Cochlear: Strategic Management

Strategic Management Theory

The current economic atmosphere is very demanding of the organization managers. For a manager to be successful, they have to be strategic, intentional, and use skills to promote their projects to the next levels. The world today has changed significantly, and this has to be done in very new ways and not the way they were being done a decade or a century ago. The things that worked ten years ago cannot work today for a company ( Neubert , 2017, pg. 3). For a company to survive this storm, organizations have no option but to take advantage of the opportunities available to improve their workers, use technologies, position themselves strategically, use special tools to be ahead of the competition, develop cultures that are winning among the consumers and many more.

Contingency Theory 

The contingency theory borrows from the concept that there is no single or no one bullet approach to managing an organization. The organization owners use their experience, knowledge, and skills to steer the organization in the right direction. Cochlear Company began as an idea at Melbourne University to become a global leader in more than 100 countries. Several factors saw the success of Cochlear in selling the implants to a different market in the world. In the same spirits, there were several messes that the company involved in the management practices that saw the company's downfall. The company's declining sales were due to a mix of management issues, and to solve these issues, the company has to use different strategic solutions to find answers and reverse the problems. The approaches could be diverse, including marketing solutions, handling employees, motivating the workers, improving product quality, reducing prices, etc. 

Knowledge-Based Theory 

Knowledge-based view of a company is a recent extension to the resource-based view. Knowledge-based view gives a strong theoretical underpinning for the company learning and intellectual capital researchers. Knowledge is considered a special strategic resource that does not depreciate in value like other conventional economic productive factors do. Knowledge resources are dynamic and intangible. Cochlear’s greatest resource had been the CEO Chris Roberts, who also serves as the company president. He joined the company in 2004 as the CEO, bringing 27 years’ experience in the medical industry. Company also has other professionals including the CFO, Chief Strategy Officer, Presidents Americas, Asia Pacific and European regions, etc ( Hubbard, Rice, & Galvin, pg. 502 ). 

Behavioral Theory 

Behavioral theory is also referred to as human relations theory because it deals with human dimensions of work. The theory provides that a better understanding of human behavior at place of work through aspects like expectations, motivation, and conflict and group dynamics enhance productivity. There is no much revealed about Cochlear treatment of its employees. Cochlear does not have a program to motivate employees, or a bonus program to excite workers to do more above average. It seems the dwindling sales could also be related to declining employee productivity. The only mention of employee support is where the company supports a group of employees called “greenFEVER” who chose to help increase environmental awareness and enhance company practices ( Hubbard, Rice, & Galvin, pg. 504 ). 

Agency Theory 

The agency theory emphasizes the underlying relations between the company shareholders or the owners and the company agents or the management. For a company to be successful, the relations between the owner and the management have to be progressive to allow for success to happen. From the information provided in the case study, the Cochlear company directors had good relations with their managers from the very beginning. There are no reported conflicts or pursuit of personal interests that could jeopardize the relations. Chris Roberts joined Cochlear Company in 2004, coming from the medical device industry where he worked for 27 years. 

Resource-Based Theory 

The resource-based theory originates from the managerial school of thought that the company resources competitive advantage can be found in their internal resources and not their position in the external environment. This implies that a company needs to compete on its capabilities and the resources it processes rather than evaluating the environmental threats and opportunities when doing business. According to the company resource-based philosophy way of thinking, some types of controlled and owned resources have the potential and promises to create a competitive advantage and, in the end, lead to the company's superior performance. Cochlear company's primary resources include 950 patents and patent applications worldwide (electrodes, chipsets, acoustic implants transducers, chipsets, implantable microphones, and many more), new nuclear systems. Cochlear had a presence and customer in more than 100 countries ( Hubbard, Rice, & Galvin, pg. 498 ). This is a major competitive advantage because the company I already known in the market, and bringing newly revamped products can give it an edge in easily penetrating the market. 

Cochlear Company Strategic Issues 

The primary strategic challenges experienced by Cochlear are as follows:

The first issue with Cochlear implant products is that they have to undergo a series of approvals from different customer quarters, including the governments in countries of operation, relevant authoritative and regulatory approvals, and the market approvals. It has come out clearly, that the Cochlear process of product acceptance and the target market is a big problem. From the case study, we are told that the company had a series of 'customers' to ensure the product was successful. First, the company had to have the product approved by the regulatory bodies to ensure it is safe before using them. Since Cochlear had its operations in several countries, every jurisdiction had to approve the product to be accepted in each region. To make it worse, the governments were the main financial customer of the product. Secondly, the doctors and the health experts had also to be convinced that the devices were appropriate and desirable. The doctors had to learn to implant the products and understand how to upgrade from previous recipients ( Hubbard, Rice, & Galvin, pg. 504 ). Lastly, the end customers had also to be convinced. Interestingly, it was the customers who determined the results of the product. This indicates that Cochlear had missed properly identifying its product and going easy and cost-effective to identify its market.

