Optos Environment and impact of current economic climate

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Optos takes environmental scanning seriously and regularly carries out the task as part of strategic decision making. The scanning is performed by the board of director's who gain input from other sectors of the business.

The environmental analysis, carried out as part of this report, shows that Optos will could be adversely effected by the current economic climate, however due to a unique product offering, continued revenue streams through a PPP (price per patient) model and cost containment measures, that Optos has put strategies in place to ride the storm.

Changes in US healthcare laws and new healthcare initiatives, means that 31m Americans now have access to healthcare, and this is a huge untapped market for Optos. Many people now understand the importance of eye care as part of a healthy lifestyle and understand that early detection of eye diseases is the most effected way of mitigating eye issues.

The aging US population, and as yet untapped geographies, gives Optos the ability to expand its customer base considerably in the near future.

The eye care sector as a whole, remains attractive due to high barriers to entry and moderate buyer power (people will always require health care). Threats from rivals are moderate at this time.

Optos has gained a competitive advantage by offering a unique selling point, namely the 200 degree wide field eye exam that no competitors can match.


The purpose of this report is to introduce the reader to Optos with a view to using Optos as a case study for environmental scanning.

The report describes the aims, size and structure of Optos PLC and describes how Optos measures success or failure of the business.

As part of the report, an environmental scan was carried out to describe how Optos is affected by the environment in which it operates. This environmental scan used PESTEL analysis, Porters 5 forces and a SWOT analysis to help the reader understand how Optos is affected by its environment.

Introduction to Optos

About Optos

Optos plc is an innovative retinal imaging company with a vision to be recognised as the leading provider of retinal diagnostics.

Optos designs, develops, manufactures and markets retinal imaging devices that create optomap® images. The optomap® is the only image that provides an ultra-widefield, 82% view of the retina. 

A simple optomap® scan is an important tool for the screening, early detection and diagnosis of eye problems, such as retinal detachment, glaucoma, cataracts, retinal holes/retinal tears and age-related macular degeneration. It can also indicate evidence of non-eye diseases, such as diabetes, hypertension and certain cancers. Many of these conditions can be seen in the periphery of the retina as well as in the central pole which is why widefield imaging is so important.

Optos operates within the health care equipment & services sector.

Structure and Size

As of October 2010 Optos employs approximately 270 people in 3 locations worldwide, UK (Dunfermline), US (Boston) and Germany.

A high level outline of the company structure is detailed in Appendix C.

Key Performance Indicators

Optos use a number of KPIs to measure the success or failure of the organisation's strategies during an operating period, typically 6 months.

A 6 month period of one year is compared against the same 6 month period from the previous year. These comparison indicators illustrate the success or otherwise for the period.

Table 1.0 KPIs Optos plc. October - March 2010/October - March 2009

Table 1.0 (Source Optos 2010) shows a number of KPIs used by Optos to measure success or failure, and shows the comparison between the first 6 months of 2010 compared against the first 6 months of 2009.

Table 1.0 shows that Optos continues to perform successfully, within a challenging market. Optos can be judged a success over the period shown as the KPIs identify:

The number of installed optomap® systems increased by 25.

The renewal rate, for optomap® increased to 84% from 83%

The number of optomap® examinations per site increased to 109 from 102. This resulted in the number of eye examinations increasing to 2.4m from 23m, which had the knock on effect of increasing revenue generated per install site to $2099 from $2032.

Profit per share increased to 2.5c from a loss of 0.7c.

Operating profit increased to $4.3m from a loss $1.8m.

Financial Indicators

Like all organisations Optos plc use financial information to define the success or failure of the strategies over a given period.

Financial Six months Six months Year

Table 2.0 Optos Financial Overview March 2010

Table 2.0 details a financial summary, created by Optos plc for the period October to March 2010. The results show profit and revenue are up and operating costs and debt have reduced. Optos can be judged a success as the business is moving in the right direction and is growing after a period of loss ($4.4m) for same period in 2009. Like most companies during 2009, the economic downturn has affected Optos.

Why Choose Optos?

The author has decided to use Optos plc for this study for a number of reasons:

The author is currently employed at Optos plc and therefore has ready access to the relevant information and personnel.

Optos required to provide a wealth of information, such as accounts and interim reports that the author can use as part of the research.

The reports outcome may be of benefit to Optos as the author's employer and project sponsor.

Environmental Scan

Fahey and Naravanan (1986) suggest that an effective scanning program should enable decision makers to understand current and potential changes taking place in there institutions external environment.

Optos recognise that scanning is a useful research tool that helps the board make strategic decisions, which is why Optos put a lot of time and energy into the scanning process.

Environmental scanning within Optos is not outsourced and is performed by the executive (see Appendix C) as part of 6 monthly reviews.

