Market Opportunities and Risks in Chinese and South African Pharmaceutical Industry

This report evaluates the market opportunities and risks in the pharmaceutical industry of China and South Africa for AUSMED Company. It highlights the benefits of expanding in the Chinese market due to government reforms and increasing demand for healthcare medication. It also discusses the challenges in the South African market due to corruption and political mismanagement. The report suggests expanding in the Chinese market through partnership as the market entry strategy.

Running head: GLOBAL BUSINESS
AUSMED
Global Business
9/8/2019

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Executive Summary
The aim of this report is to present the discussion in terms of market opportunities and market
risk that can be experienced by AUSMED Company while expanding the business in the
Chinese or South African market. The analysis has raised the argument that Chinese market
offer increased and better benefits for AUSMED Company to increase its market share
because the government is regularly introducing different healthcare reforms in the
Pharmaceutical industry for inviting foreign business to expand in the market. Besides this,
the increasing demand for the health care medication is offering chance of growth to the
company. On the other hand, the uncontrollable corruption, violence, and mismanagement of
political infrastructure in the South African Pharmaceutical Industry can raise number of
challenges for the company. Hence, the report has suggested company to expand in the
Chinese Pharmaceutical Industry through the Partnership as the market entry strategy.

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Table of Contents
Executive Summary...................................................................................................................1
Introduction................................................................................................................................3
Overview of Business............................................................................................................3
Overview of China.................................................................................................................3
Overview of South Africa......................................................................................................4
Market Opportunities in China...............................................................................................4
Market Opportunities in South Africa....................................................................................6
Risk in China..........................................................................................................................6
Risk in South Africa...............................................................................................................7
Selection of Best Market and Justification.............................................................................8
Market Entry Strategy............................................................................................................9
Conclusion..................................................................................................................................9
References................................................................................................................................11

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Introduction
Global business refers to the international trade where a business expands its operations
across the world. With the quick advancement in the technology and expanding international
trade, businesses are incentivized for vending services and products in the foreign market.
Operating the business in international or global level supports companies to expand their
share in the market, decrease costs, and be competitive (Peng, 2016). The intent of this paper
is to evaluate the market opportunities and risk that are available in the Pharmaceutical
industry of China and South Africa such that AUSMED can plan to expand its operations in
any of the one market. The paper is based on identifying the best market where company can
expand its operations and attain success. In the end, the paper is also raising the argument
related to what type of market entry strategy can be adopted by AUSMED Company to take
entry in the selected market.
Overview of Business
AUSMED is an Australian Pharmaceutical Company involved in the manufacturing of the
drugs has developed in the last 10 years. It presently employs around 60 staff and has yearly
turnover of around AUD 30 million. But, the company has not yet expanded in any other
market due to which its market share is limited. Hence, this paper is being prepared in order
to identify the best market place for the company to expand its operations.
Overview of China
China is officially called as the People’s Republic of China is th4e nation established in the
East Asia and the most populated nation in the world with over 1.404 billion population
(Shambaugh, 2013). In terms of total area, the country is called as the third or fourth largest
nation. Even, the pharmaceutical industry of the country is considered as the leading

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industries, casing synthetic drugs and chemicals, equipped Chinese medicines, instruments,
apparatus, medical devices, packing material, pharmaceutical machinery, and hygiene
materials. China holds over 20% of the population of the world but just has 1.5% of the drug
market at global level (Pharma Technology Focus, 2019). The altering health-care
environment is intended to spread rudimentary health insurance to a huge population and
allow higher access of services and products to the individuals in the country.
Overview of South Africa
South Africa is officially known as the Republic of South Africa. It is constrained to the
south by over 2,798 kilometres of shoreline of Southern Africa widening along the Indian and
South Atlantic Oceans, to the north by the adjacent nations of Zimbabwe, Botswana, and
Namibia. South Africa is said to be the largest Southern African nation and the 25th-largest
nation across the world in terms of land area and with around 57 million people, is the 24th
populous nation in the world (Venkat and Spaull, 2015). The pharmaceutical industry of
South Africa provide major services of medication to the population of South Africa and was
appreciated at R 42.6bn (€ 2,72bn) and R 45bn in the year 2016 (Market Watch, 2018). In
this section there are 276 businesses that are involved and have license by the Department of
Health and the Medical Controls Council. The local production in the country is valued at R
4.9bn in the year 2015, is subjugated by the local businesses (Market Watch, 2018).
Market Opportunities in China
The Pharmaceutical Industry of China offer huge growth opportunities for the business desire
to expand their business in the market in terms of market share, economic growth as well as
trade agreements with Australia. The Chinese pharmaceuticals industry is placed at the
second position in the world with the healthcare analytics businesses like lqvia who was
valued at around $122.6bn in the year 2017 and expected growth of around $175bn by the
year 2022, as per the reports of CNBC (Yu, Li, Shi and Yu, 2010). Multinational companies

