MDCM Inc. is one of the largest world manufacturers of medical devices making huge amount of profits but unfortunately a significant amount of loss was realized and the same was very agonizing for the new CEO of the organization, Max McMullen. The company was founded in 1972 and well-staffed with expertise of many years’ experience. The recorded losses came as a result of poor implementation of business strategies already laid down. The company’s CFO Sharon Leis told the board of executives the witnessed shrink in revenues is as a result of expensive cost of production.
According to the vice president of marketing and sales of MDCM, Inc. Pat Perry, much time is spent on customer interaction and other process that could be computerized so that the customers can do them on their own like ordering and account management. The customer relationship management system is also not functioning as expected.
Failure of the organization is also said to have been contributed to by expensive acquisition of materials resulting from expedition of orders from the supplying companies.
Fall of MDCM, Inc.
MDCM tried to compete with its competitors in market by focusing on the operational efficiency, emphasis being on cost minimization in the entire organization while trying to optimize on business model in place so as to respond to dynamic market demands. The failure if MDCM is witnessed in the quadrant of Responsive Solution Providers where the investment of IT plans was not overseen with utmost care by the executives of the organization. MDCM should have considered having one global IT infrastructure for all its subsidiaries instead of having disintegrated business units whereby each one establishes its own IT executives to oversee budget allocation.
The existence of many different customized IT applications from different IT vendors in different subsidiaries made it difficult for MDCM to maintain its IT facilities. Responsive Solution Providers need to define the IT standards and chose dependable IT vendors for their IT infrastructure in place and also provide guidelines for changing components.
Though IT division existed in MDCM, there was no worldwide network but only limited networking within regions/countries. Better means of communication should also have been institutionalized rather than just depending on phone, fax and e-mailing. Another blame to the IT division is the limited use of internet in carrying out business operations and lack of centralized view if IT assets capabilities. All these failures were as a result of irresponsibility among the concerned authorities.
There is need for the alignment of IT in the road to realization of desirable revenues. Atkins, the new CIO of MDCM, Inc. realized the significance of including the IT strategy and planning. IT cost cutting is not the solution rather; alignment of IT initiatives with corporate strategies is a possible solution to the recovery from losses. This led to emergence of “Horizon 2000” approach that was steered by the new president of MDCM, McMullen.
The main aim of McMullen and his team in the Horizon 2000 project was to bring together all branches of MDCM into single brand and each branch to oversee the needs of customers at their areas of location. Marketing and sales functions also became centralized, and each customer given a manager to oversee customer’s account management.
The team also aggregated purchase of materials and reduced the count of suppliers. Another change in the way of operation was outsourcing all the inbound and outbound logistics of MDCM and to ease this McMullen ensured that the outsourcer hired the former employees of MDCM logistic division.
The most desirable move in the project was complete reorganization of the production facilities. Older and costly facilities were closed down and more emphasis was put on the more efficient ones. MDCM also ensured certification and approval of highest standards for compliance with the regulations of many countries in the world. Following the project, information flow became more crucial and this called for high-end IT capabilities. This led to hiring of Shawn Atkins as CIO so as to solve the IT problems that resulted from Horizon 2000 within the entire MDCM.
Strategic goals of MDCM, Inc.
These are the laid down approaches that are put in place to safe an organization from its dilapidated business operation (Grünig, Kühn and Clark 72). MDCM is spending much on maintenance of IT infrastructure, about 80 percent of its operation cost. MDCM Inc. faced stiff competition from small mushrooming competitors due to its poor cost efficiency and as a result the organization lost four of its ten major customers between 1998 and 1999.
MDCM having too many suppliers could enhance cash flow management thus the need to organize these suppliers into primary suppliers and secondary suppliers. Primary suppliers refer to those suppliers who have the capacity to provide the most essential materials for major orders and secondary suppliers are those who act as backup(Grünig, Kühn and Clark 82).
