After years of growth, Medical DeviceCo faced declining revenues and profit margins due to a combination of increasing pricing pressures and its maturing product portfolio. Past cost cutting initiatives failed to keep pace with new industry realities.
By mid-2010, the company realized that regaining its competitive edge required rebuilding its business model in response to four major trends:
- Hospital consolidation, with an increased focus on price-based purchasing
- A shift in purchasing decisions from physicians to hospital procurement departments
- Uncertainty around healthcare reform
- Medical technology tax
The bottom line: Medical DeviceCo needed to cut costs faster and deeper than planned without jeopardizing quality, with the goal of using savings to fund growth opportunities in emerging markets and through acquisitions.