MediTech Inc

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During the past few years, Japan, the world’s second largest market next to the United States, has undergone dramatic changes in many long-standing systems and practices – ranging from industry deregulation and labor mobility to policies on the presence of foreign businesses in Japan.

From the standpoint of a multinational corporation such as MediTech Inc., country risk analysis is the assessment of factors that influence the likelihood that a country will have a healthy investment climate. A favorable business environment depends on the existence of a stable economic and political system whereby entrepreneurship is encouraged and free markets predominate. Under such a system, resources are most likely to be highly utilized, and people will have the greatest incentive to take risks in productive ventures (Shapiro, 2002, p. 142).

Japan being one of the world’s wealthiest nations with per person GDP of approximately $23,400 (adjusted for purchasing power discrepancies) is also the nation with the largest elderly population after Italy. Consistent with the country’s status as a high-income, developed nation, the leading causes of death in Japan are malignant neoplasms, heart disease, cerebrovascular diseases, pneumonia and accidents (Ministry of Health, Labor and Welfare, 1999). Given that, medical devices and equipments such as MRI, CT and image read software devices are high in demand, of which has convinced MediTech to introduce the thermomed(tm) Pro to the Japanese market. To do so, the company can chose to establish a joint venture with its Japanese business associate Nihon Schering or adopt other strategies which may be riskier yet providing more attractive outcomes.

This report takes into consideration the various factors that may affect MediTech Inc. seeking entry into the Japanese medical devices and equipment market, and other future potential threats and opportunities the company may face after having entered the Japanese market. Additionally, the report provides information on the comparative advantages the product thermomed(tm) Pro possess. It will also address other issues concerning the economical and political aspects of Japan being a member of both the World Trade Organization (WTO) and the Asia-Pacific Economic Cooperation (APEC).

1. Introduction

Japan’s population is large, seven times larger than that of Australia and the population aged 65 years and above in Japan is as large as the population of all ages in Australia. Both countries are highly developed and have a long life expectancy, slightly higher in Japan. Income per person is 84 per cent higher in Japan than in Australia, measured on the traditional local currency-times-exchange-rate basis. Throughout the 20th century, the country developed rapidly from an agriculture-based society to a high-value industrial and services based society. It became the acknowledged leader in economic development in the Asia-Pacific region. Very rapid population ageing was one consequence of this remarkable success. A second consequence was equally rapid change from the social forms of agricultural communities to those of modern, urban social life. These have had important implications for health and welfare policies.

Despite the size of Japan’s economy, the country has been mired in recession for over 10 years. The country’s admission into trading blocs such as World Trade Organization (WTO) and the Asia-Pacific Economic Cooperation (APEC) spurred a new beginning to trade advancements. The WTO acted as a world trade advocate encouraging nations to adopt non-discriminatory predictable trade policies. They also sought to enforce trade rules such as free trade worldwide and reduction on existing tariff barriers. APEC, on the other hand is the premier forum for facilitating economic growth, cooperation, trade and investment in the Asia-Pacific region. Unlike the WTO or other multilateral trade bodies, APEC has no treaty obligations required of its participants. Decisions made within APEC are reached by consensus and commitments are undertaken on a voluntary basis.

Prior to that, the Japanese Government has removed most legal restrictions on exports to and foreign investment in Japan, which is a huge advantage to both Australian importers and exporters. Also because Japan has been Australia’s largest export market since 1969 whereby Australia’s total exports to Japan were valued at over AUD$27 billion in 2001. Companies exporting medical devices and equipment stand at an advantage due to the rapidly aging population in Japan for the demand of such products. therefore, Japan is an ideal country for expansion as it provides an attractive market complete with high productivity and high purchasing power.

2. MediTech’s Competitive Advantage

Given the demand for devices such as image reading software in the Japanese market, MediTech will introduce the thermomed(tm) Pro to the Japanese medical sector. It is a non-invasive diagnostic system using Digital Infrared Thermal Imaging (DITI) to detect physiological problems. It also provides information about a patients’ response to treatment and their subjective feeling of pain. It offers accurate measurements at less than half the cost of conventional systems with comparable temperature and spatial resolution. It is simpler, easier-to-use, more durable, with longer camera calibration intervals and it delivers the accuracy of the much more expensive systems.

The thermomed(tm) Pro has two parts, the IR camera and a standard PC or laptop computer, making the system very portable. The system has been designed to be user-friendly with very few controls and the software is intuitive and menu driven.

The thermomed(tm) Pro does more than simply scan and record thermal images. Due to the fact that it is a PC based software, the system can hold vast amounts of data on thousands of patients. Images can be stored and retrieved for later analysis – this ability to statistically analyse the thermograms at a later date is very important in clinical work. Copies of images can easily be sent via e-mail, floppy disk, etc to referring doctors or other healthcare professionals.

Apart from the digital imaging system, the thermomed(tm) series also include other products suitable for nursing home facilities. The system is undoubtedly an economical easy-to-use tool for examining and monitoring patients quickly and accurately. MediTech, together with its Japanese associate will provide training, support and consulting services for MediTech’s customers. The need for cost-effective solutions that are reliable, user-friendly and “hi-tech” are high in demand in the Japanese market, therefore the introduction of the thermomed(tm) Pro may be acknowledged with a good response in the medical sector.

3. Country Analysis

3.1 Country Overview

Japan has built itself to be a high-income, developed country, with a highly urbanized population of approximately 127 million, and a population density of approximately 335 people per square kilometre. The country of Japan is divided into various sectors specializing in certain industries whereby over 44% of the population resides in the major cities such as Tokyo, Osaka and Nagoya. Since MediTech Inc. is involved in the medical industry, it is therefore pertinent that the company is based in Osaka to take advantage of the high concentration of biotechnology R&D around the northern Osaka area and the manufacturing bases in Osaka City and Higashi Osaka City. An alternative location would be Hyogo Prefecture – Kobe City where the medical industry is centred and costs are relatively cheaper as opposed to Osaka.

3.2 Political Risks

Japan is noted to be a country with relatively low political risk. This is an important factor when taking into consideration the ideal country for expansion so the company will not be frequently concerned with issues such as labor strikes and changes in law and policies governing operations of foreign-based companies. The less developed the country, the more difficult to predict political risk (Keegan, 2002).

3.3 Product-Market Profile

Apart from being the world’s second largest economy, the country is a promising market, with a market scale ranking among the top of the developed nations (Refer to Appendix 1). Japan boasts a very homogeneous, affluent society, with a rapidly aging population and one of the longest life expectancy rates in the world. By 2040, it is estimated that nearly one third of the Japanese population will be older than 65. With one of the lowest birth rates in the world (0.2 per cent) and negligible immigration, the overall population is ageing rapidly, with life expectancy for Japanese women now 83.99 years and 77.1 years for men.

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