Becton Dickinson & Company: VACUTAINER Systems Division

Nina Cowley Zach Evans Sean Zemek

The Beginning
Maxwell W. Becton and Fairleigh S. Dickinson met on a sales trip in 1897. Months later, they decided to go into business together, sealing their partnership with a handshake. They named their medical device import company Becton, Dickinson and Company.

Product Breakdown
Becton Dickinson (BD) manufactured:
Medical Diagnostic Industrial safety products

For:
Health care professionals Medical research institutions Medical industry General public

Business Segments

Becton Dickinson Business Segments

Laboratory

Industrial Safety

Medical Products

Medical Products Division

Becton Dickinson Medical Products Segment

Needles, syringes and diabetic products

Pharmaceutical systems

VACUTAINER blood collection systems

Becton Dickinson VACUTAINER Systems (BDVS)

Formed as a business unit in 1980 Consisted of three main products
Venous blood collection tubes and needles sold under the VACUTAINER name (70% of sales) Capillary blood collection tubes and lancets sold under the MICROTAINER name Microbiology tubes and specimen collector systems

BDVS Segment Facts

1984 sales were $90 million Each product group accounted for 33% of operating income Pioneer in converting market to evacuated tubes Estimated 80% market share in U.S.

Market Trends
7,000 hospitals performed 70% of all blood tests in 1985 700 commercial labs performed 25% of all blood tests 5% of all blood tests performed in nonhospital health care centers Market had seen a decline in hospital blood testing between 1983 & 1985 Projected that by 1990, 40% of blood testing would be done in commercial labs and physician offices

Market Trends (cont.)

Shifting purchasing patterns
Chief lab technician historically asked for certain brands Professional purchasing agents are now making decisions VERY price sensitive

Market Trends (cont.)

Cost-containment pressures in health care markets have forced:
Reduction in use of hospitals for blood testing Continued cost shaving within facilities by often choosing lowest-cost supplier Reduction in employment within healthcare industries

BDVS & APG

BDVS is main supplier of blood collection products to APG-member hospitals APG has announced beginning of single-supplier purchasing for blood collection products APG is negotiating with BDVS as well as competitors

BDVS & APG (cont.)

Major issues are:
Pricing and terms for BDVS major products Use of distributors APGs request for BDVS to manufacture private-label products

What is the problem?

What is the best price and distribution strategy for BDVS in a market that is experiencing such dramatic changes?

What are the alternatives?

Target the growing physician market that includes surgicenters, emergency centers, diagnostic centers, and physician's offices Accelerate new product development and quality standards while maintaining the current distribution model Reject APGs private label, pricing and distributor affiliation requirements Partner (or merge) with APG

Target Growing Markets

Pros Untapped market, high growth potential Potential for new product introductions Cons Lower prices/margins, compete on price Currently only 5% of entire market Different type of sales approach

Product Development/Quality
Pros Market/product innovator Maintain good distributor relationships Premium pricing for higher quality
Cons High R&D costs Increased risk associated with new products

Reject APGs Requirements

Cons Pros Loss of significant Maintain brand identity/awareness market share & revenues Maintain good Inflexible image distributor to other relationships purchasing Maintain control groups

Partner with APG

Pros Maintain significant source of market share & revenues Economies of scale through higher volume Flexible image Potential for inclusion of additional products Cons Low price/margins Loss of control Strained distributor relationships Same concessions demanded by other purchasing groups

Becton Dickinson Today

2002 Revenue: $4,033,069,000 2002 Net Income: $479,982,000 Generates close to 50 percent of revenue outside of the U.S. Marketed in the U.S. through distributors and directly to end users Marketed in the internationally through distributors, sales reps and, in some markets, directly to end users

Becton Dickinson Today (cont.)

BD manufactures and sells:
Medical supplies Devices Laboratory equipment Diagnostic products. Healthcare institutions Life science researchers Clinical laboratories Industry General public

BD serves:

Becton Dickinson Today (cont.)

Company is broken down into three main business segments:
BD Biosciences BD Diagnostics (the VACUTAINER line is a part of this segment) BD Medical

VACUTAINER Systems Today

VACUTAINER product line broken into five subcategories:
Venous Collection Capillary Collection Urine Collection Critical Care Collection Molecular Diagnostics

The end.