Local Care, International Scale

Providing local care on an International Scale

When the Prime Minister of a European nation recently suggested that "We live today in a global village" it appeared to usher in what could very well be the most profound oxymoron of the new millennium.

To suggest that our culture is at once part of the smallest community, unit and the largest at the same time, has significant implications for organizations that wish to join the growing trends to provide products and services on a multi-national basis. Although people are people, they most certainly bring very different perspectives on how to do business.

Indeed, European reaction to American customs and culture represent a series of seemingly conflicting attitudes that can confuse the most seasoned international executive.

They respect, for example, American free enterprise. However, they resent having American solutions forced on them. They admire American leadership in developing innovative healthcare programs and products, but they will not dream of implementing them without thorough medical and technical review, and a series of inevitable modifications. And when they appear completely disinterested in an American product or service, they might actually be quite interested but careful not to acknowledge it.

With all the cultural and political differences between different regions of the world, what accounts for the increasing interdependence among them? Unlike periods in America's past when much of Europe was inaccessible due to war, trade barriers and cultural isolation, American companies today find that "going global" is facilitated by improvements in satellite, cellular and fiber optic technology, giving rise to an explosion in various forms of electronic commerce.

In addition, actually traveling to foreign destinations is easier and less costly, and more foreign cultures readily accept English as the governing language of business affairs. Changes in the political climate have promoted more international trade, with the formation of the European Union and a common currency, the fall communism, and the introduction of economic reforms such as deregulation and privatization all bringing the world closer together.

Make a Plan

Developing an international strategy makes sense for many healthcare companies because of the improved economic and political climate, and for practical reasons as well, because going global actually can be less risky than continuing to expand within the domestic market.

"Organic" growth in the domestic market will never offer sufficient momentum for a company to grow quickly enough to outpace globally minded competitors, and entering new markets can be costly and time consuming, with no guarantee that the new product or service will generate the desired return on investment.

Yet another growth strategy - acquisition - will be costly, and although it offers the potential for overnight growth, it carries with it the risk of enormous corporate distraction, emotionally bankrupt employees and potential problems that led to the sale in the first place.

Finally, attitudes toward health vary widely, particularly within the countries of the European Union, and with such disparity in satisfaction it will be increasingly hard for American companies to resist the temptation to enter foreign markets with American-style solutions.

A Tapestry of Perspectives

Periodic surveys of satisfaction with various health systems in Europe reveal dramatic differences across the continent. Calls for healthcare reform are inversely related to consumer satisfaction, according to Robert G. Geursen, Ph.D., MD, VP for corporate public policy for Hoechst Marion Roussel in Frankfurt, Germany. Geursen reported his research during his presentation to the Annual International Summit on Managed Care, held last year in Miami, FL.

According Geursen's research, Europeans value rapid and uncomplicated access to medical care, freedom of choice, no waiting lists, and equality of coverage without regard to the ability to pay. Those countries where access to care is subject to a administrative bureaucracy, or where the basic infrastructure of a contemporary medical system is absent, also are subject to high levels of dissatisfaction and frustration.

Two of the largest corporations in US healthcare already have made significant inroads in their attempt to build a global brand. Blue Cross / Blue Shield Assn. got its first global experience by attempting to prevent trade though the use of the Blue Cross brand overseas.

In the 1980's, they discovered uses of the brand overseas that constituted a violation of their trademark and a threat to their plans for a future international strategy.

"By early 1991, we had won an important trademark lawsuit in Europe to protect our claim on the Blue Cross brand." says Diane Iorio, Vice President of brand enhancement and extension for Blue Cross / Blue Shield Assn., Chicago, Ill. "After we won, we realized that with many valuable trademarks you use it or lose it, so we began a process of setting up international Blues Plans."

After experimenting with various organizational structures, Blue Cross realized the potential for synergy through alliances with local partners. Today, it has an ongoing presence in many parts of central and Latin America based on the same franchising concept that the Blues Plans pioneered in the US healthcare market.