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in the pharma industry are increasingly making China the main priority for selling drugs,
because the profit potential in the market is being broadly seen as a conclusive
counterbalance in contradiction of the risks of working under the Chinese government. This
increasing growth and opportunities for the business in the Chinese market reflect that
AUSMED the Australian Pharmaceutical Company can expand its operations in the Chinese
Market with the intention to cover the opportunities of increasing market share.
In addition to this, the Healthy China 2030 policy of the government prioritize the public
health of the decision making, and the credit to the role played by the international innovators
in attaining the health objective of the nation is said to be another sign that China is the better
option for the investment in terms of pharmaceutical industry (Yu, Li, Shi and Yu, 2010).
This shows that government of the country is also taking steps to promote and invite foreign
players to cover the share in the Pharmaceutical industry of China.
Furthermore, the manufacturing powerhouse of the world, is shifting towards value added
economy and there is one key industry that can dominate the consumer and maker. This is
because China speeded into its place as the second biggest economy of the world with the
strict one-child policy, adding to the increasing aging society with increasing medical
requirement (Kriz and Keating, 2010). As per the report of IQVIA, China is the second
biggest national pharmaceutical market across the world in the year 2017 with the value of
over $122.6 billion. It was the largest pharmaceuticals emerging market with development
anticipated to touch $145 billion to $175 billion by the year 2022 (Tan, 2018).
This is not enough, the market opportunities for AUSMED are higher due to the trade
relationship that Australia and China shares. The China-Australia Free Trade Agreement is
said to be the bilateral Free Trade Agreement between both the country’s governments

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(Kawai and Wignaraja, 2011). This trade agreement between the companies allows
companies operating in both the countries to expand smoothly without any barrier.
Market Opportunities in South Africa
The growth situation has been predicted for the pharmaceutical industry of South Africa. The
anticipated growth in the pharmaceutical market at global level between years 2012 to 2021
is projected at 26%, however the drug market of the country can increase by 200% as per the
realistic conjecture made, or by 300% as per the optimistic hypothesis in this similar period
(Pharma World, 2018). Depending on the market report of the African Pharmaceuticals 2016,
the South African market is anticipated to reach the market value of over $45 billion in the
year 2020 (Pharma World, 2018). On the other hand, as per the market research of Goldstein
Research, the size of the market is set to touch USD 160.7 billion by the year 2024, over the
forecasted years (Pharma World, 2018).6. This anticipated market growth reflects that there
are opportunities for the AUSMED to expand business in the South African market.
In addition to this, the trade relationship between Australia and South Africa are strong which
results in offering increased opportunities to the businesses operating in the country. South
Africa is considered as the largest export market for Australian firms with the two way
agreement of trade in terms of services and goods totalling of AUD 3.6 billion in the year
2017 (Australian Government, 2019). In addition to this, South African market is the major
investment partner of Australia with bilateral investment impending in the year 2017 to AUD
15 billion (Australian Government, 2019). A Memorandum of Understanding was signed
between the South Africa and Australia in the year 2010, distinguishing the huge cooperation
history between the two nations and targeting to reinforce strategic, political, and economic
engagement. This trade relationship between both the countries also offers opportunities to
the players to expand operations in the country with limited risk.

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Risk in China
As per the investigations by Chinese authorities under the corruption and bribery claims in
the multinational companies dealing in the pharmaceutical industry of China reflects an
augmented promise to eliminate the corruption. Since 2009, the government of China has
enhanced its reforms for making affordable and accessible healthcare. But, the present
developments have highlighted that these efforts at implementation are not as effective as
expected, and society dissatisfaction with the services of healthcare endures to increase. The
cases that recently took place in the country highlights that the corruption will stay rife and
international businesses should stay carefully in whatever industry they operate (China Go
Abroad, 2019). Though, there are signals that the authorities in China are planning to
reinforce their enforcement on the corruption and bribery issues in the industry of
pharmaceutical, this will unavoidably take time. This reflects that if AUSMED is planning to
expand their operations in the Chinese market then it has to be careful from the officials who
are involved in the bribery and corruption and should not encourage them by meeting their
demand.
In addition to this, the competition in the Chinese pharmaceuticals industry is another risk or
threat for the AUSMED Company because the government reforms and demand of health
care medication is offering growth opportunities for the local as well as foreign businesses.
There are numerous players who are involved in developing different health care machines
and drugs that are offering benefits to the population (Yates, 2019). Hence, it is bit tough for
the company to expand in this market however with the help of strong entry strategy and
marketing strategy can effectively place the business in the China.
Risk in South Africa
Corruption is considered to be a global problem in the health care section and even in the
South African market it has impacted the businesses as well as patients. As per the research

