Doing Business in China: a Consulting Report on Success in Entering China for a Fictitious Pharmaceutical Technology Company

COMPANY BACKGROUND

Phoenicia Medical Technologies, a Delaware registered corporation with corporate headquarters located in Tempe, Arizona, is a specialized biotechnology company that produces innovative and proprietary drug delivery technologies. Founded in 2001, the company currently has nearly 50 employees and 2009 revenues totaling over $68.2M. Over 80% of the company's revenues comes from licensing revenues of its GI-CRG (gastrointestinal controlled-release gelatin) coating that is currently used by Israel-based Teva Pharmaceutical Industries Limited in manufacturing generic glucophage, a widely prescribed anti-diabetic drug.

Several of the executives have expressed strong interest in expanding overseas to China, where they see a significant growth opportunity for generic drugs and a current lack of new drug delivery technologies. The goal of this consulting report is to provide a snapshot of the business environment and pharmaceutical industry in China, including political, legal, economic and cultural perspectives. Finally, we propose our recommendation for expansion into China, with two strategic options for consideration, including potential advantages, drawbacks, and final recommendations.

BUSINESS ENVIRONMENT IN CHINA

The unique business environment in China can best be explained through a basic understanding of the country's political, economic and cultural roots.

POLITICAL AND ECONOMIC BACKGROUND

Since the end of the Chinese Civil War in 1949 until 1978, China adopted a Soviet-style central government whereby the state controlled all major sectors of the economy and formulated all decisions about the use of resources and the distribution of output. During this time, communist leader Mao Zedong instituted social reform programs such as the Great Leap Forward and Cultural Revolution to help propel China from an agricultural state to become a modern, industrialized country. While these programs failed to produce the type of economic growth that...