Opportunities and Risks in China and South Africa for AUSMED

This report outlines analysis of opportunities and risks in China and South Africa as prospective international expansion marketplace for an Australian pharmaceutical organisation, AUSMED. The study includes an exploration of key risk and prospects connected with the two nations and choosing the best destination to increase enterprise actions and processes.

Running Head: MANAGEMENT 0
GLOBAL BUSINESS

MANAGEMMENT 1
Executive Summary
This report outlines analysis of opportunities and risks in China and South Africa as
prospective international expansion marketplace for an Australian pharmaceutical
organisation, AUSMED. The study includes an exploration of key risk and prospects
connected with the two nations and choosing the best destination to increase enterprise
actions and processes. The report particularises on the Chinese marketplace with the reason
why it is preferable global market for the organisation pharmaceutical products. The report
also discusses various opportunities as an example comprising economic growth, market size,
and trade agreements. Various risks connected to the global trade comprises of legal
regulations, deprived technology and innovation, currency and financial cost. With regards to
this, the report also discourses exporting as a right entry mode to the global marketplace.
Table of Contents

MANAGEMMENT 2
Introduction................................................................................................................................3
Exploration of Opportunities and Risk......................................................................................3
South Africa...........................................................................................................................3
Cross cultural risk..............................................................................................................4
Commercial risk.................................................................................................................5
Political risk.......................................................................................................................5
China......................................................................................................................................5
Political risk.......................................................................................................................6
Commercial risk.................................................................................................................6
Cross Cultural risk..............................................................................................................6
Destination Country...................................................................................................................7
Entry strategy.............................................................................................................................7
Conclusion..................................................................................................................................9
References................................................................................................................................10
Appendices...............................................................................................................................12

MANAGEMMENT 3
Introduction
AUSMED Pharmacy Company has positioned itself in the drugs production and is planning
to increase its footprints in international markets as growth and sale of company have
recently impeded. AUSMED is planning to increase its footprints in either China or South
Africa based on the study of opportunities and risks in the two countries. The company was
found to be generating a yearly turnover of closely AUD 30 million with being operational in
last ten years and hiring more than 60 employees in the organisation. To increase the growth
and sales of the enterprise, the organisation management focused on considering internal
market for the first time and this report gives in-depth exploration of opportunities and risks
in both respective country, i.e. China and South Africa so as to assist the organisation to
select the correct country to expands its footprints and trade while suggesting the right entry
strategy for the particular target nation. In this paper, the key risks associated with both the
nations in relation with pharmaceutical business like financial, legitimate aspects and
currency threats and others are being covered. Various significant opportunities elaborated in
the study comprises of financial growth, greater marketplace scope and encouraging business
contracts with the native country.
Exploration of Opportunities and Risk
South Africa
Opportunities
One of the prime issues faced by the company includes improper technology and disease and
slow innovation to production of drugs for a rising diseased populace. AUSMED can tap this
opportunity to increase its footprints in South Africa with developing potential solutions with
the help of innovation and manufacturing of drugs that help in combat with various health
diseases including diabetes. The company also has a multi-billion opportunity due to the
market gap as there is found to be a significant increase in the ageing population of South

MANAGEMMENT 4
Africa and there are only a few enterprises available who are producing drugs to fulfil the
expectations of the whole population. In 2014, South Africa pharmaceutical sector value was
increased to 5 billion dollars from just 800 million dollars and according to various
researches, it is anticipated to grow to higher than $10 billion (one.oecd.org, 2018). This
gives various opportunities to drug manufacturers like AUSMED.
In South Africa, AUSMED also has a prospects to increase higher share in the market due to
easiness of firms operations as of flexible government regulations. The government in South
Africa has export handling areas that regulate international organisations to function tax-free
in the initial years of fucntions. Hence, it can help AUSMED in boosting its operation.
AUSMED can also gain higher profits and market share due to infection prone situation in
South Africa as the country is facing similar diseases impacting the continent of Africa like
AIDS/HIV, malaria, measles, diarrhoea, which collectively calls for 90% of the diseases-
related demises in the country (who.int, 2018). South Africa population includes 58 million
individuals with an increasingly urban populace that are susceptible to to various diseases
(Sliwa et al, 2008). With regards to this, South Africa is one of the rising emerging nations in
Africa with increase in economy every year because of foreign capitalization and this might
secure AUSMED sustainability for longer period of time. The government of South Africa is
also set to do any sorts of trade contacts with the drug producers who are eager to capitalize
on the nation with an objective to boost the economy and makes various employment
opportunities (Collins, Ishizaka and Snowball, 2019).
Risks
Cross cultural risk
When AUSMED will move to South Africa, it has to face several language barriers due to the
difference in the culture of people. IN addition to this, it is also required to change the
packaging of the products as per the language requirement of the people. One of the key risks
in putting out processes in South Arica for AUSMED is the various legal laws of government
that can create various difficulties for the company to record and gain necessary medical
copyrights. South Africa is on the verge of influencing international organisations that seeks
to capitalise in this industry and initiate drives in compliance with general manufacturing
(Power et al, 2016). This law also out the barrier in one of the known loophole called as every

