Dexcom Corporation is a healthcare company that distributes generic, branded, and specialty pharmaceuticals in the United States. The firm’s main goal is to offer quality health care and enhance the quality of care through the products provided in the market. This paper will identify business-level and corporate-level strategies and evaluate their effectiveness in the company. It will also analyze the competitive environment and evaluate whether it fits in a fast or slow cycle market.
Business-level strategies
Business-level strategies refer to an organization’s specific actions to provide its customers with value and gain a competitive advantage by exploiting its core competencies. It is concerned with the firm’s position in the industry relative to the forces of competition and its contenders (Hitt, 1, 108). The three business-level strategies that Dexcom has applied to its advantage include cost leadership, segmentation, and differentiation. Organizations are often faced with stiff competition that necessitates the need for market research to obtain essential souk requirements.
Market segmentation enables a firm to yield products tailored to meet the customers’ needs, which gives it a better chance to utilize the most effective method of executing the market promotion (Hitt, 1, 117). Dexcom serves every market niche using a separate distribution channel to promote competence and ensure that the needs of its customers are met. The company uses a cost leadership strategy as a competitive tool to provide quality products at an affordable price. Dexcom can do this because it acquires cheap raw materials from its suppliers by merging and absorbing them. Product differentiation is a strategy that Dexcom uses to distinguish its products, particularly in the less sensitive segments.
Amongst these business-level strategies, product differentiation is the most important in the long-term success of the Dexcom Company. Dexcom has implemented product differentiation as an essential strategy that has helped it to benefit from a competitive advantage. The company has taken advantage of its market, characterized by exceptional and distinct customer needs that are easily satisfied if it directly produces goods that respond to diversity. Differentiation is an essential tool for business success because it is an intellectual property protected by patents (Hitt, 1, 122). However, competitors tend to establish related products, whereby consumers are convinced to purchase counterfeit products at the same price. Dexcom Inc has benefited from product differentiation because it is an extremely expensive venture involving high costs and time, discouraging other firms from doing it.
The company has maximized its ability to innovate new products and services, attracting new customers and providing long-standing clients with a good reason to purchase its items. That has been made possible by its ability to build economies of scale, hence decreasing the cost per unit. Therefore, the company can manufacture high-quality, varied products, thus differentiating itself from its competitors. Product differentiation has been facilitated by the company’s ability to build its capacity and spend money on research, enabling the firm to define its standards continuously. Differentiation strategy might benefit Dexcom in the future because the company is likely to change product designs, features, and names, making them stand out in the market. It will benefit from its core competencies, including developing products using variety and quality features, brand names, and differentiated packaging.
Corporate-level Strategies
Corporate-level strategies refer to business decisions that affect the functioning of the entire company in terms of finances, human resources, management, and the markets where products are sold. These strategies often define a plane that hits a particular target required to achieve a specific purpose (Hitt, 1, 172). Dexcom has implemented various corporate-level strategies to increase its organizational goals and objectives. It has adopted strategies such as growth, diversification, and stability. Growth strategies often entail identifying methods to acquire increased revenue from the sale of the company’s goods and services.
Diversification strategy involves developing a plan for successfully marketing the company’s products and services. Dexcom has adopted the strategy through a single corporate diversification approach and dominant business modification to become a leader in the niche. Stability strategy is applied in Dexcom to help the company attain its optimum market share. Instead of scaling up, the company has chosen to introduce stability by making cost-efficient processes through cutting costs, automation, and negotiating better deals on some of its distribution margins and raw materials.
A business growth strategy has been adopted successfully, and it is likely to be the most beneficial in the future. Dexcom Inc has been focusing on developing new solutions that enhance the delivery of patient care while driving incremental growth of profit (Cappuchino Finance, 3). This strategy entails multiple growth pillars and considers a comprehensive review of the company’s cost structure and operations, designed to enhance efficiency, execution, and the company’s performance in the long term. The business growth strategy in Dexcom has been used in the expansion of the supply chain and commercialization of services for both pharmaceutical and manufacturers of medical supplies (Hitt, 1, 175). This also includes the provision of enhanced solutions for the growing pharmaceutical market and the establishment of new offers that strengthen and expand the role played by a retailer in delivering patient care. Dexcom can achieve long-term growth by investing in those areas and simultaneously accelerating its growth trajectory.
