The Changing Face of Healthcare
An interview with Jürgen Steinbeck, Managing Director of Richard Wolf.
As a global business, what differences have you come across when setting up in China vs. other countries?
When expanding your business into new regions, it is always important to consider cultural differences above all. Before we made a move into China, we had to familiarise ourselves with the processes and business practices and discuss them in great detail. We found, for example, that verbal agreements and meetings generally have a different degree of importance, meaning that start-ups without “insider” support may have difficulties overcoming the language barriers. Setting up a business or your subsidiaries in China without professional assistance is risky because it is difficult to manage these cultural differences in particular.
How has your sales strategy changed over the years?
Richard Wolf started selling in China decades ago. At that time, our strategy was to work with a main distributor out of Hong Kong who had his own network in Mainland China with sub-dealers within the country. When this proved successful, we established a second main distributor as a backup, also managed out of Hong Kong. This way, we had a wide reach in China while maintaining the more Western-minded Hong Kong distributors as our main point of contact.
Now, our strategy has shifted with the establishment of a branch office in Hong Kong via which we have taken over the complete dealer structure from one of our previous main distributors. By the end of this year, we will expand by taking over a second main distributor organization, managing the entire network out of our Hong Kong office. In addition to this, our Richard Wolf Service Centre based in Shanghai provides support throughout the country. This will be supplemented with a further branch office in Beijing in the coming year. We have recruited a team of Business Development Managers who proactively look after the management of the dealers and their activities.
As times change, we have adjusted our strategy and now we find it essential to have our own offices on the ground. We are able to manage our distributors better, which is mutually beneficial, as they, too, prefer to have closer ties to the Headquarters. We can offer our expertise more readily, in addition to engaging more actively in marketing activities in China organized directly by Richard Wolf.
How has your business model evolved since you first entered China?
As previously mentioned, our aim was to move away from the main-distributor model. While this kind of arrangement worked well for us in the beginning, once we reached a certain sales volume, it didn’t quite make sense anymore. The Greater China region has become our second most important export market after the USA! Over the past few years, the key factors for Richard Wolf as a mid-sized company were restructuring in China, centralizing the management of activities and also providing as much scope as possible to adapt the strategy to the regional differences within China.
How have you increased brand awareness in China?
After we built up our presence in China, it was much easier to implement our own marketing plan, leading to further business development within the region. Now we coordinate our own participation at all important exhibitions and workshops, as well as focus groups and meetings with Key Opinion Leaders (KOLs). Previously, these activities were arranged by our distributors but we have found that all of these channels prefer to be directly in touch with us. Through Fiducia, we were able to strategically hire Business Development Managers, who have a wide network and know where we need to be present to build our brand in China.
We work closely with KOLs in China to develop new technologies and facilitate knowledge exchange with Europe. In some cases, we will name our products after the person who has assisted in its development, so our product catalogue reflects our close work with world-renowned doctors and professors across the globe.
What persistent challenges have you come across in China?
Overall, there were no problems that were fundamentally insurmountable. We were able to overcome all the challenges with the professional help of Fiducia. Hong Kong was undoubtedly easier than China, simply due to the lack of seemingly never-ending bureaucratic procedures, but we got through them all. Indeed, in China the hurdles presented by regulations are the biggest challenge in the area of Medical Devices. They can range from the most detailed piece of information about your product to mundane things like how many power sockets your showroom has.
In recent years, these regulations have become so inflated by the Chinese FDA that the issue for every new product, as well as existing ones, relates to whether or not a license should be sought for China. Approval times of up to 2 years are normal, which is a significant obstacle in our sector. Nonetheless, it is worth it to go through these processes to gain access to the Chinese market.
How is the competitive landscape in China?
The medical devices market in China is effectively split into two parts: the low-end market at one end of the spectrum, occupied by mostly domestic products at a lower quality but cheaper price, and the classic high-end market with the more familiar, mostly Western premium providers, such as Richard Wolf. Naturally, pressure comes from both sides and the boundaries are moving ever closer together. Recently, we have even seen Chinese premium providers which will undoubtedly play a very important role in the high-end segment in the future.
Hospitals tend to be divided along these lines as well. On the one hand, you have your big university clinics and premium private and public hospitals, which have access to top-quality medical equipment, while, on the other hand, the smaller hospitals tend not to have access to Western technology. Since the spectrum is so wide, competition is also spread out along these lines.
We have seen the “In China for China” trend in many industries. How does this apply to medical equipment?
This trend undoubtedly also exists in the medical equipment industry, with certain big players adapting their products for the local market. However, at Richard Wolf, we have agreed that our focus will be on selling premium products with the same standard on a global basis. Training the people who use our equipment is essential and our products are the same in China, Germany or Brazil.
Moreover, it is important not to forget about the emotional effect here. When people are dealing with their own health, they like to have access to the best possible products and despite all the efforts of the domestic Chinese industry, medical technology that is “Made in Germany” is more in demand than ever before. This is linked to the fact that the middle class in China has undergone dramatic growth. There is a direct correlation between economic wellbeing and the importance people place on their health and that of their loved ones. Now, more and more people in China can afford better treatments and are willing to spend their money on this.
Jürgen Steinbeck is the Managing Director of Richard Wolf, one of the leading manufacturers of high-quality products for endoscopic diagnosis and therapy in human medicine and veterinary medicine.