Changing Business Environment And Model: Expanding To Tropical Regions – Kenyan Case

Expanding to Tropical Regions: Kenyan Case

Discuss about the Changing Business Environment and Model.

Hoffman- La Roche is an international healthcare company, which deals mostly with the pharmaceutical with headquarters based in Switzerland, and the third largest worldwide. More so, the Swiss multinational firm has manufacturing sites in various parts of the world including, USA, UK, Canada, Brazil, India, China among others. Some of the intentions of the institution are focusing on translating excellence in the provision of better medicine for patients, performing targeted therapy with corresponding diagnostics and a world leader in cancer treatment requirements (Roche 2016). Such operations have enabled the firm to control biotechnology companies based in Arizona, America’s Genentech, and the Japanese Chugai. Notably, Roche’s Pharma is among the few pharmaceuticals with a progressive trend in dividends annually. Therefore, with the rising demand for the products, the company is determined to open its markets and activities within the tropics, with a close look at Kenya, in East Africa.

Considering innovation, Roche is a proof of scientific inventions that leads the production of medical products that are clinically differentiated to save and improve the life of patients (Roche 2016). Currently, there are strategies for fostering scientific excellence and empowering researchers to have breakthroughs in life that make a difference. With a primary focus on immunology, oncology, neuroscience, ophthalmology, and infectious diseases, the company looks forward towards reducing human suffering globally. Therefore, the industry has made a distinguished contribution towards healthcare with some of the developed medicines in the WHO list of essentials, for example, the life-saving antibiotics, chemotherapies and anti-malarial (Glauner, 2016).

It is true that for a very long time the multinational pharmaceutical companies neglected the tropical regions, simply because of the weak markets and cold economies. In spite of this, there is already a demand and existing market as people die weekly from curable and preventable diseases. Such cases can be challenged by the economies in the sense that the poor citizens of their underdeveloped countries need the medicines, so this poses fear of insufficient funds from research investments. Therefore, this calls for a great conflict in pursuit of health and wealth (Pettinger, 1994).

Kenya’s position in the regional hub has been consolidated by impressive progressive the financial inclusions that have been attained through an energetic service sector spearheaded by the citizens themselves. Particularly, this is true regarding the underlying resilience in the industry. Indeed, with the laid economic reforms, Kenya’s economy has risen in the past few years. Therefore, the future of Kenyan economy holds a greater promise for global markets. In fact, countries within the sub-Saharan Africa are among the second fast growing worldwide, averagely 5.6% over the last decade, especially, Eastern Africa. In the African tropics, Kenya has been a lead in regional integration that has become a second largest investor with strong advocacy through the East African Community (Musila & Rao, 2012; IMF, 2014). Such moves have opened up new markets and supported the emergence of the middle class.

Economic Stability and Growth

Considering the international business environment, there has been significant trends that are identifiable on a global scale for foreign markets. Similarly, Roche has not been left out in strategizing for the same. One of the essential effects in Kenya that favors international investments is the growth of the urban population. The community evaluations that consider a higher growth mainly the Africa and Asian countries where the rural populations are dominant are most likely to fuel the growth. Such a scenario puts Kenya on the global map among the tropical countries. Furthermore, the developed countries as well will be able to form new cities as the economy grows. Therefore, such implications will facilitate the development of megacities due to size and demand for resources will rise, which gives privilege to Roche’s company.

The demographic change, whereby there is an increasing population of the elderly and children in Kenya create the need for improved and increased healthcare services. Such a scenario calls for increased demands for pharmaceutical and diagnostic care, which leads to significant shifts within the labor force (Pharmaceutical Corporations and Medical Research, 2010). Approximately two-thirds of chief executive officers worldwide is especially concerned with the matter that makes them alter the manner by which they attract and maintain employees based on the demographic needs. Therefore, this gives opportunities to the less dominated tropical countries by redesigning their business models (Richards, 2016). Expanding to Kenya based on such trends will increase the profit margin for the firm.

