth. Coming from a history of long spells of civil war, its economy is one of the fastest growing economies in Africa and the rest of the world with an average growth rate of 11.1 percent (Gallagher, 2000). In addition, the government, with the help of the International Monetary fund has embarked on projects to build its infrastructure. This is in accordance to the Global financial stability report. Consequently, this effort by the Angolan government to standardize the infrastructure is a noble move that encourages the influx of prospective investors into the countries fragile economy (Moran, Graham, & Blomström, 2005). According to The Economist, Angola’s economy has huge potential for growth in future. This is owed to the fact that Angola is endowed with huge deposits of diamonds and oil. In fact, diamonds and oil make up 60 percent of its economy (Hodges, 2004). Therefore the country relies heavily on these minerals. However, poor management of these resources and issues of corruption have resulted in Angola being rooted among some of the poorest countries in the continent. However due to the relative calm experienced in the region, there exist a number of large-scale agricultural systems. However, there also exist huge levels of social inequality with many people being classified as poor. Consequently, these huge social gaps result in serious structural problems in the country’s economy. This is evidenced the high uneven nature of distribution of resources with may if these resources concentrated in the capital, Luanda. Many of the other cities in the interior do not have access to the necessary infrastructural systems for prime business operations. Nevertheless, with the introduction of free markets, there is an opportunity for Foreign Direct Investment (FDI) into the Angolan market (Sader, 2000). In addition, the stabilized political situation and other efforts by the government to support the expansion of the infrastructure provide a sign of an improved potential prospect for business. Consequently, Angola remains to be a viable potential prospect for investment. What Conditions Exist in Angola that Could Benefit from McKesson’s Products? Angola’s population of about 18.9 million people provides a sufficient market base for an emerging African economy. With regards to the healthcare system in Angola, many of the local institutions stand to benefit immensely with the introduction of McKesson into Angola’s healthcare industry. This is owed to the fact that provision of affordable, quality, sufficient, effective and affordable healthcare is still a challenge in the republic of Angola. Therefore, the health sector stands to gain significantly fro the introduction of McKesson into the market. In addition, the existence of already established health facilities and institutions set up by the government provide McKesson with the desired basic infrastructural systems for establishment. Moreover, the introduction of McKesson into the industry would provide the locals with efficient and affordable healthcare systems. Investment Opportunities Angola mainly relies on imports for most of its pharmaceutical products (Cohen, 2007). Consequently, this offers an opportunity for McKesson to exploit and establish its operations in the Angolan market. In addition, being a developing and emerging market, Angola is open to the establishment of foreign multinational companies. However, the Angolan market may be a bit volatile due to vices such as corruption and poor infrastructure. Consequently, the Angolan government in conjunction with other organizations is working on minimizing corruption and improving the infrastructure. Therefore, whereas Angola offers an opportunity for companies like McKesson to invest in its healthcare industry, caution must be exercised in the process of investing. Investment must be based on high integrity level to avoid the instances of corruption. In addition, proper analysis of the infrastructural development must be analyzed so as to optimize the location of the establishment. However, the availability of a huge demand for effective and affordable healthcare system presents interested investment companies such as McKesson with a conducive and viable investment opportunity. This makes Angola a potential prospect for the establishment of McKesson. Different Ways to Enter the Angola Market In order to reap the benefit from the Angolan market, Foreign Direct Investment (FDI) must be long-term. In addition, due to the high poverty levels experienced in parts of the country, investors must also be willing to invest in on-the-ground facilities of the country. Like any other county, for business to thrive in Angola there is need for the formation of healthy business relationships with both the local businesses and the government. However, due to high levels of corruption, caution should be undertaken in this process. Consequently, high integrity standards are encouraged for potential investors in the Angolan market. Consequently, there exist a number of ways through which McKesson can enter the Angolan market. Based on the market analysis of the Angolan market and taking into consideration the threats that McKesson faces, the most suitable ways to enter the Angolan market would be as provided below. 1. Partnering with a Local Company Partnering with a local company can be facilitated by the U. S. Chamber of Commerce. This process facilitates the necessary steps undertaken in the establishment of a suitable partner for legitimate business with a U. S. firm. Thus, all the processes including access to publications, legal and consulting services can be undertaken (Shea, & Rosenow, 2010). Consequently, in order to effective engage in the local market of Angola, McKesson must be conversant with all these procedures and select a suitable partner with the capability of providing the necessary services. 