Embrace Part C

A1)
The competitive advantage of Embrace infant warmer was that it was low-cost, good quality, easy
to use, and it served a very specific purpose (as it was designed keeping necessary features in mind
and not luxury ones). Traditional incubators served Tier 1 hospitals mainly in the large cities
whereas Embrace was targeting semi-urban and rural markets. As they were not designing a
complex incubator, their product design was simple and they could outsource manufacturing of
many components to external manufacturers to save costs without sacrificing quality to a large
extent. At first glance it seems that Embrace did not have any competitors, but that's not the case.
The neonatology units at the time bought imported as well as indigenous models. This was a good
sign as having competitors proves that there is demand for a product better than the existing
solutions out there (Graham, 2012) . Embrace had a clear edge over its competitors here as it was
affordable and easy to use and maintain for the rural clinics, doctors and hospitals in India.
The competitive advantage of Embrace would only be sustainable if they are able to secure the IP
(so that competitors do not come up with a similar product) and keep the price point of their infant
warmer low enough so as to create a market of their own (Farrell, 2012). As mentioned in the case,
they realized early on that their warmer was not an incubator and would not be a replacement.
Lullaby by GE was priced at Rs 150,000. The primary customers for Embrace would be Primary
hospitals (hospitals in rural areas and smaller towns) and to a certain extent Secondary hospitals
(Located in areas with populations between 0.5 and 1 million in Tier 1 and Tier 2 cities), which
were not targeted by GE. GE had a large workforce but they were mainly targeting Tertiary
hospitals (metro or Tier 1 cities).
Another possible use for Embrace, which could tie in to its competitive advantage, could be its use
in ambulances to transport a child to nearby hospitals. All current options were prohibitively
expensive.

A 2)
Customers: Parents and doctors in far-flung hospitals located in small towns and villages were
the primary customers for Embrace infant warmer. This is the best way to increase a company's
value. Getting continuous feedback from customers helps to keep the focus on what the customers
really desire, as opposed to what a company thinks their customers want. A good example of this
when Rahul discovered that their customers in the villages did not trust western medication and
equipment, the Embrace team incorporated this feedback and put in a simple OK indicator rather
than a thermometer (Kelley & Kelley, 2013) Such feedback can take a company from being a startup to being a successful business.
Suppliers: Embrace can tie in with suppliers to get low cost parts for its products and also engage
them in improving the overall quality of the product. By partnering up with the right suppliers,
they can synergize and develop solutions to problems which may be difficult to solve alone
(Rigsbee, 2013). However, choosing the right suppliers is key and can make a world of difference.
Once they are partnered up with the right supplier, they can reap many advantages such as getting
a technological edge, increase distribution, better risk management, and greater consistency in
product delivery.

Competitors: Large multinational companies like GE and other Indian manufacturers actually
benefit Embrace because they prove that the market desires the product, is aware of the
shortcomings of the current options and gives the company a yardstick against which they can
compare their own product's features (Parsons, 2013). By comparing it's product against the
options provided by GE and other companies, Embrace can quickly demonstrate that their product
fills in a much needed gap for premature babies born in rural areas.
Complementors: Embrace infant warmer has an advantage as it much cheaper, easier to store and
transport as compared to a bulky and complicated incubator, and far more portable and convenient
to use. These features make it possible to sell Embrace along with other baby products targeted
towards newborns and prematurely born babies- diapers, clothes, bottles, tubes, thermometers etc.
Also, companies like GE can become complementors in away as the Embrace warmer can be sold
with GE's current expensive and complicated incubators. At the same time, doctors running their
own private practice in small cities and towns can also act as complementors and so can small
dispensaries. Local NGOs can be very good complementors as well as they are very well connected
within rural communities and would be able to provide a solid distribution network.