The growth strategy will be most successful in the future for Dexcom. Its growth initiatives can be funded by savings made from optimizing its cost and model structure. The growth will occur in multiple phases and will encompass essential functional areas in the organization, including finance, technology, and human resources. Dexcom has invested in innovation in response to changing patient and customer needs in the recent past. The growth initiative will continue to build on the company’s previous successes while focusing on new areas with the most substantial impact on the patients. Embracing improved ways of working and becoming more agile and efficient will help the company support innovation while creating value for its shareholders, customers, and patients (Cappuchino Finance, 3). This indicates that although stability and diversification strategy have a significant impact on the company’s growth and success in the future, the business growth approach has the greatest potential.
Competitive Environment
Dexcom faces stiff competition from multinationals in the established industry, such as AmerisourceBergen Corp, GlaxoSmithscline Inc, Owens & Minor Inc New, and Cardinal Health Inc. The state of competition has been increased by companies’ financial status and the ability to conduct in-depth market research to advance their practice. Competitors are an essential stakeholder group in the organization as they determine the level of rivalry and extent of new entrants entering the industry. Dexcom’s competitors, Amerisourcebergen Corporation, represent 30% of the market share, and Cardinal Health represents 22% of the total share in the American market (CSIMarket, 2). Dexcom faces significant competition from specialty wholesalers spread in various parts of the country. Dexcom, though remains the largest distributor of pharmaceutical products in the United States despite the competition.
CSI market reports of 2019 show that Dexcom had a net margin of 5.15%, lower than its competitors. Its competitors, such as Carefusion Corp, reported a net margin of 10.52%, Helen of Troy Ltd a 10.81%, while Johnson& Johnson reported the highest margin of 27.27% (CSIMarket, 2). Dexcom is ahead of its competitors in terms of revenue and profit margin due to the technological solutions that allow it to reduce the variability and costs of its health care products and services. Its team has consistently built stable and reliable relationships with its customers by providing innovative supply chain products and services.
The ability of Dexcom to adapt to the recently advanced manner of production and to diversify its growth has helped the company to remain ahead of its competitors. Unlike Dexcom, where the management is executed, Cardinal Health has experienced significant problems with the performance of its administration. This harms the rate of tax change, and the ability to resolve issues is slowed, hence affecting the execution of its services.
Market Cycles
The main competitors in the market depend on the cycle and market conditions for success. The pharmaceutical market will continually have competition so long as there are competitors. Therefore, the decision to own and run a business in the industry should be well thought out. However, the factors that determine if a specific business will be successful or not are whether it is a slow-cycle or fast-cycle market. A slow-cycle market is one where the competitive advantages of the firms are protected from imitation for a long time, especially where it is costly (Hitt, 1, 159). The company’s competitive advantages are sustainable for a long period in this kind of market. Competitors are different in a slow cycle market than in a fast cycle market.
The choices presented will differ in both fast and slow-cycle markets in different ways. In a slow-cycle market, it will make changes for the long term, and the souk does not introduce innovative products in a short time. With the fast-cycle markets, products change continuously, and innovative products are introduced within a short time (Hitt, 1, 169). The fast-cycle type of market is rapid, and the company is not likely to depend on outstanding resources. The demands of clients are continually changing, and an organization that wants to thrive must lay extra effort in identifying new trends and gaps to incorporate its products and services.
The choice of growth strategy in the question above will change in the fast-cycle market. With plans to introduce new products within the long term, there are also high chances of establishing innovative products in the short term. Besides, a company faces high competition from its opponents, which will necessitate the introduction of new innovative and high-quality products to differentiate it and identify new gaps and trends. Therefore, the market cycle is perfect for the pharmaceutical environment because it will encourage competition and is cheap to run, hence acting as an advantage to Dexcom Inc. The company will also discourage monopoly since customers will benefit from improved quality and cost of products.
Sources
- Michael A. Hitt. 2020. p. 108-203. Strategic Management: Concepts and Cases: Competitiveness and Globalization 13th ed. Cengage Learning.
- CSIMarket. 2019. Dexcom Efficiency versus its Competition. Stocks. Web.
- Cappuchino Finance. 2018. DexCom: Fast-Growing Medical Device Company For Diabetes Care. Web.