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Companies that achieve success in their home market are frequently compelled to expand to international soil to take advantage of desirable demographics and less competition. Many feel that it’s a natural progression. However, selecting the right market for your product, and setting up an efficient and effective sales and distribution network, can be daunting tasks—especially for a young business.
Small- to mid-sized companies that are leaving the U.S. for the first time are often tempted to target major international markets like Brazil, China or Germany. However, those nations have obstacles that may make their barriers for entry too great. Instead, some experts recommend smaller, less-sought-after nations (think Poland or Australia) for your implant.
The Challenge
Countries like Brazil, China, Japan, Germany and the U.K. hold certain appeals for U.S. companies. They’re either massive markets with attractive demographics, or countries that mirror the U.S. culturally and economically, albeit on a smaller scale.
However, barriers to market penetration in those countries can be extremely high. For China and Brazil, regulatory hurdles can delay entry for years. In Germany and the U.K., competition from other players will be intense. Plus, the complexities of cultural differences in doing business can create unintentional smokescreens.
 | ||
| Edgar Kasteel, EMERGO | ||
 | ||
| Tim Jeavons, Lighthouse Orthopaedic Consultancy | ||
 | ||
| Ames Gross, Pacific Bridge Medical | ||
“In Japan, for instance, companies take more time to go over information,” says Edgar Kasteel, Manager Distribution Division, EMERGO. “If someone at a Japanese company says, ‘We’ll think about it,’ American companies may think, ‘We’re close on this proposal.’ Meanwhile, the person on the other end of the phone wants to say no, but it’s not culturally acceptable to say no outright.”
Additionally, almost all of those markets already have a strong presence from orthopaedics’ five largest companies (DePuy Synthes, Zimmer Biomet, Stryker, Smith & Nephew and Medtronic, in order by revenue); most have a thriving domestic market, as well. For companies that want to enter those nations and market themselves as a low-cost American implant, it is sometimes difficult to find success.
Tim Jeavons, Founder and CEO of Lighthouse Orthopaedic Consultancy, says that for startups or small OEMs, sometimes the decision to enter a market is left to chance.
“Some companies go straight into looking at sales channels. They skip a step,” Jeavons says. “You need to buy market research. Investigate the size of your targeted market. You need to speak to other companies operating in that nation. There needs to be more voice of customer; small companies don’t always have the resources to do that.”
Ames Gross, President and Founder of Pacific Bridge Medical, says that small- to mid-sized OEMs do not always take the time to properly investigate markets in Asia. Because of that, he says, they may set up their international operations in the least optimal way.
“Companies will go to exhibitions, and there will be a network of distributors looking on LinkedIn for products. A lot of it is quite random and not necessarily a due diligence search,” Jeavons says. “Compare the process of selecting international distributors and sales channels to the incredibly sophisticated recruitment market. They’re willing to go down that due diligence path for new hires, but when you look at the distribution network, it almost feels like a notice board filled with fliers.”
Without the resources to manage a more thorough search and validation process, these companies, will attend exhibits or trade shows, meet a distributor interested in their products and form a business relationship. In some instances, they may also rely on social platforms like LinkedIn to provide introductions to international distributors.
Gross advocates that care be taken when pursuing partnership with a distributor at a trade show for entry into that distributor’s home nation. When you meet someone “cold,” you’re forgetting that relationships and trust are crucial in doing business in Asia. For instance, in Korea, Gross says, if a distributor is signed up without any relationship and they lie or steal from a foreign company, they may not be doing anything wrong in the eyes of their culture.
For U.S. companies, the ramifications of a poor partnership with an international distributor can shatter a company’s plan for expansion. In some nations, like Brazil and China, foreign companies may register their products through a domestic distributor. However, should the foreign company want to terminate that relationship, the registration process must begin again.
“Smaller companies like the idea of having their distributor serve as Registration Holder because they don’t have to pay upfront for the regulatory approval. But what should be taken into consideration is that once the distributor submits and receives that approval, that distributor owns the registration. The moment you want to switch distributors, you have to start the whole registration process from scratch,” Kasteel says. “That means, if it took you two years to get your approval and three additional years to determine that the distributor wasn’t the right fit, you’re five years in and you still haven’t sold much. Then you have to invest another two years into registration. Sometimes you’re seven years out of the market that you want to be in. That’s a really costly mistake.”
As Jeavons points out, he has seen companies attempt to enter Europe, get burned by a distributor and abandon the region entirely. “You have to think, perhaps you tried to enter that region wrong. It wasn’t necessarily the wrong market,” he says.
