Case Analysis of Ring Medicals Essay

1690 Words Feb 17th, 2011 7 Pages
Major Issues
• An average of 2 to 3 units of HCS-100 a month was expected to be sold, yielding total revenues of approximately $150,000 per month at an average gross margin of nearly 50%, whereas till April 1988 only 5 systems had been sold versus a budgeted sales volume of over 30 and revenues totalled about 15% of the targeted annual amount of over $1.7 million
• Scanvest Ring had spent in excess of $700,000 on the HCS-100 effort and its CEO Helge Midttun and other board members were hesitant to invest further in a project that had so far shown lacklustre results
• There was disagreement about the most appropriate channels of distribution wherein three fairly distinct schools of thought prevailed

Actionable Recommendations
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Following analysis explains the opportunity in this segment and the value offered to the customer wherein the hospital is able to recover the cost of capital within two years and make a profit of $21,000

Based on the data collected, the numbers in the recommended segment and the market potential is provided below:
• US Hospital and Healthcare Market data o Present Number: 6,988 hospital sites in US o Size (6 – 99 beds): 3,239 small sites o Size (100 – 399 beds): 2,847 medium sites o Size ( over 400 beds): 902 large sites
• Market Potential: o % with automated Telephone Answering Systems: Less than 5% penetrated o % to be upgraded: 50% estimated medium and large sites o 2,847 + 902 = 3,749 sites with over 100 beds o 3,749 sites x $70,000 per site = $262 million o % to be upgraded: 50% estimated = $131 million
In terms of competition, the analysis is as follows which also shows the distinct advantage that HCS-100 has over the competitive product:
• Ring Medical had five principal competitors of which only one, AIS focussed exclusively on the hospital market
• Ring management estimated 80

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