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  • http://www.isaps.org/members-by-country-by-number-of-members.html
  • http://www.frost.com/prod/servlet/market-insight-top.pag?docid=153913646
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  • http://www.yourplasticsurgeryguide.com/checklists/plastic-surgery-cost.htm
  • http://digital.miinews.com/display_article.php?id=627843http://www.aesthetictrends.com/news/?p=960http://www.aesthetictrends.com/news/?p=960http://aestheticmedicinenews.com/stem-cells-and-beauty-promise-and-hype.htmhttp://www.medscape.com/plastic-surgery
  • http://www.brandsofspain.com/more-about-brands/chinese-consumers-highlight-the-quality-and-design-of-spanish-products/
  • “The U.S. franchisor generally receives between 20% and 50% of the franchise fee upon each unit opening, and between 25% and 40% of royalty revenues. These fees should not be determined based on the country in question, but rather on detailed financial analysis and an understanding of specific support services required.”
  • http://www.bus.lsu.edu/ei/franchise class/pages/forbook/chapterfour/chapterfour_page4.html
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  • http://www.evercare.com.cn/evercare_en/team.htmlhttp://www.dofusgame.com/guide/2012/03/annual-revenues-exceed-15-billion-annual-economic-added-value-of-the-plastic-industry-20/
  • http://www.premiumbeautynews.com/en/An-overview-of-the-Italian,067?checklang=1http://www.treatmentabroad.com/cosmetic-abroad/italy/accreditation/
  • Transcript

    • 1. International Expansion Plan for Dorsia Clinics Presentation to Otsu GROUP Management 26 May 2012
    • 2. Table of Contents Report Overview 3 Global Aesthetic Procedure Market Overview 12 Master Franchise Expansion 34 Organizational Structure 50 Dorsia Financials 56 Appendix 63 What is Dorsia What is Master Franchising Selected Market Overview Relevant Contacts 2
    • 3. Executive Summary Deliverables 1 2 3 A five (5) year (2013-2017) international expansion business plan A global, organizational structural plan for Dorsia A data-driven model to project future market potential Recommendations 1 2 3 Promising markets: US, Brazil, China, South Korea, Colombia, Italy* Primary entry methods: US Commercial Service (US, China), Brokers (Brazil, South Korea, Colombia), Serendipity (Italy) Dynamic conception of Dorsia vis-à-vis the target country Steps going forward 1 2 3 Due Diligence Master Franchise Charter Go-to-Market strategy Report Objective: To develop a clear implementation path toward establishing Master Franchising for Dorsia in promising markets Source: Consultant research; * included per Otsu management discussion with potential Master Franchisee 3
    • 4. Considerations Moving Forward There are both advantages and considerations to be aware of in expanding Dorsia abroad Advantages Considerations Expansion of services/products tailored to a specific market (and therefore potential for larger organizational learning/crosspollination throughout Dorsia franchise network) Significant reputational risk should a negative event occur in one office (especially in an emerging market) Opportunity for Dorsia patients of one country to travel and be seen by clinicians/surgeons in other countries, increasing a sense of ‘being close to the patient’ for Dorsia overall Greater complexity in operating Dorsia franchises/managing resources, with each market representing unique challenges/opportunities (even in such an arm’s length structure as Master Franchising) Globally recognized brand increases brand reputation for individual units throughout the world Worldwide platform from which to learn about individual markets and potential to launch additional Otsu brands 4
    • 5. Markets Selected 5      After reviewing the international aesthetic market, the international- and country-level franchising space, and the various regulatory, economic, socio-cultural and demographic aspects of several key countries, the Consultant has identified five (5) markets for Dorsia to consider its initial phase of expansion While the top three (3) countries (US, Brazil, China), based on number of procedures, represent strong competitive pressures, the cosmetic market in this countries promises strong potential for Dorsia in the years ahead Italy, as a sixth market, is included in select slides given previous discussion Otsu management has held with potential Master Franchisee South Korea was noted as the top market for cosmetic surgery in the world, with roughly 20% of Korean women said to undergo some form of surgery (notably eye cosmetic surgery) Colombia, similar to its neighbors Brazil and Argentina, has shown strong growth in the consumer class and a demonstrated desire for cosmetic procedures for aesthetic reasons Source: Consultant research 5
    • 6. Selected Markets and Perceptual Catch-all $50 United States $46 Want GDP Per Capita (in $000, 2012) $42 Germany $38 Japan France United Kingdom $34 $30 Italy Spain South Korea $26 $22 $18 Russia $14 Need Mexico Turkey $10 Brazil Colombia China $6 $2 Should India 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Rate of Cosmetic Procedures (per 1000 People, 2010) Source: Consultant research, ISAPS Survey, 2010 6
    • 7. Entry Methods for International Expansion of Brand Recommended Approach to International Expansion Primary Secondary Serendipity Trade Missions Brokers U.S. Commercial Service United States Brazil China Italy South Korea Columbia Serendipity  Franchisee finds Dorsia listed on US industry trade publications or through general networking Trade Missions  Sponsored by groups such as the International Franchise Association, trade missions attempt to provide franchisors with introductions to a number of qualified candidates in each country. The franchisor is typically responsible for their own expenses (which can run upwards of $10,000), their own follow-up, and their own negotiations. Brokers      U.S. Commercial Service   Brokers work by promoting your franchise within a particular market, and will often employ a strategy of directly contacting the best potential partners to determine their interest. Generally, brokers will not ask the franchisor to visit the country until they have generated some serious interest, and oftentimes, the candidates will visit you as a first step, thus minimizing your expenses. More importantly, this direct contact approach will generally result in the best follow-up, as the broker will generally derive the bulk of their compensation based on "success fees." These fees generally range between 10% and 20% of the initial fee. The U.S. Government is even available to assist companies in these endeavors through programs such as the Gold Key program. After contacting the appropriate U.S. embassy and, for a modest fee, they will assist in researching the market and identifying potential partners. They will even set up meetings with these partners Source: Consultant research, www.franchise-chatter.com 7
    • 8. Preliminary Expansion Plan HQ 2013 2014 2015 2016 2017 Potential Other Areas 2013 2014 2015 2016 2017 New York City Rio Di Janeiro Belo Horizonte Delhi İzmir Miami Shanghai Recife Guangzhou Yokohama Los Angeles Tokyo Beijing Hong Kong Osaka Sao Paulo Mexico City Mumbai Medellin Kaohsiung Seoul İstanbul Bussan Cali Taichung Bogota Salt Lake City, UT Taipei Ankara Shanghai Source: Consultant research 8
    • 9. Org Structure Otsu Management Dorsia Dorsia Americas North America Canad a West Europe Dorsia Europe Dorsia Asia China USA HQ: NY Eastern Europe Japan/Kore a North Europe Other South America Country HQ Country HQ Country HQ Source: Consultant research 9
    • 10. Steps Forward  After reviewing the present Report, Dorsia management can decide which aspect to develop, keep-on-hand or omit in further strategy development of its brand  Critical is that the financial model is confirmed relevant and comparable with both existing and planned Dorsia operations within Spain and internationally  Following presentation of this Report, the Consultant is ready to work with Dorsia to implement many of the strategic initiatives considered herein, notably: Due Diligence:  Contact and discuss with relevant industry and medical professionals (a list of organizations in both cosmetic and franchising associations is included in the Appendix with medical professionals in the corresponding excel sheet) Master Franchise Charter:  Framing of Dorsia’s core mission, philosophy and competitive advantages in each target market in conference with area representatives Go-to-Market strategy  Further drill-down into selected countries in terms of market competition, industry developments, a more granular country-to-country strategic plan (e.g., ‚Expanding into China for a Master Franchisor: Dorsia‛), additional reach-out to key individuals not considered herein  Further development of the preliminarily crafted financial model built for this present Report Source: IFS’a 45th Annual Franchise Convention, Haynes and Boon, LP, Consultant research 10
