Cochlear

  • Category:
    Marketing
  • Document type:
    Assignment
  • Level:
    Undergraduate
  • Page:
    4
  • Words:
    2554

Cochlear

Cochlear

Cochlear

Executive Summary

The report is prepared to analyze factors that impacts Cochlear’s overseas marketing. The report will also assess the macro and micro factors which influences the company when deciding on their target market and then developing the appropriate marketing mix. Cochlear is an Australian multinational biotechnology company with headquarters in Sydney (Cochlear 2014). IBISworld (2014) claims that the company develops, produces and distributes the Nucleus cochlear implant, Baha bone conduction implant and Hybrid electro-acoustic implant. Cochlear company was established in 1981 and has since grown and now operates in 25 countries across the globe.
The company currently holds the largest share of the hearing implant market globally. It holds 67 percent of the global market (IBISworld 2014). The company has won various awards due to its innovative nature. Cochlear won Forbes’ most innovative firm award both in 2002 and 2003.

Table of Contents

2Cochlear

2Executive Summary

41.0 Introduction

42.0 Cochlear’s target market

53.0 Macro factors

53.1 Political Environment

63.2 Economic

63.3 Technological Analysis

73.4 Social

83.5 Legal

84.0 Micro factors

84.1 Company

94.2 Suppliers

94.3 Customer markets

104.4 Marketing intermediaries

104.5 Public

115.0 Conclusion

126.0 References

1.0 Introduction

As the 21 st century unfolds, hearing diseases have been in the increase as a result various industrial noise. The situation has provided opportunities for some people to venture into the business and help solve that societal problem. Dr Graeme Clark is one the people who spotted the opportunity and immediately ventured into it (Cochlear 2014). In 1981, he convinced the government of Australia to provide funds which he then used for biotechnology Implant Company, Cochlear. IBISworld (2014) postulates that by 2010, global hearing implant market looked lucrative was valued at approximately $960.8m with a projection of growth of 14 percent equivalent of $2.4 billion by 2017.
The market is now being driven by the rising population of people experiencing hearing loss. The situation has prompted Cochlear to target new markets to be able to increase its profits. As such the report will analyze macro and micro factors that may affect Cochlear when deciding on their target market and then developing the appropriate marketing mix.

2.0 Cochlear’s Target Market

Cochlear has originally been manufacturing in Sydney, Australia. The company has spread its supply to other 25 over the years
(IBISworld 2014). However, the company now targets Asian Region particularly China because of its population growth. A closer look for this country reveals increase in industrial activities and noise that is associated with hearing loss. The population of the old people (baby boomers) is what is driving the company to target this market. According World Health Organization, the rising population of old people of 65 year and above have become a major influence in the hearing implant market. Life expectancy is another key drive to this market (Einhorn & Khan 2013).

3.0 Macro factors

Cochlear’s capability to continue staying as one of the stronger brands in implants industry can be attributed to its competence and quality status which comes from internal environment. This involves the company’s strategic objectives and goals which can be associated with its competency. According to Cochlear (2014) company’s management team has an unquenchable passion to increase the efficiency of its operations. Hence, to completely understand the company’s macro environment and how it affects Cochlear’ marketing mix, PESTLE analysis is conducted.

3.1 Political Environment

China political environment has been friendly to businesses (Czinkota et al. 2013). Cochlear has been the dominant supplier in China for a long time. However, the country has realized the need to promote its own companies and now regulates its market to protect its companies. For instance, today, the government is providing political patronage to its company Hangzhou Nurotron Biotechnology to be able to improve its operation and make several implement machines.

Einhorn & Khan (2013) contend that in 2013, Nurotron received a huge boost when state-owned hospital and Chinese Academy of Sciences provide funding of up to 75 percent of initial strata-up for the company to improve its producing and marketing of cochlear implants. The Chinese government provided the funding with an aim of supporting local research, designing and production of cochlear implants accessible at a cheaper price for its Chinese nationals (Einhorn& Khan, 2013). The support and influence the companies get from the government makes it hard for Australian Company, Cochlear to penetrate the Chinese market. This only means that Cochlear will be forced to lower its prices to be able to attract that target market. There the marketing mix of Cochlear is threatened in terms of prices.

3.2 Economic

In the recent, the economic growth of China and increase in number of business has led to increase in number of middle class population (Czinkota et al. 2013). In this country, the middle-class population has increased over 300 million people by 2012 (Czinkota et al. 2013). As such, the disposable income has increased tremendously, making different businesses to target that country. Cochlear company is one of such company which has understood the importance of Chinese market. Business Spectator (2013) posits that cases of hearing loss have increased a great deal due to high levels of aging people and increase of life expectancy in China. Health care cost has been expensive in China, and increase in disposable income has provided hope to Chinese citizens and so is to Cochlear implant business.

