LAHORE SCHOOL OF ECONOMICS

Omega Medical Products, Inc

Case Study WAC

Introduction: Omega Medical Products located in Denver, Colorado is one of the top manufacturer of lifesupport medical equipment and surgical pharmaceuticals. The company employees 175 sales representative, including a separate sales force of 40 people that handles the companys anesthesia line .The marketing function of the firm is divided into four categories or lines. The patient care group compromises of anesthesia equipment and disposables, nursing equipment and infant care. The anesthesia equipment and disposables accounted for the sale of almost near to $100 million, on the other side respiratory therapy line accounted for $66 million sales in 1998, its growth was bit slower than the former product line but it was expected that the sales of respiratory line may increase to $ 97 million by 2002. Small and medium sized hospitals were the primary market segment. The third product line was architectural product line whose sales in 1998 were $ 59 million. The fourth product line compromised of $ 32 million sales and it compromises of government, OEM, service and military. Qualitative facts: Vice president of sales and marketing destined to be the most powerful positions at OMP wars filled by Earl Callahan. Filling this position with an outsider generated noticeable discontent among several executives who had been considered top contenders. After viewings omega current organization charts, Sales figure, and marketing plans for new products, Callahan realized there were several major problems. With new product at the primary growth factor at the in the portable patient monitoring area, Sales were expected to be $191 million by 2000. Callahan thought one primary reason they had done so well was that the majority of Omegas product were not particularly complicated and sales force could be adequately trained by product managers when new products were introduced. Callahan knew many products sold with little sale or no sale effort because of the Omega name and strong dealer network.

 Callahan believed however, that this would not continue because many products planned for the market introduction in the next five years were state of art electronic monitoring equipment. Most of these products were anesthesia line. For the past year, the marketing manager of respiratory care, Bill Givers had been attempting to convince Callahan that despites the line history real growth potential existed in respiratory therapy. Callahan knew that Jeff hardy, marketing manager for patient care, would lobby for a separate sales group for anesthesia products since that line represents on e quarter of the company sales. Hagen is very proud of his organization, believing his sale representatives are a cut above the general line organization. Consequently he wants no part of any plans to join the two forces. Quantitative facts: In 1998, Omega Medical Products, Inc. recorded annual sales of $380 million. Over past three years, sales have increased at an annual rate of 18 percent. The company employs 175 sales reps, including a separate sales force of 40 handling companys anesthesia line exclusively. The position of executive vice president was eliminated and the position of vice president, marketing and sales, was created. Earl Callahan was hired for the new position. OMPs marketing function was divided into four product areas; a patient care group, respiratory therapy, architectural products and anesthesia (gases). The patient care group accounted for $139 million out of $380 million. The general sales force, consisting of 135 reps, was reporting to 16 district managers and six regional vice presidents. Bill Griese was the marketing manager of respiratory therapy line.

The general line sales organization was reporting to Paul West who was upset about his apparent demotion as a result of reorganization.

Problems: 1. Disapproval of senior executive over appointment of Earl Callahan: Callahan , the newly appointed vice president of marketing and sales, previously held the top marketing job in a firm that manufactured medical products unrelated to those sold by Omega. Filling this position with an outsider generated noticeable discontent among several executives who had been considered top managers

2.

Omegas Reputation in Respiratory Care: Although Omega was a leader in the anesthesia field, it did not enjoy the same position in respiratory care. Because of the several major failures with new products during the past 10 to 15 years, the Omega name was still associated by many therapists with inferior quality, poor product design and inadequate service.

3.

Lack of experience in medical electronics: Callahan speculated that many products planned for introduction in the market for next five years were not ordinary ones therefore the sales force required technical knowledge and expertise to sell them. Not only Omegas sales force lacked technical skills but their training was also inadequate.

4.

Amount of time spent by general line sales force in field of anesthesia: The sales representatives were spending a disproportionate amount of sales time in field of anesthesia due to which its adverse impact was observed in respiratory therapy segment.

5.

80/20 Principle: The company was putting too much emphasis on Anesthesia (gases) for two reasons. First, the product is unique and its patent only runs through 2002 , Secondly its

contribution towards sales is 22%. In due course, the company neglects the significance of remaining divisions. 6. Sales per person ( A comparison of Anesthesia Sales Organization vs General Line Sales

Organization): By comparing average sales made by anesthesia sales organization with general line sales organization , it can be clearly observed that representatives in General Line Sales Organization are much more productive then the representatives of anesthesia sales organization and have superseded them in terms of average number of sales made in 1998.

Total Representatives General Line Sales Organization Anesthesia Sales Organization Total 135 40 175

Sales 297526 82591 380117

Average Sales Per Person 2203.8963 2064.775

Core problem: Incorrect segmentation of product areas , ineffective organization structure and absence of team selling from Omega Medical Inc. employing wrong type of people. Team Selling, a pivotal factor that could prove crucial for success of any organization, was missing in Omega Medical Inc. Omega Medical Incs sale segmentation of products appears to be fallacious as many sales reps for different products would visit same department of same hospitals which would exasperate the hospital employees. Such recurring incident brings about bad name to the company. Organization structure of Omega Medical was subjected to frequent changes which cause confusion among employees. Recommendations: All the segments related to anesthesia should be combined in a single division in order to make it easy for the sales rep to make sales with less ambiguity. Minimum and maximum commission on sales over quota of General line representatives should be increased from 3% - 7 % as they are putting much effort to make sales. Commission on sales up to quota should be increased from 1% to 1.5% A technical seller should be hired to disseminate information related to the product that requires more technical expertise. Omega Medical Product should put its utmost emphasis on team selling in order to mitigate majority of the problems faced by them.