    • 11. Table of Contents Report Overview 3 Global Aesthetic Procedure Market Overview 12 Master Franchise Expansion 34 Organizational Structure 50 Dorsia Financials 56 Appendix 63 What is Dorsia What is Master Franchising Selected Market Overview Relevant Contacts 11
    • 12. Aesthetic Procedure Overview     Plastic Surgery includes the repair, reconstruction, or replacement of physical defects of form or function involving the skin, musculoskeletal system, cranio-maxillofacial structures, hand, extremities, breast and trunk, and external genitalia or cosmetic enhancement to these areas of the body Cosmetic surgery is an essential component of plastic surgery where the plastic surgeon uses cosmetic surgical procedures both to improve overall appearance and to optimize the outcome of reconstructive procedures According to industry analysts, the cosmetic surgery market has remained relatively stable over the last few years despite the global recession, balanced by impressive growth in emerging markets and slower growth in more developed countries, such as the US and Europe The rise of ‚medical tourism‛, or travelling to other countries for medical procedures (cosmetic or otherwise) has vastly shifted the landscape, with countries like Brazil, China and India becoming principle medical tourism markets Source: Consultant research, Frost & Sullivan 12
    • 13. Principle Market Trends to Consider Four principle trends in both the larger market and internal in Dorsia’s growth make now an important and timely moment to expand Demand for international brands   In both emerging and developed economies, there is a growing sense that international brands = luxury or ‚the better life‛ Emerging classes tend to prefer international over domestic Growth of Franchising and Master Franchising model     Master Franchising is recognized as a popular vehicle for brand expansion Brands are quickly expanding abroad, capitalizing on rising discretionary incomes, internet (and therefore awareness of global brands) and greater globalization ‘flattening’ the world Of 7,500 master franchisees worldwide, 3,200 of franchisors offer master franchises throughout the globe (and importantly, a legal, financial and cultural infrastructure) Overseas, 80% of U.S. franchisor expansion is through master franchising Growth in cosmetics and general body-orientation   Advance in cosmetic/surgical-related technologies, convergence of global health standards (e.g., breast augmentation) and general increase in patient knowledge and power have led to a boom in cosmetic procedures over the last few years; a trend that is expected to continue across the globe Demand for cosmetic surgeries has also increased over the years Dorsia’s unique evolution  Know-how, capital, networks and overall corporate strategy have been proven in the Spanish market Source: Consultant research 13
    • 14. Major Trends | US | Media portrayal of cosmetic surgery The show (set in Miami, and then Los Angeles) began in 2003, and the series concluded on March 3, 2010, with the 100th episode. The show had 45 award nominations, winning a Golden Globe and an Emmy. Series creator Ryan Murphy has said that the medical cases on the show are "100 percent based on fact‛ Source: Consultant research 14
    • 15. Major Trends | South Korea - Celebrity Status and Cultural Spread ‚In a country where plastic surgery is common place, measuring and weighing candidates at interviews is practiced and pop stars are revered—it is not an understatement to say that Koreans are image obsessed.‛ Source: Consultant research; From Blog post: That ‚Perfect‛ look: Image Obsession in Korea, http://thethreewisemonkeys.com/2010/11/15/image-obsession-in-Korea/ 15
    • 16. Industry Drivers Rise of emerging markets   Greater role played by emerging markets such as China and Brazil. Example for former: the Second World Congress for Plastic Surgeons of Chinese Descent was held recently (October 29-31, 2010) in Taipei, Taiwan at the Department of Plastic Surgery In Brazil other local developments (e.g., 2014 FIFA World Cup) are boosting image of country as a major destination Attractive Demographics  Females between the ages of 25-40 account for the largest group undergoing cosmetic surgery, an age bracket that is increasing in emerging markets, while developed markets, such as the US and UK, have a greying population which also fuels demand in total procedures, boosting youth and redefining the body to appear younger Advance in technology  Movement toward digital health systems—at least in developed markets such as the US (as part of President Barack Obama’s recent healthcare program overhaul)—can increase the efficiency and expediency of select procedures Growth in non-surgical cosmetic procedures  Industry reports note that non-surgical procedures are increasing in volume faster than surgical (driven largely by injectable and chemical peels), while surgical procedures are being driven by the development of Minimally Invasive Surgeries Increased focus on natural and global cosmetic regulatory structures  Regulation is being developed and refined across several international markets, notably in Europe and Asia (e.g., the CEN system is the European equivalent of ISO, a voluntary process where standard institutes of the participating countries provide committees where all stakeholders discuss a specific topic Source: Consultant research 16
    • 17. Global Cosmetic Procedures | Number of Procedures and Surgeons Worldwide Number of Procedures Surgeons Worldwide 2 North America 4.6 million (25%) 8,042 (24%) 3 Europe 4.0 million (21%) 7,479 (23%) 4 South America 3.7 million (20%) 7,137 (22%)    5 Africa 320,000 (1.7%) 594 (1.8%) 1 Asia 5.9 million (32%) 9,512 (29%) 6 Oceania 166,000 (0.9%) 273 (0.8%) Asia (essentially China) is the largest regional market in the world, with South Korea accounting for the largest amount of procedures per Capita Demographics in Asia, including a relatively young median age, rising discretionary incomes and a shifting pro-beauty culture makes Asia a must for Dorsia expansion North America (the United States) follows in terms as the largest national market in the world, followed by Europe Source: Consultant research 17
    • 18. Global Cosmetic Procedures | Number of Surgical and Nonsurgical Procedures Surgical Procedures Lipoplasty, 23.0% Other, 32.0% Breast augmentation, 15.9% A bdominoplasty, 7.2% Rhinoplasty, 10.4% Blepharoplasty, 11.5% Nonsurgical Procedures Other, 19.4% Botox Dysport, 33.8% IPL Laser Treatment, 6.4% Laser hair removal, 8.8% Hyaluronic Acid, 22.5% Autologous fat, 9.2% Source: Consultant research, ISAPS Survey, 2010 18
    • 19. Global Cosmetic Procedures | Surgical and Nonsurgical Source: Consultant research, ISAPS Survey, 2010 19
    • 20. Global Cosmetic Procedures | Top 25 Markets Ranked by Total Procedures A recent survey by the International Society of Aesthetic Plastic Surgeons (ISAPS) identified the top 25 markets for cosmetic surgical and nonsurgical procedures Based on their findings, the United States, Brazil and China are the three largest markets in 2010, with Spain in 13th place, decreased from its 2009 ranking Colombia made the largest leap from 18th to 10th place followed by Italy (13th to 7th) From these 25, the Consultant has selected 5 of the most attractive markets based on a number of strategic, economic and demographic criteria Italy is included based on previous discussions with a Master Franchisee Source: Consultant research, ISAPS Survey, 2010 20
    • 21. Global Cosmetic Procedures | Top 15 Markets, Total per 1,000 People In terms of procedures performed per 1,000 People, South Korea is by far the strongest market, with roughly 7 people/1000 having some surgical procedure, and over 8 people/1000 having a nonsurgical procedure Italy ranks second in total amount of procedures per 1000 people (13.4) and Brazil a close second (13.1) with the United States in fourth place (10.6) For the majority of countries (save Colombia), the amount of surgical to nonsurgical procedures performed are roughly 50/50 Colombia’s surgical procedures is almost double its nonsurgical Source: Consultant research, ISAPS Survey, 2010 21