2. Creation of a New Branch This process requires careful planning and implementation strategies. This is because opening of new foreign based branches could be risky. Though, Angola, poses a few challenges in terms of poor infrastructure, this should not be a challenge to a company of McKesson’s magnitude. This is because the company has the required resources to make this investment. Thus, only the risk factor could hinder this process. Consequently, if the risk is properly calculated, a noble investment can be undertaken. Thus, to minimize the risk factor, the resources provided by the Chamber of Commerce should be fully utilized. This will significantly cushion the company in terms of risk management. Due, to the high level of disparity in the distribution of resources and facilities in Angola, caution should be exercised in the selection of location of the business. As mentioned earlier, Portuguese is the official language in Angola. Consequently, it will be necessary to have all the product labels and ingredients written in Portuguese language. In addition, the marketing and advertising of these products have to be in the Portuguese language. In the process, cultural and ethical considerations should also be taken into consideration. Being an emerging market, competition in Angola is at greatly reduced levels and many locals would be receptive of foreign healthcare products. However, like any other investment, there are other costs to be considered. These include labor cost, pricing and taxation. Being a developing nation, the cost of labor in Angola is relatively low. The pricing of the products can be made based on the market dynamics of the local population. Consequently, the purchasing power parity (PPP) should be considered. Angola’s PPP is US$ 100.948 billion. This clearly reflects the local economic state of Angola. Consequently, the pricing of the products should be accordingly done. This is because it is crucial to get the pricing of the products right in accordance with the prevailing local market conditions and the purchasing power parity (PPP) for effective revenue collection. However, McKesson must also take into serious consideration the disparity in wealth distribution. Conclusion Based on this proposal, McKesson has a viable and profitable investment opportunity in Angola. This is because Angola is endowed with numerous minerals and the potential for future growth. Is rapid economic growth rate is a testimony to this fact. In addition, there are efforts by the government to curb corruption and improve the infrastructure. Despite the previous civil wars, the country has grown to political calm. The expensive nature of quality healthcare makes it a scarce commodity in the republic of Angola. Consequently, this creates the need for these services. McKesson is in a good position to take advantage of the business prospect offered in Angola. Therefore, Angola presents a safe and sustainable base for the establishment of McKesson. The necessary institutions for the facilitation of the establishment process are available in Angola. Angola is also subject to various treaties which promote free trade operations. However, in order to avoid competition, there is need for McKesson to act with speed in order to consolidate market share in Angola. This is owed to the dynamic nature of the Angolan market. In addition, to succeed in Angola, McKesson must employ effective locally based market strategies. Consequently, following this thorough analysis of the market viability of McKesson in Angola, the desired nation was found to viable for the establishment of McKesson. It is therefore the recommendation of this investigation that McKesson pursue a Foreign Direct Investment (FDI) program in Angola. The Foreign Direct Investment (FDI) program could be either of the two mentioned above. However, all the necessary considerations cited must be taken into account for a successful establishment. Partnership with a local company represents the simplest and easiest ways to pursue the Foreign Direct Investment (FDI) program. However, due to the alarming levels of corruption in Angola, this process could in turn be risky for McKesson. Consequently, based on its financial capability and the availability of the necessary framework in Angola, a full establishment would be the most suitable way for McKesson to enter and profit from the Angolan market. References Birmingham, D. (2006). Empire in Africa: Angola and its neighbors. Athens: Ohio University Press. Cohen, S. D. (2007). Multinational corporations and foreign direct investment: avoiding simplicity, embracing complexity. Oxford: Oxford University Press. Gallagher, P. (2000). Guide to the WTO and developing countries. Boston, MA: Kluwer Law International. “Global financial stability report: market developments and issues.” (2002). Washington, D.C.: International Monetary Fund. Health Care Information Technology Medical-Surgical Supplies and Pharmaceutical Distributor: McKesson. (n.d.). Health care information technology medical-surgical supplies and pharmaceutical distributor: McKesson. Retrieved June 15, 2012, from http://www.mckesson.com/en_us/McKesson.com/ Hodges, T. (2004). Angola: anatomy of an oil state (2nd ed.). Oxford: Fridtjof Nansen Institute in association with James Currey. Moran, T. H., Graham, E. M., & Blomström, M. (2005). Does foreign direct investment promote development? Washington, DC: Institute for International Economics. Sader, F. (2000). Attracting foreign direct investment into infrastructure: Why is it so difficult? Washington, DC: World Bank. Shea, B. J., & Rosenow, S. (2010). A handbook on the WTO customs valuation agreement. Cambridge: Cambridge University Press. Woods, N. (2006). The globalizers: The IMF, the World Bank, and their borrowers. Ithaca, N.Y.: Cornell University Press. Read More