An International Business Opportunity Analysis in the Philippines
Executive summary
The Philippines is a region in South East Asia, and by 2017, it had a population of 104.9 million. In the world, it is the 13th highest populated country. 92.2% of the total population are Christians out of which 87.4% are Roman Catholics. Minder now consists of a majority of the 5.6% Muslim minority groups. The literacy rate of adults in the country is 96.5%. The Philippines has been ranked the fastest-growing economies in Asia with gross domestic product. Being a newly industrialized country, it is in the process of transitioning from agriculture-based to service and manufacturing based. Filipinos currently live longer than in the past years with life expectancy at birth relatively increasing. The increase is attributed to the improved treatment and management of infectious diseases, better access to health services and improved living conditions. Nevertheless, the burden of disease has now tripled in the Philippine. First, climate change has increased, and globalization has gradually affected the health of individuals. Second, the increasing prevalence of risk factors linked to high systolic blood pressure, tobacco smoke, and diet has contributed to the rising incidences of cardiovascular diseases, road traffic accident, diabetes and malignant neoplasms. All these are cases of non-communicable diseases in the Philippine. Finally, even though there is an improvement in the treatment and management of infectious diseases, most Filipinos continue to suffer from conditions whose effective interventions exist. The disorders include diphtheria, measles, TB, and HIV. The report below gives an analysis of the environmental factors in the Philippines healthcare market. The environmental factors include political, social, legal, cultural, technological and economic factors. To enter the market, the entry strategy that is recommended is exporting, and the organizational strategy is providing a variety of healthcare facilities. There are several benefits and challenges of investing in that market. The benefits include increased profit, industry growth, consumer awareness, and efficiency in the production of quality health products. The challenges include pressure in the pricing of products caused by the cheaper medicines act of 2008 and the poor implementation of the patent laws.
Introduction
Over the past few years, health has become an increasingly more important topic in the Philippines. The nation has implemented different reforms that have strengthened its health systems. It has been actively following universal health coverage since 2010, it introduced a social health insurance program in 1995, and implemented regionalized health governance in 1991. As as a result of its focus on the general socioeconomic advancement and health sector, the country has accomplished considerable improvements in immunization and life expectancy coverage, and a double decline in under five and infant mortality. Even though there are many achievements in the country, many concerns still exist in the health sector and require to be handled. They include the management of the increasing tide of non-communicable diseases, reduction of the prevalence of childhood pneumonia and tuberculosis, and more strengthening of the preparation and response capability to human-induced and natural disasters. Although there has been a lot of efforts to enhance the delivery of health services in the country, socioeconomic and regional disparities in the accessibility and availability of resources, have been a significant challenge. Human resources and infrastructure are maldistributed within and across regions which are focused in major cities like metro Manilla. Despite the Philippines being a substantial exporter of healthcare professionals, it finds it challenging to ensure sufficient availability within the country. The fragmented nature of the health system has contributed to the persistent implementation and governance challenges, even though the utilization of health budgets has been improving over the years. The private sector in the country is expanding, and it has a mixed health system. It does not have an effective mechanism for regulating private for-profit healthcare providers. No mechanism has been put in place to control the quality and cost of services and to monitor the accreditation of the healthcare facilities. Below is an analysis of the international opportunity for a healthcare facility in the Philippines.
Analysis
Social, political, cultural, technological, legal, and Economic Analysis
Philippine is a small nation with many big and small islands in the western region of the Pacific Ocean. Farming and seafood are the primary sources of income in the country. In the world, it is the 64th largest country with Manilla as its capital city. It has the highest biodiversity in the whole world and several natural resources. Its population is approximately 100 million and other countries import its different product—most people in the country deal with manufacturing, services, and agriculture.