    • 22. Global Cosmetic Procedures | Top 15 Countries, GDP Growth and Per Capita GDP Per Capita is assumed within the present Report to correlate with market potential The United States has the highest GDP Per Capita ($50,000) as well as the most amount of procedures performed, though a medium growth in total GDP (PPP) of 4.5% forecasted to 2017 China, with a much lower GDP Per Capita ($9,000) but with a much greater growth rate (10.0%) represents a highly attractive market Spain can be categorized as having an medium-high GDP Per Capita but a low GDP (PPP) Growth Rate to 2017 of 2.4% Source: Consultant research, ISAPS Survey, 2010 22
    • 23. Currency Movement among Selected Countries against EUR (indexed to 52 weeks) Source: http://www.oanda.com/currency/historical-rates/ 23
    • 24. Currency Movement among Selected Countries against USD (indexed to 52 weeks) EUR/BRL: 2.5493 EUR/KRW: 1,482.35 1.2786 2,257.72 8.0703 Source: http://www.oanda.com/currency/historical-rates/ 24
    • 25. Risk and Opportunity Analysis l Source: Consultant research 25
    • 26. Global Cosmetic Procedures | Surgical Procedures Among Six Markets The United States has ~11x the amount of total surgical procedures as Spain; in terms of specific procedures, the US and Brazil have ~45x and ~100x, respectively, the amount of Buttock augmentation as Spain; Top 10 and Bottom 10 highlighted Source: Consultant research, ISAPS Survey, 2010 26
    • 27. Global Cosmetic Procedures | Non-Surgical Procedures Among Six Markets The United States has ~11x the amount of total nonsurgical procedures as Spain; in terms of specific procedures, Laser Assisted Lipoplasty occurs roughly 120 times for every 1 procedure completed in Spain. Boxtox is the most frequent nonsurgical procedure in every market, save for Italy (where Hyaluronic Acid occurs slightly more frequently; Top 10 and Bottom 10 highlighted Source: Consultant research, ISAPS Survey, 2010 27
    • 28. Global Cosmetic Procedures | Top 5 Procedures Among Six Markets Source: Consultant research, ISAPS Survey, 2010 28
    • 29. Average Surgeon’s Fees in Select Markets Based on average surgeon’s fees in five markets (based on ISAPS data identified) across five of the top surgical procedures, fees charged by surgeons in the US are roughly 25% to 50% more than the average figure, while India is the reverse, undercutting average fees by -15% to -30% Dorsia’s payment to surgeon fees account for roughly 15% of the total cost for the procedure; considering the average fee of Lipoplasty (say, $2,321), one would subtract hospital fees, administration expenses and other G&A to reach an approximate figure paid out, as profit, to surgeons in these markets Source: Consultant research, ISAPS Survey, 2010 Comparison 29
    • 30. Future of Aesthetic Medicine While many are in the "early stages" today, such technologies will become the norm over the next 5-10 years; Additional breakthroughs in bioengineering and nanomedicine can lead to yet-unimagined innovation in surgical and nonsurgical cosmetic procedures, alike Item Findings Comments Fat-reducing Technologies Several fat-reducing technologies have hit the market, such as UltraShape, currently used in 57 countries and pursuing FDA approval, which uses highintensity focused ultrasound waves to penetrate the skin and break up fat cells, and Zeltiq, a machine that uses intense cold to destroy fat cells. Such treatments are powerful and completely non-invasive alternatives to liposuction and other surgical procedures. Controversial and has proven to be not as affective as advertised At-home Laser Removal Laser-hair removal will be done at home, to be purchased at doctor's offices. The device pinpoints small areas of skin with every treatment to gradually improve discoloration and fine lines. Innovation will lead to greater acceptance of cosmetic procedures No Acid needed And in lieu of hyaluronic acid: "In a few years, we'll actually be able to use a patient's own skin tissue as the basis for a custom-tailored filler that will ideally last longer—with no possibility of allergy or rejection," says Ranella Hirsch, MD, assistant clinical professor of dermatology at Boston University School of Medicine. Core improvement in the sector Rub-on Botox A new gel is being developed containing botulinum toxin type A to penetrate the skin topically to smooth wrinkles. The gel is applied, left on for 30 minutes, then wiped off. This rub-on Botox is expected to be available by early 2013. Potentially gamechanging innovation that can disrupt prime revenue generator for doctors today Source: Consultant research 30
    • 31. Select Global Players Allergan, Inc. is a multi-specialty health care company that develops and commercializes pharmaceuticals, biologics, medical devices and over-the-counter products for the ophthalmic, neurological, medical aesthetics, medical dermatology, breast aesthetics, obesity intervention, urological and other specialty markets globally. Anika Therapeutics, Inc. develops, manufactures, and commercializes therapeutic products and devices. The Company's products, based on hyaluronic acid, promote the repair, protection, and healing of bone, cartilage, and soft tissue. Anika's products include ORTHOVISC and HYVISC which treat osteoarthritis. Merz Aesthetics is a division of Germany-based Merz Pharmaceuticals. Merz Aesthetics, with headquarters in San Mateo, California, operates subsidiaries in 16 countries and cooperates with more than 30 distributors worldwide. Founded in 1908 by Friedrich Merz, Merz introduced the world‘s first anti-wrinkle treatment in 1953 after conducting extensive research on the effects of revitalizing skin care essences. Candela Corporation develops, manufactures, markets, and services lasers for a broad variety of aesthetic and cosmetic procedures. The Company's products are used for hair removal, noninvasive treatment of varicose veins, removal of benign pigmented lesions, treatment of scars, and skin resurfacing. Candela's products are sold primarily to dermatologists and plastic and cosmetic surgeons Cutera, Inc. develops and manufactures aesthetic laser systems. The Company markets the CoolGlide family of products for removal of unwanted hair and treatment of vascular lesions. Cutera markets the systems to dermatologists, plastic surgeons, and other practitioners worldwide. Cynosure Inc. develops and manufactures lasers for medical and aesthetic treatment applications, including leg veins, hair removal, scar revision, port-wine birthmarks, facial spider veins, stretch marks, tattoos, and pigmented lesions. Source: Consultant research, Bloomberg, Company Materials 31
    • 32. Select Global Players (cont’d) DermaMed Solutions helps spa owners, dermatologists, plastic surgeons and other skincare and medical professionals expand their practices to include additional services. Entrepreneur Roger Parkin founded the company in 1998. Inspiration came when an aesthetician suggested he develop a quieter microdermabrasion machine. The result was MegaPeel®. Besides being quieter than similar devices, the company’s microdermabrasion system was smaller, was easier to use and reduced troublesome vibrations. Valeant Pharmaceuticals International, Inc. is a multinational specialty pharmaceutical company that develops, manufactures and markets a broad range of pharmaceutical products primarily in the areas of neurology, dermatology and branded generics in the United States, Canada, Latin America, Eastern and Central Europe, Australia, South East Asia and South Africa. ExcellaDerm Corporation manufactures microdermabrasion systems for the removal of the dead skin cell layer on the surface of skin. Its microdermabrasion systems include M2000 Microdermabrasion systems for use by physicians and their clinical support staff to provide smoothing, polishing, and planning of the skin; and B2000 Microdermabrasion and B280 Microdermabrasion systems for use by estheticians to provide smoothing and polishing of the skin for their patients or clients Genesis Biosystems is a certified ISO 13485 manufacturer of quality aesthetic and biomedical products. The company stands behind its company’s product brands, customer support, product warranty and service, and continually strive to produce new and innovative products to meet the needs of its customers and the aesthetic industry. Johnson & Johnson manufactures health care products and provides related services for the consumer, pharmaceutical, and medical devices and diagnostics markets. The Company sells products such as skin and hair care products, acetaminophen products, pharmaceuticals, diagnostic equipment, and surgical equipment in countries located around the world. Source: Consultant research, Bloomberg, Company Materials 32
