Abstract
This paper describes the export business plan of ‘Naver Associates’ (Naver) a company engaged in the manufacturing, supply and export of expensive patented medicines. Naver needs to diversify its business activities and has decided to expand its operations to the foreign market of Malaysia. To serve the international market is indeed a huge step for every firm which makes plans to enter a strange, alien and new market, striving to obtain related data about potential global markets.
‘Naver Associates’ commenced its business in the year 1982 and since then have been ranked among the top manufacturers and exporter of expensive patented medicines. They have been engaged in manufacturing, selling, outsourcing and exporting, and distributing a comprehensive and modern line of medicines and drugs to cater the need of pharmaceutical and healthcare industry along with providing related services of management and consulting. The target market of Naver comprises hospitals, doctors and all associations related to healthcare industry. The tradition of company’s operational excellence continues to exist as an innovative manufacturer of patented medicines backed by innovative research activities to promote and ensure reliability and durability.
The Business plan on Market Plan Cafe Internet Marketing Business
Marketing Plan for INTERNET CAF " ES IN Indictable Of Contents 1 Executive Summary 22 Situation Analysis 32. 1 Market Summary 42. 1. 1 Market Demographics 52. 1. 2 Market Needs 62.1. 3 Market Trends 72. 1. 4 Market Growth 92. 2 SWOT Analysis 102. 3 Competition 142.4 Services 142. 5 Keys to Success 162. 6 Critical Issues 162. 7 Macro Environment 173. 0 Marketing Strategy 173. 1 Mission 183.2 ...
The paper also discusses the healthcare industry of Malaysia in detail. Relevant data and figures have been provided to augment the international business plan presented in the paper for entering Malaysian healthcare industry. Success in pharmaceutical and healthcare industry in Malaysia is mostly dependent upon different micro and macro environmental aspects that influence consumer and industrial spending. Spending by healthcare industry and related business directly impacts the manufacturers and exporters of medicines. In this paper the marketing components and their significance in export business plan have also been highlighted. The concept of target market is to divide total market into different identifiable segments and choosing the most profitable and suitable segment as the target market.
Distribution systems, their significance and the vital role played in the success of marketing activities have been discussed with special reference to the Malaysian market. There are many local dealers, distributors and resellers who aid in the direct and indirect export activities along with providing storage, importation services, reception and distribution of merchandize. We have discussed the element and significance of export pricing in an international business plan and the implementation schedule along with follow up steps.
As we have entered the twenty first century, the nature of competitive and corporate strategy is experiencing radical transformation. Firms in the past were able to conduct a comprehensive analysis of industry, implement and craft plainly defined competitive strategies, obtaining competitive advantage and sustain a long-term position. Many forces have in fact conspired to establish a rational approach towards strategic planning that is virtually obsolete and they comprise; accelerating technological change rate; blurring of conventional industry boundaries; opening up of markets that were previously closed; global confrontations of sustainable development; information revolution; demand for responsibility and corporate transparency and proliferation of stakeholders.
All these factors combined together construct strategic management in the coming times as a game of programming and planning rather than innovation. In the next decade, probably, most of the industries are deemed to be restructured with incumbents tends to be losing their present positions to the entrants that will be emerging from beyond conventional industry boundaries. It is predicted that by the year 2020 the automobile, oil, chemical, food, pharmaceutical and utility product industries will particularly present an entire new look as compared with today. The communication, software, computers, electronics, knowledge industries and financial services are predicted to lead from the front in radically redefining the manner in which human needs can be served.
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Contents
Introduction 7
primary health Care Services 9
Focus of Healthcare Services 10
Role of Health Promotion 11
Mission Statement of Naver Associates 13
Organizational Structure 13
Products and Services 14
Resources of the Firm 15
Financing the Venture- Financial Resources 16
Financing the Venture- Non-Financial Resources 16
Additional Human Resources 16
Miscellaneous Resources 17
Support of Banking Sector 17
Decision for Expanding Operations to Malaysian Market 17
Malaysia- An Overview 18
Social and Political Factors 19
Healthcare Industry in Malaysia 21
Market Entry in Malaysia for Exporters in Healthcare Industry 22
Opportunities in Malaysian Market 23
Government and Environmental Regulations 23
Marketing Structure and Target Market 24
Distribution Methods 26
Sampling and Promotion 27
Intellectual Property Considerations 28
Tariffs, Customs and Regulations 29
Sales Goals: Profit and Loss Forecasts 29
Setting up of Export Pricing 29
Implementation Schedule 32
Conclusion & Recommendations 33
References 35
Appendix-1 Implementation Schedule/Follow up 36
Appendix-2Healthcare Professionals By Category, 1990 – 2010 38
Appendix-3 Estimated Pro-forma of Revenues 39
Introduction
Every export firm that needs to enter the international marketplace or expand its global operations has almost similar questions and aims that define the firm should do to establish successfully overseas or foreign sales and distribution of their products. When these are further categorized and put specifically into a sequence, they form an export business plan. There is a commonality that exists for each and every firm as they start this process, it can also be termed as continuum of events.
