Strategies of Chinese Medical Device Manufacturers When Entering Western Markets
In May 2012 I submitted my thesis for the MBA degree at Tsinghua University. The thesis can be downloaded from this link:
Camilla Storaa – Chinese medical device manufacturers
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There are more than 3000 medical device manufacturers in China, most of them established in the 1990s or later. The maturity and product quality levels differ across both companies and product types. These companies primarily cater to the internal market, but more and more are aiming for global expansion and today at least 5 are listed on international stock exchanges. Generally the Chinese medical device manufacturers will start marketing their products in other developing countries in the Middle East and Africa before going to the Western markets. The products are considered to be mid- or low-end with simpler functionality and lower cost. The present report investigates the obstacles for the Chinese medical device manufacturers when trying to access the Western markets. Research is based on interviews and literature review, and a model of the system dynamics for the Chinese medical device manufacturers in the Western markets is presented.
The findings are that for the mature companies that have actually mastered the adequate product quality level required by Western regulatory bodies and consumers, the largest obstacle the Chinese medical device manufacturers face in the West is the perception of everything made in China being of poor quality. Reports on poor quality of unrelated products, like food or toys, make the Western consumer skeptical to buying Chinese medical devices. The Chinese manufacturers find this perception difficult to meet directly, and are rather fighting it with trying to produce at higher and higher quality levels and by starting their own product development. They are of the opinion that if they continue to deliver products with high quality the customers will gradually become more accepting of Chinese devices. Another strategy for venturing abroad is through acquisition of Western medical device manufacturers. The current economic downturn represents an opportunity for the Chinese manufacturers as the Western buyers, which are usually the governments, will start looking for cheaper devices than what the Western market leaders have traditionally offered.
In conclusion the most mature Chinese medical device manufacturers have good prospects with a growing Chinese market and an increased need for more affordable products in the Western markets.
Keywords: medical devices; Chinese manufacturing; global expansion; healthcare; made in China