In 1997, it augmented these diverse programs with BlueCard Worldwide, a network of 130 hospitals in more than 40 countries where Blue Cross members frequently travel and require medical care.

"We recognized the opportunity to achieve a presence internationally while creating a competitive advantage within our domestic market for Americans that want security during their travels abroad," Iorio says. "We also recognize that this program would appeal to European travelers who, because of the nationalized medical programs in their own country, would have limited or no access to healthcare resources when they leave home."

Forming international alliances as a strategy to achieve international exposure is gaining in favor rapidly among American corporations, though it already has been used widely among European companies operating in the United States.

According to a study of more than 5000 corporations by the Dallas based office of Horwath International, 20% of US companies have utilized international alliances to support their international mission, whereas 50% of companies within the European Union have created them. On both sides of the Atlantic, these companies report much higher rates of return from well-conceived alliances than from domestic initiatives.

Minneapolis based United Healthcare used a broader range of strategies when launching United Healthcare Global Consulting in 1993.

"Our projects range from straight consulting projects to management contracts with equity arrangements, with many variations in between," says Ed Griese, United's Managing Director of European Operations. Today, United has taken their approach to international ventures into Germany, Portugal, South Africa and Asia.

"In the beginning, we attempted to replicate many of United's American-based managed care tool and techniques, with mixed success," Griese says. "Today we are better at detecting the nuances of each country's healthcare system, identifying techniques that will have a positive impact and customizing our approach based on cultural, regulatory and individual client needs. Ideally, we end up with an equity relationship in an international market with a strong local partner."

United's activities in Germany exemplify the challenge and the opportunity to export American expertise in managed care and healthcare technology. The healthcare market in Germany is heavily regulated. Outpatient and inpatient services there are financed through separate mechanisms, and there is no incentive for physicians to move inpatient procedure to more economical settings. Various "sickness funds" provide coverage for most citizens, and German employers make contributions to the fund. United co-operated with one of these sickness funds to create a coordinated program of care that optimized use of inpatient and outpatient resources. In a pilot program among four Berlin hospitals they demonstrated a 7% reduction in length of stay for targeted patients.

"In many parts of Europe, members stay within their sickness fund for life," Griese says. "Therefore American programs oriented around prevention, demand and disease management, clinical practice guidelines, and utilization management have great potential."

Iorio agrees, saying that the "length of hospital stays in Europe are often two or three times as long as they are in the United States. Also, the use of computers to aid in decision support is higher in U.S. hospitals. European markets appear very interested in adopting medical technology from the United States. They're looking at American `know-how` to maximize the efficiency of those systems for decision support purposes."

European View of American Tactics

With all the extraordinary opportunities available to American companies seeking expansion overseas, why do they continue to struggle in their international affairs?

The problems Americans face in conducting business overseas can be traced to their failure to recognize the many unique characteristics of their international target market, according to Mark Woodbridge, chief executive officer of Woodbridge Consulting, a German-based firm that specializes in promoting trade between companies in the United States and Europe.

"The most universal problem for American companies is that they fail to prepare for international expansion with the same level of planning and due diligence with which they would approach a domestic initiative," he says.

Woodbridge points to the fact that an international strategy requires a minimum three-year commitment.

"Unfortunately, upon deciding to support an international strategy, American companies will take their proven American products and proven American marketing model and will assume these will succeed equally well in another world altogether," he says. "When they find that they are rebuffed in their attempts to establish themselves overseas, they prematurely assume the venture has failed and they return to focus on domestic opportunities."

How does one begin to develop a global mentality so that common mistakes -because of the parochial historical perspectives of U.S. business- are avoided?

"This requires top management commitment and a statement by company leadership that your customers are no longer within American borders, and that wherever customers or prospects are located, they are entitled to the same level of high quality service as your most important domestic client," Woodbridge suggests.