However, recent commitment of the Chinese government to provide affordable and accessible health care complicates matters for foreign companies like Cochlear Company (Business Spectator 2013). The government has gone ahead to fund its local companies in a bid to improve health care. The still has potential to increase its profits in China because of high population of people who cannot still afford the cost of health care. Chinese presently spend only 5.5 percent of its national budget equivalent to $350million on financing health care (Business Spectator 2013). For that reason, Cochlear can segment its market towards low income owners.

3.3 Technological Analysis

Technology has continued to shape up competition in business the recent time (Douglas & Craig 2011, p.151). In fact, technology and business analyst claim that you either embrace technology or you ship out of business. Today, producers continually enhance their technology to make products which meet the anticipations of patients and surgeons. China is one of the companies which invest heavily of science and technology to improve the lives of its citizens. According Business Spectator (2013) in the hearing implant sector, Cochlear as a biotechnology company, it is known for its unique technological machines particularly cochlear implant, Baha bone conduction implant and Hybrid electro-acoustic implants which assists several deaf people globally to get 75 percent of their normal hearing back. The company products convert sound waves into signals and convey them directly to peoples’ brain.

However, there is threat in Chinese industry non-regulation of technology, making market players vulnerable to lawsuit as a result of similar products and patents (Einhorn & Khan 2013). For instance, Hangzhou Nurotron Biotechnology has similar technology and products. Hence, Cochlear marketing mix depends on its technological innovation and edge, and quality reputation that have been in international markets for quite some time (Hewerdine & Welch 2008, p.190). Just like Chinese companies, Cochlear has maintained considerable investment in research and development which is portrayed in recently made hearing gadget, Nucleus N6 (Business Spectator 2013). The new device automatically gives the company a competitive edge over young company, Nurotron Biotechnology.

3.4 Social

Health care is one of the industries which depend on the social lives of human beings. Some of the factors which influence this industry includes population, occupation, attitude, behavior, and culture and income level among others. Companies which operate in this industry must offer quality and excellent services to make customers trust them with their lives. As a company that offer products and service in the health sector, Cochlear faces a number of social factors which could affect its marketing mix in new markets (Business Spectator 2013). They consist of disposable income, attitudes, behavior and values.

Increase in disposable in China looks promising for Cochlear Company. This is because many people are likely to come for hearing treatment; hence many companies are likely to buy its products and service. Kennedy & Parsons (2011, p.38) argue that cultural factors are known for impacting influencing customer behavior and attitude of segment market. Cross-cultures are normally incorporated to social context of a society and China citizens who are rooted to their own culture might just find it difficult to buy Cochlear’s ideas and marketing concept. As result, the situation could impact marketing mix of the company.

3.5 Legal

Even though, China is a business friendly country, various agencies have set the law to regulate the market and protect its companies and business (Huang, Davison & Gu 2010, p.558). Under the Therapeutic Goods Act 1989, China expects both local and foreign manufactures to apply for license under such laws in order to conduct its business (IBISworld 2014). With the country try to improve the status of its own companies, they may set new strict laws to raise barriers to entry. Such laws could affect Cochlear’s marketing mix in future

4.0 Micro factors

Under micro environmental factors, the report will discuss the company, suppliers, customer markets, marketing intermediaries and public.

4.1 Company

Cochlear uses its internal strengths to explore a new opportunity in the health care sector. According to IBISworld (2014) Cochlear company is ranked as the largest hearing implant manufacturer both in Australia and globally in terms of capacity and revenue. This implies that Cochlear is a strong brand that is recognized internationally. This makes it easy to market this company both local and abroad.
The company banks on its qualified team of management to provide customer excellence (Cochlear 2014). The company makes quality products which make the customers willing to pay even if the price goes up. This form of quality has been maintained due to its heavy investment in research and development. Superior products and services influence marketing mix in that it makes it easy to market the company’s products. Top management also understands that workforce is the key asset the company owns; hence they provide different incentives and rewards to make improve its performance. Today, Cochlear employs up to 2,500 staff, with 800 belonging to the manufacturing department (Cochlear 2014). However, in 2011 the company’s image was tainted when it most of Nucleus CL500 implants were found to be faulty and had to be recalled.

4.2 Suppliers

Suppliers are very important to Cochlear because they influence production by providing raw materials. Currently, hearing implant industry has few players making it very hard for suppliers to influence the market. It implies that the market has a low level of suppliers bargaining power. This has made it very easy for Cochlear to influence the supplier to provide high quality raw materials at low cost. In return, Cochlear is able to make quality products at a lower cost. To further influence hearing industry, Cochlear is now using vertical integration to take over roles that were done by suppliers (Theage 2006). For instance, in 2006 Cochlear bought one of the influential suppliers,
Crystalaid Manufacture Limited at a cost of $19. Crystalaid is a major producer and distributer of particular accessories and parts of cochlear implant system (Theage 2006).

