Monday, December 9, 2019

Strategic Management Report Of Given Imaging Company

Question: Describe about the Strategic Management Report of Given Imaging Company. Answer: Introduction With the increased competition, globalisation, technological advancement and the need to meet unique patient needs have resulted in the need of a rethinking of the companies approach to strategic management. This allows the company to critically evaluate their market, performance as well their competitors and develop various strategies that earn the company a competitive edge over their competitors resulting in maximum shareholder investment returns. This report, however, will focus on Given Imaging's and more specifically its development of Camera pill which is heavily relied on by most medical practitioners to diagnose gastrointestinal tract ailment. Therefore, this report evaluates the strategic management approaches that Given Imaging's deploy to achieve and maintain competitive market advantages. To achieve this, the report firstly discusses the Given Imaging's external environment in terms of the general operating environment, industry environment, and its internal environment. This will be achieved by discussing situational analysis through PESTEL and SWOT techniques. From the analysis, political, economical and cultural environment is found to be favourable to the growth of the company while ecological and legal environment is found to pose a hindrance to the growth of company. The internal environment will be analysed through analysis of companies resources, core competencies and company capabilities to exploit market opportunities. In the SWOT analysis the company is found to enjoy strengths emanating from human resources, distribution and market reach. Weaknesses are high cost of training and high employee turnover which negatively impact the company marketing strategies. The opportunities emanates from political and economic environment while threat are related to ecological and legal environment. The report will discuss various strategic market growth options including expansion to new foreign units, increase advertisement and widening of the service line in the existing market. Finally, the report gives a recommendation based on the discussion and observation of the company. Company Overview According to Iddan and Swain (2004) Given Imaging is an Israel-based company founded in 1998 by Electro-optical Engineer Gavriel Iddan. The founder of the company developed a medical device, Camera pill that used to send visual images of the gastrointestinal tract to help in locating and diagnosing small intestine ailments. In the year 2014, Given Imaging was acquired by Covidien, a Dublin-based company for $860 million which later Medtronic for $49.9 billion in 2015 (CNN, 2014). The acquisition has allowed the enjoy economies of scale, a larger market share access more resources as well more competent personnel in research, managerial and marketing department. Nevertheless before acquisition, the company has enjoy a relatively positive market performance as indicated by tremendous revenues and net income growth between the year 2003 and 2012 as illustrated in the diagram below; Figure 1; Given Imaging financial performance Source: Given Imaging (2013) However, in the early days the company enjoyed a market monopoly in Endoscopy market but later faced intense competition due to increased awareness of the benefits technology. Among the major competitors includes Olympus, IntroMedic, and Fujifilm Holdings To reach its consumers Given Imaging operated its direct sale in various markets in USA, Japan, Canada, Hong Kong, and Latin America countries. This was made possible due to free media advertisement. External Analysis General External Operating Environment Analysis According to Rothaermel, (2015) the popular tool applied in analysing the environment is PESTEL which aid in analysing the external operating environment encompassing social ecological, political, economical and technological factors. Figure 2; PESTEL framework Source; Rothaermel, (2015) Political environment The medical sector industry is to a larger extent affected by the political policies adopted by different countries of operations (Toth, 2010). Among the political factors included stability, taxation, tariffs and trade treaties among the trading countries. These factors directly affect the company policies and budget. Strict control measures adopted by most of the countries in relation to medical equipment hygiene have resulted in increased manufacturing cost. In addition, difference in quality measures in different countries also poses a challenge to the company products (Keating and Loughlin, 2013) Nevertheless, the increased need to meet to offer affordable healthcare to the most of the government in most of countries most countries has positive impact that allows thriving of competitive strategies adopted by firms in the sector Economic environment Although the industry faced challenges during the economic depression, the economic recovery in the major world market has presented a positive outlook for the sector. The improved economic environment implies increased employment rates and higher incomes to the targeted consumers corresponding to the higher earning to the sector. Further, the stabilisation of the inflation and interest rates European and Asian markets provides a stable and predictable market environment for the growth of the industry Holmes et al. 2013). These factors present a favourable environment for companies to implement various strategies without worries of negative economical impact. Socio-economical environment As noted by Lupton (2012), the medical technology industry and health care industry has experienced some great changes in the recent years characterised by increased attention to the promotion of health and well-being of the society as well as incorporating the high standards to the conscious consumers in the market. In addition, the market is composed of highly informed consumers, technology savvy with unique lifestyles that demands unique health products. Nevertheless, the changing lifestyle with higher urbanised society has resulted in increased level of the digestive tract diseases presenting a market to the Medical technology industry players with an opportunity to expand their market in providing solutions (Frenk et al. 2010). These kinds of characteristics coincide to the firms need to aggressively implement various strategies. Ecological environment As noted by (Porter, 2011) consumers are increasingly becoming conscious on the environmental impact of medical products they buy and use. In addition (Haufler, 2013) noted that by virtue, most the medical technology companies are based in European countries and America, they must adhere