Five reasons for German MedTech SMEs to develop partnerships

Germany’s financial market signifies one of the most mature ones in the world. Germany offers good business set up an environment for globally competitive firms. Small- to mid-sized German Medtech companies make up the most of the industry. Due to the rise of emerging markets and low-cost technologies, German MedTech SMEs are facing a stiff challenge to counter the sudden rise and competition.

Let’s review some of the reasons why small and mid-sized German MedTech should change strategies

1. Partnerships reduce R&D costs

Costs and Pricing are top issues worldwide for the MedTech industry, as per BCG’s 2015 benchmarking study. Among the top 100 global medical companies, revenues of those from emerging markets grown from 4.5 Billion USD to 119 Billion USD from 2005 through 2015. They are critical in emerging markets. Small- to mid-sized German MedTech firms should expand their manufacturing base and R&D in emerging markets to reduce costs. For products that are not labor concentrated, such as local manufacturing or assembling will not be a total solution, but it could still decrease supply chain costs and help lower tariffs. Moreover, product simplification should be a part of pricing strategies. For price-sensitive care providers and hospitals, no-frills products represent the best value for their constraint budgets.

2. Partnerships offer a chance to create localized products

Emerging-market companies are much more successful than multinationals at modifying their products to local requirements and constraints. China’s Mindray has a strong market presence in nearly 3-quarters of all medical organizations in India. The company steered in-depth customer research in India, started local operations, hired local workforce, and personalized its line of equipment to address local needs. For example, it employed local engineers and hands to provide 24/7 customer service and assembled a local marketing and sales team. German MedTech SMEs should start the following the same.

3. Partnerships reduce foreign competition and enhance cooperation

In the last decade, new and advanced medical devices are introduced in the market at a lower price for consumers. This is problematic for the MedTech SMEs to maintain its position in the global market, and remain competitive with other countries like China, India which produces a decent range of quality medical devices at a lower cost.

The sales of medical equipment in China have increased rapidly over the last decade, reaching a total value of 36 Billion EUR by 2014. (Per EUSME Report 2015).

4. Partnerships offer a chance to acquire know-how

Mergers and Acquisitions can be an effective strategy for German MedTech SMEs. If they plan to build local manufacturing facilities in emerging countries, they still may not replicate a local company’s cost & performance structure. FDA-certified factories and processes, for example, are costly. Mergers and Acquisitions can allow MNC’s to acquire this setup cheaply than they might be able to build it.

Mergers and Acquisitions can also speed time to market. Many MedTech devices need to wait many years for successful registration with the FDA; the purchase of a registered company instead can bypass the long wait. Lastly, by acquiring, German MedTech SMEs can enjoy the favorable status of local businesses in tendering and demand processes.

GE Health care illustrates this approach. The company has more than 1,000 R&D engineers and seven manufacturing facilities in China alone with strategic partnerships. GE Healthcare has dedicated $300 Mill to create its Healthcare Business Solutions, which is aimed at emerging markets.

5. Partnerships help you adapt and diversify product portfolio

The typical German MedTech SMEs’ product may be too expensive, complicated to operate with not so useful accessories. But it would be a silly mistake only to manufacture a similar version of the standard product line without attending other essentials of the business.

Medtech SMEs need to develop urban customer insight competencies in their most important emerging markets. Their business development, R&D, and sales teams in these markets need to work closely possibly implementing the fast approach of standing atop of competitors. Recognizing the value of external innovation, GE has also decided a $50 Mill technology incubator that will invest in health care startups, including low-cost technologies.

Focus on partnerships, M&A, localization

The history of emerging-market companies displays; when they set their eyes on an industry, they often catch multinationals by surprise. Small and Medium German MedTech companies could be the next to face an unpleasant surprise unless they learn the lessons of their peers in other industries. Several Global Multinationals have acquired products, distribution, local R&D, and manufacturing through acquisitions to keep up the tempo and remain competitive. It is entirely feasible for Small and Medium sized MedTech companies to do the same and stay competitive in the market.

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