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A Case Study of Export Success: Cochlear
By Alex Patrick and Meg CunninghamMay 2002
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Introductory Note
This case study was undertaken as part of the subject ECC2520/3520 'Australia in theAsian business world since 1945' at Monash University. The opinions expressed in thisstudy are those of the authors alone. This study relies solely on the extensiveinformation on Cochlear that exists in the public domain. Cochlear, whilst being thefocus of this study have not had any direct connection with this study.
Methodology Statement
The information we obtained defined the approach we took.Our initial intention was to focus on Cochlear’s venture into China, but as weprogressed, we discovered that accessing information specifically regarding entry intoChina was not readily available.Furthermore, we soon came to appreciate the importance of the sequential nature of thedevelopment of the export markets. Our focus on America was not originally intended,but it became apparent that America was appropriate for Cochlear’s first trading marketand facilitated their entry into the Japanese and Chinese markets.A limitation of the information we obtained was that no one was overly critical ofanything Cochlear had done. We discovered that Cochlear’s rational approach tobusiness, the restrictive nature of the industry and lack of direct competitors made itdifficult to develop an opinion other than that Cochlear were a successful company. Thesimple fact that their share price has risen from $2.50 in 1995 to $48.10 in October 2001and steadying at $41 in April 2002 illustrates that Cochlear’s shareholders agree.There was also a lack of information regarding financial results and performance thatwas country specific. This limited the scope of our investigation in terms of comparisonsbetween countries, but it does not appear that having such information would havechanged the conclusion we reached.While we were not able to access much academic material, the articles we used werefrom a variety of global sources, including domestic American and Chineseperspectives.
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Cochlear’s successful export relationship with Japan and China
Cochlear’s patience, determination and bold financial decisions have been the key toaccessing the unchartered Japanese and Chinese biotechnology markets. It hassucceeded where many large Australian companies have failed. This achievement isreflected by an award from the Australian Chamber of Commerce in Hong Kong for itssuccess in the Asia-Pacific region in October 2001.To examine the reasons for Cochlear’s success it is necessary to understand how thevision and product developed. As the bionic ear became a reality, the commercialaspect needed to become more sophisticated. This resulted in Cochlear commencingoperations as the internationally recognised Cochlear Ltd.The sequential development of Cochlear’s three main international markets, America,Japan and China, is a critical factor to their success. It is argued that Cochlear’sachievements in Asia would not have occurred if its international standing did not beginin the US. Cochlear’s American experience allowed them to develop connections andtrial their business etiquette and culture in a familiar market. They needed all theexperience and adaptability that they could extract from America in order to tackle thetougher Asian biotechnology industries.Cochlear’s distinct advantage over other Australian firms came with the nature of theirindustry. Japanese and Chinese markets require patience, therefore Cochlear’s bionicear devices suit these markets because they take considerable time to research anddevelop, let alone implement. This complements Cochlear’s approach becauseextracting profit from trade with Asia is often a long-term process. Thus, Cochlear hasidentified and acted upon the fact that it must first raise awareness of hearingdeficiencies and the potential success a device may have. Whilst establishing neo-nataltesting programmes takes time and money, they are particularly important given that thedevices offer maximum results to children under the age of six. If a child with a hearingdeficiency can be identified in the womb or as an infant, this increases the opportunityfor parents to organise further testing and the necessary implantation while the childremains fully receptive to the device.Cochlear must also train medical professionals in the implant and rehabilitation processand obtain financial support. Their success in the Japanese and Chinese markets can,in part, be attributed to the identification of these issues and their ability to actualisethem.The issue of reimbursement is one that will continue to hinder Cochlear’s development.Without reimbursement, Cochlear’s devices cannot reach as many potential candidatesdue to the prohibitive costs associated with the implementation of the devices. For thisreason it will be seen that Cochlear constantly work on developing appropriate financialprogrammes to increase the availability of the device.
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