As companies move out of their domestic market into the international arena and become multinational enterprises, they are faced with differing business environments. The countries they expand to may differ in consumer behaviour, legal systems, language, infrastructure, economic systems, political systems and business culture, to name just a few (Lopez 2005). Multinational companies need to interpret these changes so that they can operate in the fast changing, dynamic and competitive environments so that they can gain competitive advantage. Evidence suggests that successful multinationals realise that achieving sustainable growth and achievement of goals through strategies of including minimisation of cost, location economies, innovation, customer satisfaction, leveraging subsidiary skills and customisation (Dowling, Liesch, Gray, & Hill 2009 and Porter 1996). Researchers have a long history of investigating how multinational enterprises achieve and sustain advantage in the global market place (Dowling, Liesch, Gray, & Hill 2009).
This paper will investigate the Masimo Corporation (referred to as "Masimo" herein) as a multinational enterprise medical manufacturing company based in Irvine California United States (US). The period of investigation is from January 2005 to January 2010 and it will explore multinational strategy of product to provide sustained competitive advantage for different geographic markets and consider the company's unique business innovation.
Masimo is a multinational enterprise engaged in medical patient monitoring technologies, including devices and a wide array of sensors. Masimo has direct controlled entities in Europe, Canada, Australia, Singapore, Japan, China and an international office in operation centre in Neuchatel, Switzerland (Masimo Corporation 2010a).
The US based company is in the top ten of rated Medical companies via means of intellectual property and innovation scores (The Patency Board 2010). With an annual turnover of $300 million of direct sales and $49 million in royalties in 2009, Masimo has reported a 25 fold growth in the last 5 years and over 2000 staff worldwide (Masimo Corporation 2009 and Datamonitor 2010).
Masimo has created value to the different markets through product differentiation to its competitors and maintenance of high levels of control of intellectual property (IP) patents to provide strong consistent growth and recognition in the global market place (Masimo Corporation 2010a). Masimo's technology is award winning in many different countries and has achieve milestones into worldwide company branding. Masimo's estimated install base of pulse oximetry and original equipment manufacturer (OEM) to be at 640,000, based on a life cycle of 7 years and as at January 2010, see figure 2. Primary drivers for market share increases are through the recurring sales of single patient use sensors (Masimo Corporation 2010a). According iData market research as cited in Masimo Corporation (2009), Masimo market share between two major pulse oximetry brands Nellcor and Masimo comprise of 81% together in the market with a split Masimo, 43.5%, and Nellcor, 37.4%. Together with the install and Masimo revenue drivers have notably seen revenue increases steadily rise in the past years from 1998-2009, figure 3.
Masimo strategy to create and expand value of its products within existing and new medical care segments and focus on expanding operations in Europe, Japan, Canada, Latin America and rest of Asia, while providing competitive advantage and sustainability. Providing greater single economy dependence in the US, currently between 74-81% total revenue comes from US. Masimo management focus is to aggressively increase it presence and move to a more balance revenue multinational percentage (Masimo Corporation 2009).
Pattern of Multinational expansion
Masimo is currently publically traded company, since August 2007. Masimo's current position as at time of initial public offering (IPO) was that it already had a multinational presence 14 different nations with over 80 distribution channels. Before the IPO Masimo was a private company operating and expanding in Europe, Japan and Canada directly and then in May 2007 operation for further expansion into rest of Asia started. Rest of Asia started with direct entity for Australia and China, then a further distributer manager for other emerging markets in Asia (Masimo Corporation 2009).
Masimo's approach to multinational expansion is to use modes of entry that are less risky that do not require creation of local country entities or acquisition of office space and employment of staff (Dowling, Liesch, Gray, & Hill 2009 and Choo & Mazzaroll 2007). When Masimo enters a new market it is through non exclusive distribution exporter channels with a regional Masimo manager to support and manage the process. There can be significant challenges in changing the structure of channel from distributor/agent to direct marketing. In some cases if negotiations are not maintained or conflict with loss of business can damage business perception and strategic relationships in the market (Kotler, Keller, & Burton, 2009).
Once comfortable with the new market Masimo increases it scale of entry through recruitment of local management and leasing of property in which to conduct business directly to the nations market place (Masimo Corporation 2010). Masimo continues to increase the support it expansion in the market place by taking advantage of Masimo core competencies which are expanding to new sites and applications (Masimo Corporation 2009).
