Strategic Plan Report: Stryker Corporation - Essay Example

STRATEGIC PLAN REPORT – STRYKER CORPORATION For Years 1998-2002 Prepared by Executive Summary Stryker Corporation, which is a global market leader in Orthopedic and Medical instrument industry, operates four key operations, which include orthopedic implant devices, medical & surgical equipment, physiotherapy and Trauma & spine implants. While being a market leader in its US national market Stryker is also a global player with Europe and Japan being second and third key markets. Although Stryker’s products are sold in over 100 countries world wide, the market share and volume of sales generated from rest of the countries have remained comparatively low. The strategic plan for the period from year 1998 to year 2001 aims to establish the corporate objectives and required strategies, which can capitalise upon the identified business opportunities. SECTION I MISSION AND LONG-TERM OBJECTIVES 1. Mission Statement/ Strategic Vision Strategic Vision driving Stryker Corporation is to improve the tools that physicians use in treating patients. The mission statement: - To be a pioneering global force in producing and marketing high quality specialty medical & surgical products and services through innovation and dedication to product excellence. 2. Market share objectives for Year 1998-2002 Following market shares are projected to be achieved by year 2001 In North America 40% In Europe 25% Asia 15% In Other 10% 3. Strategic objectives for the company Aggressive New product development – a target of 3-5 patents per year Expansion of existing markets – Asia and other countries Consolidation of key markets – North America and Europe Maintaining above industry average profitability through scales, process streamlining and strategic alliances with suppliers and customers. 4. Justification of Projections. The market share projections have been made in consideration of business environment as well as organisational competencies and resources. Orthopedic implants segment is projected to capture 30% of the market. Introduction of the new OP-1 Bone Growth Production Device is expected to contribute to this boost. The overall market too is growing in this segment due to factors such as aging population and increased use of such sophisticated devices across the globe. In the Medical and Surgical equipment segment the company holds market leader position. Growth in Arthroscopy procedures is an advantage and Stryker being a pioneer in this segment enjoys first mover advantage. New products to be released to the market are in the pipeline. Innovative products in bed and stretcher segment are also a key success factor. In Physiotherapy, the company operates 302 outpatient centers, which allows a wide coverage of the market. However the large number of competitors in terms of individual practitioners and others will limit Stryker’s aggressive growth in this segment. Spine& Trauma is the newest operation of the company and low projections are made in this view. Geographically, North America will remain the key market of the company and Stryker aims to hold a 40% market share of the overall market. With only two key national competitors – Biomet & Johnson & Johnson this target is feasible especially as the national market is growing at an approximate rate of 15%. Further, the strategic acquisitions of Colorado Biomedical, Image Guided technologies Inc. and InforMedix is expected to boost the marker share. A 25% market share in Europe is forecasted in the face of stiff competition from Swiss and other European competitors. Acquisition of Howmedica of Pizer is expected to boost the European market share along with the arrangements made for direct distribution in Italy. In Asia, especially in Japan the company hopes to boost its market share supported by strategic alliances and aggressive marketing. The market share in rest of the world, which is currently a insignificant 2%, is expected to be boosted to 10% as the emerging markets are growing at a rapid phase. SECTION II INDUSTRY AND COMPETITIVE ANALYSIS 1. Dominant Economic features of Industry and Market Trends Market Size - $ 12 billion for Orthopedic products Scope of Competitive Rivalry – Concentrated between 5-6 key players. Market growth rate - 15% for orthopedic and medical equipments.25% fir spine implants Number of customers – 6,000 direct customers in USA. ,300 dealers in foreign markets. Entry Barriers – High due to legislature, approval procedures, learning curve effects and high investment and R&D costs coupled with patent restrictions. Technology and Innovation – Critical for success. Patented innovations. . Product characteristics – Highly specialized and technology dependent. Scale economies – Essential for competitiveness.. Leaning and experience effect – Bears high impact on the product development process. Industry profitability – Attractive industry returns. 2. Driving forces of the industrial competition Rivalry among competing sellers – As the industry structure is skewed towards being an oligopoly, the competitiveness among existing rivals is moderate. Companies aim to achieve competitive edge through innovation and patent protection. High R&D costs are a key feature. Potential entry of new competitors – This is low as industry entry barriers are high with legislature and patent rights. Capital costs and high R&D costs also act as prohibitive agents. Availability of substitutes – While there is other optional treatment in place of modern medical science, there are no direct substitutes for orthopedic and medical instruments. Strength and bargaining power of suppliers – The industry is supplied with key raw materials such as stainless steel, aluminum, cobalt chrome and titanium alloys by a concentrated number of suppliers. The bargaining power of suppliers can be assessed as high. Strength and bargaining power of buyers – This too is increasing due to trend of hospitals merging to become larger entities and the purchase decisions being shifted from physician and hospitals to managed care provides (Porter 1996). 