IDENTIFYING MARKET SEGMENTS, TARGETING & POSITIONING:

As a general rule, organizations operating internationally cannot serve all customers in

that market since the customers needs are numerous and diverse.
Following the above rule, our company, needs to identify market segments that
it can serve most effectively. In this conditions, we have to select the specific market
instead of scattering the marketing effort (Shot Gun Approach), we can focus on buyers
whom we can have greatest chance of satisfying (Rifle Approach). This is called target
marketing.
Market Segmentation
Using the preference patterns as the most important element in determining market
segmentation, the key factors influrncing discussion of X-corps market are:
- medical procedures
- product usage
- customers and chain of distribution
The princilples segments identified using the above patterns are:
- Managed care groups - the market is dominated by managed care groups. More than
50% of all purchases of medical devices are made by these groups.
- Hospital buying groups
- Physician groups
- Independent physicians
- Medical supply houses
The following chart illustrates the approximate total number of these buying groups that
exist. But initial concentration may be more defined by targeting the largest 50 customers
in each segment.

Market overview:

Japans healthcare system is designed for universal access and affordability

anyone can go to any facility without referral; the patient usually pays 30% of
overall cost, with some differences by age group.

Japans historical fee-for-service system had the National Health Insurance

reimburse any medical intervention to the facility without strict oversight on need. This
resulted in much longer average hospital lengths of stay than other countries such as
USA or countries in Western Europe.

The population of Japan peaked in 2008 and the percent of elderly (65+) Japanese
will grow to 30% in 2025 and 40% in 2055.
The aging of society puts presure on the economics of the healthcare system, since
health care for the elderly costs more per capita than for the young. Health care
expenditures for the 20% of the population aged 65 and older already account for 40% of
total expenditures.

Japanese patients are known for their high level of compliance and respect for
medical professionals.
- Increasing patient awareness and access to information makes them important
contributors to the treatment decision.
- The Internet is the main source of information for patients and family members.
Currently, Japans market for medical devices is about 2.3 trillion yen, according to
report on "Attractive sectors -Healthcare" by Japan External Trade Organization
(JETRO). It is ranked third, following the US and Germany. According to the Ministry of
Health, Labor and Welfare, the market size is expected to reach about three trillion yen by

2015. According to Espicom, the medical devices market remains the second largest, after
the US.
- The market isexpected to grow at a rate of 5% despite intensifying downward price
pressure
- Imports account for over 45% of the Japanese medical technology market
- Domestic Manufacture: Diagnostic Imaging Apparatus, Operating Instruments
(endoscopes and surgical disposables), Artificial Implants and Home Medical Apparatus
are the biggest categories for Japanese domestic medical technology companies.
- Japan has more general hospitals than any Western country
- Most Japanese hospitals are designated as not-for-profit medical Corporations
- Japan has a very high number of general hospitals and general hospital beds. Overall
hospital bed utilization is 82%. In addition to the hospitals, Japan has 166,862 clinics,
defined as medical institutions with fewer than 20 beds.
Market Targeting
1. Hospitals
Japan has a relatively high hospital bed-to-population ratio, and the number of
hospital beds kept increasing.
Close to 90% of hospital facilities with 20 or more beds are classified as "general
hospitals." The remainders are mental health facilities or tuberculosis and leprosy centers.
General hospitals are dominated by small, privately owned and operated "nonprofit"
facilities. The average number of beds in a Japanese hospital is 163, and half of them
have fewer than 100 beds. Although the last few years have witnessed a proliferation of
national hospital chains, the majority of small hospitals continue to be privately owned
and managed by physicians. As in public hospitals, physicians in private hospitals are
salaried. With 283 beds, the average public hospital is larger than its private counterpart.
Although 19% of hospitals are public, they account for 33% of all beds. About 75% of
public hospitals are under the jurisdiction of municipal and prefectural governments the
remainder are national institutions. About 1% of hospitals are owned and operated by
quasi-public agencies and organizations such as the Red Cross, social insurance agencies
and employment related groups.
Despite these distinctions, all hospitals in Japan tend to be viewed as
recuperative centers rather than as merely therapeutic institutions. Even large teaching
hospitals do not limit themselves to providing acute-care services. Hospitals have
traditionally functioned, in part, as long-term care facilities. Of the nearly 400 hospitals
that have more than 500 beds, only about 60% have adult intensive care units, and only
30% of them have neonatal intensive care units, the majority of which have only five to
seven beds.
As a result of this orientation, patients in Japanese hospitals have the longest
average length of stay in the world. Even accounting for the lengthy stays of psychiatric
patients, the average patient's stay in a Japanese hospital far exceeds that of most other
OECD countries both in the aggregate and by specific disease categories. In addition to
the nursing home functions played by hospitals, other factors accounting for the lengthy
stays are probably the large number of beds, the low admission rates, the per diem form

