Becton Case
Short Description
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Description
BECTON DICKINSON AND COMP COMPANY ANY : MULTIDIVISIO MUL TIDIVISIONAL NAL MARKETING MARKE TING PROGRAMMES PROG RAMMES
Becton Dickinson at a Glance Type
Public
Industry
Medical Equipment
Founded
East Rutherford, New Jersey (1897)
Founders
Maxwell Becton & Fairleigh S. Dickinson
Head Quarter
Franklin Lakes, New Jersey, US
Area Served
World Wide
Key People
Edward Ludwig (Chairman) Vincent Forlenza (President)
No. of employees
28,803
Continued…
BD’s Strategy: To To serve the world's population po pulation as a global leader in developing and applying technologies to solve emerging, important, sometimes underappreciated and fundamental healthcare problems with discipline and committed service to customers and shareholders
At present BD manufactures and sells a broad range of medical supply devices, laboratory equipment and diagnostic products
Customers: Healthcare Institutions, Life Science Researchers, Clinical Laboratories, Pharmaceutical Industry and General Public
Continued…
The company was organized into two sectors:
Medical having 59% of total sales
Diagnostics having 41% of total sales
It is divided into 19 operating divisions
Each division had their own marketing and sales organization, distribution network, customer service departments billing and account division, national accounts programs and warehousing facilities
Continued…
Advantages
Clear product-market focus
Decentralized approach
More effective and efficient approach to clients operating and service needs
Disadvantages
Minimal interaction between divisions
Inefficiency and duplication of work
Trends in Hospital Market (1980s)
Growth of Group Purchasing Organizations (GPO) like Allied Purchasing Group (APG)
Primary decision making authority shifted from end user to non user (Away from individual institution to centralized GPO)
Primary decision makers changed from different hospital departments to individual/committee of GPO
Competitive Developments
BD’s major competitor was a Japanese company Terumo
It offered the products at lower prices, was spending large amount on promotions and expanding distribution network
Has achieved a limited success in US market against BD’s individual divisions
Terumo regarded hypodermic to establish brand identity and distribution capabilities in U.S.
Ques-1: Why is this topic of “multidivisional marketing” attracting corporate attention at Becton Dickinson (BD) during the period covered by this case? Is it a good idea? What factors aid or inhibit the implementation of this concept at BD?
Multi Divisional Marketing
BD believed in divisional organization as the best approach for maintaining competitive position, but in 1988 began exploring Multi Division Marketing
Its goal was to achieve competitive advantage by providing superior customer service
Multidivisional Marketing Structure
What is Multi Divisional Marketing? o
o
o
Multidivisional structure emerged during the 20th century in response to the coordination problem caused by the diversification The multidivisional structure is a modular organization where business level strategies and operating decision can be made at the divisional level, while the corporate headquarters concentrates upon corporate planning, budgeting, and providing common services The key advantage of diversification structure (whether product based or geographically based) is the potential for decentralized decision making
Benefits o o
Better demonstration of BD sales Effective use of resource to develop value added services and programs
o
Increase control on divisions
o
Can promote many services that, as a corporation, they provide to account
Broadest product line
Inventory management task was easier
End user training
Problems with BD’s Multi
Divisional Marketing
Different divisions have different conceptions in marketing and sales
Each divisional RSM had its own divisional agenda
Lead RSM was expected to be a divisional RSM and to perform multi divisional activities in addition to his ongoing sales management responsibilities
Lead RSM got $200 cash reward but sales or marketing manager got only one half of the lead RSM
Divisional RSMs perceived it as an interference in their plans and methods of action
Process for Multidivisional Effort
Develop and disseminate market segmentation and account selection
Differentiation between value added and basic services
Development of common information and communication system (MIS)
The delineation of organizational roles and incentives for multidivisional marketing and sales efforts
Market segmentation
Earlier System Categorized customers by
Product category and
Amount bought
New System under MDM Effective segmentation revolves around:
Customer demographics (size, location, type of funding)
Operating variables (brands, used in product category)
Purchasing approaches (centralised, decentralised, frequency)
Technology ( disposable vs. Reusable)
Market segmentation
TYPES OF CUSTOMER:
National Account
A hospital buying group having members in several states (GPO)
Key Account
Individual hospitals providing large sales and requiring additional efforts (HMC)
Market segmentation “Profiling and Plan Development Process”
Account selection
Development of key account profile by RSM’s for relevant divisions (A document that captures information helpful for developing a framework within which an effective interdivisional action plan can be developed)
Assessment of design to minimize the risk and maximize the opportunity
Development of the multidivisional action plan for the account
Value-Added vs. Basic Services
Types of service o
o
Basic services: which includes fulfillment accuracy, on-time delivery, damage free goods, accurate invoicing, effective sales representation and efficient in-servicing of end users — alue added services: which includes customized V designed product, customized quality control, deferred billing, priority order processing, JIT inventory management, new services, extended warranty plan
Information System
It is a process to identify common products, customers and vendor identifiers across divisions
MIS creates opportunity for cost saving and services
Improves supplier-distributor-buyer relationship
Supply Chain Management (SCM) Group
Helps in serving customer better who contract with several BD division. Major activity of SCM was to transport information and materials from suppliers to end users
