...9-108-091 REV: JANUARY 14, 2009 ATH MicroTechnologies: Making the Numbers Instructions: This case describes the evolution of an innovative, entrepreneurial firm in the medical technology industry. The successes—and difficulties—of the business are due in large part to management’s attempts to design and use formal control systems to achieve profit and performance goals. The case is structured in five chronological sections: (1) founding of the company, (2) growth phase, (3) push to profitability, (4) refocus on process, and (5) takeover by new management. At the end of each section, you will be asked a series of questions about how managers should use control systems to overcome the problems that they encounter. Write your brief answer in the space provided before proceeding to the next section. In this way, you can evaluate your understanding of the applicable techniques to balance profit, growth, and control. I. Founding In 1997, Dr. Charles Casper and John Frost founded ATH MicroTechnologies, Inc. to develop, manufacture, and sell a new medical imaging product. Dr. Casper (47), a radiologist, had trained at Johns Hopkins medical school and, after a research fellowship at Harvard Medical School, joined a private practice in Florida. Casper specialized in the use of imaging systems for the medical practice. Over time, he had experimented with different procedures, such as ultrasounds and x-ray, until he became interested in a new technology based on sending electronic...
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...earn-out structure focus on the right performance goals? Basically yes, but it should also focus another measure. From this deal, ATH will get around $21 million ($120MM * $4.7MM / ($4.7MM+$11.3MM+$10.5MM)) which would be enough to continue its business at the 2010 profitability level before it makes profits in 2013. Besides, Scepter will support and incentivize ATH financially with the FDA approval ($35 million) and technology superiority ($45 million), which are essential to achieve sales and earnings goals from 2013. In addition to these, Scepter set the appropriate incentives to retain key people, including Casper and John. Scepter’s focus on profitability, processes, and key people would be right. On the other hand, the core of ATH would be its new technology and research and development(R&D) is essential to grow its business. If Scepter focuses only on earnings, ATH may reduce R&D payments. Therefore, Scepter should also focus on R&D Expense to Revenue ratio to drive ATH’s R&D....
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...Case: ATH Micro Technologies Ryan Stroud Strategic Cost Analysis – 45809 Mini 4, 2011 Professor Glover What is the Problem? The ATH Microtechnologies case highlights the problems that the company has faced in five chronological stages: founding, growth, push to profitability, refocus on process, and takeover by new management. In each stage ATH faced a different problem or series of problems with respect to performance goals, controls, measurement, and strategy. In the founding stage, the company focused on sales and earnings as performance goals and did not have adequate controls on spending which grew out of hand. In the growth stage, ATH focused on increasing market share to the detriment of profitability. In the push to profitability stage, the company focused on earnings but at the expense of poor customer satisfaction and low quality products. They also received a “Warning Letter” from the FDA during this stage. In the refocus on process stage, the company strove to address the FDA’s and customer concerns, however, employees were incentivized to avoid problems instead of creating solutions and improving products. In the new management stage, the focus was on product development and technological leadership. This challenge in this stage will be for the company to achieve these goals in lieu of profits, revenues, growth, and quality. As this case illustrates, a company’s life cycle presents new complexity and performance measures and goals at each stage...
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