    • 33. Table of Contents Report Overview 3 Global Aesthetic Procedure Market Overview 12 Master Franchise Expansion 34 Organizational Structure 50 Dorsia Financials 56 Appendix 63 What is Dorsia What is Master Franchising Selected Market Overview Relevant Contacts 33
    • 34. Strategic Considerations Based on the Ansoff Matrix, Dorsia has four (4) potential strategies to pursue; the main objective of the present Report is to structure Strategy III: Market Development 34 Brands Existing Penetration Product Development (new brands, Dorsia or otherwise, e.g., Dorsia Corner Clinics) Existing (more Dorsia clinics within Spain) New Markets I II III IV Market Development Diversification (New markets) New (new brands for new markets) Source: IFS’a 45th Annual Franchise Convention, Haynes and Boon, LP, Consultant research 34
    • 35. Topics for Dorsia to Consider In the course of developing this Report, the Consultant found seven (7) main considerations for Dorsia to keep in mind as it begins to expand globally Dorsia Today To Consider for Tomorrow Marketing Positioning With word-of-mouth and promotional activities serving as powerful mechanisms for patient acquisition 6% may not be enough to echo Dorsia’s success in other markets; marketing accounts for major costs in market elsewhere Perception of Dorsia as a Spanish Brands Dorsia maintains a certain advantage in its ‘home market’ by being a Spanish brand found throughout the country and therefore instantly recognized as ‘local’ by Spanish customers. However, the local nature of the Dorsia brand was not clearly a competitive advantage (vs. customer acquisitions model, pricing, etc.) Ultimately, the attractiveness of the Dorsia brand will be based on how it is positioned in the market and how it stands compared to its competitors. There was little evidence found supporting the idea that a medical surgical practice, as a Spanish brand, would be discouraged in the market. (for example, in China, specifically, however a recent Spanish brand-centered forum noted an increased interest for Spanish brands, though there it was not clear if this was equal for all products) Perceived Competitive Advantage (i.e., close to the Patient) Either through a) personal consulting, b) provision of complementary services/products (e.g., nutritionist, psychologist), c) monthly games/activities (‚Cinderella‛ contests), d) larger market plays (e.g., fashion shows), e) engaging IT (e.g., mobile apps), etc. May be difficult for either franchisees or Dorsia headquarters to successfully or adequately manage Source: Consultant research, www.brandsofspain.com 35
    • 36. Topics for Dorsia to Consider (cont’d) In the course of developing this Report, the Consultant found seven (7) main considerations for Dorsia to keep in mind as it begins to expand globally Dorsia Today To Consider for Tomorrow Competitive Edge Spanish competitors unable to successfully emulate Dorsia formula to link beauty with confidence Competitors in other markets may be more nimble, or ‘responsible beauty’ mission less a differentiator in other markets Quality Management Strong emphasis on quality when selecting franchisees Critical to be replicated internationally for both franchisees, or JV partners Competitive Pricing In Spain, Dorsia has, on average, 10-20% cheaper prices than principle competitors Clinicas Londres and Corporacion Demoestetica Pricing power will differ based on market, and in several markets higher pricing points may be preferable (e.g., signaling quality) Geography Benefit of Mediterranean weather and need/desire to show body Although not specific to Dorsia, this cultural and climactic factor is noteworthy, especially in terms of other markets to consider for expansion Source: Consultant research 36
    • 37. Market Positioning for Dorsia to Consider in Individual Markets Depending on the market (competitive setting, GDP per Capita, socio-cultural trends, etc.), Dorsia may need/want to shift its market positioning Discussions with Otsu Management have revealed that the first two categories (‚Goddess‛ and ‚Working Women‛) are the desired markets Motivation Product Place Promotion Price Goddess (all ages) ‚Just‛ Focus on surgical, emphasize ‚specialness‛ Luxury stores, high-priced malls Premium ads/marketing Premium price point (30% above norm) Working Women (30+) ‚Just for Me‛ Surgical + Nonsurgical, comprehensive Both residential and corporate settings Combined with corporate settings (e.g., WSJ, etc.) Medium-High Soccer Mom (30-40+) ‚Just for him and me‛ Comprehensive, emphasize functionality Accessible, shopping malls, residential areas Internet, inserts, holiday promotions Medium Graduate (21-30) ‚Just for the world‛ Focus on surgical (non-surgical as complementary) Accessible, shopping malls, residential areas Focus on internet, with partner ads Medium Student (18-21) ‚Just because I want (or to be like ‘her’)‛ Focus on surgical (nonsurgical as complementary) Accessible, shopping malls, university areas Focus on internet, time with academic seasons Medium 37
    • 38. Additional Market Expansion Considerations   Individual countries vary on their level of complexity, quality accreditation and optimal 38 market entry for Master Franchise arrangements. The two principle entry methods suggested for international franchises are 1) brokers and 2) leveraging 3rd party resources such as the US Commercial Service and 3) Trade Missions    In terms of ensuring medical qualifications, associations such as the International Society of Aesthetic Plastic Surgeons (ISAPS) are key in either vetting surgeons or as central network to identify other medical professionals in the country. In terms of understanding the country's franchising situation, it is recommended to work with, or otherwise access professionals associated with the International Franchising Association (IFA). The following steps are recommended: 1 2 3 4 5 Leveraging the present Report, a dialogue should be initiated between the relevant representative of each major country at the US Commercial Service, the ISAPS (e.g., several select doctors) and at the IFA. The Master Franchise Charter should be drafted by Dorsia noting a brief overview of Dorsia and why Master Franchising is the strategy being pursued at this junction. Where appropriate (e.g., China, Korea, Brazil) it is suggested that the Master Franchisee Charter be translated to ensure smooth dialogue moving forward. This dialogue with all representatives will be carefully documented and a go-to-market strategy outlined in further detail, including the identification of local representatives most appropriate for Dorsia's brand equity. When/where appropriate, a fee structure (e.g., using third party brokerage or US Commercial services), along with peripheral fees (e.g., travel, translation, printing) will be outlined and presented to Dorsia management as part of the later stages of Phase 2: Due Diligence • Source: Consultant research 38
    • 39. Status of Critical Elements for Expansion Currently, Dorsia exhibits most to all of the principle elements needed for successful international Master Franchising agreements Commitment at the top Strategy and Plan Intranet Competitive Advantage Success at Home Well-documented training, support and marketing systems System standards and reporting processes Market and competitor research Trademarks and Other     Clear commitment shown  - Completed but need further examination in new markets (based on local regulations) - Present report, in process Potential to purchase off-the-shelf software designed specifically for medical sector Based on market; needs clarification – Dorsia must maintain clear differentiation Strong growth over last several years, with 60 new units expected by 2016 Need translation into English, etc. To be completed once markets agreed upon and identified (see Appendix for US players) Registered internationally in select markets (e.g., Japan); must register in new markets Source: IFS’a 45th Annual Franchise Convention, Haynes and Boon, LP, Consultant research 39
