Cochlear Case

Answer

Corrections

Issues 

• Within the global deaf community there is a continuing and serious debate about the use of technology to aid hearing in the profoundly deaf.
• There is a sleeping issue in regulatory matters – an implant is expensive and personally invasive technology and it is reasonable to suggest that regulators will.
• The meningitis crisis in the cochlear implant industry, which leads to the regulation barriers, especially the US FDA.

Analysis: 

Porter:

Define industry: 

• Cochlear devices - implantable hearing devices. Medical industry - Hearing impairment.
• High-technology industry.
• Markets and audiences - Cochlear implant technology is a lifelong and expensive service, so its audience is limited to a relatively affluent, and who does have a physical defect.

Bargaining Power of Suppliers:

• Capital: the cost of cochlear implant is USD$20,000-25,000 per unit, huge cost of technology development as well as the cost of production.
• Materials: Raw materials requirement is high, but there are lots of suppliers.

Bargaining Power of Buyers:

• People who are profoundly deaf and who have money and are willing to risk the operation, the numbers are huge. Meanwhile once you select the product, it is not easy to replace or be shut down.
• Early, patients can choose different cochlear implantation suppliers or reject the use of the technology.

Rivalry Among Existing  Competitors:

• Advanced Bionics from America has been the focus for two FDA notifications, the meningitis scare and the 2005 water damage product recall. Both have given Cochlear an advantage over them.
• Allhear Inc. Designs had still not been approved by the FDA for general sale in the United States.
• Med-El, a fierce competitor.

Threat of New Entrants:

• The number of operators with well cochlear implant technology is only a few and barriers to entry are very high.

Threat of Substitute Products or Substitutes:

• Cochlear implant technology has moved from experimental research into clinical applications and been treated as a conventional method for severe deaf.

SWOT:

Strengths:

• Cochlear is that rare high-tech company in such industry.
• FDA issued regulations that benefited Cochlear.
• Cochlear has unique Nucleus 3 system.  
• The company has around 70 per cent of the world cochlear implant market, especial holds 80% market share in China.
• Cochlear devotes 12 per cent of total revenue to research every year, and maintain links with implant recipients and the surgeons and audiologists and collaborative research arrangements with 80 other partners in 35 countries.
• Cochlear has a good committee system and an excellent training system for new staff and the ethnic diversity of staff.

Weakness:

• No obvious in drawbacks

Opportunities:

• In 2005 Cochlear acquired Swedish bone conduction hearing company Enteric Medical Systems This broadened the base for Cochlear.

Threats:  

• Competitors like Med-El who has eight subsidiaries and nine service centers throughout the world, increasing market share.
• Sonova acquires Advanced Bionics, direct threat to the global strategic plan and the competitiveness of Cochlear.
• Regulator setters, especially FDA, setting new regulations block the market.

PEST:

Political Factors:

Australian Trade Commission  provide them with a variety of services, from the organizations involved in professional exhibitions and promotion activities, to assist in the search for suitable suppliers and other service organizations to provide recommendations about China policy and business

Economic Factors:

The high cost lead to the narrow  market, but the middle to upper income groups are increasingly prosperous and these people are a potential market

Societal or Sociocultural Factors:

The conflicts between benefits of a cochlear implant and   deaf culture intensified.

Technological Factors:

Industry-leading and core technology.

Decisions

CEO Chris Roberts should maintain the dominance of Cochlear in its industry. However, Cochlear can also expend its industry such like Hearing Aid R&D to cater for the low-end market.

Outcomes:

• Cochlear should prove that Cochlear implant technology aims to improve the living standards of the deaf community not to create disputes and contradictions for deaf culture.
• Due to the high cost, the market selection is still important.  At the same time, the development of new products to cater to the low-end market, also beneficial to the company's brand reputation and long-term development.
• Stressing the safety and reliability of the products of Cochlear. They are different from the AB’s design changing products.