Final johnson and johnson revised 1
- 1. Team J Akash Gandhi Jessica Minarolli Jessica Dominic Shaishav Desai Elias Roman Shekhar Gurnani Rutuja Ajgaonkar
- 2. Table of Contents Overview Business Recommendations Swot Analysis Risk Analysis Competitive Landscape Financial Metrics Conclusion
- 3. Overview Enthuse, a global healthcare company, is a highly respected and well organized company which consistently ranks as one of the “Most Respected Companies” annually. The company’s reputation is based on high quality products, innovation, and customer focus. Enthuse values are guided by their credo.
- 4. Goals Expand Portfolio Launch a new knee replacement product Capitalize on Market Demand Enthuse plans to achieve this through acquisitions, continuous innovation, and product development.
- 5. Business Recommendations Product Development Buy with Consultants Hiring orthopedic specialists as consultants Consumer Relationship Quality Assurance Increases market share by .9% Lower cost than either licensing option
- 6. Other Alternatives In House with No consultants Lowest development cost Design and Quality would be weaker No increase in market share Licensing License with a company for further development Option to buy for 240 Million in 2018 No control over design and development No increase in market share Reliability
- 7. Total Product Development/Acquisition Costs 0 200 400 600 800 1000 1200 1400 In house w/o consultants ($671M) In house with consultants ($1,058M) License to outside company (buyout in 2018) ($1,192M) License to outside company through 2018 ($1,194M) Costs in MM
- 8. Business Recommendations Pricing Strategy $4500 with no price increase from taxes. Increase of 3% per year After bearing the excise tax our selling price actually is $4,396.50 Price slightly higher than previous years but still cheaper than the average competitor
- 9. Market Share impact with price options *Passing the excise tax decreases market share by .4% $4000 1.4% Market share $5000 1.2% Market Share $4500 No change in Market share
- 10. Net Sales with Price Options 0 500 1000 1500 2000 2500 2016 2018 2020 2022 2023 Net Sales Years $4,000 $4,500 $5,000
- 11. Business Recommendations Marketing Strategy Premium strategy Target surgeons, hospitals, health care professionals, and non-clinical stakeholders Health Care Reform and Affordable Care Act Increase of market share of .75%
- 12. Business Recommendations Sales Force Strategy Direct Representatives Exclusivity- Better then Competitors Beneficial to Doctors and Hospitals Better earnings and sales
- 13. Units sold: Direct vs. distributor 0 50 100 150 200 250 300 350 400 2016 2017 2018 2019 2020 2021 2022 2023 Direct Rep. Distributor
- 14. Supply Chain Strategy In House Better for Public Relations Adding new jobs improving economy Advancement of Employees Sustain total control of manufacturing process Product Development in-house Quicker turnaround time Business Recommendations
- 15. Subsequent Decision Points In 2018 new competitor enters market Impact on market share Change the pricing strategy? Change the marketing strategy?
- 16. Subsequent Decision Points Keep Marketing Strategy flat at premium Keep pricing at $4500 Products already proven with high value Medical market continues to grow Shows confidence in our product
- 17. SWOT ANALYSIS Internal Strengths -Developing internally-Ability to design product with specifications, functionality, material choices, etc.. -Use of consultants gives insight to target specific issues for patients needing product. Weakness - Low initial market share. - High upfront costs. External Opportunities - Continuous growth in knee replacement surgeries. - Increasing market demand due to aging population and lifestyle-related diseases. -Expansion to hospitals and non-clinical stakeholders through use of premium strategy Threats -Existing competition from Simmer and Inflictus. -New Competitor expected to hit the market in 2018. -Loss of market share due to diminishing returns after 2020.
- 18. Top 3 Risks Removing resources from the development of other products. Keeping the pricing and marketing strategy the same when a new competitor enters the market. Losing a year of revenue due to the longer R&D time.
- 19. Competitive Landscape Simmer – Leader in musculoskeletal health care 30% of market share Current Lawsuits Inflictus – Focuses on revision and partial knee 20% of market share
- 20. Market Outlook: Positive World demographics are shifting towards older populations Between 2000-2050 Life expectancy in developing regions Grows from less than 20% to 34% An increase in the life expectancy combined with lifestyle related disease, increases demand for medical devices
- 22. Make Vs Buy (Net Income @ $4500)
- 23. Cumulative Net Income with Changes to Development 1921 1898 1741 1823 1650 1700 1750 1800 1850 1900 1950 In House no consultants In House Consultants License (buyout in 2018) License Net Income (in MM) Different Development Options
- 24. Cumulative net income with changes to price and Marketing 16501700175018001850190019502000 4000/Basic 4000/Prem 4000/Prem Plus 4500/Basic 4500/Premium 4500/Prem Plus 5000/Basic 5000/Premium 5000/Prem Plus Net Income in $MM (In Dollars)
- 25. Market Share
- 26. NPV Changes with Different Options 600 650 700 750 800 850 $4000/Basic $4000/Prem $4000/Prem Plus $4500/Basic $4500/Prem $4500/Prem Plus $5000/Basic $5000/Prem $5000/Prem Plus NPV
- 27. IRR changes with Different Price and Marketing options 28 29 30 31 32 33 34 35 IRR in %
- 28. Differences in NPV and IRR between Direct and Distributor Strategies 745 750 755 760 765 770 775 N P V 32.4 32.6 32.8 33 33.2 33.4 33.6 33.8 34 34.2 I R R I N % *With the Distributor Strategy we lose 1% market share and less sales than direct.