MANAGEMMENT 5
greening that will create challenges for AUSMED to gain pharmaceutical patent to run
processes in the country.
Commercial risk
Low innovation and technology is another risk for AUSMED to increase drug business in
South Africa as it might impact on company manufacturing process. AUSMED needs to
invest high in research and development for the production of medicines to fulfil the rising
request of the disease-prone country, mainly the AIDS/HIV sufferers. Due to the lesser
technological innovation capability in South Africa, it is required by the AUSMED to carry
necessary research and development for the welfare of its business. it might also be possible
that due to the lack of skilled employees, it will not be able to carry out its functioning
properly.
Political risk
The operation cost of AUSMED will also increase with expanding of operations as South
Africa technology does not accept high manufacturing and it will need skilled employees,
subcontracting equipment and tools from other countries including Australia for the smooth
functioning of processes (Perumal-Pillay and Suleman, 2017). However, the country
government is eager to involve into various contract related top trade with international drug
manufacturing organisations, the government are facilitating the business actions in the
process of cut every rising market niche and suggesting general manufacturing.
China
Prospects
China is one of the most potential countries for expanding the pharmaceutical business
because it is strategic marketplace with full of prospects. In the recent time, the government
in China is giving emphasis to promote the healthcare industry for the welfare of its citizen.
The major opportunity available for the Pharmaceutical industry is the wider market size of
China that can ensure the investment and further growth in the pharmaceutical industry (Hu
and Zhang, 2015). The major goal of the government in China is to increase and develop the
availability of healthcare services for the population. The major investment done in this

MANAGEMMENT 6
sector will definitely help the citizens from protection handling. Besides this, it has also
raised the stake from 60 per cent to 90 per cent. The bigger scope of the market with 1billion
people also proved to be helpful for AUSMED in order to increase its operation in the
country.
The prospect for the Medical commerce will also drive the major growth of the economy
fuelled by societal and demographic factor. Due to the huge market for the products of
pharmaceutical, it will enable several players to target the customers and thereby increase
share in market. The other significant aspect is the going population of the Chinese populace.
Due to this, pharmaceutical goods demand is also increasing. AUSMED produces those drugs
that are required by the elder or aged individuals in nursing households. Moreover, the
country has around 300 million individuals having age of 65 years (Hu and Chung, 2015).
Due to the several diseases and weaker immune system, ageing population tends to face
several problems.
Chinese market also tends to present the opportunity for AUSMED through differentiation,
innovation at the time of trade with bio pharmacies. By ensuring this, organisation can also
advance more sales and share in market by doing innovation in the products of pharmacies.
E-Commerce is also increasing in the market of China by almost all the customers. It will
present the opportunities for growth by exploring new prospects for the international player.
Threats
Political risk
The major threat for the AUSMED at the time of increasing pharmaceutical business China is
the sluggish approval of drugs in China. In the past few years, CFDA was accused of
dragging its approval for the new drugs (Tan, 2016). However, it will take long time for
getting approval for the drugs in China due to huge regulations. There are several drug
approvals are not made on time that states that there is risk of slow drug approval and
corruption. Undeveloped private sector is also one such risk for the pharmaceutical industry
in China that tends to attract several unfavourable regulatory environments which in turn
affect the growth (Zhang and Wu, 2019). Due to thee increasing corruption and bribe,
government also ensure the tight regulatory standards and reviews for the outsider companies
specially.

