GENICON: After the BRICS Choosing from Other Emerging Markets

By: 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 nonfinancial 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 SouthEast 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 economy 6. 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/results

2. http://www.guidemesingapore.com/incorporation/introduction/singaporeincorporation-advantages
3. http://www.transparency.org/cpi2014/results#myAnchor1
4. http://www.washingtonpost.com/wpdyn/content/article/2010/03/03/AR2010030301396.html
5. http://www.doingbusiness.org/data/exploreeconomies/chile/~/media/giaw
b/doing%20business/documents/profiles/country/CHL.pdf?ver=2
6. https://www.kpmg.de/docs/2012-01-kpmg-doing-business-in-chile.pdf
7. Foreign Market Entry- Jan Benedict Steenkamp (JBS)
8. http://www.tradingeconomics.com/vietnam/indicators
9. http://www.tradingeconomics.com/chile/gdp-growth
10.http://www.tradingeconomics.com/ghana/gdp-growth-annual
11.http://www.economist.com/news/asia/21618894-ordinary-folk-are-sickand-tired-their-public-hospitals-limping-along
12.http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2585124/

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