    • 40. Market Conditions Constraining Diffusion of Franchising in Emerging Markets Academic, Anecdotal and an analysis of successful market entry strategies (of which Master Franchising is considered a sub-category) yields the following six aspects to consider for a successful expansion; below are selected items to consider Geographical Distance Considered a fundamental element in the expansion of (US) international franchising, noting that distances increases the costs of both monitoring and logistical support Cultural Distance Differences between two cultures (both national and industry-wise) can have a powerful effect on the success of a venture; that beauty is a culturallyconstrained Uncertainty Avoidance Franchising is considered an optimal strategy as a way of mitigating uncertainty for international players as locals leverage networks and know-how in the market Individualism The degree of individualism within a society may impact the popularity and spread of franchises Political stability Franchising works well when the political climate is both stable and unstable Economic Market Potential 40 Economic market potential here is equated with the country’s GDP, GDP per Capita and population data as well as those cultural aspects which demonstrate a sustained interest in cosmetic procedures Source: Consultant research 40
    • 41. Case Studies for International Brand Expansion Measure Political/ Economic Company Case Hilton exited Iran as a result of revolution (1979) Hotel bombed by terrorists in Indonesia (2003) Legal/ Regulatory Lengthy legal battle with Chinese joint venture partner (2006-08) Unfavorable lease agreement which led to withdrawal from EU (1971) Cultural Distance Experienced $1 billion pre-tax loss as a result of misjudging German consumer and business culture. Exited market after 9 years (2006) Company accused of ‚cultural imperialism‛ (1993) Market Potential Lose ‚first mover‛ advantage when German fitness center copied concept and saturated market (2004) Company unable to achieve profitability and exited UK market (1991) Source: E. Hachemi Aliouche and Udo A. Schlentrich, International Franchise Assessment Model: Entry and Expansion in the European Union 3 Entrepren. Bus. L.J. 517 (2009) 41
    • 42. Preliminary Expansion Plan 42 in 2012 Throughout Spain New York City HQ 2013 2014 2015 2016 2017 New York City Rio Di Janeiro Belo Horizonte Delhi İzmir Miami Shanghai Recife Guangzhou Yokohama Los Angeles Tokyo Beijing Hong Kong Osaka Sao Paulo Mexico City Mumbai Medellin Kaohsiung Seoul İstanbul Bussan Cali Taichung Taipei Ankara Bogota Source: Consultant research 42
    • 43. Preliminary Expansion Plan 43 in 2013 Los Angeles New York City Miami HQ 2013 Seoul Shanghai Bogota Sao Paulo 2013 2014 2015 2016 2017 New York City Miami Los Angeles Rio Di Janeiro Shanghai Tokyo Belo Horizonte Recife Beijing Delhi Guangzhou Hong Kong İzmir Yokohama Osaka Sao Paulo Mexico City Mumbai Medellin Kaohsiung Seoul İstanbul Bussan Cali Taichung Taipei Ankara Bogota Shanghai Source: Consultant research 43
    • 44. Preliminary Expansion Plan 44 in 2014 Salt Lake City, UT Istanbul Tokyo Mexico City HQ 2013 2014 Rio Di Janeiro 2013 2014 2015 2016 2017 New York City Rio Di Janeiro Belo Horizonte Delhi İzmir Miami Shanghai Recife Guangzhou Yokohama Los Angeles Tokyo Beijing Hong Kong Osaka Sao Paulo Seoul Bogota Mexico City İstanbul Salt Lake City, UT Mumbai Bussan Taipei Medellin Cali Ankara Kaohsiung Taichung Shanghai Source: Consultant research 44
    • 45. Preliminary Expansion Plan 45 in 2015 Beijing Taipei Mumbai HQ 2013 2014 2015 Bussan Recife Belo Horizonte 2013 2014 2015 2016 2017 New York City Rio Di Janeiro Belo Horizonte Delhi İzmir Miami Shanghai Recife Guangzhou Yokohama Los Angeles Tokyo Beijing Hong Kong Osaka Sao Paulo Mexico City Mumbai Medellin Kaohsiung Seoul İstanbul Bussan Cali Taichung Bogota Salt Lake City, UT Taipei Ankara Shanghai Source: Consultant research 45
    • 46. Preliminary Expansion Plan 46 in 2016 Ankara Delhi Guangzhou HQ 2013 2014 2015 2016 Hong Kong Cali Medellin 2013 2014 2015 2016 2017 New York City Rio Di Janeiro Belo Horizonte Delhi İzmir Miami Shanghai Recife Guangzhou Yokohama Los Angeles Tokyo Beijing Hong Kong Osaka Sao Paulo Mexico City Mumbai Medellin Kaohsiung Seoul İstanbul Bussan Cali Taichung Bogota Salt Lake City, UT Taipei Ankara Shanghai Source: Consultant research 46
    • 47. Preliminary Expansion Plan in 2017 Izmir Taichung HQ 2013 2014 2015 2016 2017 2013 2014 2015 Yokohama Osaka Kaohsiung 2016 2017 New York City Rio Di Janeiro Belo Horizonte Delhi İzmir Miami Shanghai Recife Guangzhou Yokohama Los Angeles Tokyo Beijing Hong Kong Osaka Sao Paulo Mexico City Mumbai Medellin Kaohsiung Seoul İstanbul Bussan Cali Taichung Bogota Salt Lake City, UT Taipei Ankara Shanghai Source: Consultant research 47
    • 48. Preliminary Expansion Plan Dubai HQ 2013 2014 2015 2016 2017 Singapore Other Sydney Melbourne Johannesburg 2013 2014 2015 2016 2017 New York City Rio Di Janeiro Belo Horizonte Delhi İzmir Miami Shanghai Recife Guangzhou Yokohama Los Angeles Tokyo Beijing Hong Kong Osaka Sao Paulo Mexico City Mumbai Medellin Kaohsiung Seoul İstanbul Bussan Cali Taichung Bogota Salt Lake City, UT Taipei Ankara Shanghai Source: Consultant research 48
    • 49. Table of Contents Report Overview 3 Global Aesthetic Procedure Market Overview 12 Master Franchise Expansion 34 Organizational Structure 50 Dorsia Financials 56 Appendix 63 What is Dorsia What is Master Franchising Selected Market Overview Relevant Contacts 49
    • 50. Org Structure Otsu Management Level 1 Existing Structure Dorsia Otsu’s existing structure has Otsu as umbrella company for Dorsia and six other brands Source: Consultant research 50
    • 51. Org Structure Existing Structure Otsu Management Level 2 Dorsia Dorsia Americas Dorsia Europe Dorsia Asia CrossRegional Teams As a global structure, cross-regional teams between Americas, Europe and Asia would serve as powerful organizing divisions through to which to communicate franchisee concerns/comments Source: Consultant research 51
    • 52. Org Structure Otsu Management Level 3 Dorsia Dorsia Americas North America Existing Structure West Europe Dorsia Europe Dorsia Asia CrossRegional Teams China Regional Divisions Eastern Europe Japan/ Korea North Europe Other South America For each major Regional division, further regional breakdown should be provided to manage individual markets Source: Consultant research 52
    • 53. Org Structure Existing Structure Otsu Management Level 4 Dorsia Dorsia Americas North America Canad a West Europe Dorsia Europe Dorsia Asia China Regional Divisions USA HQ: NY Eastern Europe Japan/ Korea Franchisee Country Level South America Country HQ Country HQ CrossRegional Teams Country HQ North Europe Other The franchisee will be selected per country, with each regional head (e.g., North America) covering individual country franchisees Source: Consultant research 53
    • 54. Org Structure Otsu Management Level 5 Dorsia Dorsia Americas North America Canad a West Europe Dorsia Europe Dorsia Asia Regional Divisions Eastern Europe Japan/ Korea Franchisee Country Level South America Country HQ CrossRegional Teams China USA HQ: NY Country HQ Existing Structure Country HQ North Europe Other Franchisee Locations Overall number of franchisees depend on success of individual franchisee signing Master Franchisee Agreements Source: Consultant research 54
    • 55. Table of Contents Report Overview 3 Global Aesthetic Procedure Market Overview 12 Master Franchise Expansion 34 Organizational Structure 50 Dorsia Financials 56 Appendix 63 What is Dorsia What is Master Franchising Selected Market Overview Relevant Contacts 55
    • 56. Spanish Franchise Footprint in Emerging Markets There are currently 63 Spanish franchisors with over 2,800 franchisee outlets operating across various emerging markets Among 6 countries selected in this Report, China and Brazil represent largest multiple Source: Verónica Baena, (2012),"Market conditions driving international franchising in emerging markets", International Journal of Emerging Markets, Vol. 7 Iss: 1 pp. 49 - 71 56
    • 57. Expansion Model The present model takes a market-driven approach, with the total market (population) and addressable market (female population between 25-40 years of age) and assumes a rough figure of a) patients per clinic, b) total number of clinics, and finally c) total revenue per clinic, all based on historical performance by Dorsia in the Spanish market Source: Consultant research 57
    • 58. Table of Contents Report Overview 3 Global Aesthetic Procedure Market Overview 12 Master Franchise Expansion 34 Organizational Structure 50 Dorsia Financials 56 Appendix 63 What is Dorsia What is Master Franchising Selected Market Overview Relevant Contacts 58
    • 59. Dorsia Overview Source: Consultant research 59
