Medical Device Contract Manufacturing - Case Study Example

Table of Contents Introduction 3 The Strategic Goals of the Firm 4 Why Should Business Have Strategic Goals? 4 Strategic Planning To Achieve Strategic Goals 5 Strategic Planning Offers the Following Benefits 5 Strategic Goals and Competitive Advantage 7 7 The Competitive Environment of the Firm 7 Tools for Analyzing the Competitive Environment of the Firm 8 MDCM Incorporation 8 A Brief Profile of the Company 8 The Position of the Company 9 Defining the Overall Strategic Goals of the Firm at This Time 10 10 SMART Analysis 11 The Competitive Environment around MDCM 13 The IT Objectives of MDCM 13 Conclusion 16 References 17 Introduction Business organizations have well defined objectives. They explain the very purpose for which the organization is into business. A business organization can have different kinds of objectives such as- Providing goods and services to the society at reasonable prices Maximizing shareholders return Maintaining certain standards of quality Environmental consciousness The Strategic Goals of the Firm A business organization is a perpetual entity. It is not created to exist for a day. It is assumed that the business will continue even if its prompters die. In order to exist for a considerable period of time, business need to have a well defined long term goals. Long term goals are known as strategic goals. Strategic goals are set after a thorough analysis of the business environment. There are different management tools such as PEST analysis, SWOT analysis to scan the business environment (Work911/Bacal & Associates Business & Management, “What Are Strategic Goals?”). Why Should Business Have Strategic Goals? A successful business is one which has a clear vision. The vision of a business implies where it wants to see itself after a certain period of time. Strategy helps to convert this goal into reality. Therefore, in this context, strategic goals denote the long term goals of the organization. The long term goals should be absolutely specific, quantifiable and practical, achievable, and completed within a definite time span. The purpose of having a strategy in place is to achieve competitive advantage over others. Managers may have different parameters for setting strategic goals. One common parameter is profit. However, Peter Drucker is of the opinion that attaching single most importance to profits is not correct. A host of variables can also be considered for setting strategic goals. These variables are innovation, market share, employee productivity, performance of the management, company goodwill, and the physical and financial resources of the firm. It is quite possible that two firms in the same industry can have different strategic goals. For example, the strategic goal of a growth oriented firm cannot be the same as that of a mature firm in the industry. Strategic Planning To Achieve Strategic Goals Through strategic goals, one can set a long term target of moving from where one is currently in to where one wants to be. Through strategic planning, business can accomplish its strategic goals. Strategic Plans combines mission, vision, goals, objectives, SWOT within the framework of strategy. It also provides a sort of connection between missions, visions and goals. Strategic Planning Offers the Following Benefits Explains the most important thing to be done Helps people to take decisions on a daily basis Creates an environment for people to think strategically It is important to bear in mind that no strategic plan can be applicable to all organizations (Lewis & ET. Al., “Management: Challenges for Tomorrow's Leaders”). Strategic Goals and Competitive Advantage One of the major reasons for business to have strategic goals is to acquire strategic advantages. The strategic advantages could be in the form of superior manpower, financial strength, technology, and control over vital ingredients of production. Moreover, goals provide direction to the management about the success of their plans (MyStrategicPlan, “One-Page Strategic Plan”). The Competitive Environment of the Firm A firm is influenced by lot of external variables. These variables are the government, competitors, technology, customers, and media. These variables influence the firm in different ways. In order to deal with these external variables which constitute the competitive environment of the firm, a firm needs to do a proper competitive environment analysis. Moreover, the external environment of the firm is never static. In order to ensure its survival a firm needs to constantly evolve itself through change. Moreover, a firm can succeed only if it can exploit the opportunities that come with challenge. Tools for Analyzing the Competitive Environment of the Firm The competitive environment, which is dynamic, is extremely difficult to foretell. However, a firm should analyze its competitive environment because it offers lot of opportunities. There are certain tools that can help a firm to analyze the environment. These tools are – Competitiveness Profiling Perceptual Mapping The Five Forces Model (Kachru, “Strategic Management”) MDCM Incorporation A Brief Profile of the Company Founded in 1972, it is the world’s largest contract manufacturer of medical devices. The abbreviation MDCM stands for Medical Device Contract Manufacturing. Though incorporated in the United States of America, the company has branches in many foreign countries. The purpose of the company is to provide medical device contract manufacturing services. Since it does its business activities through contract, it in the past did not do any research and development activity nor marketing. The company operates on a very simple philosophy: ‘Listen to the customers and provide them with the best that they can afford’. The company’s sophisticated machinery helped to provide quality service to the customers. The company entered into a joint venture to produce medical syringes. The company also designs medical equipments. The Position of the Company MDCM is a leading company in the manufacture and packaging of medical equipment devices. The company has held the notion that to succeed in the medical contracting and packaging business, it is important to understand what the customer’s wanted. Therefore, the company has entered into partnership with its customers in designing medical equipments. The company followed this policy to optimize its manufacturing costs. This policy of the company won it plenty of goodwill among the customers. As result, MDCM’s share in the American market increased considerably. It opened branches in several cities of America. However, the company believed that in order to expand, it needed to make its presence felt overseas. It started entering into foreign countries through acquisitions. However, growth through acquisitions brought with it its own share of problems. It was getting difficult to integrate the corporate goals of the organization with the strategic goals of the organization. The company started incurring losses. The various departments of the company were facing