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Despite being a young industry, the wheelchair business showed a large amount of growth in a ten year
span in terms of sales. By 1992, worldwide sales were approximately US 800 million, with half of these
numbers coming from sales in the US while the rest were concentrated in Europe. These numbers were
an indicator of the potential the industry had and this was confirmed by projected sales growth, which
ranged between 5% to 15% annual increases for different product lines. There was excitement as an
important US insurance program announced it would reimburse more money for wheelchairs of higher
price, fact that could boost sales in the near future. Although sales potential was attractive, profitability
margins were still low because costs ranged between 65% and 75% and additional operating expenses
ranged from 23% to 34% of sales (exhibit 1).
The market was dominated by three major players, who combined accounted for an average of 70% of
the market share. As sales potential rose, two of the three competitors (Sunrise Medical and Invacare)
kept delivering positive net margins through product innovation, competitive sales strategies,
acquisitions and efficiencies in lowering costs. The remaining main competitor, Everest and Jennings,
was lagging behind with four straight years of negative margins and ongoing concerns about its viability
in the medium term. This meant that, if Sunrise Medical and Invacare continued to improve the
strategies that had E&J struggling for its future, they could continue gaining market share and growing
in the wheelchair business.
The short term looked like a two player game, although neither of the two seemed to set itself apart from
the other with a dominant advantage. Given that both had turned into leading players in the industry in a
short period of time, it was not unlikely for other competitors to enter the game. If a new company decided to enter the industry, it could copy Invacare´s model of building a manufacturing plant where
costs were low ± although this meant investing several million dollars ± or it could become an assembler
through a low initial investment and, albeit higher costs, compete with an efficient sales and marketing
strategy and gain market share progressively.
Although the barriers of entry in the wheelchair industry were not too high in 1993, the product itself
had no relevant substitutes in the market. Both leading companies also produced other mobility products
and medical equipment such as crutches and walkers that could be used as substitutes, but did not have
the sales potential or the usefulness wheelchairs did. They were also involved in the making and sales of
wheelchair parts, and in the latter years they were becoming more standardized to fit wheelchairs made
by competitors, leading to a more homogeneous industry thus making it harder for substitute products to
Companies that manufactured their own products, like Sunrise Medical and Invacare, had a competitive
market advantage because efficiencies in their production processes could lead to lower prices and
higher sales volume. Since raw materials accounted for up to 80% of production costs and there were
many suppliers in the market, the bargaining purchase power was in their hands. Even for assemblers
that did not have their own manufacturing plants, there were several companies that would sell them
On the buyers¶ side, there were three main distribution channels that had more negotiation power than
suppliers; two of the three channels had a few buyers that concentrated most of the purchasing on each
channel, situation that had led to deep discounts and reductions on retail prices during the last years.
Home medical equipment dealers had achieved price decreases of 15% followed by medical distributors with a 5% decrease and rehab suppliers with 2%. This meant that manufacturers must maintain and
develop a competitive cost structure to keep up with volume sales and growth.
Increasing sales potential, coupled with few competitors, negotiation power with suppliers and no
apparent substitutes, made the industry attractive for existing players. As buyers had gained great power
and prices were forced to drop, cost efficiency became more relevant; this made it harder for new
competitors to enter the game, albeit not impossible. The key was to continue developing sales with the
distribution channels hoping to slow down falling prices, and take advantage of the bargaining power
with suppliers to get raw materials and prefabricated parts to be cheaper, getting net margins to rise.
Innovation also played a key role in the industry and it had helped both Sunrise and Invacare develop
new models to stay competitive and increase sales.
Quickie¶s wheelchairs competed in the most innovative segments of the industry: it dominated the
Ultralight segment with a 49% market share, it had a competitive market share of 24% in the Power and
Pediatric segment and it was developing its brand in the Lightweight Standard which was dominated by
Invacare (Quickie held a 12% market share vs. Invacare¶s 57%). Altogether, these three segments
accounted for 67% of US market sales and had the greatest potential for forecasted growth in sales
(exhibit 2). Quickie was historically an innovating company and this had had a positive effect on sales
and a differentiation effect from Invacare during the latter years; Quickie invented the Lightweight
Standard category, although it lagged in market share, as well as the Ultralight category, in which it was
the leader. Its designs in the Power and Pediatric category were considered to be a growing, original
trend. Proof of its innovative ways was Quickie¶s introduction of a new power model featuring new
functionalities, and although its market release was temporarily stalled by the FDA, if approved it would
sell at a great price and generate additional revenue. Quickie also developed a strong relationship with
the rehab suppliers¶ distribution channel, which did not offer discounts from retail prices; this stood out
as another advantage as the other two channels were the ones that pushed for the strongest price drops.