Embrace Part D
A3)
For a product to be viable in the Indian market, it needed to master 2 essential aspects - low
manufacturing cost and sales & distribution.
Manufacturing is an easier problem to solve due to the design of Embrace infant warmer. It was
composed of 3 individual parts which could be either outsourced or manufactured in-house. But
they did not have a patent on the infant warmer as of now. The initial discussions within the
Embrace team made them realize the basic problem with outsourcing the entire process to a single
manufacturer - another competitor could easily copy the design and come up with a product of
their own. But due to the modular design, they could possibly target different manufacturers and
get some, if not all, manufacturing outsourced. This way they could save on some costs and still
be able to prevent someone from copying their product.
The difficult problem to solve was sales and marketing. As their target customers were located in
sometimes inaccessible areas and were spread widely across the country, it would be absolutely
crucial to leverage existing resources of a larger firm like GE or even outsource the entire sales
process. As their target customers were secondary and tertiary hospitals, they would need a sales
team to be able to reach those customers. Another viable option is partnering up with local and
national NGOs and deliver the products through them - this would be a mutually beneficial
proposition.
Also, in urban areas neonatal deaths were 28.5 per 1000 for 360 hospitals per 100,000 (Exhibit 1
in Embrace (B)). Thus, even though Embrace was initially only targeted towards "poorer"
customers, once they had the IP and some credibility in the form of clinical trials or FDA
compliance, they can also approach tertiary hospitals because of the wide applicability of the
product.
Hence, Embrace's business model was definitely scalable depending on how they tackled the above
problems.

A4)
Embrace should not completely outsource the product as they do not have the IP as of now. For a
product like Embrace infant warmer, which is easy to engineer and in a market where there were
seasoned players like GE, outsourcing the complete manufacturing would be akin to shooting
oneself in the foot. An option for them would be to outsource certain parts of the infant warmer
and possibly assemble it in-house. The logical reaction to this would to be completely internalize
the process and not outsource anything. However, for a firm that is in the inception phase, it is
difficult to raise that much capital to make the product in-house. If they run out capital, they will
be out of business before they even get a chance to establish themselves.

A5)
GE was well-established in the Indian market - it had a huge sales team, lot of credibility, and
expertise on how to market products. It was an established firm with a lot of resources - human
and capital. It could be huge for Embrace if they could have a partner like GE on board. Also, it is
important to realize that Embrace's infant warmer was their first product out there. In the near
future when they would be successful, they would have to basically "forget" everything that they
did in the first place and literally start over. This is natural in the evolution of a start-up (Wald,
2014). Producing a few hundred units is vastly different from producing a few hundred thousand.
Similarly, targeting one customer segment or one region is vastly different from targeting multiple.
A partner like GE could provide them with the right exposure and know-how to help them evolve
successfully to the next phase.
It might be possible for Embrace to convince GE because of the social welfare aspect of Embrace's
infant warmer. GE can benefit by this relationship by demonstrating their Corporate Social
Responsibility if they partner up with a company like Embrace.

References
Farrell, M. (2012). The Law of the Ladder - How customers make purchasing decisions. Retrieved from
Evan Carmichael: http://www.evancarmichael.com/Home-Based-Business/5233/The-Law-of-theLadder--How-Customers-Make-Purchasing-Decisions.html
Graham, P. (2012, November). How to get Startup ideas. Retrieved from Paul Graham:
http://paulgraham.com/startupideas.html
Kelley, T., & Kelley, D. (2013, November). A Solution for Poor Mothers, When Expensive Hospital
Incubators
Won't
Do.
Retrieved
from
Slate's
Design
Blog:
http://www.slate.com/blogs/the_eye/2013/11/04/embrace_infant_warmer_creative_confidence_b
y_tom_and_david_kelley.html
Parsons, N. (2013). Why Competition is a Good Thing.
http://articles.bplans.com/why-competition-is-a-good-thing/

Retrieved

from

BPlans:

Rigsbee, E. (2013). Supplier PartneringKeep Your Profits Up & Costs Down. Retrieved from Strategic
Alliance Relationship Association: http://www.rigsbee.com/ma29.htm
Wald, J. (2014). Startup Phases And The Turning Of The Team. Retrieved from Forbes:
http://www.forbes.com/sites/waldleventhal/2014/07/22/startup-phases-and-the-turning-of-theteam/