Running head: Case Study McDonald’s and Its Critics
Case Study: McDonald’s and Its Critics
ORM 680: Capstone in Strategic Management
Spring Arbor University
Jaspreet Kaur (Jas)
Terry A. O’Connor, Ph.D.
August 27, 2010
Abstract
McDonald Corporation is the leading fast-food industry. The company has an established brand name that is well known at home as well as internationally. McDonald’s management believes in keeping long-term relationship with customers, suppliers, and shareholders. The company’s key to success is its name brand, healthy food, quality customer service, and the focus on “play to win” strategy. Although in the past, the corporation has had global critics attack but today the company is able to accomplish and keep its positive image. McDonald’s focus of being socially and environmentally responsible helps the company with its positive revenue growth.
McDonald’s and Its Critics
Introduction
The purpose of this document is to analyze the existence of McDonald’s Corporation and its Critics. This paper will discuss the history and background plus the strengths and weaknesses of the company. In addition, the document will define the differences among the CEO’s of McDonald’s and their main strategies for the company. And finally, the document will discuss the McDonald critics and the recommendations for the Corporation.
McDonald Corporation is the world’s leading retailer in the food service industry. Today, McDonald has 32,000 local restaurants serving more than 60 million people in 117 countries each day. The company focuses on providing excellent customer service and building positive relationship with employees and suppliers. McDonald’s “play to win” strategy helps the company gain customer confidence as well as revenue growth. As per the USA Today, in the U.S., where McDonald’s has almost 14,000 of its more than 32,000 restaurants, operating income in July 2010, climbed 7% to $895.1 million. Revenue in the U.S. rose 2% to $2.08 billion while rising 5.2% in Europe and 4.6% elsewhere around the globe. The $15.15 billion company has increased its market profit share by offering healthy menu items such as salads, milk, and deli sandwiches, wide range of beverages, ice creams, fries, new breakfast dollar menu, kids’ meal, and last but not the least the everyday dollar menu items. In addition, nearly 50% of McDonald restaurants have included the play area for children which help the corporation attract the younger crowd tremendously.
McDonald’s Mission Statement
McDonald’s brand mission statement is “to be our customers’ favorite place and way to eat and improve our operations and enhance our customers’ experience”, (mcdonalds.com).
History and Background
The journey of McDonald Corporation actually began in 1930’s by two brothers, Richard and Maurice. Both the brothers opened up a carhop drive-in restaurant in San Bernardino, California in 1930. By the 1950’s, the restaurant was replaced into self-service car hop with simplified menu to offer just hamburgers, cheeseburgers, French fries, milkshakes, soft drinks, and apple pie; and ran like an assembly line operation (Hill and Jones, 2010, p. C147). Both Richard and Maurice believed in the concept of providing quick and simple service. The idea was to prepare a model that could be learned quickly from anyone stepping into the restaurant kitchen for the first time. As per John Love, the McDonald’s historian; “typically, there were three grill men, who did nothing but grill hamburgers, two shake men, who did nothing but make milkshakes, two fries men who specialized in making French fries, two dressers, who dressed and wrapped the ham burgers, and three countermen who did nothing but fill order at the two customer windows”. The resulting labor cost savings, combined with the increases volume of sales, allowed the McDonald brother to cut the price of hamburger from 30 to 15cents (Hill and Jones, 2010, p. C147).
By the 1954, the restaurant working model of the McDonald brothers was doing astonishingly good. The restaurant revenue was growing by leaps and bounds and caught the eyes of Ray Kroc, who supplied milkshake mixer machines to the brothers. After observing the concept of their restaurant, Kroc knew that this was the formula to the business success in the food industry. He bought the rights from the McDonald brothers to open a restaurant franchise across the nation. On April 15, 1955; Kroc opened up his first McDonald fast food chain in Des Plain, IL; featuring the same concept of using limited workforce, low price, quick and efficient service as San Bernardino, CA site. The very first day, Kroc was able to draw customer’s attention and made $366.12 in sales. After that there was no looking back, from 1955 till the present day; McDonald Corporation has grown rapidly at home as well as globally. From the era of 1950’s till the 2000’s, the McDonald Corporation went through several transitions. The company’s foundation was laid out by the founder Ray Kroc in 1955 and moved on to the food consolidation of the food service network under Fred Turner’s direction (1973-1987). From 1987-1998, the company was under the leadership of Michael Quinlan, who encouraged the concept of global expansion. The 1998-2003 was the era of Jack Greenberg, under whom the company went through the financial crises and faced revenue declined. In 2002, Jack Greenberg announced his resignation. In the November of 2004, Jim Skinner became the CEO of the company and has shown positive results both financially as well as company’s expansion growth.
As the McDonald Corporation entered the 21st century, the company had to face many criticisms publically as well as politically. Although the world’s largest food chain has been attacked several times and gone through several litigations yet, the company is still able to grow and challenge its competitors on the world’s platform of food industry. Today, the McDonald Corporation is maintaining its reputation by being environmentally responsible, offering healthy and high quality food options, providing quality service, supporting and giving back to the community, and finally; practicing McDonald values of being responsible towards the community, business, and corporate world.
