'Medtronic External and Internal Analysis Essay\r'

'Medtronic Inc. endure advant progressously be comp ard to le Concorde, a turbojet ultrasonic passenger airliner low flown in 1976. This jet was to a with child(p)er extent than in two ways as fast as any other airliner ever readyd, flying at speeds of up to 1,350 mph. The capability to fly at more than than than twice the speed of a regular airliner equates to twice the flights and grant prices for this astonishing service. The resulting profitability of le Concorde is what puts this machine at the top of its class. In 1957, Medtronic founder Earl Bakken created Medtronic’s Pace master, the first wear able thingamabob to treat abnormally remit substance rates.\r\nThe Pacemaker is now the staple point of intersection of Medtronic and stern be comp atomic material body 18d to le Concorde for its conception, efficacy, and profitability. This is just single manikin of Medtronic’s ability to apply its cornerst one and only(a) to transform the treatment of chronic disease world broad. The unshakable has been a leader in the medical doojigger Manufacturing industry for all over two decades, developing and manufacturing innovational medical devices to treat more than seven one million million million patients each course of study. Its crops include pacemakers, defibrillators, heart valves, and stents, among others.\r\nMedtronic’s app atomic number 18nt motion for excellence is better(p) summed up by its corporate mission, â€Å"To contri yete to valet welfargon by drill of biomedical engineering in the research, design, manufacture, and sale of instruments or appliances that alleviate pain, restore wellness, and extend life” (Medtronic. com). To carry out its remnants and maintain victor, Medtronic essential continuously monitor and evaluate its external environment and the forces in it that could affect the club. The checkup thingumajig Manufacturing industry is exposed to numerous forces and issues that bottom generate opportunities for unwaverings to exploit as closely as threats for familys to avoid.\r\nOf none are the effects of rivalry, buyers, regulation, and globalisation trends. The Medical Device Manufacturing industry, as a whole, has aimn at an annual rate of 18. 9% since 2005, contri moreovering to a high level of industry attractiveness (ibisworld. com). Medtronic is the irradiate leader with 17. 2% food marketplaceplace share. Its closest rivals, capital of Massachusetts scientific and St. Jude Medical, give market shares of 2. 8% and 4. 8%, respectively (ibisworld. com). Recently, the industry has seen a dramatic recoverion in consolidation as larger firms establish cquired smaller trading trading operations in an effort to beam their portfolios and come through market share.\r\nThis shrinkage has resulted in greater industry concentration, increasing the rivalry among these happen upon moulders. concentrate on a more narrow outlin e of the Cardiovascular Device segment reveals a similar, more intensified, environment for rivals. Compared to the overall industry, this specific segment has late witnessed some(prenominal) lower growth rates because the market is saturated with products that deliver little differentiation and moderate innovation possibilities.\r\nFor this reason, merger & acquisition drill is especially prominent among top firms seeking to create strategic free-enterprise(a)ness. They look at identified the threat of rivals and are looking to gain improveral re witnesss and capabilities through diversification. The role of buyers is very incomparable in this industry. bit soulfulness patients are the ultimate consumers of medical devices, firms very much localise on healthcare providers when selling products. This is because patients in the market have low brand recognition of the devices they use.\r\nInstead, they rely on their hospitals and physicians to recommend products fo r treatment. It is important for manufacturers to understand this line since it is these physicians and other providers that have the grea prove brand loyalty. That said, psyche patients still drive demand for products, and their satisfaction system the ultimate goal. One central demographic trend of buyers is the aging U. S. population. As life expectancies continue to rise, and the ball up boomer generation ages into their late sixties and seventies, this expanding age group ordain create a great probability for medical device manufacturers.\r\nFor example, elderly patients come a higher occurrence of health issues compared to the hoard up market, brainish demand for medical devices upward. In fact, 40% of all patients diagnosed with heart disease or arthritis are 65 or older (ibisworld. com). The Medical Device Manufacturing industry is in like manner subject to tight regulations, two domestically and internationally. For example, a modern device whitethorn require a tetrad-year trial before it appears on the market so that the Food and Drug judicatory (FDA) can test its long-term effects.\r\nProducts in Europe, meanwhile, contribute a different regulatory process; products are frequently introduced in Europe two to four years before they are available for patients in the U. S. Furthermore, compliance with these regulations requires firms to devote significant additional resources, often detracting from enthronisations much(prenominal) as Research and Development. Along with these sign requirements, devices are constantly monitored for defects, which can result in product recalls that damage brand reputation and legal injury profits.\r\nGlobalization trends entrust certainly continue to have a strong impact on the industry, creating both(prenominal) opportunities and threats. Research shows that exports account for 21. 6% of industry tax revenue with an expected 2010 growth rate of 3. 9% (ibisworld. com). By developing these expor t markets, firms can work to maximise capacity utilization as they expand their dispersion channels to reach more customers and generate more tax. This is especially true of developing economies, in which 80% of chronic-disease-related deaths occur.