Case Study Analysis: Sunrise Medical, Inc.

Posted: November 7th, 2023

 Case Study Analysis: Sunrise Medical, Inc.

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November 7, 2023

Case Study Analysis: Sunrise Medical, Inc.

The case study is about Sunrise Medical Inc.’s potential growth and expansion by introducing a new and innovative wheelchair. The company has grown into several divisions through an aggressive acquisition program. The company’s primary goal is to enhance the living conditions of persons with disabilities by creating high-quality and accessible wheelchair products. Top management at Sunrise Medical Inc. faces a dilemma of two divisions wanting to introduce a new wheelchair and become direct competitors. Although the internal competition might be problematic for management, all factors indicate that introducing the new wheelchairs will be beneficial to Sunrise Medical Inc.

Situation Facing the Firm

Sunrise Medical Inc. is faced with increasing competition in the wheelchair industry that is eroding its market share. In addition, the company’s strategic planning did not consider the potential conflict between departments selling patient aids. The company is faced with the daunting task of introducing a new and innovative wheelchair design that will complement its product line. The new wheelchair should be able to compete with products present in the market and be profitable for the parent company, Sunrise. Fortunately for Sunrise Medical, the American market possesses several indicators that indicate it offers compelling opportunities for potential investors. The case study highlights that the American market is characterized by a substantial number of eager buyers and significant market concentration (McGahan, 1993). The wheelchair market has grown at a steady pace since the 1970s. Social and technological developments have led to persons with disabilities experiencing greater freedom and access to wheelchairs and public spaces. The increased demand for wheelchairs from these social developments has increased demand for Sunrise Medical’s new wheelchair.

Sunrise Medical benefits from an almost monopolistic competition in the wheelchair industry. Sunrise Medical, Invacare Corporation, Everest & Jennings International dominate the market with their products. While it is not evident which of the three companies is the biggest, each holds a substantial market share to be threatened by new companies. The lack of competition puts Sunrise Medical in an advantageous position. However, with increasing technological advancements, changing customer demands will impact the company’s profitability (McGahan, 1993). Sunrise Medical needs to find new processing methods to lower its cost of production and the cost of the final product.

The prospect of repeat purchases makes the American market appealing to the wheelchair manufacturer. It is common for individuals who have been recently injured or disabled to purchase a new wheelchair to reduce their reliance on others. On the other hand, individuals with disabilities might be forced into purchasing new wheelchairs to replace their old ones. Moreover, McGahan (1993) notes that the number of senior American citizens is increasing. The aging population can potentially increase sales because they need wheelchairs for mobility. The senior demographic is another factor that makes the American market attractive to investors.

While the American market attracts new investors, some structural changes must be made to make it investor friendly. In the old manufacturing process, wheelchairs were produced through labor and resource-intensive processes (McGahan, 1993). There was a minimal investment in machinery, resulting in higher production costs per unit. The product development strategies made the cost of market entry quite restrictive. The Food and Drug Administration (FDA) also outlined that the design of the wheelchairs interferes with radio signals (McGahan, 1993). Therefore, newer models need newer power models.

Strategic Position of Sunrise Medical

Competitive Advantages/Differences

Sunrise’s Quickie Division holds several advantages over its competitors. The business can differentiate itself by offering high-quality, comfortable wheelchairs that meet consumer needs (McGahan, 1993). A gradual increase in profits has enabled the company’s division to achieve balanced growth over the years. Quickie produces portable, durable, and lightweight wheelchairs. The superior design of the product ensures durability and enhances mobility. In addition to its ease of use, the innovative design of the wheelchair is versatile, allowing customers to utilize it for extended periods of sitting or shorter periods of movement. The multipurpose function means that the wheelchairs are easier to resell at a profit. Reselling makes the wheelchairs more accessible to individuals who might not otherwise afford a new one.