Political analysis
In the previous few decades, the country was experiencing dictatorship. However, a democratic system has been established, and currently, the government is being controlled by one political party. A better track record of business has been set, and its industry has also been developed. Currently, prosperity and peace exist because of the many steps the government has taken. Therefore, the political atmosphere is conducive for people to progress in all fields of life (Zhang et al., 2012). Also, the worst evil of corruption has been addressed by the government. In the country, it was higher than in other countries such as China, India and the United States, and it posted great danger for development and prosperity. Once the democratic system was restored in the country, the service sector advanced, and various areas improved in their performance. Individuals now understand their responsibilities and rights since the government has introduced different political reforms in the government. The healthcare industry in the Philippines is closely connected to government policies. With the improved sale of drugs, the government keeps a close eye on the drug manufacturers. Hence the healthcare sector receives pressure from the government, and this may result in political uncertainties. The conflicting interest between the healthcare industry and the government is the leading cause of uncertainties since the industry targets generating higher income. In contrast, the government focuses on healthcare savings. Therefore, political instability may exist for the industry, and political conflicts may also result in higher cost of medicine.
Economic analysis
The political reforms in the country have contributed to the quick progress in the economy of the country. The healthcare industry in the Philippines is a vibrant, growing industry. Sales and access to medicine have improved in the country due to the expansion of universal healthcare (Dixon et al.,2013). The sector alone has contributed significantly to the Philippine economy through the development of healthcare products and medicine for different diseases. Furthermore, the country’s economy is on a stable path of growth, encouraging investment to the healthcare industry. Each P1 worth of extra demand from the pharmaceutical sector contributes P2.53 worth of additional output from other areas according to the pharmaceutical and healthcare of the Philippines.
Social analysis
Currently, consumers in the Philippines are more aware of the social value of cure and health that the healthcare industry offers. The value of individuals to live healthier lifestyles alters the way these individuals work and live. With the ageing population, healthcare funding is pressured by this. As a result, the demand for quality healthcare products and medicine increases. Therefore, the healthcare industry will always have a market in the country because people will look for the help of medicine every time.
Technological analysis
Improved technological equipment’s in the Philippines has led to the reduction of the cost of products and drastically increased the output. The efficiency of the healthcare industry has been boosted by computerization. Diversity and the level of technologies that the industry must use are rising, imposing both new uncertainties and risks and new investment burdens. The development of new technology makes it easier for the manufacturing of quality products, which helps, in the constant search for the cure to diseases. Furthermore, the use of social media helps in communicating healthcare awareness to the public, and these positively impact the industry.
Legal analysis
The latest regulatory development in the Philippines is the cheaper medicines act of 2008, whose goal is to bring quality and affordable medicines to the public. The law has enabled the imposition of price ceilings on different drugs and has allowed the importation of patented medicine from other nations where the prices are relatively lower than the prevailing rates in the country. Therefore, a healthcare business s’ sales and revenue may be affected by this as it increases pressure on the pricing. Moreover, the implementation of patent law is poor, leading to extensive production of counterfeit drugs. The patent on drug discoveries on pharmaceutical companies is mainly to recover the high cost of investment and to protect the technology used. With that compromised, laws should be implemented to reduce these constraints.
Cultural analysis
Older Filipinos cope with sickness with the assistance of friends and families and by faith in God. Slightest improvement or complete cure in illness is perceived as a miracle. Therefore the decisions of patients concerning healthcare are, to a large extent influenced by the Filipino families. To maintain harmony in groups, patients always go along with the demands of a more commanding family figure and also subjugate personal needs. The older population of the Philippines handle their sickness by self-monitoring of symptoms considering emotional and financial burden to the family and identifying the threat sand severity to functional capacity before looking for professional assistance. Sometimes they even utilize traditional home remedies like complimentary or alternative treatment methods.
Business culture and environment
Power distance
The Philippines is a hierarchical society at a score of 94. Individuals agree to take a hierarchical order whereby everyone has a place, and that requires no more justification. In business, hierarchy reflects inherent inequalities, the perfect boss is a benevolent autocrat, the subordinate expect to be directed on what to do, and centralization is common.
Individualism
The Philippines is a collectivistic society with a score of 32. It is demonstrated in the close and long-term commitment to the member ‘group’ be it that of family, extended family, or any relationships. In a collectivist culture, royalty is dominant and overpowers many other societal rules and regulations. The society nurtures strong relationships where every individual is responsible for fellow members of the group. In this society, offense results in loss of face and shame (Roxas et al.,2012). Also, promotion and hiring decisions take account of the managers’ in-group, employee/employer relationship are viewed in moral terms and management is the management of groups.
