MediCorp's market entry strategy for the Siemens Acuson ultrasound system in Germany

Title Page
Client Organization: MediCorp
Selected Country: Germany
The Client's Product: Ultrasound Diagnostic System
Type of Legal Structure: Civil Law System
Alliance Partner: Siemens Healthcare GmbH

Table of Contents
Executive Summary
Introduction
Marketing Strategy
Governance and CSR
Financial Projections
Strategy Implementation
Conclusion MediCorp Executive Summary This is a business plan for U.S.-based MediCorp to enter the German market to provide a selected medical device to facilitate this entry based on Germany’s projected market value of $38.2 billion by 2020 for medical devices through a joint partnership with German-based Siemens Healthcare GmbH. The recommendations that are set forth in the business plan below were based on an analysis of current market trends for the medical devices provided by MediCorp in general and the company’s Siemens Acuson S2000 ABV cart-based ultrasound system in particular. In addition, a description of an optimal entry strategy and joint venture partner—as well as significant cross-cultural differences between MediCorp and its German joint partner that may have positive and/or negative effects on corporate performance—are also explored in the business plan that follows below.

MediCorp, Inc. International Business Plan This business plan is provided in response to a request from MediCorp’s leadership to identify a medical diagnostics device that the company can use as a tool to expand to other countries, including Germany, which was selected as the optimal foreign country for the company’s expansion into overseas markets at present. Headquartered in Tampa, Florida, MediCorp LLC provides a wide array of state-of-the-art medical devices, including ultrasound systems and support services (About us, 2019). The company has extensive experience in the medical devices industry, with a special emphasis on providing innovative, high-quality ultrasound systems as well as ongoing support services for these systems. According to the company’s promotional literature, “The specialty training of our consultants and technicians and our competitive pricing options combined with a high commitment to value and service make MediCorp a first-choice provider for healthcare professionals” (About us, 2019, para. 4). In addition, MediCorp also offers purchase or trade-in alternatives for used ultrasound equipment for its clients in its current domestic market (About us, 2019).

MediCorp Marketing Strategy In some ways, the German medical devices market represents a challenging market for new market entrants given the country’s lengthy history of manufacturing high-quality medical devices including precision medical and dental instruments, diagnostic imaging, and optical technologies (Export.gov, 2019). Moreover, although Germany represents the third-largest global market (following the United States and Japan), the county is the largest in the European market, ranked twice as large as France’s and three times as large as the United Kingdom, Italy, and Spain (Export.gov, 2019). In fact, the U.S. Commerce Department ranks the German medical devices market as the top market in the world today (Export.gov, 2019). A marketing mix for the German market and the company’s Siemens Acuson S2000 ABV cart-based ultrasound system is provided below.

Pricing Strategy The Siemens Acuson S2000 ABV cart-based ultrasound system currently costs between $10,000 and $24,999 per unit in the company’s domestic market. These costs are highly competitive compared to current pricing schemes for similar ultrasound systems available in Germany that cost up to 200,000 euros for high-end units (about US $220,300 currently) (Ultrasound pricing, 2019). Therefore, the company should price this unit as inexpensively as possible, even accepting a short-term loss in collaboration with and approval from its joint venture partner, to generate interest and gain new market share using the promotional practices described below.

MediCorp Promotional Practices Entry into the German market will introduce a new of additional new guidelines concerning acceptable promotional practices for medical devices. Although the company currently complies with all relevant U.S. Food & Drug Administration promotional practices guidelines, it must also ensure through collaboration with its German joint venture partner that any existing promotional materials conform to relevant European Union (EU) guidelines as well. Some specific issues the company should focus on in this regard include consumer-directed television broadcast advertisements, full disclosure of any potential risks associated with the medical device as well as Internet and social media marketing initiatives (Advertising and promotion guidance, 2019).

MediCorp Branding and Branding Strategies Although MediCorp enjoys a strong brand reputation among its domestic clients, it has far less international recognition. Fortunately, Siemens brand is known worldwide and brand strategies will draw on this strength.

