Case Study

Case Study

Executive summary

At GEHS, there was need to understand the technological risks associated with the new products and whether the new products were sustainable for a longer period. It was also significant for the company to understand in detail all the marketing concepts required for the products to reach the market target. The demand for the imaging devices for the early detection of cancer problems was quite high. This was attributed to the increase in cancer and heart complication cases that needed closer attention from the medics. The demand was not constant since the number of patients was also not constant. The GEHS was therefore faced with the challenge of market uncertainty for the new products made under the healthymagination strategy. Before the introduction of this strategy, the GE Company had the problem of selling its products at high prices that were not affordable to most patients. Most of the ultra sound devices fetched premium prices that locked many patients from accessing them. The solutions for these problems include manufacturing products that have low prices to reduce the cost burden that is given to patients. This should be done while maintaining high quality in the products. GEHS should also assess the market in order to identify the specific customer needs in order to make its products more accessible to the customers.

Problem statement

The introduction of the healthymagination strategy was done in order to improve accessibility for its products, improve quality, and to lower the costs charged on its products. Various issues required to be evaluated in order to arrive on the right prices and quality. Technology uncertainty affected the products from GEHS since technology kept changing. Effective products required application of the latest technology. In most of the new products that were planned to be introduced by GEHS, it was challenging to identify the best technology to be used due to the stiff competition from Toshiba and Siemens health services. Market uncertainty also affected the introduction of the new products since market is not just determined by the number of potential customers but on the marketing strategies to be used.

Situational analysis

The financial performance for the General Electric (GE) Company had $16,997 million in revenue collection for the year 2007. This was an improvement from the previous year where the revenue collection was $16,550. In 2008, the revenue collected was higher than the two years and stood at $17392. The revenue collected in 2009 was $16,015 while in 2010 $16,897 was the total revenue collection for GE. The consolidated net earnings for the years 2008, 2009, and 2010 were $18,686, $11,743, and $15,771 respectively.

SWOT Analysis

Strengths

In the year 2010, GE had become a global conglomerate that had annual revenues of more than $150 billion. The GE Healthcare revenue was $17 billion of the total revenue. GE Healthcare develops medical imaging equipment and other devices that are used in hospitals and various clinics around the world (Kumar & Rangan, 2012). In 2010, most of the revenue from the General Electric Healthcare Systems (GEHS) was from equipment as they had sales of $7.5 billion.

Healthymagination strategy was introduced to improve delivery of healthcare services to more people in US. The main strength in this strategy is that it aims to improve the cost of healthcare by making it affordable to most people. This strategy also aimed at improving the quality od health service in order to satisfy more patients. In addition, the healthymagination at GE Healthcare Systems was designed to improve the access to healthcare in the global markets.

Although there is stiff competition in the healthcare sector, GE has effective customer care services through the provision of superior products. The personnel in the sales and service department also play a critical role in making GE a formidable force in the healthcare sector.

After realizing the role played by customers in any organization, GEHS withdrew its attention on engineering aspects of its products only and instead started considering customers as important assets that need to be addressed in their marketing strategy (Kumar & Rangan, 2012).  Healthymagination helped GEHS realize that making the right products was not only what was required for a successful business but good relations with clients were also critical. Paying attention to customer satisfaction leads to better value creation on its products that eventually benefit the company. The products manufactured during the healthymagination strategy, focused on customers’ specifications that were necessary for the maintenance of customer loyalty.

Weaknesses

The implementation of the healthymagination strategy GE required $6 billion investment to introduce quality health care at a lower cost that was affordable to most people. The investment was distributed into R&D, financing, and technology. GE sought advisory services from Oxford Analytica (OA). OA was supposed to advise GE in the evaluation of the healthymagination product claims. This company was authorized by GE to assess and determine whether each product was valid for healthymagination. No product could be marketed by GE without being approved by OA. The dependency on OA for the approval of GE products slowed down the process of healthymagination.

Previously, GEHS focused on engineering and technology and ignored the customer aspect. More attention was given in the manufacture of quality products that were durable and met all the engineering requirements. The company failed to recognize the role of customers in the marketing process. Marketing was therefore not done strategically as only few customers were reached. The lack of connection with the customers’ needs and preferences contributed to low sales and almost affected the reputation of the GEHS.