Disciplines where SCM worked were corporate logistics, information systems, purchasing EDI service products, corporate sales and marketing effort
Serves both internal and external customer groups Internal Group includes logistics, IT, purchase External Group includes distributors, GPOs , individual hospitals, warehouse operators, and material suppliers Greatest Single Short Term Opportunity - Consolidated purchasing Biggest Long Term Opportunity –Coordinated MIS and Corporate Marketing Efforts
Rationale of SCM
Health care players at all levels of the Supply Chain are vitally interested in asset-management techniques and systems that can lower their total cost of obtaining and using needed products and services
SCM at the divisional level can further differentiate their offerings and strengthen their relationship with the end users, distributors and suppliers
“Lead RSM” Role in Multidivisional
Key Account Program Identification of Key Account:
A potential account is usually identified by a division or divisions who are under competitive pressure or see new business opportunities or wish to solidify a strong position
The lead RSM may come from the initiating division or may be the corporate national account field manager or the corporate national account manager
Lead RSM reviews survey of responses and communicates “go or no go "decisions to all RSMs
Continued… Developing the Key Account Profile, Plan and Proposal
Lead RSM schedules RSM team meeting
Team completes key account profile, action plan, and preliminary proposal, including appropriate input from marketing
Team members secure value-added offering and pricing approvals from their division management
Corporate national accounts is consulted prior to finalizing the proposal
Continued… Interfacing and Negotiating with Key Accounts
Lead RSM sets up meeting between customer and selected team members
Proposal is submitted to customer, discussed and customized to meet the customer’s needs
An additional RSM meeting may be needed to address customer modifications
The modified proposal in the form of an agreement or contract, is submitted to the customer for signature by lead RSM
Continued… Managing key accounts after the Multidivisional agreement is signed:
Schedule an implementation planning meeting with customer management and the participating divisions. Agreeing on contract implementation plan
Each divisional RSM team member should submit divisional implementation plan to lead RSM
Lead RSM reviews contract progress quarterly with the customer
Quarterly implementation status report sent to RSM team by lead RSM
Que-2: More generally, under what circumstances would the kind of marketing strategy inherent in the multi divisional approach make sense? Do those circumstances apply at the HMC account?
Que-3: What is at stake at the HMC account: for BD? For Becton Dickinson Division (BDD)? For other BD divisions? For various personnel at HMC? Who are the key players that must be considered in responding to the competitive threat at this account?
Q 2 and 3. Becton Dickinson and Health Medical Centre
HMC was a leading teaching hospital in US HMC purchased products from GPO HMC purchased syringes and needles from a division of BD i.e. Becton Dickinson division (BDD) via BDD-APG national account contract where APG was a GPO BDD generated a sales $252000 from HMC HMC was suffering with financial crisis and was looking for cost reduction measures Hospitals have typically many division e.g. Orthopaedics, ENT, Cardiology, Radiology, Pathology, Neurology, OT, OPD, Dental, Gynaecology, Paediatric, Gastroenterology, Urology, Dermatology, Rheumatology, Respiratory, Medicine, Surgery, Oncology
Problems…
Four other BD divisions sold significant amounts of product to HMC through separate sales and distribution efforts and a variety of separate contracts
BDD had the most substantial presence in the account, with previous year’s sales of $252,000, of which $216,000 was needles and syringes
HMC was facing a severe budget deficit. State funding had been slashed, and HMC had instituted expense reduction measures
There was a need for cost reduction
MULTIDIVISIONAL MARKETING…
Multidivisional Marketing would make sense in :
Diversified organization
Sub-division with own profit centre
Dealing with common client having same product requirement
Analyzing the situation…..
Syringes and needles were the second-largest medical supply expense product at HMC. HMC had used Terumo’s IV catheters, blood collection needles, and arterial blood gas kits for a number of years
City Surgical is a Terumo distributor. However, City Surgical is also part of BDD’s Advantage Distributor Program
Terumo guaranteed a 15% discount to HMC’s current pricing for BDD hypodermics
Stake of BDD at HMC
A switch would mean that Joanne Wilson (purchasing manager) had attained one-third of her expense-reduction goal Strong loyalty of BDD Effort by BDD - demonstrated that Terumo could not supply all the needles and syringes offered by BDD, and that buying these items off the APG contract would increase HMC’s costs by $7,000 (thus reducing the purported cost savings to $25,000). Kmetz also explained BDD’s inability to undercut the APG contract HMC evaluation committee Multidivisional approach to HMC - HMC could become a key account and that interdivisional programs and services could provide cost savings equivalent to, or more than, that represented by Terumo’s lower price, while maintaining BDD’s pricing on its APG contract and perhaps solidifying its position with purchasing influences at levels higher than Wilson
Stake of BD divisions…
BD’s Acute Care division (BDAC) had a strong field
relationship with Wilson and others in purchasing. Their primary products at the account were surgical blades/scalpels and surgeon’s gloves. This represented two of BDAC’s eight major product lines, and thus the potential existed for significant sales increase at HMC. Pulsifer expressed his division’s willingness to participate in a multidivisional effort at HMC Deseret medical (DM) division - only had the IV catheter business in the anesthesia department at HMC. It did not have a strong overall presence in the account. Mason welcomed the opportunity to work on a multidivisional agreement with HMC, “especially if it contains incentives helpful in placing this new product there.”