Masculinity
The Philippines is a masculine society as it has a score of 64. The culture in the Philippines is driven by success, achievement, and competition. Success is defined by the best in the field/the winner. The value system begins in school and goes on all through organizational life. Also, in this society, individuals leave to work, and employers are expected to be assertive and decisive. The culture emphasizes on performance, competition and equity, and conflict resolution is through fighting out.
Uncertainty avoidance
The score of the Philippines on this dimension is 44, indicating that the Filipinos have a low preference for uncertainty avoidance. The society maintains a more relaxed attitude whereby it is easier to tolerate deviance from the norm, and practice counts more than principles (Kelly, 2012). Also, the Filipinos believe that more rules other than the necessary should not exist and if they do not work or are ambiguous, they should be changed or left out. In the Philippines, innovation is not viewed as threatening, punctuality and precession do not come naturally, hard work is undertaken when required but not for its own sake, and schedules are flexible.
Long-term orientation
In this dimension, the Philippines indicates a low score of 27. Therefore, it can be concluded that society is more normative than pragmatic. Individuals in the Filippino society are actively concerned with the determination of the absolute truth; hence there thinking is normative. They show great respect for traditions; they focus on accomplishing quick results and have a considerably small propensity to save.
Indulgence
In this dimension, the Philippine culture has a low score of 42. It is Restraint and therefore has a tendency of pessimism and cynicism. Further, society controls the satisfaction of its desires and does not emphasize on leisure time. Individuals in this society believe that social norms restrain their actions. Also, they feel that indulgence is wrong.
Entry and organizational strategies to be considered
The market entry strategy that will be considered is exporting since the country imports most of its healthcare products and medicine. A local distributor will be appointed, and the asset that will be used in assigning the local distributor will be a client base that already exists. The strategy will allow the healthcare facility to enter the philistine market without much capital investment (Goswami et al., 2011). The local distributor will manage all the aspects of importation, which include acquiring customs clearance for the products, getting a license and registration. He or she will assist in both advertising and promoting the products through dealer networks and sales and facilitating the entry of the product into the market. Also, the local distributor will register with the food and drug authority (FDA) before the health facility starts its operations. The FDA will give a license for importation and operation to the distributor. On average, the tariff charged for medical equipment in the Philippines is 3%, and a 12% value-added tax (VAT). The vat is founded on the estimation done by the bureau of customs for the application of excise taxes, customs duties, the duties themselves and other charges. The bureau of customs (BOC) does clearance, classification, and valuation. The organizational strategy to be used is increasing the range of products and services that will be offered. Currently, demand shows healthcare wants for growing incidences of HIV/AID, cancer, respiratory ailments, TB, kidney diseases, diabetes, and hypertension. Therefore, products such as linear accelerators, breathing appliances, x-ray and radiation equipment, ultrasonic scanning machines, magnetic resonance imaging equipment, competent tomography apparatus, and electrocardiographs will have high sales in the Philippines market. Also, there is a high demand for biological rapid test kits and diagnostic laboratory products. Hence, exporting those products to the Philippine market will be a great organizational strategy for the healthcare facility that will be established.
Ethical, Leadership, and management challenges associated with entering the market and pursuing the entry strategy
Generally, health results are improving. However, the rate of improvement is sluggish, and the neonatal mortality rate and the maternal mortality ratio are stagnant compared to the neighbouring countries. Most Filipinos suffer from HIV, diphtheria, measles, dengue, and TB, which are preventable diseases and can be treated using cost-effective interventions. The problems arise due to the inefficiency in the health system and health inequalities that arise from pluralistic and devolved service delivery, fragmented health financing, and disorganized governance.
