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Five days in Switzerland – How the Swiss continue to play hardball in the global market

Welcome back to the Medical Technology Blog. We have an interesting post today, from a business perspective as well as a Medical Technology one, please read on…

In late September, Medical Industry Week was invited by representatives from Switzerland’s Federal and regional agencies to gather an insight into how the country has consistently grown in competitiveness on the global stage, and more importantly, how it aims to build on this progress in the future.

Switzerland is a country with 26 culturally diverse Cantons and half-Cantons, four official languages, and an internal rivalry that, from an outsider’s perspective, begs the question – to an outsider at least – why are you part of the same country? But the closer you look into how the country ticks and the way its Cantons co-exist, and tolerate each others’ eccentricities and cultures, the more you can see why the country has become enormously successful.

Whilst in other developed countries, manufacturing is usually the first thing that gets out-sourced to cheaper locations in Asia, the situation is somewhat different in Switzerland. In fact, manufacturing remains a key element of the Swiss product, backed up by strong apprenticeship programmes that keep producing the talent. Even Zimmer, a giant in orthopaedics, makes its own manufacturing tools for its implants, at its main facility in Winterthur.

Understandably, the Swiss closely guard their reputation for quality and as a competitive selling point. They also enjoys the benefits of a liberal Federal state structure that has comparative low tax rates, flexible labour laws and a comprehensive education programme that generates the skills to keep it all going. Collectively, this support helps companies to resist the temptation to shift production abroad.

The package seems to be working because a common theme across most of the manufacturing sites – both small and large – is for a pressing need to expand production capacity to keep up with growth. When one considers the recent economic downturn, and the fears of further economic woes to come, these businesses ooze comparative confidence. Maybe that’s why Switzerland leads the way on the global front, with a 2009/10 Global Competitiveness Report placing the country ahead of the likes of USA and Singapore.

Switzerland may be doing well globally, but it’s also a country made up of little countries that result in a competitive element from within that, although intense, somehow manages to avoid boiling over into internal strife. It’s as if they understand that although they don’t necessarily need each other they also recognise the power of being together, and it’s fascinating to see how the various cantons that Medical Industry Week visited choose to highlight their part in Switzerland’s success.

In the comparatively small canton of Zug for example, it’s all about attracting foreign companies and skills using the carrot of low taxes. Its central location – close to Germany and Italy, and proximity to the centre of Zurich also helps. Collectively, it has helped the Canton to support the development of business clusters, including centres for commodity trading, medical device & diagnostics, IT, pharmaceuticals and chemicals, financial services to mention a few. In the medical field, the company has Swiss companies such as Medela and Schiller, but  also boasts international giants such as Abbott Laboratories, Johnson & Johnson’s Cilag unit, Coloplast, Smith & Nephew, Varian Medical Systems and Hitachi.

With Zug’s tax rates lower than other Cantons, how have the others responded? Thurgau, a “mid-sized” Canton, relies heavily on its links with Germany, a well qualified, flexible, workforce and university system, and a “can do” attitude to business requirements that is exemplified in the statistic that 85 per cent of planning applications are approved within just two months. It’s a trait that runs right through Switzerland.

Maybe because of its strong non-Swiss population, which represents 30 per cent of its population, Basel-Stadt’s approach to investment has resulted in a multicultural society that has become a major sector for life sciences, including “Medtech”, pharmaceutical and biotech companies. It’s also become strong in nanotechnology and microtechnology. Many of these reasons are cited by its fellow cantons. A strong skills base is the common theme, low taxes, and its great location – it serves as major junction for road, rail, water and air within Switzerland and abroad – are big selling points.

Interestingly, as one heads south down towards the French-speaking part of the country, the selling point seems to be skills development and research activity. Berne, for example, is the home of the Competence Center for Medical Technology, which provides a link between technology and universities, colleges and industry. In Lausanne, situated in the Canton of Vaud, there’s the fast expanding Federal Institute of Technology (EPFL), which is ranked as one of the top universities in the area of engineering, technology and computer sciences. It’s plethora of shiny, new buildings is indicative of how successful the institution has been in working in partnership with the private sector.

The EFPL has helped to establish around 150 start-up companies since 1995, with around SFr 250 million in venture capital funding. Some 15 per cent of these companies are categorised as Medtech companies. It also acts as a location for at least 100 start-up companies, and as a host for R&D/business development for large companies. Nestle, for example, is investing at least SFr 500 million in an R&D centre for research into nutrition products, a new business area for the company.

Described as “the fastest growing life science cluster in the world”, BioALPS, an initiative set up by seven of the French-speaking Cantons, based near Lake Geneva, was the home of the first stent way back in 1986. It’s goal is to attract business to the area that will use the location as its base. It seems to work because the grouping ranks in the top three centres in Europe for research in the biotechnology and medical technology fields. The benefits of this strategy are clear. With 80 to 90 per cent of Swiss Medtech products exported, around 750 companies in operation and over 20,000 people employed, Switzerland can play a major role in the global community.

An excellent article from Lawrence Miller there, Lawrence is Espicom’s Medical newsletters team leader and editor-in-chief of our top medical subscription magazine Medical Industry Week.

Hope you all have a fab weekend, please come back soon, Paul.

Espicom Business Intelligence

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