Download Suggesting marketing strategy for Agito Medical

Chapter 1
1.1 Introduction
Agito Medical was founded in 2004 as a Danish based company with specialisation in the
purchase and resell of used but usable medical equipment. Following a consolidation and
steady progress in its field of endeavour, it has become one of the best and big players in
Europe in this area of business with established offices and warehouses in France, the
Netherlands and Norway. It has working co-operations with hospitals, clinics, laboratories
and original medical equipments manufacturers across Europe such as Siemens, Philips to
mention but two.
Agito Medical is no exception to the business development trend where companies expand
into new markets. It has had an intention to expand their operations to Africa particularly
North Africa. Unfortunately, this part of the continent suffered an upsurge of civil unrest
resulting in a shift in focus to other countries like Ghana and South Africa. It must be made
clear that management of this company holds the view that a stable political and economic
situation impacts on the company in a positive way. This is built on the premise that
economic and political stability results in less problems for the end users to source funding
for their project that fast track the decision making process and the ability to pay the bill. It
however acknowledges that in some situations, unstable economic situation can be an
advantage to the company in the sense that it makes the purchase of pre-owned system the
best and easiest choice because of it been significantly cheaper and therefore acceptable to
the financing company.
The drive towards Africa is been motivated by management thinking that there is low level of
organised healthcare in Africa couple with high populations which are saddled with
purchasing power problems for brand-new systems. With used equipment coming in with an
advantage of less cost (affordability) it sounds great to resort to them as a perfect base to
improve healthcare systems. Additionally, the company thinks it has a competitive edge over
its American competitors on the basis of language, shipping time, time differences etc. This
motivation culminated in a visit to South Africa to gather first hand information and to have a
feel of the market situation. Unfortunately, the experience in South Africa is described to be
pretty disappointing with two reasons accounting for that situation. The first been a restriction
on the importation of used equipment into the country. To import used equipment into the
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country demands that the company has to show a written contract with a local service
company stating their competence and ability to handle the service of a given equipment.
This has not been easy and turn out to be hapless for Agito Medical. The second reason was
that the ability and knowledge of local service companies that were located were somewhat
limited and nothing to write home about. Since every coin has two sides, South Africa proved
to be positive on the other hand with exportation of used equipment having no major
obstacles which makes it good for the company to purchase and export equipment to Europe
for reinstallations.
This project is therefore, focusing on Ghana with the view to establishing the feasibility of
success in expanding their business to the country. The marketing objective is multifaceted.
Much as it want to increase profits-this is pretty an opportunistic motive-there is the need to
increase market share and to grow sales since it is growing and consider them as
complementary. Among other issues to have been considered is a comparison between the
business cultures of the Home country, Denmark and the Host country, Ghana. Cultural
issues will be playing an ancillary role and so it was agreed that emphasis should be given to
the market analysis for now.
The company motivation to consider Ghana has not deviated from the general motivation it
draws from Africa. Admittedly, Ghana in the comity of African nations has demonstrated a
serious dedication and commitment to the philosophy and practice of multi party democracy
and market liberalisation policies for almost two decades now. Management has a definite
conviction that government policies matter with an instance that if a government decides preowned equipment per definition is crap, then the company is completely locked up and
cannot do anything. This is applicable to all markets be it growing, stable, democratic or
otherwise.
To Agito Medical, in new markets the first sale is the most important with Ghana not
exempted. Getting a doctor or clinic to procure a system-even something cheap and simply as
ultra sound or C-arm-will be a success and worth the effort. For this reason, the African
market in total is not expected to be more than a few hundred thousand EUROS per year, like
300-400 as maximum. The company believes that much as the potential is huge the obstacles
are equally huge lending credence to this assertion as below:
Companies of all sizes are today engaged in selling their products in international markets.
This developments is due partly to a continuing lowering of trade and investment barriers
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through bilateral and multilateral negotiations, improvements in communication,
transportation and logistics, fast development of new products, and increased wealth
generation and distribution in many emerging market economies. Although opportunities
have increased in the international market arena, the degree of competition and market
turbulence have equally increased. Kuada 2008.
The decision to expand your business operations beyond the current frontiers into new
markets can be both exciting, challenging and daunting. At one moment you are confronted
with risk and uncertainty about the efforts and cost of the expansion. At another moment you
are hoping for increase in sales, profits and growth depending on your marketing objectives.
Suffice then to remark that market expansion sounds wonderful but it must be noted as well
that it does not come risk-free. This underscores the importance of market research and
market analysis with the view to reducing the risk while optimising your marketing
objectives. For success will depend on how well managers are well informed about the
prevailing opportunities, expected changes in the not too distance future and the strategic
responses of current and potential competitors to those changes. Decisions to garner those
opportunities and how to do it will depend on how much of the information the company is
privy to (Kuada, 2008).
Now the problem formulation! The decision to expand into Ghana is placed in a dilemma or
paradox as to whether it will ultimately tell a story different from South Africa or not. The
fundamental research question that this research will seeks to address is:
How, and to what extent, will Ghana serves as a good and potentially profitable market
for Agito Medical?
Management of Agito Medical sees a good and profitable market as one with returning
clients. To them, an even better market is a market with serious local service company who
can function as the link between the company and the local demand. This is deemed to be
very difficult to come by in Sub-Saharan Africa. The African Economic Research
Consortium(AERC) on Foreign Direct Investment motives in Sub-Saharan Africa (2006)
referenced Basu and Srinivasan (2002) as having enumerated below as some motives:
• Natural-resource-seeking investment, which aims to exploit the natural resource
endowments of countries. Companies extracting oil (in Nigeria), gold (in Ghana) and
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diamond (in Botswana) belong to this category.
• Market-seeking investment, which aims to access new markets that are attractive as a
result of their size and/or growth.
• Efficiency-seeking investments, which aim to take advantage of special features in a
Certain area such as the costs of labour, the skills of the labour force, and the quality and
efficiency of infrastructure
This puts the case of Agito Medical within the second classification which is market-seeking
investment. The project will investigate how Ghana will be a good and profitable market to
Agito medical based on the above way the company has elected to view or define a good and
profitable market which can be profiled in order of magnitude as a market:

With local service companies as a link between the company and the local demand

With returning clients to make repeated purchases

With stable and growing economic and political atmosphere
The above definition will form the basis upon which this project will be built on.
1.2 Brief Profile of Ghana
Ghana is located on the west coast of Africa south of the Sahara with a population of about
24 million people. The people are warm, friendly and are highly credited for their hospitality
and a high degree of personal safety as compare to its sister countries on the same continent.
Ghana has carved a congenial trend in the practice of multi-party democracy and market
liberalisation policies for almost two decades now. This phenomenon is hard to find in most
nations on the continent. For this and other reasons, the economy of the country has seen
significant improvement and stabilisation presenting an excellent opportunity for
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investments. As such, investor confidence in the economy is in the increase as evidenced by
major successful investment in most sectors especially in the mining and telecom industries.
In 2003, the country made some reforms into its health sector by the introduction of national
health insurance scheme as a good and pragmatic alternative to health care financing. Its
introduction has made the sector vibrant yet still going through some teething problems.
Ghana has recently discovered oil in commercial quantities which has boasted the economy
projecting the country growth rate and making it one of the strongest in West Africa.
1.3 Structure of the Project
The structure of the parts of this project are presented diagrammatically below touching
briefly on the basic purposes of the various parts outlined in the research.
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Part of Chapter:
Introduction and
Purpose:
This part is designed to overview the purpose and
The Scope of the Problem
background of the project and as such the problem
Motivation
formulation.
This explains the proposed methodology applied to
investigate
the Methodology
study
Research
This provides the framework and the basis for the
Theoretical Framework
study to be built upon theoretically
and or Models
Analysis of Agito Medical
This translate the theories into reality analysing the
And Ghana
situation under study
Findings
this summarises the findings, provide recommendations
Reccomendations
Conclusion
Figure: 1 structure of the project
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and conclusion
Chapter 2
2.1 Methodology
The research will put into perspectives the meta-theoretical assumptions and philosophies
that has characterised research in the social sciences and for that matter business economics
and market knowledge acquisition “for a study successfully to address its research question, it
must be firmly grounded within a methodological approach”(Maggs-Rapport, 2001, p. 373).
Analysis will be made of them and a choice will have to be established between the
application of both quantitative and qualitative approaches to the research in question.
One of the dominant perspective of social science paradigms relating to knowledge creation
was presented by Abnor and Bjerke(1997). Attempt will be made to study the various
approaches in order to find a strategic fit for this research. This is because researchers have
the prerogative to identify with the vantage point through which they view reality but this
must be guided by the standardised perspective of marketing research (Kuada, 2008, p.48).
They put the following three view points:

Analytical Approach

Systems Approach

Actors Approach
2.2 Analytical Approach
This approach to knowledge creation provides positivistic direction in science theory and a
prerequisite for quantitative strategies. Here reality is considered to be objective and built
upon the idea that the total is equal to the sum of the parts which can be analysed
quantitatively. Issues can be described by pure facts and can be predicted by theories.
Scientific knowledge based on the analytical thinking is independent of subjective human
sentiments.
According to Kuada 2008, market variables exhibit predictable features and there is relative
stability in the market environment with well defined methods and procedures for data
collection given rise to specific types of outcomes. The advantage of this, he maintain by that
assumption, is that managers are able to outsource marketing research activities. And this
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assumption is that analytical thinking makes it possible to measure all parts of the various
dimensions of the problem under review, so that at the end of the day the sum is the total
value of the various parts. There is also the cause and effect relationship.
Owing to the prescriptive tools in data collection by the analytical approach which some
limiting factors will not permit, there will not be an elaborative application of it. It must also
be stated that marketing research and analysis factors have relationship with each other and
interact extensively to produce a comprehensive and relatively exhaustive outcome for
purposes of decision making. Analytical approach will reduce it to specific parts which will
be handicapped in granting a synergistic whole.
2.3 Systems Approach
This approach is the philosophy that consider the search for knowledge built on the premise
that things influence each other within a whole. System consist of people, structures and
processes that work with effective combinations to complement each other to ultimately
results in a healthy outcome. In relation to problem solving, it is premise on the thinking that
problems must be dealt with as part of an overall system, rather than responding to specific or
individual part. Issues can best be dealt with when they are analysed in context of
relationships with other parts rather than in isolation. Therefore, system thinking can be
described to be cyclical rather than cause and effect. Thus parts are understood in relation to
the whole (holistic view of things). Understanding of system will mean examining the
interrelationships, linkages and interactions between the parts that contribute to system in its
entirety. This is how Abnor and Bjerke presented the fundamental issues in the systems
approach:
“First, all phenomena can be regarded as a web of relationships among its components, that
is, as a system. Second, all systems have common patterns, behaviour and properties which
can be explained and/or understood to develop greater insight into the behaviour of complex
phenomena and move closer toward the unity of science”. (2009, p.103)
I share in the view of other market analyst who think business should be viewed as a
components and relations that should interplay with each other to produce a desired synergy
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rather than a “manifest cause-effect relation”(Kuada, 2008, p.52). This is grounded on the
fact that managers must view their firms as external to the environment for which reason they
must organise well internally to deal with the externalities. The approach could be that of
openness or closeness bringing us to the further description of system as either a close or
open (Abnor and Bjerke, 2007).
Close System and Open System
A close system is one that is not influenced by its environment. The environment consist of
very significant factors and are beyond the control of the system. Notwithstanding how
important the environmental factors can be closed systems remain adamant and water-tight
by ‘disallowing such exogenous intrusions’ (Kuada, 2008, p.53).
On the other hand, open system do not have watertight boundaries as it is allowing exogenous
factors to influence it-implies it imports and exports information to and from the
environment. This is where the significance of environmental factors are been seen. Kuada
(2008) maintains that ‘market knowledge emanating from the external environment is,
therefore, expected to have impact on intra-firm structures and relation as well as firms’
responses to the environment’. Business perspective is usually focused on open system as it
will be greatly influenced by its environment (Abnor and Bjerke, 2007, p. 113).
Agito Medical is no exception to been an open system in that their initial plans was to extend
to North Africa but development such as the civil unrest in this part of the world culminated
in their change of focus to Ghana and South Africa, the reason for which made this studies
worthwhile.
Furthermore, knowledge to be gained in the external environment of Agito Medical will be
utilised by the firm as a system. For instance, the decision that will be taken after considering
the knowledge emanating from the exogenous environment will have a cross-functional
effect on the firm and not a specific unit of the it. If this is reasonable to go by, then this
system will be fitting well to what Abnor and Bjerke referred to as “self organising system
model”. This type of model are perceived to be open and learning system and possesses the
capacity to organise its structures according to the new environment (p.123).
More so, market research and analysis involves multiplicity of factors that exhibits
characteristics across many divides. Interestingly, system approach encompasses both
measurable and non-measurable information i.e. quantitative and qualitative data and
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subscribes to the existence of objective reality just like analytical approach but unlike actors
approach (Andersson, 2003, p.28) citing (Abnor and Bjerke, 1994).
System approach allows for interpretation and analysis of limited data and information which
makes it possible to transform them to very useful knowledge. It promotes organisational
communication at each level in the organisation thereby attenuating the silo effects syndrome
making it enjoy general acceptability in application in most cases in business research. This
study will not depart from the status quo for want of better outcome.
Conversely, system approach has also been criticised. One general and regular criticism of it
is that it is too abstract for easy comprehensibility. This makes it rather difficult to be applied
in studies in the quest to understand reality. Not all but also it dwells on holistic treatment of
issues and lack focus on the individuality. It makes much sense in some cases to focus on the
individual part.
2.4 Actors Approach
Actor approach sees reality as a social construction with individual players or actors with
their characteristics which must be interpreted. Here the assumption is the whole can be
understood from properties of the parts. This approach is the newest to the other advanced
two and seen as an approach developed in response to the loopholes or critiques that are been
levelled against the analytical approach. Its view of business is like any social construction of
the world which is being in perpetual flux (Kuada, 2008, p. 53).
As people go about their business transactions, there are seen as actors with their actions
producing outcomes which are reflected upon and which are used subsequently to guide
future behaviours or actions. ‘Actions, counteractions, reflections and thoughts in turn
combine to influence the on-going process of market developments. Thus, the business
environment...........are viewed in the actor’s approach as being temporary’(Kuada, 2008, p.
53). It does not lend itself to the effective use by an outsider since it dwells much on
experience with other business actors such as customers and distributors.
In summation, a study of this kind cannot do without some level of compliance to the
philosophical underpinnings advanced by Abnor and Bjerke. From the forgoing it is crystal
clear that this study will draw on the strengths of the systems much but not to the absolute
neglect of actors and analytical approaches since the research will not hesitate to draw on
their relevance.
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2.5 Methods
The research will predominantly be desk research (secondary data) exploiting what is now
referred to as data mining. The use of the internal data arsenal of the company. The internet
will be mostly used and other scholarly documents in getting information about both the
company and the market that is under study. The internet is noted by Kuada (2008) to have
emerged as a powerful tool for gathering secondary data and has the following as some of its
advantages:

It is readily accessible and cheap to use

It produce information fast with much of it been frequently and quickly updated

It has wide geographical scope and suitability for multi-country comparison
On the contrary its demerits among other things include non-availability for market size
figures for most parts and conflicting information due to the fact that no single body is in
control of what is been posted.
This research is going to be qualitative since the trend in international marketing research is
noted to be tilting more towards that direction. According to Kuada (2008, p. 133), ‘a market
analyst who uses qualitative approach to market knowledge acquisition will bring his or her
unique interpretation and goals to bear on the analysis’. The research is intended to provide
quick and easy understanding for decision making as well as support other existing research
works on the Ghanaian market for the company in question. Therefore, qualitative approach
is thought out to be the best approach to filling this gap.
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Chapter 3
The previous chapter was devoted to the methodological approaches upon which this project
is built upon. The locus of attention for this chapter will be on the theories and models that
supports the project. Two broad streams of theories will be used here to analyse both the firm
and the market in question. The first one will build a theoretical frame that will identify and
analyse the resources of the firm that will give it the needed strengths as against its
weaknesses in operating in the Ghanaian market and markets with similar environments.
The other broad stream of theories will be on the internationalisation thereby helping to
analyse the market opportunities of Ghana and the suitable market entry mode for Agito
Medical.
3.1 The Resource-based Theory of a Firm
Resource-based theory antecedents is traceable to the early work of Edith Penrose (1959) and
subsequent works of Prahalal and Hamel(1990), Runelt(19191), Barney(1991) etc.
Its thinking can be used as a managerial tool in determining the strategic resources at the
disposal of a firm. This strategic bundle of resources forms the basis for a competitive
advantage of a firm and lies fundamentally on how the firm deploys or apply this valuable
resources. Its approach to dealing with the competitive environment of a firm takes the
‘inside-out’ perspective by commencing with the firm’s internal environment (inwardlooking). This has been considered by others as an alternative perspective to Porter’s (1980)
five forces framework. It is as a result of the determination of the internal capabilities of the
firm that it is provided with the strategic choice to approach competition in the external
market or better still able to assess its ability to expand.
It must be pointed out clearly as noted by Fahy and Smithee (1999, p. 5) that the list of
resources at the disposal of firms is likely to be pretty long and one cardinal insights of the
resource-based view is that not all resources of a firm are of equal importance or possess the
potential to be a source of sustainable economic advantage. For this reason many scholarly
attempts have been made in trying to make discernible those resources that has the power of
generating strategic competitive advantage. These scholarly endeavours has outlined the
characteristics of advantage-creating resources in a variety of ways. According to Fahy and
Smithee (1999), Grant (1991) was of the view that levels of durability, transferability and
replicability are important determinants while Collins and Montgomery (1995) put forward
five test to be inimitability, durability, appropriability, substitutability and competitive
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superiority and Amit and Schoemaker (1993) went further to delineate eight criteria
embracing complementarity, scarcity, low tradability, inimitability, limited substitutability,
appropriability, durability and overlap with strategic industry factors. Many of these
characteristics are noted to be overlapping and worthy of considering.
Barney (1991) is noted to have identified a popular checklist as key and significant
characteristic for resources to be strategically important. For its simplicity for easy
understanding and its ability to transcend other classifications, the research will look at it
further. For resources to possess strategic competitive advantage, it must be:

Valuable-the resources must be one that deliver great and adequate value to the firm.
There is no basis of keeping resources that confers no value on the firm.

Rare-the resource should not be found to be commonly possessed by a large number
of firms. It should be unique and idiosyncratic of the firm. Resources that are
possessed by greater number of firms cannot confer strategic competitive advantage
on firms.

Inimitable-the resources should be too good and special for others to copy so easily
and realise the same standard or effect. Resources can only be a fountain of
competitive advantage if firms that do not possess them cannot imitate them and get a
similitude of it.

Non-substitutable-there must be no strategic equivalent valuable resources that are
themselves neither rare nor imitable. No resource should come near in delivering the
value it is noted for.
The resource-based theory postulates that firms have resources some of which provides it
with the opportunity to achieve competitive edge or advantage whilst others enables it to
achieve superior long-term performances. Resources with rare and valuable qualities can lead
to the creation of competitive advantage. That advantage is possible to be maintained or
sustained for a longer span of time such that the firm will be able to build protection against
imitation, transfer or substitution as depicted in figure 2 below.
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Source: Wade and Hulland (2004), copied from: http://www.istheory.yorku.ca/rbv.htm
Value to customers is an essential ingredient to gaining competitive advantage. Therefore, for
resources to serve as a potential source of competitive advantage , it need to be valuable or
guarantee value generation. This study will seek to identify resources of Agito Medical that
will permit it to conceive or implement strategies that will increase efficiency and
effectiveness by delivering the needs of customers in a way that competing companies cannot
comply with in the new market.
Another important underpinning of the resource-based view is the competitors’ inability to
duplicate resources endowment of the a firm. Of course, some factors will certainly make it
difficult or impossible for resources to be duplicated as advanced by many scholars many of
whom are found to be overlapping. Fahy and Smithee (1999, p. 5) enumerated the following
with their corresponding proponents as some which include assets stock ‘accumulation
(Dierickx and Cool 1989), capacity gaps (Coyne 1986), capacity differentials (Hall
1992;1993), ex-post limits to competition (Peterf 1993), isolating mechanisms (Rumelt
1984;1986) , uncertain inimitability (Lippman and Rumelt 1982) and causal ambiguity (Reed
and DeFillippi 1990)’. Basically, the competitor will lack information as to what is
accountable for a given success by a particular firm and also uncertainty or ambiguity about
the connectedness of the actions and results.
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Fahy and Smithee (1999, p. 6) concluded that resources are likely to be inimitable or
perfectly inimitable where their relationship with advantage is poorly understood and or they
possess the characteristics of tacitness, complexity, specificity, regulatory production and
economic deference. It makes it clear to look at the table they presented enumerating barriers
to resources duplication.
Table. 1. Alternative Classification of Barriers to Duplication
Author
Barriers to Resource Duplication
Lippman and Rumelt (1982)
Uncertain Inimitability
Reed and DeFillippi (1990)
Complexity, Tacitness and Specifity
Rumelt (1984; 1987)
Communication Good Effects, Economies of Scale,
Information
Impactedness,
Producer
Learning,
Reputation and Response Lags
Coyne (1986)
Business System Gaps, Managerial Gaps, Position
Gaps and Regulatory Gaps
Hall (1992;1993)
Cultural
Differentials,
Functional
Differentials,
Positional Differentials Regulatory Differentials
Dierickx and Cool (1989)
Casual Ambiguity, Interconnectedness of Assets
Stocks, Time Compression Diseconomies
Source: Adapted from Fahy and Smithee (1999, p. 6)
3.1 Types of Advantage Creating Resources
The issue of what constitute resources has evoked a variety of approaches. Essentially,
resources comprises of three distinct sub-groups namely tangible assets, intangible assets and
capabilities. To some, resources are thought of to be inputs that enable an organisation or
firm to accomplish or carry out its activities and has been broadly classified into tangible
resources and intangible resources.
Tangible assets refers to the fixed and current assets of the organisation that have a fixed run
capacity (Wernerfelt 1989). Examples include plants, equipments, land, other capital goods
and stocks, debtors and bank deposits. Tangible assets have the ownership and their value is
relatively easy to measure(Hall 1989) referenced by Fahy and Smithee (1999).
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Intangible assets on the other hand include intellectual property such as trademarks and
patents as well as brand and company reputation, company networks and database (Hall
1992; Williams 1992).Capabilities includes the skills of individuals or groups as well as
organisational routines and interactions through which all other firm’s resources are coordinated ( Carant 1991).
The other classification of resources into tangible and intangible resources considers tangible
resources to be the physical assets that a firm possesses which are physical resources,
financial resources and human resources. Physical resources encompasses the current state of
buildings, machinery, materials and productive capacity. It is the capability of the physical
resources to flexibly respond to the marketplace dynamics that value is added. State of the art
technologies that are couple with efficient processes with rich knowledge to maximise their
potential that will guarantee value for firms. If a firm is able to realise desirable return on its
capital employed, it will be able to attract outside capital or financial resources. The financial
resources of a firm will include its cash balance, debtors and creditors.
Human resource becomes intangible when the total workforce employed and their
productivity, as value by parameters such as profit or sales per employee are encouraging.
Here tacit knowledge and special skills of the employees becomes an intangible resource that
is difficult for competitors to emulate or imitate.
Intangible resources consist of intellectual and technological resources and reputation.
Technological resources is about a firm’s readiness and capacity to innovate and the speed
with which innovations occurs. Intellectual resource include patents and copy right which
may be derived from technology. Intangible resources may be embedded in routine and
practices that have developed over time within the organisation. Examples are organisation’s
reputation, its culture, knowledge and brands.
Competence : the availability of resources to a firm does not by themselves grant benefits. It
is only the judicious and timely configuration and deployment of the resources that will inure
to the benefits of the firm. This provides the firm with what is referred to as competence
otherwise known as distinctive capabilities in other jurisdictions. Just like resources
themselves, competence or capabilities does not deliver or guarantee competitive advantage.
Core competence or distinctive capability is described as a cluster of attributes that an
organisation possess which in turn enables it to grasp a competitive advantage. It could
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simply be a situation where the organisation is able to configure its collection of resources in
a way that grant it to compete successfully.
The following table presents how resources of firms have been classified with their
corresponding authors.
Table 2; Classification of the Firm’s Resource Pool
The Firm Resource Bundle
Author
Tangible Assets
Intangible Assets
Capabilities
Wernerfelt(1998)
Fixed Assets
Blue Prints
Cultures
Intangible Assets
Intangible
Hall (1992)
Capabilities
Hall (1993)
Assets
Prahalad and Hamel
Competencies
Core Competencies
(1999)
Itami (1987)
Invisible Assets
Amit and Shoemaker
Intermediate Goods
Silznick(1957);
and
Hitt
Ireland(1985);
Hofer and Schendel
Distinctive
Competencies
(1978)
Irvin and Michaels
Core Skills
(1989)
Adopted from: Fahy and Smithee 1999.
Managers have a role of converting resources into something of value to customers. What is
entail in this managerial role is the identification, development, protection and deployment of
the firm’s resource base as reported by Fahy and Smithee (1999) to have been advanced by
Amit and Shoemaker (1993). This process is well presented by the resource-based model of
sustainable competitive advantage in a diagram below. What is significant and worthy of reemphasizing is that not all the resources of the firm provides value. It is in the light of this
that the resource-based view provides a conceptually grounded framework for assessing
strengths and weaknesses and enables strengths or weaknesses to be examined in terms of the
17
criteria for establishing sustainable competitive advantage (Fahy and Smithee, 1999). Focus
is much on provision of value as it is also on the durability of resulting advantages. It makes
managers assess whether or not the claimed strengths actually matter in the marketplace-do
they provide value for customers.
Figure 3.
A RESOURCE-BASED MODEL OF SUSTAINABLE COMPETITIVE ADVANTAGE
MANAGEMENT’S STRATEGIC
CHOICES
RESOURCE IDENTIFICATION
RESOURCE
DEVELOPMENT/PROTECTION
RESOURCE DEPLOYMENT
KEY RESOURCES
TANGIBLE INTAGIBLE, CAPABILITIES
ASSETS, ASSETS
SUSTAINABLE
COMPETITIVE
VALUE
BARRIERS TO
DUPLICATION
APPROPRIABILITY
Source: Adopted from Fahy and Smithee (1999).
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SUPERIOR
PERFORMANCE
ADVANTAGE
VALUE TO
CUSTOMERS
MARKET
PERFORMANCE,
FINANCIAL
PERFORMANCE
In summary, it makes sense to consider what Edith Penrose (1959) is often cited to have
written “ a firm is more than an administrative unit; it is a collection of productive resource
the disposal of which between the users and over time is determined by administrative
decision. When we regard the function of the private business firm from this point of view,
the size of the firm best gauged by some measure of the productive resource it employs”
(Fahy and Smithee, 1999. P 2).
3.2 Critique of the Resource-Based View
The Resource-based view, for about three decades ago, ‘has emerged as perhaps the most
fruitful and controversial contemporary perspective in strategic management’ drawing to
itself a myriad of advances, arguments and some aporias (Stephane, 2007, p. 3) which has
been widely taken up and subjected to considerable criticism (Kraijenbrink et al. 2010).
In a review and assessment of the critiques of the resource-based view of a firm,
Kraaijenbrink et al. (2010) outline eight criticism and concluded that the core message of the
resource-based view can withstand five of the criticism because of the well provided
variables, boundaries and applicability and that the three criticism that cannot be easily
dismissed advocates for further researching and theorising. They claimed it has arisen from
the indeterminate nature of the two basic concepts of the resource-based view-resources and
value-and the narrow conceptualisation of the firm’s competitive advantage. Their suggestion
seeks to indicate that the resource-base view’s community has clung to an inappropriately
narrow neoclassical economic rationality, thereby diminishing its opportunities for progress.
The eight critiques as they have outlined are as follows;