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The continuum also emphasizes primary elements of a firm’s status and position during development. These elements can be subsequently determined in two main categories, the management and the firm status; first can be stated as an interest in exporting on management’s part, resulting in an overall awareness of the international markets and the potential that is necessary for the product of firm; this is normally followed by decision of management for committing their resources while preparing the firm’s export eagerness and readiness.
Serving global market is indeed a gigantic step for most of the firms who have limited data about new market markets. Prior to accessing the international market it is necessary that a strong analysis should be made by the firm of the potential advantages and risks that could be encountered by the firm and capture the entire assessment in an export plan. Proper diagnostic evaluation of current resources or business should be made as well as huge volume of research time should be spent on developing the export plan. This specific diagnostic evaluation will help to assess whether the aim for exploring foreign markets will be ultimately satisfied and whether the related risks of the venture are worth the expected returns.
In this paper we attempt to present a comprehensive export business plan of a company, Naver Associates, operating in the different healthcare markets of the world in Europe, North and South America, still planning to diversify its business by expanding to the lucrative Far East market of Malaysia. As there is a huge need for patented medicines in Malaysia, it is pertinent to penetrate and exploit the opportunities present there by catering effectively to the needs of healthcare industry. We have tried to outline the significant components of export business plan and discussed the necessary details involved in it. The marketing components, tactics and export budget have been discussed. At the end we have also outlined an implementation schedule for the sake of follow up.
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The healthcare and pharmaceutical industry has been studied and presented in the paper. Awareness about industry is significant not only for the present but for future also. In the diagnostic evaluation, the specific items to study and understand are the growth potential and current trends of industry. A highly competitive industry, a saturated domestic industry or a highly competitive industry could motivate seeking development potential in the foreign market. The diagnostic should also comprise a view on the company as it is significant to ascertain commitment of management to exporting, the available human and financial resources along with production capabilities.
Primary Health Care Services
Focus of qualitative primary health is based on practical, culturally appropriate, scientifically sound and socially acceptable method that is accessible universally to people in the community. It involves heavy participation of community and is integral to the main health system. Primary health care covers a wide spectrum of services; some of them are as follows:
• Participating in communities as well as working with community groups for the purpose of improving the health of individuals in communities.
• Preventive services and health improvement like health counseling and education along with disease prevention.
• Providing first-level primary care services, such as mobile nursing services, general practice services, pharmacy services and health services that also include advice and medications.
• First-level services for some particular conditions, such as family planning, maternity, dentistry and sexual health services or those using some particular therapies like chiropractic, and osteopathy services as well as alternative and traditional healers.
The primary health care services support an overall framework and structure for the health sector with the main aim of directing such health services at those particular areas that can ensure the greatest benefits for the people, focusing in particular on undertaking inequalities in health. The primary health care services ensure appropriate and accessible services for people specifically relating to lower socioeconomic groups. These services, if effectively delivered, can help open the particular way into the community life for entire population needing support in health sector and remove the barriers to their overall participation.
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Focus of Healthcare Services
People are a part of primary health care services that can adequately improve their health and also keep them well. Primary health care services concentrates on better health for the people and vigorously work to reduce overall health inequalities among different groups. Primary health care services strive to accomplish the vision along with maintaining some new arrangement to work with domestic communities along with identifying and removing health inequalities. The services should offer approach to comprehensive set of facilities for improving, maintaining as well as restoring health of general public. Primary health care coordinates overall care across entire service areas and develop effective primary health care workforce. (Margaret M 2001)
Continuity in the services of primary health care in fact means that individuals have an effective and usual source of care. People can also use that source not only for advice but help over time. People in community using the service basically form significant associations with their provider. Continuity can result in providing numerous benefits, specifically where there is an effective relationship with some particular practitioner. It is related with better and effective preventive care as well as with patients who can care for themselves in future.
The primary health care system enables people to experience continuity of care where it is significant. Primary health organizations providing care services are expected to respond to the overall priorities and needs of their communities involving in their governing processes. People should be able to choose any particular health care provider at any particular time. They should also be able to change their nominated care provider without any difficulty or explanation.
A strong and robust primary health care system is basically central to improving the overall health of community, confronting inequalities in health. The primary health care services provide a clear and unambiguous direction specifically for the future development and growth of primary health care of the community so that it can play this vital role among the entire health system. Sufficient evidence should be available to the citizens about the particular contribution primary health care can make for improving health results. (Leanne M 2005)
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The primary health care services set out goals, principles and objective for the health system and have guided the overall development of primary health care plans and strategies. People are the part of primary health care services that can improve and maintain their health, keep them particularly well, and coordinate their continuous care. Primary health care services in the community concentrates on better health for a population and also work actively for reducing health inequalities among different groups.
Role of Health Promotion
Primary health care services emphasize on population health as well as the role of health promotion, community and prevention care, the dire need to involve a spectrum of professionals and the benefits of funding particularly based on population needs instead of fees for service. Some of the basic elements in program for primary health care services for the betterment of people are:
• Work actively with local community.
• Identify and subsequently remove health inequalities.
• Offer access to thorough and comprehensive service for the purpose of improving, maintaining and also restoring health of people.
