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Strategic Research Project Essay

This paper is about a strategic overview of Medtronic Inc. Medtronic is a global leader in medical technology- alleviating pain, restoring health, and extending life for people with chronic conditions around the world. Medtronic conducts business in more than 120 countries developing and manufacturing a variety of products and therapies with emphasis on providing a complete continuum of care to diagnose, prevent and monitor chronic conditions.

Mission Statement

The mission statement of Medtronic Inc. is to contribute to human welfare by application of biomedical engineering in the research, design, manufacture, and sale of instruments or appliances that alleviate pain, restore health and extend life. It is evident that Medtronic is meeting their mission statement. Medtronic is providing doctors with new therapy procedures through their research and development. Medtronic is able to design and modify medical devices that assist and meet the needs of physicians around the world. In addition, Medtronic is conducting business in more than 120 countries and focused on preserving the lives of individuals with medical needs and plagued with chronic health conditions. Medtronic’s mission statement is firmly preserved in all of its employees around the world that want “to alleviate pain, restore health, and extend life.” It is apparent that Medtronic has not lost focus as to their purpose by the assistance to nearly 6 million people benefiting from therapies each year. Porter’s analysis of competition for Medtronic Inc.

Rivalry among competitors

Medtronic Inc. participates in the development, manufacture and marketing of medical devices. There are very few competitors in this field that include Johnson & Johnson, Guidant Corp., St Jude and Boston Scientific Group. Medical devices that are developed cost a considerable amount of money and if they have to be recalled these costs have to be absorbed. These recalls are viewed by competitors as an opportunity to move in a particular direction in medical device development. Because of the threats from competitors and their debatable actions dispute resolutions often transfer to court rooms for litigation to determine rights to patents. This often leads to the delay in product development and an increase in costs associated court determinations.

Potential entry of new competitors

There are several obstacles that competitors will have to overcome in in the development, manufacture and marketing of medical devices. First, The Food and Drug Administration regulations are very specific and detailed. A competitor attempting FDA approval should expect a lengthy approval process. Once an approval is obtained they are not covered against product recalls that can cost a lot of money. Furthermore, recalls can tarnish the reputation of the company leading to a loss in consumer confidence. Secondly, the design and manufacture of medical products will require a solid understanding of the management of high end technologies. Next, competitors entering the market will spend a lot of money in the Research and Development in an economy where few companies willing to invest.

Potential development of substitutes products

Medical devices are considered a minimally invasive form of treatment and are considered a substitute for more invasive treatment procedures used in the past. Medtronic has several departments all working on product lines and are susceptible to other companies developing similar devices with the same purpose. This drives certain secureness when new procedures and equipment are developed preventing a competitor from knowledge and profit.

Bargaining power of suppliers

Just as the electronic industry, medical device makers send their work to a growing industry of contract manufacturers. These manufacturers do not have a lot of bargaining power due to the low customization of their work. The device makers do not rely on one manufacturer and can easily find another. This tactic enables device makers to deal with speed-to-market and the cost associated with closing plants and laying off employees. There is not an estimated increase to the bargaining power of the suppliers because new companies are not likely to develop products overseas due to the trouble in changing contracts to foreign manufactures.

Bargaining power of consumers

Some hospitals organize and group together to lower costs. These enables more bargaining power over the suppliers due to their collective size. This causes competitors have also to deal with the final payers that are sometimes the insurance company that try to minimize their costs and influence the type of patient care. Even if the buyers are not directly the doctors, the suppliers have to target them since they are advisers providing influence to the decision process. This gives tremendous bargaining power over the suppliers of medical devices enabling better competition and ability to absorb the pressures of the t healthcare system.

Intensive Strategy of Medtronic

Medtronic has seven main divisions and combines operations into a single operating segment.

Market Penetration

Medtronic’s market penetration in solidified in the Cardiac Rhythm Disease Management division where it is the world’s leading supplier of pacemakers. In addition, Medtronic’s holds over 50% Implantable Cardiac Rhythm Devices (ICD) Market share which contributes to 25% of Medtronic’s overall sales.

Market Development

Medtronic is continually moving toward innovation through their pursuit to develop markets in areas of healthcare distribution and treatments. They are have collaborative partnerships, product development and are pilots of new business models in several developing countries. Eli Lilly & Company have partnered together in the field of Drug Delivery systems. Together they are working to develop treatments for Parkinson’s and Huntington’s diseases. They are engineering implantable pumps that allow the delivery of drugs directly to a targeted area of the brain bypassing the blood-brain barrier that restricts drug therapy for these diseases.

