mgmt 1101 memo week 3

Memorandum
Baxter Pty Ltd

Date: 13 August 2013

To: Mr. Ilro Lee, Vice President
From: xxx, Product Manager
Subject: India Medical Product Market

I recommend that we enter the Indian medical products market to promote our new valuable and innovative dialysis product. This is mainly because India is facing a rapid rise in the number of people who suffer a Chronic Kidney Disease (CKD). There are many modes of operations but I will only consider three of them. Those are Foreign Direct Investment (FDI), Exporting, and Licensing.

Nearly ten percent of India’s 1.24 billion people suffer from chronic kidney disease (CKD). One 2013 survey found that more than 15 percent of urban Indians have the disease, with rates almost 50 percent in some cities (Gross, 2013). As the number of CKD patients goes up, so has the size of the Indian dialysis market. It increased in value to more than $150 million in 2012, from $100 million in 2007. India’s demand for dialysis is growing at a rate of 31 percent, compared to 6 percent in the US and 8 percent in the rest of the world (Gross, 2013). Furthermore, the Indian Government is trying to increase the presence of private investors, and manufacturers of medical device because the lack of healthcare infrastructure in India (Espicom, 2012). Thus, our company can provide products that India still can’t produce. In addition, as we will establish a wholly owned subsidiary, we will receive a 100 percent share in the profits generated in India. However, doing a direct investment is not easy. It will require us to produce overseas and they are more risky and costly. We need to purchase new assets, provide administrative costs and have to consider the wages cost for labours in India.

Exporting can also be considered as a good mode of operation. It is supported by the medical market research report in India that states imports rise by 39.9%, to stand at US$2,372.6 million (Espicom, 2012). Moreover, exporting is suitable for small and medium sized companies that are still in the early stages of internationalisation, including our company. It has a relatively lower cost rather than direct foreign investment since we do not have to buy new capital asset to be placed in India. Yet we need to consider the tariffs, quotas and fluctuation of transportation cost because India is geographically quite far from Australia. In addition, we have to find a loyal and reliable representative to be appointed as our distributor.

Licensing is also can be an attractive mode since our company does not have to bear the development costs and risk associated with operating overseas. However, licensing is difficult in our case. This is because India is still in the local expansion phase. It means that they still don’t have a great medical product manufacturer that can be seen as our licensee. It is also supported by the medical market research report that says India will likely take years for locally produced equipment to reach the performance and quality standards of imported medical devices (Espicom, 2012).

On the whole, I can suggest that creating a direct foreign investment as the best and most profitable idea above the other two modes of operations since there are still less competitor in India and the needs of the disease management equipment is keep increasing until now.

Bibliography

Overview of the Medical Market in India 2012, Medical Market Research Reports, Espicom, viewed 13 August 2013,

Gross, A. 2013, India 's Dialysis Market, Pacific Bridge Medical, Bethesda, USA, viewed 13 August 2013,
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Bibliography: Overview of the Medical Market in India 2012, Medical Market Research Reports, Espicom, viewed 13 August 2013, Gross, A. 2013, India 's Dialysis Market, Pacific Bridge Medical, Bethesda, USA, viewed 13 August 2013, .