Sunrise Medical

SUNRISE MEDICAL INC.’S WHEELCHAIR PRODUCTS

A GLANCE AT THE WHEELCHAIR INDUSTRY IN 1993

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...