Student name: Le Thi Tu Hang Student number: 408848

Major: Management and International Business

1. Analyze overall challenges of GEMS in 2002 a. Technological change: + Genomics and healthcare information technology such as Digital Imaging, Electronic Patient Records and Disease Management Systems make personalized medicine and personalized diagnostics possible. Moreover, healthcare practice move from cure to prevention. These changes require expertise in biomedical sciences rather than in engineering and physics; and also investment, collaboration with pharmaceutical companies which facilitate the creation of imaging equipment necessity to alter GEMS business model which is away from engineering heritage toward bio-chemistry and develop drug based on genetic code for specific individual, or small group rather than entire population. b. Demographic change: + Population were aging in advanced nation, implied fewer working-age people to pay for more intense care while the emerging middle-classes if Asia, Eastern Europe and Latin America were increasingly aware of, and needed, better healthcare. This requires the shift in distribution of healthcare equipment in these countries (more for Asia, Eastern and Latin America) and the change in market segment of healthcare equipment. + Global information flows made healthcare disparities between developed and developing nations more stark and unacceptable. Thus, concentrating more on developing world needs great effort investment and customization. c. Fierce competition: + Siemens is leading in healthcare IT, which is a great advantage for them to thrive in technological change era. All competitors move on healthcare IT segment, potentially affecting the market share of GEMS. 2. Strengths and potential weaknesses of the Global Product Company (GPC) approach introduced by Immelt. Company strategies are transnational (multifocal) which aimed at both global integration and customization; and cost leadership which focus on cost effectiveness. Particularly, GPC cut costs by shifting manufacturing activities, and eventually design and engineering activities, out of high cost countries and moving them into low cost countries. a. Strengths: + Company gains cost reduction of manufacturing (first year cost savings of moving to a low cost country were about 30%, expect further ongoing cost reductions of 10% annually) + Distribution channel improved: can ship anywhere in the world which help develop market share, brand name and revenue. + Attract and utilize new talent in new countries: product design responsibility to gravitate towards countries with talented but under-utilized human capital; and also capitalize on diversity. + Promote the coordination among units and subsidiaries. b. Weaknesses: difficult and complex strategy + Difficulty in development of suppliers in low cost countries in short time such as China and India where long-term relationship need strong commitment and time spending. + Incur quite high cost involved in inventory, logistic, documentation and import duty costs relating to moving materials and products around the world. + Less experienced workforce in the new location due to culture conflict and need time for adaptation. 1

Student name: Le Thi Tu Hang Student number: 408848

Major: Management and International Business

+ Lose concession or favorable treatment from developed countries which manufacturing are moved out. + Shifting knowledge bases of relevance created potential for being blindsided. + Face marketing challenges: customize products to suit the needs, marketing old and new products with different demand, languages, infrastructure in different countries; and marketing products to clinicians. 3. Whether to adopt the In China for China approach. From my perspective, Hogan should adopt the In China for China approach because of the following points: + According to resource based view, GEMS can set up manufactures in China because GEMS has ability to benefit in China by low production or labor cost, and can transfer partly the advantage to China ( it did that in the past though joint venture and then wholly own in China). + China is a potential market (location advantage): Demand for diagnostic equipment was high in proportion to the overall amount spent on healthcare; it has big market size and is the third largest market for medical diagnostics worldwide or largest demand for low-end medical diagnostic products to succeed in low-end, company has to own Chinese market. + The incremental cost of transferring is small; direct production to meet high demand in China creates more benefits than distribution equipments to China from other countries. China in the future may become the strategic location in Asia in both consumption and production for GEMS.