Before September 2006, the name “Mindray Medical” was familiar to only a handful of people in China. That changed overnight on September 26 of last year when the company, as well as founder Xu Hang (CEIBS EMBA 2002), both found themselves in the international limelight. On that day, Mindray successfully listed on the New York Stock Exchange, making history as the first Chinese medical equipment supplier to list in the oldest U.S.-based exchange - and collecting a cool US$270 million in the process.

Mindray’s successful listing on the NYSE is a Cinderella tale that began with an event so unlikely that few entrepreneurs even dream of it: a visit and a formal invitation to list from the NYSE CEO John A. Thain. The resulting IPO launched Mindray Medical into position as one of China’s most envied companies.

A graduate of China’s top biomedical engineering program at Tsinghua University, Xu Hang founded Mindray in 1991. In the 16 years since then, the company has racked up more than 20 “firsts” for China's medical equipment industry. These include developing the nation’s first monitor to meaure oxygen saturation in blood (among other equipment). In addition, under Xu’s leadership, by 2000, Mindray grew from start-up to its current position as China’s No. 1 maker of medical monitoring devices and diagnostic machines. By that year, Mindray also captured 30 percent of the marketshare in China for these two product lines - for the first time outpacing international medical equipment giants such as GE, Siemens and Philips.

These victories in China soon lead Xu to set his sights overseas. In 2000, the company made its first offshore foray by exporting to South America. In the six years since then, the company has doubled its overseas sales every year to reach revenues of RMB736 million in 2006. Mindray’s overseas revenue surpassed domestic revenue for the first time in the company’s history in the second half of last year, after the NYSE listing.

Today, the company has become one of China’s primary exporters of patient monitoring devices; Chinese Customs reports that among every set of 100 patient monitoring devices exported from China in 2006, 65 were made by the company. In addition, among China’s exports of ultrasound imaging and analyzing products, 40 percent were made by Mindray. Known for quality as well as quantity, last spring, Mindray received the 2006 Global Market Penetration Leadership Award in the Patient Monitoring Market by New York-based Frost & Sullivan consultancy. 

How can a Chinese company succeed in the highly demanding global medical equipment industry? What is its secret to competing head-to-head with the established international giants? To answer these questions, The LINK visited Xu Hang in the Shenzhen headquarters of Mindray last month. In the interview below, Xu shares the details of his mission to create world-standard, affordable medical equipment in China and offers his strategies for overseas expansion, plans for research and development, and lessons learned in sales and marketing.

The Link: Mindray has been very successful in the domestic market for the past decade. Why did you chose to go global?
Xu Hang: Mindray began its overseas expansion in 2000. At the time, we thoroughly analyzed the global and domestic markets and found the medical equipment industry has several special factors. First, not every country has domestic medical equipment producers: Australia has none; Britain and France have fewer and fewer. Second, the global market is huge ? buying up US$100 billion-worth of products ? but China supplies only 3.5 percent of the global market.

I estimated that, within several years, Mindray would hold a 50 percent share of the China market for medical monitoring devices and diagnostic machines. We were growing 2 to 3 times faster than the overseas market, but the Chinese market was still too small. If Mindray wanted to grow, we had to head overseas.

The LINK: How did you prepare to enter overseas markets?
Xu Hang: At the launch of our overseas business, we focused on two areas. First, we developed our own overseas marketing and sales team. Before 2000, some of our domestic salespeople started doing international business to get experience. In 2000, we set up overseas offices.

Second, we got accredited according to key international quality standards including Europe’s CE and the USFDA. The medical equipment industry is very strict on quality, with many different regulations from different countries. Today, all of our products have reached CE standards and more than 10 have been approved by the FDA. 

The LINK: What have been the biggest difficulties faced by Mindray during its overseas expansion? How did you overcome these?
Xu Hang: Up till now, our overseas progress has gone relatively smoothly. Before going overseas, we had built up strong capabilities. Our products, technology and research were all on par with that of global companies. In addition, Mindray enjoys the advantages of a faster launch cycle for new products, stronger after-sale service and lower price and cost.

