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ZOLL Medical Corporation Strategic Marketing

The U. S. market is the largest single consumer of medical equipment and supplies in the world. Similarly, U. S medical technology equipment manufacturing companies are the global market leaders in medical device production. The domestic external defibrillator market has been segmented into primary and secondary segments. Primary markets include; hospitals, pre-hospital, the public access markets, and the alternative health care markets. Hospital market is further subdivided into the acute care hospitals, non-acute centres, the non-treatment areas, and military care areas.

Within these areas, there are unique defibrillators purchasing patterns which have developed distinct solutions for combating sudden cardiac arrest (SDA). The end users in this market are the doctors and nurses. Pre-hospital markets are the first responders or the initial medical personnel on the scene. Emergency response e. g. ambulances, also, the professionally medically trained personnel are the primary users. Also targeted are paramedics who have advanced life-saver training or the emergency responsive teams with the basic life saver training (BLS).

Others in this category are fire-fighters and the police who usually are the first to arrive at the scene of emergency. 2. 0 Situational Analysis U. S. external defibrillator market was uniformly divided in 2004, between the pre- hospital at

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29. 9 percent, hospitals at 30. 2 percent, and the public access markets at 29. 5 percent. The alternative care sector had 10. 3 percent. The public access sector will however overtake the other segments by 2006, and with forecasts of 36. 2 percent by 2011. The conventional hospital and pre-hospital segments external defibrillator markets are expected to shrink from 33.

1 and 38. 6 percent market allocation in 2001 respectively, to a low of 26. 2 and 25. 2 percent market share correspondingly. Public access market is the latest and potentially largest frontier for the automated external defibrillators devices which consists of all non- public facilities. This are meant to ensure the defibrillator devices are located within easy reach of the general public or any potential victims, hence minimize the response time. All the emergency response teams are also targeted.

Penetration of this market by automated external defibrillators has been made possible due to the portability of the devices, the ease of use, and affordability. Public members like the untrained co-workers, passer-by, and a family member are the intended end users. However, in some public places, trained professional personnel are usually the intended end users. The last segment is the alternate health care market. This encompasses the ambulance services which include the doctor’s offices, dentists, outpatient surgical centres, medical diagnostic laboratories and hospices.

2. 1: Environment Approximately 450,000 people die from sudden cardiac arrest (SCA) in USA alone. This has led to rapid expansion of the external defibrillator market from the early 1990s. Defibrillators are handy electronic devices that mechanically treat sudden cardiac arrest (SCA). They detect potentially mortal cardiac arrhythmias of ventricular fibrillation and ventricular tachycardia in a trauma victim and are able to treat the same through defibrillation or the application of a controlled electrical therapy which ‘arrest’ the arrhythmia.

This has led to rapid expansion of the external defibrillator market from the early 1990s. The devices were initially set up in hospitals in the 1960s. Using monophasic waveforms, the early technology were set up in health centres in the form of crash carts. This technology was only changed in the 1990s, when the biphasic waveforms were initiated. This new technology allowed for less power shocks while stabilizing and even improving shock effectiveness. Even with this improvements studies showed that the slow response by the emergency teams were still contributing to high mortality rates.

The industry is therefore still under pressure for improvement in technology development and expanded device placements in order to improve the survival rates. This has made the external defibrillators market to be of high growth, with the potential of revolutionizing the emergency resuscitation treatment. 2. 2: Industry The U. S. external defibrillator market penetration is dependent on the specific market and device segment. Initially defibrillators were only located at medical treatment areas however, the public access market was largely neglected.

The seven firms engaged in the automated external defibrillators development in the U. S. can be categorized into three segments according to size. The first segment is composed of the firms not confined to the automated external defibrillators only, but further engages in other medical equipment devices development. The other group is composed of the firms which mainly deal with automated external defibrillators, and lastly the small defibrillator company start up firms. The first group is composed of Medtronic Emergency Response; Philips Medical; Zoll Medical and Welch Allyn.

The second segment has Cardiac Science, while the last grouping is made up of Defibtech and Heartsine. The market leader is Medtronic Emergency Response with a 42. 9 percent share, with Philips next at 24. 0 percent and Zoll at 21. 3 percent. The balance is held by Cardiac Science which has 5. 2 percent and Welch Allyn at 4. 7percent. Heartsine and Defibtech have minimal share of the market. Medtronicshare of the market has slipped from the high of 47percent in 2002 with the entry of Heartsine and Defibtech in the market coupled with the acquisition of MRL by Welch Allyn.

These changes seem insignificant in view of the tremendous growth in the external defibrillator market. The market share equation is expected to remain uninterrupted if no new technology is unveiled in the near future. 2. 3: Organization Zoll Medical Corporation is one of the major resuscitation solutions providers. Its principal activities are to design, manufacture and market non-invasive cardiac resuscitation devices and related software. It’s a financially stable public company which has a reputable product and reliable record.

Zoll develops comprehensive resuscitation technologies that include external defibrillators, pacemakers, disposable electrodes and other accessories. This are sold in mainly in the US market and more than 140 other countries. The company has direct operations, distributor networks, and business partners throughout the US, Canada, Latin America, Europe, the Middle East and Africa, Asia and Australia. Zoll Corporation is the third largest manufacturer and distributor of automatic and non-automatic external defibrillators

To be the market leader, it needs to have diverse market strategies. 2. 4: Market Strategy Zoll Medical Corporation has being steadily diversifying its products by acquiring several additional resuscitation technology developing companies. This has enhanced its potential to be granted large contracts in the medical professional sector, with its enhanced product portfolio, for example, hospitals and similar emergency medical services center. A product, Infuse has penetrated the lucrative military market.

Its CPR focused product line has the new additions like AutoPulse Resuscitation System and the ResQPOD Circulatory Enhancer. Zoll also has acquired device patents, which are integral to its future technology development with defibrillators. Zoll is the third largest company in the U. S. market for defibrillators. Zoll market strategies are clearly geared towards further market penetration, but the firm has yet to really challenge the market players in the lucrative hospital segment and the potentially high growth public access markets.

Its market strategies should be more focused on the mass market segment with its new CPR aligned devices. 3: Problems Found in Situational Analysis 3. 1: Statement of Primary Problem: Targeting the Wrong Customer Zoll has mainly been focusing on the non-AED devices market rather. This market is dominated by Medtronic with Phillips second and Zoll. Zoll Medical focus on non-AEDs is misplaced in view of the projected future market forecasts. (Frost and Sullivan – 2005) With the AEDs market expected to dominate the market reaching a high of 92.

5 percent of all unit shipments by 2011, the AEDs will be dominating the market in the future. 3. 2. Statement of Secondary Problem: Producing Premium Products for a Commodity Market Zoll should re-focus on development of production cost effective models that will sustain its revenue. The company’s AEDs products are too expensive to the company in terms in terms of their production costs. The high production costs erode the company’s revenue base. The company should produce devices that are less cost effective while maintaining its high quality. 4.

Strategic Alternatives for Solving Problems 4. 1: Alternative 1 Zoll Medical can initiate the following alternatives. The company should focus on designing and developing a device that has low production costs. This is due to the fact that the main problem affecting manufacturers of the AEDs is low unit price due to the price sensitive nature of the market. The new device can incorporate a feature for administering cardiopulmonary resuscitation (CPR) as there is an ongoing debate on whether CPR should be administered first rather than use of AEDs.

Zoll already has a similar device in the market, hence will only need redesigning. By concentrating on a unique product aimed at minimizing the manufacturing cost, Zoll will have a clear competitive edge over the firms in the market. The product must however maintain the company’s excellent reliability, durability, and easy to use. The more advanced high end products should therefore be limited to the expensive non-AED devices. The projected new devices will enable the company enter the high growth markets in private and public institutions.

Defibtech’s LifeLine AED is an example of such a device. A firm like Zoll Medical with larger distribution channels, high reputation, and vast resources can have huge success by coming up with an efficient reliable device, aimed at mass market. By virtue of being able to minimize costs, the company will realize higher revenues hence concentrate on even better designed mass market products. The potential for the public mass markets which includes homes, health clubs, police cars, shopping malls, theatres etc is very huge and represents the future for the AED manufacturers.

Unlike the heavily crowded hospital market, the mass market penetration is largely un- chartered territory. Defibtech a start-up company has managed to cut a niche targeting ‘small’ markets as dentists offices, physician offices etc. The current defibrillator technology requires high power hence appreciating the manufacturing costs. Developments of a pioneering device aimed at cutting down on the cost of production will dramatically lower its cost price and guarantee Zoll Medical high returns.

It would also benefit from the present consumer awareness and positive drive towards sudden cardiac arrest (SDA) and early defibrillation that are the major drivers in the external defibrillation market. A manufacturing company like Zoll can actively campaign for the enactment of legislation process while supporting the lobbying organisations like the American Heart Association to help hasten the passage of favourable legislation. This includes the adjustment of the Good Samaritan legislation to allow a manufacturer to only follow the laws of the state where it is domesticated.

Lobbying for legislation to requiring placements of the AEDs in specific areas like health clubs. 4. 2: Description of Strategic Alternative 2 Another alternative a firm like Zoll Medical can use is in enhancing its revenues and market share is the development of dual-mode AEDs. These are devices designed to have the capabilities of the basic AEDs plus the more advanced non-automatic external defibrillators. This hybrid device will be the balance to counteract the inexpensive basic AEDs which are pulling down the manufacturers profits, by incorporating the more advanced manual features employed in the non-AEDs.

This dual-mode device will be moderately priced hence ease the pressure on the manufacturing firms, while at the same time not be too primitively expensive for the semi-professional consumers. These groups include the police, hospitals, EMS, and fire departments that can be equipped with these dual-mode devices. These dual-mode devices can be aggressively marketed to the specific institutions to encourage greater sales for the companies. The strategy of using dual-mode devices should also ensure the continued use of the basic AEDs to help sustain the current market and similarly the expensive non-AEDs to also maintain that market.

The development of the dual-mode devices should therefore be complimentary to the other existing defibrillators and enact a fresh market segment thereby enhancing the manufacturing firm’s revenues. Phillips’ HeartStart FR2+ device is an enduring example of this market model. This alternative should be coupled with manufacturers enhancing and maintaining their distribution lines. By using the distributors who already have established programs, they will be able to assist Zoll Medical in the fitting, maintenance of the devices and instruction on use with the consumers.

The distributors, who have other equipment on site, will be in a better position to extend the same maintenance services to the AEDs devices. This is after also undergoing own training with Zoll Medical. This service integration will benefit both Zoll Medical by reducing costs and the distributors as the latter will have a better value preposition with their clientele. To improve revenues, Zoll market strategy for the firm should be focused mainly on the AED market in the public sector. In 2001, non-AED was the major revenue earners with a market segment of 59.

7 percent. Since then, the growth of the AED market has been more rapid and prediction is that it will surpass the non-AED sector by 2005. Public awareness of SCA has driven the growth patterns towards the AED with the need for early defibrillation gaining prominence. Although this sector has less revenue returns, the ability to offload large shipments counteracts the sectors negative price elasticity. It is therefore prudent for a firm to concentrate on this mass market with its tremendous growth potential to secure and enhance its market share.

By 2011, the AED market share is forecasted to be at 57. 3 per cent. (Frost and Sullivan, 2005) 5. 0: Selected Strategic Alternative The first alternative involving concentration on the mass market as the company’s market driver is obviously the better alternative to be used by a firm like Zoll Medical. By emphasizing on its superior technological development and renovation, the company will be able to re-enter the AED market with a low cost, specialized device that will be available easy to use but capable of upstaging other AEDs in the market.

The main objective is to ensure penetration and capture of a unique niche in the public sector. High volume sales for the device which with low production costs will radically improve its market share and revenue. However, the company will still keep its other production lines intact but utilize the same distribution channels. The firm will also lobby for more favourable legislation through the various agencies like American Heart Association (AHA) and state legislators to ensure more public access to its products. Summary The U. S. external defibrillator market has very good prospects for growth.

This is evident in the widespread public awareness of the importance of application of defibrillator to offset sudden cardiac arrest (SCA) to trauma victims. The implication of litigation against public institutions has also led to the urgency of the installations of the AEDs. There is also pressure on the legislators to enact appropriate laws concerning the AEDs across the country. Zoll Medical Corporation as one of the manufacturing firms in the AED market needed to implement appropriate marketing strategies towards exploiting the favorable demand market for the AEDs by initiating the right mix of marketing strategies.

References

Medical Equipment Industry, Paddock, Richard, Hein, Matthew DOC/ITA/MAS/OHCG, (202; C/ITA/MAS/OHCG, (202) 482-5014) 482-3360 Medical Device Daily, The Daily Medical Technology Newspaper, June 23, 2004 Vol. 8 No. 120 Special report, Defibtech gains a niche in very competitive AED Market Johnson, Holland (2004) Cardiac Science Announces Exclusive Partnership with the City of San Diego To Outfit Automated External Defibrillators Throughout The City, www. cardiacscience. com American Heart Association: Learn & Live, available from, www.

amaericanheart. org (Retrieved October 21, 2008) American Red Cross: Saving a Life is as Easy as A-E-D available from, www. redcross. org (Retrieved October 21, 2008) FDA Heart Health Online: Automated External Defibrillator (AED), available from, www. fda. gov/hearthealth/treatments/medicaldevices/aed. html (Retrieved October 21, 2008) State Laws on Heart Attacks, Cardiac Arrest & Defibrillators, available from, www. ncsl. org/programs/health/aed. html (Retrieved October 21, 2008)

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