For example, LGU, DOH, and Phil Health facilities are spending on similar child health and maternal services, whereas the cases of NCDs are growing. The emergency care, the NCDs need are poorly prioritized and inefficiently funded (Higuch, 2010). In philippine healthcare financing, the inefficiencies and confusion are mainly brought about by the absence of harmonization and demarcation in tax-funded services and premium funded benefits, and parallel funding by the three sources. Moreover, involving the private sector in distributing healthcare in the UHC context needs strong regulatory ability by using both control and command mechanisms, and leveraging financial incentives. However, the effect of these strategies has not yet been developed and harnessed. In the meantime, the lack of a facilitated referral system denies patients the chance to navigate the health system efficiently (Bower et al.,2011). Therefore the patients are not able to identify the suitable healthcare provider. Also, they cannot identify the appropriate person to advise on the required medical test or procedures and referral back from hospitals to primary care for constant healthcare. The healthcare management in Philippine does not implement the national health insurance program effectively. Therefore, patients are not assured of quality and compassionate healthcare since they are not provided with financial risk protection, and their payments are not leveraged. The varying membership contribution rate of Phil Health and engender inequalities. Medical care is faced with severe information asymmetry between payers and funders, and providers and patients.
In most cases, empowering patients with information is believed to incline the balance in their favour. However, the actual redistribution of power and restructuring of the relationship between patients or providers has not yet happened. Mainly, in the Philippines patient empowerment is challenging and critical especially in light of pervasive income inequality unfinished evolution of social health insurance, pervasive lack of knowledge of prices and fees and lack of advertisement in the medical profession. The leaders’ trials to harm patients with information has not succeeded. Equally, Phil Health has failed to offer membership cards to the poor to facilitate access and steer the use of health services. Therefore, making the poor aware of their entitlements and rights is still a logistical and administrative challenge. With all these challenges, exporting the quality and variety of healthcare products to the Philippines will be challenging.
Recommendations
Healthcare industry in the Philippines is vibrantly growing and thus encouraging investment in healthcare facilities. The Philippine healthcare sector and the government have been pressurized to revolutionize the healthcare industry. Demand is mainly driven by the ageing population and the growing economy. With rising incomes and expanding middle class, individuals have begun to spend more on healthcare. However, outdated technology, the absence of healthcare personnel, and the inability to access affordable and quality healthcare remains a challenge (Gan et al., 2013). Healthcare is still out of reach in remote and rural areas, and therefore inequality is still a problem in the Philippines. Exporting quality and low-cost healthcare products and equipment is consequently recommended since it will enable most of the individuals in those areas to have access to healthcare services. Also, there is no integrated healthcare network in the country. As a result, the geographic and economic access to health services has been negatively affected. The efficiency and quality of these health services are also wanting. To address this, the healthcare facility will distribute its facilities to serve the people in those remote regions. Currently, approximately 40,000-45,000 more hospital beds and health facilities are needed in the Philippines to offer quality medical services to its population. Therefore, facilities such as linear accelerators, breathing appliances, x-ray and radiation equipment, and ultrasonic scanning machines will facilitate the provision of the quality medical services.
Since the Philippine economy encourages investment in the healthcare industry, establishing the healthcare facility in the country is recommendable. While doing so, healthcare will be improved and thus encouraging increasing cost that will influence economic productivity. Medical complications, sicknesses, as well as common non-communicable diseases like chronic respiratory diseases, cancer, cardiovascular diseases, and diabetes while, be readily addressed.
The consumers in Philippine have been made more aware of their rights, and therefore the demand for healthcare products has increased. Therefore, investing in the healthcare facility will be profitable, as the increased demand will lead to increased sales, which eventually will lead to a high rate of return.
Producing quality health facilities will be efficient because of recent innovations and advanced technology. The health facilities will help overcome geographic and distance barriers.
Even though there are political uncertainties in the healthcare industry, other environmental factors allow better investment in the healthcare facility.
Conclusion
From the above analysis, it is clear that the opportunities in the healthcare industry are more than the threats. Therefore, investing in a healthcare facility will be more beneficial to both the investor and the Philippine economy. The investment will enhance the growth of the industry, encourage more investment, the efficiency of the healthcare, and increased consumer awareness. The threats in investing in the healthcare industry in the Philippines include the pressure in pricing caused by the regulatory establishment of the cheaper medicines act of 2008. The pressure may affect the financial performance of the health facility. Also, the poor implementation of patent laws may financially affect the finances of the business since the primary source of revenue is patent.
References
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