SCRATCHIES, TAKE ME AWAY! - Global Trending News

Scratchies aren’t characters from The Simpsons. They’re what Aussies call scratch-off lottery tickets, and they are just one of the 21st-century equivalents of the lipstick that Depression-era women bought to brighten their lives. Global View has been tracking numerous examples in this vein.

It’s not only lipstick that’s enjoying a sales boost; women are turning to all beauty products for affordable indulgences. This category is booming in India, with some having just discovered makeup. (Good girls weren’t supposed to use cosmetics.) Now that it’s become acceptable to wear it, they’re not letting it go just because of the recession.

Global consumers are also finding solace in other treats. Chocolate is raising endorphins from Seoul to São Paulo. Argentineans can’t get enough of alfajores, dulce de leche sandwich cookies. The Japanese, especially women, are lining up for cakes and pastries. The credit crunch is turning into a “credit munch” in the U.K., where biscuits with tea are “nonnegotiable treats” and sales of bubbly are popping.

If you can’t eat or drink it, wear it: Beautiful lingerie is a pick-me-up worldwide. Turkish women feel pretty in sexy stockings, which cost much less than new shoes. Mexican and French women get glam with costume jewelry, which is cheap and breaks easily but lifts the spirits.

And there’s the scratchie, the ultimate “lipstick” for men and women around the globe. After buying beer or chocolates at the convenience store, instead of taking the change, many consumers are asking for a few lottery tickets. Because along with comfort, consumers want fantasy — the dream that their circumstances could change, all for a few bucks.

BOTTOM LINE: The Narrowing Distribution Funnel: How to Get Your Medical Device to Market

Especially for smaller companies, creating a compelling product line and getting it to the buyers requires resourcefulness and considerable strategic planning.

Virtually every day there is news that the distribution network from medical device manufacturer to healthcare provider is becoming more and more concentrated. Hospitals and alternate-site care centers continue to consolidate, and physician practices are becoming more interconnected as publicly owned physician providers organize to confront the health maintenance organization phenomenon.

Cost containment and the need to be more competitive have spawned larger and more-sophisticated buying entities seeking lower procurement costs and value-added inventory management services. Prominent examples are group purchasing organizations (GPOs)—independent entities that represent groups of hospitals and other healthcare providers in obtaining volume-based pricing and other benefits. In reaction to the GPOs, and to gain more control over product purchasing, healthcare providers are themselves forming centralized purchasing groups, further reducing the population of medical device buyers. These groups are called integrated delivery networks (IDNs).

To make matters worse for many device manufacturers, buying groups and large distributors are joining forces with one another. Although the McKesson– Amerisource and Cardinal–Bergen Brunswig mergers failed in 1998 to pass antitrust muster, McKesson's acquisition of Red Line and Cardinal's pending combination with Allegiance signal that the "urge to merge" is far from satisfied.

Not only are distribution channels narrowing, but the choice of products offered by many participants in the chain is shrinking. We are in the age of "sole-source" and "preferred-provider" contracts, accompanied by measures to encourage compliance. The distribution funnel can be compared to the cable TV industry: device manufacturers are like television program producers, and distributors and buying groups are akin to monopolistic cable systems. Producers may have terrific television programs, but if they can't get a cable system to carry them, no one will see them.

With all this concentration in the distribution network, the spotlight is on those medical device manufacturers whose products are already included in the system. Yet, behind the scenes, hundreds of smaller manufacturers struggle to get their products to market through conventional and alternative means. Larger companies too face similar issues with lower-volume product lines that are unrelated to their core businesses.

It used to be that having an effective product itself provided enough impetus for a company to reach its ultimate customer. Now, expensive marketing campaigns and extensive distribution channels are vital. And after getting through the supply chain, continued product improvement, R&D, and marketing are required to remain competitive.

The implications of this change in distribution affect not only the companies involved but also society at large, as the public is denied exposure to a vast array of products. Perhaps survival of the fittest dictates that scaling-up leads to efficiency and lower costs throughout healthcare markets, and that smaller firms cannot provide products cheaply enough. However, opportunity is the engine that breeds innovation and entrepreneurship. Smaller device firms have often been the source of critical new technologies or otherwise valuable products. In today's market, how does a small company deal with the narrowing distribution funnel? This blog proposes a few strategies.