4.3 Customer markets

Cochlear has large customer market which it has built in many years it has been operational (Einhorn & Khan 2013). The Cochlear customer market is mostly healthcare institutions. Since consumers normally choose where they purchase their products, the company has always developed quality products to ensure they are selected as the company of choice. In their part customers have pile pressure on the company by ensuring it makes products which satisfy their needs (Ville 2009, p.434). The company uses its strong brand and differentiation in maintaining customer loyalty.

4.4 Marketing intermediaries

Marketing intermediaries have become a very important aspect of Cochlear Company. The company currently supplies its products in 25 countries (IBISworld 2014). It does not have manufacturing plants in all these countries so it uses marketing intermediaries to conduct business on behalf of the company. Ville (2009, p.428) claims that intermediaries, including distributors, retailers, agents and wholesalers act as the brand ambassador by marketing, creating brand awareness and answers questions concerning the products. Intermediaries normally hold enthusiastic responsiveness of consumer markets and insight into creating strong customer relationships (Kennedy & Parsons 2011, p.39). They can cause positive or negative feedback on the Cochlear products. Positive feedback will actually create brand loyalty. In this perspective, it can be argued that marketing intermediaries form the marketing chain at Cochlear hence they influence the marketing mix of the company.

4.5 Public

Just like any other business, Cochlear operates within a society. The company was established to provide the needs of a society, that is make machines that correct the hearing problems. Within the society, there are customers, employees and other stakeholders who have their opinions concerning Cochlear’s products.
Douglas & Craig (2011, p.157) hold that in any society there are rooted cultures which form their behavior, values, perception and attitude among others. It is from those aspects their opinions and purchase decisions are made (Douglas & Craig 2011, p.157). Therefore, Cochlear must manufacturer their products public opinion shapes their marketing success of failure.

5.0 Conclusion

Cochlear Company is currently enjoying the market dominance as the most innovative company and the largest hearing implant company in the world because of its talented and innovated employees. The company has continued to use its strength to improve its market share for many years. However, many companies are coming into Cochlear’s target market indicating that company is likely to face stiff competition. To ease that competition, the company must rethink its strategy and align them with macro and micro environment factors to be able to continue its profits.

6.0 References

Business Spectator 2013, Cochlear faces China competition, viewed on August 27, 2014 from

http://www.businessspectator.com.au/news/2013/7/31/health-and-pharmaceuticals/cochlear-faces-china-competition

Cochlear 2014, Cochlear Official Website, viewed on August 27, 2014 from

http://www.cochlear.com/wps/wcm/connect/intl/home

Czinkota, M.R, Ronkainen, I, Sutton-Brady, C, Beal, T & Stegemann, N 2013, International

Marketing: Asia Pacific Edition, 3rd Edition, Cengage Learning

Douglas, SP & Craig, CS 2011, The role of context in assessing international marketing

opportunities, International Marketing Review, Vol. 28, No. 2, pp. 150-162

Einhorn, B & Khan, N 2013, A Chinese Hearing Implant Takes Aim at Cochlear, Bloomberg

BusinessWeek, Viewed on August 27, 2014 from http://www.businessweek.com/articles/2013-03-28/a-chinese-hearing-implant-takes-aim-at-cochlear

Huang, Q, Davison, R.M & Gu, J 2010, The impact of trust, guanxi orientation and face on the

intention of Chinese employees and managers to engage in peer-to-peer tacit and explicit

knowledge sharing, Information Systems Journal, Vol. 21 No.6, pp.557-577.

Hewerdine, L& Welch, C 2008, Reinterpreting A Prime Example of born global Cochlear’s

International Launch, New Perspectives in International Business Research Progress in

International Business Research, Vol. 3, No.1, pp. 189–206

Kennedy, A & Parsons, A 2011, Macro-social marketing and social engineering: a systems

approach, Journal of Social Marketing, Vol. 2, No. 1, pp. 37-51

Theage 2006, Cochlear buys key supplier for $19m, viewed on August 27, 2014 from

http://www.theage.com.au/news/Business/Cochlear-buys-key-supplier-for-19m/2006/12/19/1166290516835.html

Ville, S2009, Making connections: insights into relationship marketing from the Australasian

stock and station agent industry, Enterprise & Society, Vol.10, No.3, pp.423-448.

IBISworld 2014, IBISWorld Industry Report C2412:
Medical and Surgical Equipment

Manufacturing in Australia, viewed on August 27, 2014 from http://clients1.ibisworld.com.au.ezproxy.lib.uts.edu.au/reports/au/industry/default.aspx?entid=262