Case Study Augustine Medical

1372 Words 6 Pages
The Bair Hugger Patient Warming System would be retailed to hospitals in the USA. The product is an appliance which has been specially designed to treat hypothermia which affects many patients following operational procedures. The warming system contains two main parts; there is a heater/blower function and disposable warming covers. The quintessential issue facing Augustine Medical, Inc. is the best pricing method for the two major parts of the product and how to position this product in comparison to its competitors. There are many alternatives which hospitals can avail of to treat and prevent the condition. However, there are many downfalls associated with these alternatives which all virtually treat Hypothermia. Augustine Medical
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The warming time per patient is approximately two hours; this could pose an issue if a patient’s hypothermia worsens in this two hour gap, as results aren’t evident until after this two hour period. This is the only product the company provides and therefore demand is essential for the success of the company.
3. Opportunities
Augustine Medical recognises the opportunity in marketing their product to hospitals and clinics, also the company believe their product provides greater advantages than competing alternatives. If the company were willing to sell the physical unit free of charge, but charge the hospitals for the blankets they could create a monopoly.
4. Threats
The company are well are of their existing competition in the hospital market. There are many cheap alternatives on the market. There are many surface warming technologies currently available and the easiest way of treating hypothermia is warmed hospital blankets. An important competitor that may exist for the company is Hosworth-Climator who produces something similar in England and they could be distributing in the U.S.A within the next year, but if the company price the product too high their risk of failing will
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• Initial capital of $500,000 produced due to investor interest and medical technology. This capital includes staff support, facilities, marketing and research and development.
• Initial investment is believed to cover fixed costs of the firm during year 1.
• Variable cost= $380 per heater and $.85 per blanket.
• Distributor’s margin would be 30% of selling price of the heater and 40% of selling price of blankets, fewer discounts for both products.
• 31,365 recovery beds less hospitals with fewer than seven beds: 31,365-1,608-3,603=26,155 recovery beds in the U.S.

One system will be sold for every eight beds. Therefore, 26,155 /8 = 3,269 units for sale. These blankets come in a set of twelve; the demand for the blankets is dependent on the number of procedures as well as the amount of patients that could potentially become hypothermic. The cost of the system is $380. If the company chose to charge nothing for the unit they would create a monopoly as only the disposable blankets provided by them would work with the units. The relevant cost would be ($380 x no. units 3,269) = $1,242,220. Distributor cost in this case is irrelevant as there in no unit

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