The direct subsidiaries of Masimo would take control of sales and marketing process exposing it to direct selling price of medical devices and sensors sold into the country. In addition, the direct entity would apply to local government organisations to provision of business name and medical regulatory approvals under that name. These direct entities start small and then as they gain experience and growth in revenue and further investment into the market is provided. This is consistent with the Australian, China and Singapore experience (Masimo Corporation 2010a and Dowling, Liesch, Gray, & Hill 2009).
Masimo's product and IP protection is important and one of many ways to protect it is to enter national markets directly. Although some emerging markets across the world, revenue generation and health infrastructure excludes market entry in these cases (Dowling, Liesch, Gray, & Hill 2009).
Current Business Strategy
Porter (1996) describes successful competitive strategy as being different, and deliberately choosing a set of activities to deliver a unique mix of value. Masimo has successfully utilised the combination of resources and capabilities; substantial intellectual property portfolio, strong expansion into other healthcare segments, internal development and operational management. The ability to organise and leverage this combination of resources and capabilities, in addition to providing number activities has gained competitive advantage and growth as a multinational enterprise. Masimo has been able to gain advantage internationally as they possess the resources that can be leveraged in foreign markets (Datamonitor 2010 and Masimo Corporation 2009).
Masimo is successful in exploiting its intangible and tangible resources to add value for the business. The effective management of these resources creates capabilities that are value to the organisation and build competitive advantage (Pitt & Clarke 1999). Masimo mission and major strategy is to be committed to improving patient outcomes and reduce cost of care by working with Hospitals and key stakeholders to convert healthcare institutions around the world to Masimo pulse oximetry technology (Masimo Corporation 2010).
Multinational firms must build new capabilities, as well as leveraging existing ones, if they intend to find sustained advantage in the face of changing environments and evolving competition (Dowling, Liesch, Gray, & Hill 2009).
Masimo current structure is centralised to the US Headquarters where management, Marketing, research and development (R&D) and manufacturing are all performed in on main location (Datamonitor 2010). Recently Masimo has extended support of International business to incorporate support through finance and human resources, with an operation centre in Neuchatel, Switzerland (Masimo Corporation 2010).
Adaption of strategies and products
Masimo continually redefine its products and approaches to expansion to current and new countries and to remain constant with the evolution of the markets it does business in and the services they offer (Masimo Corporation 2010). Current position and structure of Masimo can be represented into the quadrants as shown in figure 1. As described in Dowling, Liesch, Gray, & Hill (2009), cost pressures and pressures for local responsiveness are typically faced within multinational enterprises. Masimo is operating currently in an international strategy, although there is low pressure on costs and local responsiveness. Masimo does put measures in place to maintain costs and does take steps to enable local responsiveness by means of languages and regulation. Patient monitoring techniques are universal and do not change from country to country for healthcare internationally, although many countries have slightly different government controls and healthcare regulation (Masimo Corporation 2009 and US Food and Drug Administration 2010). In the Pulse oximetry segment there is a number of competitors although two main stream market share holder Masimo and Nellcor. Masimo has a centralised marketing, research and development, manufacturing and until recently back office functions (Masimo Corporation 2009).
Central to Masimo success within this strategy is tight control over and high level of internal innovation, intellectual protection and focus on healthcare segments provide ease of communication across countries. The culture includes a strong focus on human resources issues, these include: strengthening senior leadership through lateral recruitment and internal promotion, ensuring the stability of global leadership through talent identification and putting in place appropriate reward structures for growth in the future (Masimo Corporation 2010a)
Masimo has been successful in obtaining sustained competitive advantage through the nurturing and building on capabilities and competencies and via pursuing market opportunities that have built on and leveraged their core competencies (Dowling, Liesch, Gray, & Hill 2009; Porter, 1996 and Berwai 2004). Masimo exploits it core competence as an innovative noninvasive medical technology company to achieve its goals (Masimo Corporation 2009). International expansion is central to increase the percentage of revenues generated outside the US and leverage of other market to buffer in hard economic times. With ongoing innovation, research and development and commercialisation of non invasive medical technologies Masimo will prove profitable and create significant opportunities going forward. Whether expansion into other markets is realised will not be due to lack of opportunity or ability to be successful, rather, it will be as always a considered decision of whether the opportunities align with Masimo's strategy and business model.
(Dowling, Liesch, Gray, & Hill. 2009, p.379)
(Masimo Corporation, 2010a, p.6)
(Masimo Corporation, 2010, p.7)