BECTON DICKINSON AND COMPANY : MULTIDIVISIONAL MARKETING PROGRAMMES

Becton Dickinson at a Glance

Type Industry Public Medical Equipment

Founded
Founders Head Quarter Area Served

East Rutherford, New Jersey (1897)

Maxwell Becton & Fairleigh S. Dickinson Franklin Lakes, New Jersey, US World Wide

Key People
No. of employees

Edward Ludwig (Chairman) Vincent Forlenza (President)

28,803
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Continued
BDs 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

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

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

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

Competitive Developments
BDs 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

BDs individual divisions

Terumo regarded hypodermic to establish brand identity and

distribution capabilities in U.S.

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?

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

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 sales

o Effective use of resource to develop value added services and

programs o Increase control on divisions o 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 BDs 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 RSMs 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 service
o 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 preliminary proposal, including appropriate input from marketing

Team completes key account profile, action plan, and

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 to meet the customers needs

Proposal is submitted to customer, discussed and customized 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 years 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

requirement Analyzing the situation..

Syringes and needles were the second-largest medical supply

expense product at HMC. HMC had used Terumos 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 BDDs Advantage Distributor Program

Terumo guaranteed a 15% discount to HMCs 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 HMCs costs by $7,000 (thus reducing the purported cost savings to $25,000). Kmetz also explained BDDs 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 Terumos lower price, while maintaining BDDs 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
BDs 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 surgeons gloves. This represented two of BDACs eight major product lines, and thus the potential existed for significant sales increase at HMC. Pulsifer expressed his divisions 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
BDs 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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