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conducted, it has been identified the relationship between the state and corruption and have
recommended that corruption is impacted by the insufficient power’s separation between the
leading political party and the state, dissimilar ideas of politics and of the state, and is
increasing conflicts of interest, information irregularities and absence of or unsuitable
directive in the sector of private health. In the year 2013, as per the index of Transparency
International’s corruption South Africa is placed at the 72 position out of 177 nations (Rispel,
Jager and Fonn, 2015).
In addition to this, there are some of the other serious issues related to a host of political
regulatory and economic factors that influence negatively the foreign businesses. These
comprises determined reports related to the mismanagement in high circles of the government
that touched a crescendo in the year 2017 under the management of then-President Jacob
Zuma, noteworthy unemployment, improper infrastructure, poor service delivery by the
government, and violent crime to needy communities (Export. Gov, 2019). This reflects that
the absence of proper infrastructure, increasing unemployment, and crime in the country is
impacting businesses. Therefore, it can be said that if AUSMED Company expands its
business in this country it has to be very careful while considering any legal aspect.
Selection of Best Market and Justification
From the above analysis, it has been identified that corruption is one of the major issue in
both the country’s Pharmaceutical Industry is dealing with immense pressure and the
performance of the businesses operating in the industry is getting impacted, however, the
government of Chinese market is taking corrective actions for the betterment of the market.
On the other hand, the government of the South African market is not yet taking major
actions for eliminating corruption from the country. Besides this, the increasing growth of the
Chinese Pharmaceuticals Industry is offering growth opportunities to the local as well as
international firms to expand their operations. In fact the government of the country is

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introducing different health care policies and programs to invite businesses to take entry in
this segment. Further, the pharmaceutical industry of China is regularly contributing in the
development of the country. This discussion recommends that AUSMED Company must
expand its operations in the Chinese market in order to gain considerable growth and
development of revenue and sales.
Market Entry Strategy
The strategy of market entry is said to be a planned delivery and distribution technique of
services and goods to a new market. In the export and import of the products, it is said to be
the creation, introduction, and management of the contracts in the international or foreign
nation. There are different businesses that can successfully run their operations in a specific
niche market deprived of ever intensifying into the new market. On the other side, few of the
businesses can increase their sales, business stability, and brand if they plan to take entry in
the new market (Chandrasekhar, 2012). Considering the limited but successful business
operations of AUSMED Company in the Australian market it could be said that company
must go with partnership as the market entry strategy to take entry in the Chinese market.
Adopting partnership will help company in getting the partner who can invest capital in the
business for the operations in the market (Aaronson, 2011). Besides this, the risk that can be
raised in the direction of AUSMED Company while operating in the Chinese market such as
corruption and competition can be overcome by partnering with one of the existing player of
the Chinese Pharmaceutical Industry. This partner cannot just help AUSMED Company in
arranging capital and dealing with the competition, but, its goodwill in the market can help in
taking a long-term position in the Chinese market and by intensifying the promotion.

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Conclusion
The above report has discussed about the market opportunities and risk that can be
experienced by AUSMED Company that is planning to expand its operations in the Chinese
or South African market. The above discussion has claimed that the increasing market
growth, strong economic position, and government reforms are offering growth opportunities
for the foreign businesses to expand in the country. Besides this, the trade agreement between
Australia and China can offer leverage to AUSMED Company for the importing and
exporting of the services. On the other hand, this market also poses some challenges or risk
for the businesses like corruption and competition that can impact the performance of the
AUSMED Company in terms of revenue and sales. Furthermore, the discussion related to the
South African market, it has been identified that there are estimations been made regarding
the future growth of the pharmaceutical industry. Even the Australia and South Africa has
bilateral agreement for the trade that can offer benefit to the company. But, considering the
negative side of this market, it has been identified that the corruption, violence, crime, and
mismanagement of the reforms is at peak that will definitely effect AUSMED Company to
operate in the country. This analysis, takes the discussion towards the conclusion that
AUSMED Company must expand its operations in the Chinese market in order to meet its
objective that is to increase market share, revenue, sales, and customer base.

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Market Watch (2018) South African Pharmaceutical Industry 2017-2018 with 88 Company
Profiles, including Pfizer, Aspen and Roche - ResearchAndMarkets.com [Online]. Available
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