    • 60. Dorsia Snapshot 60 Dorsia Snapshot     Operating under the slogan ‘Responsible Beauty’, which can be understood as the combination of ‘health and natural results’, Dorsia Clinics consist of top aesthetic doctors, plastic surgeons, endoscopic surgeons and dermatologists in 23 clinics across Spain Dorsia Clinics is held by Otsu, considered a ‚‘company of companies’, and specializing in the creation and development of projects through the identification of an area of opportunity, with whom [Otsu] identifies in its genesis, vision and values‛ Dorsia Clinics is considered the 2nd largest operator in Europe and 3rd largest in Spain Formed in 2002, Dorsia Clinics is dedicated to resolve any aesthetic concern on a global level by means of surgery and personalized medical-aesthetic treatments that combine its effectiveness with a consistent follow-up. Dorsia’s Expansion    Dorsia is in the process of launching a new, innovative format called ‘Breast Corner‛ With 23 Dorsia Clinics opened currently, Management projects an additional 60 Dorsia Clinics to be opened by 2016 History and forecasted expansion of the Dorsia brand are discussed further in the Appendix Source: Consultant research 60
    • 61. SWOT Analysis of Dorsia Clinics Strengths Weaknesses            Early and maintained awareness of holistic beauty (mind and body as linked) Investment in its people! Proven business model (approach, marketing, etc.) Multi-format model (franchisee, owned units) Entrepreneurial (unique in Spain) Focused demographic (women between 25-40) Careful growth (based on acquisition of qualified franchisees) Strong consumer engagement (‚Cinderella‛) Engagement with customers, including surveys, etc. Strong word-of-mouth advertising    61 Unique vis-a-vis non-adaptive competitors; not so in other markets where competitors may be more nibble (flexible in business model) and better financed Individuals wearing too many hats at present stage for international expansion Principle vision dependent on concept that beauty is linked with external form, which may, to a degree, be culturally dependent prime concern is that Dorsia mission may not be as robust in other markets IT System not currently scalable Opportunities Threats             Dorsia product (skin care, clothing, etc.) Private equity as vehicle for financing/increasing Dorsia scope Medical tourism in Spain Partnerships with academia, products, etc.) Strengthen organizational statistics Breast cancer reconstruction Identify additional synergies between Otsu divisions Quality control department based on training, follow-up – consider more automatic IT ‘red flags’ International partnerships with soaps, cosmetics Men! Or at least segue to minor investment (1%-5%) – may be more profitable in other markets (e.g., Asia) Greater cross-pollination possible Source: Consultant research     Relevance of Dorsia Model (to maintain competitive advantage) Local and global competitors Reputational loss Opportunity costs Shifting legislation in emerging markets (in terms of Dorsia’s international expansion) 61
    • 62. IT Considerations Currently, the one major constraint for Dorsia to seamlessly (and successfully) expand internationally is lack of a proper IT infrastructure ‚Dotsu‛ was considered previously as a comprehensive IT architecture to assist Otsu in adding franchisees and coordinating activity between its many clinics (both franchise and owned); additional Otsu subsidiaries/franchises can be added as appropriate There are four (4) critical elements needed for Dorsia’s IT systems: 1. Scalable – the ability to easily add new franchisees/clinics to the system, along with, at a later date, third party off-the-shelf systems used by Otsu divisions (e.g., Yoogle, Quick Gold, etc.) 2. Analytics – the ability for a back-office analytic system to better understand customer experience, local, regional and global trends, user experience with different Dorsia elements (web, Dorsia Breast, etc.) and potentially predict challenges in the market (e.g., with multivariable analysis) 3. Flexible – the ability to add/delete/modify procedures and related information during course of procedural evolution in individual clinics 4. ROI – the Dotsu system was predicted to have 3-5 year ROI – no systems with longer ROIs should be considered Source: Consultant research 62
    • 63. Table of Contents Report Overview 3 Global Aesthetic Procedure Market Overview 12 Master Franchise Expansion 34 Organizational Structure 50 Dorsia Financials 56 Appendix 63 What is Dorsia What is Master Franchising Selected Market Overview Relevant Contacts 63
    • 64. What is a Master Franchise Q: How successful is international master franchising? A: 30% want to buy another master franchises Master Franchising is a commonly used way to grow beyond one’s home territory, whether within a country, or to another country.         Relatively low-cost expansion vehicle Individual units can provide bottoms-up intelligence for head office Less dependent on the US market New sources of initial fees, royalties and product sales Increases brand value for all stakeholders New platform for business growth Sustainable, incremental and diversified Leverages your existing intellectual property and resources Strength     64 Reliance on identifying quality Master Franchisees or partners Cost dynamics differ per region Transaction costs—both initial and ongoing—may run high based on market HQ required for each market Weakness Opportunity Threats     Learn about local market and translate into knowledge into further international strategy Potential for second brand launching if gaps in foreign markets are identified Potential synergy with partner/franchisee’s local networks in other areas (esp. key for Otsu) Opportunities to expand in selected cities and leverage partner’s local networks Source: Consultant research    Increasing global and local competition Shifting regulatory structures in emerging markets Potentially expensive legal battles 64
    • 65. Options to Expand Internationally – Franchise Matrix Less Master Franchising / Regional Licensing Investment Joint Venture (direct franchising) Area License Direct Franchise More Direct Investment More Control Source: IFS’a 45th Annual Franchise Convention, Haynes and Boon, LP Less 65
    • 66. Potential Structures for Franchising Typical for: Large multinationals (McDonalds, KFC) to ensure effective control over product quality and company operations Offshore Franchise Retail Model Typical for: Small and Medium-sized franchisors to leverage local knowledge, networks Direct Franchising via Local Franchisee China The Athlete’s Foot, Inc. (Franchisor) Foreign Investor Chinese JV Partner Lease Payment Fixed Payment Branch Store Offshore Investment Vehicle Equity JV Cooperation JV Branch Store Branch Store Technology Service Fees Trademark Licensing Fees Management Services Fees Branch Store Branch Store Franchise Agreement (Trademark License Contract, Management Service Contract) Royalty and Service Payment RetailCo. China Holdings (Franchisee) Corporate Store Corporate Store Corporate Store Branch Store SubFranchisees Branch Store Source: Fraser Medel, ‚Legal Issues Related to Franchising in China,‛ Franchising in China, Nov. 2003 Global Franchising Operations Management: Cases in International and Emerging Markets Operations Branch Store 66
    • 67. Typical Master Franchise Owner Area Developer Sub-franchises Master Franchisee The area development agreement is one of the most popular ways to create multi-unit franchises. Sub franchising occurs when a franchisor grants an individual or group the right to franchise the franchisor's business in a specific territory for a set period of time. The franchisor may reserve final approval of the selected sub franchisee, the actual operator/owner, and thereafter the sub franchisor has total control over the relationship. Commonly used when franchisors franchise internationally. The development agreement allows the franchisee (developer) to develop and operate multiple units in a given specific area. This right is generally accompanied by obligations to create and establish a specific number of franchises in the designated territory over a given period of time. The franchisee generally will develop the territory as fast as possible and is often required to develop at least one franchise unit per year in the specific territory. The sub franchisor may even use its own franchise agreement and assumes all obligations such as training and field support services to all sub franchisees. This method of franchising is finding disfavor with many franchisors because of the added complexity and legal liabilities which the franchisor still retains because the use of trademarks and trade names related to the franchise organization. Source: http://www.bus.lsu.edu The individual or entity known as the "master franchisee" is generally granted the rights within a prescribed territory and for a specific period of time to solicit prospective franchisees. The franchisor directly enters into a unit franchise agreement with many the prospective franchisees that it approves. However, in foreign countries, the master franchisee will be responsible for the solicitation and signing of each franchisee and will generally provide the training and other services to the franchisee and usually receives a percentage of the franchise fees paid to the franchisor. A master franchisee also has the right to develop and operate franchise units within the territory assigned. 67
