The MDCM Corporation - Case Study Example

 Table of Contents Table of Contents 1 Introduction 2 Quadrant Fall of MDCM 3 Strategic Goals of the Firm 5 Competitive Forces Analysis 6 Critical IT Objectives for MDCM 13 Conclusion 14 Works Cited 15 Introduction MDCM is recognized as one of the leading agreement manufacturers of medical devices in the world. Its main corporate domicile was in the United States along with nineteen other foreign subsidiaries located at thirty five cities. MDCM Corporation of United States was the oldest and leading subsidiary with United States Food and Drug Administration (FDA) registration. MDCM had been an expert in the medical devise contract manufacturing, clean room medical injection molding and the plan and invention of specialty assembly equipments in the medical devise manufacturing sector. The primary objective of MDCM is to offer end to end packages of medical device contract development service. Moreover, the firm used to work very closely with the customers as well as shared their risks and also rewards which also improved the designs of the manufactured equipments thus reducing the developmental cost. However, the company earned revenue of $1.12 billion in the year 2002’s second quarter, which was identified as a net loss of an amount $33 million. The firm could not sustain in the long run due to inadequate implementation of their operations especially as a result of improper information management and due to the improved global capabilities of the competitors (Jeffery, M. & Norton, F. J., “MDCM, INC.(A): IT Strategy Synchronization”). In this paper, the problems regarding the downfall of MDCM is described along with the strategic goals and objectives of the firm and the competitive environmental analysis of the firm is also conducted. Subsequently, the critical information technology (IT) objectives of the firm have also been identified. Quadrant Fall of MDCM MDCM is one of the foremost contract manufacturers of medical devices with main headquarter in the United States and having subsidiaries all round the world. It acquired success due to its policy of working closely with the customers of the company, but it could not sustain its position in the market among competitors. It failed due to various factors which was evident in the second quarter of the year 2002 when the company posted its fifth successive quarterly loss. The factors are stated below: Global Capabilities of Foreign Competitors MDCM is one the largest manufacturers by contract in the medical devices sector. Its primary aim was to offer the customer with innovated quality parts and products at the time of requirement. Unfortunately, MDCM could not sustain its position in the market as the foreign competitors started capturing the market with products of improved designs and features, which proved much more beneficial for the customers (Jeffery, M. & Norton, F. J., “MDCM, INC.(A): IT Strategy Synchronization”). This affected the brand awareness as well as the customer loyalty which reduced the productivity and ultimately lead to the downfall of MDCM. Poor Coordinated Manufacturing System The manufacturing system of MDCM was quite poor as compared to the competitors. It used to purchase same materials as well as parts from varied sources all over the world which created a threat for the company to maintain its position in the market. Moreover, due to improper manufacturing system, both the workforces as well as the machines were utilized on a seasonal basis and at times to the fullest extent. The manufacturing system of the company was facing this type of problem due to its inappropriate business strategy as well as operational strategy. Moreover, the manufacturing system lacked accurate planning which led to ultimate reduction of brand awareness, market share and profitability among the competitors of the market. These underlying barriers marked the downfall of MDCM. Poor Sales Department The sales department of MDCM was also in a degraded state. The managers lacked the proper process of marketing the products of the firm in this competitive era. Moreover, the products knowledge was also inadequate which created inefficiency on their part. In addition, most of the times, the managers used to spend their times bidding among each other instead of selling the products. Thus, it hampered the business of the company to a large extent creating a substantial gap between the target customers and the company and it ultimately declined the brand image of the company (Jeffery, M. & Norton, F. J., “MDCM, INC.(A): IT Strategy Synchronization”). Operating and Profit Margins MDCM was the largest company in the sector of medical apparatus but the operating and profit margins were quite appalling as compared to others in the market. It was due to its ineffective corporate strategy and business objectives. Moreover, the employees also lacked the efficient knowledge required for performing the individual activities. This reduced the brand awareness as well as the competitive position in the market, which ultimately affected the productivity and profit margin of the company resulting in downfall of the firm (Jeffery, M. & Norton, F. J., “MDCM, INC.