Selecting a Market and a Partner
Kasteel says that selecting the right country for your device comes down to two main considerations: regulatory hurdles and market fit.
First, he tells clients to target low-hanging regulatory fruit, meaning: leverage their existing approvals to determine where the barriers for regulatory approval may be lower.
“If you have a European CE Mark for your device, there are markets that are relatively easier to penetrate from a regulatory point of view. Australia is a well-known example of that,” he says. “If you have a CE, it will not be difficult to receive clearance in Australia.”
Kasteel adds that many American companies will receive their CE Mark before their FDA clearance because the CE process is quicker and more predictable. That’s especially true for companies developing new technologies. The FDA system is a predicate-based regulatory scheme. That means that another product very similar to yours must already have 510(k) clearance by FDA. Europe uses a rules-based system which favors the introduction of innovative technology with no clear predicates, Kasteel says.
Then, companies should investigate whether the market is right for them. That means knowing where your competition is, knowing population demographics, implant procedure preferences and understanding local business culture. Don’t choose a market based on factors such as average age and obesity levels. Consider several factors, like market potential, regulatory hurdles, reimbursement payouts and pricing realities in the market.
“U.S. startups may not want to develop a custom market plan for every European country,” Jeavons says. “Instead, they’ll look at Germany, the U.K., maybe France or Italy. But lesser-known countries may be more successful for them based on population and culture.”
For example, Poland is an overlooked country that has a strong economy and attractive population makeup. Targeting nations like Poland also means that you will likely face less competition from major orthopaedic companies.
“The large companies are well-established. They tend to be successful in the U.K. and Germany, where they may have a salesforce of 40 to 50 people,” Jeavons says. “Then look at a market like Poland—that salesforce may be much, much smaller. The majors are not as strong in that region.”
Going into a smaller, less-targeted European market can also boost credibility for a company that does wish to enter the U.K. or Germany eventually. During future meetings, that company will be able to say they’re already selling in Europe and thus have at least some understanding of local customs and business culture.
Additionally, Jeavons adds that companies need to examine their products within the scope of a foreign market. He uses distal radius plating as an example.
“The U.K. has something like 46 companies selling distal radius plates. Yet, there are companies that are doing very well in the U.S. selling distal radius that are on LinkedIn advertising for people to sell their product in the U.K.,” he says. “That market is worth about $7 million. If there are 46 versions of that plate, yours may be the best, but you may still be stuck with the 47th-best salesperson, because the best 46 are all signed up already.”
Finding the Distributor
Once a company has thoroughly vetted the market they wish to enter, the process of finding a distributor should begin. Kasteel says that most companies pursue a foreign market in reverse: they find a distributor and then vet the market. Reversing that will support a better likelihood of locating the best distributor.
You can further your distributor selection process by creating a list or database of distributors operating within a target nation. This can be done in traditional ways: trade shows, LinkedIn and by investigating who other manufacturers use. Then, create local contacts and lean on them for information in vetting the distributor list.
Kasteel recommends directly calling U.S. manufacturers that export to, and foreign companies operating in, your chosen region to discover which distributors are well- respected and well-used, and become familiar with the nuances of the business culture. In some Asian countries, like Japan and India, information on distributors will likely not be shared via telephone or email. Instead, companies will need to travel to those locations and meet, face-to-face, with other manufacturers. In those situations, Kasteel says, it is important to bring a local contact along to ensure that all cultural business practices are being followed.
While some companies are reticent to discuss their relationship with a distributor, Kasteel says that it is worth the effort of reaching out.
“Everything is dependent upon the relationships that you have and develop,” he says. “If a U.S. company calls a European manufacturer to ask about an Indian distributor, chances are good that they’ll provide some feedback.”
Jeavons adds that companies should take an additional step and get their product validated for a specific nation. That may mean setting up surgical boards to review a product. Once you’ve determined that your product is right for the market, or that you’re willing to make the market requested changes, you can set pricing and go to a distributor with a package of validated information.
Additionally, he says that companies may wish to target a specific type of hospital or surgeon when entering a region. For instance, a company may target university hospitals across Europe, then target university hospitals across less-attractive nations. Then a company must target a distributor who knows university hospitals well, and they can use that criteria to drive their search.
“You have to find the right customer,” Jeavons says. “That’s what this all comes down to. You have to find your customer.”
Questions about this article? Email Julie Vetalice.
Companies that achieve success in their home market are frequently compelled to expand to international soil to take advantage of desirable demographics and less competition. Many feel that it’s a natural progression. However, selecting the right market for your product, and setting up an efficient and effective sales and...