Resource-Based View has No Managerial Implications: this seeks to portray that the
resource-based view has limited or lacks substantial managerial implications or
“operational validity” citing Priem and Butler (2001a). Resource-based view after
having informed managers to create resources with value, rare, inimitable and nonsubstitutable qualities and an appropriate organisation remain silent as to how this
should be done. In a similar vein, they cited McGuinness and Morgan (2000)
submission that the resource-based view invokes “illusion of total control” trivialising
property rights issues and exaggerating the extent to which managers can control
resources or predict the future value. It is also said to have resorted to unobservable
19
variables, thus making empirical research and validation problematic (Stephane,
2007). Lado et al. is cited by Stephane (2007) to have argued that the resource-based
view suffers a tension between descriptive and prescriptive theorising. To this tension,
(Van de Ven, 2007) is cited to have counter this with the view that this tension is
present throughout management research which is not yet resolved and should not be
levelled at Resource-based view especially. The theory, according to Nelson (19191) ,
Rumelt (1984) and Barney (2005), is aspiring to explain strategic competitive
advantage of some firms over others and has never intended to provide managerial
prescriptions.
What the theory seeks to explain may provide more than indicative yet more value to
managers, and there is no reason to oblige it to generate theoretically compelling
prescriptions. The task and focus should not be about lack of managerial implications
but rather about its impact on management practices (Stephane, 2007).

Resources-based view implies infinite regress: this critique of infinite regress is
attributable to Collis (1994) and Priem and Butler (2001a). The illustration of Collis
(1994) as referenced by Stephane (2007, p. 352) “a firm that has the superior
capability to develop structures that better innovate products will, in due course,
surpass the firm that has the best product innovation capability today”. This is so in
that a second-order capability (developing structures that better innovate products)
will in the short run be more valuable than any first-order capability (product
innovation) and that the resource-based view is suggestive of firms striving to obtain
such second class-order capability. This particular critique points to where this step is
extended ad infinitum, leads into everlasting search for ever higher-order capabilities
and makes sense only in abstract terms (Stephane, 2007, p. 352).
In response, Lado et al. (2006) made it clear that infinite regress is only problematic
for people who think management and economic science a positivistic quest for
certainty-for the ultimate source of strategic competitive advantage. Where strategic
management is appreciated as a practical engagement with indeterminacy and openendedness, the infinite regress critiques is less relevant.

Resource-based view applicability is too limited: this critiques is been put into three
perspectives by Stephane (2007).
The first perspective borders on the notion of resources uniqueness, the melding of
heterogeneity and immobility, which denies the resource-based view any prospect of
20
generalization citing Gibbert (2006a, 2006b) as the proponent. He, however, considers
this argument to be overly academic but hasten to agree with Levitas and Ndofor
(2006) that it is perfectly practical to generate useful insights about degree of resource
uniqueness as an “applied theory”.
The second argument, he writes, emanated from Connor (2002) who argues that the
resources-based view is applicable specifically to large firms with significant market
power. That the smaller and nimble firms strategic competitive advantage cannot be
based on their static resources putting them beyond the bounds of resource-based
view. This argument by Stephane (2007) does not hold water when non-tangible
resources are admitted.
The third perspective of the applicability critique is put forward by Miller (2003) and
implicit in his “sustainability-attainability” discussion. His argument is that the
resources that a firm needs to generate strategic competitive advantage are precisely
hard to come by in the first place. And that only firms that already have strategic
competitive advantage creating resources are capable of acquiring and applying
additional resources else competitors will acquire them with equal ease.

Strategic competitive advantage is not achievable: the prime motive of the resourcebase view is the achievement of strategic competitive advantage that defeats any
efforts aim at duplication. The premise that strategic competitive advantage is really
attainable has generated this critique. The proponents are of the view resources and
how firms use them needs to be constantly changed leading to the creation of
temporary advantages and that every strategic competitive advantage must eventually
be competed away.
Granted that under static environments some static unique resources can provide
strategic competitive advantage, dynamic environments demand dynamic capabilities
since firms are not passive.

Resource-based view is not a theory of the firm: another prominent critique of the
resource-based view is that it is unsuccessful or not grounded enough to be a theory of
the firm. This idea was mooted by Conner (1991) and Kogut and Zander (1992) with
a conclusion that Resource-base view is striving to be a theory of the firm but differs
materially from other available theories such as transaction cost economics and N.J.
21
Foss (1996a, 1996b) also concluding that it is insufficient as a theory of the firm
Kraaijenbrink et al (2010, p. 355).
The originators concedes that though resource-based view is not a putative theory of
the firm but t does not suffer any debility as a theory of rent and strategic competitive
advantage. It has appeared more as a complement to the transaction cost economics
and there see no reason to require it to meet the criteria for a theory of a firm
(Kraaijenbrink, 2010, p. 355)

Value, rare, inimitability and non-substitutability is not necessary and sufficient for
Strategic competitive advantage: resource-base view postulates that strategic
competitive advantage can be achieved when firms has resources that are of the above
qualities and are deploy well. The critiques are claiming empirical research has
modest support for that assertion. More so, the deployment of such resources does not
suffice in offering full explanations for strategic competitive advantage. Others like
N.J. Foss and Knudsen (2003) considers uncertainty and immobility as real and true
prerequisites for strategic competitive advantage to arise and any other conditions are
additional(Kraaijenbrink et al. 2010).

The Value of resources is too indeterminate to provide for useful theory: the resourcebase view is also criticised for been tautological that fails to fulfil the criteria fir a true
theory. Kraaijenbrink et al. (2010) referenced Lockett et al. (2009) and Priem and
Butler (2001a, 2001b) as having argued that resource-base viewdoes not contain the
law-like generalisations that must be expected and rather builds on analytical
statements that are tautological by definitions and unable to be tested(ibid).

The definition of resource is unworkable: the definition of resource by the proponents
of the resource-base view are thought out to be overly inclusive and whose acceptance
indicates nothing strategically useful with the firm that is not resource. i.e. there is no
recognition of the difference between resources and inputs and resources that enable
the organisation of such inputs and that there is no recognition of the different types
of resources can contribute to sustained competitive advantage in different manner
(ibid).
Notwithstanding, the resource-based view continues to give an insight and provides useful
framework for assessing the resources of firms for sustained competitive advantage and
ultimate success in the business world.
22
3.3 Internationalisation Theories
This part of the chapter will look broadly at internationalisation theories with specific
perspectives and scope on international market opportunity analysis and entry mode
decisions. Kuada’s model of international market opportunity analysis has invariably covered
most of the essential ingredients that are needed for studies of this kind. The research is
therefore drawing from that insight and inspiration.
3.3.1 The Screening Approach to Market Selection Model
Firms are often confronted with the difficult decision in wanting to extend their services to
new markets. This makes it necessary and significant to do a proper scrutiny of the various
motivational factors and alternative markets and to screen the avalanche of them to arrive at a
very good and attractive destinations. Globalisation of businesses has gained ascendancy
resulting in ‘increasing dependence of companies on international business and growth and
the intensity of competition makes selection of non-domestic markets one of the most critical
decision in international strategy (Anderson and Strandstov 1998)’ cited by (Sakarya et. al
2006, p).
The market screening approach consist of a systematic process of filtering the global market
employing a set of criteria that will navigate you to a market considered to be most attractive
or suitable to the firm. Having concluded with a particular country as the most potentially
suitable destination for the firm to operate in, the next task is determining a segment out of
the numerous within the country that are mostly going to help ensure that the objectives of
the firm will be well met (Kuada, 2008, p. 64). The essence of this exercise is to identify and
select the market that offers the greatest market potential and opportunity . The process
involves market information gathering at the larger market level and narrowing it down by
screening using a pre-determined set of criterion as illustrated with a typical screening model
in figure x2 below. According to Kuada, 2008, each stage of the steps in the process ladder as
presented in the diagram below demands decisions of the factors that management deem to be
significant in strategically appraising on the countries under study. Macro economic factors
23
are considered to be easier in assessing vis-a-vis social and cultural issues which are rooted
deeper and defies easy understanding without deep rooted analysis.
The researcher thinks if not all but some o the underpinnings of the stages under this model
might have informed the decision of Agito Medical to have narrowed down to doing the last
stage on Ghana and markets of similar economic indices. A better understanding is hereby
presented that the good micro economic factors, stable political gains and the general low
level of organise health care, high demographic figures and the low purchasing powers for
new equipments are accountable.
Figure 3. Steps in Market Screening process
Establish initial list of countries to be
examined based on corporate objectives
Establish a list of variables for initial
screening
Score each country on the evaluation
criteria and delete countries not meeting
threshold conditions
Decide on evaluation criteria for second
level screening
Score remaining countries on the new
evaluation
Select handful of countries for in-depth
analysis
Conduct sensitive analysis of the results and
make a final choice of countries
24
Source: Kuada 2008.
3.3.3 Integrated Model for Market Opportunity Analysis
This model provides a framework upon which an international market can be evaluated. It
primarily identifies three important outcomes on which market analysis must be developed to
serve. International market analysts often will initially want to establish the potential market
size of the demand because market size determines potential profits or revenue. But
determining market size is not an end in itself in that it must be cross evaluated against
competition since a large potential market size could be served already by other players. This
is where the task of assessing how well competitors are serving the demand becomes very
important and necessary. When that is done the firm will be better placed to assess the
marketing efforts that will be needed to serve the demand. By this the firm Agito Medical
will be well informed with what it takes to serve the Ghanaian market and whether it can
make the needed profit and whether it is prepared to designate the required resources to the
service of the market. So the primary outcomes will be determining;