The second issue is the lack of focus on technology, innovation, and continuous R&D. From the case study and we are informed that Cochlear only has two major international competitors in its market; Advanced Bionics and Sonova. Advanced Bionics marketed itself as the most advanced cochlear implant. Bionics claimed its product is five times more sound persistent compared to the competitors ( Hoffmann et al., 2018, pg. 12 ). Despite this fact, the company only had a 10% share of the market. This was expected to rise with the new launches of new products. Bionics bounced back with Naida device, a waterproof cochlear. Med-El was another serious global competitor to watch over. There was not much known about Med-El and had been banned in the American market for eight months in 2014 ( Brahmana et al., 2020, pg. 23 ). The company launched a series of new products in the year 2006, 2011, and 2013. The company boasted a 30% market share. Med-El introduced a better product in 2013, a high innovation that did not feature anything worn being the Rondo's ear.

The third issue that Cochlear is facing is the lack of an appropriate value proposition. The value proposition in simple terms is the promise to deliver value, communicate, and acknowledge importance. The value proposition is also the perception of the client of how the company will provide the product. The cochlear company had lost its value proposition to the competitors' new products, and it needs to create a unique value proposition as it seeks to reenter the market.

Customer Needs and Opportunities for Cochlear 

The world is changing rapidly, which is forcing the strategic managers in different kinds of companies to hasten their decision-making. The more agile and adaptive companies leave behind companies that delay or lag in making decisions to the environment by responding much faster to the customer's changing needs and fashions demands. This is entirely true and actionable in the healthcare sector, where there is vicious combat in the manufacture of cochlear hearing devices and other health care technology devices. Cochlear Company is one of the largest cochlear implant companies, and it earned billions of dollars from the implant devices. The product moved from simple research to a product embraced across 100 countries across the globe ( Kienzler & Kowalkowski, 2017, pg. 45 ). Thirty years later, things were not well. The sales were dwindling, and the Cochlear Company was forced to recall one of its products in 2011, negatively impacting its reputation for reliability. Advanced Bionics, a global competitor, was already matching up its innovations and quality. A new Chinese company also came to the market with new products. 

The fear of embracing change, lack of research, and lack of continued improvement and innovations on the Cochlear implants led to a delay in implementing the necessary changes to the business model to bring new pro innovative products to the market. Changing the Cochlear implants made thirty years ago to meet the changing customer needs was the reason for its problems. The competitor managed to research over the years. They imitated the product, introduced new technologies, and improved on the product to meet the customer needs. 

Many other competitors emerged during this time, but Cochlear was still adamant about changing its main product because it was still profitable. The old generation cochlear line of product manufacturers did a good job searching what the new generation wanted, like devices that allowed users to listen to music without interference, making the device much smaller and functional, and making it look great and appealing to younger generations. 

Not all is lost for the Cochlear Company. One of the greatest benefits of a free and fair market is that when you conduct the research, come up with a better solution to serve the consumer's needs, and the products will sell. Cochlear company has been in the market before with one of the best cochlear implant devices. The company has the most incredible opportunities in that the brand name and the image are still with the customer ( Dolnicar et al., 2018, pg. 56 ). The company can take advantage of this and introduce a new cochlear implant product that is more advanced, differentiated, and deliver high-quality services to the consumer. 

Strategies and Recommendations

Competition and Innovation 

An innovative future product will be based on artificial intelligence and technologies like DICEE models. The DICEE model simply refers to deep, indulgent, complete, elegant, and emotive. It will be upon the companies to conduct serious studies to understand the consumers' needs before settling on the design ( Morandi Stagni et al., 2020, pg. 3 ). The final product will have to consider all the users' demands, implying that they will be highly sophisticated. However, these products must be welcoming; they must be intuitive and easy to use front-end. The cochlear implant will allow the users to accomplish some of the most critical tasks easily without interruptions. The product will have to give the users' satisfaction interaction.

Therefore, to remain competitive, Cochlear must be at the top in its Research and Design. The company must be forward thinking in its future product and be ahead of the competition. One way to be relevant is to look at the new technologies in the market and try to integrate them into the product. Another way is to continue innovating the product by listening to the user's demands and affecting them. Most importantly, Cochlear must be aware of what the competitor is doing. When Med-el introduced the Rondos, Cochlear was caught unaware. Customers love new products that meet their needs and make their lives easier.

Value Proposition 

The first step Cochlear must take to review its value proposition. The cochlear value proposition should be creating a niche new branding of cochlear products that matches a new world. Change equals opportunity, and as such, Cochlear must be able to adapt to the fast-changing market demands ( Payne, et al., 2017, pg. 22 ). To adapt effectively, it means that Cochlear must innovate and develop new collections and new ideas. People love sleek-looking products, small in size, makes life easy for the customer, yet highly functional.

Cochlear needs to begin thinking about how patient needs will change to adapt to this growing demand and trend. The consumer will begin searching for cochlear implants that allow them to talk on their smartphones in a quiet environment ( Schmidt & Scaringella, 2020, pg. 33 ). They should have enhanced speech, cognitive, music, and psychophysical performance.

The cochlear value proposition should not just lie on the product alone, but it needs to be fully dependent on delivering new products to the target market. The following have to be considered:

Strengthen Online Sales 

The best way to reach potential customers is through the internet. Cochlear needs to invest more in the organic internet market to reach customers as a new approach to marketing. More online presence and virtual support need to be funded more.

