Case Study 2
Al Merritt founded MD International in 1987. A former salesman for a medical equipment company, Merritt saw an opportunity to act as an export intermediary for medical equipment manufacturers in the United States. He chose to focus on Latin America and the Caribbean, regions in which he had experience. Trade barriers were starting to fall throughout the region as Latin governments embraced a more liberal economic ideology, creating an opening for entrepreneurs such as Merritt. Local governments were also expanding their spending on health care, creating an opportunity that Merritt was poised to exploit.
Merritt located his company in south Florida to be close to his market. The company has grown to become the largest intermediary exporting medical devices to the region. Today the company sells the products of more than 30 medical manufacturers to some 600 regional distributors. While many medical equipment manufacturers don’t sell directly to the region because of the sizable marketing costs, MD can afford to because it goes into those markets with a broad portfolio of products.
The company’s success is in part due to its deep-rooted knowledge and understanding of the Latin American market. MD works very closely with teams of doctors, biomedical engineers, microbiologists, and marketing managers across Latin America to understand their needs, and what the company can do for them. The sale of products to customers is typically only the beginning of a relationship. MD International also provides hands-on training to medical personnel in the use of devices and extensive after-sales service and support.
Along the way to becoming a successful exporter, MD International has leaned heavily upon export assistance programs established by the U.S. government. For example, in the early 2000s a shipment to Venezuela was held up by the country’s customs service, demanding proof that the medical devices were not intended for military use. Within two days, staff at the U.S. Export Assistance Center in Miami arranged for the U.S. Embassy in Venezuela to have a letter written and delivered to customs, assuring that the products had no military applications, and the shipment was released. Merritt has also worked extensively with the Export–Import Bank to gain financing for its exports (the company needs to finance the inventory that it exports).
Despite these advantages, it has not all been easy going for MD International. Latin American economies have often been highly cyclical, and MD International has ridden those cycles with them. In 2001, for example, after several years of solid growth, an economic crisis in both Argentina and Brazil, coupled with a slowdown in Mexico, resulted in losses for the year and forced Merritt to layoff one-third of his staff and cut the pay of others, which included a 50 percent pay cut for himself. Things started to improve in 2002, and the weak dollar in the mid-2000s also helped to boost export sales. However, the global financial crisis of 2008- 2009 ushered in another tough period, although prior experience suggests that MD International can not only survive such downturns, but also come out stronger as weaker competitors fall by the wayside.
Case Discussion Questions
1) How does an intermediary such as MD International create value for the manufacturers who use it to sell medical equipment in foreign markets? Why do they want to use MD International rather than export directly themselves?
2) Why did MD International focus on Latin America? What are the benefits of this regional approach? What are the potential drawbacks?
3) What would it take for MD International to start exporting to other regions such as Asia or Europe? Given this, would you advise Al Merritt to continue his regional focus going forward, or to add other regions?
4) How important has government assistance been to MD International? Do you think helping firms such as MD International represents good use of taxpayer money?