Discuss about the Cochlear Limited.
Expanding internationally is a very big thing for every company and all the companies’ think of expanding globally so that they can increase there market share and earn more and more of profits. There are many problems that are being faced by the companies who plan to expand their global business as expansion is not a cup of tea for every business there are lots of researches and surveys required before a company puts its first step in any country where not even the customers but also the market is different as compared to the home country. (Marketing 91 2000) This report covers the international expansion of Cochlear Limited and the problems it faced during its expansion. (Ahlstrom 2010) Before moving towards the expansion techniques used by the Cochlear Limited the strategic analysis of the current position of the company will be carried on. The report will include the current position of the company and its international expansion. What are its success mantras along with its weaknesses and what are the steps the company has taken to overcome the weaknesses. The various marketing factors that has affected the Cochlear Limited, The SWOT analysis of the company, Boston matrix and the various strategies. (Rameshan 2006)
Cochlear Limited is a very well known company of Australia that provides the various hearing solution all over the globe. There have been many innovative solutions delivered by the company for more three decades. The Cochlear limited is a global leader that has its main focus on gaining the competitive advantage. There are various local distributors who help the company in selling its products in various other countries. The main focus company has is in providing value to its customers by the help of its products that are of very high quality and the services that are brilliant. The innovation in the Cochlear limited is focused on the better consumer experience and consistency. The company has a very well developed customer information system for delivering its products and services that match the needs and the tastes and preferences of the customers. (Philip 2014) The Cochlear limited has developed a small hearing device that helps the deaf person to hear. The company is working hard in improving its technology so that it can provide better products and services to its customers and satisfy them. It is seen that presently the Cochlear limited is mainly concerned in adopting various strategies so that it could gain competitive advantage along with sustainable growth. (Gupta 2014)
Cochlear limited is considered to be a very high value added manufacturer without any established domestic market and that broke from a conventional wisdom. (COCHLEAR 2013)The current CEO of Cochlear limited is Chris Roberts who describes Cochlear Limited as a thirty-year old startup. According to the reports of the Access Economies it has been found that one out of six people in Australia are affected by hearing loss due to which the hearing loss has been increasing over the time. Also it has been estimated that this figure could increase to one in four people in Australia till the year 2050. Singapore is the country that is based upon the principles of quality, globalization, productivity and integrity. Singapore has been ranked as number one in the ease of doing the business according to the World bank as it has competitive corporate tax rates, infrastructure that includes developing knowledge economies and strategic location that is fit for expanding the exports to the various Asian Pacific regions. For the better identification of the strategies that are used by the company from time to time it becomes very important to know external as well as the internal environment of the company. Various strategic tools like Porter’s Five Forces Model, PESTLE analysis and value chain analysis have been used for the development of the strategies of the Cochlear (Utkarsh 2015). This assessment shall be responsible for the evaluation of the competitive position of Cochlear limited along with the attractiveness of the company with Singapore as a place for conducting its business and sustaining various advantages and making various recommendations that may concern the implementation of the different global strategies.
PEST Analysis
The PEST analysis helps in analysis the four macro environmental elements of Cochlear limited so that a better understanding of the external environment of the company can be known.
Political Factors:
The political factors are the factors that refer to the intervention of a government in the business, policies and the economy. The government of a particular nation impacts the infrastructure, health, and economy of a particular company. As Cochlear limited carries out its operations in various other countries so it becomes very important for Cochlear Limited to align itself to the laws and legislations of every country. (Nelson and Smith 2007)There is lots of political stability in Singapore that has a positive impact on the business of the Cochlear limited. Also the proper tax planning in Singapore helps in boosting the economy. Much of the value is given to the medical regulatory implications in the Singapore that can affect the growth positions of the Cochlear limited in Singapore. All these factors need to be considered while the Cochlear Limited develops its strategies. (Vandenabeele 2006)
Economic Factors:
Singapore economy is a great economy. The economy of Singapore has great infrastructure facilities. The trade is strong in Singapore due to its transparent business environment due to which number of investors gets attracted towards the economy of Singapore. The strength of the Singapore economy has proved out to be very advantageous for the business operations of the Cochlear Limited. Moreover it can be seen that the Cochlear Limited has been operating in various countries that has robust and stable economy like Germany, France, United Kingdom and Switzerland.
Social Factors:
The main impact on the strategic design of the business is of the social factors. If we analyze the social structure of Singapore than it can be found that the population of the Singapore has been growing at a very fast pace which is a very positive sign for the business of Cochlear Limited. The industry to which the Cochlear limited belongs is the medical technology that is also growing at a high pace so that it can provide better services to the growing population of the Singapore.
Technological factors:
Technology has a very vital role to play in the industry of Cochlear Limited as the advancement of technology helps in the production of new and innovative products. Various new products for the hearing solutions have been developed due to the technological innovations. It is required that the Cochlear limited develops long term and effective hearing aids solution for the satisfactions of its customers. (Cullen 2013) If the company wants to achieve customer satisfaction that it is important that it takes in to account the technological innovation.
It has been suggested by Michael E. Porter that the company shall consider the five factors that have dominance on its industry. The various factors that are outside the industry and influence the nature of the competition are included in the Porter’s Five Forces analysis. It was suggested by the Porter that the competition is the key to the success of every business. The intensity of the rivalry that is faced by an organization determines how the organizations give away the value created by them. The companies either pass the value to the buyer in the form of low priced products or it is absorbed by the higher costs. The Five Forces for the hearing aid industry includes:
There are many competitors of Cochlear limited that are operating all over the globe and giving tough competition to the Cochlear Limited. (Patibandla 2006) As Cochlear limited is a global leader in the hearing aid solution therefore the presence of strong competitors is creating great threat on the company. Some of the biggest competitors of the Cochlear limited that are operating in the market are Resound, Beltone, Oticon, Sonic, Phonak, Advanced Bionics, Starkey etc. All the competitors have adopted advanced technology so that they can innovate new products and deliver life time solutions to the hearing loss of its customers. There has been tough challenge given to the Cochlear Limited who has the global presence. For gaining the substantial growth it is required that the company adapts new technology so that it can reach the potential customers. So, here it can be concluded that there is high competition in the cochlear implant industry.
There has been various implant mechanisms that have been developed by the Cochlear Limited through its intensive research and development. One of the major factors for developing high tech products is the technological advancements. There is a great growth of the medical technology industry due to rapid technological innovations. There is high bargaining power of suppliers as the number of suppliers for the Cochlear limited is less who is responsible for providing innovative products to the company. The suppliers have great power to dominate the market as they are limited. It is advisable that Cochlear limited maintains healthy relations with its suppliers. (Cullen 2013)Moreover the company shall choose the suppliers in a manner that the quality of the company’s products is not hampered. It can be concluded from the analysis that the bargaining power of the suppliers is high.
The demand and the supply of the products decide the bargaining power of the customers. According to the reports of the World Health Organization it has been found that the demand fulfilled by the hearing aid solution is only 10% of the actual global requirement. So here the layman can imply that the demand is high as compared to its supply. The company needs more time and aid to meet the global need of the hearing aids. The number of customers who are in need of the hearing aid is significantly higher as and when compared to the production of the product the customer power is very low. So, here it can be concluded that the bargaining power of the customers is very low that has a positive impact on the Cochlear limited.
Medical industry requires a lot of capital and hence it is a capital intensive industry therefore this industry creates various barriers for the new entrants. The R&D expenditure that is required in this industry is very high due to which the new entrants cannot attain economies of scale. Hence it is considered to be the major barrier for the organization for starting its venture. The other reason is that the global leaders who are operating in this industry have already been able to achieve the loyalty of the customers along with the economies of scale. The market leader have high profitability due to which they are able to invest huge amounts in there research and development so that they can bring new and innovative products in the market. Thus it can be said that the existing leaders can gain competitive advantage if they put themselves in to continuous improvements. Here, it can be concluded that the threat of new entrants in this industry is very low.
The main purpose of the Cochlear Limited is to provide lifetime solutions to the hearing problems. The substitute for the cochlear implant is external hearing aid, but this product does not provide long term solution to the hearing loss problem and the deafness is not cured completely by this product. At present no solution is available that can cure the deafness completely on the long run. The company need not focus on its substitute products. Hence, it can be said that the substitute products availability for the cochlear limited is low as there is no substitute found for this industry so far.
These days the concept of positioning is applied by the various companies extensively in the various emerging markets. After the company has decided the target market or the segment market the next step that the company is required to take is deciding on how the product should be perceived in the consumers mind. Positioning as defined by Trout and Ries (1969) as the strategy for ‘staking out turf’ or ‘filling a slot’ in the mind of the target customers”. (Annoymous 2008)There is no relation of the positioning with the product rather the main relation of the positioning is with what the marketer does with the target customer. Positioning is basically a two step process in which the first step involves clarifying which product shall be compared to. (Piercy 2008)And in the second step the differentiating characteristics of the brand are identified and communicated. Under the strategic positioning the future position of the organization is invented on the ground of the present and the predictable exploitations and then various programs are constructed for realizing that positioning.
The positioning of the organization can be identified by SWOT analysis and the BCG matrix (Boston Consultation Group). The cash cow that is the high market share of the company and the low market share is identified by the BCG matrix. Whereas the Dogs are the low market share and the low growth. Stars show the companies which have high growth as well as high market share that includes the companies.
Singapore- The Economist Model
According to the latest reports of the World Bank it has been found that the Singapore is the high-income economy. Singapore has a gross national income of $55,150 per capita as of the year 2014 according to the ATLAS method. It has one of the most business friendly regulatory environments for the various local entrepreneurs and it has also been ranked as the world’s most competitive economies. (World bank 2016). The company has a stable political system that has a track record of flexible and sound economic policies.
Singapore-Market Potential Index
Each year the market potential index is published by the globalEDGE so that the market attractiveness for the international business can be known. The detailed ranking of the 26 emerging countries is known through the market potential index. There are several dimensions on which the emerging markets are ranked that allow various appropriate strategies that can be developed for each country. (Pennisi 2013). There was a fall in the city state economy in the year 2015 and the insolvencies increased by +17 % in the year 2015. (G 2013)
Country Entry Mode
There are various entry modes that a company can use to enter a particular country. Some of the entry modes includes licensing, Franchising, Exporting, Joint-ventures, wholly owned subsidiary and Acquisition. The company shall go through the various pros and cons of the different entry modes and decide which entry mode it shall use to enter a specific country.
Exporting
|
Pros |
Cons |
|
· Leverage brand in new markets · Permits Gradual Market Entry · Less financial Exposure |
· Various Tariffs and trade barriers · Conflict with the distributors · Lack of control over marketing |
Licensing
|
Pros |
Cons |
|
· Low cost to access markets · Avoid tariffs and other trade |
· Give up control · Dependency on the Licensee |
Franchising
|
Pros |
Cons |
|
· Low Financial Risks · More control · Franchisee have knowledge of local markets |
· Dependency on the franchisee · Conflict with franchisee · May be it creates future competitor |
Acquisition
|
Pros |
Cons |
|
· Increase market power · Overcome barriers entry |
· High cost · Integration difficulties |
Wholly Owned Subsidiary
|
Pros |
Cons |
|
· Maintain control over operations · Strong protection of technology |
· High investment · Difficulties in speed and knowledge |
By going through the various pros and cons of the different entry modes it can be concluded that the best method of entry of Cochlear Limited in Singapore is Franchisee and exporting through which it can have its control over the company and the competition chances can also be minimized.
There is a high degree of centralization for the Cochlear limited as it is a market leader with less number of competitors. It enjoys the position of the leader and attains profitability. The company has attained the loyalty of the customers due to which the customers prefer buying the products of the Cochlear limited rather than any other company.
One of the major strength that Cochlear limited has at its disposal is its employees. There are various employees from different departments like the sales department, marketing, research and development who work in collaboration to produce new and innovative products. The Cochlear limited practices various international HR practices and makes its employees capable of competing in the international market.
There are lots of diagnostic techniques that are available in the local market and help in the growth of the Cochlear limited. The company needs to expand its research needs in order to expand the needs of the developing countries.
Conclusion
Hearing solutions to more than 2,50,000 people have been provided by the Cochlear Limited all over the globe. The main aim of the Cochlear limited is not just providing the products but also providing quality services to its customers. The company enjoys competitive advantage as it provides high quality services to its customers. A lifelong partnership has been formed by Cochlear limited. The company has gained leadership position in the market. The company understands the unique strategy by understanding the problems of the customers. (R. Griffin 2015)The company can take the help of various strategic theories and tools to be a successful player in the market, like the BCG matrix or the Ansoff’s Product market matrix. The company can use either of these factors so that it can expand its business in a smooth and effective manner. Proper and effective strategic planning is required for an organization to be successful in running its business.
Here, it can be concluded that the company can get in to international business and start its operations in Singapore as it has lots of scope for this. The population is increasing at a high pace in Singapore that has given lots of opportunities for the company like Cochlear Limited and hence the company has great growth opportunities available in the market of Singapore.
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