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Augustine Medical

In: Business and Management

Submitted By olgavlad
Words 1297
Pages 6
The issue at this time is the determination of the list price to hospitals for the heater/blower unit and the plastic blanket. The price set for the Bair Hugger Patient Warming System would influence the rate at which prospective buyers would purchase the system since the market was price-sensitive to alternative methods. Also, price and volume together would influence the cash flow position of the company. Before the company prices this system, several considerations are required in terms of organizational objectives, demand for the product, customer value perception and buyer price sensitivity, the price of competitive offering, and direct variable costs. The estimate of total potential market for heater/blower unit is 2737 units and 2737000 units for blankets. The direct cost of the heater/blower unit would be $380 and $0.85 per blanket. The initial investment, $500,000, for this system would cover the fixed cost of the company during first year of operation. Based on this information and other considerations, I will discuss the company’s pricing strategy for both products.
Company Background
Dr. Scott Augustine, an anesthesiologist , founded Augustine Medical, Inc. in Minnesota in July 1987. In early 1988, Augustine developed the Bair Hugger Patient Warming System to warm post- surgical patients. The targeted market for this system is the hospital operating rooms and postoperative recovery rooms. The system is designed to treat hypothermia which is a condition found in 60-80 percent of all postop patients where the body temperature is below 36 degrees Centigrade or 96 degrees Fahrenheit which is the result of the patient’s exposure to cold operating room temperatures, heat loss due to evaporation of fluids used to scrub patients, evaporation from the exposed bowel and breathing of dry anesthetic gases.

Competition, Hospital market and Industry

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