Strategic Management Cochlear Ltd - Essay Example

?Strategic Management Table of Contents Cochlear Ltd 3 External Analysis 3 Opportunities 3 Growth and Innovation 6 International Expansion 6 Strategic Alliance Role 6 Threats 7 General Analysis 8 Industry Analysis 9 Industry 9 Success Factors of Industry 9 Competitors Analysis 12 Sustainability in Future 12 Diversification 12 In General 13 References 15 Cochlear Ltd Cochlear Ltd is an Australian based company that is located in Sydney and operates in more than 100 countries. The company has been delivering implant innovation technology to over 170,000 people for more than two decades. They have set corporate goals for customer focus and enhanced the organisational and the shareholder value (Cochlear Ltd 2011). External Analysis The external analysis will focus upon opportunities and threats that Cochlear Ltd is facing. Along with this general, industry and competitor’s environment of Cochlear Ltd will be analysed for the success and growth of the company. Opportunities There is great opportunity for Cochlear Ltd as it operates in the health care sector. The company has been able to increase its revenue due to increasing demand of their products. In developed economy there has been increase of implant surgery of 25% and in the emerging economy it has been approximately 20%. There are great opportunities as there has been increasing demand for implants of Cochlear in emerging economies. The increasing trend is shown graphically in figure 1 below. Figure 1: Increasing trend (Cochlear Ltd 2011). By analysing the stock market of Cochlear Ltd, positive trends have been observed. This represents the performance of the company and the interest of investors in investing in the company. This offers the company an opportunity to raise funds and invest in new technology or innovation in order to expand their market and develop new products. The positive trend is represented graphically in figure 2 below. Figure 2: Positive Trend (ASX Limited 2011). Growth and Innovation The company invests in research that provides opportunity to develop innovative products. This is the key strategy that has led the company to a remarkable growth and innovation in the global market (Cochlear Ltd 2011). International Expansion With the increasing sale and growth the company has been able to enter in Eastern Europe, China and Southern American market. The increasing demand and revenues have helped Cochlear Ltd to achieve its international expansion (Herald and Weekly Times 2011) Strategic Alliance Role Cochlear Ltd has been able to integrate the goals of customers’ lifetime value to dynamic and performance-focused organisation that are poised to achieve its full potential and develop shareholder’s value and meet stakeholder’s expectations, which have strategically enhanced the performance of the company. Threats The threat is from technical advancement. There are innovative technical devices for impartial deafness. There are developments of new processors in portable size with greater efficiency that challenges the company as well as industry competition (McDermott & et al 2011). The implantation of these devices has shown discrimination in the result of performance. They do not show similar pattern of outcome (Busby & et al 2000) This problem of performance is threat to the company’s position in regards to the electrode bands of a cochlear implant array which had not been able to deliver greater results. There were lot of variations and the results are still not determined about the consequences. The problem is a threat for the company to grow in different economies (The American Journal of Otology 2011). General Analysis In the children category, there is greater opportunity for Cochlear Ltd as there are opportunities in the implantation of children. It is the best market for such opportunity to be tapped is the UK and the US market (Waltzman & Roland 2006). The implantation of cochlear is popular since people prefer these devices for themselves and also for their children. The scope is huge as there are supports for the product by children as well as by their families (Chute & Nevins 2002). Even in the tough competitive environment, Cochlear Ltd has been able to perform better and offer higher returns to its shareholders that lured other investors to invest in company and grow with the company. They have developed new products and the innovation process for product development is still continuing. The profit margin of the company is approximately 30%. To gain competitive advantage the company invests 12% from its turnover in the research. The expectations of generating revenues can be through new markets such as China, South America and Eastern Europe. The company has been able to gain sales of 42% from America and 43% from Europe. Furthermore, the company holds greater market share than competitors in the global market. The competition from advanced Bionics in the US and its brands has provided tough competition to the company and the company had lost considerable market share in the US (Herald and Weekly Times 2011). Industry Analysis Industry Cochlear Ltd operates in the health care industry. This industry attempts to deliver modern health care services that are highly depended upon interdisciplinary group of trained professionals. The industry provides health care solutions of varied nature that include manufacturers of pharmaceutical and medical equipment as well as health insurance firms. Success Factors of Industry The industry adopts new technologies for successful development. New technologies when implemented and operated increase the efficiency of the firms and ultimately assist in growing in the market (Cochlear Ltd 2011). Adaptation and diffusion of innovation in this industry are the critical factors for success of the firms in this sector. The innovative technical devices and prevention processes and cures for health related issues assist the firms of the industry to rapidly expand and grow with these factors (Leonard 2004). The industry in the Australian market has shown positive trends and Cochlear Ltd along with the industrial growth has been able to expand and develop. The development of the industry and its performance of the stocks can be better illustrated through graphical representation of the market