MDCM: Contract Manufacturer of Medical Devices - Case Study Example

Table of Contents Introduction 2 Fall of MDCM 3 Strategic Goals of MDCM 4 Competitive Forces Analysis 5 Threat of Entry 6 Threat of Substitutes 6 Bargaining Power of Buyer 7 Bargaining Power of Supplier 7 Competitive Rivalry 9 Critical IT Objectives for MDCM 9 Conclusion 11 Works Cited 12 Introduction Organizations in recent times face difficulties in managing information assets and this problem arises due to inappropriate information management. Unavailability of information can result in loss of customers’ expectations and increase in operational expenses which can impact on the business of a company. Thus, it is important for every company to introduce Information Technology (IT) and align it with the business objectives to gain full benefit of it and induce sound business process. Every big organization uses IT for accurate flow of data in all parts of the business. It can help to make proper budget, management of inventory, appropriate decision and ultimately reduce operational costs. The objective of the paper is to create, align and express IT strategy of a medical device and equipment manufacturing company named MDCM, Inc which had confronted declining business performance due to ineffective information management (Jeffery & Norton, “IT Strategy Synchronization”). Fall of MDCM MDCM, Inc is one of the leading medical device and equipment manufacturing enterprises, which operates its business internationally. Though it had a strong position in the market and competitive pricing, the company had undergone losses in recent times. From 1998 to 1999, the performance of MDCM was quite low and it had lost four major clients at that period. In the year 2001, the loss of MDCM was almost 98 million USD which had increased to 1.12 billion USD by 2002 (Jeffery & Norton, “IT Strategy Synchronization”). MDCM had been failed in four quadrants: Information Unavailability: The foremost problem for failure of MDCM was lack of information. It has been observed that MDCM has effective marketing and sales personnel, but the company wasted whole lot of time on those tasks which can be easily performed by ‘self–service’ system. The employees face difficulties for getting proper information at appropriate times which is essential for satisfying customers’ requirements. As a result of information unavailability the company was unable to fulfill customers’ requirements on time (Jeffery & Norton, “IT Strategy Synchronization”). Material Unavailability: The other problem for failure of MDCM was material unavailability. Though MDCM had plenty of suppliers, it faced difficulties in acquiring materials due to ineffective forecasting. The company always rushes for orders from the suppliers due to lack of appropriate production schedule planning which in turn creates confusion in the entire production system (Jeffery & Norton, “IT Strategy Synchronization”). Poor Coordination: Poor coordination was the other quadrant where MDCM had failed. Though MDCM had been a big player in the medical devices and equipment industry, it had poor coordination within several production plants. The poor coordination among manufacturing departments resulted in confusing situation in the organization. Where some manufacturing units had more idle time, other units performed overtime. The lack of synchronization caused improper allocation of work and thus company was unable to utilize its full capacity to operate production (Jeffery & Norton, “IT Strategy Synchronization”). Diversified Accounting System: Diversified accounting system was the other quadrant for failure of MDCM. The company used several tailored system in numerous departments and each system had different standards. As a result, the assignments or projects of MDCM at times contradicted or intersected with each other. The diverse systems could not synchronize with each other and it caused defective results in accounting. The defective results in accounting led to incorrect predictions, scheduling problems, and overstuffed stocks which in turn impact on supply chain management operations (Jeffery & Norton, “IT Strategy Synchronization”). Strategic Goals of MDCM The main strategic goal of MDCM is to increase its market presence and make a strong position in the industry. Due to the above discussed problems, the company had faced several difficulties and accordingly experienced weakening competitive advantage. The implementation of IT is aimed for swift flow of information which can help managers to take decisions faster and accurately and also help the sales personnel to access information when needed which can reduce the wastage of time and ultimately increase operational efficiency (Jeffery & Norton, “IT Strategy Synchronization”). The other goal of MDCM is to decrease the internal operations expenses. IT can be used for recognizing functional and idle parts of organization and effective utilization of all resources for business purposes. In this way, it can increase the capacity of the organization (Jeffery & Norton, “IT Strategy Synchronization”). MDCM also seeks to maintain good association with their customers and suppliers. It is the goal of the company to develop a customized system which is best suited with company’s objectives and culture. Effective implementation of IT can help to reduce the operational expenses and ultimately the company can enjoy lesser product cost (Jeffery & Norton, “IT Strategy Synchronization”). Competitive Forces Analysis The medical devices and equipment industry includes ranges of medical and therapeutic tools, surgical machines, equipments, and apparatuses. This industry is growing rapidly in the USA. In 2002, the production of medical devices and equipment industry had surpassed 70 billion USD and had a growth rate of 6% per annum. This industry is highly regulated and the organizations which deal in medical devices and equipment devote substantial amount of capitals for product sanction procedure, medical trials, user subscriptions and plant inspections. The USA is considered as one of the largest markets of medical devices and equipment and is also popular for producing quality medical devices by applying advanced technology. In the year 2005, the value of “medical device and equipment” industry in the USA was almost 80 billion USD and it is expected that the USA market will stay competitive within the international market (International Trade Administration, “World Market and Trends”). The competitive environment of medical devices and equipment industry can be judged by Porter’s five competitive forces analysis