In 2003, we were convinced of the huge potential of the overseas market and we were sure that most of our business would come from there. The challenge in this industry is to win the heart of your customers and the loyalty of distributors. To achieve this, a company must build transparency and influence, and we thought listing overseas would help us do this. So we approached Goldman Sachs to help us list on the New York Stock Exchange. People trust renowned investors, so we collected US$290 million on the day we listed. 

The LINK: How has listing on the NYSE sped up Mindray’s overseas expansion?
Xu Hang: Listing overseas has been very helpful. In many countries, we used to “plead” with distributors to sell our products. Now the tables have turned; distributors actively approach us because they know us and know we are a good company. Many SME medical equipment manufacturers now approach us for cooperation or acquisition. After listing, we greatly influenced small and medium-sized companies in the U.S. and also shocked the international giants. During the first half-year, our overseas business increased 70 percent, while the domestic business increased 40 percent.  

The LINK: Mindray now sells products in more than 140 countries and territories. What differences do you find among these markets?
Xu Hang: Our products are available in nine languages and are adapted to the operating norms of different markets - some countries apply European standards; others apply U.S. standards. Since the Chinese standards only apply to China, it is very likely that a product that Chinese doctors find easy to use may be considered difficult to use by foreign doctors. 

The LINK: How have you built your overseas distribution system?
Xu Hang: Building a brand name is more difficult and takes longer than developing the technology. One difficulty is gaining market recognition and customer trust. The other is managing local salespeople. Medical equipment salespeople have very good educational background because they need to be knowledgeable about the equipment before they can sell. The problem for a Chinese company is: how to manage the salespeople from so far away, and how to make sure they recognize and respect the company culture. This is a very big challenge. Another challenge is language and communication - some countries don’t speak English. A third difficulty is knowing and understanding the labor laws and employment regulations in other countries. We are experienced in working with Chinese distributors but we are groping to find our way in the overseas market.

The LINK: How did Mindray build its strong R&D team?
Xu Hang: The manufacturing of medical equipment involves more than 20 scientific disciplines. No university or research institute in China offers such a major. That means every newcomer, no matter how good his educational background, needs several years of learning before they perform well.

How can Chinese companies produce world-standard products? First, you must be clear with your employees that you are producing first-class products for sale to the whole world.

Second, be clear about your positioning. Mindray’s positioning is to provide products demanded by the customer. In other words, good technology is not enough. Is the product reliable, durable? How’s the cost? We must consider all these aspects. 
Third, provide a good platform for your personnel. Training is very important. Give them learning opportunities, allow them to fail and let them grow.

The LINK: How does Mindray attract and retain staff in the intensely competitive China market?
Xu Hang: Mindray employs around 3,500 staff. Our 11 vice presidents are all promoted internally, so our management team is very stable.

We have a fair performance evaluation system - we reward good performers and we educate those who are not performing satisfactorily. If they can’t meet our standards, I have to let them go. Our evaluation system is results-oriented. No matter how hard you work, it is the same as doing nothing if you cannot accomplish your goals. We provide salaries above the industry norm, plus bonus and stock options. Getting stock options is not easy, however - they are given according to your accomplishments. This incentive system works well to inspire people’s passion for their work.

The LINK: What are your goals for the overseas markets during the next five years?
Xu Hang: The global market for medical equipment is huge. If we keep doing well overseas, we can expect that 90 percent of our revenue will eventually come from overseas business. North America will be one of our target markets - it is the biggest medical equipment market, occupying 45 percent of the global market, and we hope it will be the fastest- growing market during the next five years.

The LINK: How will Mindray compete with rivals, especially international giants, in the near term?
Xu Hang: Differentiation. Our strategy is to develop better technology than the international giants, and to better satisfy our customers. We will also control costs better and launch new products quicker.
Our advantage is people: our 3,500-strong R&D team is large enough to match our rivals. We can identify key customer segments and provide products that specifically meet their needs. This is our strategy for competing with our global rivals.