\r\nLarge portions of these markets are greatly underserved and demand is non being met. In addition, by diversifying into different geographical markets abroad, firms are able to mitigate the risks associated with being besides dependent on the domestic market. The emergence of globalization also introduces several threats that firms must be sensible of. For one, the competitive landscape changes as companies establish operations sites in foreign countries. When this happens, the demand in export markets declines since customers can purchase devices locally.\r\nExporting firms must hence reevaluate their international strategies and consider establishing similar operations of their own. Another threat globalization brings is that of increased competition. Manufacturers constantly fight to expand their geographic reach and to gain control of underserved markets. Given the effects of strong forces and uphill trends in the Medical Device Manufacturing industry, firms should strive to bear a key group of success operators in ordinance to gain strategic competitiveness.\r\nThe first factor is employees; they must be highly skilled and intentional since the devices they design and produce are very complex. Second, economies of dental plate allow firms to improve profitability by decrease variable comprises in manufacturing, which, in turn, lowers prices for customers. Third, as previously mentioned, the importance of global positioning cannot be understated. In order to compete in the industry, firms must make a global presence, expanding geographic cranial orbit and penetrating underserved markets. Finally, access to the latest innovations is imperative.\r\nTo acquire smart technologies, firms must inves t considerable resources into Research and Development. non only must they develop unfermented technologies, but they must also look for ways to continuously improve existing products through high levels of innovation. This sagaciousness of the industry environment is essential when considering a firm’s intimate strategies. At the business-level, Medtronic possesses a number of strengths and competencies that are used to create a competitive usefulness and contribute to the overall performance of the company.\r\nIn particular, its research and growth efforts along with its superior homophile resources drive the firm’s differentiation strategy in the Cardiac Rhythm Disease management (CRDM) unit (see appendix for more strengths). This sector frame the firm’s most profitable product market, accounting for $5. 268 billion of Medtronic’s $15. 817 billion ingrained net sales in 2010 (Medtronic). As a percentage of those sales, Research and Developme nt expenses equated to 9. 23%, a total of $1. 46 billion. Moreover, this expense has seen a deepen one-year Growth Rate of 8. % in the know 5 years, indicating Medtronic’s continued confidence in its ability to create value through the investment in research and increment. The innovation fostered by research and development in CRDM has allowed Medtronic to create many young products; the complex nature of these products makes them rare and costly to imitate. They often even trump and replace the existing technology in the market, making them highly valuable and unsubstitutable. These key innovations, therefore, give Medtronic a significant competitive advantage in research and development.\r\nFor example, the CRDM unit belatedly introduced a new leadless pacemaker. Once implanted into the heart via catheter, the penny-sized device permanently latches into the flesh with tiny claws. Doctors can then wirelessly monitor and control the pacemaker. Medtronic’s infer ence of reduced size and wire elimination will create a new standard for such devices in the industry, making current, bulky pacemakers obsolete, and giving Medtronic a sustainable competitive advantage. Medtronic’s 40,000 employees also play a key role in the success of CRDM and of the company as a whole.\r\nThey are the source of one of Medtronic’s most valuable intangible asset assets: knowledge. With a thorough understanding of human physiology and a breadth of technical skills, employees are a driving force behind the company’s forward-looking innovations. They generate judgements and implement processes that create new or improved products or therapies. These advancements require that employees are well trained and possess a high mark of knowledge about the products or therapies they develop. In addition to the actual production of products, employees extend their knowledge to customers.\r\nBy educating healthcare providers and users about the device s, employees ensure that patients safely prevail the plenteous benefits of Medtronic’s products. One way Medtronic optimizes its human resources is through collaboration blogs and internal grants. The company’s Quest program awards project grants that encourage employees to test their own ideas for product innovation. Nearly 25% of these projects at long last set out a product or whatsoever part of a therapy. For example, employee Brain Lee had an idea to create an sound diagnostic tool for patients who suffered from unexplained fainting.\r\nWith funding from the Quest program, Lee modified a pacemaker by adding self-contained electrodes. The device could be implanted just below the skin, recording electrocardiogram (ECG) signals in an endless loop. Much more effective than existing external tools, Lee’s device received additional funding, leading to successful clinical trials, and, eventually, a commercial release. This is just one example of how Medtroni c’s strong workforce creates a load competency for the firm, one that is unmatched by its rivals.\r\nFurthermore, the innovations veritable by employees and through research and development efforts can often be valueed with patents, generating competencies that are not only distinctive, but also sustainable. At the corporate level, Medtronic is very well positioned. The firm outperforms its rivals in basis of market share with 17. 2%, compared to Boston scientific and St. Jude Medical, which hold 2. 8% and 4. 8% market share, respectively. Since 2007, Medtronic has see an 8. 75% compound annual growth rate. While lower than St. Jude’s growth rate of 12. 3% in the period, it is noticeably higher than that of Boston Scientific’s, 6. 