MediCorp International Cultural Differences While many ultrasound systems have universal applications among global health care consumers, there are some cross-cultural differences between the company’s assigned expatriate representatives and their German counterparts that may affect the performance of the joint venture as shown in Figure 1 below.

Figure 2. Comparison of cultural dimensions for Germany and the United States
Source: https://www.hofstede-insights.com/product/compare-countries/
As shown in Figure 1 above, although there are some significant cultural differences between Germany and the United States, that are also some important similarities, including most especially in the power distance and masculinity dimensions that make this country a good choice for a joint venture and for marketing its medical devices in general and its Siemens Acuson S2000 ABV cart-based ultrasound system in particular based on the strong recent and projected growth in this market segment. German Medical Devices Marketing Strategy There are a number of potential entry strategies available to the company, including direct export, franchising, acquisitions, and mergers as well as joint ventures. Of these alternatives, a joint venture was considered the optimal choice for the company’s expansion plans into the German medical devices market for the reasons discussed in the market analysis sections below.

German Medical Device Market Analysis The global ultrasound market has experienced sustained year-to-year growth in recent years and this growth is projected to reach $8.4 billion by 2023; the projection represents an impressive 5.9% annual growth rate based on the global market estimate of $6.3 billion in 2018. (Ultrasound market, 2019). There are a number of factors that account for this sustained growth, but increased health care consumer preferences for less invasive medical procedures combined with technological advances that are making ultrasound systems more robust in performance and cost-effective in price.
In addition, there has been a proliferation of diagnostic hospitals and treatment centers that are also fueling growth in the global market for ultrasound systems. Although the global ultrasound markets are highly segmented, the diagnostic ultrasound segment is projected to experience the highest growth in demand through 2023 (Ultrasound market, 2019). According to the ultrasound market analysts at Markets and Markets, “The large share of this segment can be attributed to the availability of medical reimbursements for diagnostic ultrasound procedures in mature markets, ongoing technological advancements in the field of diagnostic ultrasound imaging, and the growing applications of emerging ultrasound techniques” (Ultrasound market, 2019, para. 6).
Besides being segmented otherwise, the global ultrasound market is also segmented into compact/handheld ultrasound systems, point-of-care ultrasound systems and into trolley/cart-based ultrasound systems. Of these segments, the trolley/cart-based ultrasound systems segment is projected to experience the largest percentage of market growth through 2023 based on its portability and the increasing use of these systems (Ultrasound market, 2019). Other factors that are expected to contribute to the growth of this segment include their use in emergency and acute care departments and tertiary health care facilities (Ultrasound market, 2019).
In sum, all of the foregoing factors indicate that the company’s Siemens Acuson S2000 ABV cart-based ultrasound system is the optimal choice for initial entry into the German market today. This cart-based ultrasound system is depicted in Figure 2 below and was specifically selected to facilitate entry into the German medical devices market based on the above-cited growth factors as well as its demonstrated reliability and wide range of health care applications.

Figure 2. Siemens Acuson S2000 ABV cart-based ultrasound system
Source: https://www.MediCorpllc.com/wp-content/uploads/2019/04/Acuson-S2000-ABVS-370x278.jpg Characteristics of Potential Customers in the Country The German population currently stands at around 80.5 million people with large percentages of older residents that require ultrasound diagnostic services. In fact, at present, Germany has the second-highest median age in the world at 47.4 years. Life expectancy, though, is ranked 37th in the world at 80.9 years (German people, 2019). A population pyramid for Germany is provided in Appendix A and a breakdown of the population pyramid is provided below.

0-14 years: 12.83% (male 5,299,798 /female 5,024,184) 15-24 years: 9.98% (male 4,092,901 /female 3,933,997) 25-54 years: 39.87% (male 16,181,931 /female 15,896,528) 55-64 years: 14.96% (male 5,989,111 /female 6,047,449) 65 years and over: 22.36% (male 7,930,590 /female 10,061,248) (German people, 2019)

Use of Web Networks and Social Media for E-Marketing Germany is a highly modernized country with a state-of-the-art communications network, and the country has the eighth highest number of Internet users in the world (about 72.5 million subscribers) (German communications, 2019).

