Henry Schein Case Study

Henry Schein Case Study

Henry Schein Inc. is a US healthcare firm that has survived the market turbulence for decades. It is important to note that the firm’s growth strategy is mostly enshrined in the US business laws and regulations. Therefore, the management can attribute its success to the fair business practices in the western world. Every corporation that experiences a steady growth rate should incorporate plans of Globalization and international business operation. It is the only way that the business entity can break the barriers and limits to its performance. The United States has a border that often results in market saturation for many business sectors—the health care sector is not an exception. As such, there is a need for Henry Schein to consider the option of penetrating to the developing world.

            The United States economy is has performed poorly since the recession. A fear of business entities venturing into countries like China, India and South Africa has a potential of spelling doom to the future of the corporation. However, the management of Henry Schein should be aware of the strong contrast of the business environment in the developing world and that of the developed Westernized world such as the US and the European Union. Besides, Factory activity and business bubbles fuel the economic growth in China and other BRIC states. Such economies are prone to economic shocks hence resulting in bubble bursts.

The Chinese health care business sector is still at a growth stage. It implies that the business environment is yet to attain a maturity state in which the government influence is greatly diminished and the performance is driven by market forces.  In fact, the Chinese communist regime wields total control of the business operations and is focused on keeping the country less prone to Western values. As such, it is safe to state that the political and business environment in the developing world (especially in Asian states) are intertwined and interrelated. On the other hand, the United States government encourages the independence of Business sector from the political influence.

The business model used by Henry Schein Inc. is incompatible with the business policies in the developing world, especially China. For instance, Chinese Laws that govern international trade are unclear of the distinct roles of government authorities. In fact, it is a norm in China to regularly interfere with progressive policies introduced by foreign firms that seem to demean the competitiveness of the local business enterprises.

More than half of the local corporation are state owned, or, at least, are partially owned by the government. Therefore, the government has an upper hand in terms of introducing restrictive laws to curb market saturation or dominance by multinationals. Currently, the competition levels between the Chinese government and the United States has reached a new high. Russia, India, and the rest of G20 states are attempting the creation of a sphere of regional influence. Such a move is even more amplified in the business sector as the leadership of each country strives to protect and to improve the conditions of local businesses. 

Unless amendments are made to Henry Schein’s partnership model, chances are that the strategy is less likely to be effective in the developing world. Uniqueness, innovation, and adoption of new ideas characterize success in the modern business environment. It is imperative for the firm's management to phase out the age-old strategy and adopt a rhyming idea that fulfills all the requirement of the specified states. Different countries have different business rules regulations to oversee the sector. By the same token, a strategy that is appealing in one state may fail to yield the desired outcome in the other. Chinese and Indian business environment, for instance, are quite expansive and multicultural. Such countries exhibit different cultural practices deeply enshrined in hereditary and informal rules. Most developing nations in Asia have centuries-old business traditions that inhibit partnerships and alliances with foreign firms. The government is careful not to violate such traditions so as not to appease the society or to encourage mass protests.

As Chinese market welcomes the global integration and international trade, it is more focused towards establishing itself as a dominant force in the future (Luo and Park142). Many Chinese analysts foresee the US as a waning power, thus, China is poised to take her place. The government and business strategists are betting on the rise of Chinese firms which can hardly be attained if they integrated, fused, or absorbed by growing Western firms such as Henry Schein. There a notion that the Chinese small firms can be swallowed by the partnering multinationals given their massive size and sophisticated business structure. Therefore, if the government relaxes the regulations to encourage globalization, business slavery is imminent (Kotabe et al. 168).

The western culture is more dominant than the Asian or Chinese Values. The Chinese authorities welcome retention of the manager of the acquired small firms by Henry Schein Inc. However, the healthcare corporation should be more focused on the after-effects and the negative consequences, for instance, the erosion of the corporate culture. Business managers in China are mostly loyal to the state authorities. Therefore, retention of one manager to head a Chinese branch may render the business vulnerable to the government manipulation.