CREATE A DISCRETE, SPECIALIZED PRODUCT LINE

First and foremost, device manufacturers need to review their product lines and marketing efforts to determine how they can be improved. To gain recognition, smaller manufacturers need to create a specialized product line that can be promoted to elicit strong trade name identification from the marketplace—an awareness that "the specialist in this area is company X."

Not only must the product line be specialized, it must also include a critical mass of related products so that a product grouping can be marketed and distributed as a complete line. Too often, small companies create a singular product or group of products that fails to cover the targeted niche in its entirety, making the limited line difficult and expensive to market. Other times, small companies expand beyond their area of specialization, becoming miniconglomerates and spreading themselves too thin.

If a manufacturer lacks the resources to produce a certain item that would complete its line, it should consider commissioning a subcontractor to make it. If the outsourced product sells well, the device manufacturer may be able to internalize production later on.

MARKET TO BOTH HEALTHCARE PROVIDERS AND DISTRIBUTORS

Once a specialized product line is created (or redefined), small manufacturers need to follow a two-pronged approach. The objective is to "sow the seeds" within different parts of the supply chain, so that a groundswell of support for the product builds up. Certainly, manufacturers must appeal to networks of independent dealers to distribute their products. But demand must also be created at the grassroots level—with the medical providers or, depending upon the product, even with the end-users or patients.

Because dealers have their own competitive issues, they often cannot be relied on to promote a manufacturer's products, particularly those of a small company. It is worthwhile for the manufacturer to identify key physicians in the relevant field and concentrate efforts on converting them to its product line. Influential physicians can often serve as "champions" or informal endorsers of a product line, leveraging the marketing effort.

Of course, an effective marketing program should include targeted advertising, publicity, and exhibitions at professional association meetings. But efforts should be focused on developing demand in defined segments of the market, such as in selected geographical areas or with certain hospitals or physicians groups. In developing this demand, the device manufacturer may gain important insight into marketing to broader segments. Once demand is established in the defined areas, it is easier to expand by citing the earlier customer relationships as success stories.

STAY CURRENT WITH THE PURCHASING ORGANIZATIONS

Device manufacturers—whatever their size—should stay in contact with group purchasing organizations and apply periodically for inclusion within their networks. Manufacturers should track competitive products that are included and respectfully convey the advantages of their product line to the key decision makers of the organizations. Often, a buying group considering a contract with one medical device manufacturer will entertain competitive products that are presented in a timely manner. With persistence, a device manufacturer may, over time, gain access to these large-scale networks.

If a manufacturer is losing out on buying-group relationships because its product line is not diverse enough, it should consider teaming up with other manufacturers selling complementary (noncompetitive) products that fill out the line. Together, manufacturers with this kind of relationship can often present a compelling package to organized buying groups.

PRIVATE-LABEL YOUR PRODUCTS

Private-label programs can also provide a channel to market for medical devices. Provided the device company has the necessary manufacturing capacity to produce sufficient quantities, private labeling—especially for a large customer—can dramatically increase sales by taking advantage of the customer's marketing, advertising, and distribution resources. Obviously, private-label marketing carries risks. For example, a small company may be able to ramp-up production to meet the requirements of its larger customers, but a loss of such customers could be devastating to the manufacturer. However, once a broader market has been created for the product, the device manufacturer may be in a position to market the product under its own name.

ENTER INTERNATIONAL MARKETS

A critical distribution strategy lies in finding supply niches—either domestically or abroad. Many foreign markets are less mature and concentrated than the domestic market, and their still-developing status creates distribution opportunities. Often, ambitious foreign distributors can build a strong, regular following for a small company's products, serving as another base to support subsequent increases in domestic distribution. Foreign markets can also serve as incubators and testing grounds for new devices before such products are exposed to the harsher scrutiny of the domestic markets.

