US Healthcare Market: A Successful Entry Strategy of a SME [2nd part]

The author is Expert in Market Entry Strategies at InterExprt Solutions.

In previous articles on ExportPlanning Magazine, we have presented “US Healthcare Market: Opportunities and Challenges for International SMEs” and the first part of a case study of “US Healthcare Market: A Successful Entry Strategy of a SME”.
This article will present the implementation and results of an Entry Strategy case study¹.

First Step: building company’s reputation

The very first objective was to have some track-record of sales in the US market in order to build-up company’s credibility in the eyes both of distributors and customers.
This phase took time: ten months to have a first customer and order. The real break came shortly thereafter from a small distributor that managed several lab accounts in need of new instruments. After a two-month product evaluation they were satisfied with us and started placing orders. Over the course of the next 8 months they placed orders for 12 instruments and generated a steadily increasing stream of revenues. This was important because it made the US Operation meet the Break Even Point.

After having met BEP, new challenges emerged

US Operation’s consumables supplier not only underperformed as a distributor, but became sporadic with their deliveries. After several meetings we discovered that 3 of their key managers in manufacturing, laboratory and logistics left to form their own company and they had not been replaced.

Challenges were managed as an opportunity to consolidate the presence in the US market

This situation was managed as an opportunity for making a step forward on the US market. It forced us to look for alternative suppliers. It turned out that, based on the profits generated locally, the company could actually afford to acquire new supplier. The acquisition was approved and the company consolidated their offices in a new location.
The company now controlled the supplies of their instruments and they started focusing on growing the business by adding distributors and hiring reps.

Results: Not Only Sales but also a Scalable Entry Model

The US operation soon had over 70 instrument installations and they were growing. The financial results from our operation were solid: the US entity became profitable after the first full year of operation. The US entity had 12 employees and generated continuing consumable orders revenues from instrument installations, giving company profit margin, excellent working capital and positive cash-flow. In particular, the local entity model provided about 4 times more revenues that the distributor-only model.

Conclusions

A mix of elements made the company’s Entry-Strategy into the US Healthcare market successful: US market dynamics knowledge (both in terms of Opportunities and Challenges), understanding of company’s Strengths and Weaknesses, the choice of Entry-Model option and a local Partner fitting the option, preparation together with local Partner of a detailed work-plan and flexibility (both in terms of operation tools and decision making) to allow for changes when necessary were the keys to success.
As a result, the company, which originally was trying to sell instruments at distributor prices at relatively low margins, ended-up having an additional source of revenues from instrument sales and a new one from consumables sales. Furthermore, the collaboration with the local partner created a solid revenue generation platform that could be further expanded by introducing larger instruments with higher consumables’ consumption.