McDonald’s Strengths and Weaknesses
Strengths and weaknesses are the internal factors that are use to analyze the company’s organizational and environmental issues. Below are the McDonald Corporation’s strengths and weaknesses which play a key role in company’s operations. McDonald’s is the well known food chain at home as well as internationally. There are various aspects that are aligned under McDonald’s strength factor such as:
· Strong name brand and mascot
· Huge market share nationwide as well as globally
· Well trained managers and employees from the McDonald’s hamburger university
· Customer focused
· Introduce new products
· Committed Suppliers base
· Exceptional positive financial and revenue growth, and
· Kids friendly reputation
Although McDonald Corporation has various strength factors, the company also has some weaknesses that have become the road blocks for the organization’s success such as:
· Negative publicity and image
· Unhealthy food
· Strong competitors like Burger King and Wendy’s
· Legal actions and lawsuits, and
· High management turnover
Differences among CEO’s and their Strategies
Foundations: Ray Kroc, 1955-1973
Ray Kroc was the founder of McDonald Corporation. He opened up his first adventure in the food industry – McDonalds in 1955. Kroc’s key idea to a successful business was the strategy of creating uniformity among all McDonalds, building a partnership relation with the franchises, and promoting individual creativity. Kroc’s sales background convinced him that the key to successful franchising was uniformity. Uniformity was the revolutionary concept in the food service industry in 1950’s (Hill and Jones, 2010, p. C147). Ray Kroc created an empire in the fast food industry with a vision to provide consistent service in all McDonalds around the nation. Kroc was a perfectionist; his goal was to create an operating system under which every McDonald would follow the same guidelines from making burgers to providing quality customer service. He believed in quality, service, cleanliness, and value. Unlike, other businesses; Kroc saw his franchisees as business partners rather than customers. He knew that the only way he would be successful if his business partners were making profit. Finally, Kroc believed in individual creativity and innovative ideas. As McDonald’s chronicler John Love wrote: “Ray Kroc’s genius was building a system that requires all of its members to follow corporate-like rules but at the same time rewards them for expressing their individual creativity (wiley.com).
His goal was to make McDonalds a global food chain service. He would encourage his business partners to bring him innovative ideas and was very open to implement them. The introduction of Big Mac item was case in point (Hill and Jones, 2010, p. C147).
Consolidation: Fred Turner, 1973- 1987
Fred Turner started his journey with McDonald Corporation in 1956. In 1958, he was named Operations Vice President, and in 1967, an Executive Vice President. He was elected President, Chief Administrative Officer and a member of the Board of Directors in 1968, and CEO in 1973 (mcdonalds.com).
Fred Turner was a 23year old college dropout when Ray Kroc hired him to manage one of his restaurants. In 1957, Kroc asked Turner to train other franchisees and create a training program. By 1950-1960’s Turner was able to develop a training manual for the company and laid a foundation of successful franchise system. There are number of contributions from management science to the invention of Hamburger University that Fred Turner gave to the world’s fast food leading corporation. Turner’s strategy to successful business was his management operating technique, which helped the franchisees as well as McDonald’s revenue growth.
Management Science to Management Style
Turner attempted to turn the task of running a restaurant form an art to a science. Turner’s training manual converted the systematic knowledge the McDonald’s corporation gained from operating its franchise into a “management science”, (Hill and Jones, 2010, p. C148).
Fred Turner’s 360 pages training manual was the key to success. It explained operating techniques on how to run a restaurant in minutes. The Turner’s training manual instructed managers how to staff, make reports, calculate operating costs, detect quality problem, forecast demand, and many other factors. In addition, it also has instructions for cooks on how to grill and how much ingredients to use when cooking. Altogether, the manual turned out to be very beneficial for managers as well as for employees. Fred Turner used decentralized strategy for McDonald’s organizational structure. Turner knew that the closer the manager would be to the store the better the decision he would make for that store. With that said, the regional managers were empowered to grant new site and franchise. This new strategy produced positive results with the company’s growth rate. Hence the total number of McDonald’s restaurants tripled and the profit margin doubled.
From Training to Supervising Franchisees
Turner’s another great accomplishment was the creation of Hamburger University. For a long time, Turner supervised the university as well as the text used at the school. The university played a huge role in corporation’s success. From 1961-1983, the university expanded from one classroom to seven auditorium classrooms. The graduates from the university had a better understanding of how to run the business and be successful. The classes were taught in three areas: food, equipment, and management techniques. As per the data, it was the only school in the fast-food industry accredited by the American Council of Education (Hill and Jones, 2020, p. C148).
Next, Turner invented a new technique for the company to supervise its franchisees. First of all, he created a position of “field consultant” to oversee the franchisees. Second, he developed a manual to evaluate the franchisees based on quality, service, cleanliness, and overall performance. Under Turner’s leadership, the consultant position had become the prerequisite for promotion; managers wishing to climb up the corporate ladder were required to have experience working as field consultants (Hill and Jones, 2010, p. C 149). Now franchisees had to get “A” or “B” grade in order to expand the business or obtain license to operate another restaurant.
