Tuesday, December 8, 2015

Abbott looks to Developing Markets

Today emerging markets account for a huge percentage of the global revenue. It is not surprising that firms such as Lincoln Electric have explored growth opportunities through acquisitions, joint ventures and greenfield sites.

Companies are always on a look out to put their cash balance to use to expand their product mix and drive revenues. When investing in foreign countries, the implications of the host country’s financial, political, economic and social situations are important to consider. Elections, economy growth, currency exchange rates, labor laws, industry profitability etc., determine how lucrative the expansion could potentially be for a foreign direct investment in the host country.

Abbott Laboratories is one such company, which is looking to pin down its goals to invest in the emerging markets. Its Nutritionals business is a good example to consider; their Nutritionals business accounts for 30% of Abbott’s valuation [2]. Earlier this year, the firm launched the first organic infant formula, Similac in China [2]. The company states that 40% of the nutrition business growth will be experienced in emerging markets [1]. In addition to this, Abbott is launching a nutrition unit in India in partnership with Biocon Ltd. Chief Executive Miles D. White has emphasized that, “We'll be tailoring those businesses much more closely to market desires” [1]. Therefore, we notice that although Abbott carries its brand, it is as a firm looking to adapt its products depending on the local market.

These partnerships are a small piece of the big puzzle that Abbott is setting up to establish its strong portfolio of low-cost products in emerging markets to in turn replace the revenues generated by bigger competitive players in the industry. Abbott is striving to tap into the full growth potential of developing markets, in order to foster growth outside the saturated, developed economies.

Although Abbott is faced with some formidable competitors, such as Nestlé SA and Pfizer in India and China, the firm claims to own a more organic growth strategy by investing in research and development and the creation of new products within all their different businesses. It has already taken steps towards their game plan by opening a nutrition laboratory in Singapore to re-evaluate fruit flavors for the Asian markets and have noticed significant breakthroughs, as stated by the Global Nutrition Research Lead, Robert H. Miller [1].


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