How to Penetrate the Chinese Market

A penetration into the Chinese market demands lengthy years of consultation, market study, and research. Henry Schein Inc. should not rush into establishing its presence in China because of the existing wave and the trend of major corporations. History shows that a massive movement to a particular country due to the economic prospects can result in a collapse, market saturation or bouncing operations. Japan is a classic example—the EU firms and the US rushed to set up their operations in the country during the peak of its economic growth. However, as the tide turned and Japan’s economy stagnated, most of the multinational corporations were forced to cease operations due to heavy losses.

Alternatives

Embracing the Chinese Policies and Engaging in Extensive CSR

            What most of the United States companies that seek to expand to the international market (including Henry Schein) fail or realize is that the organization cannot succeed in conducting business in the developing world unless the Western culture is replaced by the local beliefs and ways of  transactions. It is a common phenomenon for US multinationals to export the Culture to the targeted countries for a start-up operation. While the strategy can work in the third-world countries (such as the majority of African states), it is suicidal in advanced countries such as China and India. China is a fast-rising country with triple the population of the United States. It is one of the most viable destinations for launching business operations because of the mammoth population. Still, Henry Schein, Inc. and other firms have to demonstrate utmost loyalty to the Chinese government and other local authorities. One of the best alternatives to penetrate the future Chinese market, therefore, is to invest heavily in the CSR (corporate social responsibility). Besides, it is important to comply with all the government regulations, including those that infringe or oppose the Western values. Such a move can result in ethical dilemmas--this is a weakness but the corporation has to be reminded of the core purpose of joining the Asian Market. Besides, the strength is that the company will experience fewer hurdles when integrating to the new society. Over time, as the business gains ground and the management understand how the Chinese business environment operates, the policies that conflict with the company’s standards can be shaken off. It should be a gradual process so as to avert the attention of the authorities. 

A Pilot Program

            The second alternative is that the company should first establish a pilot subsidiary in China to gauge on its reception. The established business should be analyzed frequently as a source of invaluable information on the stakeholder preferences. Thereafter, the management can weigh the pros and cons of penetrating into the future Chinese business environment. The recommendations obtained from the pilot program can then be implemented prior to a formal introduction of the operations in the developing world. Even though this business model is costly to the organization (a weakness), its ability to be applied elsewhere makes it viable due to a return of investment (a strength).

Engage in a Direct Negotiation with the Government Authorities

            Most of the resistance to market penetration in China emanates from the government. However, the future Chinese government will be more willing to engage in dialogue with the multinationals that have a like mindset and a similar vision for Chinese prosperity. It is not illegal to engage the Chinese government representatives in understanding the basic requirements for becoming one of the business operators in China. It is notable that the aggressiveness and agitation of Chinese government stem from a poor understanding of the multinationals. Therefore, a direct interaction establishes a friendly tone and settles scores with the regulators. The strength of this strategy is that Henry Schein Inc can launch business operations in China successfully. On the other hand, the weakness of this strategy is that the Chinese government will eventually force the firm to compromise on its values and standards to adapt to a Chinese business culture.

Action Plan

Engaging with the government regulators demands that Henry Schein Inc. gets their attention by requesting for a meeting, prior to the negotiation, it is necessary for the firm to clearly outline the benefits that the firm will deliver to the Chinese. The management should be committed to complying wholly with the government requirements to ensure warm relationship and improve on the chances of being accepted. Besides, the organization should be clear on their requirements from the Chinese government. For instance, the leadership can forge for minimized Chinese government interference to the company’s operations. It should also be categorical of its intention as a multinational that seeks to invest and to improve China’s economic prospect.

The organization should be ready to answer all the questions asked sufficiently and exhaustively to eliminate chances of hidden agendas and negative views. Notably Chinese regulators are sensitive to the possibilities of US government influence on the American multinationals. Lastly, the firm should pledge to comply with the tax requirements and agree to partner with the Chinese government in improving the livelihoods of its potential customers and other stakeholders.

Reference

Kotabe, Masaaki, Crystal Xiangwen Jiang, and Janet Y. Murray. "Managerial ties, knowledge acquisition, realized absorptive capacity and new product market performance of emerging multinational companies: A case of China."Journal of World Business 46.2 (2011): 166-176.

Luo, Yadong, and Seung-Ho Park. "Strategic alignment and performance of market-seeking MNCs in China." Strategic Management Journal 22.2 (2001): 141-155.