Case Study on Emi
Essay by qpwoei • October 8, 2015 • Case Study • 996 Words (4 Pages) • 1,451 Views
1.
First, we must assess the profitability of the CT scanner as new good ideas are not guaranteed tickets to success.
Regime of Appropriability
Property Rights in Innovation | EMI can use a patent to protect their innovation, however, the effectiveness of using patents to protect innovation seems to have declined. |
Tacitness and Complexity of the Technology | Is it Codifiable? According to Figure A and B it is codifiable, however, processes for manufacturing the CT scanner may be based on tacit knowledge. Is it Complex? It is a mix between technologies that are well known and understood but it is very difficult to integrate all the components together to make the CT scanner However, it is somehow very easy for technology to be copied. But this can be prevented with property rights. |
Lead Time | Due to the tacitness and complexity of the CT Scanner in addition with the patent, EMI would have a huge lead time. |
Complementary Resources | EMI does not have enough resources and capabilities needed to finance, produce and market the CT scanner, therefore, they have to outsource. |
Using the regime of appropriability, the CT Scanner is a profitable innovation as it is a tacit and complex technology whereby if EMI manages to properly pursue property rights for the CT, they will have a lot of lead time to establish a strong market position. Although EMI has very little complementary resources, this can be solved by having a joint venture or outsourcing. They can even use the lead time to build up complementary resources internally.
Secondly, consider the risks involved: EMI is competing against other innovations in the Diagnostic Imaging Industry which have a lot of potential, which gives rise to technological uncertainty. However, the CT scanners are unique enough in its features to compete against them.
Also, the CT Scanner is being released in North America, which EMI has no knowledge of. This gives rise to market uncertainty. However, this might not be such a big risk as the American market likes new technology and are rich enough to buy them.
However, these risks are manageable. EMI can limit risk exposure by keeping costs low and outsourcing or by doing joint ventures with companies that have more experience with medical products and/or knowledge of the North American Market to make up for their lack of resources and capabilities.
Lastly, if EMI is able to make good use of the huge lead time they have over the competitors, they can reap benefits from the first movers advantage and build a strong market position. For example, they can form partnerships with manufacturing companies, create economies of scale, set up barriers to entry to protect their lead, form business relationships with North America and also learn about their market. As long as they protect their intellectual property rights properly, this advantage can be sustained.
Therefore, I would vote yes for the £6 million capital request to enter the scanner business as it satisfies the regime of appropriability, has manageable risk and might give the company a sustainable competitive advantage.
2.
Problem 1: Lack of resources and capabilities such as medical product expertise or knowledge of producing CT scanners’ components could lead to EMI losing out on cost savings during the manufacturing process by producing it inefficiently. This will result to a drop in profit and risk of investing into CT scanners to rise.
Solution | Pros | Cons |
Outsource Production of CT Scanners’ components | Lessens risk and helps EMI get the required resource and capabilities from external sources | May create dependence on external producers |
Start a strategic alliance or joint venture with another company | Lessens risk due to sharing costs and pools resources and capabilities from more than one firm | Also shares revenue. Possible for disagreement and culture clashes between firms. |
Internal Commercialization | Allows control over resource and capabilities | Increases risk due to heightened costs |
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