• Coordinate primary care across entire service areas.
• Develop and maintain primary health care workforce.
• Improving quality of primary care continuously through usage of good information.
Health care centers endeavor untiring dedication and commitment to the social well-being, dignity and health of community and entire patients being served. Primary health care services facilitate for specialized services, provide high quality and personal health care specifically for adults and children. Health system at any place should concentrate on achieving outcomes through understanding the elements that determine health by impacting them positively.
The health promotion programs should focus on well-being and good health for the local community throughout their lives. Primary health care services can enhance collaborative health promotion as well as disease and injury prevention. Equitable and timely accesses to comprehensive range of disability and health services are provided to every citizen regardless of their ability to pay. Primary health care services strive to form a high performing system in which every person has confidence. The primary health care programs focus on active involvement of communities and consumers at each and every level. To accomplish the Healthcare strategy, primary health care services should be organized and subsequently delivered in such a way that effectively ensures the best possible health and autonomy for the community.
Mission Statement of Naver Associates
The mission of Naver is to provide community with superior and qualitative product and services through developing solutions and innovations that ultimately improve quality of life as well as exceeding the expectations of customers, and also to provide all of its employees with expressive and meaningful work by providing advancement opportunities and company’s investors with a better and superior rate of return.
Organizational Structure
Established in 1982 ‘Naver Associates (Naver) has been on the leading edge of manufacturing, supplying and exporting valuable and expensive patent medicines and distributing a comprehensive and modern line of healthcare products supported by the related services. The target market of Naver comprises professional, commercial as well as end-users in pharmaceutical and healthcare industry including primary healthcare service providers, hospitals and doctors. From its inception, Naver has become a well-known and premier pharmaceutical company famous throughout the world for its research based and innovative medical products. It has earned a well-praised industry-wide reputation for quality in the line of manufacturing and exporting medicines and drugs. The tradition of company’s operational excellence continues to exist as an innovative manufacturer backed by world-class performance, reliability and durability.
Products and Services
Naver’s ISO 9001 certified manufacturing facility is among the highly innovated and research oriented industry. The medical products of the firm boost demand for affordable and reasonable quality drugs and medicines. The company focuses on providing personalized healthcare answers, follow-up care and prevention. Naver is among the leaders in the international pharmaceutical and healthcare industry, building on its global reputation and continuously planning to enter new and unexplored markets. A reputable manufacturer and exporter for many years, Naver continues to improve and progress on product quality, assuring that each and every product category exceeds the reliability and performance standards anticipated by customers’ nation as well as worldwide.
Naver has received many accolades for quality in manufacturing and research activities. The company holds different patents in Medicines. Products of Naver meet global certification certificates. With over twenty years of excellence in the field of manufacturing and exporting, Naver’s customers are assured of receiving the highest quality and research based medical products in the industry. Throughout their business, Naver has established a reputation for product quality, innovation, end-user focus, value and design.
The company has credited its success in the local and international healthcare industry specifically to high quality medical products, establishing research and development and an exclusive system of direct distribution. Instead of relying just on wholesalers to market its products to retailers, Naver has also employed its unique direct sales force in some regions. The close association endangered by this particular system provides the company insights into the demand of retailers along with the end user, thereby fueling modernism and innovation.
Naver pursued its new product development in the decade of 1990, focusing on research and development activities whose cost averaged around two percent of the sales. As Naver reached out specifically to the consumer market, however, it had to take specific care not to isolate its core and basic products. Realizing the lucrative and rewarding environment of Malaysian healthcare and pharmaceutical industry, Naver has ultimately decided and sought to expand its operations in that particular market. The company has endeavored to employ a multi-nationalist strategy, establishing export business plan for the target market.
Resources of the Firm
The main goals of expansion in foreign market are to diversify and spread operations in unexplored areas and identify lucrative target markets. Some of the main goals are stated as follows:
• Increase sales of the company.
• Locate and establish distribution system in the Malaysian pharmaceutical and healthcare market.
• Continue to participate actively in the global marketplace, taking lucrative advantage of the foreign market.
• Show substantial profit in export initiative in three to five years.
For achieving the above-mentioned targets and goals, certain resources are available to the firm which can be utilized effectively to support the mission. They are:
Financing the Venture- Financial Resources
• Allocation of additional capital budget.
• Half-time employee position.
• Minimum three-to-five year commitment.
• Potential of Branded program funds through regional and state trade group.
Financing the Venture- Non-Financial Resources
• Product inquiries from South East, Middle East and Central Asian Markets including Indonesia, Thailand, UAE, China and Malaysia.
• Staff Expertise
• Some members of the firm have their origins in Asia.
• Several employees with travel experience in Asian countries.
• Families of some staff members based in South East Asia and Middle East.
Additional Human Resources
• Company can consider hiring particular consultancy firm.
• Company can consider hiring new staff to support exporting.
• Some distributors are available with experience especially in Asian Markets.
• Experience with checking and requesting references of buyers.
Miscellaneous Resources
• The company’s product is currently sold in many parts of the world, in some regions through distributors and in some cases directly through retailers, as such company can benefit from this experience.