Opportunities

The Affordable Care Act that was passed in March 2010 introduced great changes in healthcare sector. The changes were done to reduce the number of uninsured people who were more than 50 million in 2009. This statistics were provided by the US census bureau. The healthymagination strategy by GE was influenced by the transformations in the healthcare sector and the medical device industry (Kumar & Rangan, 2012). The GE Company realized the need to improve the cost, quality, and access to healthcare in the global market served by GEHS.

The population growth in US has been on the increase, providing an opportunity for the increase in the number of people requiring healthcare services. Many organizations that provide services or products to their clients always benefit when there is a constant growth in population as this leads to high demand and more sales. A low population growth may be of disadvantage to an organization as this may culminate to low revenue collection.

The healthcare sector in US is worth more than $2.5 trillion and $5 trillion worldwide. According to research, more than half of the adult population in US had chronic conditions in2008 and contributed to 75% of the healthcare spending. To deal with this problem effectively, early detection was necessary.

The healthcare spending in US has been experiencing a significant rise that has a higher rate than the GDP.  Some of the factors that suggested the increase in the spending rates for in healthcare include the aging of the population and the continued growth in the cost of medical care. This prompted the Congress to project that the total spending for health care would be 31% of the GDP by 2035 and probably increase to 46% by 2080.

GEHS realized the opportunity in Japan where there were many people suffering from liver problems. Through healthymagination, the company introduced the HepEcho system that focused on diagnostic imaging for the liver. This was after the company had noted redundancies in the use of the Ultrasound devices. In addition, customers had complained for having to wait for long for the results to be processed. This new device could be used to diagnose liver cancer in the early stages.  According to a study conducted by the American Cancer Society, there were 700,000 people diagnosed with liver cancer worldwide annually where age was a factor to be considered in the diagnosis. More than 600,000 people died of cancer every year and hence the need for the early detection of the cancer to reduce the mortality rate. Japan was a favorable market for this product as it experienced 32,000 deaths every year from cancer. The ultrasound systems were unable to detect cancer at early stages despite having a market worth $400 million.

The cardiac ultrasound market had grown rapidly into a billion dollar segment where Philips was the market leader with its Live 3D TEE product that was referred to as ‘the GPS of Surgery’. High technology was required in the manufacture of this product and meeting the cost targets was in doubt. In order to utilize this opportunity, GEHS introduced the TEEmax device for the close examination of the heart. This device represents the heart in 3D giving clear details that could not be observed using the ultrasound technology. The team was however not sure whether the device would meet the criterion for the healthymagination that required a 15% improvement in quality.

Threats

The main competitors for the GE Healthcare in US include Philips Healthcare, Toshiba Medical, and Siemens Healthcare. These companies serve in the diagnostic imaging market that is largely affected by technological changes (Kumar & Rangan, 2012).  It is imperative for the GE Healthcare to remain updated with the latest devices in imaging in order to beat the competition.

CT technology started at a basic level where it was a single slice in the 1970s. In the last three decades the technology has moved to multiple slice technology with CT scanners having more than 128 slices. The technology to improve image quality has also been increasing and the competitors have been trying to emerge the best in the market by using the latest technology. This has continued to be a challenge to GE Healthcare since the company has to remain competitive or it will be faced out from the market.

 

 

Alternatives and Evaluation

In order to deal with the problem of lack of tools for dealing with the risks in pregnancies among the women in Indonesia, the GEHS may develop a more cost effective device than the Omega. Choosing Indonesia for the primary research for the Omega device was a wise move because the country reported 18 new births for every 1000 people in 2010. Being a relatively poor country, most births were assisted by mid wives since they were cheaper than hospitals where doctors charged a lot of money. The Omega device was targeted to assist the pregnant women through the provision of ultrasound system for scanning.