MANAGEMMENT 7
Commercial risk
Competition is also increasing on a huge rate in the pharmaceutical sector in country generic
and medicine goods. This tends to limit the growth and market size in the pharmaceutical
industry. Expiring patent issue also proves to be the threat leading to the legal and
governmental issues for the AUSMED firm when it will expand its operation in China. China
has also started giving less approval regarding the pharmaceutical company in China and
received bribes for allowing the unqualified and expedited approval. It is seen that from the
year 2014, more than 18000 company has now got the drug approval.
Cross Cultural risk
AUSMED is also required to translate its several product into the Chinese language like
packaging, branding and labelling to increase the product awareness With regards to this,
firm also has also not sufficient fund in relation with proper development and research on the
part of government for creating and innovating the new medicines. By the year 2020, China
is however estimated to have higher than around 300 million individuals in the age bracket of
65 and above (Campbell, 2019). Tight regulatory standard and reviews also affect the
businesses to do start their operation in China. Company will, therefore, require to ensure the
scrutiny before approval as well as after taking the approval.
Destination Country
China is proved to be the best and perfect country for expanding its operation because it
grants the vast marketplace growth for the companies. China also has more than one billion
people that demand effective services in health care in order to contest with several illnesses.
The significant motive for selecting China as compared to South Africa is the increasing
share in the market. The population of China is also comprised of the 300 million aged
people that will definitely demand home care, medical care as well as E-health elucidations.
The move to China will, therefore, provide the organisation to provide several innovations in
drug.
In spite of this, China in terms of trade is also proved to more beneficial and evolved as
compared to South Africa. In the world, China is the second largest economy after the US.

MANAGEMMENT 8
The other justification for choosing China is the opportunities available for the online
platform where it can also sell its drug on the online platform. China pharmaceutical business
is also expected to grow by one trillion dollars by 2020 (Santoro, 2015). The other motive for
selecting China is as an appropriate place for AUSMED is the adequate and favourable
policies that tend to promote innovation in the medical campaigns.
Entry strategy
Several entry mode strategies are available for the companies at the time of expanding. The
main entry strategies are licensing, Franchising, FDI, Exporting. From these strategies, the
most suitable strategy for the expansion of AUSMED in China is the export. It is because
export has a low risk with faster risk. In the contemporary time, company has no economic
money for get into the international marketplace with some other costly tactics like
franchising and licensing. Exporting will prove to be most secure way for accessing an
International market at the time of exporting the pharmaceutical products in the market of
China. The consideration related to expanding operation of AUSMED can be met through
exporting or running trade in China where it can achieve greater share in the market.
Exporting is said to be the selling of products that manufactures locally to the global
marketplace, it is done in order to increase more sales and share in the market (Oviatt and
McDougall, 2018). The major advantage of exporting is that it helps the company in avoiding
the expenses related to setting any operation in the foreign market. It also reduces the risk as
well as time.
AUSMED will, therefore, require the most innovative and creative mode of distributing and
marketing the medical products in the China by innovation and differentiation in its services
as well as products. For speeding the process of approval in the exporting stratagem, it must
come into into the contractual agreement and trade deal with the distributors as well as local
firms for gaining particular information regarding the market, operational forces and
consumers. Due to the increasing competition, company is required to start some promotional
campaign with the help of traditional and digital advertising like trade shows, native sales
force, as well as TV advertisement. Television ad will definitely assist the customers to see
the price as well as premium quality by stating its features. Due to the high number of
competitors in the Chinese industry, AUSMED requires several changes.

MANAGEMMENT 9
The major usage of exporting is to properly utilise the promotion niche formerly any
international company enter into the marketplace and upsurge rivalry. Due to this, AUSMED
is also required to translate its product into the Chinese language like packaging, branding
and labelling to increase the product awareness. It is because every country has its own
language in which they understand. In order to gain the maximum demand from Chinese
customers, it is essential to ensure the use of local language. The major drawback of the
exporting is the indulgence of higher cost at the time of transporting goods to China.
Therefore, the use of export as an entry stratagem and issuing products in China with the help
of contractual contract indicates to less regulation over the activities and pay the native
business for those services.
Conclusion
To conclude, the study explores the opportunities and risks of pharmaceutical business
extension in both South Africa and China marketplaces by AUSMED. Considering in-depth
analysis, it can be said that China is one of the leading and biggest markets in pharmaceutical
products due to its one of distinct policy relating to ensure health care for all people with the
number of ageing people is also increasing. In relation to South Africa, high response for
pharmaceutical foods is the consequence of disease-prone situation and absence of medicine
producers in the country. The Chinese marketplace is the appropriate target as it has
advanced technology and greater marketplace size attracting various international
organisations to sustain for a longer period. In terms of entry strategy, exporting can be
considered a viable strategy as it is not expensive and needs less time to establish and gains
approvals of drug from the local government. In addition to this, it is also essential in recent
time to assist the customers with the help of advertising.

