P
ProHub
English 简体中文 繁體中文
Medium Market Entry Profitability Analysis Product Launch

Patient Operated Machines

#Healthcare #Medical Devices #Diagnostics
ProHub Comment

This is a comprehensive market entry case combining market sizing, competitive analysis, and profitability assessment. The case reveals a critical tension between optimistic marketing projections (25% market share, one-third growth) and competitive reality (market saturation, slowing growth in recent years), requiring the candidate to synthesize quantitative analysis with strategic judgment about market dynamics and viability.

Estimated Time 15 minutes
Difficulty Medium
Source Cornell
50 / 100
Our client is a medical company that makes machines to test blood samples in hospital labs. These are large, complex machines that cost thousands of dollars, and are operated by professional lab personnel. They also make consumables for these machines, essentially a full range of re-agents – chemicals needed to run the blood samples. Currently, our client markets and distributes its products in the US only. Growth and profitability in the hospital business has been slowing and our client has started to look for new growth opportunities. One area they have been exploring is the idea to market patient-operated machines at homes for people who suffer from conditions that need frequent testing (e.g. diabetes). Our client has asked us to help them decide whether to enter this new market with a patient-operated machine. This machine is a home glucose-monitoring device for people affected by diabetes. They cost under $200 and are typically bought and used by the patients themselves.

Clarifying Information

Question 1 - Important areas to investigate:

  1. Understanding market size, growth, profitability, and competition
  2. Customer preferences for this new device and pros/cons vs. traditional lab testing
  3. Price sensitivity of customers
  4. Profitability analysis (revenue vs. cost)
  5. How the client can market, promote, and distribute this device

Question 2 - Market sizing data:

  1. US population is 300m people, 20% of whom are over 65
  2. Prevalence of diabetes is 5% in those over 65 and 1% in those under 65
  3. Each year, 10% of the diabetic population buy a new kit

Question 3 - Pricing and market share assumptions:

  1. Average price currently is $180
  2. In 2 years, average price expected to decline by one-third
  3. Further 25% price decline in 4 years
  4. Expected market share capture: 25%
  5. Total market will grow by one-third over 4 year period

Question 4 - Competitive landscape (US Sales Volumes in Home-Diabetes Testing Machines):

  1. Machine A: 4 yrs ago 45,000, 3 yrs ago 90,000, 2 yrs ago 130,000, 1 yr ago 150,000, This year 155,000
  2. Machine B: 4 yrs ago 50,000, 3 yrs ago 95,000, 2 yrs ago 125,000, 1 yr ago 150,000, This year 150,000
  3. Machine C: 4 yrs ago 25,000, 3 yrs ago 35,000, 2 yrs ago 60,000, 1 yr ago 75,000, This year 80,000
  4. Machine D: 4 yrs ago 50,000, 3 yrs ago 55,000, 2 yrs ago 60,000, 1 yr ago 65,000, This year 65,000
  5. Others: 4 yrs ago 75,000, 3 yrs ago 80,000, 2 yrs ago 90,000, 1 yr ago 90,000, This year 90,000
  6. Total: 4 yrs ago 245,000, 3 yrs ago 355,000, 2 yrs ago 465,000, 1 yr ago 530,000, This year 540,000

Question 5 - Cost structure:

  1. Maximum price per unit in 2 years: $120
  2. Model viable life: 5 years
  3. Up-front fixed costs (R&D, manufacturing, sales, marketing): $60m
  4. Variable costs (labor, components): $40 per machine