over a period of time. This is represented in figure 3 below: Figure: 3 Health Care Industry Performances (ASX Limited 2011). There has been positive increasing trend in the sector. This also includes Cochlear Ltd. The increasing trend of the sector represents better opportunity for growth and expansion of the company as well as the sector. The improvements in the sector will lure several investors to invest in this industry that will boost the segment to enlarge and develop. Cochlear Ltd has been able to raise capital from the market that has been estimated to be around AUD 8.8million in 2010 for its research, innovation and technical advancements. Among the top 100 companies of Australia, Cochlear Ltd is in the fourth position according to 2010 figures with a market cap of more than AUD 3974 million (ASX Limited 2011). The value trend analysis of the industry has been less volatile but the average need has decreased below the shareholders’ expectation level. The value trend analysis of the sector has been represented graphically in figure 4 below for a period of time. Figure 4: Value Trend (ASX Limited 2011). There has been incessant performance by the industry over the period from 2005 to 2010. Due to its less volatility, the investors are attracted towards it as an investment option that will offer an average return. While preparing the investment portfolio, the industry represents a significant value as a strong sector to be included in the investment portfolio (ASX Limited 2011). Competitors Analysis Sustainability in Future The market is not that volatile and Cochlear Ltd has been able to expand in different parts of the world. The company holds major share of the market in the international market. They have lost certain market share in the American market. There are tough competitions as it highly involves innovation and technical advancement. Innovation and technical advancement are the biggest competitions that create the sustainability of the company in future. However, there are health problems and it cannot be fully terminated. Therefore, the company will be able to sustain in the future and is also expected to grow with innovative and technical advancements as they invest significant amount in researches to gain competitive advantages (Cochlear Ltd 2011). Diversification Since future is always uncertain, diversification can be a better opportunity for Cochlear Ltd as they are expanding and growing. The company has always focused upon the diversification of their product lines and they are investing huge amount for the research purpose to innovate enhanced devices. The diversification is within the sector and it will assist the company to deliver better value towards customers and shareholders (Cochlear Ltd 2011). In General Even with tough competitive environment, Cochlear Ltd has been able to increase its revenues and sales in the international market. The performance of the company within the tough international competitive environment can be determined with the increase in their performance indicators. In the segment of Cochlear implants there has been 7% growth. In the segment of Bone anchored (Baha) there has been decrease of 2%. However, the revenues have increased by 8%. The earning before interest and tax has increased by 13%. The net profit after tax has been increased by 16%. Earning per Share (EPS), the most important factor for firms and shareholders, showed enhanced performance, increasing by 15%. The shareholders have received better returns as there has been increase of 11% in the interim dividend payment (Cochlear Ltd 2011). The growth of sales in emergent market has been represented below in figure 5 Figure 5: Regional Split of Sale (Cochlear Ltd 2011) There has been growth in sales in different markets that shows that the company is gaining competitive advantage over its competitors in the international market. For long term achievements, for sustainable developments and to gain competitive advantage every year, Cochlear Ltd invests in Research and Development (R&D). This strategy of the company provides to achieve its objectives and future goals. References ASX Limited. 2011. Cochlear Limited (COH). http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&asxCode=COH (accessed 2011/03/22). ASX Limited. 2011. Health Care & Biotechnology Sector Profile. http://www.asx.com.au/documents/research/health_care_sector_factsheet.pdf (accessed 2011/03/22). Busby, P. A. & Et. Al. 2000. Journal of Lippincott Williams & Wilkins. http://journals.lww.com/ear-hearing/Abstract/2000/08000/Electrode_Discrimination_by_Early_Deafened.4.aspx (accessed 2011/03/22). Cochlear Ltd. 2011. Company Profile. http://www.cochlear.com/corporate/company-profile (accessed 2011/03/22). Cochlear Ltd. 2011. Financial Report. http://www.cochlear.com/files/assets/AGM_Presentation_19-10-2010.pdf (accessed 2011/03/22). Chute, Patricia M. & Nevins, Mary Ellen. The Parents' Guide to Cochlear Implants. Washington: Gallaudet University Press, 2002, Pg-187-199. Cochlear Ltd. 2011. Results For The Half Year Ended 31 December 2010 (H1 F11). http://www.cochlear.com/files/COH_Half_Year_08_02_11_Analyst_Final.pdf (accessed 2011/03/22). Cochlear Ltd. 2011. Investment in Research & Development. http://www.cochlear.com/au/why-cochlear (accessed 2011/03/22). Herald and Weekly Times. 2011. Profit Margins High For Cochlear. http://www.heraldsun.com.au/money/investing/profit-margins-high-for-cochlear/story-e6frfh66-1111115988270 (accessed 2011/03/22). Leonard, K, J. 2004. Critical Successful Factors Relating to Health Care Adoption of New Technology. http://www.improve-it-institute.org/KJL%20Publications/GuideToSuccessfulImplementation_3.pdf (accessed 2011/03/22). McDermott, H. J. & Et, Al. 2011. Journal of Acoustical Society of America. http://scitation.aip.org/getabs/servlet/GetabsServlet?prog=normal&id=JASMAN000091000006003367000001&idtype=cvips&gifs=yes&ref=no (accessed 2011/03/22). The American Journal of Otology. 2011. Improved and Simplified Methods for Specifying Positions of the Electrode Bands of a Cochlear Implant Array. http://journals.lww.com/otology-neurotology/Abstract/1996/11000/Improved_and_Simplified_Methods_for_Specifying.10.aspx (accessed 2011/03/22). Waltzman, Susan B. & Roland, J. Thomas. Cochlear Implants. US: Thieme, 2006, Pg 187-199. Read More