CREATE DISTRIBUTION, MARKETING, OR TECHNOLOGY RELATIONSHIPS

It is not only the smaller, internally funded device manufacturers that face distribution roadblocks; well-financed companies can also encounter problems. Frequently, companies funded from venture capital firms, initial public offerings, or other financial sources have been set up with the expectation that if their products are compelling enough, distribution will naturally follow. Although this formula sometimes succeeds, it often fails. There are innumerable competitive and unpredictable forces that make establishing proper distribution difficult.

To provide a measure of security, manufacturers regularly enter into distribution and marketing arrangements with large, well-established companies. These manufacturers have decided to concentrate on their strengths—product conception, research and development, and production. They leave it to proven professionals, with appropriate distribution networks in place, to sell their products.

Although device manufacturers theoretically may earn less by entering into these arrangements compared with distributing their products themselves, it is often better to guarantee distribution with the "big guys" than to risk failure on one's own. In a global economy, such marketing and distribution agreements are becoming more commonplace, especially to address territories that are underserviced. These agreements can be structured to cover some regional markets or customer categories and not others.

Another form of partnering with larger companies involves technology transfers. These transactions often include a conveyance of technology in return for a royalty keyed to the sales volume of the product incorporating the transferred technology.

CONSIDER SELLING OR DIVESTING THE PRODUCT LINE

In light of the narrowing distribution opportunities, the corporate sale or divestiture of a business or product line may be the appropriate answer. In fact, both large and small companies are generally in the market as sellers and buyers of businesses. (Increasingly, large companies actively consider divesting discrete parts of their overall business that no longer fit their core competencies or offer compelling synergies with other parts of their operations.) Obviously, the decision of whether to sell can involve a variety of complex factors and should not be taken lightly. If a company's growth prospects are reasonably predictable given internal resources, then it may be worthwhile to continue operating the business independently. There are many benefits—both tangible and intangible—to retaining ownership of a business.

However, an honest assessment should be made as to the value of the business under the existing ownership and resources over time. A device manufacturer may have its greatest value when it is expanding but may lose value when larger competitors—with better distribution and deeper pockets—enter the fray. Sometimes, the anticipation of positive developments may be worth more than the reality.

In assessing a business or product line, it is worthwhile to prepare a 3–5-year projection, carefully analyze the steps required to realize its objectives, and then frankly assess the likelihood of meeting those goals.

Transactions can be structured as an outright sale or, in many cases, the original owners can retain a meaningful equity stake and management role and participate in the future growth of the company.

CONCLUSION

Consolidation of distribution sources has severely limited the channels by which medical device manufacturers—particularly smaller firms—get their products to market. To optimize distribution opportunities, device manufacturers first need to create a specialized and compelling product line. They should continue trying to break into organized buying groups and conventional distributor networks. At the same time, they should create demand at the provider level and pursue alternative outlets, including international markets. Consideration should also be given to forming a commercial relationship with a larger, well-established company to market or distribute the products in question. Under certain circumstances, a properly structured sale-type transaction may be the prudent course to follow.

Cuban Americans: Reuniting and it feels so good

WHAT'S HAPPENING
Cuban mamás are most likely applauding a $410 billion spending bill signed into law March 2009 that promises to grant their sons and daughters more leeway when traveling to Cuba.

The bill allows native sons and daughters annual visits, removes limits on how long they can stay in Cuba, and increases allowable spending in the island from $50 to $179 a day.

The bill also eases financing rules for imports of U.S. food and medicine into Cuba, suspending enforcement of regulations requiring Cuba to pay cash before U.S. goods are delivered.


WHAT THIS MEANS TO BUSINESS
Because restrictions regarding Cuban Americans visiting family members have long been strident, those citizens are sure to take advantage of proposed easement, even during these rough economic times.

There's also hope that passage of the bill into law will lead to steps toward friendlier relations with Cuba, and that the 50-year-old trade embargo could soon be lifted.

