Becton Case
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Transcript of Becton Case
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BECTON DICKINSON AND COMPANY : MULTIDIVISIONAL MARKETING PROGRAMMES
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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 serve the world's population 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
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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
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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
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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
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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.
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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?
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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
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Multidivisional Marketing Structure
What is Multi Divisional Marketing?o Multidivisional structure emerged during the 20th
century in response to the coordination problem caused by the diversification
o 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
o The key advantage of diversification structure (whether product based or geographically based) is the potential for decentralized decision making
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Benefits
o Better demonstration of BD saleso Effective use of resource to develop value added
services and programso Increase control on divisionso Can promote many services that, as a corporation,
they provide
to account Broadest product line Inventory management task was easier End user training
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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
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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
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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)
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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)
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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
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Value-Added vs. Basic Services
Types of serviceo Basic services: which includes fulfillment
accuracy, on-time delivery, damage free goods, accurate invoicing, effective sales representation and efficient in-servicing of end users
o Value added services: which includes �customized designed product, customized quality control, deferred billing, priority order processing, JIT inventory management, new services, extended warranty plan
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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
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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
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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
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“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
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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
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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
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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
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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?
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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
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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
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MULTIDIVISIONAL MARKETING… Multidivisional Marketing would make sense in :
Diversified organization Sub-division with own profit centre Dealing with common client having same
product requirementAnalyzing 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
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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
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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.”
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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
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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?
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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
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Que-5: In which companies
operating in India do you think a
similar situation could arise?
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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'
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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'.
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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'
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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'
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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'
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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'
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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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