GENICON: After the BRICS Choosing from Other Emerging MarketsBy: Alex Dea, Eduardo Bialostozky,Jose Gomez, Ravi Chikoti, Swetha Vasu

Executive Summary:

Based on our analysis of both financial and non-financial data, including the STEP factors, we are recommending that GENICON enter Singapore, Chile and the Philippines as their next 3 markets. Along with exhibiting the necessary financial indicators that we believe are important for new-age medical device companies when entering a new market, these three countries also scored strongly in non-financial indicators such as ease of doing business, social and political stability, and receptiveness of new technologies. Additionally, all three countries have a strong connection to the west either through historical military/colonial ties, as is the case with the Philippines, or more recently with economic ties in Singapore and Chile. Finally, GENICON is already doing business in several counties in South East Asia and Latin America, including Indonesia, Malaysia, and Thailand, as well as Brazil, Peru, Colombia, Bolivia, Venezuela and Uruguay. Below, is a detailed analysis of GENICONs STEP framework, as well as the financial and non-financial analyses that we used to make our final country selections.

STEP Framework

The STEP framework can help GENICON understand the implications and opportunities for entering various countries. By evaluating various criteria across the STEP framework, GENICON will be able to understand the implications and opportunities available for its next market entry. We recommend GENICON evaluate the following criteria when choosing their next country to enter:

Social:Evaluating the social factors of a country will help GENICON understand if the companys products and services will be attractive to serving the local population of a particular country. Furthermore, these social factors can help determine if there is an adequate demand and market need for GENICONs products. A crucial set of metrics to consider are population size and population growth. Entering a market that has a critical mass along with a positive population growth rate is ideal for GENICON and it will be important to ensuring there is a large and sustainable market for GENICON. GENICON will also want to evaluate is the quality of life and standard of living within new countries. Since GENICON provides products to healthcare providers, it will want to target markets where there are healthcare facilities and where people have access to these facilities. Last but not least, evaluating local social and cultural implications is important for GENICON to consider on a case by case basis. For instance, when GENICON expanded to India, they were challenged in entering the south of India which while lucrative, was served by the military medicine market. Each country will individual localized norms that GENICON will need to evaluate the attractiveness of entry.

Technology:In our increasingly connected world, technology enables and fuels globalization. As such, its important that GENICON evaluate several technological factors of a potential country. First, GENICON should evaluate factors around openness to technology and innovation. GENICON should evaluate how receptive a country is to a company that provides innovative, unique, or different products or services. In some cases, governments and people will be focused on the status quo, while in others, theyll be receptive to new offerings. Another technological factor to consider is the resources and infrastructure the country provides to companies that spur technology and innovation. If GENICON can enter a country that either offers incentives, in the form of tax breaks, funding, or access to resources for R&D advancements it could create future opportunities in the future for GENICON.

Economic:Evaluating economic factors are critical to determining if GENICON should enter a new country. To start, GENICON should evaluate GDP measures, such as GDP, GDP growth, and GDP per capita of a particular country. Since GDP measures the value of the goods and services of a countries commerce, GENICON can determine if the local economy and people that drive the economy make sense for it to enter. Furthermore, GDP growth and GDP per capita can determine if a country has viable longer-term prospects for GENICONs future. Another macro-level metric to consider is a countries friendliness to foreign business and investment. While some countries are open and welcoming of foreign companies, other countries are not. It will be important for GENICON to evaluate the ease of conducting business in any of its target countries before deciding to enter the country. A more specific metric GENICON should consider is healthcare spending within a particular country. Countries that spend more on healthcare services signal that there has been an established market for healthcare expenditures. Countries that spend less suggest either the market is not mature or there is not a significant amount spent. Both present challenges and opportunities, but in both cases GENICON would be wise to evaluate this expenditure.