84% (See appendix for further financial comparisons). Medtronic’s corporate-level strategy defines which businesses it will be in as well as how it will integrate those businesses to grow and deliver value to stakeholders. The firm soon operates in seven business units: CRDM, Spinal, CardioVascular, Neuromodulation, Diabetes, Surgical Technologies, and Physio-Control, all of which are largely related. Because of Medtronic’s strong war chest, it has been able to centralise its growth strategy around acquisitions.\r\nSince 2009, the firm has purchased nine companies, including ATS Medical Inc. and CoreValv Inc. , requiring a significant money investment. In fact, Medtronic spent $370 billion when it bought heart valve maker ATS Medical. The firm’s acquisition strategy specifically targets two types of purchases: those that will add immediate revenue to existing businesses, and those that add to Medtronic’s technology portfolio by providing expertise the company does not have. Of late, the firm has been guidance on the former, targeting smaller companies that lack the resources to complete clinical trials and gain FDA approval.\r\nChad Cornell, vice president of corporate devel opment at Medtronic, notes, â€Å"Size is obviously a factor, but it’s not what we start with. ” Instead the motion is â€Å"how can we add value? That’s the key lens” (Lee). Medtronic’s international strategy is best characterized as a global strategy whereby it develops devices in the united States to be distributed across country markets. To support this strategy, it uses a worldwide product divisional structure. Medtronic has recently changed its strategy, implementing a Global Realignment Initiative in 2008.\r\nThe goal of the initiative is to reorganize the firm’s resources to management on areas that add the most value and have the most attractive growth opportunities. Prior to 2008, the company had segmented its global market into the united States market and international markets. Under this new strategy, Medtronic will focus around developed markets and emerging markets, using its resources and capabilities to in effect have e ach segment’s unique needs. Developed markets include regions such as the United States and Europe where trained healthcare professionals are familiar with current devices, and new, innovative products are readily accepted.\r\nMedtronic relies on its strong innovation capabilities and Research and Development investments to meet the demands of this segment. For example, patients with pacemakers are often denied potentially life-saving MRI scans due(p) to possible pacing interference. Medtronic used its superior innovation and product knowledge to address the concern, manufacturing the world’s first pacemaker that is compatible and safe to use with MRI systems. Introduced in Europe in 2008, this innovative device provides a much-needed solution to millions of people who will now be able to receive the full benefit of a safe MRI scan.\r\n emerging markets, meanwhile, include regions such as China, Brazil, Africa, and the Middle East, where access to care is often limite d, and physicians may be unacquainted with(predicate) with certain medical devices and hesitant to accept new products. In this segment, Medtronic depends on its employees and its reliable, high-quality products. Using these strengths, it focuses on homework and educating healthcare providers so that products and treatment are much more accessible to underserved patients. At present, Medtronic operates in more than 120 countries, with more than 16,000 employees in communities outside the United States (Medtronic. om). These employees provide immense value to the company by using their extensive knowledge and skills to educate and collaborate with physicians around the world. Currently, 41% of total revenues are complete outside of the United. Medtronic plans to continue its geographic diversity strategy, aiming to become a â€Å"truly boundaryless organization” and maintain its cargo to â€Å"making a sustained, global impact in the fight against chronic disease” (M edtronic). In order to keep its world-class status, Medtronic executes conglomerate tactics at each of its organizational levels in order to protect its strategic competitiveness.\r\nFor example, the company uses a frontal dishonor on its biggest competitor, Boston Scientific. By using revenues created from CRDM, they have the capability to invest large investments into research and development in ways that Boston Scientific cannot. In doing so, they maintain continuous development and improvement of innovative products. Another tactic that Medtronic uses is the pre-emptive strike, identifying and evaluating a valuable opportunity and seizing it before a rival does so. This increases sales, differentiates Medtronic from competitors such as Boston Scientific, and helps foster innovation.\r\nBased on the analysis of Medtronic’s external environment and internal strategies, it is clear that the firm is a leader in the Medical Device Manufacturing Industry. However, there are a lso some key problems and issues the firm should address. Medtronic has had litigation issues over the past few years with recalls in various different product offerings as well as patent and licensing disputes. As noted on the 2010 annual report their litigation charges amounted to nets of, $374 million in 2010, $714 million in 2009, and $366 million in 2008 (36-37).\r\nThis has been an industry wide issue as seen by Boston Scientifics 2009 litigations charges amounting to $2. 022 billion, $334 million in 2008 and $365 million in 2007 (Boston Scientific Annual Report pg. 69). With these industry wide litigation issues, the FDA is currently creating new standard procedures for testing products and time need to introduce them into the market, which creates a separate challenge in dealing with the new health care reform. In a recent interview with Brian Johnson from Massdevice. om, the CEO of Medtronic, amount Hawkins outlines the challenges ahead with the new health care reform. â €Å"The new medical device tax will cost us $150 to $200 million per year when introduced in 2013. In 2010 we spent $1. 5 billion on R&D and this tax will directly affect that budget for us which hurts our innovation, or possibly investments in emerging markets”. Cleary the health care reform will be one of the toughest challenges ahead for Medtronic and the rest of the medical device industry.\r\n'