Although the Pacific Rim and Latin America previously have been central targets for many American healthcare technology and service companies, economic instability and uncertainty in those parts of the world have turned recent attention to Europe. Today, 70% of exporting firms focus on Europe as their primary target, with approximate annual volume of $150 billion. According to Inc. magazine, Western Europe represents the fastest-growing market for U.S. technology exports.

American corporations need to recognize that an international strategy will not always be compatible with the very short time frames and quarterly reviews with which publicly traded companies evaluate the profitability of new ventures. It might take several years to demonstrate the success of an international investment, and some U.S. corporations may find this discipline quite difficult to maintain. It could be of great value to these companies to spend some time examining the marketing philosophy and strategies of their European counterparts.

When an international venture fails, it can almost always be traced to problems in communication. American companies should realize that even where significant language barriers do not exist, significant cultural differences probably do.

An important paradigm shift, illustrated below, will help American companies adapt to the global market and will ensure that common mistakes in international marketing are avoided.

The Traditional Model

Scenario A: Traditional Perspective

In one scenario, which looks at the traditional perspective, companies approach an international initiative as an extension of the existing domestic marketing effort. The marketing director establishes a strategy and marketing plan to introduce the product overseas. A limited budget is allocated to allow for such things as market research, on-site visits, distributor recruitment and promotional materials. Projections for international penetration and corresponding revenues are developed and presented to the company's board. A timeline is put in place so that expectations regarding return on investment are measured and evaluated.

While the approach reviewed above might appear to be well-conceived, it typically is viewed from the foreign perspective quite differently:

  • Prices are quoted in American dollars, before shipping costs.
  • The product is offered in an as-is condition, a poor fit for foreign end-users.
  • The company is accessible only during U.S. business hours.
  • No one in the company speaks the language of the foreign client.
  • Reception personnel and client services departments are unaware that foreign users are attempting to contact the company.
  • Materials provided in the local language are confusing and of little practical value.
  • Initial customers begin to resent the American manufacturer.
  • Distributors fell betrayed by a lack of thorough preparation and support.
Scenario B: Ideal Perspective

Although it is not necessarily true that the Traditional Perspective will produce such disastrous results (which gives rise to the danger of generalization), it would benefit this theoretical organization to have introduced the following paradigm shift before making a decision to approach international expansion.

The Ideal Perspective

Within an ideal perspective, management first must view their own domestic market as part of a larger universe, rather than viewing international markets as an extension of domestic markets. Having this global perspective would ensure that no one assumes that what is good for the domestic market will suit the international market.

Other important adjustments that would come from this perspective:

  • Marketing will ensure that communications take place in the language of the local market, and will make it easier for them to understand product/service benefits and ordering procedures.
  • Pricing will be quoted in local currency, including freight and delivery charges.
  • Marketing will ensure answers are available 24 hours a day, either through a local office, call center or company Web site.
  • Management will recognize the importance of hiring nationals as general manager from within the countries in which they have representation, not simply relying on American expatriates to maneuver through the complexities of government regulations and subcontracting relationships.
  • Management will further acknowledge the potential need for product re-engineering, and will empower the local general manager to guide this process, producing ultimately a product that fits well within the foreign market.

Word of Advice

"The best advice I can offer is not to approach international expansion based on what the competition is doing or on what tempting offer an international partner might make to satisfy their own needs, " Iorio suggests. "Instead, focus relentlessly on your customers. Know why you are going global."

"What are your current customers' global needs? What needs of international customers can you meet? What alliances will reduce the risk and increase the efficiency of your international venture? The answers to these questions will help you find 'true north,' your own international compass," she says.

Respecting the unique nature of foreign markets is the first step toward success in international marketing. But the rewards can be significant for the American company that is determined to learn and succeed in the global marketplace.

At the end of the day, there are times when being "less American" can mean all the difference in the world.

Ian Lazarus is managing partner of Creato (www.creato.com), which consults with biotechnology and healthcare companies on strategies related to international trade and technology transfer. He also serves on the Editorial Board of MANAGED HEALTHCARE.

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