3. Key Competitor Analysis Competitor Strengths Weaknesses JJ Depuy - (Orthopedic devices/ Trauma / Spinal Implant) Established mother company support from Johnson & Johnson. Wide product range) Not represented in laprscopy and surgical navigation device segments. Zimmer Holdings - (Orthopedic devices) German company with a global presence Only compete in orthopedic segment of the market Sulzer Medica - (Orthopedic devices /Spinal Implant) Established Swiss firm with a globally recognized brand image Concentrated product portfolio Biomet - (Orthopedic devices /Craniomaxiofacial) Established market presence in orthopedic devices. Limited market presence Medtronic - (Spinal Implant/ Powered surgical instruments / Surgical navigation equipment ) Wide product portfolio. Directly competes with Stryker in many product markets. Not represented in the orthopedic segment of the market which is of high potential Others ( Hill Rom / Hausted/Midmark) Well established brands for hospital beds and stretchers Focused on hospital beds and stretchers 4. SWOT Analysis. Strengths : The wide product portfolio and presence in diverse segments of orthopedic and medical equipment market. Presence of physiotherapy division, which is a vital forward integration. High competency in innovation and investments in R&D. Substantial patent rights. Global presence coupled with strong national market share. A host of strategic alliances and joint ventures. Stable and profitable financial status. Weaknesses: Limited status in Spine and Trauma segment, which the company has recently entered. Dependency on single supplier sources for certain raw materials. Possible over dependency on large-scale buyers for US sales volume. Poor market share in other countries across the world. Opportunities: High growth potential spurred by aging population across the world, continued technological innovations and new developments in engineered raw materials. Expanding global demand for sophisticated diagnostic and surgical equipment and quality healthcare. Growing demand from emerging markets across the world further facilitated by increased free trade. Shorter approval times in non-US markets for medical products. Threats: Trend for hospital mergers reducing number of acute care facilities in US. Health care cost containment efforts by government programs, third party players and large employers. Downward pressure on prices as purchasing becomes concentrated and bargaining power of buyers shifts. Strong US currency hampering foreign market growths due to high price of US products. Long approval times in USA for medical products. The company’s innovative new products and the wide product portfolio will place the company in a favourable position to exploit the market opportunities. Involvement in service aspects of physiotherapy will further strengthen the company’s ability to take advantage of growing demand for patient rehabilitation care. Stryker’s sound financial status coupled with higher than industry average profitability will allow the company to face and absorb downward price pressures effectively. SECTION III COMPETITIVE STRATEGY 1. Overall Generic Competitive Strategy In view of Stryker’s aggressive market growth objectives in both US and non-US markets, it is recommended that the company employs a best-cost strategy. The rational for this choice is to acquire more market share across the world by offering products, which are high in quality with added features but at same price as key competitors. 2. Justification of Chosen Competitive Strategy The justification of choosing Best Cost strategy is many folds. It can counter the adverse price situation stemming from strong US currency when pursuing foreign market shares. By expanding market shares by offering competitive pricing and product features the company stands to achieve higher economies of scale (Thompson & Strickland 2003). As the company is strong in terms of its profitability and return on equity, it can now opt to sacrifice a certain percentage, which will support market growth. As Stryker has maintained its position as one of the most innovative suppliers with high product excellence, a Best Cost strategy will enhance this positioning. 3. Functional Strategies to support overall competitive strategy Production strategy – Entering production joint venture with an Asian partner to reduce costs and cater to emerging Asian markets. Reduce dependency on single supply sources. Reduce percentage of total purchase in finished and component form outside sources, which is currently 41%. Marketing strategy – High focus on R&D and new product development. Pursuing high patent targets. Close collaborations with hospitals, physicians and practitioners in developing new products. Increase control over distribution channels in foreign markets. Finance strategy – Achieving low costs through economies of scale and competitive purchasing. Compromising a degree of profitability in lieu of market share expansion. Human resource strategy – Initiating a global human resource strategy where by the company employees own personnel to manage marketing of products in overseas markets. The employee policy can be geocentric or polycentric where employees are recruited from global sources or from host countries themselves. 5. Guidelines on Strategy Implementation In implementing corporate strategy it is important to be broken down in to functional strategies while maintaining the overall linkage to the corporate goals. Allocation of resources should be in line with the strategic focus and aim should be to develop organisational capabilities to capitalize from the identified opportunities (Thompson & Strickland 2003). As Stryker is a diversified company, it is essential that the cross business opportunities and internal business synergies within each business unit is achieved through strategy implementation. 6. Conclusions In conclusion it can be stated that Stryker Corporation is poised to take advantage of many of the positive trends in the market and its new business operations in Spine and Trauma sector as well as presence in the physiotherapy sector will enhance and consolidate its market position. By implementing a Best Cost strategy the company will be able to not only consolidate its strong presence in the national market but also increase its presence in foreign markets through competitive product offerings. However it should be born in mind that the success of the overall strategy will depend on how successfully it can be converted and implemented at all operational levels. Thus it’s crucial that all operational strategies are interlinked to achieve the overall business objectives of the business. References Thomson, A. A. Jr. & Strickland, A. J., 2003. Strategic Management Concepts and Cases, 13th ed. New York: McGraw-Hill Publishing Company Ltd. Porter, M. 1996. “Competitive Strategy.” Harvard Business Review. Nov-Dec. Read More