Establishing

1
Establishing Managing International Sales
Distribution Networks

• MassMEDIC
• International Marketing of Medical Devices
• Issues and Strategies for Manufacturers
• Sandy von Stackelberg
• MedEntry International
• February 27, 2004

2
Agenda

• Rationale for International Expansion
• Complexity Markets, Internal Management
• Channel Alternatives at Various Maturity Points
• Export Manager/ Master Distributor
• Distributors
• Direct Selling
• Converting from Distributor to Direct Sales
• Pitfalls
• Conclusion

3
Why Expand Outside The US?

• Typical scenario
• New markets and sources of revenue
• Increases product knowledge base
• Defense against overseas competitors
• Diversifies business

4
Global Medical Device Marketplace 100 Billion

• Market breakdown
• US 43
• Western Europe 25
• Fastest growing regions
• Asia India, China and Southeast Asia
• Latin America Mexico, Brazil, Argentina and
  Chile
• Source Frost Sullivan

5
A Comprehensive Approach
Corporate Mandate
Execution
Business Goals
Legal
Finance
Operations
Marketing
Sales
Engineering
Customer Support
Currency Strategy
Channel Strategy
Product Adaptation
Regulation
PLAN
Export Processes
Overseas Contracts
Product Roadmap
Marketing Programs
6
Market Complexity
More Relationship-oriented
Less Relationship- oriented
Argentina
Brazil Columbia
Canada
HK, Taiwan, Singapore
Chile, Mexico
Japan
Northern Europe
Korea
Southern Europe
China
Australia
Typically Fast
Typically Slow, Business Complexity
7
Channel Alternatives
Sales Models

• Export
• Master Distributor/ Export Management Co.
• Distributor
• Hybrid
• JV - Partnering
• Direct Sales

8
Start-Up Mode, Uninformed, Worst Case
Sell Price
Activities
Rev. OpEx OI
Manufacturer
50 - 10 40
Int'l distributor contacts Regional reps No local
selling Some tender activity
Export Mgmt
Cost 50
Holds Accounts Receivable Marketing Incentives Loc
al sales force
Distributor
Export Mgmt (10 20)
Hospital/User
Distributor (20 70)
9
Small to Mid Size, Wiser Choice, Better
Sell Price
Rev. OpEx OI
Activities
Manufacturer
(60-70) - (15-20) (45-50)
Holds Accounts Receivable Bad debt Marketing Local
sales force Regulatory approval Facilities Wareho
use distribution Physician rapport Incentives
Distributor
Cost (60 70)
Hospital/User
Distributor (20 70)
10
Direct Sales, Largest Market, Best
Sell Price
Activities
Rev. OpEx OI
Manufacturer
(80-100) - (30-40) (50-60)
One Time Set-up Cost -Regulatory -Facilities -Staf
fing -Legal entity -Inventory -Banking
Local Management Holds Accounts Receivable Bad
debt Marketing Local sales force
staff Regulatory approval Facilities Warehouse
distribution Physician rapport
Hospital/User
Manufacturer (80 100)
11
Distributor
Definition Distributor is a company which
agrees to buy and then sell a manufacturers
product in a local country or region

• As is
• U.S. company contract
• On-going support
• Distributor owns, title passed

12
Distributor Score Card
-

• Quick to market
• Inexpensive
• Sales leverage
• Learn the Customer/Market

• Limited loyalty
• Representation risk
• Lack of visibility distributor plans
• Lack of visibility to customer

13
Distributor Selection Process

• How do you find them?
• Colleagues
• On-line tools
• Matchmakers
• Government resources
• How do you qualify them?
• Market fit
• Product fit
• Success
• Their resources
• References

14
Direct Sales
Definition Hiring own employees under local
legal entity (i.e., subsidiary) to sell company
products in country

• Dedicated
• Local company contract
• Customer interaction
• Price
• Margins

15
Direct Sales Score Card
-

• Control message to the market
• Understand customer
• Company loyalty
• Brand
• Priorities (focus) or products
• Time to market
• Competitive hospital pricing

• Expensive!!!!
• Accounts receivable
• Inventory
• Expenses
• Employment costs
• Limit bidding?
• Legal encumbrances

16
Conversion from Distributor to Direct Sales

• Where do you start?
• Management
• Target countries/region
• Total cost of ownership
• Legal entity
• Sales leader
• Who can help?
• Consultants
• Government
• Global search firms

17
Conversion from Distributor to Direct Sales

• Why?
• Plant company flag
• Market control
• Profit margin
• Revenues
• Customers needs
• Consistency
• Long-term profitability
• Investments (working capital)

18
Beware of the Pitfalls

• Cancel distributor contracts
• Labor Laws
• PUBLIC medical market
• Tendering
• Payment

19
How To Inoculate Yourself

• Local experts
• Legal
• Tax
• Advisors
• Local support organizations
• AmCham
• Trade support agencies
• Trade Associations

20
Overseas Distribution Maturity Curve
Fully-owned operating subsidiary in the territory
Commercial partnership with export distributor in
the territory
Export distributor supported by dedicated
staff based in the territory
Export distributor supported by dedicated
headquarters- based staff
Direct -Most profit, more expense -Long
lasting -Exclusive -Dedicated -Commitment to
market
Simple Export Distributor
Indirect -Fast revenue -Cheap -Some market savvy
Hybrid -Indirect focus reduced -Add
support -Market knowledge grows
21
Conclusion

• The right sales model function
• Stage of development
• Product
• Resources
• Company
• Three typical channels
• Establishing and deconstructing
• Homework

22
Potential Resource

• Sandy von Stackelberg
• MedEntry International
• Your Innovations to All Nations sm
• Contacts
• Phone [phone]
• Email svonstack_at_yahoo.com