David Houghton-Brown discusses the universal lessons and pitfalls learnt from Medicals Direct's foray into European markets
Many firms, on reaching a certain size, have seen a move into Europe as a natural progression and so it has proved on trying. However, this was not before discovering, as many a management team has discovered before them, that Europe remains in many respects a foreign country and they still do things ‘differently’ over there.
Many companies labour under the delusion that expanding into Europe differs little from setting up a business back home. After all, 50% of all the UK’s exports are destined for the European Union. While there is some consistency provided by EU legislation, there are still all manner of legal, social and economic differences in the way that businesses are set up and operate in the various member states.
To begin with, should you incorporate? In the UK and Ireland it is possible to register a newly-formed company with as little as £1 in share capital but in Germany, for example, you would need at least €25,000. Also, purchasing a ‘ready-made’ company as a simple and cheap method of setting up ‘shop’ is not an option in many countries and the process can become laborious and time-consuming.
Then there is setting up a bank account, VAT, payroll taxes, insurance, accounts, administration... and last, but by no means least, understanding the local business culture, including the legal, economic and cultural environment. In other words; starting again.
As an example, Medicals Direct has managed to negotiate these sometimes formidable challenges, expanding into Spain, France and Germany, forming new companies but also entering into joint ventures and licensing agreements in other territories. However, this proved a steep and sometimes unexpected learning curve. It was imperative to do some homework before ‘taking the plunge’ and expansion activities were preceded by months of research and several visits to the relevant European countries.
A method that could usefully be used by others was instigating a series of conferences to ‘spread the word’ and excite interest among potential clients. It is vital to find out as much as possible about the ‘status quo’ in terms of methods, which in this case means gathering medical evidence, in order to credibly present an alternative.
For example, in Spain, it’s the quality and turnaround time aspects of underwriting which chiefly interest potential clients, as the cost of obtaining a GP report there is relatively low. In addition, there is a real reverence for Doctors in Spain, which makes it harder for the Spanish to ‘trust’ nurses in quite the same way. So that is one cultural difference that immediately had to be taken on board.
Also, the language barrier poses more of a challenge in Spain – in contrast to some other European countries, English is not so widely spoken. It would be very handy to have a fluent Spanish speaker among the staff to present at any initial meetings, and another point would be to have access to translation services when doing business there.
In France, the law recently changed to allow bancassurer customers to obtain life cover from other providers. As in Spain, life cover had always previously been bancassurer dominated. This opening up to competitive services provides a new environment allowing real scope for introducing new forms of business.
In Germany, the costs of obtaining a GP medical report are more equivalent to the UK making, in this case, tele-interviewing immediately attractive purely on a cost basis. There are also opportunities to offer other services new to the German market.
There is one unifying theme in Europe which new entrants will find – an equally strict attitude to data protection, and because in this industry we all deal with some highly confidential information for our clients, it is naturally already a key concern. In order to expand into Europe it is necessary to obtain detailed legal advice specific to each territory. Fortunately for computer-based systems which have already achieved compliance in Britain there is usually little or no difficulty in complying with EU directives.
In dealing with European clients the very real differences between national mentalities are fascinating. It seems that the clichés are sometimes true – in Germany and Spain they are often quite conservative in their thinking. Potential clients in Germany, for example, always want to see lots (and lots) of evidence. In France too, they sometimes seem to need enough time to literally digest a more innovative approach.
European markets generally give the impression of being more hide-bound than in the UK, and certainly more so than in the US. However, the fundamental drivers of cost reduction, faster processes and improved customer experience are universal objectives which make solutions appear attractive to all these markets.
David Houghton-Brown is director of operations at Medicals Direct Group
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