The size of the market for used medical equipments in Ghana

The marketing programme and efforts that Agito Medical requires to serve the
customers effectively and

The extent to which customers are satisfied with the marketing efforts of other
players in the industry if any.
For this dimensions to be effectively analysed, further and deep research work need to be
carried out in order to provide requisite information needed to arrive at the stated outcomes
above. This is what Kuada (2008) referred to as the ‘components of a market opportunity
analysis’. Studies will have to be conducted about each component and the components are;
i.
Demand analysis of used medical equipments in Ghana
ii.
Segmentation analysis of the customers (medical institutions) of used medical
equipments
iii.
The industry analysis
iv.
Competitor analysis
v.
Channel analysis
25
Kuada (2008, p. 83) provides a descriptive framework for international market opportunity
analysis which seeks to present the relationship that exist between the various analysis that
answers the substantive queries pose by the market size, marketing programme requirements
and competitors existing marketing strategies. This descriptive frame work will be presented
in figure x3 below. The idea is that the analysis creates the information that offers a lead
insight into the issues. The various information emanating from the analysis are integrated
and further interrogated or examined to build a consistent whole for decision making
purposes. This improves the analyst comprehension of the issues under investigation.
26
Figure 4. Descriptive Framework For International Market Opportunity Analysis
Source of Market Information Component of Analysis
Outcome of Analysis
Industry and
global
sources
Customers,
Users,
Influencers
Channel
members
Competitors’
partners
Home
Country
Institutions
Demand
Analysis
Market Size
Segmentation
Analysis
Distribution
Analysis
Industry &
Competitor
Analysis
Marketing
Requirement for
Providing
Superior Value
Competitors
Current Potential
Strategies
Host Country
Institutions
Source: Adopted from Kuada (2008, p. 83).
The impulse of the diagram is to indicate that the market size, marketing requirement for the
provision of superior value and the competitors current potential strategies can be determined
through the demand, segmentation, distribution and industry analysis with the feed from
world global trends of used medical equipments, customer, users and influencers which are
hospitals, clinics and medical laboratories in Ghana, those already serving the used medical
equipments market, institutions in Ghana like the Ghana health service, ministry of health of
27
Ghana and institutions of Denmark like Danida that is in Ghana and deeply working in the
health sector.
3.4 Assessment of the Market Size
According to Kuada (2008, p. 82) “ a market may be defined as a group of people or firms
able and willing to buy a product or service to fulfil a given purpose, either production or
consumption”. He stated further that the emphasis of the definition lies in the final buyer of
product and services rather than intermediaries who are buyers for purposes of resale.
The short-term view of market for a product is when there is available demand for the
product or service and demand is when a need is backed by an ability to pay (purchasing
power). Demand comes in different types but what is noted to be significant to most
international analyst is noted to be market demand (Kuada 2008,p. 82). This source in trying
to shed more lights on market demand referenced the definition of Kotler (1994:247) which is
“the total volume of (of the product) that would be bought by a defined customer group in a
defined geographical area in a defined marketing environment under a defined marketing
programme”. Kuada (2008) deduced from the definition that market demand is not an issue
of a fixed number but rather a function of a stated condition.
Market size knowledge is of fundamental significance in the final decision of firm to enter or
not to enter a particular market. A firm may decide to discard a particular market on the basis
of the size been small. But a small market size could be found to be attractive for another
firm if it is seen to have a prospects that would be substantial in the long run. Others could
elect to do niche marketing with a small market size with greater prospects for future
developments. Some firms have stated potential sales figures to determine whether to go into
a market or to discard it.
More importantly, market size need to be considered in relation to expected profits margin
that will accrue from such investment. Also, the rate of turnover of a company’s investment
is worthy of consideration. As aptly captured by Kuada (2008) “ a small market with a fast
turnover will generate a higher return on investment than a bigger market with a slower
turnover”.
28
3.5 Demand Analysis (Types)
Demand estimation is noted to be a salient key in assessing the opportunity of a new market.
This is because herein lies the core of the market capability in term of its ability to purchase
both in the present and the future since it can be predicted. Many models are available in
guiding international market analyst gaining insight as to how to conduct demand analyst that
interest them. One important element is the potential market demand which is deemed to be
the preferred starting point. Potential market demand according to Kuada (2008) is the set of
customers who have shown some level of interest in the product. He continued to select the
classification of demand model advanced by Toyne and Walter (1989) which this research
will also focus on. They proposes that market analyst must take into consideration three
categories of demand namely, incipient market demand, latent market demand and existing
market demand.
3.5.1 Incipient Market Demand this is a demand type that is anticipated to be available in
the future. Implied here is that the demand has a long term potential than the present
(futuristic). For instance, if by virtue of income inadequacies some people within a defined
community need or want is not satisfied that represents an incipient demand. This type of
demand is noted to be prevailing in developing and transition economies for certain
categories of products. It must be pointed out that large firms often nurture and sustain this
type of demand either through the development of new products of cheaper cost or by
awareness creation via social intervention activities. This gives them competitive edge or
leverage when incomes increases to the expected levels that consumers can be able to afford.
3.5.2 Latent Market Demand this represent an untapped demand. A situation where the
demand of a product in a particular country is not yet been discovered by any firm and as
such no offer has been made by way of satisfying this need or demand. It could also represent
a demand that is been hold back due to government regulation. Should such regulations be
changed the demand will be liberated or manifest.
3.5.3 Existing Market Demand this is the reflection of demand that consumers in a
particular country are ready and prepared to pay for. It could be higher than the market
29
current levels including that part of demand not yet satisfied by currently existing products
due to imperfections in the marketing system.
3.6 Assessment of Marketing Programme Requirement
Every firm comes with its unique approach to how they want consumers to perceive them in
order to respond positively to their products by the attributes they embed into them. To be
able to assess a firm’s needs a close collaboration with management with the right insight
into the overall business plan and therefore marketing strategies is important.
Kuada (2008) has proposed a way that an analyst can conceptualise the marketing
programme by the 3Ps acronym which is the promises, the processes and the providers.
Promises: this is the bundle of promises that a firm offers to its perspective customers in its
marketing package. This is concern with the product attributes, prices etc. The promises
should be powerful and potent enough to reach the target customer and beyond (spill over
effect).
Processes: this borders on the plans of communicating the values to prospective customers,
how to solicit for orders and the organisation of the marketing activities.
Providers: this covers the plans or organising the marketing process. Task allocation in the
value creation process and its delivery at what stage and at what cost.
3.7 Assessment of Competitors Marketing Strategy
It is common knowledge that competitors will guide against the revelation of their strategies
more especially to other competitors or prospective competitors. Nonetheless, there are
avenues to gaining an insight into what competitors are doing one of which is segmentation.
Segmentation “is to find the group of customers within the target market and identifying
their needs and demands”( Kotler, 2009, p. 248). According to Kuada (2008) there are two
major approaches to market segmentation, the priori and posteriori. By the priori industrial
markets are segmented using
30
i.
demographic characteristics such as nature of the industry, the size of the
company and location.
ii.
Operating variables such as company technology, nature of products, customer
capabilities
iii.
Purchasing approaches ie the way purchases are done
iv.
Situational approaches including urgency of order fulfilment, product application
and size of order.
Then posteriori approach is done using application or usage situation benefit sought or
derived, sensitivity to marketing variables and purchase behaviour and loyalty variables.
3.8 Industry Analysis
Forces in a particular industry contributes in no small measure to determining its market
potential.Michael Porter’s (1985) five forces has been one of the widely use model in gaining
an insight into the dynamics and trends of the competition in an industry. This is because it
presents manager with the understanding of the industry players and enable a comparison to
be made in terms of the weakness and strengths of their firms. Figure x4 below present the
interrelationships of the forces by Porter.
Figure 5. Michael Porters 5 Forces Model.
31
Threat of New Entrants if an industry have a flexible entry barriers the higher will be the
competition, rigidity of industry structures and less dynamism which will be limiting the
good chances of profit making. The threat of new entrants will surely depend on the barriers
to entry. Barriers to entry comes from the following situations:

Capital requirement for starting the business

Economies of scale implications to operational cost

Brand loyalty of customers

Ability to find distributors

Protected intellectual property like patent, license and government regulation
High barriers is noted to make even potentially lucrative markets unattractive to new entrants
and so firms owe it a duty to raise high the barriers if they want to keep other firms away.
High promotional and R&D expenses and clearly communicated retaliatory actions to entry
are some ways that barriers can be erected high (Hollensen, 2011. p. 111).
Bargaining Power of Buyers: customers of an industry can also wield greater power and will
therefore, exert the power to pressing home their demands for their advantage by way of
lower prices and other goods and services. This pressure affects margins and volumes and
gains momentum under the following favourable conditions:

Buyers are very knowledgeable about industry’s offerings and the technological basis
of their production

The value and volume of items they buy are often very large

The product is not very important or critical to the buyer

Degree of concentration of buyers

Product characteristics
The powers exerts by buyers can be lowered if firms tries to increase the number of buyers to
sell to, threatening to integrate forward into buyers industry and coming out with highly
valued and differentiated products (Hollensen, 2011, p. 111)
Bargaining Power of Suppliers: suppliers are the sources through which raw materials and
inputs are coming from in order for goods and services to be provided. Like buyers, suppliers
also control some level of power under certain conditions. They are unfortunate situations
32
where firms kowtow to both pressures from buyer and suppliers. The bargaining power of
suppliers emanates from the following situations:

Product are important to buyers

Switching cost from one supplier to another are high

High concentration of suppliers

Suppliers ability to enter the buying industry (low barriers to entry)
Powerful suppliers relationships can potentially limit the strategic options of firms thereby
having serious implications on their successful operations. But according to Hollensen (2011,
p. 111), firms can mitigate the bargaining power of suppliers by seeking new avenues for
supply, threatening to integrate backwards into supply and by attempting to design
standardised components so that many suppliers will be able to produce them.
Threat of Substitute Products or service: the potential threat from substitute products or
services results from the availability of alternative products that comes with lower prices and
superior performances for the same purpose or function. Firms with such substitutes could
attract significant portion of the market share thereby reducing the market attractiveness and
profitability because it will put a constraint on price levels. Threat from substitute product
strives well under the following circumstances:

The relative price and performance of substitute products

Low switching cost for customers

Brand loyalty

Close customer relationship
To reduce the threat of substitute products, Hollensen (2011) suggested the building up of
switching cost psychologically by creating strong, distinctive brand personalities and
maintaining a price differential to commensurate with the perceived customer value.
Competitive Rivalry Among existing Firms this is the degree or intensity of competition that
is existing among the players in the industry. High competition puts pressure on prices,
margins and so on. Higher competition in an industry is likely to be sponsored by the
following conditions:
33

