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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 1 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 2 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 3 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 4 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. 5 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 6 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 7 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 8 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 9 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. 10 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. 11 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 12 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. 13 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. 14 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). 15 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 16 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). 18 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 55 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 56 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 57 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 58 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. 59 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. 61 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. 63 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. 64 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. 65 References Hollensen S. (2011) Global Marketing :A Decision-oriented Approach 5th Edition (Pearson Education Ltd. England) Abnor I. and Bjorn B. 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