    • 68. Initial Costs of a Master Franchise       International legal documents Manuals Marketing and promotion programs Sales Material preparation Sales commissions and travel expense       Agreement/disclosure pre Negotiation of master franchising agreements Franchise registration Local government approval Trademark registration Candidate due diligence Translation Costs    Unit agreements Advertising and marketing Manuals    Recruiting materials Equipment Operating procedures Assistance/Su pport Costs   On- and off-site training Pre-opening assistance (e.g., franchise recruiting and selling)  Supply and inventory sourcing and approval Opportunity Costs  Use of staff/finances which may be more productive elsewhere  Exclusive commitment to performance targets of selected market franchise Goodwill  Value above fair market value of services and products provided to master franchisee Usually reflected in franchise trademarks and service marks  Measure by reference to: a) Franchise fees paid in domestic market, b) Franchise fees paid in international markets and c) Franchise fees charged by competitors in local market Transaction Costs  Source: IFS’a 45th Annual Franchise Convention, Haynes and Boon, LP 68
    • 69. Typical Master Franchise Structure Master Franchisor Master Franchisee Master Franchisee 1. Open locations 2. Manage brand 1. Open locations 2. Manage brand Master Franchisee 1. Open locations 2. Manage brand I. Sales  Identifies additional master franchisees II. Operations  Supports master franchisees  Manages the office  Billing/account management for Master franchisees  Relevant administration Country-level Individual Franchisees Source: Consultant research 69
    • 70. Table of Contents Report Overview 3 Global Aesthetic Procedure Market Overview 12 Master Franchise Expansion 34 Organizational Structure 50 Dorsia Financials 56 Appendix 63 What is Dorsia What is Master Franchising Selected Market Overview Relevant Contacts 70
    • 71. Select Country Overview | United States The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $47,200. In this market-oriented economy, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace. US business firms enjoy greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, to lay off surplus workers, and to develop new products. At the same time, they face higher barriers to enter their rivals' home markets than foreign firms face entering US markets. US’s 2012 GDP is estimated at $15.6 bn. with 2012’17 CAGR hitting 4.5% with an inflation rate of 2.2%. The US is ranked 4 out of 183 countries in the World Bank Group’s Ease of Doing Business Ranking due to corruption and government regulations on business. Source: Consultant research 71
    • 72. Select Country Overview | United States | Cosmetic Undoubtedly the largest market on several terms, there will also be HQ of Otsu from which to 72 oversee MF for both US and South America. Cosmetic surgery paid out-of-pocket and several cities are body-oriented (L.A., Miami) or notably affluent (NY). Demand continues to rise as the country slowly makes its way out of economic hardship. Drivers     Demand for body-contouring given high rates of obesity Television talk shows, reality shows, and online resources are additionally enhancing public awareness Celebrities, and cosmetic surgeons and clinics, also stand as strong factors fueling the procedural volumes Increased product availability, strong marketing efforts, value-for-money, more FDA approvals, and expanding consumer interest and awareness will boost injectable market Constraints  Cost of treatments 30-50% higher depending on surgery and country compared to  Greater international mobility of Americans Source: Consultant research 72
    • 73. Select Country Overview | Brazil Considered as among the top destinations in medical tourism (esp. Sao Paulo, Brazil's center for technological breakthroughs in field of medical technology and research). Brazilians have long seen beauty and bodily aspirations as a right. Known for affordable, safe and innovative healthcare, Brazil is a must for Dorsia's expansion. Its main trade partners are the US, Argentina, China, Germany, Netherlands, and Nigeria. Its primary imports are machinery, electrical and transport equipment, chemical products, oil, and automotive parts. Exports consist of transport equipment, iron ore, soybeans, footwear, coffee, and autos. Brazil’s 2012 GDP is estimated at $2.4 bn. with 2012-’17 CAGR hitting 5.5% with an inflation rate of 5.6%. Brazil ranked 126 out of 183 countries in the World Bank Group’s Ease of Doing Business Ranking due to corruption and government regulations on business. Source: Consultant research 73
    • 74. Select Country Overview | Brazil | Cosmetic The bulk of plastic and cosmetic surgery clinics are located in the cities of Rio de Janeiro, São Paulo and Recife and, in fact, Recife is known as the plastic surgery capital in the world and the most popular city in the north east. 74 Clinics are also now cropping up in other parts of the country, for example, in Fortaleza in the north east where clinics offer cosmetic surgery at slightly lower prices than in Rio and São Paolo. Drivers  Latin America seen as top market for cosmetic surgery  Continued good exchange rate against US  Beauty seen as a right, not luxury; perception seen that "surgery improves a woman’s auto-estima” Constraints  Public hospitals are poorly funded Perception by some about quality, give poor status of Brazil (quality considered top decision factor in medical tourism)  Potential for reputational lost Source: Consultant research 74
    • 75. Select Country Overview | China China has gone through major economic reforms in the past 30 years in order to compete better on a global scale. These reforms have allowed for a rapidly growing Chinese economy which is now the second-largest in the world based on GDP. Its primary imports are electrical and other machinery, oil and mineral fuels, and optical and medical equipment. Exports consist of electrical and other machinery including data processing equipment, along with apparel, textiles, iron and steel. China’s 2012 GDP is estimated at $12.4 bn. with 2012-’17 CAGR hitting 10.3% with an inflation rate of 4.2%. China ranked 91 out of 183 countries in the World Bank Group’s Ease of Doing Business Ranking mostly due to government regulations on business. Source: Consultant research 75
    • 76. Select Country Overview | China | Cosmetic No official figures exist, but the International Society of Aesthetic Plastic Surgery estimated in 76 2009 that China ranked third, behind the United States and Brazil, with more than two million operations annually. Cosmetic surgery was only introduced in Beijing in 1994, and the market has evolved considerably since then. Beijing's China-Japan Friendship Hospital sees a total of 20 to 30,000 people in their plastic surgery department every year, according to department director Dr. Ma Haihuan. The numbers have been steadily increasing over the past few years. Drivers  Rising consumer class and beauty connected with greater social mobility  Age not tied with demand; e.g., largest operation is with the eyes, so age market is much wider vs. 25-40 years of age  Beauty salons (pedicures, manicures, etc.) offering Botox and eyelid surgery Constraints  Concerns with quality  Regulatory system seen as not keeping up  Nor has health standards kept up with demand: celebrity ‚Super Girl‛ died after her windpipe filled with blood during an operation to reshape her jaw in Hubei Province  Flow of Chinese patients to South Korea Source: Consultant research 76
