The MCDM (medical device contract manufacturing) Inc was established in 1972. The firm is involved in “contract manufacturing and packaging services of the medical devices industry” (Jeffery and Norton 2).
The company has its headquarters in the United States, although it operates other 19 subsidiaries in 35 cities. The company “specializes in medical device contract and manufacturing and assembly, clean room medical injection molding, and design and fabrication of specialty assembly equipment for medical device manufactures” (Jeffery and Norton 2).
In the 1980s, the firm was among the largest corporations in the industry owing to its success in manufacturing medical devices and customer satisfaction. The company promised to offer more to its target market in comparison with its competitors. In 1974, MDCM held 42 percent of the U.S market share and by 1985, it had grown to over 54 percent (Jeffery and Norton 3).
The company’s success was boosted by small business acquisitions leading to consolidation and further expansion in the US market. Between 1989 and 1990, MDCM lost its major four out of ten consumers and as a result, the company witnessed a massive decline in profits and revenues. Profit margins began to fall as a result of buyers’ consolidation.
The firm’s pricing power was lost as it could no longer compete with other players in the industry on pricing strategy. The company’s market share and profits continued to decline up to 2000 when the management decided to make modifications to reduce internal costs, increase the flow of information, and increase its efficiency.
The adoption of information technology enables an organization to cut down its operational and internal costs. Consequently, opportunities are realized in three major ways which are business/organization portfolio, competitiveness, and internal costs. Briefly, competiveness means the extra advantage associated with the development of IT leading to a competitive advantage.
Internal costs imply the process of improving effectiveness and efficiency of a company thus cutting down costs. Lastly, business portfolio refers to the adoption of IT and its influence on the decision making process of potential investors.
Strategic objectives of MDCM
Based on the case study, the current strategic goals of MDCM are to cut down its operational costs, make information available to different departments in real-time, increase market share, be a market leader of the industry, and reduce internal costs (Jeffery and Norton 1-5).
At the moment, the primary strategic objective of MDCM Inc is to cut down the production costs incurred in the process of producing medical merchandise. The case study highlights that reduced costs could be achieved through internal costs as some of the problems noted result from internal environment. For example, the company lacks a proper network system which could be used to connect all the 19 subsidiaries in 35 countries.
This has resulted in increased operational costs (Jeffery and Norton 3). The firm’s operating system is outdated and it causes delays in relaying information to the MDCM employees. Lastly, the company lacks a standardized and proper email system that can be used to communicate with its employees. The legacy of the current system increases administration costs such as duty, financial, custom sales, and inspection systems.
The other noted strategic objective is to increase its market plan and go global through internationalization and globalization. It is important to note that at one point, the company was the largest market shareholder in the medical services industry (Jeffery and Norton 2), but this has since declined. The company once had a market share of 54 percent but due to a decline in its competitive advantage the share decreased (Jeffery and Norton 3).
Due to the aforementioned reasons, the company is planning to increase its market share and going global in order to realize market diversification. The company has the strategic objective of becoming a market leader in a market that it once dominated. The company is therefore on a mission to realize the benefits associated with investing in the IT sector in order to add value, increase profits, and expand its market share (Jeffery and Norton 8).
Competitive environment in which the firm operates (a competitive forces analysis)
MDCM operates in a competitive industry whereby the company is involved in contract manufacturing and packaging services of medical devices (Jeffery and Norton 2). However, in the past four quarters, the company has been reporting losses. In a competitive market like the medical devices industry, making such losses could be detrimental to a company in the long run.
To better determine the competitive environment in which the DCM firm operates, Michael Porter’s 5 competitive forces of market analysis have been adopted. The five forces include presence of potential entrants, presence of perfect substitutes, traditional competitors, suppliers, and bargaining power of buyers/consumers (Porter 12). The forces are presented in the diagram below.
Figure 1: Porter’s 5-Forces Model