• Experience of designing strong promotional strategies.
• Sufficient capacity to enhance sales by almost twenty to thirty percent.
Support of Banking Sector
Electronic banking has gained popularity in Malaysia. Most of the banks seek to reduce their overall costs through utilization of Internet for routine transactions. However Malaysians are still concerned about the apparent weakness in the reliability, security and speed of their specific electronic banking systems. Electronic invoicing and signatures are becoming more usual places, supporting the activities of global firms intending to operate in Malaysian market. As such part of financial needs can be catered by the modern banking system present in Malaysia.
Decision for Expanding Operations to Malaysian Market
Naver Associates has considered different target markets after analyzing the strength and weaknesses of the firm, considering economic scenarios of certain nations and evaluating the above-mentioned resources of the firm. The ultimate decision for further enhancing its operations to new foreign market is to cater the needs of Malaysian healthcare and pharmaceutical market. As firm has indirect relations and experience in the market of Malaysia, it has been unanimously agreed upon to serve this particular South East Asian nation. Certain demographic factors continue to play Malaysia among the top of list for the exporters, which are; increased purchasing power; a growing population; strong preference for patent and quality medical products.
Malaysia- An Overview
Malaysia today has earned a respected reputation of an attracted and fascinated location for investment and trade ever since the colonial era. The economy and the years in past of uninterrupted growth has placed Malaysia in a position of premier market in the region of South East Asia. For more than two decades of continuous endeavors have ultimately resulted in the growth of technological expertise and development of infrastructure supported be diverse economic policies and knowledgeable workforce. For the past many years these attempts have resulted in the creation of a robust foundation for the nation, transforming Malaysia into location of options as the multinational organizations worldwide explore for satisfying their superior quality producing outsourcing needs. (Nilsson, H 2006)
Foreign investors are continuously exhibiting their confidence in the policies of Malaysia through inducting new investments and involving in the diversification and expansion in the nation. By making a comparison of economic and political stability of Malaysia and its hardworking, educated and multilingual workforce are among the main reasons for winning the confidence of foreign investors.
The strategically ideal location of Malaysia is the main reason for the vibrant development region of Asia and due to its charming and attractive location most of the multinational firms are looking forward to establish their operations in the country. Multinational firms from almost forty countries have made investment in about three thousand projects in the country. (World Bank, 2005)
Social and Political Factors
Malaysia’s successful performance is a result of its low costs, particularly for infrastructure, as well as its strong score in business environment for an emerging market. Malaysia is among the countries that will challenge India’s dominant position in business process manufacturing outsourcing in the next five years. However, as a small country with only 22 million people, Malaysia will not be able to match India’s scale advantages, and piracy will continue to be a major drawback. Other significant initiatives include government investments in infrastructure and developing the intelligent cities of Cyberjaya and Putrajaya as part of the Multimedia Super Corridor project. (www.malaysia.com/ -)
Malaysia has earned the reputation of being an attractive location for both trade and investments since the colonial era. The dynamic economy and 25 years of uninterrupted growth has positioned Malaysia as an economic leader and premier market in Southeast Asia. Now, more than ever, two decades of incessant effort resulted in development of infrastructure and technological expertise, complemented by a very knowledgeable workforce and diverse economic activities. Over the years this effort has resulted in establishment of a powerful foundation for Malaysia, making it a location of choice for the foreign firms. (Nilsson, H 2006)
Foreign investors continue to show confidence in Malaysia through new investments and expansion / diversification in the country. By comparison, Malaysia’s political and economic stability and its educated, hardworking, and multi-lingual workforce are some of the primary reasons for foreign investor confidence. To increase foreign investments in Malaysia, the government has introduced reduction of corporate tax, from 28 percent in 2006 to 27 percent in 2007 – to 26 percent in 2008. (www.malaysia.com/ -)
Malaysia has an abundant, highly-skilled, and trainable workforce. The government works to help ensure the availability of highly-skilled workers under the country’s respective development plans to support the growth of R&D activities and expansion of contract manufacturing. To meet the demand for skilled labor, the education system in Malaysia, produces English –speaking graduates with strong technical background and furthermore there is a splendid booming in IT and engineering graduates in Malaysia which totals up 75,000 annually. (Nilsson, H 2006)
The government recognizes the importance of providing good infrastructure to attract and build investor confidence. Malaysia has a well-developed infrastructure, one of the best among newly-industrialized Asian countries. Among the attractive factors include well-developed physical infrastructure. For example, transportation and telecommunications facilities, excellent airport and port facilities, utilities and industrial land, to cater for the needs of investors; As a result of this infrastructure, companies are able to lower costs of production through just-in-time production and efficient inventory management. All points of entry for goods are also now being e-enabled – making declaration and clearance of goods more efficient. Companies are thus now more integrated with global supply chains. (www.malaysia.com/ -)
Healthcare Industry in Malaysia
The healthcare industry in Malaysia is growing swiftly at a steady rate of six to eight percent per year. However the nation still imports more than half of its medical equipment and pharmaceuticals. The largest importers are United States of America, Germany and Japan. The healthcare industry is considered as one of the top priorities by the Malaysian government and strives continuously to implement new and innovative schemes to support boost the medical sector of country. (www.malaysia.com/ -)
Both private and public sectors are significant players in healthcare delivery system of Malaysia. About eighty percent of the healthcare services are ultimately provided directly by the public sector. It is still considered among best in region. The public sector is largely subsidized and endeavors to focus on healthcare promotion along with curative and rehabilitative care at the tertiary, primary and secondary levels. Conversely, the swiftly-growing private sector offers primarily rehabilitative and curative services. It is strictly financed on fee-for service and non-subsidized basis. (allmalaysia.info/)
There are three main types of public hospitals in Malaysia.