MDCM could use the power of acquisition to reduce the cost of supply. The reduction on the number of suppliers will help the organization reduce costs and gain competitiveness. Purchasing materials for many branches from one supplier is much cheaper than purchasing from many suppliers.
Power of customer
MDCM being a B2B company, its other concern is its customers. Profit realization is as a result of customers and MDCM’s major portion of revenue came from its eight key customers. It is therefore important for MDCM to ensure its customers are satisfied so as not to lose them to competitors.
MDCM enjoyed strong market dominance against its competitors due its long time service in the industry. Its personnel had strong experience in manufacturing industry.
Threat of substitution
This comes as result of the customer discovering a better way of doing what you do (Hanschke 82). MDCM could retain its customers by providing unique and excellent products and services for the customers to consider it the best provider.
Competitors may get an easy entry into your market if the cost (money and time) is little and competition is effective, few economies of scale, or little protection for your technology (Hill and Jones 82). The rapid and effective growth in the medical services industry created many small and big entrants into the market. MDCM however decided to apply acquisition strategy and improve IT management to curb the competition.
IT-aligned business objectives
Formally, MDCM did well and dominated world market with a share of about 54 percent. This was a result of acquisition and expansion of business globally. Unfortunately, MDCM ran into untold suffering of losses that led the acquired organizations have their day. This came as a result of division among its core operation leading to poor economy of scale in terms of purchases of materials, poor coordination of production schedule and even self-competition within the department of sales and marketing.
ERP to replace Computer Applications
MDCM’s IT division had a lot of issues that needed proper reaction. The presence of numerous disparate legacy systems caused a great deal of chaos in flow of information among various departments, suppliers and logistics department leading to inaccurate forecasts, scheduling headaches and distended inventory in supply chain.
With the help of the ERP system, MDCM is now able to effect operations globally in real-time. This is going to affect sales projections from customers, purchase of materials and manufacturing schedules regardless of geographical locations of these terminals. Required items could be determined thus production of the same can be done according to demand. Purchase of materials can only be done when there is need of doing so unlike the case of having a bulk when there is no demand of its end product. Production can easily be distributed to less busy manufacturing centers instead of straining certain centers.
The same system also helps in managing sales leads so as to avoid self-competition since this cause a poor impression in the prospect customers’ minds.
After system replacement, MDCM has to consider replacement of old workstations with new and up to date technology so as to eliminate the issues of software incompatibility and ease the maintenance work.
Tracking and monitoring of IT projects
The adoption of the ERP system should incorporate a way of managing projects. This will help eliminate cases of project redundancy and contradiction issues. One group has to be nominated to oversee project management so as to avoid wheel reinvention. The group should also oversee the software applications present and determine those which should be instituted to support business.
Adopt internet usage for all business purposes
Use of internet is a crucial strategy that MDCM has to institute so as to win customers. This can be well utilized in order placement by customers, accounts management so as to reduce time spent on tasks that could be done by the customers themselves and even use it to pay for their purchases. This will help to reduce customers’ work and reduce operation costs. The marketing process of the MDCM will be simplified. The company will have to set up an online store and an online process system which will be used to market their medical devices.
One of the Internet strategies that this company will have to put in place will be the selling of medical devices on their website which the clients can have access to. Although this strategy is not yet at par with other companies in the same business, it is one of the fastest strategies of most companies and is gaining popularity fast. There will be need to have online promotions where the company has been giving away free products to companies with more purchases as an initiative to attract more online clients. All these strategies will help make sales increase tremendously. In addition to this, MCDM will have to outsource contact center services which will provide marketers with general information like sales, inquiries, and assistance for customer service throughout the day in a very efficient manner.
Grünig, Rudolf, Richard Kühn and Anthony Clark. Process-based Strategic Planning. Australia: Macmillan, 2010.
Hanschke, Inge. Strategic IT Management: A Toolkit for Enterprise Architecture management. New York: John Wiley & Sons, 2010.
Hill, Charles and Gareth Jones. An Integrated Approach. United Kingdom: Edward Edgar Publishing Limited, 2009.