Many players of equal or same size

Firms exhibiting similar or same strategies

Limited differentiation between firms’ offerings

High barriers to exit for example expensive and highly specialised equipments.
Firms need to guide against spoiling the industry’s competitive stability by avoiding intense
and unhealthy price or promotional wars which will gain them little percentage increase of
market share but with the potential of dwindling the overall industry profitability and
viability (Hollensen, 2011).
3.9 Entry Mode Selection Decisions
Entry mode selection decisions are very important to determining the successful expansion of
firms business activities outside their domestic markets. According to Root (1994),
international market entry mode is to create the enabling environment or condition for
company’s products, technology, human skills, management or other resources to enter a
foreign market or country. And to Hollensen (2011) it is the institutional arrangement for the
entry of a company’s products and services into a new foreign market with the main types
been export, intermediate and hierarchical modes.
The Uppsala stage model of internationalisation recognised four different modes of entering
to an international market; no regular export activities, export via independent representatives
(agents), establishment of overseas sales subsidiary and overseas production manufacturing
units (Wu and Zhao, 2007, p. 185) citing Johanson and Wiedersheim-Paul (1975). Koch
(2001, p. 65) posited that other entry modes classifications (Cateora, 1996; Keegan, 1995;
Onkvisit and Shaw, 1993) contains generic categories such as direct and indirect exporting,
franchising, licensing, joint venturing, partially or wholly owned, overseas subsidiary,
management contracting and contract manufacturing.
Hollensen (2011, p.320) noted through the work of Root (1994) that there are three different
strategic option or rules that firms usually adopt when decisions are been taken of entry
modes. These are:
i.
Naive rule this is where the same entry mode is applied to all foreign markets
irrespective of the heterogeneity that characterises the various individual markets
34
ii.
Pragmatic rule this is where decision are taken to ensure that specific workable entry
mode are used for each foreign market. The firm start the business of exporting at the
initial stage with low-risk entry mode and look for other alternative entry modes if it
is found out that the one in use is not feasible enough. But where it is found out to be
workable the firm will not move on to investigating or experimenting with the other
alternatives.
iii.
Strategy rule this approach demands that all the available alternative entry modes are
systematically selected, compared and evaluated before a choice is made for the
application of the chosen one. The application of the systematic rule would be to
select an entry mode that maximises the profit contribution over the strategic planning
period with due consideration of resource, risk and some other non-profit objectives.
Figure 6. Basic approaches to foreign market entry mode selection.
Source: Adapted from Koch (2001).
In selecting an appropriate mode of market entry, firms are confronted with two fundamental
issues to battle with. These are the level of resources commitments they are willing and ready
to put into it and the level of control over the operations they desire to exert over the
operations and the factors influencing these two issues represent the perceived risk of new
35
market entry. Johanson and Vahlne (1977) divided them into, internal and external, the
factors influencing a firm’s choice of entry mode. Koch (2001) classification of factors that
influence entry mode selection put them into three; external, internal and mixed factors.
Hollensen (2011) considers the choice of a firm’s entry mode to be the net results of several
often conflicting factors and also classified them into external and internal. To all these
classifications, there has been some level of overlapping factors with some complementing
the earlier works.
From the work of Puljeva and Widen (2007), the model presented by Bruhno and Schilt
(2001) seeks to discourage the classification of the factors influencing entry modes into
internal and external groups. They proposes the following factors:
Motive that motive here tries to find answers to the questions of what motivates the firm’s
internationalisation. Could it be small home market base or strong competitive product. What
motives influence the firm’s choice of entry mode? Could it be indirect motives like
temporary contract with a company outside of the its home base?
Goals this seeks to question and find answer to the internationalisation drives of the firm.
What are the goals of their internationalisation? Has it been changing since it started the
internationalisation process and are they long term and or short term? What specific goals
exist regarding market shares and sales volume? Does the firm has an ambition to gain a
greater part of the market share of Ghana and similar markets?
Strategy this evaluates the strategies been used by the company abroad considering their
internationalisation experience. Does the firm has a specialised strategies for its foreign
markets? Are they have specific strategy for each market and do they develop these strategies
over the time period?
Product the fundamental questions here includes what qualities does the product have that
merit exporting or international trading? Are they standardised or adaptable? And how many
products does the company have? These issues affect how the company goes international.
The physical conditions and features of a product or service such as value, weight or volume,
perishability and composition are very important to a firm’s decision to select entry mode
(Hollensen, 2011, p.323). some could require before service and after sales service. The case
here of service requirement both before and after sale service represent a good case of Agito
Medical products categories. It will require installations services and after installation
36
services in case of break downs and servicing. This requirement contributes in no small
measure towards the enhancement of firm’s reputation and relationships with customers.
The product type and features are noted by Hollensen (2011) to be a key determinant in the
selection of channels of distribution and maximisation of economies of scale.
Management this is what is referred to as international experience in other jurisdictions. It
borders on how extensive is the international experience of the firm, any existing specific
ways that management conducts or pursues its international business.
According to Hollensen (2011) international experience is another firm-specific factor which
he describes to be the ‘extent to which a firm has been involved in operating internationally’.
He noted that it lowers cost and uncertainty of serving an international market and improves
the possibility of a firm allocating resources to foreign market.
Customer Relationships this questions the previous relationships and the way and manner
the firm establishes relationship with customers abroad. How many customer relationships
has the firm? Are these customer relationships homogeneous or heterogeneous? Does they
put concerted efforts in establishing and building these relationships?
Resources another significant factor influencing entry mode decisions is the resources of the
company. Koch (2001) maintain that small firms turn to usually have fewer market serving
options because limited resources itself will constrain it in opting for some entry modes and
Bruhno and Schilt (2001) also holds similar view that limited resources can limit the firm’s
freedom of choice when selecting a marketing channel. For example, the establishment of a
fully owned subsidiary often deals with substantial capital investment with corresponding
high risk levels.
It is true that small firm may have adequate managerial competence,
potential and special skills to enter a foreign market via creating a fully owned international
subsidiary or joint venture.
The influence of a company size on its ability and freedom of choice however, depends on
industry specific resource requirement for individual market entry mode.
The analysis of these to some extent is consistent with Agito Medical as the creation of
networks rather than subsidiary is very paramount.
Networks this is about how the company networks with others in its internationalisation
activities. Does the firm have any existing contacts and relationships in the different markets?
37
Does the firm have the opportunity to get any help from other firms in the new markets?
Does the firm have any external part involved in their international activities? Does it need
the vigorous participation of other firms in different networks? Does the different
participation affect the choice of the firm’s market or entry?
Market this very important to determining the entry mode and it has to do with the market
size and growth rate. Hollensen (2011) made the point that market size and rate of market
growth are key parameters in determining the mode of entry into a new market. That a large
market size and growth of a country is likely to result in management decision of committing
resources to the development and to consider establishing wholly owned subsidiary or
majority owned joint venture. On the other hand, a small market size especially, one that is
geographically apart from the home base and cannot be served adequately well by a
neighbouring country may warrant insignificant resource commitment and be consequently
served through exporting or licensing agreement. This may not stimulate market development
or maximise market penetration because the resource commitment to that market will be
minimal. By so doing, the firm will be freeing its resources for prospecting for more lucrative
potential markets (Hollensen, 2011).
This is how the model looks as in the figure below
Motive
Goals
Networks
Customer
Relationships
Strategy
Entry
Mode
Selection
Market
Competitors
Product
Resources
38
Management
Figure 7. Influencing factors of entry mode selectionSource: Adapted from Bruhno and
Marco Schilt (2001) through Puljera and Widen (2007
Yet still, the advanced model by Bruhno and Schilt (2004) has not adequately embodied into
it the other external factors that are very important in this regard to merit the argument that
the factors need not be delineated into internal and external factors. This is more ,especially,
true in the case of Agito Medical’s for one important external factor that is of paramount
significance is what Hollensen (2011) referred to as direct and indirect trade barriers under
his external factors. He posited that tariffs or quotas on foreign good importation and
components favours local base production and assembly operations. Above all, product and
trade regulations and customs formalities favours local companies involvement which is key
to Agito Medical operations. There are several laws on importations especially used medical
equipments and assessment of the regulations is an appreciation of how it can successful
enter a particular country for operations with used but usable medical equipments. This
assessment will assist greatly in determining how Agito Medical could enter the Ghanaian
and similar markets in Africa.
According to De Burca, Brown and Fletcher (2004), there are various approaches for small
and medium-size firms as oppose to large firms. So it is necessary to narrow this aspect down
to the small firms to aptly fit into our purpose.
3.9.1 Internationalisation of Small Firms
Just like big firms, small firms also start their internationalisation by following certain steps
as been prescribed by the stages model of internationalisation depending on the level of its
international knowledge and commitments made.
Small firms usually commence with markets that are culturally and geographically situated
within the proximity of the home base. The firm then starts with entry modes that do not
require substantial resources commitment. i.e. the use of agents or direct selling at the first
phase of the internationalisation (Forsman at. al, )
It must be pointed out that a study conducted with Finnish SMEs in 1990 by Korhonen et. al
found out that some firms start with inward activities of importing to gain experience in terms
39
of exporting though international business is thought out to be an outward activity. They gain
experience and international knowledge by way of networks and relationships that help them
to start exporting (ibid). They also made it clear that similar studies involving Finnish SMEs
by Holmlund and Kock (1996) found it otherwise. That notwithstanding, it sound interesting
for the case of Agito Medical in that they do both inward and outward international activities.
The basis is that the inward activities takes a variety of forms used to strengthen firms
resources. It could take the form of importing products to further the production process. E.g.
raw materials and machinery. The advantage is that it reduces the firm uncertainty as they
gained knowledge and experience in international business. The knowledge gain about
foreign markets and networks results in outward flows or the developments of relationships
which a “fortuitous” order can eventuate (ibid).
Relationships to foreign suppliers and other actor, such as import agents, freight forwarders
and distributors may be used to gain information about potential buyers or be used directly as
business partners. If a firm initiates exporting to a destination it has imported experience the
connection between inward-outward activities is enhance. The form could import directly
from one country to another. This can be easily identified with small firms because the
decision-makers are few.
Management is crucial for small firms internationalisation performance and this revolves
around the owner or owners. The individuals of the firm will have a substantial impact on the
international activities since close relationships with others enhances their interest. Social
relationships is noted to be extremely important in international business.
Mason and Pauluzzo (2008) observed that human capital, mainly, due to the owner, is the
main source of competitive advantage. It does not take only owner’s investment in the
operations of the firm but his role as a decision-maker and manager though not exclusive.
Other important factors such as resources size etc are been covered under the entry modes
decisions.
3.9.2 Application of the Theories and Models for the Study
The study will briefly demonstrate how Agito Medical has arrived at having Ghana among
the few selected countries to undertake further indepth analysis of its market attractiveness
for the products. In doing this, the study will maximise the part of Kuada’s integrated model
40
dealing with steps in market screening process. The entire screening process will not be
treated but the part that is dealing with selection of handful of countries for further studies.
This is intended to provide the justification for having Ghana among the few handful of
countries to further carry on with in-depth analysis of the market attractiveness. This part of
the model is given a highlight in figure 3 on page 26.
The real assessment of how attractive the Ghanaian market is for Agito Medical will ensue.
This part still borders on the integrated model of Kuada as presented in the study in page 27.
The study will take into consideration the three outcomes of market research as enumerated
and explained in the model. i.e. the market size, the marketing programme and the extent to
which customers are been served by competitors. For these outcomes to be activated by the
study there will be an empirical analysis to provide the information. To perform this
effectively, the study will undertake demand analysis of used medical equipments in Ghana
and the model has explained three kinds of demand. Emphasis will be on analysing the
market demand as a whole with little efforts to bring out the difference. Segmentation
analysis will be made of the various entities or clients that will be interested in Agito
medical’s products. This is to find the most suitable segment for the firm enabling the firm to
tailor its market efforts to this target.
Channel distribution analysis will be look into to ascertain some of the firms in any in Ghana
that Agito medical can partner with to deliver its products to the most attractive market
segment.
Then the industry analysis will be carried out employing the five forces of Michael Porter
(1985) as presented in the model by Kuada (2008). This five forces are illustrated in pages 31
to 35 in this study. This is necessary because the opportunities of a market does not only rely
on market size and demand but also on how well other industry players or firms are serving
the markets. This will also contribute in no small measure towards determining the market
attractiveness of Ghana for the products of Agito Medicals.
In a nutshell, Kuada’s model would have been used in assessing the market attractiveness of
Ghana for Agito Medical.
Having assessed the market attractiveness of Ghana, the study will then move on to apply the
resource base theory of a firm in assessing the resources of Agito Medical in order for it to
41
serve the market. The task will be to identify resources of Agito Medical that will be capable
of conferring sustainable competitive advantage when configure well.
In other words, resources that will offer Agito Medical the strengths to have the competitive
edge in its attempts to serve the market of Ghana. The requirements here is to assess
resources that confers value on the firm, that is uniquely particular to the firm and which
should have no easy substitutes. It could be capabilities including the skills of individuals or
groups as well as Agito Medical’s usual unique way of doing things or routines and
interactions. It could also be physical resources such as machinery, materials, database, etc.
This will pave the way for decisions to be taken on how to enter the market. Entry mode
selection decisions are very significant in determining successful entry of firm’s activities in
international markets. The strategy rule will be applied considering the factors determining
the success of small firms international performances.
Let me now synthesize the theories and models described above into an analytical model that
will guide the present study.
42
Figure: 8 Analytical Model Used in the Present Project
Assessment of the
attractiveness of the
Ghanaian market for
Agito Medical’s products
Using Kuada’s model
presented on page 27.
Selection of
entry mode
using model
presented on
page 31.
Assessment of Agito’s
resources to serve this
market using Resourcebased Theory
43
Suggesting
marketing
strategy for
Agito Medical
Chapter 4
This chapter presents the empirical part of the research and it is devoted to the analysis of the
case in question bringing theories to reality. It shall be presented in two sections, A and B.
Section A will be concerned with the analysis of the market attractiveness of Ghana for the
products of Agito Medical and Section B will dwell on the analysis of strengths and
weaknesses of Agito Medical’s capabilities to navigate in the Ghanaian market.
As the methodology has indicated that this study is desk research, the information for the
analysis is mostly going to be internet base. The study will attempt to draw on academic
literature, statistics from accredited organisations like World Health Organisation (WHO) and
the likes if available, national documents and newspaper articles of Ghana. Naturally, these
are some of the sources to resort to for secondary data if primary data is out of the question
for its felicity in providing the requisite information.
Section A
4.1 Analysis of the Attractiveness of the Ghanaian
Market for Agito Medical Products
4.2 Ghana Profile
Ghana is located on the west coast of Africa south of the Sahara with a population of about
24,223,431 people ( Ghana Statistical Service, 2010). It is surrounded by Cote D’ Ivoire on
the west, Burkina Faso to the north, Togo on the east and the Gulf of Guinea to the south.
Ghana’s climate is tropical with eastern and northern areas described as warm and dry, and
the south-western areas described as hot and humid. Eastern Ghana is home to the Lake
Volta, the world’s largest artificial reservoir. Though over 46 different languages are been
spoken, English remains the official language and all teaching is done in English. The use of
English language in the medical industry is prominent with precedence over any other
language. Below is a map of Ghana showing its boundaries as described above.
44
Figure9:Mapof Ghana.
The people are warm, friendly and are highly credited for their hospitality and a high degree
of personal safety as compare to its sister countries on the same continent. The people place
high premium on their health because they believe that their health is link to the general state
of development. For this reason, the commitment of government is to improve upon the
health status of all people residing in Ghana through strengthening of health system by
improvement in access, quality, efficiency and financing. This agenda has to be pursued
vigorously because the national vision on health is to “ create wealth through health and
contribute to the national vision of attaining middle income status by 2015” (Ghana Health
Service, 2009). The strategic objective are to improve geographical access to primary
services and emergency services by placing health points with a community health office,
improve financial access and improve socio-cultural access for priority groups such as
children, women, elderly and people with chronic diseases and disabled.
In furtherance of this goal, the government in 2003 introduced the National Health Insurance
Scheme to leverage quality health care access to all residents. The government of Ghana,
though a key player in this drive, does not shoulder this responsibility alone as other
stakeholders play an important role in healthcare delivery in the country. They are religious
health facilities, private clinics and quasi-government health systems.
45
Commitment to health care improvement is of central significance to this project especially
with the goal of improving not only quality and geographical access but financial
accessibility as well. This is because Agito Medical are dealing in used but functionally
usable medical equipments that will contribute immensely to the achievement of this goal
particularly realising that affordability of brand new equipments is a hindrance to quality
health delivery in Africa.
4.3 Assessing the Demand for Agito Medical Products(Magnetic Resonance Imaging
(MRI) and Computed Tomography (CT) Scanners) in Ghana
Agito Medical deals in the sales of used but usable medical equipments for a new medical
technology-radiology and others. Some of its line of products include MRI machines, CT
scanners, C-Arm, Mammography, Ultra-sound, Dialysis and others. The study has elected to
select two and do more deep investigations. The products here are MRI and CT scanners.
These products help physicians to diagnose a range of conditions by producing images of
internal organs and structures of the body. Unlike conventional radiology and CT scanning,
newer imaging technology used in MRI units do not expose patients to ionising radiation
(OECD, 2010).
To evaluate successfully the need for the above mentioned products in the Ghanaian health
market, it is important to have a benchmark by comparing the situation in Ghana to available
information by the Organisation for Economic Co-operation and Development Countries
(OECD).
The important observation here is that demand for health care in advanced world is
commonly perceived to be a basic right while quality medical care remains the preserve and
luxury for the few who are rich in the developing world. Available information about the
OECD members indicates that the highest number of MRI and CT scanners per capita is
found in Japan while USA leads the world in diagnostic imaging referrals with 91.2 MRI
examinations per 1000 of the population. OECD has its average to be hovering around 41.3
per 1000 of the population for MRI and 110 for CT scanners. De Ruiter (2011) cautions
citing (Saksena et al., 2010) that a significant proportion of these test are believed to be
medically unnecessary so it will remain rather a good guide for our estimates but not a target
for Ghana to aspire to the amount of scans performed in some countries. The OECD average
of 41.3 MRI scans and 227.8 CT scans per 1000 of population would imply that Ghana, with
46
a population of 24 million residents, the number of MRI scans should reach approximately 1
million and 5.5 million for CT scans.
Hailey (2008) indicated that at the start of 2007 there were 12.8 CT scanners per million in
Canada which was even lower than the mean value for OECD countries and 7.9 MRI
scanners per million population. To go by this average, Ghana will need approximately 288
CT scanners and 192 MRI scanners for the 24 million inhabitants.
What then is the situation in Ghana? In 2010, the President of Ghana Association of
Radiologist in the person of Dr. William Ofori Brakohiapa said Ghana had 2 MRI machines
and 6 CT machines as compare to Nigeria with 25 MRI machines and 15 CT scanners
(Ghanaweb, 2010). In a speech read on behalf of the then Minister of Health of Ghana, Dr.
Benjamin Kumbour, he acknowledged the fact that radiology has changed from merely being
only a diagnostic entity to being used for treatment and mentoring therapy. He noted further
that modern technology facilitated the advancement of medicine, especially radiology, but
hinted that it goes with a prize adding that machines and consumables had become expensive
but governments in the sub-region are trying their best to acquire them to facilitate healthcare
(ghanaweb,2010). Indeed there are costly because the average price of a brand new MRI
should be US$ 1.6 million and above depending on the technology and brands. That of the
used one could be 150,000 t0 30,000 Euros depending on the technology and brand.
In focusing on equipments as part of the major crisis brewing in Ghanaian hospitals, Dr
Arthur Kobina Kennedy made reference to a report by Ghanaian Times (Newspaper by
Government of Ghana) that the Chief Radiologist at the premier hospital in Ghana (Korle-Bu
Teaching Hospital) revealed that most of the machines at the Radiology Department have
broken down while the few functional ones had become obsolete mostly over 19 years old.
He continue to indicate that the situation is getting worse compelling them to turn patients
away who need access to the CT machines due to the constant breakdowns partly due to the
obsolescence ( Ghanaian Chronicle, 2011). The hospital in question here is the last referral
point in Ghana, the largest in the country and second largest in the west African sub-region.
To most other hospitals in Ghana, MRI and CT machines especially, are like urine to a birdnonexistent. Dr Kennedy advocated for an emergency plan to get the hospitals in Ghana with
those machines (ibid).
Since demand is when need is backed by the ability to pay, it is imperative at this juncture,
that the study delve into analysing the purchasing ability of the market under study for it is
47
evident that there is serious need for MRI and CT machines in Ghana in particular and most
other equipment.
The country’s economic growth has remained strong with real Gross Domestic Product
(GDP) reaching an estimated 5.9% in 2010 compared to 4.7% in 2009 with projected growth
of 12% in 2011(ghanabusiness.com, 2011). Ghana is currently pursuing a free market policy
with the private sectors considered as the engine of growth. Agriculture is the main
contributor to the GDP but the service sector is experiencing great strive in growth making it
the fastest growing sector in the country. Ghana is one of the few countries in Africa that is
making frantic and dramatic improvements in trying to achieve the millennium
Developments Goals by reducing poverty rate by half of the population (De Ruiter, 2011,
p.13)
Ghana has attained a middle income status, more specifically, a lower middle income bracket.
Lower Middle Income countries are those with per capita national incomes between $1,006
and $3,975 per year. Ghana leads the world as the fastest growing economy in 2011 with
GDP pinned at a whopping 20% and has the largest per capita income in west Africa and the
21st ranking on the African continent. According to the World Bank, Ghana’s economy may
expand by 20% this year as the start of oil production for export, along with high prices for
cocoa and gold, boost revenue. (ghanabusinessnews.com, 2011). Rate of inflation as at the
second quarter of 2011 was at 8.39%. After several months of depreciating against the major
world currencies, the Ghanaian Cedis has gained some level of stability. For instance, from
January to October 2010, the interbank exchange of the cedi to the US dollar stabilized
around 1.43 cedis to 1 US dollar, after the cedi appreciated against the US dollar by 2.7 per
cent from July to December 2009. Even though starting from November 2010 the cedi began
to depreciate against the US dollar, which culminated in a 5 percent depreciation rate in
January 2011, the exchange rate of the cedi has stabilized since then (ghanaweb,2011). If
exchange rate remain relatively stable speaks good of business because it affects cost of
exporting goods and the supply and price of imported good in an economy.
Ghana has introduced economic reforms and trade liberalisations policies and has continued
to deepen its credentials in that sphere. It is for this and other reasons why it has recently
been ranked the 4th investment destination in Africa by the Africa Business Panel Survey of
2011 and 7th largest recipient of foreign direct investment(FDIs) in Africa in the World
48
Investment Report by United Nations Conference on Trade and Development (UNCTAD) on
July 26th 2011(ghanaweb, 2011).
However, will it suffice to think that this favourable economic indices will translate to real
demand for medical services without considering its impact on disposable incomes?. The
Institute of economic Affairs (IEA) in its review of the Ghanaian economy observed that the
growth is been precipitated by the new oil production in commercial quantities couple with
crops production dominated by the cocoa. It noted that spreading growth to other sectors of
the economy is still a critical challenge for job creation to address the huge unemployment
deficits in the country. This is because the favourable economic performance of the country is
generating a mixed reaction from the people. While some are pessimistic about the economy,
other remain sceptical and even questions the veracity of the economic gains (allafrica.com,
2011).
That notwithstanding, per capita income of the average Ghanaian has increased by 50% in the
period 2000-2008 and Ghana Living Standard Survey 5 (GLSS5) of 2008 indicates that
average annual household incomes in Ghana is about Gh¢ 1,217 whilst average per capita is
almost Gh¢ 400. (De Ruiter, 2010, p. 14) making reference to World Bank report of 2009.
De Ruiter (2010) used the prevailing average exchange rate of the time to arrived at average
annual household income and average per capita income to amounts to US$ 1,327 and US$
433 respectively. Recent figures have improved upon these rates.
We need to appreciate the fact that there exist serious difference in levels of income between
the developed world and their developing counterparts since a comparison between them will
not make the African countries look attractive, for competing for such incomes will be harder
and tougher in Africa. Regardless of the fact that incomes lag behind with the rest of the
World in Africa, De Ruiter (2010) noted that large populations have a huge purchasing power
potential and more so, the levels of incomes are rising harder than other parts of the world.
This indicates that the number of people who can afford for the services of such equipment
has increased over the previous years and can motivate service providers to procure such
machines.
49
4.4 Segmentation Analysis for the Ghanaian Market
Medical equipments have its peculiar customers that procures them to further facilitate the
delivery of efficient and effective quality healthcare. In Ghana, government has been
identified as the major stakeholder in the delivery of healthcare but other stake holders are
playing equally important roles in this direction. They include religious entities and private
sector. Based on ownership, some people segment hospitals in Ghana using ownership as the
parameter into government-owned, faith-based, quasi-government and private-owned. Others
segment them based on the level within the hierarchy of administration into communitybased facilities, district, regional and tertiary levels (geographic).
This study intends to segment the medical facilities in Ghana based on their purchasing
abilities, level of autonomy and expertise in health delivery using sophisticated medical
equipments like scanners and others as well as looking at them in urban-rural divide. The
essence of this basis is to ensure the identification of the most profitable segment that is
substantial, measurable, accessible and different in its response to the marketing efforts of the
firm.
Ghana’s 24 million people are been served by about 3,110 health facilities in the country. Out
of this, a total of 309 are hospitals with 135 been private-ownership, 53 been owned by
religious entities and the rest been government-owned. Three (3) of the government-owned
hospitals are teaching hospitals which are the largest and modernised as compare to others.
Two other big hospitals are quasi-government-military and police hospitals. These are also
great and modern hospitals taking most of the serious cases together with the teaching ones.
Within the government-owned hospitals with the application of autonomy, regional hospitals
and the 3 teaching hospitals will be left in the bracket. The government of Ghana has moved
over the time towards granting management teams in hospitals at certain levels greater
flexibility in allocating resources according to their priorities, within the context of general
policy guidelines. This implies that the hospitals will be provided some level of greater
latitude in allocating resources, as well as raising additional resources (Govindaraj et al.,
1996, p. 14). The degree of autonomy descends from the top downwards and diminishes as it
50
gets to the grassroots. For this reason, the teaching hospitals and the regional hospitals will
have the autonomy to make decisions towards the purchase of the equipments like MRI and
CT equipments and others. Aside the government-owned hospitals, the private and religious
owned facilities are independent of stringent government regulations with decisions been
taking by their governing boards. The application of autonomy here as a basis for segmenting
the Ghanaian market for used medical equipment decisions to procure such equipments are
very important and should be independent of bureaucratic bottlenecks that has the potential to
hamper the decisions.
Couple with the above basis is purchasing abilities and the intention here is to segment the
market based on the facilities ability to raise the necessary capital to procure the products
under discussion here. It is imperative to note that the equipments we are dealing with here
are very expensive to come by especially in an African context where affordability is noted to
be a barrier resulting in the serious inadequacies of such medical equipments. Governmentowned health facilities have three main sources of funding which are identified to be
Government of Ghana funding (GoG), Donor Funding and Internally Generated Funds (IGF)
(Gyapong at al., 2007, p. 33). Though the GoG funding to Ghana Health Service (GHS) has
increased over the years but it is nominal and only due to rising cost of salaries and other
emoluments and the disbursements of funds continues to be erratic and untimely. Health
facilities now earn more than 80% of their IGF from insured clients under the health
insurance scheme but the long delays in reimbursement of the health facilities for services
rendered to insured clients is affecting the ability of health facilities to procure supplies and
equipments (GHS, 2009).
Private-owned facilities are for profit making and so operate on the scale of only what is
generated out of the daily operations. Religious-owned facilities run the facilities in a way
that they break even but they are also been supported by the religious entities.
Having said this, it must be noted that the facilities comes in different sizes and capabilities.
The biggest government-owned facilities are usually found in the regional capitals and some
few municipalities such as Obuasi, Tarkwa, Techiman etc where commercial and mining
activities are booming. Likewise the religious-owned facilities also having some selected
facilities to be big and well organised. As regards the private-owned facilities, over 90% of
Ghana’s private sector health providers are located in Accra and Tema metropolis (Obuobi et
al., 1999). The private health sector in Ghana is large and important sector in the market for
51
health-related goods and services (worldbank.org, 2011). There are mostly well organised
and targeting most of the middle and high income bracket people and expatriates who
routinely seek medical services abroad. In 2001 alone, the estimated number of Ghanaians
who sought medical services abroad amounted to 72,000 people (De Ruiter, 2011, p. 17).
The next segmentation variable that the study is employing is the expertise in health delivery
using sophisticated medical equipments. In Ghana, there is a significant mal-distribution of
health workers especially those with the high end skills and expertise and they are often low
in supply against the high demand for their services. The acute shortage of medical
equipments in Ghana is been compounded by the inadequate skill manpower with the
requisite know-how to operate them. More often than not, the available few equipments are
not put into efficient and effective use. The few experts are concentrated in the urban areas
more especially Accra, the capital to handle the equipments because it serves as the final
referral points. So it will make much sense to target those facilities that have the right people
with the right skills to man the equipments since they will be motivated to procure because
they have the manpower to successfully put them to optimum use.
The last variable worthy of considering in this study’s attempt in segmenting the medical
facilities in Ghana for purposes of Agito Medical equipments is the geographical location
with rural urban classification. As hinted above about the imbalance distribution of health
experts in Ghana seem to be favouring the urban as against the rural areas. According to
Dussault and Franceschini (2006), in Ghana in 1997, 1087 of the 1247 (87.2%) general
physicians worked in the urban regions, although 66% of the people or population were
putting up in the rural areas. The few who accept to work in the rural areas often have to
spend the weekends in the urban areas and if possible have to work privately there. It will
make sense to segregate the facilities based on this divide to ensure that you target will be
one that will be motivated by the requisite personnel to acquire the equipments in question.
There is poor road network in rural Ghana with most of the roads in bad conditions, lacking
bridges and adequate transport among other things. This will not also sound good for Agito
Medical products some of which are bulky and need to be transported on better road
networks.
From the advancement, the most important segment will be the health facilities located in the
urban areas in that they are fed with referrals from the districts level raising their ability to
increase their internally generated funds. They also have greater latitude to take decisions
52
bordering on big procurements. More so, those are facilities harbouring the most qualified
physicians and other health experts who are often been constrained by the lack of the right
medical technologies to practice with. These are areas where you can find all the different
ownership types of facilities competing to deliver the best healthcare.
4.5 Industry Analysis
Business opportunities for refurbished and used medical equipments are noted to be
increasing steadily with the USA, Europe and some parts of Asia noted to be emerging as the
fast-growing areas. For instance, sales of MRI and CT machines increased at a rate of 20%
and 11% respectively between 1992 and 1993 and reaching a total of $39 million in 1993 (US
Industrial outlook 1994). Africa is no exception to the growing trend for used medical
equipment because the two noted propelling factors are mostly inherent in Africa and for that
matter Ghana.
Two likely factors noted to be contributing to the rising demand for used and refurbished
medical equipments are the increasing cost-containment efforts in the healthcare industry and
the slower change in technology for important imaging equipments. Thus, along the new
discoveries of medical equipments, there is also an emerging trend-affordable buying which
is the basis for used medical equipments business.
4.6 Existing Competition in the Ghanaian Market
Competition in this business can be categorised into two, internal and external. Internally, the
competition identified is not very direct as the external to the operating line of Agito Medical.
Aside unorganised individual or groups engaged in selling petty little used medical
equipments the rest are dealers in brand new medical supplies. With companies dealing in
brand new medical equipments in Ghana, 13 medical suppliers of medical equipment are
identified (Medical Product 1.com, 2011). Medical Product 1.com is a B2B portal for the
international medical industry.
Another source of competition is coming from donations of medical equipments. The
Partnership for Quality Medical Donations (PQMD) estimates that in countries where
medical products are in short supply, medical donations accounts for more than half of all
medical supplies (Wiafe et al., 2008). Many Ghanaians abroad often organise used medical
equipments and send it home for donations aside Non-Governmental Organisations (NGOs).
53
These medical suppliers in Ghana acknowledge that much competition is not evident in the
industry though sales and profit growth is strong reporting that their businesses have been
increased substantially by the introduction of the National Health Insurance. This is because
purchasing for government hospitals is done centrally and most of the private medical
facilities are also concentrated in the capital accounting for all of the suppliers location in
Accra (Makinen, 2011, p. 45).
The external competition is direct as it deals also with used medical equipments with almost
the same range of products mostly coming from the USA. Some of the competitors are
DOTmed, DRE etc.
DOTmed is a US based firm that serves as a marketplace where healthcare professionals,
medical equipments manufacturers, brokers and dealers involving used and refurbished
medical equipments also could buy and sell equipments. DOTmed indicates it is the world’s
leading medical equipment marketplace, with users from virtually every country in the world.
But it must be indicated that DOTmed does not own any of the equipments or parts listed on
the site. But predominantly it serves the US market with 25% of its user coming from other
parts of the world as represented below.
Figure: 10 market coverage of DOTmed globally
DOTmed indicates their daily traffic on the site to be:

54
More than 125,000 registered users from countries around the world

More than 200,000 listings on any given day

More than 200,000 unique visitors everyday

Morethan10,000 companies in the service directory
(http://www.dotmed.com/features/stats.html)
Another US base competitor is the DRE which is also running a site for the marketing of used
medical equipments. Their strategy is focus on been a single supplier for all or major
operating room equipment and surgical equipment. They are of the thinking that clients find
that with a one point of contact the purchasing process is much more efficient and pleasant
process. DRE provides a combination of durable new and professionally refurbished
equipment to medical professionals around the globe.
Med Bay is a dynamic medical market place where you can purchase medical equipment for
discounted price. They offer both new and used medical equipment covering a wide array of
types. Additionally, they allow users of their website to place their used medical equipment
up for sale. This allows medical practices to sell medical equipment they no longer use, in
order to afford medical equipment that they need or want to add to their practice.
They all differ from Agito Medical in the sense that it is owning its equipment and also
appear on such platform such as Agito Medical enjoying a good listing on DOTmed.
4.6.1 Threat of New Entrants
Domestic entrepreneurs have not been able to venture into this business because of the capital
requirements and technical know-how that is instrumental to the success of dealing in used
medical equipments. Additionally, there is already serious inadequacies of medical
equipments in Ghana and Africa and so medical facilities are not changing new ones how
much more leaving old ones. And so Europe and the USA are predominantly the source and
having to import them for used will add much to the cost of the business. No wonder it is
difficult coming by competition within Ghana and Africa. The private health businesses in
Ghana lacks access to credit and also lack business skills to assess financial prospects of
investment ideas and to prepare adequate applications for credit (World Bank Working paper,
2011).
Government regulations have, however, not frown upon or been restrictive on the importation
of used medical equipments to Ghana even for purposes of business. Ghana is reported to
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have no explicit import restrictions on tariffs that apply specifically to used or refurbished
equipments or used equipment in general ( Francis, 2006, p. 53). He revealed, however, that
government health institutions are discouraged from procuring such equipment as a matter of
policy. Aside value assessment of value, customs officials treat all imported equipment in the
same way as new equipment (Ibid).
4.6.2 Bargaining Power of Buyer
In the case of used medical equipment in Ghana, buyers may be bargaining making
comparisons to brand new ones. Nonetheless, the luxury to gain bargaining power under
condition of large items or volume been bought may not be possible because most of the
items are expensive and buyers are confronted with purchasing power problems. But
inadequate funds can also make buyers advocate for lowering of existing prices.
Another critical issues that buyers may be clamouring for will be after sales services. One
major problem that has compounded the insufficiency of medical equipment in Ghana is the
breakdowns with no spare parts and people with the right acumen to fix them. So in order to
avoid this old canker, buyers may turn to bargaining seeking for such services. Francis (2006)
observed that aside the lack of local financing resources firms that are able to offer warranty,
spare parts and training support to the equipment can best take the advantage of this
opportunities. More so, the need for medical equipment is so important and critical to the
delivery of quality healthcare that potential buyers may not wield much power. Especially,
considering the impact of quality health delivery will bring in terms of increasing clients or
patients who will be interested in accessing such healthcare.
4.6.3 power of suppliers
Ghana could also serve as a source for Agito Medical to get used medical equipment from
since it does not only sell but buy as well from hospitals and other sources.. However, the
case of Ghana may not present a very good opportunity for them to source from immediately
since the available used ones are nothing to write home about (few).
Most of the equipment they buy from their sources often relieves them of further
environmental burden and requirements. Most hospitals in Europe and other advanced parts
of the world changes the devices as new technologies usher in modern ones. The dismantling
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and sometimes scrapping off old technologies remain a burden for most of them in order for
them to install latest models given how busy most hospitals are and the height to which some
of the equipments are installed not discounting the environmental requirements. So, sources
where they procure them often are at the receiving end and do not exert much power over
Agito Medical.
4.7 Local Base Service Companies
As indicated in the introduction, Agito Medical will consider a good or even a better market
as one that demonstrate a great deal of demand and has local base service companies that can
be a link between the company and the local demand. This is noted to be hard to come by in
Sub-Saharan Africa and Ghana is no exception.
The studies has not been able to find out such local base companies except the 13 companies
noted to be dealing with the importation of simple brand new medical equipment by Medical
Product 1.com. Further investigation could be made of their expertise and readiness to play
this important role for Agito Medical. Additionally, Hanisa Medical Service has also been
identified as a company in Ghana with focus in the provision of medical support services to
medical institutions through the supply, installation, repair and maintenance of medical
equipment and a vision to be a major player in the west African sub-region.
It is really important to have such local base service companies to help improve the product
reliability, quality and perception which are noted to be restraint factors in used medical
equipment. After sales service that is prompt to the needs of the customers, availability of
spare parts and cost of after sales service are critical success factors for firms in this business.
This is so because good after sales service raises the product quality and durability thereby
diminishing the perceived risk that are associated with used equipments.
When such conditions are put in place, the drivers for used medical equipments are seen
impacting greatly which are affordability and warranty. Most equipments can sometimes cost
less than 50% of the price of original equipments. Some facilities cannot afford to procure
equipments within some specified duration and so buying used equipments can offset such
deficits and save cost significantly. This is given a booster by the offer of warranties in the
form of post sales service. This is demonstrated in a diagram below.
Figure: 11. Restraints and Drivers for used Medical Equipment
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Source: http://www.greenbook.org/marketing-research.cfm/refurbished-medical-equipmentchallenges-opportunities-40073
4.8 Resources of Agito Medical for the Ghanaian Market
Agito Medical just like most of its competitors does major part of its business on the internet.
But unlike its competitors it owns the equipments, support the internet with efficient
telephone services with clients even visiting to have a look at what they intend buying to
satisfy their expectations and standards.
Agito Medical’s brand has become strong in the industry especially in Europe owing to the
great number of systems that it is supplying to the global market. Aside, it has build a quality
of trustworthiness around its brand name after doing relationship marketing or selling with its
clients over the years it has been in operation. Agito Medical has a high level of trust from
the people who have transacted business with it because it acts professionally with optimum
fairness in its dealings. If Agito Medical realises the slightest damage to a system that it is
responsible, it goes as far as providing the loss of the client by not only effecting repairs but
supplying new one if the need be.
They believed that investment in quality is investment in the future. The implication of this is
that it is investing much money in the skills and expertise in its growing team in order for
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them to continue to supply their clients with an increasing level of quality. For this reason it
is introducing a warranty by the first quarter of 2012 to its clients.
By their resolution to equip the team with the requisite expertise in their field of operations,
Agito Medical has a project management that has the knowledge of almost all the
manufacturers and all their modalities from MRI machines to Dialysis. Not only the
knowledge but close cooperation with the Original Equipments Manufacturers (OEMs) which
open the doors to more information for them. This dedicated team of managers and engineers
is credited for constantly beating datelines and never allowing third party company to handle
projects for them. It is also ISO:14001 certified which means that it has solutions for
everything whether they are buying or scraping it all is done in the safe way. International
Organisation for Standardisation’s (ISO) 14001 certification is awarded to small and
medium-sized enterprises that provides them with new root to make it easier for them to
achieve the benefits of implementing an environmental management system based on the
international standard. This unique system guarantees minimal impact on the environment
through environmental friendly transportation and better waste management.
Agito Medical belong to a big network of transport and have own trucks that offers it the
flexibility in all of Europe and beyond. The Logistic Department had a team with trained
knowledge in freight forwarding and shipping of medical equipment worldwide. They have
extended knowledge within import and export regulations and within the all transport forms
including air, sea, road and courier with and a wide network with professional transport
companies. They are capable of suiting the transport to the needs of customers with deep
knowledge of dangerous goods. Due to the volume of transport Agito Medical is having its
transportation quotation to be the lowest as compare to competitors and customers. This will
save cost resulting in improve affordability for the Ghanaian market.
Agito Medical staff are also flexible with many languages. The company have people who
can speak Russian, English, French and Dutch. African countries are mostly former colonies
of Europe and so the major languages of Europe are the official languages of Africa.
Additionally, the time different difference between Africa and Europe is not that much as
compare to its numerous competitors dotted in the USA. This time difference has strategic
advantage in beating delivery times and much more in having same official hours for
business transactions thereby saving resources in terms of cost efficiency and transit time.
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Agito Medical has warehouses and offices in Denmark, France, the Netherlands and Norway.
The significance is that it can stock different equipment to serve the divergent needs of its
customers. In today’s business, warehousing plays a critical role in assuring high levels of
customer service and overall logistic performance. It does so by minimising the effects of
supply chain inefficiencies, improves logistic accuracy and inventory management and
ultimately allows for product accumulation, consolidation and customisation for the final
good of the customer. With this, African market will be sure of constant delivery of their
orders without having to go searching from many equipment dealers.
4.9 Assessment of the Attractiveness of the Ghanaian Market for Agito Medical
Agito Medical’s definition of an attractive market is one with stable political and economic
environment for this undoubtedly has a positive impact on the company. Also, a market
where they can get a customer to make the first buy with the potential of repeating the
purchase or telling the story to other potential clients about the company. Above all, a market
with serious local services company that can function as a link between the company and the
local demand.
The study has establish a serious need for most of the products of the company with an
estimated need for 288 CT scanners and 192 MRI machines. The population of Ghana is
estimated to be growing at 1.82% annually and GDP estimated to grow at 12% by 2012%.
With this developments the need for such products will also be increasing correspondingly
with the increase in population and supported by the change in the economic situation of the
people.
Aside the establishment of demand for the selected products and similar other products of the
company, the study has also identified some local companies base in Ghana that may be
capable of been a conduit between the Agito Medical and the local demand. The political and
economic stability of Ghana can be well appreciated relative to the situation in the SubSaharan Africa and therefore, a good place for business transaction couple with the
government commitment to improve the health insurance scheme so as to increase source of
funding for the health sector. This has provided enough justification to conclude that the
market can be attractive for Agito Medical products but not on the higher side because the
study has not been able to establish the knowledge and competence of the few available local
base link companies.
60
4.9 Entry Mode Selection to the Ghanaian Market
Agito Medical’s previous experience in internationalisation probably going through the ad
hoc and naive approaches might have braised it up to now consider the systematic way that
employs the evaluation of the all the options to arrive at the most suitable decision.
Systematic option will be appropriate for Agito Medical in that naive and ad hoc approaches
has the greatest potential of resulting in the application of inappropriate entry mode to the
Ghanaian market making it the riskiest.
The fundamental issue of the amount of resources to be committed to the international market
and the degree of control to exert on it is still at stake. Needless to mention here that Agito
Medical market attractiveness is centred around a strategic local companies with the
competences to been a link between it and the local demand which speaks well of the
judicious way it needs to commit its resources and to allowed for shared control thereby
leveraging the perceived risk associated with it.
Just like most small and medium firms internationalisation process, Agito Medical has
commenced with markets that are culturally and geographically situated within the proximity
of the home base of the firm as prescribed by the stages model. Characteristic of it also is the
utilisation of entry modes that are less in resources commitment such as exporting and use of
agents.
Exporting and use of agents under this circumstance will be the desire option in Ghana since
it will enable the firm establish contacts and relationships with other players such as import
agents, freight forwarders and exposed it to gain more insight and information about potential
customers. With the use of agents or link, Agito Medical will have to share knowledge with
the agents in such a way that they can also use their local engineers to do installations and
after sales services. Agito Medical has establish a strong brand, has a competent project team
with working relationship with most of the original equipment manufacturers. To use agents
will mean such resources should be available with the agents or Agito Medical will come in
to support with the competences in order not to degrade the brand.
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Chapter 5
This is the final chapter of the study with a focus to summarise the important findings, make
recommendations and to draw conclusion. It is also to put across the reflections by way of
indicating what has been learnt in the process of working on this project.
5.1 Findings
The study has made some findings which are so important that highlights needs to be made of
them. Some of the important findings include the following:
The need for medical equipment in Ghana is quite great and serious that has attracted the
attention of policy makers. Evidentially, the country has great number of medical facilities
that would have made maximum use of medical equipment to improve upon quality
healthcare delivery but confronted and constrain by affordability. This is to say that not all
these medical facilities with these serious inadequacies can afford to procure used medical
equipments since it will still be out of their reach in terms of purchasing abilities and some as
a result of lack of autonomy to take decisions for such high end procurements involving very
expensive equipment and more especially used ones due mainly to government policy. This
has narrowed the market opportunity to some specific government owned hospital with the
autonomy and purchasing abilities and private owned facilities including religious facilities
which is noted to have a good potential for growth.
Mention must be made of the fact that although most of the facilities would be constrained by
funds and autonomy but the demand there can well be both incipient and latent. This is
because the need for the equipment are manifest which is not been discovered by any firm
and the potential for them to be resourceful enough so as to back the need with the real
purchasing ability in the future is unquestionable.
The introduction of National Health Insurance Scheme has in no small measure has improved
upon the internally generated funds of the hospitals and other facilities. It is also have its own
setbacks as the disbursement of the health facilities is still not promptly done. Aside the
62
internally generated funds by the facilities other sources of funding are coming from
government and donors by international organisations and nongovernmental organisations.
The brightness of the Ghanaian market attractiveness is faded further by the insufficient local
service base companies to provide conduit between the Agito Medical and the local demand
which is very central to the firm under this study. Few companies are however, seen to be in
the industry but further investigation will be needed to identify and ascertain their capabilities
to provide this all important link.
No major domestic market players are evident in the Ghanaian market and the African market
in general. However, they are major firms in the global world that is serving this need but
with no strategies well tailored for the market owing to the affordability problem. To develop
strategies for this market by having a good understanding the market needs can boost a firm
chances of attracting the largest market share. Unlike most of its competitors, Agito Medical
does not only own the equipment but have a competent team that it has invested so much in
to manage the equipment, manage the needs of the customers and to build relationship with
the customers for repeated purchase and long standing transactions.
5.2 Recommendations
The market for used and refurbished medical equipment is great and growing rapidly in many
parts of the world. Africa will not be left out of this developments in that the basis for used
medical equipment is more inherent in Africa than elsewhere and that has to do with
affordability. It therefore presents a case for firms in the industry to seize this opportunity and
capture great market share.
Link to the above is the fact that Ghana has presented an instance of untapped market with
the rural areas remaining the serious part because that is where the inability to purchase is
more endemic. Collaborations with NGOs who are into the health sector and identified as
part of the major sources of funding for the sector in this study would assist in no small
measure towards exploiting these market. If these great stakeholders in Ghana’s healthcare
are noted to be making serious strives, it will motivate government to also emulate such
examples to equipping the health facilities with the requisite equipment at a more affordable
rates.
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It would be much more strategic to penetrate the Ghanaian market with products that are
relatively cheaper such as the C-arm, ultrasound and the likes. This will establish some level
of confidence and trust which is very important in the used medical equipments business.
This is to suggest that equipment with prices that are a bit on the lower side could be used to
gain grounding in the African market. Admittedly, the issue of affordability is obvious in this
part of the world which is both propelling factor for the growth of used equipment and could
also constrain it. The situation is not that helpless as improvements in the levels of incomes
and governments spending are evident. This is to drive home the fact that in the not too
distance future the situation will improve leaps and bounds to permit the procurement of
equipments that are a bit at the higher side.
5.3 Reflections
In the process of compiling this project, it has exposed me to lot of challenges. The study was
basically employing secondary data for the analysis of the case. There are some situations
where it becomes impractical to get the information exactly as you would have wanted it to
be from the anticipated sources such as the ministries and agents of government of Ghana or
the information is not there where u think there will be there. Under such circumstance one
will often broaden the search to accredited international organisations and academic literature
and even places where you least expects. It gives one the feeling that you can get whatever
you want with wide scope of search and flexibility.
Another challenge has been translating theories and models to fit into the real situation on the
ground. A good understanding would be made of the theories and models but how to apply
them becomes quite difficult. Inspirations is often had from the supervisor who tries to bring
you from the world of thinking academically to the way managers think. It was fantastic
learning that there is a way to put an academic question for a manager before you stand to
gain the right responses and information.
The theories and models presented in this study has been apt in that it has succeeded in
guiding the study into discovering what is significant in market opportunity analysis and an
internal approach to evaluating the capabilities of the firm. With the methods, the use of
primary data to augment this study will be of paramount importance. This will present an
opportunity to directly interact with people who will be benefiting from the products
primarily.
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5.4 Conclusion
In conclusion, the study has found out that there is exist serious deficits in medical
equipments in the Ghanaian health institutions which speaks same in general terms across the
Sub-Saharan Africa. The need for medical equipment that will assist in no small way towards
the improvement of healthcare delivery has been realised. Some of the health facilities that
are situated in the rural areas will lack the locus of authority and funds inadequacy to procure
such equipments but with the great contributions of other donors in the health delivery
process such as the NGOs hope could be brought to such facilities.
The private health sector and some government-owned facilities in the urban areas could
serve as a good market for Agito Medical products. However, the situation has not presented
a great picture as the firm would anticipate the existence of local service companies that
could serve as a good link between the local demand and the firm. This has not well been
identified by the study as. Perhaps a lot more investigation in this area would have to be
established to enhance the quality of the decision to exploit the Ghanaian market.
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