Political:Evaluating political issues and implications is one of the most important criteria in the decision making process. In the past, this has been a challenge in past market entries for GENICON. First and foremost, evaluating the political stability of the country is a critical for GENICON. Since healthcare tends to be an industry with at least some government and political involvement, GENICON will want to target countries that they know will have a solid level of stability. In connection with political stability, GENICON will want to evaluate if there are any issues of corruption within a particular country. Since they are a U.S. based company GENICON must comply with FCPA guidelines which may limit countries they wish to pursue. Lastly, GENICON should evaluate the general nature of business-government relationships in the country it wishes to pursue. In some countries, regulations and intervention of government officials and agencies is a part of the cost of doing business. GENICON should evaluate this as it may hinder or help its ability to efficiently and effectively close business in a particular country.

Country Attractiveness Based on Financial Indicators

When selecting these three countries to analyze further, the group looked primarily at GDP growth rates, picking three countries that had relatively high rates compared to their neighboring countries and that were not already GENICON markets. Upon further analysis, though, only Chile looked like a plausible new market, with Vietnam and Ghana looking more like possible long term expansion options.

Chile: Out of all the countries listed above, Chile has by far the best mix of financial metrics. Even though at 5.32% their GDP growth rate is below the other two countries, this is based on a higher GDP and much higher GDP per capita. Additionally, their health spending as a percent of GDP is the highest of any of the three, at 7.30%, and almost 90% of their population has access to healthcare. The only downside of this market is that at roughly 18 million people, it is the smallest of the three markets in terms of population.

Ghana:Ghana is fast becoming an African success story. At 7.58%, its GDP growth rate is the highest among these three countries and one of the highest in Africa. This growth rate is deceiving, though, as it is based on a current $48 billion GDP, and $3,847 GDP per capita, which are by far the lowest of the three countries listed. In terms of spending on healthcare, the country spends only 5.20% of its GDP, or $2.5 billion dollars, which again is the lowest among the three countries. In terms of access to healthcare it is above Vietnam, but still far below Chile. Finally, their 25% corporate tax rate is higher than any of the three countries listed, which does not bode well for a company looking to set up shop there.

Vietnam:Vietnam has been identified by many as being the successor to China in terms of manufacturing. With labor costs going up in China, Vietnam is receiving much of the business and thus its GDP has been growing at almost 7% for the past few years. While its GDP is over $170 billion, its population is also quite large at just over 90 million, thus putting its GDP per capita at around $5,000. While its spending on healthcare is higher than Ghanas, it is still lower than Chiles. In 2005, the government announced a very aggressive program to provide universal coverage to its citizens. At that time, only 6.31% of its population had access to healthcare, but by 2014, 58.2% of its population has access to basic care. While it still has the lowest levels of % of population with access to healthcare of any of the three countries, its incredible improvement in such a short period of time is encouraging.

Country Attractiveness Based on Non-Financial Indicators

Singapore:Singapore has grown to become a land of promise- rising rapidly over the last few decades. It has been ranked highly on several indexes for its business friendly environment1, 2, 3. Singapore ranks #1 in the ease of doing business index. It takes 1-2 days to incorporate a company in Singapore with the governments support It boasts of a low corruption record - It ranks #7 in the corruption perception index It is one of the most politically stable countries in Asia It ranks high on of the quality of life, and also for having one of the best labor forces in the world. People are well educated, skilled, and follow the work hard, work smart culture

In addition to the above indicators, Singapore is also strategically located with fully functional ports and airports that connect the country with different parts of South-East Asia, and the world. It is also supports a diverse multi-racial and multi-cultural community thereby giving global businesses a scope to gain foothold on the basis of familiarity. For instance, Singapore has a large Tamil speaking Indian populace. A brand/product that is popular in India can gain acceptance in Singapore using the Indian Community as a conduit for entry. While the Hofstede Index for Singapore aligns more closely with the eastern countries such as India and China (Exhibit B) compared with the western countries such as the USA or U.K (Exhibit A), the openness to embrace technology and development is high among the Singaporeans. This of course might come at the cost of time- developing personal relationships over rushed business transactions. Also, Singaporeans have a more conservative health care system- where people pay out of their pockets vis--vis countries like the USA where corporates and the government bear the health care costs. However, the government also mandates retirement and health care expenses4 for its citizens. Together, this calls for cost effective technology for treatment in order to sustain in the competitive field for GENICON.

