Case Analysis: Disruptive Technology a Heartbeat Away: Ecton, Inc.

Topics: Marketing, Image processing, Management Pages: 5 (1252 words) Published: December 3, 2013
Case Evaluation
Ecton is going to position the company to be acquired but the board of directors and clinical advisors has some concerns about the ramifications of that plan. This paper evaluates Cannon’s Phase III Plan on March 1998. Cannon proposed a path for the next year containing five major points (Edward, 1999, 8 and 9). The bottom line of this proposal is positioning Ecton to be acquired by the end of the 1998. One of the crucial concerns of this acquisition is the possible effects on “Ecton’s product development process”. Another concern Cannon holds is the ability of Ecton to penetrate a very harsh market fills with big, established, and advanced manufacturers. Also, Cannon is not sure on how to approach specific market segments, such as ICUs in hospitals. Moreover, the absence of marking, sales, and production departments adds a burden on Ecton when it comes to negotiate its acquisition. All of these concerns and more will be discussed in the next few pages.

Acquisition: Pros
The idea of being acquired has pros and cons. starting from the pros first will help to understand some reasons behind this particular decision. The first advantage for Ecton to be acquired is the great chance to survive and to be away from a very tough-to-penetrate market. To have a clear picture for the market situation in 1996, the market share for Hewlett Packard exceeds 60% of the major cardiac ultrasound manufacturing, which equals to $ 470.4 million. Furthermore, Ecton will be having an ultimate chance to overcome barriers to entry in Echocardiography. In other word, after acquisition, Ecton’s product is expected to be presented in conferences and seminars hold by prestigious cardiac institutes and organizations, such as American Heart Association. That is because the presence of the giant major cardiac ultrasound manufacturing names which is associated with the respected cardiac institutes and organizations. In this way, the need to breakdown the cardiologists’ lobby with the echocardiography manufacturers will not be a burden for Ecton for marketing its product. Ecton imaging system will have the advantage of having the needed networks to introduce and market its product. An important point to know is how favorable the echocardiography market is by analyzing the five competitive forces (see exhibit 1). The echocardiography market is highly competitive market; thus, having the chance to enter this market via a big name will be a strategic step to do by a start-up company like Ecton Inc.

In addition to Cannon, the board of directors and the clinical advisors do not seem to have the potential to establish the marketing, sales, and production departments even though it is in their contingency plan. They are very busy working on their scientific elements of Ecton imaging system. Therefore, the acquisition will save the efforts of those genius scientists to focus on Ecton’s continues improvement, especially in such growing market. Moreover, the financial structure of Ecton Inc. was set by Cannon as if Ecton will be acquired by the end of the next year. The estimated cumulative global market for Ecton imaging system for four years starting from 1999 is $760 million (20,000 expected units to be sold globally in four years * $38,000 per/unit). This estimate by Ecton Inc. did not take in account the cost of the marketing and other logistics for the product, which will be taken care of by the acquirer supposedly.

One important component that may boost Ecton imaging product after acquisition is the benefits of the current competitors regardless who will take this acquisition. For example, the superior image quality of Acuson ultrasound instrument, the sophisticated edge detection algorithms of Hewlett Packard, and the Doppler innovation of both Acuson and ATL (see exhibit 2). Ecton’s machine has the advantage of being mobile, compact, and cheap comparing with the market prices. Therefore, combining the strengths of the Ecton’s...
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