1. General hospitals
2. District hospitals and
3. Special medical institutions.
Each of the 16 state capitals of Malaysia has a general hospital that average between six hundred to seven hundred beds each and also provide comprehensive spectrum of healthcare services. Due to the size and complete range of healthcare, general hospitals are considered as the most preferred hospitals in Malaysia. District hospitals provide more fundamental curative and diagnostic services. Finally the special medical institutions are committed to the treatment of some particular diseases like tuberculosis and leprosy. A complete network of health clinics supports and provide healthcare to most of the population. A complete referral system, which provides tertiary and secondary care, is also in place in urban and district hospitals. Normally, most of the big hospitals with hundred beds or more are entirely concentrated in the urban areas. (allmalaysia.info/)
Market Entry in Malaysia for Exporters in Healthcare Industry
There are different channels of entry in the healthcare industry of Malaysia for exporters.
• Direct marketing by multinational companies such as 3M, Johnson & Johnson and Braun etc.
• Sales through domestic distributors or agents.
• Sales from trading houses.
• Direct sales to be made to re-sellers such as rehabilitation centers and pharmacies.
• Direct sales to consumers or end-users such as medical practitioners, hospitals and clinics.
The most common strategy for market entry in Malaysia is ‘Direct Export’ which includes selling of imported medicines and drugs by involving local distributor. Certain specific services are attached to the sale of medicines in Malaysia and include consultancy, management and training programs. The transactions of exports are concluded through negotiations conducted directly with end-users.
Opportunities in Malaysian Market
Recently it has been witnessed that the trend of foreign medical and healthcare offering is changing to lean in the direction of services as well as continuous dependent on the foreign imported drugs. These present ample opportunities for the exporters to exploit the market conditions and supply medicines to local market. Foreign exporters are successful in penetrating Malaysian market with their offerings of particular niche/innovative medical products. The main opportunities for the exporters of foreign medicines are;
• Demand for foreign patent drugs.
• Specialized, niche and innovative medical equipment and
• Health IT services and systems.
Sampling and point-of-purchase are two successful and rewarding promotional activities in Malaysia. Resultantly there are unique opportunities for the exporters to exploit opportunities by selling their products in Malaysian market as a huge need still exist for the patent imported medicines. Exporting products to Malaysia can be an effective and quick way to gain access to a lucrative target market. Doing business in Malaysia has a lot in common with other countries. However caution must be observed while selecting a distributor or an agent. Today the target market of Malaysia is full of challenges for the exporters along with huge opportunities.
Government and Environmental Regulations
Pharmaceuticals in Malaysia are regulated by ‘Drug Control Authority’. This authority is under the control of ‘Drugs and Cosmetics Regulations 1984. The Drug Control Authority is managed and supervised by Director General of Health along with seven appointed members. The primary responsibility of DCA is to ensure the quality, efficacy and safety of pharmaceuticals in Malaysia. Some of the duties of Drug Control Authority include:
• Reviewing and appraising application for cosmetics and drugs.
• Licensing manufacturers, wholesalers and manufacturers.
• Post-marketing security and safety surveillance.
• Monitoring of adverse drug reaction. (allmalaysia.info/)
Only local distribution companies are allowed in Malaysia to submit a drug registration application. As such foreign firms without any domestic presence in the country have to designate a particular Market Authorization Holder who acts as their local representative. It is the responsibility of Market Authorization Holder to submit the product application and also ensure the safety, quality and efficacy of the product. (Terry, B 2007)
Marketing Structure and Target Market
Target marketing in fact tailors a specific marketing mix for one or in some cases more segments identified by market segmentation. The concept of target marketing is opposite to mass marketing, which offers just a single product to the entire market. There are two significant factors that are considered when selecting a target market segment. They are; attractiveness of segment; and objectives, resources and capabilities of a firm that are compatible with the segment. (Smutko, L 2004)
Market analysis and research is instrumental for obtaining information about target market such as buyer intentions, test marketing, sales force estimates and statistical demand analysis. The impact of applicable macro-environmental and micro-environmental variables should also be considered while defining and selecting a target market.
Population of Malaysia in the year 2005 was estimated at 26.13million. The life expectancy is: 71.8 for male and 76.2 for female. The infant morality in thousands is: 5.1. Total number of doctors is eighteen thousand two hundred and forty six. There are three hundred and fifty one hospitals, including public and private, while number of hospital beds are approximately forty eight thousand. There are 5 teaching hospitals in Malaysia and three hospitals that are administered by Ministry of Defense specifically used by army as well as retired army personnel along with their families.