Currently, Kenya is characterized by the emerging market effect, which seems to be gaining power in the economy. Kenya is characterized by increasing populations, innovation, and exports that make the country be more influential giving the priorities for international businesses. Most commonly, the state trades and invests with developed nations to stabilize the GDP growth trend that results in a rapid economic growth rate. For example, Kenya has an increasing number of middle-class populations that poses a greater opportunity for quality human resource needs. Such shifts in economic power create more competition for the global emerging markets as well as providing talents and businesses success. Therefore, it is evident that various multinational corporations are already on the move to settle in the new emerging markets, which makes Kenya a favorable target.

Consequently, advancements in technology are a significant effect on global trends, where new technicalities are forming other industries. Kenya is one of the tropical states in which advanced pharmaceutical technology is required. Companies, through anticipation of the effect on consumers, are tackling such breakthrough. For instance, Amazon technologists are seeking approval by FAA to use drone delivery system and Ogranovo also creating 3-D livers in a laboratory. Therefore, it implies that the utilization of technology is becoming necessary and not just an advantage that creates more competitions (Lang, Schneider, & Werle, 2008).

Growing Population

Currently, with the changing economic growth in the United States, international business expansions have turned to be a strategic pillar for various multinational corporations that tend to give better returns to the stakeholders. On the same note, the survey shows that success in the international trade is industry independent, thereby; any company records a higher growth in revenue (Musila & Rao, 2012). Such considerations provide confidence amongst most enterprises that succeed abroad if they primarily focus on development and execution of a value addition criterion (Glauner, 2016). Several benefits exist when the firm expands to Kenya.

One of the advantages includes faster growth rate, where it has been noted with interest that international expansion is a value accelerator. Most of the established multinationals experience a revenue increase when they invest in the emerging markets. Such elevations provide room for further developments that will improve the stakeholder’s share, which guarantee the diversification of the sources of income among the corporations. Although the diversifications differ among various global groups depending on the industry, the pharmaceutical firms enjoy more shares from the international operations to settle negated growths in home markets guaranteeing steady revenue prosperity (IMF, 2014).

Economic Percentage Growth Rate in Kenya (Source: TradeEconomics – KNBS)

Kenyan economy is not entirely established since other sectors of the economy are still underperforming. The capacity of the firm to reinvest within the areas provided in the law and regulations will increase the profit margin and the capital base. Also, improved run-on capital is experienced by higher international growth groups, which contradicts the widespread belief that expanding internationally is likely to result in declining returns. Much more, is the elevated rate of reinvestment, for example, the higher group redeploys more of their cash flows in the markets, which is created by a well-designed expansion strategy. Furthermore, expanding to Kenya as an international market remains lofty since it guaranteed for a longer period since the emerging markets are less mature; therefore, the company stands a chance of a possible sustainable profit for the longer period.

Investment Indicators Standings Percentage Market Influence Share (Source: World Bank 2016) 

Analysis of the risks in the Kenyan economy and the global economic environment leads to a revision of the forecasts for the outlook on the trends. Considering that the world economy certainly could be in a better position now than the past five years, the recovery process is underway, and there is a constant shift in the dynamics. Recent surveys show that there is a positive move in the operations of advanced economies, such as the US that leads to normalization of funds as Europe encounters a host of challenges that needs to be addressed as it emerges slowly from recession. Similarly, the emerging market economies are slowly coming up, likes of Kenya and rest of Africa. Such that any change in the market prospects is of concern as it implicates on the global financial crisis (Doleski, 2016).

Demographic Composition Trends

Financial Risk

Kenya poses a financial risk to multinational companies, due to the increased volatility in the global markets that creates new challenges to economies, whereas, the normalization occurs in the advanced countries (Musila & Rao, 2012). More so, the problem of potential spillovers from emerging markets to Sub-Saharan Africa, inclusive of Kenya is likely to be incurred from the financially integrated international economies.

Operational Risk

The Kenya and the entire Sub-Saharan Africa expects a robust economic growth, this outlook, however, does not apply without risks. Therefore, it calls for policy makers to be vigilant about the threats from slow demands in markets, unfavorable pricing of commodities, or high costs of financing products. However, the challenge remains without complacency that Kenya is capable and should, therefore, grow fast enough to address social problems, unemployment situations and quick implementation of the millennium development goals towards poverty eradication (Mitra, 2013).

