Sunrise Medical Inc.s Wheelchair Products Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Introduction:

Sunrise Medical incorporation was founded by Richard Chandler in 1983. By the end of 1986, Sunrise Medical has started producing wheelchairs and other products. The company grew to 17 divisions by 1986 through an aggressive acquisition program financed partly by an initial public offering. Later, the company has started mergers and acquisitions and acquire Guardian and then motion designs that then renamed as Quickie. In 1990, Quickie has launched its first ever power wheelchair. In 1993, Guardian introduced "the lightweight standard wheelchair". After the resignation of Richard H. Chandler in 1999, the company became private by a $250 million deal.

The primary goal of Sunrise is to make improvements in the lives of the people who use their products. The mission of the company includes improving peoples' lives by creating innovative and high-quality products. Sunrise Medical Inc. has manufacturing facilities in US, Germany, Mexico, United Kingdom and Spain. The distribution of the company’s products has been supplied in more than 90 countries. In addition to this, the company has approximately 4,400 employees.

Problem Statement:

The Chief Executive officer of Sunrise Medical needs to make a decision about to get involved in a decision related to the two divisions of the company. One division of the company that is, Guardian was planning to introduce a wheelchair known as a standard lightweight wheelchair. The aim of the company behind introducing this product was to supplement its product line that is walkers, crutches and other aids for patients. But the problem was if the company introduces this product, it will compete with the existing product line of another division named as sunrise, Quickie. Because of this entire scenario, the CEO of the company was reluctant to take any action for or against it. According to the culture of the company, the CEO of the company has given a full right and autonomy to all the divisions to make decisions about it and thus he does not want to disturb a model of the company.

Analysis:

A glimpse of wheelchair industry:

Wheelchair industry is not the old one and despite being young in the market, Sunrise Medical has shown an enormous growth in terms of sales during the passage of ten years. By the end of 1992, international sales of the company were reached to almost US $ 800 million. In this sale, approximately half of the sales were coming from sales in the United States and the remaining half from the Europe. The numbers have shown that the company was in the growth phase. The sales growth of the company was continually increasing and range from 5% to 16% on an annual basis. In addition to this, companies were delighted because of the fact that there was an announcement of United States insurance program that the company would compensate for wheelchairs with higher costs that in turn will increase the sale of the company in the long run. Despite the fact that the company was achieving positive results in terms of sales, the profit margins of the company were on the lower side. The main reason behind low-profit margins was due to the costs that are around 65% to 75% of the total cost. Along with this, extra operating expenses of the company were approximately 34% of the total sales.

In addition to this, there were three major players in the market. These three players contribute to approximately 70% of the total share in the market. With a passage of time, Sunrise Medical along with its competitor Invacare was earning a profit by having positive cash flows through their innovative and competitive strategies, mergers & acquisitions, and bringing efficiencies in by making their production cost lower. The third player of the market, i.e. Everest & Jennings was encountering with losses and negative cash flows for four consecutive years. This has shown that the two dominant players of the market if continues to achieve positive cash flows and make improvements in its strategies, then they can easily grab more share in the market in the wheelchair industry.

Although, it seems that the industry is dominated with just two players in the market, but as a fact, both the players turned to be a leader in the market in a very short time period and thus it is not something impossible for the new entrants to enter into the wheelchair industry. A company can easily make its entrance in the industry by imitating the model and strategies of any of the two major players in the industry as the cost of investing in manufacturing plants are low. However, this low cost of investing is of several million dollars....................

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General Director of Sunrise has to decide whether to intervene in the decision unit, Guardian products, introduce new lightweight standard wheelchair. Keeper wants to bring a wheelchair in addition to its product line crutches, walkers, and other means of the patient. If introduced, a new wheelchair will compete with existing products offered by the largest and most profitable Sunrise division, Quickie Designs. The Director-General decided to take action because he did not want to break the precedent of all divisions of autonomy, which is an integral part of the culture in Sunrise. "Hide
by Anita M. McGahan Source: HBS Premier Case Collection 19 pages. Publication Date: November 24, 1993. Prod. #: 794069-PDF-ENG