"In the United States, approximately 3,000,000 people aged 40 years or older are visually impaired and 900,000 are legally blind. More than 40% of blindness could be prevented or cured by provision of appropriate treatment in a timely fashion. Unfortunately, about half of potentially blinding eye disease remains undetected. Even among people who have regular access to the health care system, the prevalence of undetected eye disease is high. In the Baltimore Eye Survey, more than 85% of previously undetected glaucoma cases had been examined by a physician within the past 12 months" (Wang, F., Tielsch et al 1998)

The above evidence indicates the potential untapped market for the optomap® and with the changes in the US health care laws, resulting in a health care reform bill that aims to cover 31m uninsured Americans and could lead to the biggest change in US healthcare in decades, BBC News (2009), the potential becomes even greater.

The potential of the optomap® can be summarised by these key facts [1] :

70M+ people in US greater than 55 years old.

20M+ Americans have diabetes.

AMD is the leading cause of blindness in Americans over 55 years old.

75M+ people blind worldwide by 2020 without preventative steps.

$268B+ productivity lost annually, associated with adult vision problems.

A study carried out by the American Optometric Association (AOA) in 2008 showed percentages of respondents who did not know that a comprehensive eye exam can detect:

Diabetes (62%)

Hypertension (71%)

Brain Tumours (75%)

Cancers (78%)

Cardiovascular Diseases (80%)

With the US government changing health care law to make healthcare more readily available to Americans and also creating health care initiatives to encourage a healthier lifestyle, of which eye care is part, then the potential for the optomap® becomes clear.

Appendix A details the basic steps Optos adopt to perform Environmental scanning.


Optos operations can effect, and be effected by, the task environment and internal environment that Optos operates in.

Appendix B details the environments and how they can effect the operations of Optos.

Thompson et al (2005) state A PESTEL analysis can provide a straightforward and useful framework for analysing the external environment.

Environmental Scanning usually refers to the macro environment .These external macro environmental conditions or factors can be classified as Political, Economic, Socio-cultural, Technological, Environmental and Legal (PESTEL).

A PESTEL analysis (Appendix D) carried out on Optos plc revealed the following factors were affecting Optos most (or likely to have a significant affect in the future).


The change in the UK Government and the announced £81 billion of cuts, will affect many UK businesses, as well as society as a whole. The result being that people will have less disposable income for items such as eye exams.

Conversely, the Spending Review did not affect health spending which is expected to increase until 2014/2015, therefore ophthalmologist will still have money available to potentially purchase and use optopmap.


Impact of 'credit crunch' starts to be felt with major concerns ahead for all sectors, including health.

Recession has increased US healthcare bills.

US healthcare costs are eating up an ever-larger portion of family budgets.

31m Americans, who did not have healthcare insurance, now have health care insurance as of March 2010.


An aging US population and more awareness that regular eye exams leads to early detection of disease are the major social factors affecting Optos.


Optos products must keep up with new ophthalmology techniques as they are discovered. Main competitor Fundus cameras becoming more advanced.


Changes in US health care laws have a positive impact on Optos. More Americans now have access to health insurance with eye examinations a part of the wider health care initiatives in US.


Increase on corporate social responsibility and environmental agenda.

Optos products are expected to meet environmental guides and have major parts recyclable. Packaging also must be kept to a minimum.

Competitive Analysis Using Porters 5 Forces

Porter (1985) defined the forces, which drive competition, contending that the competitive environment is created by the interaction of five different forces acting on a business. The 5 forces allow organisations to measure the attractiveness of an industry or sector, for example, how profitable the industry or sector is.

Figure 1.0 shows how Porters 5 Forces were used as part of the environmental scanning activity, undertaken in this report for Optos, and how this helps Optos identify what competitors in the sector are doing.

Figure 1 Porters 5 Forces Analysis Optos plc

Barriers to new entry are high. The amount of investment and time required to enter the sector and gain regulatory approval, acts as a barrier to entry for most organisations.

Competitive rivalry is moderate. Competitor's offerings contain more features than what Optos offer; however, competitors systems (Fundus cameras) cannot offer the USP of 200 degree wide field scan.

Buyer Power is low. People will always need health/eye care and optometrists will always require to offer eye exams. US healthcare reforms allow more US citizens access to healthcare.

There is moderate threat of substitution, however no substitutes can offer Optos unique wide field scan, however, larger companies operate within the sector. The wide field scan is patented.

Supplier Power is low. There are readily available materials with long standing supplier relationships.


Porters 5 forces refer to internal threats and external factors that effect the competitive environment that Optos operates in. For this reason, Porters 5 forces should be used in conjunction with a SWOT analysis.

Environmental Scanning helps identify internal and external SWOT elements, which means that an Environmental Scan lays the foundation for the SWOT analysis

Lynch (2009) states that strategy options can be examined for their consistency using a SWOT analysis. The SWOT in Appendix E allows Optos management to understand the environment that Optos currently operates in.

Main points from the SWOT:

Strengths: Optos unique product offering and PPP revenue model.

Weaknesses: Small development teams and difficulties in delivering complex projects on time and to budget.

Threats: Competitor's offerings are a worry for Optos although the competitor's products, at this time, do not have the unique 200 degree wide field that Optos has. The constant battle to meet FDA guidelines, which is time consuming and costly, is also a threat to Optos.

Opportunities: Exist, particularly in the US, with an aging population and changes in the healthcare laws, as well as new geographies yet to be explored.