Datascope

August 2008 -- The Japanese market for medical devices in 2006 was estimated at 2.4 trillion yen. Japan imports more than half of these medical devices , and just over 60% of those imports come from the U.S. Datascope, a medical device company based out of Montvale, NJ, has been successfully selling their products in Japan for the past three decades but only recently established a Japan subsidiary last September. Within less than a year, Datascope has opened a main office and warehouse, in Tokyo, along with five additional offices. JETRO spoke with John Saavedra, Japan business director for Datascope's cardiac assist division, about establishing the Japan subsidiary and working with JETRO.

Company Background
Established in 1964, Datascope is the global leader of the intra aortic balloon pump (IABP). The company develops the technology and also manufactures and markets its products. Datascope's worldwide offices include direct operations in the U.S., U.K., France, Germany, Belgium, and the Netherlands, and sales offices in China and India, in addition to its headquarters and two facilities in New Jersey.

Outside of the U.S., Japan is the largest market for Datascope. Saavedra highlighted three characteristics about the Japanese market that have contributed to Datascope's success there: "(1) a very large market size, (2) customer requirements for high quality, high performance products, and (3) a highly skilled and competent work force." These characteristics along with the quality of its products have enabled Datascope to successfully sell its products in Japan for 30 years.

 CS100 Intra-Aortic Balloon Pump (front and back view), Linear 7.5 Fr. Intra-Aortic Balloon Catheter
 

The Need for a Japan Subsidiary, Even After 30 Years of Sales
Even though Datascope had three decades of history selling its products successfully through exclusive distributors in Japan, the company still saw a great need to establish its own subsidiary. In addition to increasing market share of its IABP products in Japan, Datascope's main reasons for establishing its own subsidiary were to be closer to its customers, meaning the doctors and clinicians, in order to better serve them, and to be more directly involved in the regulatory process required for gaining approval to sell their products. "We wanted to have regulatory control and take responsibility for our products in Japan," said Saavedra. "Before, we worked through distributors who were responsible for and in control of the shonins, or import licenses and product registrations. Fortunately in the past, we had a very good distributor partner, who had a very good team of regulatory affairs experts. But going direct allows us to have direct regulatory control of this process rather than going through a distributor." Having direct regulatory control enables Datascope to have faster and more streamlined registration of its products.

Working with JETRO
One of the early steps the company took to begin the process of establishing a subsidiary was to work with JETRO. Saavedra described the process as consisting of three main phases.

The first phase entailed assessing the time frames and business modes Datascope could pursue. "JETRO provided a lot of information as to what options we would have as a company, from setting up a personal office to a branch office to a subsidiary," said Saavedra. "We looked at business models, tax benefits, employee related matters, and a whole array of different things related to setting up an office in Tokyo." Based on this information, Datascope was able to create various financial models to determine the best type of corporation for the company's business in Japan.

After choosing to establish a subsidiary, Datascope went into the next stage that Saavedra described as "fine tuning" to fit the business to their needs. This stage consisted of finding potential locations for the office and handling complex HR matters, such as social and labor insurance and pension plans. Saavedra said the process of leasing an office in Japan took much longer than expected. "I think it was the fact that we were a newly registered company," said Saavedra. "Although, we did provide financial and other background on Datascope Corporation itself as a very sound, stable, medical device company that operates globally, I think the fact that we established Datascope Japan KK just a few months before was a concern to them. In some cases, it took three months to get approved."

During this phase, Datascope also interviewed and selected a distributor partner, USCI Japan Ltd., to sell and distribute the company's products throughout Japan. Datascope decided to leave the sales and marketing of its products to this distributor partner to enable Datascope's subsidiary to focus on its two main goals: (1) managing the regulatory aspects of the business and (2) performing technical services for its clients in-country by its own personnel.

The third phase consisted of hiring the key people for the subsidiary. "We initially hired five individuals that were the skeleton crew to get the business going," said Saavedra. "Right now, we have a total of 22 employees." Many companies find it challenging to hire technically qualified staff in Japan who can also communicate well with a company's U.S. base. Datascope worked with an executive search firm to hire top management and hired key middle managers and technicians from its previous distributor in Japan. "They consented and cooperated with the transfer of several of their employees into our subsidiary," said Saavedra.

Results and Outlook
In addition to a growing staff, Datascope has made tremendous progress since establishing its subsidiary less than a year ago. After opening its Japan headquarters, the company set up a warehouse and opened five branch offices for service and sales. Datascope met its original goals of being able to be closer to its customers and have more control over the regulatory processes of its business in Japan. Datascope also met its financial goals during its first quarter of operations and began to be profitable shortly afterwards. "Both from the financial side and operational side, it has been extremely successful so far," said Saavedra. "When you deal with these types of things, you always expect something might be delayed or might not go as well as planned. In this case, fortunately, things have gone pretty much as planned."

As for the outlook on the Japan business, Saavedra said, "This is really the first step. We have established a subsidiary; we have a steady flow of revenue; and we have a fairly large market share for both consumables and capital equipment. The next phase will be to try to add all our products to the responsibility of that sales office, and that process we hope to begin within the next couple of years."

Advice
When asked what advice he would give to companies looking to begin their business in Japan, Saavedra said the following:

1. "First of all, if the company already has been doing business in Japan, that would obviously be an advantage over those that do not currently have business in Japan. The fact that the Japanese consumer is fairly loyal to a high quality product once it is used and adapted by the customer, that is a huge advantage that our company enjoyed going in."

2. "And an obvious one would be to know your product and your market very, very well so that you will understand clearly the chances of success for your business in Japan."

3. "Now, as far as setting up the subsidiary or branch office or whatever other option the company might decide to pursue, my very strong advice would be to get in touch with JETRO. And I'm not trying to be over-complimentary here, but JETRO was absolutely instrumental in helping Datascope set up our subsidiary in Japan because of their expertise. We really have been impressed with the professionalism and the options available for help. JETRO covered pretty much everything that we needed."

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