ACCT 3614 INTEGRATED CASE STUDY

SEMESTER MARCH 2020

TITLE: VisuSon: Business Stress Testing

SUBMISSION DATE: 2020

LECTURER’S NAME: MADAM NURKAMARIAH BINTI KASIM

PREPARED BY:

AMIRA NUR AFIQAH 172018976

FATIMA ARIENA BINTI ZULKIFLI 181019702

LIN XUE 163917748

VisuSon: Business Stress Testing
CASE SUMMARY

• On October 10, 2008, Linda Ott, the CEO of VisuSon Inc. and Jonathan Foley, the CFO,
had a meeting to review the company’s result for the third quarter of 2008 that had just
ended, and discussed projections for the rest of 2008 and for 2009.
• Their meeting was dominated by the last agenda which was the look at 2009.
• They have conflicting projections of 2009 as the Dow Jones Industrial Average falls nearly
below 20% of its level from a week before and 40% from a year ago.
• Also, many US hospitals scrambled to replace their auction-rate debt with alternative
sources of capital.
• Both of them agreed that a wider credit crisis would negatively impact 2009 sales, but there
was no historical precedent on which to based a reliable forecast.
• Linda worried about the near-term impact on earnings and the long-term strategic impact
of a slowdown while VSI prepared to release its first entirely new product platform in
several years.
• Jon believed that the company should be focused on cash flow and VSI’s own access to
financing as much as customer demand.
• He advised to postpone the introduction of the new product and just start seeking approval
from FDA since it would probably take them over a year.

SWOT ANALYSIS

Strengths

• Visutech had merged with a unit of Bainbridge, who is a manufacturer of components for
the medical ultrasound market.
• Their systems were used in hospitals and medical practices across all 50 states in the first
six years.
• By 2008, had over 200 full-time employees.

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 • All of the employees in the manufacturing were skilled and trained according to the
regulations set by the FDA.
• Their sales were at a record high in the third quarters of 2008 and there’s a high chance
that their sales will continue to flourish for the rest of 2008.
• They produced their own system or products.

Weaknesses

• Their company only manufactured medical ultrasound equipment, which gives them a
certain range of customers.
• They are a small manufacturer in the industry that have multiple manufacturers and 4 main
ones that dominated the industry almost entirely.
• Their sales are mostly dependent on the hospitals and medical practices.

Opportunities

• One major competitor responded to VSI’s entry to the market by negotiating an agreement
under which they resold VSI’s top-of-the-line system under their own brand.
• If the company were able to start introducing their new product to the market in 2009, they
would probably make more sales.

Threats

• They have a lot of competitors including 4 major competitors. Together the 4 companies
controlled approximately 80% of the worldwide market.
• Other competitors or companies in the market competing for the remaining share.
• Other than the competitors from North America and Europe, new entrants into the global
market were emerging from other parts of the world, particularly China.
• Many of the US hospitals scrambled to replace their auction-rate debt with alternative
sources of capital, therefore the company could potentially lose most of their customers.
• The process of bringing newly hired manufacturing employees is slowed due to the skill
and training required by the FDA.
• To introduce a product into the market, it would probably take them over a year as it is an
innovative product.

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IDENTIFIED ISSUES

• To introduce the new system or product into the market, they would need probably over a
year to get the approval from the FDA.
• Their 4 major competitors could dominate the industry more by acquiring and absorbing
the smaller competitors that had established themselves and grew.
• A potential finance crisis could happen in 2009 as the stocks falls lower and lower each
week due to the recession.
• The CFO’s advised was questioned by Linda’s trusted friend and collaborator, Dr. Simon
Lee. He privately criticized the CEO as overly cautious and Peter Beeson, the Director of
Sales and Marketing, had dismissed Jon as “just a bean counter”. While the VSI’s COO,
Tom Nelson, who had worked with Jon at Bainbridge, never made a significant proposal
without having Jon first vet the numbers.
• Due to that, the CEO was confused on what to actually do in regard to the wellbeing of the
company. She want to introduce the product into the market as soon as possible, but she
also agrees with Jon’s advised.

ALTERNATIVES & EVALUATE ALTERNATIVES

l Speed up the development of new products

l Because FDA needs more than a year of testing to approve new innovative products to
enter the market, we cannot make FDA accelerate the progress of testing but we can speed
up the speed of our research and development of new products to ensure compliance with
FDA standards during production and research and development. Speed up product entry
into the market.More professional personnel can be hired to ensure that the division of
labor among the various departments is clear during the R & D process.

l Looking for investors to get more funds

l Cash and working capital are the key to determine whether the company can continue to
operate. To solve the cash and working capital, we can choose to find investors to get
more financing.

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l Sell more stocks

l Sell some shares to get more funds

l Cut some unnecessary expenses

l Although the reduction of expenses cannot make the company's funds solved, it can make
the company get more financing time.

DECISION AND WAYS TO IMPLEMENT

We decide to speed up product development process to ensure that their product will be able to get
approval at a desired time instead of being delayed. To make sure that happens, VSI should:

• Have a good operating policy

Ensure good communication with sales, marketing and manufacturing division to avoid
inventory surpluses which can cause obsolescence of stocks. Being communicative and
working efficiently helps VSI stays in position even in economic downturn.

• Take a proactive approach

Since economy is in recession, there will be less scope of work and surely ups and downs in
business. R&D should utilize their time to work on new product development and be more
creative in ideas for the future. VSI has its strength in innovation, therefore proactive approach
will definitely help them in the long run.

• Re-arrange projected budget

VSI should eliminate unnecessary expenses and save money for its new product development.
Bonuses need to be modified according to company’s performance. Mandatory meeting with
managers is vital to make them understand the company’s current situation and reasons behind
the cut off. It will also create a good and trustworthy working environment.

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CONCLUSION

VSI cannot expect the new segment to be aware of the economic downturn but they should apply
proper care to show interest on the new product. The marketing should promote HCU in both
domestic and international market in a limited cost. The best way to avoid extra cost would be to
maintain good communication between every departments.