Companies that achieve success in their home market are frequently compelled to expand to international soil to take advantage of desirable demographics and less competition. Many feel that it’s a natural progression. However, selecting the right market for your product, and setting up an efficient and effective sales and distribution network, can be daunting tasks—especially for a young business.
Small- to mid-sized companies that are leaving the U.S. for the first time are often tempted to target major international markets like Brazil, China or Germany. However, those nations have obstacles that may make their barriers for entry too great. Instead, some experts recommend smaller, less-sought-after nations (think Poland or Australia) for your implant.
The Challenge
Countries like Brazil, China, Japan, Germany and the U.K. hold certain appeals for U.S. companies. They’re either massive markets with attractive demographics, or countries that mirror the U.S. culturally and economically, albeit on a smaller scale.
However, barriers to market penetration in those countries can be extremely high. For China and Brazil, regulatory hurdles can delay entry for years. In Germany and the U.K., competition from other players will be intense. Plus, the complexities of cultural differences in doing business can create unintentional smokescreens.
| | ||
| Edgar Kasteel, EMERGO | ||
| ||
| Tim Jeavons, Lighthouse Orthopaedic Consultancy | ||
| ||
| Ames Gross, Pacific Bridge Medical | ||
“In Japan, for instance, companies take more time to go over information,” says Edgar Kasteel, Manager Distribution Division, EMERGO. “If someone at a Japanese company says, ‘We’ll think about it,’ American companies may think, ‘We’re close on this proposal.’ Meanwhile, the person on the other end of the phone wants to say no, but it’s not culturally acceptable to say no outright.”
Additionally, almost all of those markets already have a strong presence from orthopaedics’ five largest companies (DePuy Synthes, Zimmer Biomet, Stryker, Smith & Nephew and Medtronic, in order by revenue); most have a thriving domestic market, as well. For companies that want to enter those nations and market themselves as a low-cost American implant, it is sometimes difficult to find success.
Tim Jeavons, Founder and CEO of Lighthouse Orthopaedic Consultancy, says that for startups or small OEMs, sometimes the decision to enter a market is left to chance.
“Some companies go straight into looking at sales channels. They skip a step,” Jeavons says. “You need to buy market research. Investigate the size of your targeted market. You need to speak to other companies operating in that nation. There needs to be more voice of customer; small companies don’t always have the resources to do that.”
Ames Gross, President and Founder of Pacific Bridge Medical, says that small- to mid-sized OEMs do not always take the time to properly investigate markets in Asia. Because of that, he says, they may set up their international operations in the least optimal way.
“Companies will go to exhibitions, and there will be a network of distributors looking on LinkedIn for products. A lot of it is quite random and not necessarily a due diligence search,” Jeavons says. “Compare the process of selecting international distributors and sales channels to the incredibly sophisticated recruitment market. They’re willing to go down that due diligence path for new hires, but when you look at the distribution network, it almost feels like a notice board filled with fliers.”
Without the resources to manage a more thorough search and validation process, these companies, will attend exhibits or trade shows, meet a distributor interested in their products and form a business relationship. In some instances, they may also rely on social platforms like LinkedIn to provide introductions to international distributors.
Gross advocates that care be taken when pursuing partnership with a distributor at a trade show for entry into that distributor’s home nation. When you meet someone “cold,” you’re forgetting that relationships and trust are crucial in doing business in Asia. For instance, in Korea, Gross says, if a distributor is signed up without any relationship and they lie or steal from a foreign company, they may not be doing anything wrong in the eyes of their culture.
For U.S. companies, the ramifications of a poor partnership with an international distributor can shatter a company’s plan for expansion. In some nations, like Brazil and China, foreign companies may register their products through a domestic distributor. However, should the foreign company want to terminate that relationship, the registration process must begin again.
“Smaller companies like the idea of having their distributor serve as Registration Holder because they don’t have to pay upfront for the regulatory approval. But what should be taken into consideration is that once the distributor submits and receives that approval, that distributor owns the registration. The moment you want to switch distributors, you have to start the whole registration process from scratch,” Kasteel says. “That means, if it took you two years to get your approval and three additional years to determine that the distributor wasn’t the right fit, you’re five years in and you still haven’t sold much. Then you have to invest another two years into registration. Sometimes you’re seven years out of the market that you want to be in. That’s a really costly mistake.”
As Jeavons points out, he has seen companies attempt to enter Europe, get burned by a distributor and abandon the region entirely. “You have to think, perhaps you tried to enter that region wrong. It wasn’t necessarily the wrong market,” he says.
