Emerging markets: opportunities, communalities and differences

Medium term potential and opportunities are applealing in high growth emerging economies like the BRICS and Next Eleven countries. However, they differ substantially in leading market parameters as well as in the expected growth track for the coming years and require a deeper analysis. The article focuses on what these growth markets typically have in common and in what aspects they often diverge. 

A case study based on Russia, China, Turkey and Brazil

The “BRICS” and “Next Eleven” countries are often considered as somewhat uniform segments, offering comparable opportunities, market dynamics, and so requiring similar market strategies.
It’s a convenient concept, but in reality, the respective countries differ substantially in leading market parameters as well as in the expected growth track for the coming years.

Medium term potential and opportunities are appealing in most of these markets. The outcome and success of a “market development” approach however depend largely on how product strategies, distribution and sales approach, marketing communications, logistics, management of regulatory issues and pricing policies are in tune with the specific market characteristics.

This article focuses on what these growth markets typically have in common and in what aspects they often diverge.

What they have in common

Although the economic growth in the BRICS and Next 11 countries substantially slowed down as a consequence of the financial and economic crises in US and Europe in the recent past, most markets have returned to attractive growth rates.

Nevertheless, it’s fair to say that the BRICS will provide single digit growth economies, whereas the Next 11 countries are truly double digit emerging markets. At the same time all these countries will have healthcare markets which will grow substantially faster (3 to 7%) than their GDP.

Typically unemployment is relatively low (5 to 10%), but a substantial share of the population is living below the poverty line.

Governments are all dealing with the need to reform the industry models so they to cope with increasing investment needs and assure sustainable growth in domestic demand.
At the same time the economic growth results in a growing middle class. The demographic evolution shows an aging population and increasing urbanization.
All this leads to an increase in chronic and ‘life style’ diseases and in rising expectations towards quantity and standards of health care delivery as well as infrastructure.
In most countries there is the intention by the government to improve coverage, range and quality of the healthcare services. Reforms of the national healthcare systems are typically top of the list for most governments.

The private sector (insurers and care providers) play a growing but different role in the respective national health care systems.
Most governments invest in and facilitate the growth of a local health care industry capable of competing at least in the domestic markets with international providers. In most cases there is an active protection program favouring the local products.
Public hospitals buy more local products; while the private sector often chooses to work with international vendors.
International providers increasingly face “protectionist” strategies. They are consistently confronted with local competitors offering good enough products and hard-to-match prices.
In most emerging markets the competitive environment has evolved to a stage where only two options are left: being very successful or not being at all.

Cherry picking and low hanging fruits are hardly available anymore

The commercial context is consistently made more complicated by corruption and (local political) interests. This is one of the reasons why distributors (regional and local) play a crucial role in any successful market strategy.
Another element that requires an effective distribution network is the substantial regional economic and social gradients which are present in in most of these countries.

Where they differ

Business managers require a reliable indication of the real growth rates in a specific market and they also want to know whether this growth is sustainable.
From a recent survey in Russia, Turkey, China, Brazil, India and Malaysia we found the following decisive parameters marking the differences per country:

  • The political stability
  • The industry reform policies and industry network
  • The economic growth drivers
  • The determination of the government to increase the scope of healthcare
  • The local healthcare industry
  • The healthcare insurance system
  • The role of the private sector

Market growth indicators

Medical technology markets growth rates range from 2-4% (e.g. Russia, Brazil, …) to 8-10% (e.g. China, Turkey, …)
Healthcare expenditures vary widely from 4% in India to over 6 % or 7% in Russia and China to 9% in Brazil. Only a part of that (50 to 80%) is covered by public spending. The rest is patient contributions.

The actual market growth for MedTech products is largely impacted by the evolution in buying power for health care by a large part of the population. The growing middle class and the public insurance system are the main drivers for the respective healthcare markets.

Low levels of patient contribution and high penetration of public healthcare insurance systems lead to higher market growth rates. (e.g. improved healthcare insurance coverage in China, Brazil, Korea versus limited coverage in India, Malaysia, Thailand, …)

Some countries attempt to improve the availability of healthcare services by attracting private – for profit – care providers. Unless this policy is supported by a growing solid public HC insurance program, they only reach the upper and middle class of the population or turn to HC tourists from abroad. (e.g. high penetration of private care providers but limited public insurance in Malaysia, India versus a strong private sector supported by widening HC coverage in Turkey, Brazil)

Private hospitals play a minor role in today’s market in China and Russia.
Most of the private hospitals in emerging markets have up to date infrastructure, but offer a limited range of services. Public hospitals are typically underequipped and staffs are ill-trained.

Sustainability of growth

Reliability of forecasting future growth is mainly linked to the stability of the political system, the risk of political conflict and the main drivers of the present growth.
Domestic or international conflicts contain the risk of major policy changes and/or reduced national and foreign investment.(e.g. Russia, Turkey, Malaysia,..)
Nonstructural industry reforms – often combined with high levels of corruption -create insufficient foundation for solid growth (e.g. the industry reforms in Russia and Turkey are opportunistic and lack coordination,…)

Nonstructural growth drivers (e.g. exports linked to fluctuating oil or gas prices,…) lead to unstable growth patterns.

High sustainability: e.g. China, Brazil, South Korea.
Medium sustainability: e.g. Turkey, RSA, India, Malaysia, Indonesia …
Low sustainability: e.g. Russia, Thailand.

If you are looking for more detailed information per country on healthcare markets, care provision data, socio-demographics and macroeconomic information, please consult TforG’s World Healthcare Scan online business intelligence platform, covering more than 40 countries and 13 specialisms.

About Bart Van den Mooter

Bart is the founder of TforG and works closely together with over 50 global companies such as Abbott, Baxter, GE, J&J, Medtronic, Philips, Stryker and Covidien. In this function, he spends a lot time with Key Opinion Leaders and Health Policy makers in Europe and in Emerging Markets. He graduated at the Polytechnic University of Leuven with a Master of Engineering and has an MBA (Flanders Business School).