Medtronic is also collaborating with Ford Motor Company to develop and integrate medical technology with the Sync in-car system. This mobile health monitoring system will monitor chronic heart conditions, diabetes and transmit alerts if a driver health puts them in danger. Medtronic is also leading numerous cities and hospitals in India increasing patient access to cardiac therapy and improve awareness through health promotions. Through these initiatives Medtronic has assisted in the developed a tiered service and financing program provides affordable health care.

Product Development

Medtronic has always led the way with many technologies and product lines, as shown with the first pacemaker in 1957. Medtronic has adopted policy that phases out its own products to make way for newer developments. Medtronic has a solid process of innovation improving their own products. This is accomplished by utilizing computer aided design systems that allow for an 80% reduction in the time required model complex designs and a 90% reduction in required production time. Medtronic’s product development reaches into marketing approaches in the areas of technical support, customer education initiatives and product line expansion and bundling. Collectively, this provides the motivation of lowering costs for product and process improvement.

SWOT Analysis of Medtronic Inc.

Medtronic engaged in engineering a range of medical devices and therapies. They have a large portfolio that is used to enhance its influence and market share. However, current and future health care policy changes may have a negative effect on the company.

STRENGTH| WEAKNESSES|

– Diverse portfolio protecting risks- Strong Focus on R&D capabilities- Product Innovation- Global presence with stable revenues| – Issues with manufactured products and recalls reduce credibility of company|

OPPORTUNITIES| THREATS|

– Global acquisitions prospects- Growth in emerging markets- Future product lines increase revenue and market share- positive demographics’ toward healthcare spending| – Intense industrial competition in medical devices that affect share of market- Non-compliance with rules relating to reimbursement and regulation of healthcare services- Changing healthcare policies have negative affect on company|

Strengths

As a result of having a diverse product portfolio, Medtronic has a diversified stream of revenues and not heavily dependent on one particular business. For instance, during FY2011, the cardiac rhythm disease management contributed 31.4% of the total revenues of the company, spinal (21.4%), cardiovascular (19.5%), neuromodulator (10.0%), diabetes (8.5%), surgical technologies (6.5%).

Weakness

In July 2011, Medtronic recalled its SynchroMed II implantable infusion pump because it had reduced battery performance. This recall if not corrected could lead life threatening withdraw symptoms to patients with these pumps.

Opportunities

Medtronic has a good track record of acquisitions. In January 2011, the company acquired Ardian, a privately-held company engaged in developing catheter-based therapies to treat hypertension and related conditions. This acquisition augmented Medtronic’s existing interventional therapies.

Emerging markets are set to become the chronic disease centers of the world. By 2015, China and India will be the largest cardiac markets, and by 2017, the prevalence of type 2 diabetes in India will increase to more than 60 million cases from 28 million cases in 2007. To exploit the growth opportunities in these markets, Medtronic is expanding its presence by building distribution, training, education, and other healthcare infrastructure needed to ensure greater access to its products and therapies.

Threats

Medtronic is competitive in more than 120 countries around the world and encounters opposition from various product lines and markets that similar products are sold. Major competitors from Boston Scientific, St. Jude Medical, Johnson & Johnson, and Abbott Laboratories add pressure to areas of product reliability, performance, quality, and price.

US Department of Health and Human Services along with foreign governments regulate the devices produced and health services provided by Medtronic to ensure the cost and quality. Recent US health care legislation and policy changes re aimed at controlling costs and limit the amount that Medtronic can charge for medical devices and therapies. This is evident when, President Obama signed into law the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act imposing new taxes on medical device makers.

Conclusion

Medtronic is a world leader in medical technology- alleviating pain, restoring health, and extending life for people with chronic conditions. Medtronic with its relentless pursuit to bring affordable healthcare through therapy and medical devices should continue with current strategies. Over the next five years, it is beneficial for Medtronic to further explore emerging markets bringing innovative ideas to healthcare officials. Continuance in research and development will continue to reform traditional healthcare with micro-sized implant devices. Continued mission focus “to alleviate pain, restore health, and extend life” will further propel Medtronic as a medical development leader.


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