difficulties in their operations. The competitive environment of the company also started to change adversely against it. Several foreign firms with better capabilities started entering into the US market. The firms cost of operation began to escalate. As a result the prices of the facilities had to be increased. Defining the Overall Strategic Goals of the Firm at This Time The basic goal or objective of the company is to have a dedicate strategy of information technology that would provide the company a competitive advantage and also to align the information technology with the corporate strategy. The different other strategic goals of the firm at this period should be – Increase Brand Penetration – All the subsidiaries should sell a single brand. The marketing and sales function should be clustered around the regional subsidiaries. The sales manager has to be located near the customer’s headquarter. This measure will increase brand penetration. The proliferation of brands across different subsidiaries will increase the cost of marketing. Streamline The Supply Chain Of The Company – This can be done by reducing the material purchase and outsourcing all in-bound and out-bound logistics. Reduce The Cost Of Operations – The cost of operation can be reduced by overhauling the production facility. All production facilities with obsolete technology must be got rid off. Reduce Manpower To Boost Efficiency – The present manpower should be reduced. The purpose of doing this is to improve the efficiency of the existing staff. Attach Top Priority To Information System – The information system, which permeates all the departments, should be provided maximum importance. All the departments are dependent on technology for their functioning. Strengthening the Information System will strengthen these departments. SMART Analysis The SMART Analysis comprises of the following: Specific – The specific objective is that to form a dedicated IT strategy to align with the corporate strategy. Measurable – The management of the company should take care of the fact that if the newly laid strategy is contributing towards the intended organizational objectives. Achievable – The objective should be achievable. Having a dedicated IT strategy and aligning the same with the corporate strategy definitely falls in this category. Realistic – The management should allocate the requisite resources so that they can achieve the strategic objective of aligning the IT strategy with the corporate strategy. Time – The management should have a well defined time frame by which the objectives are to be achieved and take every possible measure to adhere to it. The Competitive Environment around MDCM Entry Of Foreign Competitors – Several foreign firms with better technical capabilities started to enter the US market in the late 1980’s. This posed a threat to MDCM. This is because MDCM enjoyed a big portion of the market before the entry of these companies. But, with superior technical skills and productivity, the new firms ate into MDCM’s market share. Customer Base Confined To US – This also created a problem for the company in two ways. First, due to the concentration of customers around it and close association with them, the prices could not be increased. Moreover, the domestic market for the company had become saturated. The IT Objectives of MDCM A Complete Overhaul Of The IT Department – It is important to make the IT Department responsible for looking after the projects and its role should not be confined to planning only. It is equally important to streamline costs and standardize the platforms and standards. Due to various standards and platforms used in different departments, confusion was created in the day to day running of the company. For example, different platforms and customized IT solutions were used in different subsidiaries. The confusion in IT impeded the flow of information across several departments. They were denied of valuable information that was required for decision making. Scheduling became difficult; inventory started increasing due to demand deficit. Moreeover, the orders of the customers could not be met on time due to slow pace of information flowing in the organization. Different departments used different kinds of systems. A few prominent among them were finance, human resource, sales analysis, forecasting, pricing, invoicing, material requirements and planning, logistics and customer support, e-mails and networking, customs and duty support, operating systems and databases. There were different locations of stationing the systems. The immediate impact of a flawed IT system was cost implications. The cost of operations increased and with each project delay, the cost of operations increased sharply. Identification Of Leadership – Suitable leadership capable of handling the overhaul in the IT Department is necessary. The IT Department, which is one of the most important departments in the organization, has not been functioning properly.As a result of this, the other departments, which are very much dependent on it for support got adversely affected. This led to the rise in cost and lessening of organizational efficiency. The reason why the IT Department had not been functioning properly was lack of proper leadership to run it efficiently. Therefore, only a strong leadership can help the department achieve its potential. Creation Of A Global IT Infrastructure – A global IT infrastructure needs to be created. The purpose of doing this is to bring uniformity in operations among the parent company and the branches located overseas. Conclusion This was a case of how an American firm can make a turnaround in the face of global competition. However, how successfully technology can be made use of, depends on the business model of the firm. Xerox, for example harnessed the power of technology through its business model of spin-offs. (Chesborough & Rosenbloom, “The Role Of The Business Model In Capturing Value From Innovation: Evidence From Xerox Corporation's Technology Spin‐Off Companies”). Firms that invest considerably in innovations derive the most competitive advantage. Moreover, firms investing heavily into innovation at the cost of other resources also stand to gain (Chandy & Tellis, “Organizing for Radical Product Innovation: The Overlooked Role of Willingness to Cannibalize”). References Chesborough, Henry & Rosenbloom, Richard S. “The Role Of The Business Model In Capturing Value From Innovation: Evidence From Xerox Corporation's Technology Spin‐Off Companies”. December 01, 2010. Industrial and Corporate Change, 2010. Chandy, Rajesh K. & Tellis, Gerard J. “Organizing For Radical Product Innovation: The Overlooked Role of Willingness to Cannibalize”. December 01, 2010. JSTOR, 1998. Kachru, Upendra. Strategic Management Excel Books, 2005. Lewis, Pamela & Et. Al. Management: Challenges for Tomorrow's Leaders Cengage Learning, 2006. MyStrategicPlan. One-Page Strategic Plan MyStrategicPlan, 2008. Work911/Bacal & Associates Business & Management. “What Are Strategic Goals?” December 01, 2010. Planningmaster, 2010. Read More