MANAGEMMENT 10
References
Campbell, C. (2019) China’s Aging Population Is a Major Threat to Its Future [ONLINE]
Available from: https://time.com/5523805/china-aging-population-working-age/ [Accessed
03/09/2019].
Collins, A., Ishizaka, A. and Snowball, J. (2019) Film production incentives, employment
transformation and domestic expenditure in South Africa: visualizing subsidy
effectiveness. International Journal of Cultural Policy, 25(2), pp.204-217.
Hu, H. and Chung, C.C. (2015) Biopharmaceutical innovation system in China: system
evolution and policy transitions (pre-1990s-2010s). International journal of health policy and
management, 4(12), p.823.
Hu, H. and Zhang, L. (2015) Catch-up of Chinese pharmaceutical firms facing technological
complexity. International Journal of Innovation and Technology Management, 12(04),
p.1550017.
one.oecd.org. (2018) one.oecd.org [ONLINE] Available from:
https://one.oecd.org/document/DAF/COMP/WD(2018)117/en/pdf [Accessed 03/09/2019].
Oviatt, B.M. and McDougall, P.P. (2018) Toward a Theory of International New Ventures.
In International Entrepreneurship(pp. 31-57). New York: Palgrave Macmillan.
Perumal-Pillay, V.A. and Suleman, F. (2017) Selection of essential medicines for South
Africa-an analysis of in-depth interviews with national essential medicines list committee
members. BMC health services research, 17(1), p.17.
Power, M., Newell, P., Baker, L., Bulkeley, H., Kirshner, J. and Smith, A. (2016) The
political economy of energy transitions in Mozambique and South Africa: The role of the
Rising Powers. Energy Research & Social Science, 17(1), pp.10-19.
Santoro, M.A. (2015) China 2020: How western business can—and should—influence social
and political change in the coming decade. New York: Cornell University Press.
Sliwa, K., Wilkinson, D., Hansen, C., Ntyintyane, L., Tibazarwa, K., Becker, A. and Stewart,
S. (2008) Spectrum of heart disease and risk factors in a black urban population in South
Africa (the Heart of Soweto Study): a cohort study. The Lancet, 371(9616), pp.915-922.

MANAGEMMENT 11
Suokas, J. (2019) China remains second largest FDI recipient in the world. [online]
Available From: https://gbtimes.com/china-remains-second-largest-fdi-recipient-in-the-world
[accessed 5/09/2019].
Tan, A. (2016) Drugs and Vaccines for Public Health Emergencies–A Comparative Law
Analysis. Journal of Biosecurity, Biosafety, and Biodefense Law, 7(1), pp.113-132.
Trading Economics. (2019). China GDP annual growth arte. [online] Available from:
https://tradingeconomics.com/china/gdp-growth-annual [accessed 5/09/2019].
who.int. (2018) The African Regional Health Report: The Health of the People [ONLINE]
Available from: https://www.who.int/bulletin/africanhealth/en/ [Accessed 03/09/2019].
Zhang, F. and Wu, F. (2019) Rethinking the city and innovation: A political economic view
from China's biotech. Cities, 85(1), pp.150-155.

MANAGEMMENT 12
Appendices
GDP rate of China 2019
The GDP rate of China has decreased from 6.4 per cent to 6.2 per event. It is seen
as the lowest growth rate as compare to previous years.
Population rate
Ye
ar
Populat
ion
Yea
rly
%
Cha
nge
Yearl
y
Chan
ge
Migr
ants
(net)
Me
dian
Age
Fert
ility
Rate
Den
sity
(P/K
m²)
Ur
ban
Po
p
%
Urban
Popul
ation
Coun
try's
Shar
e of
Worl
d Pop
World
Populat
ion
Chi
na
Glo
bal
Ra
nk
20
19
1,433,7
83,686
0.43
%
6,135,
900
-
348,3
99
37.0 1.65 153 59.
7 %
856,40
9,297
18.59
%
7,713,4
68,100
1
20 1,427,6 0.47 6,625, - 37.0 1.65 152 58. 837,02 18.71 7,631,0 1

