Medi-Cult Discussion

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hswt: Medi-Cult
1. What are the benefits of Medi-Cult’s IVM approach over the existing IVF method for patients, clinics, and doctors? · · · Reduction of Cycle from 30 days to 2 Days No Adverse Health Effects Cost Reduction

2. What is the value of a single dosage of IVM medium? Cost of Cost of Lab IVF Hormones Work Treatment IVF USA – Min USA – Max $4,000 $6,000 $3,000 $3,000 $1,500 $500 $500 $300 Misc Cost Total Costs

$500 $500 $200

$8,000 $10,000 $4,000

Rest of the $2,000 World – Min Rest of the $3,000 World – Max

$1,500

$300

$200

$5,000

IMF

USA – Min USA – Max

$4,000 $6,000

$300 $300 $150

$250 $250 $150

$250 $250 $100

$4,800 $6,800 $2,400

Rest of the $2,000 World – Min Rest of the $3,000 World – Max

$150

$150

$100

$3,400

Cost of USA – Min IMF Medium USA – Max Rest of the World – Min Rest of the World – Max

$3,200 $3,200 $1,600

$1,600

3. Should Medi-Cult adopt a skimming or penetration pricing strategy?

Penetration Pricing – The firm provides significant customer value by setting prices close to costs. Skim Pricing – The firm retains value by pricing high. In my opinion, Medi-Cult should adopt skimming. The reasons are as follow: i. It is providing customers a lot of addition value by reducing the cycle time and the health effects. Both of them are huge, cycle time lets people know whether it was successful or not really early. And having no adverse health effects is such a relief. You don’t have to go to the clinic twice a day anymore to administer hormones; don’t have to do the blood tests every week. ii. This is not a mass market procedure. It is an expensive procedure and will remain expensive. So it is not that volume will continue to grow and go off the roof. There are only a certain number of people who will want to go through this procedure. 4. What launch price(s) should Medi-Cult adopt for Denmark, France, United Kingdom, and the United States? What would be the expected contribution to profits in the first year after the launch?

Potential Price Points High Price Country Price Volume Revenue Market Share 5.0% Price Medium Price Volume Revenue Market Share 7.0% Price Low Price Volume Revenue Market Share 17.0%

Denmark

DKK 12,000 8,000 €

325

3,900,000

DKK 10,000 5,000 €

500

5,000,000

DKK 8,000 4,000 € £500 $1,000

1,200

9,600,000

France

500

4,000,000

1.5%

650

3,250,000

2.0%

900

3,600,000

3.0%

£900 $2,200

2,000 1,200 4,025

1,800,000 2,640,000 $6,963,661

8.0% 1.5%

£700 $1,600

3,000 1,200 5,350

2,100,000 1,920,000 $6,781,607

12.0% 1.5%

4,000 1,200 7,300

2,000,000 1,200,000 $6,676,190

16.0% 1.5%

=> The revenues are the highest in the first scenario; the company should go with the High Price. => Addition to Gross Profit = $6,963,661-$66413 ~ $6.9M =>Total Fixed Costs before IMF = $3.5M =>Lets assume they will rise to $5.0M => Net Increase = $1.5M =>Gross Profit from Old Sales = 2M => Lets assume sales will be 25% less, Net Loss = $0.5M =>Total Addition to Profits = $6.9M – $1.5M - 0.5M ~ $4.9M

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