EMI and the CT Scanner (A) and (B) Case Solution

1. Case A: Should EMI license its invention? What are the pros and cons of such a decision? What do you think of the argument that EMI made that it would be a bad idea to license to X-ray firms because the X-ray firms would be reluctant to cannibalize their own business?

EMI is faced with the decision to license its invention of the CT scanner or not. It can be analyzed that with licensing, the company’s aim to cover the global medical electronics industry would be achieved. The company can reach those markets that it cannot reach with its distribution network. It would reach a greater consumer base. It would also distribute the sales function of the company, and the suppliers will take up most of the sales positions. It would also increase the marketing since the licensees would market the product to hospitals. Furthermore, it is said that the licensees would be X-ray suppliers. This means that they would have contacts with medical staff and hospitals. EMI’s CT scanners would be its first step into the medical machinery market. With licensing, it can achieve the suppliers having greater access to the consumer base that EMI has not developed. It did offer small medical products, but they had not been successful.

The cons of this situation are that the licensees would have licenses of selling X-ray machines as well. Since the CT scanner is a competitor to the X-ray machines, these licensees would not promote the CT scanner that would cannibalize the sales of the X-ray. Other than that, the negative outcomes of this licensing would be the product not being marketed correctly and not reaching to the customers. One other con is that with licensing, the licensees could sell the products to competitors who would try to examine the product and develop it with a different concept. This would threaten the situation of the company, and competition would emerge in the market with a similar functioning product.

However, this argument that the licensees would not promote CT scanners is not valid to a certain extent. If the company offers them greater margins and shows them the demand that the invention will generate, it would make them want to sell CT scanners and promote them to the hospitals in which they have contacts. By marketing, the demand for CT scanners can be created. Although it would threaten the X-ray manufacturing firms, it would create a demand for CT scanners and licensees, and suppliers would demand the product creating a pull factor from the customer end. However, the negative of the situation of other competitors with more expertise trying to develop a similar, but a different product is valid. Such competition can threaten the company’s position, and there would be no use of the company’s first-mover advantage in this case. So, the company should go with the licensing decision that should be backed by marketing to gain the share that the X-ray machines have in this category.

2. Case B: What is EMI's competitive position in 1976?

In the case of B, the situation shown is of 3 years after the company had decided to go ahead with the venture. The market trend was the increasing demand for CT scanners. It had increased to a forecasted demand of 350 annually.