as below: Threat of Entry The threat of entry in medical devices and equipment industry is quite high because an enterprise must fulfill several medical requisites before presenting any new product in the market. This industry is characterized by high investment on research and development compared to other sectors. Organizations that desire to enter in medical devices and equipment industry need large amount of capital to cope up with competitors’ manufacturing abilities. The delivery of products usually happens by direct sales persons, which requires maintaining strong relationships with doctors or physicians. There are several big players in this industry that have already developed a strong brand image due to quality, technology and pioneering products and any new comers will have to face significant difficulties to make their position in the market (Wipperfurth & Et. Al., “Minnesota Medical Device Cluster”). Threat of Substitutes The threat of substitutes in medical devices and equipment industry is medium because in order to develop a perfect substitute the products need to do similar functions. There are certain substitutes that exist in the market and physicians can choose according to their preferences. Substitution in medical equipments is common but not pertinent to every product. But in future as technology advances, the threats from substitute products may increase due to emergence of new advanced equipments which can serve similar purpose. Overall it can be said that though alternative equipments or devices might arise in the market, the demand for medical products will always be strong (Wipperfurth & Et. Al., “Minnesota Medical Device Cluster”). Bargaining Power of Buyer The bargaining power of buyer in medical devices and equipment industry is strong. The major customers of medical devices and equipment are usually hospitals, nursing homes or doctors. Their bargaining power is strong because individual physician’s personal decision has substantial effect on the demand of medical products and brands they use or recommend. However, as the cost of healthcare increases, more hospitals are involving doctors or physicians for negotiating the purchasing decisions which increases their bargaining power. Another tendency which increases the bargaining power of buyer is the fact that hospitals share the price related information with each other which help them to negotiate more for low price (Wipperfurth & Et. Al., “Minnesota Medical Device Cluster”). Bargaining Power of Supplier The bargaining power of supplier is medium in this industry due to less risk of switching cost. There are several suppliers for providing medical components which are used for manufacturing medical equipments, thus the threat for changing from one supplier to the other is comparatively low (Wipperfurth & Et. Al., “Minnesota Medical Device Cluster”). Competitive Rivalry The competitive rivalry in the medical devices and equipment industry is high because there are several big organizations which compete with each other. Organizations use product differentiation strategy to accomplish competitive edge over other firms. The strategic misperception of competitors make the rivalry stronger in this industry and due to fluctuating economic conditions and health care development, this rivalry is expected to grow in near future (Wipperfurth & Et. Al., “Minnesota Medical Device Cluster”). Critical IT Objectives for MDCM The critical IT objectives of the organization are to reduce the confusion due to lack of coordination, because it is necessary to acquire proper information for satisfying the customer requirements on time. From the above analysis, it has been observed that the flow of information was quite slow in MDCM due to ineffective business operation system. Thus, the IT objectives of MDCM can be: Improved Networking: MDCM has lack of internal networking which had caused many difficulties in business operations. Through IT, MDCM attempts to empower effective networking access between all subsidiary companies and headquarters. Customized System: MDCM has different tailored systems which had resulted in increased management expenses due to diverse custom sales, dissimilar standards and different funding. Thus, IT will be used for minimizing the expenses and the misperception by applying similar systems with comparable standards in all departments and subsidiary companies. Supply Chain Management: The other objective of information technology is to increase the operation of supply chain management. IT will be applied for developing internal information processes such as ordering system, rapid reactions to customers’ queries, and better account management among others which will strengthen the management of supply chain. Better supply chain management can improve relationships with the suppliers as well as customers. Operational Efficiency: IT will be used for increasing the efficiency of business operations. Through implementation of IT, the managers of MDCM will effectively coordinate with each other and develop the production schedules, forecasts, and budgets appropriately. Thus, the organization can operate its business by using full capacity of every department through increasing the operational efficiency. As a result, the excess administration expenses will reduce and MDCM can successfully recover its position in the market. Conclusion MDCM was one of the big players in the medical devices and equipment market before it had suffered heavily from increasing operational expenses and intense rivalry from other firms. From the analysis, it can be observed that IT has great significance on organizational performance. The strategy of IT is intended for increasing the business performance of MDCM. Through implementation of effective information technology, MDCM can successfully reduce the internal operational expenses and increase productivity of employees by smooth flow of information through all areas and departments. Therefore, MDCM can compete effectively with other rivals in the industry. It can be observed that the objectives of IT are balanced with the business objectives of MDCM which can help to increase its profit margin and secure a strong position in the international market. Works Cited Jeffery, Mark. & Norton, Joseph F. IT Strategy Synchronization Kellogg School of Management, No Date. International Trade Administration. “World Market and Trends”. November 30, 2011. Medical Equipment Industry Definition, No Date. Wipperfurth, Adam. & Et. Al. “Minnesota Medical Device Cluster”. November 30, 2011. Microeconomics of Competitiveness, 2010. Read More