regulations in regard to waste disposal as set by the individual. To minimise the negative environmental impacts, majority of the medical technology companies have embarked on recycling processes and enforce strict waste disposal mechanisms to avoid heavy penalties imposed on the companies (Brown and Sovacool, 2011). As a result, the companies have faced increased scrutiny and supervision in the manufacturing negatively impacting the company strategies implementation. Legal environment The legal enacted in relation to product safety, employment laws, financial regulations and health safety laws largely affects medical technology, companies productions process, marketing and operations (Tombs and Whyte (2010). These regulations mainly aim at providing consumers assurance that various product in the market distributed under set hygienic conditions. Further, most of the companies have guarantees safety of their product through seals that ensure they are handily faked in the market. Through strict labelling requirements, manufacturers must clearly display the various important details including handling measure and expiry dates. To promote and protect the worker health and safety, most government demands that firms must assess all health and safety risks (Jones Gordon, 2013). On employees, various countries regulation have set the minimum wage, working age as well as maternity leaves durations among the workers. These strict laws, negatively impact firms in the indust ry. These factors impacts negatively the implementation of competitive strategies. Technological environment Among the technological factors that are likely to impact the medical technology companies are related to rate of technology transfer, government spending on research and development as well innovation development in various market (Kumar and Siddharthan, 2013). More specifically, increased usage of mobile technology and internet where almost all adult have access have result to high reliance on technology to market and monitor distribution of the medical equipment. To market their product most of the companies have resulted to online platforms to reach out to existing and new consumers. To support the industry, the government have increased their investment in the medical field by increasing the budget allocations, building training facilities as well as expanding research and development centres in their respective countries (Jakovljevic, 2013). Some governments like UK have offered subsidies to the companies in the medical technology to promote growth of the industry. The Industry Environment Analysis The sector environment has a direct effect on the company's strategic competitiveness in the whole sector. This environment is analysed through five forces of competition as discussed below: Threat of new entrants New entrant threat is posed by both direct and indirect competitors who are appealing to new markets and rivalling the firms on prices and customer choices (Robinson, 2009). The medical technology industry is a small and a very competitive. As such, in an attempt to enter the highly lucrative market few companies enter the market every year. This can be attributed to high cost and regulation in the medical sector (Enthoven, 2014). For Given Imaging is reputed as among the industry pioneers been around for over two decades with a history of quality and innovative products that meets the consumer expectations (CNN, 2014). In addition the health sector in the last decade have experienced high rate of mergers and acquisitions further inhibiting success of new market entrant thus allowing already established companies to enjoy a considerable share of the market (Gassmann et al., 2013). Overall, these factors makes the threat of new entrants is moderate in medical technology sector. Bargaining power of suppliers Given Imaging has a market reputation especially in Israel of maintaining positive relationships with suppliers CNN, 2014). However, due to scarcity of the raw materials required in the in the production, the supplies of Given Imaging hold a considerable power to the company. Nevertheless, the company prefers to preserve and find new suppliers with the aim of establishing long-term relationships with them thus achieving a constant flow of the raw materials (Given Imaging, 2013). Further, the firm advises supplier to help them cut on the unnecessary cost further cementing their relationships. Bargaining power of buyers The innovativeness and unique of the Given Imaging CAMERA PILL offered it a considerable power over its consumers (Given Imaging, 2013). The patent laws allowed the company to enjoy considerable market dominance for few years. However, the company understand the need of the consumers as well the market trends and strived to meet them. More specifically, Given Imaging has endeavoured to incorporate health and wellness into the creation of its products as society has started becoming more health conscious (Given Imaging, 2013). Threat of substitutes According to (Peng, 2013), threat of products substitute occurs when products or services produced by different companies and that meet needs of the consumers in the market. Ideally, the high profitability in medical technology tend to attract many potential entrants. This is also exacerbated by the favourable economic conditions and medical technological advancement in various countries. However, the threat of substitutes is relatively moderate (Russell, 2010). This can be attributed to the high cost and technological advancement required for the company to produce a similar product. Intensity of rivalry among competitors Hill and Jones (2011) noted that competitive rivalry is the intensity of business rivalry among established firms in any given competitive sector. This results to struggle by the market players gaining the market share of each other in various markets. The major competitors in medical technology facing Given Imaging Company include Olympus, IntroMedic and Fujifilm Holdings (Given Imaging, 2013). The competition is further heightened by the imitation of strategies adopted by rivals. However, high customer loyalty and reputable brand name as well mergers and acquisition have resulted lower rivalry intensity in the industry. Internal company environment analysis The value chain model undertakes a looking inside-out perspective of the companys primary and support activities. The primary activities are marketing and sales and operations inbound and outbound logistics, while support activities include the companys infrastructure, human resource, procurement and technology (Husted et al, 2010). This is as indicated in diagram below; Figure 3; Support and primary activities in value chain model. Source: Kurtz (2012) Primary activities and support activities The primary