German Medical Device Governance and CSR There are some governance issues involved in entry to the German medical devices market that the company must take into account in formulating its joint venture, including some of the most salient that have been identified by the U.S. government set forth below:

The German market for medical devices is regulated by German and EU directives, standards, and safety regulations. The EU Medical Device Regulation (MDR) will take effect on May 26, 2020, with increased testing, certification, and compliance requirements; the complementary IVD Regulation will come into effect in May 2022. Companies seeking market entry should also carefully map their distribution strategy depending on their target group(s) (Export.gov, 2019, para. 8). A graphic depicting the central actors in the German statutory health insurance scheme that may be involved in corporate governance oversight for medical device companies is provided in Figure 3 below.

Figure 3. Central actors in Germany’s statutory health insurance system
Source: https://els-jbs-prod-cdn.literatumonline.com/cms/attachment/1665ecef-9e24-4c3f-8e01-e63e44f5857e/gr1.jpg
Further, the civil law system that is in place in Germany differs from the common law system in place throughout the United States (except for Louisiana) so any issues created by these differences must also be taken into account in formulating the company’s market entry strategy and post-implementation business practices.
In addition, German consumers place a high premium on companies they regard as engaging in corporate social responsibility (CSR) activities (Peng & Altan-Uya, 2014). This means that the company must identify new opportunities to engage in appropriate and cost-effective CSR practices in a German context, a process that will be facilitated by collaboration with its joint venture partner. German Medical Device Market Financial Projections Market share estimates for sales of the selected ultrasound product in Germany for the next 3 years based on an initial price of $10,000 per unit are provided in Table 1 below.
Table 1
Market share projections for Siemens Acuson S2000 ABV cart-based ultrasound system

2020
2021
2022

Sales levels
700
740
781

Gross
7,000,000
7,400,000
7,820,000

Based on these projections and the assumptions that 3 years is sufficient to gain new market share and the company can then increase its prices for this unit, a breakeven point that takes into account the initial costs of the joint venture will be reached in about 3.5 years.
Although Germany conforms to internationally recognized generally accepted accounting principles, the company must also take into account language differences in its preparation of financial statements and corresponding disclosures. In addition, there are some fundamental differences between the German health care network and the U.S. that will also affect accounting practices depending on the central actors that are involved. For instance, according to Busse and Blumel (2017), “In 2004, self-governance was strengthened through the establishment of the Federal Joint Committee, a major payer-provider structure given the task of defining uniform rules for access to and distribution of health care, benefits coverage, coordination of care across sectors, quality, and efficiency” (para. 6).
Although German health care consumers enjoy world-class care, there are some constraints involved that may also affect the timeliness of payments from various German clients. In this regard, Busse and Blumel (2017) also emphasize that “The German health insurance system is not as cost-effective as in some of Germany's neighboring countries, which, given present expenditure levels, indicates a need to improve efficiency and value for patients” (para. 7). Here again, consultation with the company’s joint venture partner can help ensure that these types of issues are identified early on in order to avoid potential problems with collecting accounts receivable. MediCorp Strategy Implementation There are a number of tools that are available that can help guide the company’s implementation of its market entry and marketing strategies as well as evaluating their effectiveness in achieving their respective intended outcomes, including the balanced scorecard. While the balanced scorecard for these purposes in a number of different fields and professions, it has demonstrated effectiveness in the health care industry in particular (Wills, 2014). The four perspectives of the balanced scorecard are applied to the company’s envisioned joint venture in Germany in Table 2 below.
Table 2
Application of the four perspectives of the balanced score to the company’s German joint venture
Perspective
Application Learning and Growth Perspective Fortunately, the company’s expatriate representative in Germany will benefit from the real-world experiences of their German counterparts, but a careful, ongoing evaluation of market data and organizational culture issues is essential.