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 Medicals 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%...