activities at Given Imaging Corporation entail production, distribution, and marketing of its produce digital medical device, Camera Pill to various markets worldwide (Given image.com, 2014). The company usually sources the raw materials across the world. The companys business strategy gives it an excellent value based and priced raw material and services due to the cost advantages resulting from negotiations with various regional and global suppliers. The establishment of the various operating centers with collaboration with major hospitals allowed the easily their customers in those markets. In addition, Given Imaging operates a supply management system and marketing strategies that seek to ensure continuity and safety of inventory avoiding stock-outs. Support activities Human resource, legal and taxation policies by the governments are the major challenges that face Given Imaging operation in various markets worldwide. To navigate this, the company has restructured its Human resource strategy with a view to attracting and retain the best talents. Through this strategy has enabled the company to hire and retain best talents. This has allowed employing over 800 highly qualified medical technology specialists (Given image, 2013). The organisation workforce mostly is sourced from the local population and trained on the best practices to serve the company. This helps them to focus on their customers world over without being constrained by language, physical and cultural barriers. The company has also relied on Technology in its communication with clientele and customers through their interaction with the customers through their official website and social networks such as Facebook and Twitter (Given image.com, 2014). This helps the management to get cons umer feedback at a reduced cost. Nevertheless, faces high employee turnover mainly due poaching from competitors in various markets especially Asian countries. SWOT analysis Strengths Human Resources; the company had over 800 highly qualified employees to offer service to the client. This gives the company ability to professionally and effectively various competitive strategies Strong distribution network. This gives the company an ability to competitive reach various market effectively and efficiently. Active online communicates that cut on cost of communication A strong network of global sales teams especially in European and American markets that offer the companys a competitive advantage in reaching various regions Strong supplier relationships that help the company avoid shortages in raw materials need in production process Weaknesses High employees turnover due to poaching by rivals that negatively impacts on implementation of strategies developed High cost of training and retaining employees, reducing available resources from the core activities Limited scope of production which was based in Israel that constrains the applicability of the global strategies developed. Opportunities Improvement in the global economy and increased spending power of consumers. Increasing income level among the citizens that results to higher consumer base. Support by various government allow implementation of various competitive strategies Threats Over regulation of the sector that hinders the applicability of some strategies Unfavourable and unpredictable tax policies that negatively finances. Current strategies According to Porter (2009), there are three broad strategies need in creating a strong market position and outperforming competitors, namely product differentiation, cost leadership and focus strategies. According to Johnson et al. (2010), these generic strategies enable a firm to gain a competitive advantage over the competitors. In regard to differentiation strategy Given Imaging company, emphasises on offering products that are perceived in the industry as being unique and innovative by consumers (Given image, 2013). This is achieved by having a different design of Camera Pill and adoption of new technology. Market and product differentiation as applied by the company is strong and defendable for earning above average returns. According to (Kurtz, 2012), for a firm to position itself accordingly, the firms need to have unique products with desirable attributes attracts premium prices among the consumers. This is achieved by creating strong brand loyalty, the uniqueness of the prod ucts offered to consumers and buyer mitigation since they have limited alternatives. To achieve effective differentiation, the company has adopted a strong marketing skills, applied research, and development. However this is faced with a challenge of differentiation are; The Consumers need for differentiation may fall, high imitation of the products decreases perceived differentiation, high cost. In the cost leadership strategy, the company has persistently lowered cost of production by the adoption of latest technologies. This enables the firm to offer a product at comparatively low prices without compromising the quality of the product and thus earning the company a competitive advantage in the market. Conclusions and Recommendation The external environmental analysis shows political, social and technological factor favour the growth of the industry. However, the overregulation and strict government supervision make legal and ecological factors be a hindrance to sectors growth. On the industry environment analysis indicates that the threat of new entrant is low, suppliers bargaining power of is high while bargaining power of buyer is moderate. The intensity among competitors the supermarket is considered low. The internal analysis shows that Given Imaging has engaged well with suppliers well and enhanced quality control of procured materials as well as liaising with more suppliers. Their key strength is customer loyalty and uniqueness of the products, while the price is the key weaknesses. Strategy imitation is the key threats. However high staff turnover poses a great challenge due to costs associated with training. Recommendation Given imaging should apply differentiation strategy. This is due to imitation in the market which similar products at almost equal prices. This can be achieved by producing their product and pricing them differently according to the targeted group. The strategy is most appropriate since it is likely to insulate Given Imaging products from competitive rivalry by creating brand loyalty. It also brings the uniqueness of the product and thus reducing the threat of substitutes in the market as well as creating a barrier to market entry. References Brown, MA Sovacool, BK 2011, Climate change and global energy security: technology and policy options, Boston: MIT Press. CNN 2014, Medtronic buys Covidien for $42.9 billion. 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