Asia Pharmaceutical Market – Finding “The” local partner
Cheap labour, low production and set-up costs are all characteristics of emerging Asia markets. While multinational pharmaceutical companies want to capitalise on these production havens, protectionist policies and poor distribution networks are factors hindering their entry. As such, it becomes essential for multinational companies to engage a local distributor/partner in order to ensure a smooth entry into these markets.
Government in countries where the pharmaceutical industry is less developed, for instance Vietnam, Indonesia and Myanmar tend to place heavy market entry barriers in an effort to defend its domestic pharmaceutical companies as well as increase the profits for its locals. In Myanmar and Indonesia, it is preferred that locals apply permits for manufacturing and import while in Vietnam, foreign companies are allowed to import their products but only locals can sell and distribute their products. It is thus necessary that companies entering these countries engage help from locals.
For countries with a wide geographical area such as India and China, engaging a local distributor is essential to ensure a good coverage across the country. This is especially so for rural areas where there are poor communication and distribution infrastructures. However, while this is so, many of the distribution agencies in China have limited coverage as well, covering only one or two departments of a few hospitals and thus the challenge would be to find distributors which can provide as much coverage as possible.
The biggest folly of foreign pharmaceutical companies is the lack of understanding of the business culture of the countries in these emerging markets. Relationship is key in doing businesses in these countries and engaging a local partner would definitely ease one’s effort to penetrate into the market. Benefits of engaging a local partner include helping one to save a lot of trouble in terms of administrative procedures and delays and securing of distribution networks and coverage.
- What form of distribution method should we employ for each emerging country?
- Which local distributors should we work with for different geographical coverage requirements?
- What model of partnership is recommended if we were to enter a targeted country?
- What licenses can only be applied for locals in these emerging countries?
- What are the costs of employing local distributors in targeted countries?
- What are the effects on my profit if we were to engage a local partner?
- What are the other intangible benefits which a local partner/distributor can provide me with?
- How are these partners incentized and how shall we manage them to build a trustful relationship?