Even though private hospitals are mostly concentrated in the cities like Klang Valley, there have been continuously more set-ups in the larger towns all around Malaysia. The present ratio of doctors to the population is almost 1:12 as against the set national target of 1:60 by the year 2020. The current ration of nurses is 1:1518. Some of the expansion strategies adopted by Malaysian government to provide healthcare are as follows:
• Establishment of new centers for providing medical training.
• Recruitment of foreign specialists and doctors.
• Acknowledging foreign degree in medicine which was formerly not recognized.
• Continuous increase in scholarships for providing foreign training to selected Malaysian doctors.
The Malaysian consumers include; upper class which is five percent of the population and characterized by luxury housing, high level of education and multiple vehicles; the upper middle class which is twenty five percent of the population who serve as professionals, are university graduates or company managers, own homes and a wide range of household appliances; the lower middle class which is about fifty three percent of the total population includes those who live in smaller homes and also spend most of their income only on basic necessities; the rural, the unemployed or underemployed.
Distribution Methods
Distribution is everything about getting products to the right people at the right place and at the right time with substantial consideration for effectiveness and profit. Successful marketing aims at developing a product that is appropriate to the needs of target audience. When a product is purchased by any customer, it could have been bought through number of intermediaries including wholesaler and retailer or could have been bought directly from the business. These are called distribution channels.
Distribution channels are mostly influenced by the size and type of the business as some of the channels could be feasible for the business while others are not. Consequently a business should take note of the distribution channels that could be adopted in the Malaysian market to accommodate the specific needs of consumers and to support business growth. Companies interested to export in Malaysia have the option to contact distributors and wholesalers preferably through personal contact. Doing business in Malaysia has been simplified over the last few years. The types of distribution methods available to Naver Associates in Malaysian market are; Direct (on-site); Direct Mail; Telemarketing; Internet; Wholesalers; and Retailers.
Logistics and technology are interlinked in trade. Malaysia is a nation of international traders who are interested in implementing the latest and modern technology to increase their competitiveness in the worldwide marketplace. A general awareness exists about the need to create and sustain efficient planning and efficient logistics for the purpose of meeting the customer needs and ensuring future development opportunities. The appearance of specialized and large warehouses in Malaysia is an evidence of a market specifically for distribution operations.
Licensed importers and wholesalers in Malaysia are required to maintain record of each and every transaction that involves pharmaceutical product. The period of maintaining records is a minimum of 5 years from the transaction date. The Licensed wholesalers are also responsible for maintaining record related to the following information:
• Date of Sale.
• Name and Address of the buyer.
• Name and quantity of the sold product.
• Registration number of the product.
• Number of delivery order or invoice
Importers in Malaysia are required to maintain record of: date of importation; quantity and name of the imported product; name and address of supplier; number of bill of lading; name and address of buyer; and date of the sale.
Sampling and Promotion
Ministry of Health has granted an industry trade body: The Pharmaceutical Association of Malaysia, to regulate sampling of pharmaceutical in Malaysia. The regulations related to pharmaceutical sampling is outlined in ‘The Code of Conduct for Prescription’. As per this code, the samples in pharmaceuticals can be distributed only to a doctor or anyone authorized specifically by doctor for the purpose of receiving samples on the behalf of doctor. Any firm distributing such samples to doctors are responsible for keeping records of these samples. Samples are not allowed to be used as an incentive tool to motivate doctors for buying a particular product.
Materials of Pharmaceutical promotion are also regulated by the same ‘Code of Conduct for Prescription’. According to the code, only members related to medical profession are allowed to receive promotional material. Pharmaceutical firms are not allowed to indulge in advertisement of prescription products to Malaysian products. The code particularly outlines the restrictions and requirements for pharmaceutical advertisements. Material related to promotion should include all information regarding side effects of product and any particular claims that are made by the firm are to be supported directly by clinical data.
Intellectual Property Considerations
The government of Malaysia has implemented some new measures in the enforcement and implementation of intellectual property considerations, including conducting of reviews and creating new legislation. Such actions primarily correspond to the ‘Trade Related Aspects of Intellectual Property Rights’ (TRIPS).
Some of the implications of TRIPS particularly for Malaysia are as follows:
• The current transition to the Industrial Design Act 1996 from United Kingdom Designs Act 1949.
• Establishing an autonomous Intellectual Property Training Center designed for usage and recognition by each and every ASEAN member country.
• Amendment of Patents Act 1983 and Trademarks Act 1976.
• Application of Technology Action Plan aimed at industrial development programs.
Tariffs, Customs and Regulations
There is deviation in Malaysian tariffs for medical disposables, equipments and medicines. Most of the medical equipment being imported is not subject to tax, however import tax charged on complementary products ranges from 0 to thirty percent of the product value. There are some additional products which have additional sales tax. The rate of tax ranges from 0 to 10%.
