1. Diagnosis Lack of a favorable channel in the US High bargaining power of buyers through group purchases High regulatory costs Startup mode: limited resources

2. The paradox Bubble size = Margin60% 40%Market

3. Tough US Market

4. And costBubble size = Margin / Cost

5. Lookelsewhere

6. Is Goliath weak there

7. What else is good for a startup? Disorganized channel Low public contribution (govts usually have high bargaining power; may prefer local) Easy regulation

8. Case Information Economy Health Care situation Regulation Medical Device Industry

9. Brazil- Qualifiables Positives Government committed to expanding access to essential healthcare10% GDP. Regulation: International Standards generally accepted Swift registration process (takes 10 mo., valid 5 years) Few large-scale domestic manufacturers Large, rapidly growing market U.S. accounts for 50% import market Unlike many other emerging markets- Low import tariffs No import duties No value-added taxes

10. Brazil- Qualifiables Negatives Medical device distribution highly fragmented 3000 importers/distributors Expected to consolidate creating greater market access

11. Russia- Qualifiables Positives The $1.98 Billion Medical device sector displayed robust long term growth Public and Private Healthcare spending could be 3.8 percent of GDP which could reach $97.4 Billion by 2013 The Russian economy is expanding and so are healthcare investments By 2013 a CAGR of 7.74 percent was expected with for the medical device market and is predicted to have a market valuation of $2.88 billion Imports contribute to 75% of the market in spite of the economic crisis giving local manufacturers an opportunity as the price of imported products rose sharply starting in 2005

12. Russia- Qualifiables Negatives Potential changes to legislation could worsen Tariffs on medical devices are expected to drop to an average of 5% with Russia potentially entering the WTO Government could seek methods to increase the market share of local producers using methods like increasing tariffs Local manufacturers have sales of about $1.98 billion

13. India- Qualifiables Positives Regulations Improving Continually; becoming more transparent $2.35 billion market for Medical Device Technology Private sector accounts for ~75% of Health Care Spending Imported High end Goods increase its share Reduction of levies & Increase of foreign firms Medical Devices rise by 23% expected YOY(2005-06)

14. India- Qualifiables Negatives Poor, (but emerging) population Intellectual Property Laws are lacking Shortage of Staff in Private and Public sector Private sector accounts for ~75% of Health Care Spending

15. China- Qualifiables Positives Medical device market accelerating by 12.87% YOY Population = 1.3 billion (ageing population), although population is highly segmented Foreign medical device manufacturers are expected to increase their presence

16. China- Qualifiables Negatives Heavy resistance to foreign imports Although Population = 1.3 billion (ageing population), its highly segmented foreign competition gaining presence The regulatory framework is hindering the path toward efficient operations in the medical industry, but improvements expected in the next couple of years

17. How do we decide? Regulation / Compliance Brazil: international accepted! Fast process Import resistance Russia: weak teeth/ political; Brazil: zero tariff! India: somewhat hopeful Russia: 75% potential but strong push for local China: uncertain, seems difficult and slow India: Moderate; China : High Bargaining power of buyers Political Russia : Indirect govt. funding Russia, China unfavorable Brazil: heavy direct govt spending Brazil looks much better China and India: favorable privatization trend Size and Growth Local competition / Saturation/Price pressure Cost advantage China Local players, price pressures how about geography Russia: local encouragement Early entry advantage India: nothing mentioned (better) Market similarity

18. 2520 Does size matter? Brazil15 Russi a India10 5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

19. Barrier to entry Brazil Russia India China Regulation Import-resistance Local-C/S Buyer power

20. Finalists Brazil China Regulation Import-resistance Local-C/S Buyer power

21. How about Europe? A startup can easily make a small dent Hard to expand Margin/Cost information not available for BRIC

22. Recommendation Enter Brazil Keep an eye on China Maintain status-quo in high Margin/Cost countries like Spain and Greece Consider exiting low Margin/Cost countries like Italy (sorry Professor)