Solving customer needs 

Consumer behavior has changed; customers have specific detailed needs. Cochlear needs to consider identifying the specific customer needs through R&D and work towards solving these problems. Being customer-centric is the way to go. Listening to the customer's voice is the best way to get to a new market recovering from a pandemic.

Market Segmentation 

Armstrong & Kotler (2016) points out that there is no single way to segment a market. A marketer needs to try several segmentation variables to determine the most appropriate way to view a market structure. Armstrong & Kotler (2016) outlines some of the variables used in segmenting a consumer market, including geographic, demographic, psychographic, and behavioral (Table 7.1).

The second segmentation variable given by Armstrong & Kotler (2016) is demographic segmentation (pg. 25). Demographics refers to determining the target market by considering the population's age, going for a specific gender, either male or female, using income variable, level of education, ethnicity, generation like the second generation, and religion. Every organization chooses demography based on the type of product they sell. For example, an alcohol manufacturing company may decide to come up with a new non-alcoholic beverage drink with a new target market. The company may choose to sell the new drink to young people aged between 5years and 35 years based on the product's content ( Hernani-Merino et al., 2020, pg 66 ). This is a new demographic market for the alcohol company because its normal demography should be adults aged 18 years above (depending on the specific national laws), not ailing from diseases like diabetes.

Armstrong & Kotler (2016) has given psychographic as the third demographic segmentation (pg. 5). Psychographic segmentation is when the company breaks its customer groups into small units regarding their values, beliefs, and reason for being. These psychographic factors influence consumer purchase behavior like consumer opinions, consumer lifestyles, social status, and activities. Armstrong & Kotler (2016) gives further psychographic examples, including lifestyle, social class, and personality (pg. 30). The company reads these psychographic behaviors and leverages them to target possible perfect markets to buy their products.

Behavioral segmentation is the fourth variable by Armstrong & Kotler (2016). Behavioral segmentation is an approach of market segmentation that categorizes the consumers into different groups that exhibits specific behavioral patterns in common (pg. 13. The users may have similar lifecycle stages, they may have previously purchased a specific product, or the people may have responded similarly to a marketing message. Armstrong & Kotler (2016) give examples of user status, occasions, usage rate, benefits, and loyalty status (pg. 14).

Recommendations

As a recommendation, Cochlea needs to bring its product in the market much simpler and faster. First, Cochlear needs to work with one regulatory and approval body, specifically the FDA. Once the FDA approves, there will be no need to have it approved in every part of the world where the company sells its products. Second, Cochlear needs to get pharmaceutical accredited ISO accreditation like the ISO 9001. The FDA and ISO certifications and a series of awards for the quality product are an ideal way to ethically, legally, and professionally guarantee different jurisdictions that these products are universal. They are likely to deliver the best services as expected.

References 

Armstrong, G., & Kotler, P. (2016).  Principles of Marketing . Pearson Education Inc.

Brahmana, R. K., Loh, H. S., & Kontesa, M. (2020). Market competition, managerial incentives and agency cost.  Global Business Review ,  21 (4), 937-955. 

Dolnicar, S., Grün, B., & Leisch, F. (2018).  Market segmentation analysis: Understanding it, doing it, and making it useful  (p. 324). Springer Nature. 

Hernani-Merino, M., Lazo, J. G. L., López, A. T., Mazzon, J. A., & López-Tafur, G. (2020). An international market segmentation model based on susceptibility to global consumer culture.  Cross Cultural & Strategic Management . 

Hoffmann, W., Lavie, D., Reuer, J. J., & Shipilov, A. (2018). The interplay of competition and cooperation.  Strategic Management Journal ,  39 (12), 3033-3052. 

Hubbard, G., Rice, J., & Galvin, P. (2018). Strategic Management Thinking, Analysis, Action . 5 TH Edition. Pearson Australia. 

Kienzler, M., & Kowalkowski, C. (2017). Pricing strategy: A review of 22 years of marketing research.  Journal of Business Research ,  78 , 101-110. 

Morandi Stagni, R., Santaló, J., & Giarratana, M. S. (2020). Product ‐ market competition and resource redeployment in multi ‐ business firms.  Strategic Management Journal ,  41 (10), 1799-1836. 

Neubert, M. (2017). International pricing strategies for born-global firms.  Central European Business Review ,  6 (3), 41-50. 

Payne, A., Frow, P., & Eggert, A. (2017). The customer value proposition: evolution, development, and application in marketing.  Journal of the Academy of Marketing Science ,  45 (4), 467-489. 

Pisano, G. P. (2017). Toward a prescriptive theory of dynamic capabilities: connecting strategic choice, learning, and competition.  Industrial and Corporate Change ,  26 (5), 747-762. 

Schmidt, A. L., & Scaringella, L. (2020). Uncovering disruptors' business model innovation activities: evidencing the relationships between dynamic capabilities and value proposition innovation.  Journal of Engineering and Technology Management ,  57 , 101589.