Disruptive technology a heartbeat away free essay sample

Ecton is going to position the company to be acquired but the board of directors and clinical advisors has some concerns about the ramifications of that plan. This paper evaluates Cannon’s Phase III Plan on March 1998. Cannon proposed a path for the next year containing five major points (Edward, 1999, 8 and 9). The bottom line of this proposal is positioning Ecton to be acquired by the end of the 1998. One of the crucial concerns of this acquisition is the possible effects on â€Å"Ecton’s product development process†. Another concern Cannon holds is the ability of Ecton to penetrate a very harsh market fills with big, established, and advanced manufacturers. Also, Cannon is not sure on how to approach specific market segments, such as ICUs in hospitals. Moreover, the absence of marking, sales, and production departments adds a burden on Ecton when it comes to negotiate its acquisition. All of these concerns and more will be discussed in the next few pages. We will write a custom essay sample on Disruptive technology a heartbeat away or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Acquisition: Pros The idea of being acquired has pros and cons. Starting from the pros first will help to understand some reasons behind this particular decision. The first advantage for Ecton to be acquired is the great chance to survive and to be away from a very tough-to-penetrate market. To have a clear picture for the market situation in 1996, the market share for Hewlett Packard exceeds 60% of the major cardiac ultrasound manufacturing, which equals to $ 470. 4 million. Furthermore, Ecton will be having an ultimate chance to overcome barriers to entry in Echocardiography. In other word, after acquisition, Ecton’s product is expected to be presented in conferences and seminars hold by prestigious cardiac institutes and organizations, such as American Heart Association. That is because the presence of the giant major cardiac ultrasound manufacturing names which is associated with the respected cardiac institutes and organizations. In this way, the need to breakdown the cardiologists’ lobby with the echocardiography manufacturers will not be a burden for Ecton for marketing its product. Ecton imaging system will have the advantage of having the needed networks to introduce and market its product. An important point to know is how favorable the echocardiography market is by analyzing the five competitive forces (see exhibit 1). The echocardiography market is highly competitive market; thus, having the chance to enter this market via a big name will be a strategic step to do by a start-up company like Ecton Inc. In addition to Cannon, the board of directors and the clinical advisors do not seem to have the potential to establish the marketing, sales, and production departments even though it is in their contingency plan. They are very busy working on their scientific elements of Ecton imaging system. Therefore, the acquisition will save the efforts of those genius scientists to focus on Ecton’s continues improvement, especially in such growing market. Moreover, the financial structure of Ecton Inc. was set by Cannon as if Ecton will be acquired by the end of the next year. The estimated cumulative global market for Ecton imaging system for four years starting from 1999 is $760 million (20,000 expected units to be sold globally in four years * $38,000 per/unit). This estimate by Ecton Inc.  did not take in account the cost of the marketing and other logistics for the product, which will be taken care of by the acquirer supposedly. One important component that may boost Ecton imaging product after acquisition is the benefits of the current competitors regardless who will take this acquisition. For example, the superior image quality of Acuson ultrasound instrument, the sophisticated edge detection algorithms of Hewlett Packard, and the Doppler innovation of both Acuson and ATL (see exhibit 2). Ecton’s machine has the advantage of being mobile, compact, and cheap comparing with the market prices. Therefore, combining the strengths of the Ecton’s imaging system together with one of those dominant manufacturers is expected to produce more novel instruments. Although Ecton Inc. could obtain 0. 5 million in the first year, 1996, and another 1. 5 million the year after, the necessary funds for Ecton Inc. in 1998 have not met yet. That is because VC firms are not attracted to the medical imaging industry even though industry’s experts are expecting a high growth rate (mainly because ultrasound instruments provide less expensive diagnosis tool than MRA machines and other imaging diagnostic tools). This situation puts more pressure on the company’s growth plan. The acquisition is one of the best ways to survive in this market, especially with a start-up company like Ecton Inc. Moreover, in case if the seven trail tests succeeded in spring 1998, the lack of required funds is expected to cause a delay of delivery for the next year orders. Cannon proposes a contingency plane that contains establishing independent marketing and production units; however, there is still a high risk regarding the time frame of the production process. Acquisition will provide a good penetration for Ecton Inc.by expanding its market to enter the most difficult ones, hospitals. That is because hospitals are heading to consolidation. Since Ecton team has only one product, this will not satisfy hospitals which prefer to have all of their equipment from one vendor. Acquisition: Cons Ecton team has potential alternative markets, such as the privet practice, primary care physician angles, and international market. Being acquired will decrease Ecton chance to obtain a decent global market share. For instant, expected global market share for Ecton Inc.  after four years is 9% (see exhibit 3 and exhibit 4), which is the same market share of the second largest ultrasound manufacturers currently. The first concern of Ecton’s board of directors and clinical advisors is the impact on their activities when acquired, specifically, the â€Å"product development process†. Cannon and his team left their previous company, Interspect, because of its way to handle their product development process. In other words, Ecton team wants to focus on its product instead of solving products’ problem or rescuing other project. Thus, Cannon and his partners will work in more freedom environment if they keep their company away from acquisition. Action Plan If Ecton machine passes the tests, Cannon should actively approach the big manufacturers, HP, Acuston or ATL. In this way, Ecton team will be focusing on developing their product and start working on a new product in parallel. The acquired company then will launch the production line for Ecton imaging system which expected not to take long time (because they share the same domain, ultrasound instrument knowledge). Since the future is for the contrast echocardiography, Ecton team may start research in this specific field. Ecton’s board of directors and clinical advisors may express their conditional approval of any acquisition based on the team core objective, which is their special product development process. Moreover, targeting global market, specifically, developing countries may help the established company, or acquirer, to justify the new competitive low price of the Ecton machine, $38,000.