Selecting a Market and a Partner
Kasteel says that selecting the right country for your device comes down to two main considerations: regulatory hurdles and market fit.
First, he tells clients to target low-hanging regulatory fruit, meaning: leverage their existing approvals to determine where the barriers for regulatory approval may be lower.
“If you have a European CE Mark for your device, there are markets that are relatively easier to penetrate from a regulatory point of view. Australia is a well-known example of that,” he says. “If you have a CE, it will not be difficult to receive clearance in Australia.”
Kasteel adds that many American companies will receive their CE Mark before their FDA clearance because the CE process is quicker and more predictable. That’s especially true for companies developing new technologies. The FDA system is a predicate-based regulatory scheme. That means that another product very similar to yours must already have 510(k) clearance by FDA. Europe uses a rules-based system which favors the introduction of innovative technology with no clear predicates, Kasteel says.
Then, companies should investigate whether the market is right for them. That means knowing where your competition is, knowing population demographics, implant procedure preferences and understanding local business culture. Don’t choose a market based on factors such as average age and obesity levels. Consider several factors, like market potential, regulatory hurdles, reimbursement payouts and pricing realities in the market.
“U.S. startups may not want to develop a custom market plan for every European country,” Jeavons says. “Instead, they’ll look at Germany, the U.K., maybe France or Italy. But lesser-known countries may be more successful for them based on population and culture.”
For example, Poland is an overlooked country that has a strong economy and attractive population makeup. Targeting nations like Poland also means that you will likely face less competition from major orthopaedic companies.
“The large companies are well-established. They tend to be successful in the U.K. and Germany, where they may have a salesforce of 40 to 50 people,” Jeavons says. “Then look at a market like Poland—that salesforce may be much, much smaller. The majors are not as strong in that region.”
Going into a smaller, less-targeted European market can also boost credibility for a company that does wish to enter the U.K. or Germany eventually. During future meetings, that company will be able to say they’re already selling in Europe and thus have at least some understanding of local customs and business culture.
Additionally, Jeavons adds that companies need to examine their products within the scope of a foreign market. He uses distal radius plating as an example.
“The U.K. has something like 46 companies selling distal radius plates. Yet, there are companies that are doing very well in the U.S. selling distal radius that are on LinkedIn advertising for people to sell their product in the U.K.,” he says. “That market is worth about $7 million. If there are 46 versions of that plate, yours may be the best, but you may still be stuck with the 47th-best salesperson, because the best 46 are all signed up already.”
Finding the Distributor
Once a company has thoroughly vetted the market they wish to enter, the process of finding a distributor should begin. Kasteel says that most companies pursue a foreign market in reverse: they find a distributor and then vet the market. Reversing that will support a better likelihood of locating the best distributor.
You can further your distributor selection process by creating a list or database of distributors operating within a target nation. This can be done in traditional ways: trade shows, LinkedIn and by investigating who other manufacturers use. Then, create local contacts and lean on them for information in vetting the distributor list.
Kasteel recommends directly calling U.S. manufacturers that export to, and foreign companies operating in, your chosen region to discover which distributors are well- respected and well-used, and become familiar with the nuances of the business culture. In some Asian countries, like Japan and India, information on distributors will likely not be shared via telephone or email. Instead, companies will need to travel to those locations and meet, face-to-face, with other manufacturers. In those situations, Kasteel says, it is important to bring a local contact along to ensure that all cultural business practices are being followed.
While some companies are reticent to discuss their relationship with a distributor, Kasteel says that it is worth the effort of reaching out.
“Everything is dependent upon the relationships that you have and develop,” he says. “If a U.S. company calls a European manufacturer to ask about an Indian distributor, chances are good that they’ll provide some feedback.”
Jeavons adds that companies should take an additional step and get their product validated for a specific nation. That may mean setting up surgical boards to review a product. Once you’ve determined that your product is right for the market, or that you’re willing to make the market requested changes, you can set pricing and go to a distributor with a package of validated information.
Additionally, he says that companies may wish to target a specific type of hospital or surgeon when entering a region. For instance, a company may target university hospitals across Europe, then target university hospitals across less-attractive nations. Then a company must target a distributor who knows university hospitals well, and they can use that criteria to drive their search.
“You have to find the right customer,” Jeavons says. “That’s what this all comes down to. You have to find your customer.”
Questions about this article? Email Julie Vetalice.
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Julie Vetalice is ORTHOWORLD's Editorial Assistant. She has covered the orthopedic industry for over 20 years, having joined the company in 1999.
