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BECTON DICKINSON AND COMPANY : MULTIDIVISIONAL MARKETING PROGRAMMES

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Becton Dickinson at a Glance

Type Public

Industry Medical Equipment

Founded East Rutherford, New Jersey (1897)

Founders Maxwell Becton & Fairleigh S. Dickinson

Head Quarter Franklin Lakes, New Jersey, US

Area Served World Wide

Key People Edward Ludwig (Chairman)Vincent Forlenza (President)

No. of employees 28,803

Continued…

BD’s Strategy: To serve the world's population as a global leader in developing and applying technologies to solve emerging, important, sometimes underappreciated and fundamental healthcare problems with discipline and committed service to customers and shareholders

At present BD manufactures and sells a broad range of medical supply devices, laboratory equipment and diagnostic products

Customers: Healthcare Institutions, Life Science Researchers, Clinical Laboratories, Pharmaceutical Industry and General Public

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Continued…

The company was organized into two sectors: Medical having 59% of total sales Diagnostics having 41% of total sales

It is divided into 19 operating divisions Each division had their own marketing and sales

organization, distribution network, customer service departments billing and account division, national accounts programs and warehousing facilities

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Continued…

Advantages Clear product-market focus Decentralized approach More effective and efficient approach to clients

operating and service needs

Disadvantages Minimal interaction between divisions Inefficiency and duplication of work

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Trends in Hospital Market (1980s)

Growth of Group Purchasing Organizations (GPO) like Allied Purchasing Group (APG)

Primary decision making authority shifted from end user to non user (Away from individual institution to centralized GPO)

Primary decision makers changed from different hospital departments to individual/committee of GPO

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Competitive Developments

BD’s major competitor was a Japanese company Terumo

It offered the products at lower prices, was spending

large amount on promotions and expanding distribution

network Has achieved a limited success in US market against

BD’s individual divisions Terumo regarded hypodermic to establish brand

identity and distribution capabilities in U.S.

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Ques-1: Why is this topic of “multidivisional marketing”

attracting corporate attention at Becton Dickinson (BD) during

the period covered by this case? Is it a good idea? What factors

aid or inhibit the implementation of this concept at BD?

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Multi Divisional Marketing

BD believed in divisional organization as the best

approach for maintaining competitive position, but in 1988

began exploring Multi Division Marketing Its goal was to achieve competitive advantage by

providing superior customer service

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Multidivisional Marketing Structure

What is Multi Divisional Marketing?o Multidivisional structure emerged during the 20th

century in response to the coordination problem caused by the diversification

o The multidivisional structure is a modular organization where business level strategies and operating decision can be made at the divisional level, while the corporate headquarters concentrates upon corporate planning, budgeting, and providing common services

o The key advantage of diversification structure (whether product based or geographically based) is the potential for decentralized decision making

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Benefits

o Better demonstration of BD saleso Effective use of resource to develop value added

services and programso Increase control on divisionso Can promote many services that, as a corporation,

they provide

to account Broadest product line Inventory management task was easier End user training

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Problems with BD’s Multi Divisional Marketing

Different divisions have different conceptions in marketing and sales

Each divisional RSM had its own divisional agenda Lead RSM was expected to be a divisional RSM and to

perform

multi divisional activities in addition to his ongoing sales

management responsibilities Lead RSM got $200 cash reward but sales or marketing

manager got only one half of the lead RSM Divisional RSMs perceived it as an interference in their

plans and

methods of action

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Process for Multidivisional Effort

Develop and disseminate market segmentation and account selection

Differentiation between value added and basic services

Development of common information and communication system (MIS)

The delineation of organizational roles and incentives for multidivisional marketing and sales efforts

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Market segmentation Earlier System

Categorized customers by Product category and Amount bought

New System under MDM

Effective segmentation revolves around: Customer demographics (size, location, type of

funding) Operating variables (brands, used in product

category) Purchasing approaches (centralised, decentralised,

frequency) Technology ( disposable vs. Reusable)

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Market segmentation

TYPES OF CUSTOMER: National Account

A hospital buying group having members in several states (GPO)

Key Account Individual hospitals providing large sales and

requiring additional efforts (HMC)

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Market segmentation

“Profiling and Plan Development Process” Account selection Development of key account profile by RSM’s for

relevant divisions (A document that captures information helpful for developing a framework within which an effective interdivisional action plan can be developed)

Assessment of design to minimize the risk and maximize the opportunity

Development of the multidivisional action plan for the account

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Value-Added vs. Basic Services

Types of serviceo Basic services: which includes fulfillment

accuracy, on-time delivery, damage free goods, accurate invoicing, effective sales representation and efficient in-servicing of end users

o Value added services: which includes �customized designed product, customized quality control, deferred billing, priority order processing, JIT inventory management, new services, extended warranty plan

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Information System

It is a process to identify common products, customers and vendor identifiers across divisions

MIS creates opportunity for cost saving and services

Improves supplier-distributor-buyer relationship

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Supply Chain Management (SCM) Group

Helps in serving customer better who contract with several BD division. Major activity of SCM was to transport information and materials from suppliers to end users

Disciplines where SCM worked were corporate logistics, information

systems, purchasing EDI service products, corporate sales and

marketing effort Serves both internal and external customer groups

Internal Group includes logistics, IT, purchase External Group includes distributors, GPOs , individual

hospitals, warehouse operators, and material suppliers Greatest Single Short Term Opportunity - Consolidated

purchasing Biggest Long Term Opportunity –Coordinated MIS and

Corporate Marketing Efforts

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Rationale of SCM

Health care players at all levels of the Supply Chain are vitally interested in asset-management techniques and systems that can lower their total cost of obtaining and using needed products and services

SCM at the divisional level can further differentiate their

offerings and strengthen their relationship with the end

users, distributors and suppliers

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“Lead RSM” Role in Multidivisional Key Account Program

Identification of Key Account: A potential account is usually identified by a

division or divisions who are under competitive pressure or see new business opportunities or wish to solidify a strong position

The lead RSM may come from the initiating division or may be the corporate national account field manager or the corporate national account manager

Lead RSM reviews survey of responses and communicates “go or no go "decisions to all RSMs

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Continued…

Developing the Key Account Profile, Plan and Proposal Lead RSM schedules RSM team meeting Team completes key account profile, action plan,

and preliminary proposal, including appropriate input from marketing

Team members secure value-added offering and pricing approvals from their division management

Corporate national accounts is consulted prior to finalizing the proposal

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Continued…

Interfacing and Negotiating with Key Accounts Lead RSM sets up meeting between customer and

selected team members Proposal is submitted to customer, discussed and

customized to meet the customer’s needs An additional RSM meeting may be needed to

address customer modifications The modified proposal in the form of an

agreement or contract, is submitted to the customer for signature by lead RSM

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Continued…

Managing key accounts after the Multidivisional agreement is signed:

Schedule an implementation planning meeting with customer management and the participating divisions. Agreeing on contract implementation plan

Each divisional RSM team member should submit divisional implementation plan to lead RSM

Lead RSM reviews contract progress quarterly with the customer

Quarterly implementation status report sent to RSM team by lead RSM

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Que-2: More generally, under what circumstances would

the kind of marketing strategy inherent in the

multi divisional approach make sense? Do those

circumstances apply at the HMC account?

Que-3: What is at stake at the HMC account: for BD?

For Becton Dickinson Division (BDD)? For other BD

divisions? For various personnel at HMC? Who are the key players that must be considered in responding to

the competitive threat at this account?

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Q 2 and 3. Becton Dickinson and Health Medical Centre

HMC was a leading teaching hospital in US HMC purchased products from GPO HMC purchased syringes and needles from a division of BD i.e.

Becton Dickinson division (BDD) via BDD-APG national account

contract where APG was a GPO BDD generated a sales $252000 from HMC HMC was suffering with financial crisis and was looking for

cost

reduction measures Hospitals have typically many division e.g. Orthopaedics, ENT,

Cardiology, Radiology, Pathology, Neurology, OT, OPD, Dental,

Gynaecology, Paediatric, Gastroenterology, Urology, Dermatology, Rheumatology, Respiratory, Medicine, Surgery, Oncology

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Problems…

Four other BD divisions sold significant amounts of product to HMC through separate sales and distribution efforts and a variety of separate contracts

BDD had the most substantial presence in the account, with previous year’s sales of $252,000, of which $216,000 was needles and syringes

HMC was facing a severe budget deficit. State funding had been slashed, and HMC had instituted expense reduction measures

There was a need for cost reduction

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MULTIDIVISIONAL MARKETING… Multidivisional Marketing would make sense in :

Diversified organization Sub-division with own profit centre Dealing with common client having same

product requirementAnalyzing the situation…..

Syringes and needles were the second-largest medical supply expense product at HMC. HMC had used Terumo’s IV catheters, blood collection needles, and arterial blood gas kits for a number of years

City Surgical is a Terumo distributor. However, City Surgical is also part of BDD’s Advantage Distributor Program

Terumo guaranteed a 15% discount to HMC’s current pricing for BDD hypodermics

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Stake of BDD at HMC

A switch would mean that Joanne Wilson (purchasing manager) had attained one-third of her expense-reduction goal

Strong loyalty of BDD Effort by BDD - demonstrated that Terumo could not supply all

the needles and syringes offered by BDD, and that buying these items off the APG contract would increase HMC’s costs by $7,000 (thus reducing the purported cost savings to $25,000). Kmetz also explained BDD’s inability to undercut the APG contract

HMC evaluation committee Multidivisional approach to HMC - HMC could become a key

account and that interdivisional programs and services could provide cost savings equivalent to, or more than, that represented by Terumo’s lower price, while maintaining BDD’s pricing on its APG contract and perhaps solidifying its position with purchasing influences at levels higher than Wilson

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Stake of BD divisions…

BD’s Acute Care division (BDAC) had a strong field relationship with Wilson and others in purchasing. Their primary products at the account were surgical blades/scalpels and surgeon’s gloves. This represented two of BDAC’s eight major product lines, and thus the potential existed for significant sales increase at HMC. Pulsifer expressed his division’s willingness to participate in a multidivisional effort at HMC

Deseret medical (DM) division - only had the IV catheter business in the anesthesia department at HMC. It did not have a strong overall presence in the account. Mason welcomed the opportunity to work on a multidivisional agreement with HMC, “especially if it contains incentives helpful in placing this new product there.”

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Continued…

BD VACUTAINER Systems (BDVS) sold blood collection tubes and needles. Had good relationship . Divisional sales strategy is to solidify end user brand preference for BDVS products and keep purchasing out of this process

BD’s Microbiology Division (BDMS) sold products used by various hospital and commercial labs to diagnose infectious diseases and determine proper therapy. Harry Henderson, an RSM at BDMS, noted that the division had a strong position at HMC for one of its major product lines , prepared plate media. Was liked by end users

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Que-4: What should Mr. Jones, VP of sales at BDD, do with regard to the HMC account?

Specifically, should he pursue a multidivisional approach in this situation, a price decrease or

another option? How should any actions concerning threat at this

account?

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The company should pursue a multidivisional approach

Because of following reasons: The total business of BD is $ 432,000 And BDD alone is providing $252,000 If the all the divisions are combined together then

by providing 7.5% discount the company can match the prices offered by Terumo

By providing value added services with the help of MIS, company can help HMC in material management and thus in cost reduction

Even customers are very brand loyal so it can gradually increase its prices in future

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Que-5: In which companies

operating in India do you think a

similar situation could arise?

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Companies in India where similar situation exists: Cadila Pharma

Following is an introduction to different divisions under Branded SBU:

Magna Magna-is a multi-specialty division. It maps general

practitioners,

consulting physicians, surgeons, cardiologists, gastroenterologists,

gynaecologists, paediatricians and nephrologists Product: Magna's portfolio primarily covers gastroenterology,

cardiology, gynaecology and others. Magna's major brands are

'Aciloc', 'Rabeloc', 'Cadilose', 'Envas', 'Losium', 'Caditor', 'Calcirol',

'Haemup', 'LMX', 'LMX forte', Levocide, and 'Fludac'

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Continued…

Maxima Maxima is a multispecialty division. Its portfolio covers

respiratory

inclusive of ENT, chest (anti tuberculosis), dentistry, anti-infectives

and orthopaedic therapies Maxima targets ENT specialists, chest physicians,

dentists,

paediatricians, orthopaedicians and surgeons Major brands of this division are 'Lorfast', 'Vasograin',

'Symbiotik',

'Mycobutol', 'P-Zide', 'Amdepin', 'Emvit Plus', 'Cuga', and 'Immuvac'.

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Continued…

Volta Volta is a super-specialty division. Its portfolio covers

cardiology,

diabetology, endocrinology, gastroenterology, nephrology, and

critical care The division adopts three therapeutic approaches,

viz., cardiac

therapy, diabetic therapy, and critical therapy Major brands of this division are 'Nodon', 'STPase',

'Teli',

'Envas IV', 'Glyloc', 'Glista', 'Caditor', 'Humstard'

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Continued…

Oncocare Oncocare division markets products that manage and

treat

cancer and tumors Oncocare's major brands are 'Cadigran', 'Caditrex',

'Karplat',

'Paclicad', 'Posid', 'Kinaplat', 'Cadria L', 'Docecad', 'Filcad',

'Platin' and 'Recovarin'

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Continued…

Explora The objective is to increase reach and penetration

in rural market. Explora aims to make available quality medicines

at affordable prices to people living in interior towns and villages.

Explora portfolio covers general practitioners, consulting

physicians, pediatricians, and gynaecologists Explora's thrust brands are 'Nuflam', 'Haem up', 'Tummy Ease',

'Happytizer', 'Lactoceff', 'Anstisept', 'Hepasave', 'LMX',

'Wormin A', and 'Fleximuv'

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Continued…

Generic Generic is a wing of pharma business. The wing covers

almost

all therapeutic segments. Generic directly deals with stockists ,

retailers and dispensing doctors through super distributors. A major chunk of business and promotion focuses mainly on

stockists. Generic has three sub divisions, namely, 'Generic', 'Genvista'

and 'Genstar' Generic's major brands are 'Ciprodac', 'DPhesic', 'Dexasone',

'Famonext', 'Demisone', 'Campicillin', 'Oritaxim Inj.', 'Mokcan' and 'Cotrimoxazole DS'

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Continued…

Vet nova Vet nova is an animal healthcare division. It is one of the earliest

and most reputed concerns in animal healthcare A team of more than 100 people take a wide range of the

brands pertaining to cattle and poultry into the remotest

corners of India While some of Vet nova's brands like Cal D Plus DS, On feed

and Cal D Min are household names, other brands like No lapse

(for prelapse) and Endotrin (Ecbolic) are innovative offerings

of Vet nova

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