Advertising
Another great concept to company’s success was the introduction of corporate mascot “Ronald McDonald” in 1960’s. The advertising campaign of the clown character “Ronald McDonald” became so famous in the children market that by 1992, 40% of the sales were coming from children under seven. Ronald McDonald became the highlight for kids’ birthday parties. In addition, the company sold Ronald’s wristwatches and wall clocks. In 1990’s the company launched a website encouraging children to send an email to Ronald McDonald listing their favorite menu items (Hill and Jones, 2010, p. C 149). Ronald played a huge role in increasing company’s profit margin and competitive advantage over its competitors.
McDonald’s under Attack: Franchisees’ and Union Rights
During the management of Fred Turner, the corporation had to deal with two major issues: first, franchisees issues and second, union issues.
First of all, in 1970’s; the group of 50 franchisees staged an open rebellion against McDonald’s asking to establish their own organization, the McDonald’s Operators Association (MOA). The reason for this revolt was that the franchisees were getting frustrated with the tight operating rules of the company. Second, the franchisees complaint about declining sales of their existing stores which was caused by the opening of new stores. To eradicate both the issues, Turner established a committee called National Operators Advisory Board (NOAB). The role of this committee was to listen to franchisees’ complaints and issues and provide them the necessary assistance. In addition, the NOAB issued policies pertaining to McDonald’s relationship with its franchisees (Hill and Jones, 2010, p. C154).
Second, in order to keep McDonald Corporation unionized, Turner hired John Cooke; a labor management consultant who was a former union organizer. Cooke organized a team of “flying squads” which helped managers at the restaurants detect union threats. The team would visit the store sites to make sure that the stores were unionized and would hold “rap sessions” with employees if suspect any union organization target.
Expansion: Michael Quinlan, 1987-1998
Michael Quinlan began his career from McDonald’s mailroom in 1963. In 1982, he became the President of the company and in 1987 was appointed as the CEO of the McDonald Corporation. Quinlan reputation of informality combined with his hands-off management style made him popular among the McDonald’s employees. Quinlan transformed McDonald’s into a global empire, extending the chain’s reach to more than 100 national markets (Hill and Jones, 2010, p. C150). Quinlan’s strategy to successful business was his customer service initiative, cost cutting, and global expansion.
Customer Service
Michael Quinlan launched a “customer service” program at all McDonald’s restaurants. The focus of customer service initiative was to empower the employees to do “whatever it takes”, to satisfy customer’s requests or needs, listen to customer, and solve their problems on the spot. McDonald’s management implemented several techniques in order to improve customer service such as: customer complaint tracking system, consumer focus group, face-to-face orientation between employees and customers. By executing customer improvement techniques, McDonald Corporation was able to differentiate its products and services from the other competitors in the industry.
From Cost Cutting to International Expansion
Michael Quinlan’s another major contribution to McDonald Corporation’s was his philosophy of cost cutting. Under Quinlan’s direction, McDonald’s lowered its restaurants’ construction costs by three means: redesigning restaurant buildings, using more efficient construction methods, and substituting pricy material with cheaper alternatives (Hill and Jones, 2010, p. C150). As a result, first; the company was able to reduce construction cost by 27%, and second; the company gave option to its franchisees to choose their own insurance company which helped the corporation save $50million annually. In addition, the management introduced a new style “mini McDonald’s”, which gave the company competitive advantage over other competitors. The concept of mini McDonald helped the company tremendously with lower the construction and other overheads costs. Moreover, the mini McDonald’s concept became so popular that it opened up many doors for the corporation. Now the company started to operate its restaurant business in hospitals, Wal-Mart, military bases, and gas stations.
Next, under the leadership of Michael Quinlan; the McDonald Corporation was able to increase its international profit share. The global expansion was Quinlan’s remarkable achievement which helped the company with its revenue growth. McDonald’s two major milestone entries were into Russia and China. Due to the large population count in both the countries, the international market grew by 18.2%.
McDonald’s in Crisis
During the management of Michael Quinlan, McDonald Corporation went through several crisis: first, introducing new products, second; opening new stores, and third; increasing competition.
First, the introduction of new product such as vegetable burgers, pizza, pasta, fried chicken, and fajitas did not catch consumer’s eye. When people thought of McDonald’s, they thought of hamburgers and French fries; the variety of new products on the menu created negative impact on the sales. And finally, all these products were withdrawn from the menu. Second, the opening of new stores created a revolt among existing franchisees. The existing store management claimed that the new restaurants were building in the wrong places and were effecting negatively on the existing stores. Third, the company was losing market share in the food industry because of the growing number of competitors such as Wendy’s and Burger King. Altogether, because of these three factors; McDonald’s market share declined and the company’s profit share in the United States dropped tremendously between 1987 and 1998.
Crisis: Jack Greenberg, 1998-2003
Jack Greenberg was appointed as the CEO of McDonald Corporation in 1998. Greenberg joined the company as a CFO (chief financial officer) in 1982. The day Jack Greenberg took the company’s leadership; he called each of McDonald’s 20 largest shareholders telling them “I’m a different person; I’ll have a different style”. