Marketing your products and services
Market entry
To successfully launch your products/services in China it is important to:
- Select the correct distribution channel
- Have correct positioning/pricing
- Have effective market promotion
Most biotechnology products can be categorised into 'Pharmaceutical', and 'Health and medical'. The market potential for these two segments is considerable with rapid growth predicted for the next five years. However, the overall healthcare market has become more competitive due to increasing imports and improving quality of domestic products.
Correctly positioning your products and setting a competitive pricing strategy is critical for success. For prescription drugs, convincing the relevant government authorities to include your products on the 'Reimbursement List' will be of considerable benefit otherwise your products will not be covered by insurance and the social security system.
Building relationships with doctors and holding frequent seminars in hospitals and clinics are also important. For over-the-counter products, one of the most competitive market segments in China, an effective market communication strategy is essential, such as advertising, road shows, media, and training.
Another option is to market your products at tradeshows/events, such as Analytica China and Sino-Med.
Demand for biotechnology products in the non-medical segment, ie. agriculture, environment protection and food industry is also growing rapidly. Advanced technology, effectiveness of products, adaptability of products and services, and safety are key success factors in this segment.
Price sensitivity is not as dominant as for the drug market. One strategy often used by foreign companies with leading technology products is the use of educational programs and training for key influencers in the market.
Distribution channels
There is no specific distribution channel for biotech products in China. The channels for pharmaceutical, medical devices, functional foods are similar to other finished goods. There are three types of companies involved in the biotechnology market:
- State-owned distributors
- Privately owned distributors
- Foreign invested distributors (including joint venture)
Many years ago, state-owned companies played the major role in the healthcare distribution network (pharmaceutical, medical, home care). Today, multi-ownership or privately owned companies are growing rapidly and increasingly playing a very important role in this market. However, state-owned companies still dominate in many areas particularly the drug market.
State-owned companies have several strengths:
- Government support and networks
- Generally solid financial position
- Strong relationships with relevant government authorities to ease the regulatory process
- Strong sub-dealer network
- Monopoly positions in some market areas, eg. pharmaceutical
At times they also exhibit less strong management, low efficiency, high labour and operational costs, limited customer focus and service support, and limited flexibility to market changes.
The number of privately owned companies in China is growing rapidly. These companies will increase in importance in the future.
The strengths of privately owned companies include:
- Aggressive thinking and action
- Flexible business strategy; good service provision
- Better relationship with customers
- Low operational cost and high efficiency
- Better control in designated territory
- Loyal to the supplier
However, privately owned companies are often:
- Small to medium size companies
- Less financially secure
- A higher risk in receiving payment
- Limited second-tier dealers, having restricted market coverage
- High turnover rate of their sales team
Presently the number of foreign invested distributors (including joint venture) is small due to government restrictions. However, this number is growing steadily as the sector becomes more open. These companies generally are well funded, with experience in business management and advanced supply chain management.
Strengths:
- Understand international conventions, easily accepted by foreign companies
- Professional business management; strong supply chain management
- Sound financial condition
- High credibility
However, at times they also exhibit a lack of knowledge of the local market and high operational costs resulting in higher margins.
Australian companies need to think thoroughly about potential distributors’ advantages and disadvantages to identify and select the correct local partner for their future business growth in China.
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