On top of this, Quickie had the lowest costs structure among all competitors, which made Sunrise the
company with the highest gross margin in the market.
These market advantages were mostly due to Quickie¶s business strategy: first it was all about high
quality, customizable products that enhanced efficient costs structures and improved cash flows through
the elimination of finished products inventory. It also developed great relationships with its customers
and consumers, cultivating a great service policy that resulted in high levels of customer satisfaction.
Innovation was fostered through its ³pursuit of excellence program, involving every area of the
company thus creating a highly collaborative scenario. Employees were also important, helping keep up
their morale along with competitive salaries and excellent incentives; this resulted in enhanced
productivity and eventually a virtuous circle that would lead back to the factors stated above.
Invacare has focused mainly on improving production techniques to achieve maximum cost reduction.
In 1983 it made an attempt to acquire Quickie but the negotiations never prospered because, according
to Quickie¶s founders, the value-system developed at Sunrise was more appealing and aligned with their
business model; Invacare was a big manufacturer while Quickie showed a different approach to business
beyond mass production. The company¶s CEO was a retired military who, during the early eighties,
executed a well thought out plan to bring down its competition through heavy volume discounts and
other customer benefits. It engaged in a price war with E&J until it opened up a production facility in 1989 in Mexico; since then, E&J has not been able to keep up with its competitors low costs, however
Invacare is still to outperform Quickie¶s low productions costs.
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Albeit still dominant in the Lightweight Standard segment, Sunrise¶s corporate strategy looked more
solid than Invacare¶s in 1993. The segments with the most promising growth perspectives in the
wheelchair industry were Lightweight Standard, Ultralight and Power and Pediatric, and Invacare was
strong in only one of them. If Sunrise¶s Guardian division enters the Lightweight Standard wheelchair
market, it is more likely to steal from Invacare¶s 57% market share than from Sunrise¶s 13%; this would
help Sunrise gain more market in two of the ³high growth categories, with a good chance of continuing
to gain share in the Power category if the new model is to be approved by the FDA.
It is also important to keep in mind that Quickie¶s customer and marketing strategy revolved around
younger people, while Guardian¶s focused on the elderly. This could explain Quickie¶s low market share
in the Lightweight Standard category whose main users were typically the senior, and it would also
reinforce Guardian¶s argument to enter this market segment. One downside to Guardian¶s entry into the
Lightweight Standard category is its youth in the wheelchair industry as well as it high cost structure
(72% compared to Quickie¶s 62% of sales, view exhibit 1). It subcontracted fabrication to a Taiwanese
company, experiencing a series of quality and delivery issues as well as higher costs.
Despite these factors, Guardian and Quickie belonged to the same company, Sunrise. If they produce the
same product and one of them has a cost control advantage and knows the market better, sharing best
practices and implementing them at Guardian is a realizable alternative. Both shared the same principles
that had led to Quickie¶s success in terms of quality, customer service and employee satisfaction, which
would drive both to start taking over Invacare¶s market share in the Lightweight Standard line, take full advantage of Medicare´s new policy of reimbursement for these models as well as other factors resulting
in forecasted 15% annual growth rates in sales. Guardian could maintain its focus on the elderly market
while Quickie could continue delivering high quality products to its younger audience.
Invacare¶s response to new product introduction by competition has historically been of engaging in
price decreases through heavy discounts, introducing a new product themselves or acquiring a firm to
generate growth. Since most product lines were already developed and Invacare was not much of an
innovator, it was likely to put more price pressures on the market to counteract heavy competition from
Sunrise. Whatever the case, Sunrise¶s strategy of divisional autonomy could be kept since it had proved
effective until 1993, however operational and financial synergies between both divisions should be
developed if they were about to compete with each other.
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