Should Becton Dickinson alter their current pricing strategy and enter in agreement with APG and thus shift end-users’ perception from BD being a differentiator to price leader?
Becton Dickinson is being asked to revise their initial proposal, presented on August 1, 1985, subject to rejection. Lowering their prices as well as having all their blood collection products be part of APG’s private-label program is part of APG’s stipulations. This presents an opportunity for BD to increase sales and market share, but could also entail potentially compromising their current distributor relationships, as well as their image of being a product differentiator. A major concern involving this strategic transition will be BD’s ability to retain its current market power despite adopting a price leader position in the industry.
Becton Dickinson has until August 15 (two weeks), 1985, to submit a new proposal with APG. This time constraint poses a challenge for company managers to make a quality decision in a timely fashion.
* Diverse product portfolio
* Possess high market share (80%)
* VACUTAINER Systems
* offer a wide selection of blood collection products * products are available for both single and multiple sample collection * quality control is imperative
* Reputable product quality
* Solid infrastructure in place
* First industry entrant
* Z-contracts are negotiable
* Investment in R&D (91% of net income)
* Ability to gather data regarding clients
Becton Dickinson’s strengths enable the company to possess numerous competitive advantages as well as recognizable power in the industry. Through the use of distributors, Becton Dickinson is able to use its information database to meet demands.
* Products only distributed in the United States * VACUTAINER products are costly, hospitals have limited budgets * Loss of sales in total healthcare due to new entrants * Z-contracts becoming tedious/less enjoyable
Becton Dickinson’s lack of global presence results in the inability to compete outside their current market geography. Consequently, smaller competitors are acting as greater threats to BD.
* Large market (7,000 hospitals in the United States) * Expanding focus to non-hospital healthcare centers * Barriers to entry (withdrawal of Johnson & Johnson, Corning Glass, etc) * Advancements in technology
* APG’s power in the market
APG’s influence in the market could serve as an opportunity for Becton Dickinson to remain a competitive leader, and potentially acquire new market segments, increasing overall market share.
* Increasing competitor attempts to enter market * Pressure to reduce prices from APG, among other distributors * Competing companies also using ASP as a distributor * Decreasing response from hospital programs associated with APG
Pressures to reduce BD’s prices could result in future decrease in revenue, affecting the company’s overall financial performance. Opening a new product line featuring APG’s name could take away from...