(A): IT Strategy Synchronization”). High Internal Cost High internal cost was also another significant factor for the downfall of MDCM. As the internal coordination among the departments was not efficient as well as there was reduction in the level of employees’ knowledge and techniques required for marketing or selling the products in the market among competitors. It resulted in reduction of the market share and productivity of the company. As a consequence, MCDM lost four out of every ten customers and as a result could not resist the competitive pricing scenario of the market (Jeffery, M. & Norton, F. J., “MDCM, INC.(A): IT Strategy Synchronization”). Thus, it can be stated that all the above discussed factors collectively led to the downfall of MCDM. Strategic Goals of the Firm MDCM is one of the leading deal manufacturers of medical devices in the world. But due to inefficient business and operational strategy, the market share of MDCM declined which affected the productivity of the company to a great extent. The strategic objective at this time of downfall is primarily to focus on the assurance of delivering quality products and parts at exact time (Jeffery, M. & Norton, F. J., “MDCM, INC.(A): IT Strategy Synchronization”). This can enhance the customer satisfaction as well as enhance the loyalty of the customers towards the company. This can also augment the growth and the profitability of the firm. Moreover, appropriate coordination with the customers by sharing both the risks and the rewards can also boost the market share of the company in this turbulent situation. Changing the traditional working strategies in order to develop innovated designs of manufactured products as well as enhanced information technology (IT) system in the organization can also improve the brand image and market share among the competitors. In addition, the management of the company, in order to handle the situation, thought of major acquisitions to reach out to large customer segments on a global basis. This can augment the profit margin of MDCM and enhance its position as well (Jeffery, M. & Norton, F. J., “MDCM, INC.(A): IT Strategy Synchronization”). Thus, it can be stated that above discussed goals can facilitate MDCM to regain its position in the market as a leading name. Competitive Forces Analysis Strategies, in an organization, exist at various levels such as corporate strategy, business unit strategy and operational strategy. Examining the market scenario and the overall cost, capabilities and customers for policy development is known as strategic analysis. Competitive and environmental analysis is the other aspect of strategic analysis. Competitive and environmental analysis is defined as the purpose to examine and recognize the market conditions along with the demands of customers and the position of the competitors. The competitive scenario of an industry or firm can be examined by using Porter's five forces analysis. It is also recognized as the industry and competitive analysis (Rice, “Adaptation Of Porter’s Five Forces Model To Risk Management”). Porter’s Five Forces Model Source: (Rice, “Adaptation of Porter’s Five Forces Model to Risk Management”). The five forces of this model include the intensity of rivalry among existing competitors, the threat of new entrants, the threat of substitute goods or services, the bargaining power of buyers, and the bargaining power of suppliers (Rice, “Adaptation Of Porter’s Five Forces Model To Risk Management”). Intensity Of Rivalry Among Existing Competitors Intensity of Rivalry among Existing Competitors signifies the degree of competition among the existing firms. The extent of rivalry among the existing firms determines the level of revenues generated from the market. The degree of rivalry depends on the number of competitors, high level of investment, low brand loyalty and highest level of capacity utilization. The intensity of rivalry is high in the medical devices industry among the existing competitors because of large number of competitors. In case of MDCM it was observed, in the industry the rivalry is high among the existing players as the loyalty of the customers on the brands were very low due to the use of innovative and developed strategies by the competitors to enhance the market share and profitability (Rice, “Adaptation Of Porter’s Five Forces Model To Risk Management”). Threat of New Entrants Threat of New Entrants refers to the threat of new competitors in the industry. A commercial industry can attract more competitors for achieving more profits. The high threat of new entrants can pose a positive effect on the competitive environment of the existing competitors and also influences the capability of existing firms to achieve revenues. The high threat of entry identifies that new competitors are likely to be attracted to the industry. The market share and profitability of existing competitors can be threatened or decreased due to entry of the new competitors with high product quality or price levels. In case of MDCM, the threat of new entrants is high due to the global demand of the medical devices and the attractiveness of the industry due to prospect of growth and attaining high profit margin if a company is capable of providing quality products (Rice, “Adaptation Of Porter’s Five Forces Model To Risk Management”). Threat of Substitutes The threat of substitutes is defined as the availability of substitute products that the consumer can purchase. A substitute product is the manufactured goods of another industry which offers same benefits to the consumer as the industry products. It