Continued…
BD VACUTAINER Systems (BDVS) sold blood collection tubes and needles. Had good relationship . Divisional sales strategy is to solidify end user brand preference for BDVS products and keep purchasing out of this process
BD’s Microbiology Division (BDMS) sold products used by
various hospital and commercial labs to diagnose infectious diseases and determine proper therapy. Harry Henderson, an RSM at BDMS, noted that the division had a strong position at HMC for one of its major product lines , prepared plate media. Was liked by end users
Que-4: What should Mr. Jones, VP of sales at BDD, do with regard to the HMC account? Specifically, should he pursue a multidivisional approach in this situation, a price decrease or another option? How should any actions concerning threat at this account?
The company should pursue a multidivisional approach
Because of following reasons:
The total business of BD is $ 432,000
And BDD alone is providing $252,000
If the all the divisions are combined together then by providing 7.5% discount the company can match the prices offered by Terumo
By providing value added services with the help of MIS, company can help HMC in material management and thus in cost reduction
Even customers are very brand loyal so it can gradually increase its prices in future
Que-5: In which companies operating in India do you think a similar situation could arise?
Companies in India where similar situation exists: Cadila Pharma
Following is an introduction to different divisions under Branded SBU:
Magna
Magna-is a multi-specialty division. It maps general practitioners, consulting physicians, surgeons, cardiologists, gastroenterologists, gynaecologists, paediatricians and nephrologists
Product: Magna's portfolio primarily covers gastroenterology, cardiology, gynaecology and others. Magna's major brands are 'Aciloc', 'Rabeloc', 'Cadilose', 'Envas', 'Losium', 'Caditor', 'Calcirol', 'Haemup', 'LMX', 'LMX forte', Levocide, and 'Fludac'
Continued…
Maxima
Maxima is a multispecialty division. Its portfolio covers respiratory inclusive of ENT, chest (anti tuberculosis), dentistry, anti-infectives and orthopaedic therapies
Maxima targets ENT specialists, chest physicians, dentists, paediatricians, orthopaedicians and surgeons
Major brands of this division are 'Lorfast', 'Vasograin', 'Symbiotik', 'Mycobutol', 'P-Zide', 'Amdepin', 'Emvit Plus', 'Cuga', and 'Immuvac'.
Continued…
Volta
Volta is a super-specialty division. Its portfolio covers cardiology, diabetology, endocrinology, gastroenterology, nephrology, and critical care
The division adopts three therapeutic approaches, viz., cardiac therapy, diabetic therapy, and critical therapy
Major brands of this division are 'Nodon', 'STPase', 'Teli', 'Envas IV', 'Glyloc', 'Glista', 'Caditor', 'Humstard'
Continued…
Oncocare
Oncocare division markets products that manage and treat cancer and tumors
Oncocare's major brands are 'Cadigran', 'Caditrex', 'Karplat', 'Paclicad', 'Posid', 'Kinaplat', 'Cadria L', 'Docecad', 'Filcad', 'Platin' and 'Recovarin'
Continued…
Explora
The objective is to increase reach and penetration in rural market. Explora aims to make available quality medicines at affordable prices to people living in interior towns and villages.
Explora portfolio covers general practitioners, consulting physicians, pediatricians, and gynaecologists
Explora's thrust brands are 'Nuflam', 'Haem up', 'Tummy Ease', 'Happytizer', 'Lactoceff', 'Anstisept', 'Hepasave', 'LMX', 'Wormin A', and 'Fleximuv'
Continued…
Generic
Generic is a wing of pharma business. The wing covers almost all therapeutic segments. Generic directly deals with stockists , retailers and dispensing doctors through super distributors.
A major chunk of business and promotion focuses mainly on stockists.
Generic has three sub divisions, namely, 'Generic', 'Genvista' and 'Genstar'
Generic's major brands are 'Ciprodac', 'DPhesic', 'Dexasone', 'Famonext', 'Demisone', 'Campicillin', 'Oritaxim Inj.', 'Mokcan' and 'Cotrimoxazole DS'
Continued…
Vet nova
Vet nova is an animal healthcare division. It is one of the earliest and most reputed concerns in animal healthcare
A team of more than 100 people take a wide range of the brands pertaining to cattle and poultry into the remotest corners of India
While some of Vet nova's brands like Cal D Plus DS, On feed and Cal D Min are household names, other brands like No lapse (for prelapse) and Endotrin (Ecbolic) are innovative offerings of Vet nova
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