of hospital reimbursement, and the emphasis on recuperation over invasive medical and
surgical interventions.
2. Clinics and Ambulatory Care
Japanese physicians have traditionally operated on a small scale, working out of their
homes to provide health care services to their community. Although these clinics have
typically provided a low-level intensity of care, many have recently acquired a wide
range of sophisticated medical equipment .
Small, privately owned clinics provided most outpatient services until the 1970s. In
addition, roughly 25,000 physicians' offices, equipped with up to 19 beds and also
referred to as "clinics," function as small hospitals. They add 276,000 beds to Japan's
already high number, thus increasing the total number of hospital beds by 17%.
Over the years clinic physicians have become concerned about losing their share of
primary-care services to hospitals. Although the number of clinics has increased from
about 50,000 in 1955 to more than 80,800 in 1990, the number of clinics with beds
decreased by almost 20 percent during the 1970s and 1980s. Likewise, although the
number of physicians has increased by 113% since 1960, the proportion of physicians
running clinics has dropped from 44.8% in 1960 to only 27.5% in 1990. This decrease in
the number of clinics with beds and the proportion of physicians running clinics is due
largely to direct competition with larger hospitals in outpatient services and high land
prices that prohibit the establishment of new clinic facilities. Larger hospitals are
attracting both young doctors and outpatients with their sophisticated technology and
services.
Despite the competition between clinics and hospitals, two structural aspects of Japan's
health care system appear to constrain the trend toward specialization and high-tech care
and to promote primary-care services. First, clinic physicians do not have admitting
privileges to hospitals. Second, once referred to the hospital, many patients do not return
to a clinic but continue to be treated by the hospital's outpatient department. These
barriers give clinic physicians an incentive to put off hospitalization.
Most clinic physicians operate in solo practices without hospital privileges, thus making
it difficult to collaborate with specialists as well as with peers. Standards of practice,
professional competence and patient care are neither monitored nor evaluated in any
formal way. In addition, Japanese physicians do not typically subscribe to the idea of
"comprehensive primary health care and often fail to respect the person as a whole person
operating in a complex social and economic environment."
3. Aside to the segment marketing, our company can take also into consideration the
Niche Marketing:
Due to the two upcoming shifts in Japans healthcare sector that can create
opportunities for our company if we can meet changing needs and work within Japans
dealer distribution system.
The first shift comes from the increase in senior population which increases the
demand for in-home therapeutic operators.
This sector often requires more localization than other sectors in that equipment must be
adjusted to fit the smaller sizes of living quarters in Japan and smaller physical stature of

the Japanese people. However, growing demand for such equipment makes the Japanese
market an attractive source of revenue.
A second shift comes from a push within the healthcare industry to provide more
basic diagnostic services through local physicians than hospitals. Currently, people in
Japan visit large university hospitals for nearly all ailments, including the common cold.
To more efficiently use hospital resources, healthcare providers are encouraging patients
to seek basic care from local physicians. This upcoming shift is expected to increase
demand for diagnostic equipment, a sector in which our company has a strong lead. Japan
receives 60% of its medical equipment imports from outside of those imports, 72%
consist of diagnostic equipment.
After evaluating the different segments above, we decided to use the Selective
specialisation pattern in order to establish which/how many segment
to service/target.
The five patterns of target market selection are:
_ Single segment concentration.
_ Selective specialization.
_ Product specialization.
_ Market specialization.
_ Full market specialization.
Selective Specialization:
- Our company will select Hospital, Phisiciens and Home-care segments, each of which
are attractive and in line with the companys objective/resources. Each segment has profit
potential and the multi-segment coverage will help to spread risk even if one segment
becomes unattractive, the company can continue to earn in other segments.