Becton Dickinson & Company: Vacutainer Systems Division
1) 1982 to 1985: Why Did BDVS avoid negotiating with APG headquarters? What was the consequence?
A) APG invited BDVS to have the standardized agreement for the purchase of needle and tubes besides price reduction on their products in the year 1982. It avoided negotiation.
The reasons for BDVS avoiding negotiation with APG are as under:
i) It is in the business since 1940’s and has a good hold in the market in Blood collection tubes and needles and is having 80% market share in US;
ii) BDVS used to have its own Independent Distributive Network of around 1000 Nos dealers through which it used to cater Hospital and Labs across US. However its six large distributors were contributing 50% business and 50 dealers were contributing 85% business.
iii) The trump card of BDVS is commitment towards quality, range and service. The productions costs were also kept under control through its innovations to check abnormal price rises;
iv) Its two products VACUTAINER AND MICROTAINER were the best products to be considered under tubes as per the Hospital lab technicians;
v) Its sales program were so intense that it used to interact directly and offering concessions on case to case basis with the major hospitals directly by launching Z Contracts through its strong 55 Sales force, targeting the bench strength of laboratories to recommend its products, established relationship with small local distributor through its BD division
vi) It has a good distributing network through ASP (American Scientific Products) , CMS ( Curtin-Matheson Scientific) and four others to cater the needs of the hospital for the timely supply of materials.
Consequences for the above arrangement:
i) These distributors have started developed manufacturing capabilities (backward integration) which can eat away the pie
ii) APG formed the national purchase agreement with Temuro, the main competitor of BDV and thereby increasing the chances of losing
A) APG invited BDVS to have the standardized agreement for the purchase of needle and tubes besides price reduction on their products in the year 1982. It avoided negotiation.
The reasons for BDVS avoiding negotiation with APG are as under:
i) It is in the business since 1940’s and has a good hold in the market in Blood collection tubes and needles and is having 80% market share in US;
ii) BDVS used to have its own Independent Distributive Network of around 1000 Nos dealers through which it used to cater Hospital and Labs across US. However its six large distributors were contributing 50% business and 50 dealers were contributing 85% business.
iii) The trump card of BDVS is commitment towards quality, range and service. The productions costs were also kept under control through its innovations to check abnormal price rises;
iv) Its two products VACUTAINER AND MICROTAINER were the best products to be considered under tubes as per the Hospital lab technicians;
v) Its sales program were so intense that it used to interact directly and offering concessions on case to case basis with the major hospitals directly by launching Z Contracts through its strong 55 Sales force, targeting the bench strength of laboratories to recommend its products, established relationship with small local distributor through its BD division
vi) It has a good distributing network through ASP (American Scientific Products) , CMS ( Curtin-Matheson Scientific) and four others to cater the needs of the hospital for the timely supply of materials.
Consequences for the above arrangement:
i) These distributors have started developed manufacturing capabilities (backward integration) which can eat away the pie
ii) APG formed the national purchase agreement with Temuro, the main competitor of BDV and thereby increasing the chances of losing