Augustine Medical

Topics: Variable cost, Costs, Fixed cost Pages: 4 (817 words) Published: August 4, 2012
Augustine Medical – case brief
Background and Problem Definition: Augustine Medical, Inc develop and market products for hospital operating rooms and postoperative recovery rooms. The first two products are patient warming system to treat post operative hypothermia patients and another one is tracheal intubation guide which can be used in operating room. Their main issue is to determine the price to hospitals for heater/blower units and he plastic blankets. Market and industry analysis: There are 5500 hospitals in US where approximately 21 million surgical operations are performed annually. According to a research, Augustine Medical indicted that there are 28,514 operating rooms and 31,365 postoperative recovery beds in hospitals in US. There were major competitors like Gaymaosworth Air Ltd and Cincinnati Sub Zero. Prices of automatic control unit ranges from $4850 to $5295, for manually controllable unit the average cost is around $3000. Reusable blankets range in price from $168 to $375. The prime target of AM should be hospitals having more than 7 (exhibit 1) beds as it will make up for around 80% of surgical operations in US. There is a possibility that this product will succeed as there are many big hospitals and capture the market share by selling these products in low price. Alternatives:

Break even in case of blankets = 1612903(exhibit 2), and break even in case of blowers/heaters = 4717 (exhibit 3) Pricing strategy for blankets – skimming strategy – assuming the price of blankets as $24 , we are able to calculate profits up to $3916500 and profit per unit is coming around $3.73. (exhibit 4) Penetration strategy – assuming the price of blankets as $18 , we are able to calculate just 0.3$ per unit, which will result in less profit generation(exhibit 4) Pricing strategy for blowers/heaters – skimming strategy – assuming price of blowers as around $4200, the profit which we will be generating profit per unit as $2365, and net profit as $6078050 (exhibit...
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