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Specialise or Grow 

Mr. Leendert Santema, CBI Consultant

The medical sector in certain developing countries, notably South Africa and India, is healthy enough to compete on the European market. The only problem is that many producers there lack the capacity to supply the quantities European buyers need. Specialising in low-quantity niche products or forming clusters with other exporters may be the solution, says CBI consultant Leendert Santema.

The medical sector in developing countries has everything but volume, says Leendert Santema.

The European medical deices sector is clearly on the look out for cheaper production countries, says Santema. "There is a definite shift going on at the moment. That means there are some very interesting opportunities for exporters from developing countries."

A Strict Consultant

Santema’s knowledge of the medical devices market is first hand. After 38 years of experience in the medical and paramedical sector with a special knack for all things technical, the 59 year old Dutchman now runs a successful medical disposables business himself – in fact the company is the Netherland’s market leader in the total pain management segment, he says. "It is a fascinating market. I love it. I learn new things every day about people as well as technology."

Despite his business responsibilities, Santema has plenty of energy leftover to consult a host of CBI-supported companies in developing countries. He formally began working with the CBI in 95. "The programme is very intensive and I am a very strict consultant", he says with a wink. "I always tell our participants: If you don’t do your homework, you can get lost." He smiles, half apologetically, "I am very direct."

Santema’s motive for being a consultant is as straightforward as his manner of speaking. ‘I am getting older’, he says, patting his round, balding head. "In a number of years, I will be stretched out in a wooden coffin. All the experience and knowledge that has been granted me will disappear – unless I do my best to share it while I can. Of course I love meeting new people, seeing new places, but the biggest kick of this work is sharing in the success of others. Their success is my success. No, I don’t intend to stop for quite a while yet."

Sourcing is the big thing

Considering what is happening on the global market, there will be plenty of work for Santema in years to come. "Many European companies are either shutting down their European plants altogether or relocating the high cost units abroad", he observes. "For instance, I heard about an Austrian company just recently that set up a production plant in Malaysia as well as moving its entire packaging facility across the boarder to Hungary. Sourcing is the big thing at the moment. Budgets are being slashed and the demand for cheaper sources is huge."

The main drawback of many producers in developing countries is not that they are lagging behind technologically. On the contracy, says Santema "The level of the South African sector, for instance, is very high. They know their suff and there is a lot we can learn from them. India has a very highly developed sector as well, although the Indians do still send their people to the US and Europe for advanced training. But even so, I would say many private clinics in India are 5-10 years ahead of our Dutch clinics. They have a very wide range of scientific equipment there. In terms of technology, industrialization, labour conditions and the like, both India and South Africa have little room for improvement compared to countries in the West."

Two million intravenous sets

The problem, however is that many producers in developing countries also have little room for production. "Volume is a big issue. There are companies out there – in Egypt, for instance – whose product range and quality are very attractive to European buyers. But they can’t supply the quantities needed. Take intravenous sets, for example. I know a company that produces good quality IV sets, 15000 a day. With a lot of effort, they might be able to double that capacity. But even then they are no party for big European conglomerations like Tyco and others. Companies like that would be asking for two million sets a week. Anything less is not interesting for them."

Clusters and niche markets

One answer to the volume problem is clustering. Says Santema: "The CBI places a lot of emphasis on the importance of clustering for small and medium sized producers. Especially those in the commodities segment will just not make it onto the export market if they don’t find partners with whom they can increase their capacity."

Getting intimate with perceived rivals is not always easy. Santema admits, "Many smaller companies in developing countries are family-owned. That can make things very complicated. For instance, if there is a grandfather around who founded the business and still wants to wear the trousers, he won’t get excited about sharing the leadership with outsiders or getting up close and personal with long-time competitors."

On the other hand, Santema has seen some examples of very effective clustering. "The role of business support organizations is very important in this respect", he says. "They can provide a lot of help in terms of mapping out government subsidy channels, country presentations and communications."

An alternative advice to producers that can’t deliver the volumes needed in Europe is to avoid the commodities segment and specialize in low quantity niche products. "Despite the opportunities, we don’t want exporters in developing countries to think Europe is paradise", says the consultant. "The growth of the market as a whole is limited. In the context, focusing on specialized products is a sensible option.

Don’t forget the details

Before getting onto the European market through a cluster or with a niche product, there are certain details – for instance in the areas of hygiene or presentation – you can’t afford to forget as an exporter. Explains Santema: "I remember a company I visited this year. As I approached their building the first thing I noticed was the shabby entourage. The paint on the front of the building was peeling off, the grounds were unkept and on a pile of garbage over to the side of the grounds I saw a big, fat rat. Inside the place was spotless. Absolutely perfect. And their product was excellent as well. But the exterior was a mess. I met the director and early in the conversation I got pretty angry with him about it. "What do you think your client from Europe is going to think if he comes on his first visit and almost trips over a rat by your front door?" I said. The director was not very happy with my telling-off, but when I came back for another visit less than three months later they’d cleaned the whole place up and he thanked me for being so straight forward. I have seen quite a few situations like that in developing countries. Whereas the staff, the products and the production process re excellent, many companies neglect external details that are in fact very important to clients. Another example is of a company that took a group of visitors including myself on a tour through the plant. We came to the clean room and it was perfect, just like everything else. Except for one small detail: when we washed our hands, we all used the same little towel. Ten people. I gave that company a telling-off, too. You can’t tell your client hygiene is important to you and then give him a towel ten other people have just used."

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