Q1: What is the underlying logic behind the global product company idea? Global Product Company (GPC) philosophy is mainly aiming at producing products that fit global markets with lowest cost and highest profit. This philosophy has mechanisms that have been applied to different phases of product lifecycle: Manufacturing phase: In manufacturing phase, cutting costs was achieved by moving manufacturing activities and eventually design and engineering activities from high-cost countries to low-cost countries.
R&D phase: R&D is a very important phase in product development, it is essential to develop new products that can compete in the global market and considers different customers’ needs. Having high skilled workers in developing countries, where labor has relatively lower costs, has enabled the movement of R&D from high-cost countries to low-cost countries, however R&D programs, objectives, and strategies were still managed by headquarter and the corporate global senior management.
Marketing & Sales phase: On contrary to R&D and Manufacturing, marketing & sales have to be localized operations according to each region and country. Accordingly, GEMS has established many offices around the world for sales and marketing management to get closer to the customer. Q2: Should the Global Product Company philosophy be altered to suit the needs of medical diagnostic market in China? China already has the third largest market for medical diagnostic after USA and Japan and it is already the fastest growing, it has the biggest market or low-ended products which has about 20% of the worldwide industry revenues. Accordingly, somehow the tenets of the GPC policies should change to increase the market share in the low-end products; GEMS should adopt the new “In China for China” policy and bring the plants in already low-cost countries to China. According to Chinese culture and rules, domestic production will bring greater demand and will also bring a slight cost saving that could enable GEMS low-end products to compete with Siemens products that are already being manufactured in China.
Dropping the price with 10% can increase the sales with 50%. Although the “In China for China” policy might cause duplication in infrastructure, the newly expected market share in the Chinese market can absorb this duplication of infrastructure and production. Q3: Should GEMS be pursuing genomics and health care IT opportunities aggressively in addition, or instead of the China opportunity? China opportunity is a cash cow for the time being, it represents the biggest opportunity in the low-ended products.
On the other hand, genomics and health care IT opportunities are the future of the industry they are star products. If GEMS did not look for opportunities and investments in genomics and health care IT, then it will lose its market share in the high and medium-ended products which both represents about 80% of the industry market. Accordingly, I see that GEMS should pursue genomics and health care IT opportunities aggressively in addition to the China opportunity.
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