also shapes the competitive arrangement of an industry. There are several factors which determine the high threat of substitute products in an industry. Primarily, if the substitute products are cheaper than the industry’s and moreover, if the substitute products are of equal or superior quality compared to the industry’s product, the threat of substitutes is high. And finally, if the benefits of the substitute product are identical or superior to the industry’s product, then the threat of substitutes are high. In case of MDCM, the threat of substitutes is medium as the substitute of a quality product of MDCM is quite difficult to be matched by any competing rival as the medical devices preparation requires technically superior manufacturing process which may not be able to be provided by others (Rice, “Adaptation Of Porter’s Five Forces Model To Risk Management”). Buyer Bargaining Power According to Porter’s five forces model, buyer bargaining power is defined as the pressure exerted by consumers on businesses to provide higher quality products, enhanced customer services, and lower prices. Bargaining power of buyers is analyzed based on the perception of the sellers in the market. The buying power can be high due to various factors such as if there are many buyers and few sellers, low switching cost of the buyers, high threat of backward integration, large volumes of purchase by customers, and availability of substitute products in the market. In relation to MDCM, the bargaining power of the buyers is high due to the availability of substitute products, large number of buyers as well as low cost requirement for switching over to competitors’ products and adequate knowledge about the products (Rice, “Adaptation Of Porter’s Five Forces Model To Risk Management”). Supplier Power Supplier power is defined as the stress exerted by the suppliers on businesses by raising the prices and reducing the quality as well as the availability of the products. The power of the suppliers can become high if the switching costs of buyers are high, the buyer is not price sensitive and uneducated, highly differentiated products and unavailability of substitute products can enhance the power of suppliers. However, in case of MDCM, the supplier power is medium because there are a number of suppliers available in the indystry. Thus, it can be stated clearly that the environment of MDCM is highly competitive and advanced and therefore advanced techniques and strategies were required for sustaining the position among competitors in the market. Enhanced business and corporate strategies were required to improve the market share as well as the brand image of the company (Rice, “Adaptation of Porter’s Five Forces Model To Risk Management”). Critical IT Objectives for MDCM According to the observation made from the case, it can be inferred that MDCM faced certain hurdles in their operational process due to improper information management which emanated from the fact of inadequate IT implementation. It was one of the side effects after implementation of Horizon 2000. In the year 2002, Shawn Atkins was hired by Max McMullen to solve the problems regarding IT. The primary objective of IT was to implement a smooth information flow among the departments, subsidiaries, management, suppliers and logistics (Jeffery, M. & Norton, F. J., “MDCM, INC.(A): IT Strategy Synchronization”). IT needs to enhance the total value chain of the organization. This can assist the company in meeting the demands of the customers with accurate quality and at correct time, which can enhance its market share, profitability and position. Proper IT system can also augment the inaccurate forecasts and scheduling regarding production systems and facilitate proper utilization of stuffed inventories in the supply chain. Appropriate IT structure should also be implemented to enhance the systems of networking, logistics and transportation, human resource, material procurement planning, pricing, invoicing, operating systems as well as in finance departments in order to ease the information flow in the organization. This can improve the market position and brand image among the competitors and customers as well (Jeffery, M. & Norton, F. J., “MDCM, INC. (A): IT Strategy Synchronization”). Conclusion MDCM was the leader in the segment of medical apparatus but due to inefficient IT systems, its position declined in the market. Thus, it can be stated that appropriate IT system should be implemented in order to improve the information flow in the organization. Moreover, it can enhance the total value chain including the logistics, human resource, suppliers, customers and subsidiaries as well. In addition, pricing of the products, invoicing techniques, planning for production, forecasting and transportation should also come under the influence of IT system. Conclusively, it can be noted that a proper IT system should be implemented in order to maintain appropriate business and corporate strategy which can boost the market share and brand awareness of the company (Jeffery, M. & Norton, F. J., “MDCM, INC.(A): IT Strategy Synchronization”). Works Cited Jeffery, Mark. & Norton, Joseph F. MDCM, INC.(A): IT Strategy Synchronization Kellogg school of management, 2006. Rice, John F. “Adaptation of Porter’s Five Forces Model to Risk Management”. December 03, 2011. Defense Acquisition University, 2010. Read More