Analysis of tradeoff
In response to the need for an Electrocardiogram (ECG) machine suited for the Indian rural populace, General Electric (GE) Healthcare India developed the MAC series of ECGs with varying tradeoffs compared to each other and to the standard High-end ECG. The High-end standard had a high price at $5000 and therefore rendering them unaffordable to use in poor rural areas. The most radical innovation was the MAC 400, which retailed at $800 (Govindarajan and Trimble 149). Though small, cheap, easy to use and low in power consumption it lacked some features. It lacked a memory card and patient examination results had to be printed immediately, it also lacked a keyboard and names of patients had to be written on the printouts manually. The next series (the MAC India) was cheaper to produce (it retailed at $500) but it has the same shortcomings as MAC India but with a smaller printer and no powers supply. The MAC 600 had complexity that was more technical and consumed more power than the MAC 400. The MAC 600 cost $1200. The Chinese version of the MAC series (MAC 800) had better features but it cost $2000 close to the $5000 of the high-end standard (Govindarajan and Trimble 154).
The PESTEL Analysis examines the (Political, Economic, Social, Technological, Environmental, and Legal) factors. GE Healthcare India experienced a favorable political climate whose regulations promoted the development of medical solutions for Indians. There was relative calm devoid of civil unrest, which could otherwise have affected GE Healthcare in a negative manner. The Economic climate in which the target market for the poor rural populace compelled the GE Healthcare India to come up with a machine that could retail at $800 and sell to numerous countries. The Local Growth Team (LGT) developed the MAC 400 from a low budget of $500,000 and after sometime was able to sell more than 15,000 pieces due to prudent economic management (Govindarajan and Trimble 158).
The Social climate was one characterized by poverty and skepticism at highly priced products and services. As such, a low-cost, efficient, low in power, and easy to use machine could gain social acceptance and GE India delivered. The Technological climate was marked by skilled manpower led by Oswin Varghese an engineer who brought a team together to use locally available technologies such as non-GE-manufactured Digital Signal Processor (DSP) and printer. The locally available technologies could complement the production of cheap, light, and effective ECG (MAC 400) (Govindarajan and Trimble 157). Environmental factors included compliance with international standards in the production of healthcare equipment to which GE Healthcare India complied. The Legal climate was also favorable since the LGT did not encounter lawsuits or prohibitive constitutional or legal regulations. The LGT’s strategy of compliance with the international standards ensured that the outcomes could find acceptance in the international market.
Porters Five Forces Analysis
In terms of supplier power, GE India collaborated with the producers of components such as the standard Digital Signal Processor from Texas Instruments and Analog Devices thereby gaining significant economies of scale (Govindarajan and Trimble 157). It also obtained cheap printer used in the Bangalore buss ticketing system in buses and as such, the negative supplier power of inflating prices was significantly reduced. The competitive rivalry initially came from BPL, which controlled 60-70% of the market compared to the GE India’s less than 5%. The rivalry reduced when GE India produced the low cost MAC 400, which was able to sell well in India and beyond. The threat of new entrants is real with threats from China such as MAC 800, which fortunately retails at $2000 anad therefore MAC 400, and MAC India can retain their marker shares and beat the threat since they are also improving their technologies and suitability of the machines to the target market (Govindarajan and Trimble 157). The MAC 400 costing $800, MAC India at $500 and MAC 600 at $1200 are affordable to buyers and since there are no cheaper products in the market, the buyers cannot dictate the process to GE India’s detriment. There is minimal threat of substitution since no other machines can do the work of measuring the examining cardiac issues other than the ones currently in the market.
Several strengths have enabled GE Healthcare India to come up with the successful MAC series machines. First Varghese led the aggressive Local Growth Team in an impressive manner. GE also has a huge financial backing at more than $17 billion in revenue and this gave the developers some backing and assurance of support (Govindarajan and Trimble 144). GE is well known in the development of medical equipment and the experience, status and exposure gave stakeholders belief in them and assured customers of quality.
The weaknesses were than GE has not developed products similar to the MAC 400 for the low-income target market and the restructuring was marked with fears of the unknown. The huge compromises in the MAC 400 from the standard ECG machine were a serious tradeoff and the machines could fail when they were least expected to in the rural areas.
Plenty of opportunities abound for GE India through the successful launching of the MAC 400. There were no competitor products and the market for the products soon went beyond India and Asia. The products are marketable and applicable world over. The company can also begin producing other low-cost products for the low-income target groups as it did with the Lullaby Baby Warmers.