Sales Goals: Profit and Loss Forecasts
Managers lead, plan, control, coordinate and organize the sales activities of a company. Sales plans are developed and maintained to assure that the sales goals are accomplished. Periodic reviews are conducted to ensure attainment of the sales goals. The strategies of sales goals aim at the growth of market share and constantly improving customer service by aligning with customer and corporate expectations. The sales goals set for Naver Associates are as follows:
• Increase sales of company by five percent in the first two years of market entry.
• Establish distribution system.
• Show a profit in the company’s export initiative in three to five years.
Setting up of Export Pricing
Calculation of pricing in exports is normally based upon the differential costing method. In this method export is treated as an additional business. Since Naver Associates is already well-established in the domestic business and has presence in European and North American markets, it aims to diversify business activities by diversifying its operations to Asian market, initially to the Malaysian market. This specific method of calculating export price is useful and bears an overall reduced contribution to the fixed costs of manufacturer. (Norman, G. 2006)
Export prices could also be affected by duty drawback. When an export product is inclusive of imported component or material on which duty has already been paid, the amount of paid duty can be altogether claimed back from Customs service in case the product is eventually exported. The export price reflects this specific reduction in cost. The general guide to export pricing is:
Calculate manufacturing cost and then add to it the special export cost which will result in factory cost. The element of duty draw back, if any, should be deducted from this amount. The interest factor as well as sales margin should then be added to arrive at Ex Works Price. The cost of inland transportation and wharf & Loading charges should be added to it and an FOB price is reached. If freight cost is to be borne by the exporter, it should be added here to give CFR pricing and the insurance cost addition to the CFR price will give a CIF price. This is shown in the below-mentioned statement:
Manufacturing Cost ________________
Plus Special Export Cost ________________
= Factory Cost ________________
Less Duty Drawback (if any) ________________
= Net Factory Cost ________________
Plus Interest Element ________________
Plus Sales Margin ________________
= Ex Works Price _________________
Plus Cost of Inland Transport ________________
Plus Wharf & Loading Charges ________________
= FOB Price _________________FOB
Plus Freight Cost _________________
= CFR Price _________________CFR
Plus Insurance Premium _________________
= CIF Price _________________CIF
Additional costs like cost of Forward Exchange Cover and bank charges could be taken into account prior to arriving at an export price. It is pertinent to mention that an artificially low price should not be set specifically at the time of market entry as it is normally complex to increase it to the level of realistic and accurate pricing subsequently. It is rational to enter foreign market at an accurate and realistic level with an undertaking to maintain prices firm for a particular and fixed time period such as ninety or one hundred and twenty days after quotation date.
Implementation Schedule
As per implementation schedule shown in Appendix- 1, the priority number one in implementation schedule is to educate the staff on exporting matters. This could be accomplished by the staff attending seminars on exporting. This activity can increase the awareness of exporting to the employees. Next step in implementation is determining potential of distributors. All inquiries which are received should be assessed and evaluated with regards to the number and quality. (Sapirito, B 2005)
In the next phase potential distributors should be identified and a purchase list of foreign buyers should be prepared. For the preparation of purchase list, support from trade associations and internet may be obtained. The number and quality of contacts should also be made at this stage. The brochures of the product may be sent at this stage to the available contacts in Malaysia. Follow up with different promising contacts is also made in this phase while attending trade shows in Malaysia. The area of potential distributors should be narrowed at this stage.
The next stage comprises identifying and finalizing potential distributors as well as submitting advertisement in the list of buyer alert. Further packaging and labeling should be finalized keeping in view the regulations and requirements of local laws. In the next stage the purchase list of buyers in Malaysia should be studied and the current responses may be checked that are generated from emails and letters. Emails and letters should be sent to all potential buyers present on the list. The trade shows and medical conferences in Malaysia should be attended while samples and brochures should be sent to prospective buyers. The sales and marketing staff should visit the Malaysian market and meet with importers and distributors while attending trade shows. Finally a distributor should be selected which should represent the company successfully.
Conclusion & Recommendations
Even though Malaysian economy has suffered some serious setbacks fro the crisis in the late 1990s but the exuberant recovery is underway. The healthcare industry of Malaysia has emerged strongly and effectively in the recent years. Despite some temporary controls which were imposed by the Malaysian government in 1997-98 Malaysia has reinstated its entire program of deregulation and is on the track to become one of the most open economies of the world. Exporters of medicines and drugs are therefore optimistic of the lucrative opportunities present in Malaysia.
However exporters of pharmaceutical and healthcare industry should anticipate different changes that are being experienced. In the endeavors to make provisions of healthcare more effective and efficient, the favorable and attractive foreign investment policies of Malaysian government are being continuously matched by highlighting safety and quality which should be considered while making an international business plan as well as developing approval and product strategy in the country. New regulations have been implemented in the country and there is a continuous debate about the approval structure of pharmaceutical and healthcare industry. As such foreign exporters can reap benefits of numerous increasing opportunities present in Malaysia.
The companies in Malaysia are receptive and open to new products and services. As such following recommendations are made to Naver Associates for exporting in Malaysia.
• Malaysian healthcare sector should be visited regularly.
