MNG00723 AUSMED Case Scenario - Assignment Solution

Introduction

AUSMED the Australian pharmacy is an organization which runs its core operations on the manufacturing of drugs, with a healthy turnover of over 30 million AUD and around 60 employees’ plans to consider expanding its core operations in one of the countries from South Africa or China based on the analysis of risk and opportunities. The worldwide revenue of the pharmaceutical industry is $1204Bn USD (www.statista.com, 2019) with a steady growth of 4-5% (Pharmaceutical Commerce, 2019) global expansion is the correct path considering the fact that AUSMED currently has a stalled growth  the research for international expansion is costly and has multitude of diverse factors with lack of previous research. The risk which is to be analyzed is focused on the pharmaceutical industry which would include laws and regulations, socio-political situation, currency exchange volatility, and culture. Whereas, the opportunities which will be analyzed are economic growth, competitive advantage, spreading business risk, and increase the customer base. Following a detailed analysis, a country for expansion which will be selected through the equal weight of risk and opportunities the appropriate market entry strategy will be discussed for the selected country. 

Analysis of risks and opportunities

China

The economic climate in the European region and America has been clouded since past 5 years whereas, China is growing its economy by double digits it will successfully take over the United States of America in the upcoming years (International, 2019) for AUSMED to enter into this complex economic environment an understanding has to be developed and all dynamics of the country are to be analyzed. 

Opportunities

Economic Growth

The membership with the World Trade Organization (WTO), China has been on the path of becoming the biggest economy of the world it is currently the fastest growing economy of the world. The growth of China is due to the focus in urbanization, middle-class development and smoother political environment (Lieberthal, 2011). The economic stage of china is currently a mix of capitalism with Chinese characteristics which will have its diverse economic climate where AUSMED can set the path for growth with the economy (Yu, Chan and Ireland, 2007).

Competitive Advantage

The global expansion of AUSMED to China can bring a sustainable competitive advantage for the organization due to the fact that China has invested heavily in R&D but the market is still to mature, there is an ample opportunity for an international company like AUSMED to take over the market with its unique sales and marketing strategies it can also invest in R&D for Asian market by focusing on liver diseases, certain cancers and diseases due to different environmental and genetic factors. The competitive advantage for AUSMED can be achieved due to low labor cost and advanced resources available within the same country saving cost for procurement. The expansion can also assist in increasing the scope for obtaining local competitive advantage due to increased R&D in the sector.

Spreading Business Risk

Expanding the business portfolio across different countries gives an opportunity for AUSMED to spread their business risk, the Australian region has a growth of 2.4% for the industry which in comparison to China is 5%, the biggest threat looming in the Australian pharmaceutical industry is intensifying retail competition with an industry of only $18Bn AUD (Ibisworld.com.au, 2019). The exponential growth of an immature industry in China will give a nice balanced spread of the business for AUSMED.

Increase Customer Base

China has been the fastest emerging market for the sector of healthcare in the world which has the second-largest market for pharmaceuticals, this rise is directly influenced by the one-child policy china had an aging population which has rising medical needs (Tan, 2019). There is still a major room for growth in the pharmaceutical sector due to the low expenditures as compared to GDP and with a population of 65 aged above at only 11% but in terms of number it is the largest elderly population in the world it is also expected to boom in the next 7 years as the population is aging at a rapid growth as the age group of 55-64 is around 11% of the whole population (Data.worldbank.org, 2019). There is immense potential to increase customer base with fewer expenditures.