Case Analysis of Ring Medicals
Major Issues
• An average of 2 to 3 units of HCS-100 a month was expected to be sold, yielding total revenues of approximately $150,000 per month at an average gross margin of nearly 50%, whereas till April 1988 only 5 systems had been sold versus a budgeted sales volume of over 30 and revenues totalled about 15% of the targeted annual amount of over $1.7 million
• Scanvest Ring had spent in excess of $700,000 on the HCS-100 effort and its CEO Helge Midttun and other board members were hesitant to invest further in a project that had so far shown lacklustre results
• There was disagreement about the most appropriate channels of distribution wherein three fairly distinct schools of thought prevailed
Actionable Recommendations
• HCS-100 should be positioned as “high end” hospital internal communication system for large and medium size hospitals with clear message of the value delivered with ROI calculations
• HCS-100 should also be sold through the network of telecommunication distributors such as Introlink but with control on branding and pricing through agreements
Analysis is support of Actionable Recommendations
• Target Market potential studies indicated nearly 7000 US hospitals spent over $1.4 billion on telecommunication equipment in 1987
• Of all US hospitals, only 5% had an automated telephone answering system
• Under Ring Medical’s current pricing scheme, the roughly 95% of unpenetrated medium and large hospitals represented a market of some $260 million
• Internal company estimates projected that at least half of these hospitals will be upgraded to offer an automated TAS service within the next five years
• US Hospital and Healthcare Market data o Present Number: 6,988 hospital sites in US o Size (6 – 99 beds): 3,239 small sites o Size (100 – 399 beds): 2,847 medium sites o Size ( over 400 beds): 902 large sites
• Market Potential: o % with automated Telephone Answering Systems: Less than 5% penetrated o % to be upgraded: 50%
• An average of 2 to 3 units of HCS-100 a month was expected to be sold, yielding total revenues of approximately $150,000 per month at an average gross margin of nearly 50%, whereas till April 1988 only 5 systems had been sold versus a budgeted sales volume of over 30 and revenues totalled about 15% of the targeted annual amount of over $1.7 million
• Scanvest Ring had spent in excess of $700,000 on the HCS-100 effort and its CEO Helge Midttun and other board members were hesitant to invest further in a project that had so far shown lacklustre results
• There was disagreement about the most appropriate channels of distribution wherein three fairly distinct schools of thought prevailed
Actionable Recommendations
• HCS-100 should be positioned as “high end” hospital internal communication system for large and medium size hospitals with clear message of the value delivered with ROI calculations
• HCS-100 should also be sold through the network of telecommunication distributors such as Introlink but with control on branding and pricing through agreements
Analysis is support of Actionable Recommendations
• Target Market potential studies indicated nearly 7000 US hospitals spent over $1.4 billion on telecommunication equipment in 1987
• Of all US hospitals, only 5% had an automated telephone answering system
• Under Ring Medical’s current pricing scheme, the roughly 95% of unpenetrated medium and large hospitals represented a market of some $260 million
• Internal company estimates projected that at least half of these hospitals will be upgraded to offer an automated TAS service within the next five years
• US Hospital and Healthcare Market data o Present Number: 6,988 hospital sites in US o Size (6 – 99 beds): 3,239 small sites o Size (100 – 399 beds): 2,847 medium sites o Size ( over 400 beds): 902 large sites
• Market Potential: o % with automated Telephone Answering Systems: Less than 5% penetrated o % to be upgraded: 50%