• Follow up should be made on previous visits through emails, faxes or telephones.
• Increase awareness about cultural issues in Malaysia.
• Obtain necessary information about the products, services and competitors.
• It is preferable to engage a local distributor or agent.
References
Leanne M (2005) Growth, Bullfrogs and Small Businesses. The Coastal Business Journal, Volume I, Number I
Margaret M (2001) A Private Sector Model for Rebuilding Inner-City Competitiveness: Lessons from MidTown Cleveland. Brookings Institution
Nilsson, H (2006) Evaluation and visualisation of future growth in Malaysian economy. Journal of Manufacturing Technology Management : Special Issue 5I3M. (92) : 6, s. 714-716
Norman, G. (2006) Expanding Organizational Capacity: The Human Capital Development Initiative. Classical Business Journal
Terry, B (2007) Emerging High-Growth Finns and Economic Development Policy Economic Development, Quarterly, Vol. 16, No. 1, pp. 17-19.
Sapirito, B (2005) Black & Decker’s Gamble on ‘Globalization. Fortune, pp. 40-44.
Smutko, L (2004) Building a Pro-Quality Niche. Chilton’s Hardware Age pp. 59-61
The World Bank (2005) Malaysia: firm competitiveness, investment climate and growth. Poverty Reduction, Economic Management, and Financial Sector Unit (PREM), Report No. 26841-MA, June
www.malaysia.com/ –
Appendix-1 Implementation Schedule/Follow up
Priority Objective Task Resources Schedule/dates Evaluation
1 Educate staff on exporting Attend training seminar on exporting $____ Increase Awareness of exporting
2 Determine potential of distributors List company on the Supplier List in Malaysia Fee Evaluate number and quality of inquiries received
3 Identify potential distributors Purchase List of Foreign Buyer from Malaysian Trade associations/internet $____ Assess number and quality of contacts
Send brochure to contacts in Malaysia $____ Appraise and evaluate number and quality of inquiries received
Follow up with different promising contacts while in Malaysia for tradeshow $____ Narrow the area of potential distributors
4 Identify and finalize potential distributors Submit advertisement in the list of Buyer Alert $____ Evaluate quality and number of inquiries received
5 Prepare packaging for Malaysian market Design label for Malaysian market
Print labels $____
Clear label with Malaysian Government
6 Identify and finalize potential distributors Purchase list of foreign buyers in Malaysia $____ Check current responses that are generated from emails and letters
Send emails and letter to all potential buyers present on list $____
7 Attend the Trade shows and Export conferences in Malaysia Register for Trade show $____ Evaluate and determine number of qualified leads
Prepare brochures $____
Send samples and materials $____
Send two sales/marketing staff members to show $____
Meet with Importers and Distributors while attending tradeshow
8 Select a distributor Check available references of entire prospective distributors Identify the distributor for the sake of representing the company
Appendix-2Healthcare Professionals By Category, 1990 – 2010
Category 1990 1995 2000 2010
MEDICAL PROFESSIONALS
Doctors 7012 9504 14029 15510
Dentists 1471 1791 2243 2909
Pharmacists 1239 1622 2586 2909
RATIO TO POPULATION
Doctors 1:2569 1:2177 1:1658 1:1500
Dentists 1:12245 1:11552 1:10370 1:8000
Pharmacists 1:14538 1:12756 1:8995 1:8000
ALLIED HEALTH PROFESSIONALS
Dental Paramedics 2137 2720 4097 6361
Radiographers 508 530 1049 1297
Public Health Inspectors 1007 1418 2019 2695
Medical Assistants and Laboratory Technologists 4903 5392 8287 9482
Occupational Therapists 234 410 811 911
Nurses 28932 32401 47812 50551
Source: Seventh Malaysia Plan, 1996-2000
Appendix-3 Estimated Pro-forma of Revenues
Sales $26,260,416
Direct Costs of Goods $21,242,400
Production Payroll $300,396
Other $300,000
————
Cost of Goods Sold $21,842,796
Gross Margin $4,417,620
Gross Margin % 16.82%
Operating Expenses:
Sales and Marketing Expenses:
Sales and Marketing Payroll $225,492
Advertising/Promotion $144,000
Travel $21,000
Miscellaneous $24,000
Other $0
————
Total Sales and Marketing Expenses $414,492
Sales and Marketing % 1.58%
General and Administrative Expenses:
General and Administrative Payroll $119,400
Sales and Marketing and Other Expenses $0
Depreciation $216,000
Leased Equipment $50,400
Utilities $36,000
Insurance $72,000
Rent $305,250
Other $0
Payroll Taxes $58,076
Other General and Administrative Expenses $0
————
Total General and Administrative Expenses $857,126
General and Administrative % 3.26%
Other Expenses:
Other Payroll $0
Contract/Consultants $18,000
Other $0
————
Total Other Expenses $18,000
Other % 0.07%
————
Total Operating Expenses $1,289,618
Profit Before Interest and Taxes $3,128,002
Interest Expense $262,644
Taxes Incurred $1,299,147
Net Profit $1,566,211
Net Profit/Sales 5.96%