Strategic Risk

The strategic planning involved in entering into Kenyan market operations is complicated due to diversification. Great challenge comes to the disparity in the market forces where big towns and urban centers are densely populated, northern arid and semi-arid parts are mostly neglected due to the unfavorable temperatures. Therefore, it becomes hectic for the direct medical sales persons to access such areas with ease and they also offer small markets.

Compliance Risk

The government gives a provision of various regulations and policies for global business to be carried out in the country. Such parameters would be challenging since they are coupled with substantial charges to gain certification for trade. Also, some gaps exist in the distribution channels that lack proper tracking systems to achieve safety and quality standards for the products. Therefore, it seems an expensive and insecure affair for a multinational company that is crossing over into a new environment (Musila & Rao, 2012; Garnefeld, 2016).

For Roche to succeed in Kenya, it must improve the relation with the new customers, in that, the two parties must stay closer from social media to focus groups ideas must be exchanged for the sake of building the relationship. The company must also understand their ideal business; this is to ensure the market force do not lose focus being in new surroundings. Such call for better product knowledge, to be contented in the competitive. As well technological advancements must be embraced to enable the efficiency of the services, for instance, mobile optimization is standard to attract the right people to the business. In the changed environment, the macro trends must be understood so as not to be irrelevant. On the same note, the adaptation of the changes is crucial to the business to get going and avoid stagnating (Clark, 2013).

Conclusion

In conclusion, Roche’s pharmaceutical company has embarked upon a tremendous journey that requires full support from the stakeholders to transform the economy through venturing into the tropical countries to expand its international business. In so doing, the management should find a way of curbing or reducing the potential risks identified and mitigation process to ascertain comfort in the changed business environment. Also, the industry must adapt and carefully embrace the rapid changes likely to be encountered during the shift. Therefore, Kenya being one of the emerging markets in the global economies; it provides a platform for implementation and navigation of the various market strategies by multinational corporations.

Reference

Clark, D. (2013, July 9). How to stay relevant in a changing business environment. Retrieved from https://www.forbes.com/sites/dorieclark/2013/07/09/how-to-stay-relevant-in-a-changing-business-environment/#2aafdee03e4f

Doleski, O. D. (2016). Integrated business model. Retrieved from https://www.springer.com/gp/book/9783658096977

Garnefeld, K. (2016). Marketing challenges in a turbulent business environment. Retrieved from https://www.springer.com/gp/book/9783319194271

Glauner, F. (2016). Future viability, business models, and values. Retrieved from https://www.springer.com/gp/book/9783319340296

IMF. (2014, January 6). Sub -Saharan Economy. Retrieved September 14, 2016, from https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp010614

Lang, A., Schneider, V., & Werle, R. (2008). Between politics, economy, and technology: The changing environments of business associations. Organized Business Interests in Changing Environments (pp. 42–62). https://doi.org/10.1057/9780230594913_3 

Mitra, A. (2013). Flexibility, Controllability and risk measurement metrics in changing pattern of business environment. The Flexible Enterprise (pp. 173–196). https://doi.org/10.1007/978-81-322-1560-8_11

Musila, J. W. & Rao, U. L. G. (2002). A forecasting model of the Kenyan Economy. Economic Modeling, 19(5), 801 – 814. https://doi.org/10.1016/s0264-9993(01)00080-3

Pettinger, R. (1994). Managing in a changing environment. Introduction to Management (pp. 352–380). https://doi.org/10.1007/978-1-349-23258-1_13

Pharmaceutical Corporations and Medical Research. (2010). Global issues. Retrieved September 14, 2016, from https://www.globalissues.org/article/52/pharmaceutical-corporations-and-medical-research

Richards, L. (2016). The effects of a change in business environment on strategic planning. Small Business Chron. Retrieved from https://smallbusiness.chron.com/effects-change-business-environment-strategic-planning-4708.html

Roche. (2016). Roche Pharmaceuticals – business overview. Retrieved September 14, 2016, from https://www.roche.com/about/business/pharmaceuticals/roche_pharmaceuticals_business_overview.htm.