MANAGEMMENT 13
Ye
ar
Populat
ion
Yea
rly
%
Cha
nge
Yearl
y
Chan
ge
Migr
ants
(net)
Me
dian
Age
Fert
ility
Rate
Den
sity
(P/K
m²)
Ur
ban
Po
p
%
Urban
Popul
ation
Coun
try's
Shar
e of
Worl
d Pop
World
Populat
ion
Chi
na
Glo
bal
Ra
nk
18 47,786 % 995 348,3
99
6 % 2,095 % 91,040
20
17
1,421,0
21,791
0.49
%
6,972,
440
-
348,3
99
37.0 1.65 151 57.
5 %
816,95
7,613
18.83
%
7,547,8
58,925
1
20
16
1,414,0
49,351
0.51
%
7,201,
481
-
348,3
99
37.0 1.65 151 56.
3 %
796,28
9,491
18.94
%
7,464,0
22,049
1
20
15
1,406,8
47,870
0.55
%
7,607,
451
-
310,4
42
36.7 1.64 150 55.
1 %
775,35
2,918
19.06
%
7,379,7
97,139
1
20
10
1,368,8
10,615
0.57
%
7,606,
847
-
435,6
77
35.0 1.62 146 48.
9 %
669,35
3,557
19.68
%
6,956,8
23,603
1
20
05
1,330,7
76,380
0.62
%
8,045,
123
-
393,1
16
32.6 1.61 142 42.
2 %
561,98
3,323
20.34
%
6,541,9
07,027
1
20
00
1,290,5
50,765
0.79
%
9,926,
046
-
76,60
30.0 1.62 137 35. 460,37 21.01 6,143,4 1

MANAGEMMENT 14
Ye
ar
Populat
ion
Yea
rly
%
Cha
nge
Yearl
y
Chan
ge
Migr
ants
(net)
Me
dian
Age
Fert
ility
Rate
Den
sity
(P/K
m²)
Ur
ban
Po
p
%
Urban
Popul
ation
Coun
try's
Shar
e of
Worl
d Pop
World
Populat
ion
Chi
na
Glo
bal
Ra
nk
0 7 % 7,048 % 93,823
19
95
1,240,9
20,535
1.07
%
12,80
7,372
-
155,9
96
27.4 1.83 132 30.
9 %
383,90
1,711
21.60
%
5,744,2
12,979
1
19
90
1,176,8
83,674
1.82
%
20,25
8,863
-
86,33
0
24.9 2.73 125 26.
3 %
310,02
2,147
22.09
%
5,327,2
31,061
1
19
85
1,075,5
89,361
1.47
%
15,10
0,025
-
40,00
0
23.5 2.52 115 22.
8 %
244,94
6,241
22.08
%
4,870,9
21,740
1
19
80
1,000,0
89,235
1.55
%
14,76
9,670
-
9,401
21.9 3.01 107 19.
2 %
192,39
2,094
22.43
%
4,458,0
03,514
1
19
75
926,240
,885
2.28
%
19,72
7,898
-
221,0
96
20.3 4.85 99 17.
3 %
160,24
4,444
22.70
%
4,079,4
80,606
1
19
70
827,601
,394
2.70
%
20,67
6,485
-
32,00
0
19.3 6.30 88 17.
3 %
143,51
3,192
22.36
%
3,700,4
37,046
1

MANAGEMMENT 15
Ye
ar
Populat
ion
Yea
rly
%
Cha
nge
Yearl
y
Chan
ge
Migr
ants
(net)
Me
dian
Age
Fert
ility
Rate
Den
sity
(P/K
m²)
Ur
ban
Po
p
%
Urban
Popul
ation
Coun
try's
Shar
e of
Worl
d Pop
World
Populat
ion
Chi
na
Glo
bal
Ra
nk
19
65
724,218
,968
1.86
%
12,76
2,182
-
51,20
5
22.2 6.11 77 18.
0 %
130,68
4,595
21.69
%
3,339,5
83,597
1
19
60
660,408
,056
1.53
%
9,633,
300
-
11,90
0
21.3 5.48 70 16.
1 %
106,56
1,743
21.76
%
3,034,9
49,748
1
19
55
612,241
,554
2.00
%
11,56
4,456
-
51,20
5
22.2 6.11 65 13.
8 %
84,639
,825
22.08
%
2,773,0
19,936
1
China is seen as the highest populated country. Due to this, AUSMED will gain the
favourable market condition due to the increasing aged people.
Inflation Rate

MANAGEMMENT 16
In the year 2019, annual inflation rate of China has increased by 2.8 per cent. This can
decrease the purchasing power of the Chinese people. However, AUSMED will not get too
much affected due to the increasing health concern of the people.
Unemployment rate of China
In China, Unemployment rate has however reduced from the previous years. Due to
this, AUSMED might get some difficulty in acquiring the skilled and competent person. By
paying the higher pay scale as compare to other industries, it can get the higher skilled
employees.
Foreign direct Investment

MANAGEMMENT 17
AUSMED will gain the growth by expanding its business in China. It is because China has
found to be the second largest FDI recipient in the world (Suokas, 2019).