- 29. 748 749 750 751 752 753 754 755 756 757 758 In House US 3rd Party US 3rd Party outside US Net Present Value Changes in NPV and IRR with Supply Chain Strategies
- 30. Conclusion In house development with orthopedic consultants $4500 price option with bearing the excise tax Premium Marketing Strategy Direct Representatives In House supply chain strategy Keep price and marketing strategy flat in 2018 Increase market share from 19% to 21.4%
Editor's Notes
- #4: Company’s dedication to providing new and innovative products to its customers and delivering value to its shareholders are whatmakes this companyone of the leading corporations in the market– say that guys
- #5: Enthuse is looking to expand its portfolio and launch a new knee replacement product that meets the needs of the current marketplace. Enthuse is looking to capitalize on the marketplace demand for a new product that offers a superior combination of stability and range of motion when compared to products already in the market. Enthuse plans to achieve this through licensing, acquisitions, continuous innovation, and product development.
- #6: When asked Dc. Lisa said that having the input of 10 specialists will definitely make it more likely for her to recommend that particular product to her costumers as she would feel more comfortable with it She also said that doctors look for quality Hiring orthopedic specialists as consultants will give us the best quality product on the market.Customers will become more comfortable with a product developed with orthopedic specialist.Have complete control and oversight of the development process.Increases market share by .9%Lower cost than either licensing option.
- #7: In House with No consultantsLowest development costWould not nearly have the same design and quality as developing a product with specialist.No increase in market share.LicensingWould license the product to an outside company that is further in development Have the option to buy out and take full control of development in 2018 but cost $240 MillionNot have control of design and development.Not of same quality since they would not use orthopedic consultants.No increase in market share.
- #8: More elaboration to explain the chart and what it means -don’t forget to include v.c cost and f.c for each option
- #9: Pricing Strategy$4500 with no price increase from taxes.Overall after the taxes the product will initially sell for $4,500 per product with an increase of 3% per year.After bearing the excise tax our selling price actually is $4,396.50. This price is slightly higher than our older Strut knee implant (which sold for $4,200), but cheaper than the average price of a knee implant ($4,500).
- #12: However it is important to recall that that orthopedic joint replacement market is at a cross road between:Time tested conventional procedure Advanced implant materialsSurgical techniques With this being said it will be on our best favor to save money by choosing the premium strategy vs. premium plus. It will be more likely that the doctor will be the educator than adds, so getting to the doctors is what matters to achieve the greatest market share Marketing StrategyPremium strategySurgeons, hospitals, healthcare professionals, and non-clinical stakeholders are targeted in order to fully promote our knee replacement productAs a results of changes from the Health Care Reform and the Affordable Care Act, hospitals are now eligible for reimbursement rates as long as they meet certain criteria’s.Increase of market share of .75%
- #13: Direct RepresentativesExclusivity – Our product wont just be another option in the market of knee implants, this provides a beneficial exclusivity to doctors and hospitals.Better earnings and sales.
- #15: Supply Chain StrategyIn HouseKey Factors in manufacturing such as public relations and controls will be facilitated by using an existing plant and infrastructure giving us complete control over manufacturing. We would be adding new jobs within our community to help those raising families.* Employees have the opportunity to not only be trained but to also advance within the company.We sustain total control of the manufacturing process while keeping other assets like product development in house.In case of a problem with recalling a product the turn around time would be shortened drastically rather than waiting on shipping and freight if we outsource the supply chain aspect of the company.
- #16: In 2018 a competitor is composed to enter the market. According to intelligence the new product will have an immediate impact on the market share. Management in Enthuse has chosen to reevaluate the initial business decisions to counter the new entrant.Change the pricing strategy?Change the marketing strategy
- #17: After reevaluating our prior decision we have decided to not only hold our prices but to also hold the marketing strategy as well. Customers will more likely purchase an already proven part with high value rather than risk on a new product. The medical market continues to grow as well.By holding our previous business decisions we show to the market that we are fully confident that the products we produce are of top quality and do not fear changes in the market landscape.
- #20: Simmer is the worldwide leader in the muscoskeletal healthcare holding about 30% of the market.Currently is suffering a multitude of lawsuits as a result of their malfunctioning product Inflictus holds 20% of the market.Focuses primarily on revision and partial knee surgery Enthuse currently holds 19% of the market.
- #21: World demographics are increasingly shifting towards older populations between 2000-2050Life expectancy in developing regions will grow from less that 20 to 34%An increase in the life expectancy combined with lifestyle related disease, increasesdemand for medical devices
- #31: Product Development – In house development with orthopedic consultants.$4500 price option with bearing the excise tax.Premium Marketing Strategy.Direct Representatives.In House supply chain strategy.Keep price and marketing strategy flat when new competitor enters the market in 2018.We increase our market share from 19% to 21.4% before we start experiencing diminishing returns after 2020.