Cochlear Limited's Performance Analysis

Executive Summary

The aim of this report is to outline Cochlear Limited's performance. This is proved by an organisational analysis of the entire organisation's objectives, strategy, and structure. Market leader, market growth and earnings growth are recognised in this report as Cochlear's three main performance elements.

Organisational Overview & Analysis

Cochlear Limited was founded by Dr Graeme Clark in 1981 (Cochlear 2019a). Cochlear is the world leader in implantable hearing alternatives with cochlear implants, bone conduction implants and acoustic implants (Cochlear 2018). Cochlear ranks 335 out of 2,000 companies in Australia and produced total revenues of $1,374,500,000 in 2018, including sales and other revenues (IBIS 2018).

Objectives

Cochlear has the following mission statements (Cochlear 2019b):

1. We help people hear and be heard.
2. We empower people to connect with others and live a full life.
3. We help transform the way people understand and treat hearing loss.
4. We innovate and bring to market a range of implantable hearing solutions that deliver a lifetime of hearing outcomes.

Corporate Strategy & Structure

Corporate strategy relates to the organisation’s framework to attain these objectives (Riley 2018). Cochlear sells in over 100 countries, with the worldwide headquarters in Sydney and regional headquarters in Asia Pacific, Europe and the Americas (Cochlear 2018).

Figure 1. Cochlear Operational Structure (Cochlear 2018, p. 37-39)

Competitive Strategy

Competitive strategy is also known as the business strategy and its approach of the organisation to compete effectively in the selected market (Riley 2018). Cochlear remains competitive by continuingly investing in R&D to launch new and improved products and thus empowering and transforming people’s understanding of treating hearing loss. (Cochlear 2018).

Operational Strategy

The organisational strategies of Cochlear are centred on the client with operations directed at increasing awareness and access for implant applicants to the sector. Cochlear seeks to accomplish this by innovating products that assist transform people's knowledge and treat hearing loss and empower them to connect and live a full life. (Cochlear 2018).

Performance

Performance relates to the assessment of efforts and achievement in attaining business goals and objectives (Karakas & Sebahattin 2012). It was asserted that because of its ambiguity, organisational efficiency could not be defined (Otley 1999). The Performance Management System (PMS) was, therefore introduced to analyse the performance of the implementation of the strategy (Ferreira & Otley 2009). Through organisational analysis of Cochlear, we can derive the performance aspects of market leader, market growth and earnings growth. / Figure 2. Cochlear strategic priorities (Cochlear 2018, p. 11)

Market Leader

Market leadership refers to a firm’s ability to lead the launch of a new generation of a product (Li & Jin 2009). The performance aspects of market leadership are derived from the objectives of innovation and empowerment. To achieve Cochlear’s objective of innovation and to bring in a range of hearing solutions, they invest heavily in R&D to strengthen their position through the development of market-leading technology. And aim to empower them to connect with others and live a full life (Cochlear 2018). Cochlear has a global innovation network with over 100 research partners in over 20 countries with over 350 R&D employees. Since 1996 Cochlear has invested over $1.7 billion in R&D and currently invests more than 12% of sales revenue on R&D. Through innovation, Cochlear has created a portfolio ranging from Cochlear implants to Acoustic implants. Moreover, Cochlear can retain market leadership by providing world-class customer experience which can empower people to connect with others. It is imperative for Cochlear to continually innovate products and provide excellent customer experience to eliminate any threats from competitors, which will help them to retain market leadership. Thus, the level of innovation and empowerment is a significant performance aspect for Cochlear as this will maintain their market leadership.

Market Growth

Cochlear can increase their market growth by building awareness and providing access to cochlear implants. This section will focus on how market growth is closely related to its objective of transformation. Generating sales is an integral part of any company to grow in the market. As mentioned in the objectives, Cochlear has to transform the way people understand and treat hearing loss to gain more sales. According to Cochlear’s annual report, the global market penetration is less than 5% for cochlear and acoustics implants (Cochlear 2018). Cochlear has identified three segments in which they have prioritised with strategies to improve awareness and access tailored by segment. Figure 3. Segments (Cochlear 2018, p. 15) It is clear that Cochlear needs to spread awareness of its products to the ‘Adult and seniors’ market’. By this they will be able to transform the people lives more effectively. Hence, market growth is an essential performance measure for Cochlear as they can meet the objective of transforming people’s life.

Earnings Growth

Cochlear is committed to increasing shareholders return by continually investing in R&D to innovate new products and help transform the way people treat hearing loss. According to the strategic management paradigm, the successful organisation tries to satisfy not solely stockholders; however, additionally, customers, employees, and suppliers (Peters & Waterman 1982). Cochlear has three business units in which they can focus to increase sales to derive performance. The three business units are Cochlear implants, services, and acoustics. As mentioned, market growth section, Cochlear believes that the senior and adult segment has the most significant market potential. Cochlear can increase earnings in this segment by building awareness of the benefits of implants and how they can transform one’s life. By spreading awareness, Cochlear can increase their earning while also retaining its market leadership. Moreover, research has also shown that earnings growth is the crucial indicator of success for organisational performance (Fairlie & Robb 2009). Therefore, earnings growth is an integral aspect of performance for Cochlear.

References

• Cochlear Ltd 2018, Annual report 2017-2018, < https://www.cochlear.com/43d56bcc-d510-4a20-ab70-6208fa5af77e/en_annualreport2018_cochlear2018annualreport_5.69mb.pdf?MOD=AJPERES&CONVERT_TO=url&CACHEID=ROOTWORKSPACE-43d56bcc-d510-4a20-ab70-6208fa5af77e-mkRS5RK>.
• Cochlear Ltd 2019a, About Graeme Clark, viewed 6 August 2019, <https://www.cochlear.com/intl/about/company-information/history-of-innovation/about-graeme-clark>.
• Cochlear Ltd 2019b, About us, viewed 6 August 2019, <https://www.cochlear.com/au/en/about-us>.
• Fairlie, Robb, 2009, ‘Gender differences in business performance: Evidence from the characteristics of business owners survey’, Small Business Economics, vol. 33, no. 4, pp. 375-395
• Ferreira, A. & Otley, D. 2009, ‘The design and use of performance management systems: An extended framework for analysis’, Management Accounting Research, vol. 20, no. 4, pp. 263-282.
• IBISWorld 2018, Cochlear Limited - Premium Company Report Australia, June 2018, viewed 06 August 2019, <https://www.ibisworld.com.au/australian-company-research-reports/manufacturing/cochlear-limited-company.html>.
• Karakas, A. & Sebahattin, Y. 2012, ‘Defining methods and criteria for measuring business performance’, Procedia social and behavioural sciences, vol. 58, pp. 1091-1102, Viewed 07 August 2019.
• Otley, D. 1999, ‘Performance management: a framework for management control systems research’, Management Accounting Research, vol. 10, no. 4, pp. 363-382.
• Peters, J.W. and Waterman, R.H. (1982), In Search of Excellence: Lessons from America’s Best-run Companies, Harper & Row, New York, NY.
• Riley, J. 2018, ‘What is Strategy?’, tutor2u, Viewed 07 August 2019, <https://www.tutor2u.net/business/reference/what-is-strategy>.
• Ying Li & Yanhong H. Jin. 2009, ‘Racing to market leadership: Product launch and upgrade decisions’, International Journal of Production Economics, Volume 119, Issue 2, June 2009, Pages 284-297.