Medical Device Growth in Emerging Markets: Local Companies versus Multinational Companies

This week I found an interesting article by Nicholas Donoghoe, Ajay Gupra, Rob Lindern, Palash Mitra and Ingo Beyer Von Morgenstern on Mc Kinsey’s website. They focus on the medical device growth in emerging markets. In the emerging markets, increased access to care and new features versus price tradeoffs leads to revising the existing strategies and business models.

To this end, there are a few lessons learned:

·         -Multinational companies (MNCs) enter and introduce new, innovative technologies but they are rarely customized to local needs.

·       -  Locals enter and develop new business models. They meet the micro-segment needs, they are quick in customizations, they have less sensitivity to multiple dealers than their US or EU counterparts, they have lower cost, they are more effective in government relationships. Local products often have advanced features with an affordable price, and thus this generates demand and growth in the mid-tier market.

·        - In creation of successful local products, locals perform better through a cheaper and more productive R&D opportunity than their MNC competitors. They do better in manufacturing because they have the ability to source locally, which lowers the production costs. Also, they can better employ direct sales force with lower labor costs. Locals utilize different distributors, which makes them more flexible. Often, they have engineers in nearly every location where they sell a product, which makes it easier for the customers to get support when they face a problem. This also opens the way for the next potential order.

Although MNCs have some attempts in responding the competitiveness of the locals’, they changed their strategies. Some of the MNCs, hired local leadership, strengthened its relations with the local government. Some other MNCs performed local existence to lower costs and meet the needs of mid-tier customers.  For example, Siemens, is now focusing on SMART (simple, maintenance-friendly, affordable, reliable and timely to market) product design.

Medical devices, still undergoing a rapid growth and change, propose opportunities in developing markets. Today, barriers such as affordability, accessibility and acceptability have been removed. MNCs should plan, organize and act like local companies. They need to encourage local decision making, enable local experimentation. But there are still remaining questions. Would it be sustainable in economic terms to act like local companies?

You can reach the whole article from the link below:

http://www.mckinsey.com/Search.aspx?q=medical%20device%20growth%20in%20emerging%20markets%20lessons%20from%20other%20industries