There are a few threats such as the BPL Healthcare, which could venture into the production of products similar to the MAC 400 and try to regain the 70% market share it controlled while competing with GE’s high-end ECGs (Govindarajan and Trimble 146). The threat of products such as MAC 800, which are produced in China, could also pose a serious threat to the establishment of a sustainable market share.
VRIO (Value, Rareness, Imitability, Organization) Analysis
GE Healthcare India has created value for the people. Physicians and patients can find value in the MAC 400 since they can buy or use the product for $800 and $2 respectively. The MAC series products are rare to the world since healthcare equipment producers such as GE and its competitors produce the large high-end version of the ECG. The product has a chance of being imitated as has already happened with the Chinese MAC 800 (Govindarajan and Trimble 157). This is so because GE has not patented the components that make up the MAC series products. The organization of the company to come up with a Local Growth Team (LGT) such as the one led by Varghese is hard to replicate since it has also of unique dynamics such as technical requirements, collaboration with senior management among others.
Excellent financial management aided the development of the MAC series products. The LGT worked on a budget of $500,000 to develop the MAC 400 ECG. Taking an average of $800 for the 15,000 pieces that the company had sold since 2007, the company had gained $1.2 million dollars and this is impressive sales record given that sales are scaling in the emerging markets. The fact that people in rural areas can use the MAC series products for as low as $0.2 for tests done using the MAC India shows that the company’s products stand to benefit millions of people across the world at a cheap price (Govindarajan and Trimble 157). The firm is performing according to mission statement of reaching to millions of people with high quality and affordable medical equipment.
Global Strategy Implications and fit
The global strategies should include the maintenance of manufacturing and production standards of the MAC series products in line with the international standards to aid in their acceptance to different markets. The MAC series machines should revolutionize cardiac care and prompt other industry players to make cheap and efficient medical equipment for the developed as well as emerging markets, which universally appreciate portability, low-power consumption among other features (Govindarajan and Trimble 157). GE should go for aggressive marketing to acquire large marker shares since the threat of new entrants is real. They should also maintain quality in order to ensure customer loyalty and sustainability in the market.
Leadership handling problems
The leadership problems have been handled since the development of the LGT and its authorization to spearhead the development and sales of the MAC series the rough the rationale of reverse innovation. The leadership at GE should continue to develop teams such as the one in India to spearhead the devilment of products suited for the local people.
Rationale for reverse Innovation
The rationale for reverse innovation in the case of the ECG machines for the poor Indian rural population was sound. It was informed by the need to come up with a product that would be cheap to the local hospitals, which could not afford the $5000 machines (Govindarajan and Trimble 157). The local patients could also not afford the $45 charged to use the machines. The nature of the machines (heavy and reliant on mains power) ensured that the majority of the local population remained unreached. The MAC 400 was a revolutionary product, which weighed at about 1.2 kg and it was easy to repair, easy to use, cheap and could use rechargeable batteries. People in the rural areas could effectively use such as machine. The rationale for reverse innovation (development of the MAC 400) was a sound decision that should be replicated for other high-end machines.
Reverse Innovation Implementation Plan
The implementation plan, which started with the setting up of a LGT, was effective. The fact that h team was led by a local person was also right since local people are best suited to develop products for themselves. The recognition of the LGT and its plan by GE’s management was also a step in the right direction as it gave them autonomy and freedom to make changes and team up with suppliers who brought about value to the project. The LGT is responsible for the continuation of the MAC projects. The team understands the nature of the project in full and it can lead in the replication of the projects in other countries and markets.
Timeline for implementation
The MAC 400 was launched in 2007 after a few years of development. Although a clear timeline for the implementation of the project was not given, the nature of the work by the LGT shows that the team worked fast and consistently since they had massive autonomy and simple reporting procedures.
Monitoring the success of the project to develop MAC 400 was made easy and bureaucracies were eliminated. The LGT was freed from the short team performance criteria that occupied business units at GE. The LGT could challenge “GE’s way” and monitoring was done on the team’s terms rather than GE’s general terms. The monitoring was based on the LGT’s development of a machine that delivered value for many and as opposed to value for money (Govindarajan and Trimble 150). Was the innovation frugal enough?. Instead of PowerPoint slides to show the progress of the project, it showed tangible demonstrations of progress by presenting their machines or demos of their latest prototypes upon which judgment of achieving cheap and efficient machines was made. Each prototype would have evolved considerably the global executives would give consent for them to continue undisturbed.
Govindarajan, Vijay and Chris Trimble. Reverse Innovation: Create Far from Home, Win Everywhere. Massachusetts: Harvard Business Review press, 2012.