            The Quickie Division has years of experience designing and producing wheelchairs, which makes it adaptable to market changes. The company has made substantial changes to its assembly line over the years, improving its production capacity. In addition, the steady revenue growth over the years allows the company to cover its overhead costs. Quickie Division has been innovative with its designs with minimal investment in research and development (McGahan, 1993). Creativity in design makes Quickie products more attractive to customers compared to other wheelchairs in the market. Quickie Division has enough money to commit to other requirements because it has minimal labor expenses and does not have budgetary allocations for product development. One advantage is Quickie Division’s potential to grow through innovation. The company has achieved substantial growth without significant investments in research and development, suggesting significant potential for future growth.

Issues in Addressing the Firm’s Problems

            Sunrise Medical Inc. is confronted by the likelihood of internal conflict between its divisions. Sunrise needs to improve its strategic positioning by improving its sales and market share. The company has to introduce Guardian’s innovative wheelchair design, but the move will come at the expense of its most profitable division to date, Quickie Designs (McGahan, 1993). Sunrise Medical has to come up with ways to ensure the two brands do not become direct competitors while the new product design is introduced into the American market. The parent company should be worried that any responses it takes in this industry will act as internal pressure against its policy of divisional autonomy.

What the Company Should Do as a Response

Basic economics suggests that Guardian has no option but to introduce its innovative, lightweight, and standard wheelchair. Introducing the wheelchair will improve sales for Chandler while opening the company up to a new market. According to the case study, Guardian’s wheelchair accounted for 25% of the growth in Sunrise’s revenue in 1993 (McGahan, 1993). The transformation of Sunrise sales highlights that there is a market for Guardian’s product. The wheelchair is praised for having innovative features. For instance, it is easier for disabled individuals to get in and out of the new chair. The optional adjustment of a cup holder improves comfort, especially when the user is driving. One of the issues identified in Invacare’s wheelchair design is the tendency for users to spill food and drinks on their laps.

The lower production costs would translate to an affordable price, making Guardian’s wheelchair more available and accessible to individuals with disabilities. Entry of the product into the American market will greatly benefit hospitals. Healthcare institutions can charge the same price for the wheelchairs while getting them at a lower price from Guardian. Additionally, the new chair allows Guardian and Chandler to differentiate themselves from their competitors. The study indicates that the new product does not contain compatible parts with Invacare or Everest’s wheelchairs (McGahan, 1993). The wheelchair’s unique features will attract consumers, while the uniqueness of the parts will create user loyalty and dependency on the brand. Differentiation is a strategic means for Guardian and Chandler to maintain a sustainable market share.

Sunrise’s standard wheelchair will disrupt the chair industry once fully introduced into the American market. The new product has already proven to be successful in the American market. Foremost, it offers consumers more features, flexibility, and power (McGahan, 1993). Before its introduction, consumers had one option, which was heavy and tiresome to maneuver for long periods. Secondly, the new chair is lighter and more portable. Users will have fewer constraints while using it daily (McGahan, 1993). The new wheelchair will open new marketplaces for the company, especially in rural areas. Thirdly, the wheelchair’s compact design makes it fit in tighter spaces, making it more usable in areas such as airports and hypermarkets.

Launching the lightweight, standard wheelchair is expected to change the competitive landscape of the wheelchair industry. While it was previously challenging to determine the dominant player among the three manufacturers, introducing this new product will establish Sunrise as the clear leader. Consumers buy Sunrise’s wheelchair because of its lower pricing and improved utility. Everest and Invacare may need to invest in research and development to keep up with Sunrise. The discontinuation or decreased price of their older chairs caused by Sunrise’s new product could result in financial losses for the two companies. Smaller businesses that offer the similar innovative designs as Sunrise might have to close shop because they will be unable to match their lower pricing.

Conclusion

Guardian’s decision to acquire lightweight standard wheelchairs is timely, given the market’s growth. The recommendation is to let Guardian expand its presence in the wheelchair industry because of its innovative new design and more established distribution channel. Sunrise should leverage its uniqueness within the firm to offer wheelchairs that are cheaper, more durable, and more convenient to users. The director-general should allow the company to build and introduce the new chair to avoid breaking the precedence set for all departments to have autonomy. The approach would be strategic to Sunrise’s organizational culture, profitability, and position in the market.

Reference

McGahan, A. M. (1993). Sunrise Medical, Inc.’s wheelchair products. Harvard Business School, 1-19.