Chile:Among the Latin American countries, Chile boasts of the most dynamic economy6. It is one of the first few countries to achieve economic freedom. Below are some noteworthy indexes: It ranks #41 in the doing business in index. Chile is moving towards creating simpler rules for foreign investors to start operating in the country It ranks quite highly on the corruption perception index- #21 It aligns with the USA and the UK in several of the Hofstede indicators (Exhibit C) and to a lesser extent with India and China. But, given GENICONS presence in Latin American regions, this difference may not be a deterring factor (in terms of the marketing efforts needed etc.) Chile also boasts of a low political risk with an A+ credit rating by the S&P

Besides its edge on the basis of the above indices, Chile actively encourages foreign investments. InvestChile provides assistance to foreign companies and services to invest in the country. Chile also boasts of skilled workforce with over 61 universities and 43 professional training institutions. These factors could work in favor of GENICON that requires the presence of skilled workers to learn and use its medical technology.

Philippines:Although Philippines ranks lower on some indexes compared with Singapore and Chile, it has advantages. It has cheap and skilled labor force and a well-developed infrastructure for supporting foreign businesses. Makati City, a part of the Metro Manila in Philippines is a growing hub for several multinational companies. Philippines can serve as GENICONs low cost manufacturing center with its competitive wages and educated workforce. Below are some index ranks: Philippines ranks #95 in the doing business in index It ranks #85 in the corruption perception (transparency) index It aligns closely on the Hofstede factors with India and China in the east compared with USA and UK. However, given GENICONs presence in the east, this may not be a significant factor of consideration (Exhibit E and Exhibit F)

Other Considerations7:Besides growth potential in the specific Minimal Invasive Surgery (MIS) field, the mode of entry in each of the countries- Singapore, Chile and Philippines- will be a significant factor to consider for GENICON. For instance, GENICON could consider a joint venture, acquisition, or Greenfield operations. In countries where the political risks are lower, GENICON could consider Greenfield operations. This will ensure that the company has complete equity and operational control. If implemented in countries like Philippines where cost of labor is low, it could also give GENICON an ability to coordinate globally and compete on cost efficiency. However, on the flipside, these modes of entry are time consuming and require capital expenditure. To overcome the time constraint, GENICON could consider the acquisitions model. JV is yet another option to consider. This ensures cost sharing and access to partners knowledge base. In competitive countries like Singapore, this knowledge sharing might be useful. However, this also comes with the disadvantage of limited operational control and divergent goals and interests of the partners. It also poses a difficulty in coordinating globally for GENICON.Given the global presence of GENICON, it could also adopt the model of direct exports to geographically close countries- for instance, manufacture in Philippines, and export to Singapore etc.Only an analysis of the competitive landscape and financial feasibility (cost estimates) of GENICON can result in a definitive mode of entry for the company in each of these countries.

APPENDIX

Exhibit A: Hofstede Index- Singapore vs. USA and UK

Exhibit B: Hofstede Index- Singapore vs. India and China

Exhibit C: Hofstede Index- Chile vs. USA and UK

Exhibit D: Hofstede Index- Chile vs. India and China

Exhibit E: Hofstede Index- Philippines vs. USA and UK

Exhibit F: Hofstede Index- Philippines vs. India and China

References:1. http://www.transparency.org/cpi2014/results2. http://www.guidemesingapore.com/incorporation/introduction/singapore-incorporation-advantages3. http://www.transparency.org/cpi2014/results#myAnchor14. http://www.washingtonpost.com/wp-dyn/content/article/2010/03/03/AR2010030301396.html5. http://www.doingbusiness.org/data/exploreeconomies/chile/~/media/giawb/doing%20business/documents/profiles/country/CHL.pdf?ver=26. https://www.kpmg.de/docs/2012-01-kpmg-doing-business-in-chile.pdf7. Foreign Market Entry- Jan Benedict Steenkamp (JBS)8. http://www.tradingeconomics.com/vietnam/indicators9. http://www.tradingeconomics.com/chile/gdp-growth10. http://www.tradingeconomics.com/ghana/gdp-growth-annual11. http://www.economist.com/news/asia/21618894-ordinary-folk-are-sick-and-tired-their-public-hospitals-limping-along12. http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2585124/

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