Expand, hang on, make redundant, or ignore?

We have china on our mind. Not the china on your dinner table but this China may be just as delicate for many reasons. After three decades of relatively smooth growth and transition to embrace China for manufacturing, supply chain, and commercialization opportunities, there are now geo-political, pandemic, cultural, inflation, and logistic challenges which could fracture the China/Western World relationships for years.

The post-pandemic 2022 may be a new strategic inflection point for many organizations relative to their China strategy. There was some previous re-thinking of APAC regional supply chain strategies pre-pandemic due to the Trump Trade War. Some companies had already thought about Vietnam, Malaysia, or Indonesia for new low-cost manufacturing locations.

This leads to the question for medtech businesses: What is your China strategy going forward?

There are several options and there may not be any one clear-cut answer. At a high level, for discussion purposes, we believe the key strategy will revolve around either expand; hang on for the ride; make redundant; ignore; a combination of all or some of the above! Let’s consider each.

Expand: Depending upon the depth and quality of your team globally and in China, this may be the right option for your business. If your China team is capable of executing (and you can retain them), your business could have a competitive advantage for a period of time.

Hang on for the ride: If your organization has a foothold in China but lacks depth, it may be possible to hang tight. If your company pulls out now, it may be difficult to get back in later. If you stay, there could be benefits to maintaining a long-term presence IF your team can perform. Not an easy decision as that is a BIG IF.

Make redundant: If your company is mostly focused on manufacturing and/or supply chain in China (and not commercialization in China), it might be a good time to consider how you make your China manufacturing/supply chain redundant. This is especially important if you don’t have a Latin American operation. Going forward, it’s going to be critical to have a regional Americas manufacturing/supply chain strategy to grow your U.S. business. A country that’s part of or benefits from USMCA is always a plus.

Ignore: We believe the age-old wisdom “ignore at your own peril” applies at this time. Your organization needs to consciously choose what it will or won’t do in China in the years to come.

Combination of all or some of the above: It’s possible your company may need to have different strategies for various portions of your business. Or, you may have a separate strategy for your China commercialization plans than for your global supply chain efforts. Of course, if you plan to have sales in China, you’ll need to have some manufacturing arrangements there. However, you could also make your manufacturing/supply chain there for supporting the rest of your global business.

In summary, there’s no right or wrong answer. One size doesn’t fit all. Whatever you decide, we wish you well to strengthen “your China” – whatever that means to you and your medtech business.

CEO Florence Joffroy-Black is a long-time MedTech M&A and marketing expert. She can be reached at florencejblack@medworldadvisors.com. Managing Director Dave Sheppard is a former medical OEM Fortune 500 executive and an experienced MedTech M&A professional. He can be reached at davesheppard@medworldadvisors.com.

To view this article on the Today’s Medical Development Magazine website, click here.