Financial Literacy is not just for middle class

OBSERVATION
Spoiled rich kids? Wealthy parents have little faith in their heirs

WHAT'S HAPPENING
The super affluent aren't just worried about the economy; they're worried about their kids' incompetence with cash. In a survey of Americans with at least $1 million in liquid assets, just 20% said they believed their children would "keep their family's wealth secure for future generations" (WSJ.com 2.10.09). Only a third thought their kids would ever "make financial sacrifices."
Analysts at U.S. Trust blame materialism. Over the past decade and a half, the affluent have taken conspicuous consumption to new heights, and their kids identify primarily through fancy clothes and exotic automobiles.
The extreme wealth generated during boom times means that about $50 trillion will be passed to the next generation in the next 50 years — probably the greatest transfer of wealth in history.

WHAT THIS MEANS TO BUSINESS
Financial literacy isn't just for the middle class. In fact, the children of wealth may be even more at risk for financial mismanagement, since life has been pretty easy for them so far.
Savings, entrepreneurship, philanthropy, and investing: these are the areas rich kids need to focus on, according to the authors of the study.

Best Business To Start: Going Global Firms

Even though the value of the dollar and the trade deficit may fluctuate, globalization is here to stay. We all know about multinational corporations, but even an increasing number of small businesses are finding it possible to take their businesses abroad. A 2007 UPS survey found that a third of all small businesses are already involved in international trade, and the think tank Institute for the Future wrote in a February 2008 report that half will be involved by 2018.


But that number doesn't show the practical side of the matter: Who is going to make all these global deals happen? Naren Balasubramanian, a member of the board of advisers for Global Crosswalk Inc., is the first to tell you it's not easy. Too many players in trade are sending white males to offices to lead groups of Indians, he says, without knowing what they are getting into. That's where his company comes in. Global Crosswalk, owned by Radha Nath, a Canton, Mich.-based entrepreneur, helps employees of local corporations being sent abroad prepare for the cultural differences they will encounter. It also offers services to help employees of foreign companies sent to work in the area adjust to life in the States. "Being able to build bridges with different cultures brings me joy," Nath says.

The burgeoning field of global consulting also brings Renato Beninatto joy. "I have a goal of visiting three new countries a year," he says. Beninatto has been able to achieve that goal as "chief connector" for Common Sense Advisory Inc., the Boston-based global research firm he cofounded in 2002. Common Sense Advisory provides research about the global marketplace to foreign language translation service companies and works with other global companies on how they can better provide services to foreign countries. For example, a company might not know how to write a user guide for a product in a foreign country, or might lose global customers because it cannot offer the right payment option. Common Sense offers expertise on those kinds of issues. "Language is an enabler and a multiplier of business," says Beninatto.

What does it pay?
According to the Bureau of Labor Statistics, the mean annual wage for executives in the management, scientific, and technical consulting industry in May 2007 was $182,790.

What kind of background do you need?
Direct experience with international business is a prerequisite. Beninatto had been an entrepreneur in his native country of Brazil and had expanded that business to Argentina. What allowed him to generate clients right off the bat, he says, was that he and his partners already had a reputation as "thought leaders" in the area of globalization, specifically on issues of foreign languages. Knowledge about a specific area of international business and global trade can be used for public speaking or blogging, providing the perfect launching pad for a start-up. Nath says that her connections with the Detroit-area Asian-American community were one of the most helpful parts of her background. She used that network of friends as the starting place for her marketing strategy. Experience in human resources—Nath worked in that field for over a decade—can also help you find talented people to work as consultants with your customers.

How do you get started?
Traditional start-up costs—like renting an office—aren't necessary in this line of work. "It lends itself to virtual offices," Nath says. She mainly works from her home, and when she needs to formally meet with clients or hired consultants, she has arrangements with the local chamber of commerce for office space. Being a member of the Detroit Chamber of Commerce has also been a great way to find businesses in the area that are in need of her services, she says. The main start-up cost, however, will be intellectual capital, as the quality of your service is only as good as the quality of your ideas. Beninatto's cofounder of Common Sense Advisory, Don De Palma, was an early researcher about globalization at Forrester Research. Beninatto says it was useful to divide the work so that his partner focuses on the research products and he handles the face-to-face meetings. They also have a separate executive run the business side of things to allow them to concentrate on their services. "When you're working, you're not selling. When you're selling, you're not working. We needed somebody above us," Beninatto explains.

