Too often when companies enter into emerging markets, they frequently fail to fully characterize the value chain. Yes, those markets are growing. Yes, they represent a population with newly minted coins clinking in their pockets. Yes, the government is encouraging investment. Those Old Developed Markets look much like they looked to Columbus as he said good-bye to Spain and set for the New World.
Talent pool
When Christopher Columbus landed in America, he thought very little about the local talent pool. He assumed the locals knew little of the sophisticated technology that he was going to bring. But the question for Columbus was how much was he going to spend once he got there? How much of his R&D was going to be coming from the old world or was he going to invest adequate resources on the new ground?
When entering emerging markets it is important for companies to understand how much intellectual capital they are going to import and how much they are going to generate locally. There is always a certain amount of comfort in knowing that the home fires are being stoked and the fruits of the scientists from the main office will be coming into the new territories.
However, understanding and tapping into the local talent pool is often a valuable cost-effective of accessing smart lower-cost labor. Quite often local talent is hungry to get the imprimatur of a foreign capital company on their resume, and may be dissatisfied with the opportunities available in local companies.
Accessing this R&D talent pool is also an excellent way of gaining critical on-the ground understandings of the ins and outs of local regulations.
Collaboration with Universities/Research Centers
As real estate agents say, location, location, location. Accessing that local talent pool also goes to where facilities are located. The closer the location to major universities and other research operations, the easier it is to attract talent. This location fact is true whether a pharma company is planning to be in New Jersey or in China. Many of the big multi-national pharmaceutical companies, e.g. AstraZeneca, GSK, Novartis, Roche and Pfizer, have R&D centers located in Beijing and Shanghai where it is easy to attract local scientific talent. While these companies also have operations in other cities, the critical mass achieved around these two major cities.
Regulations
Understanding local regulations are critical to safe, sound, government-improved operations. What kinds of permits are required for laboratories? What kind of inspections need to be done to start and to maintain facilities on an on-going? The essence for operations is being able to comply with on-the-ground oversight, and this compliance can be even more challenging as local regulations evolve.
Patent Laws
Many companies shy away from establishing cutting edge research operations in emerging markets because of concern about loosely filed and loosely followed patent laws. Losing control and ownership of innovations that rightly belong to the company continue to be a major concern. One way that companies address these issues is by using R&D to make incremental improvements to existing compounds and products rather than developing something entirely new. In so doing, the risk is less because the products are generally protected elsewhere, and yet the development team can still contribute to the innovation of life cycle management process.
By understanding these critical components, companies can best maximize their allocation of scant resources and live more productivity off their new markets.
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