    • 77. Select Country Overview | Italy Italy has a diversified economy well divided between the more strongly developed north and the less developed south where unemployment is much higher. Its economy is dominated by trade and manufacture of high quality consumer goods. Italy’s main trade partners are Germany, France, Spain, UK, US, Belgium, Netherlands, and China. Its primary imports are engineering products, chemicals, transport equipment, energy products, textiles and clothing, and food, beverages, and tobacco. Exports include engineering products, textiles and clothing, production machinery, motor vehicles, transport equipment, chemicals, and food, beverages, and tobacco. Italy’s GDP in 2012 was $1.8 bn. And 2012-’7 CAGR is estimated to be 1.9% with inflation rate of over 3.0% Italy ranked 87 out of 183 countries in the World Bank Group’s Ease of Doing Business Ranking. Source: Consultant research 77
    • 78. Select Country Overview | Italy | Cosmetic Italy is a highly recommended destination for having plastic surgery abroad. The cosmetic surgery industry in Italy is well developed and tightly regulated. Italy boasts some of the finest medical professionals in the world, many of whom work in the cosmetic surgery sector. The majority of private clinics are of a high standard and prices are very competitive, especially vis-à-vis the UK. 78 Membership with the Italian Society of Cosmetic Medicine and Surgery is another good indication of quality. The Italian Ministry of Health oversees and assesses all clinics and hospitals in Italy, keeping a close eye on the plastic surgery industry. Drivers  Combination of "surgery and vacation"  Competitive pricing against other European countries  General European focus on beauty Constraints  Recent macroeconomic challenges represents constraint on surgical demand  Perception of cost (on par with Europe) and quality (less than US) may impact willingness to see Italy as attractive market Source: Consultant research 78
    • 79. Select Country Overview | South Korea South Korea has gone through an amazing period of economic growth since the Korean War in the 1950s. It is now comparable to some of the largest economies in the world with a GDP of more than one trillion and is becoming a more attractive area for foreign investment. Its main trade partners are China, Japan, the US, Hong Kong, and Saudi Arabia. Its primary imports are machinery, electronics and electronic equipment, oil, steel, transport equipment, organic chemicals, and plastics. Exports consist of semiconductors, wireless telecommunications equipment, motor vehicles, computers, steel, ships, and petrochemicals. South Korea’s GDP is over $1.6 bn and 2012-’17 CAGR estimated to be 5.5% an inflation rate of 2.9%. The country is ranked 8 out of 183 countries in the World Bank Group’s Ease of Doing Business Ranking. Source: Consultant research 79
    • 80. Select Country Overview | South Korea | Cosmetic The plastic surgery industry has stormed Asia, and South Korea has the continent's biggest clientele. The Economist first reported that a 2009 survey by a market-research firm known as Trend Monitor found that about one in five women from Seoul have undergone some sort of plastic surgery. 80 The International Society of Aesthetic Plastic Surgery says per capita, South Korea leads the way with 20 percent of women in Seoul aged between 19 and 49 undergoing the knife. Drivers  Korean pop sensations (Goo Hara from hit girl group KARA) noting their cosmetic surgery  Flow of Chinese patients from China  More Korean teens having surgery  Parents have powerful influence on children Constraints  Cultural concerns over obsession with cosmetic surgery  China as competitive market capturing medical tourists Source: Consultant research 80
    • 81. Select Country Overview | Colombia Colombia’s economy has experienced a period of accelerated growth since a 2002 with an average of 7% annual growth. Since 2002, unemployment has reduced by 25% and poverty has been cut by 20%. Its main trade partners are the US, Venezuela, China, Mexico, Brazil, and Ecuador. Its primary imports are industrial equipment, transportation equipment, consumer goods, chemicals, paper products, fuels, and electricity. Exports consist of petroleum, coffee, coal, nickel, emeralds, apparel, bananas, and cut flowers. Colombia’s GDP in 2012 was $500 million with a 2011-’17 CAGR forecasted to be 6.2% with an inflation rate of 3.3%. Colombia ranked 42nd out of 183 countries in the World Bank Group’s Ease of Doing Business Ranking. Source: Consultant research 81
    • 82. Select Country Overview | Colombia | Cosmetic Colombia has become a hot spot for cosmetic tourism, becoming more popular (i.e., currently experiencing a tourism boom, with 3% believed to arrive for cosmetic procedures) along with higher demand for its competitive pricing. Quality of Colombian medicine is perceived as high. Other major cities, such as Cali and Medellin, are also becoming strong destination spots outside of Bogota. 82 The news that Argentine soccer star, Diego Maradona, who had become obese, underwent a successful stomach-stapling surgery in Cartagena, helped further boost interest in the country as a place for cosmetic surgeries. Drivers  Combination of "surgery and vacation"  Latin America seen as leader in cosmetic surgery Constraints  In terms of local demand, poverty and relative poor nature impacts infrastructure and quality assurance for doctors Source: Consultant research 82
    • 83. Table of Contents Report Overview 3 Global Aesthetic Procedure Market Overview 12 Master Franchise Expansion 34 Organizational Structure 50 Dorsia Financials 56 Appendix 63 What is Dorsia What is Master Franchising Selected Market Overview Relevant Contacts 83
    • 84. Key Contacts Per Country Country Cosmetic Franchising Other United States International Society of Aesthetic Plastic Surgery (0)1-603-643-2325 http://www.isaps.org/ International Franchise Association 1501 K Street, Suite 350 Washington, D.C., 20005 Phone: (202) 628-8000 www.franchise.org U.S. Commercial Service Deputy Senior Commercial Officer: Scott Shaw (Scott.Shaw@trade.gov) Phone: 011-55- 11-5186-7191; Rua Thomas Deloney, 381 Chacara Santo Antonio 04710-041 American Society of Plastic Surgeons Plastic Surgery Foundation 847-228-9900 http://www.plasticsurgery.org Brazil Brazilian Hospital Medical Quality Organization São Paulo Albert Einstein Hospital The Brazilian Medical Association China Evercare http://www.evercare.com.cn Cosmetic Association of China Beijing's China-Japan Friendship Hospital American Franchisee Association Telephone: 312-431-0545 http://www.franchisee.org/ Brazilian Franchising Association Ricardo Bomeny, Chairman Ricardo Camargo, Executive Director São Paulo Phone: +55 11 3814-4200 www.abf.com.br U.S. Commercial Service Rio de Janeiro Principal Commercial Officer: Alan Long (Alan.Long@trade.gov) Ph: 011-55-21-3823- 2000; Presidente Wilson, 147, 4o Andar 20030-020 Rio de Janeiro, RJ China Chain Store & Franchise Association (CCFA) Guo Geping, President Lucy Wu Rui Ling, Vice Secretary General lucywu@ccfa.org.cn www.ccfa.org.cn U.S. Department of Commerce International Trade Administration Office of China Economic Area 14th & Constitution Avenue Washington, D.C. 20230 Tel: (202) 482-3583 84
    • 85. Key Contacts Per Country (cont’d) Country Cosmetic Franchising Other Italy Italian Society of Cosmetic Medicine and Surgery (SIES) http://www.sies.net/ Italian Franchise Association (AIF) Graziano Fiorelli, Chairman Italo Bussoli, Secretary General www.assofranchising.it assofranchising@assofranchising.it U.S. Embassy Thomas Moore, Minister Counselor for Commercial Affairs Via V. Veneto, 119/A, 00187 Rome, Italy Tel.: +39-06-4674-2202 Rome.Office.Box@mail.doc.gov Korean Society of Plastic and Reconstructive Surgeons (KSPRS) Http://www.plasticsurgery.or.kr/ php/eng/s01_02.php South Korean Franchise Association Hyosan B/D 3F 57-80, Gui-2Dong, Kwangjin-Gu Seoul, 143-202 Phone: (82-2) 447-6094 www.ikfa.or.kr The American Chamber of Commerce in Korea http://www.amchamkorea.org/ Colombian Society of Aesthetic Plastic Surgery Columbian Franchise Association Apartado Aereo 25200 Cali Phone: +57 2 330-7827 Colombian-American Chamber of Commerce: www.amchamcolombia.com.co Council of American Companies (CEA): http://www.ceacolombia.com/es/ The European Association of Societies of Aesthetic Plastic Surgery http://www.easaps.org/ Italian Society of Plastic and Reconstructive Surgery http://www.sicpre.it/ South Korea Colombia Colombian Association of Hospitals and Clinics: www.achc.org.co Doctors of Cosmetic Surgery in Bogota www.1stchoicecosmetic.com/doc tors.html Association of American State Offices in Korea http://www.asok.or.kr 85
    • 86. ¡Muchas Gracias! 86

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