Best Small Business To Start: Export Manager

If you want to know what has kept the U.S. economy afloat during hard times, you have to look at exports. They've been responsible for two thirds of the nation's economic growth from 2007 to 2008, says U.S. Trade Representative Susan Schwab. While it is true that the dollar's recent rebound, which is likely to continue, has put a damper on exports, one important driver is not going away anytime soon: the growing demand for U.S. products in emerging markets like China and India. The problem is that this demand has cropped up so fast that many American businesses are not ready. "Most American businesses are woefully behind the rest of the world on exporting," says George Solomon, associate professor of management at George Washington University. Export intermediaries are the small-business sector's solution to this big problem. Their basic mission is to connect domestic sellers to foreign buyers. There are two ways to do this. Export trading companies take title to goods made by domestic companies and directly sell them to buyers overseas. Export management companies have a simpler role. They don't buy the exports in question—they just find the foreign buyer. Andy Reinke of Indianapolis, who has run the export management company Foreign Targets Inc. since 1996, says that difference cuts your risk. "In export management, you share the risk with the manufacturer," he says. If something should go awry between buying the goods and exporting them—let's say the market goes belly up in the country in question—the export trading company would be stuck with the full bill for the goods it bought.

How much does it pay?
Specific wage statistics for export managers aren't available. But according to the Bureau of Labor Statistics, in May 2007, the mean annual wage for chief executives in the wholesale trade industry was $166,870.

What kind of background do you need?
Running an export management company requires considerable knowledge of international trade. Reinke explains the steps he goes through in one case: First, you have to figure out where in the world demand for the goods is highest. That requires looking at trade statistics and doing marketing research. Then you have to combine that research with knowledge of the relevant tariff rates. Next, Reinke says he contacts companies that manufacture similar products to the one he is trying to export but that are not in direct competition—for example, if you're trying to sell a sort of industrial valve, you would look at where companies that sell a different kind of valve have found buyers abroad.

From there, you contact the overseas companies you have identified. Here, knowledge of a foreign language might help but is not necessary. Reinke says he knows enough French and Spanish to get by, but the countries he deals with—which include China, Vietnam, Indonesia, and Jordan—are so diverse that he could never know enough languages to keep up. The fact that he deals mainly in high-tech industrial products makes it easier to find people on the other side of the bargaining who speak English, the language of technology today.

A background that is sure to make the process simpler, however, is having worked in the export field. Reinke worked at the Indiana State Department of Commerce and then did export development for a small manufacturer in South Bend. Any experience in international business would increase your likelihood of having contacts to find clients and foreign buyers.

How do you get started?
One benefit of starting in this field is that you may not find yourself with much competition. When he first started, Reinke says, "we opened up the phone book and identified the fact that no one else was doing this." But there's a challenge hidden in that benefit—you have to convince people who may be unfamiliar with export managers that your services are worthwhile. To do that, Reinke says, you need to lay out a specific timeline for clients in which you can deliver tangible results.

How do you find clients? "I don't advertise myself much.... It's a tightknit community," Reinke says. He found his first clients through trade shows, which he learned about through his previous job in export development.

Other resources

Starting an export trading company—Small Business Technology and Development Center
Small Business Exporters Association

Guy Kuwasaki Important Rules to Succeeding in Selling

Guy Kawasaki is the managing director of Garage Technology Ventures, and the ultimate decision maker for new business owners trying to make the sale of a lifetime. Here are the major tips you need:

How do you present yourself to get attention?

- I’m giving you :30 seconds to explain what you do.
- I don’t want your life story – I don’t care.
- Get to the point – this is business and investing
- Remember, we’re not dating, this is a business meeting

Follow the 10, 20, 30 Rule:

- 10 powerpoint slides
- 20 minutes – max
- The smallest font is 30 points.

What is included in the perfect pitch?

- Get to the meeting early
- :30 seconds to explain what you do
- 10/20/30 format
- Shut up and listen

How do you close?

- Don't look to have an order or agreement right off the bat... rather, look to not be eliminated as opposed to be accepted
- Do your due dilligence, and look for a second conversation with the potential investor