The GEHS Company was expected to spend $6 million in the initial investment for this device with an estimated price of $3,000 per device. The device was supposed to assist the midwives to identity any problems early and refer the affected patients to doctors. For the midwives to earn a living by using this device, they were supposed to afford the $3,000 as the initial price for the device. The research conducted by the team from GEHS revealed that only 2 out of 4 midwives could afford the device. This made the team to be uncertain on the sales expected from these devices as they were not sure exactly how many midwives would be interested to buy it due to the economic situation.

The UltraLipo product was designed by GEHS as a body-sculpting ultrasound device designed for cosmetic procedures. The procedure involved breaking down body fat cells by use of ultrasound through a process called cavitation that does not cause any damage to the skin. To have effective and reliable results a market evaluation in global marketing was done by Stephanie Meyer.

There was a similar product that was sold by an Israeli company, Ultrashape, which made a lot of sales in different countries. Ultrashape marketed its product as painless and time saving. There was also another product referred to as ‘Liposonix’ from Medics Technologies Corporation. However, none of the two companies involved in the manufacture of these products, had received any approval from US FDA. The target market for these products was people interested in fat removal procedures. Most patients in US preferred a liposuction as a surgical procedure for the removal of fat from patient’s body. There were around one million liposuction procedures per year in US in 2010.

The estimated market size for the body-sculpting industry was over $1 billion and was expected to increase by 6.4% from 2008 to 2013. The UltraLipo product at GEHS was introduced at a premium price of $120, 000 through the use of simpler technology than the competitors’. Some of the team members tasked with the development of this product at GEHS were hesitant because the product was expensive to introduce as it required a capital investment of $10 million. In addition, a research conducted on behalf of GEHS revealed the product lacked clinical benefits and hence it was difficult to market it.

The other productions to be considered and evaluated as alternatives for customers were the HepEcho and the TEEmax. The HepEcho was a product that was designed for diagnostic imaging for the liver. This was after it was realized that current Ultrasound devices were redundant and several cases of inefficiencies had been reported. The product played a significant role in improving the services for the identification of liver cancer in patients. The team from GEHS agreed to base the product on the LOGIQ E9 architecture. These specifications allowed the HepEcho product to be capable of fusion where Ultrasound images were combined with MR and CT images for clarity. A total investment of $36 million was to be made where each products was to cost $120,000. This cost was still high for most patients even if it passed the healthymagination validation procedure.

The TEEmax product was to be used for close examination of the heart when there was a need for the replacement of the mitral valve. The product was an improvement of the current ultrasound systems that took the images of the heart from the esophagus. The results from this product were in 3D representations that displayed the heart in motion. The team from GEHS agreed that the clinical impact of TEEmax product was difficult to determine using the using the 15% quality improvement policy as required by the healthymagination strategy.

Recommend solutions, implementation and justification

For the Indonesian market GEHS should have introduced a scanning device that could be used by midwives in detecting pregnancy complications at early stages in order to avoid the deaths that may be associated with such complications. The healthymagination strategy required GEHS to introduce new products in the market to improve quality and cost. Although the omega device had good quality imaging for the scanning of pregnant mothers the cost of purchasing it was too high for the Indonesian midwives and hence only half of them could afford to buy the device. This was contrary to the objectives of the healthymagination policy that aimed to reduce the cost by at least 15%. There was a need for the GEHS to introduce a new ultrasound product that had a price of around $2,500 so that many of the midwives in Indonesia and other parts of the world could afford it. The result would be more or almost all of the midwives in Indonesia would afford such a device and hence the company would experience high sales. The idea would be to sells many products with a small profit margin where the objective of improving on cost and maintaining high quality would be achieved. More pregnant women would also have access to the new services offered by this device.

The TEEmax product that was designed for the 3D imaging of the heart should not have been ignored. The population of the people suffering from  heart ailments has been on the increase over the years forming a huge potential for investors. The team from GEHS should have considered introducing this product from the market since the price was relatively low and the total amount required for the investment was $20 million. Due to the increased on the number of people with heart conditions, the product would have made a positive impact if the company conducted a survey to find out how it could be used to deliver better services than in the current market. By doing this, it would be easier to identify the areas of improvement to make the product affordable and accessible to many people.

Reference

Kumar, V., & Rangan, K. (2012). Healthymagination at GE Healthcare Systems. Harvard:            Harvard Business School.

 

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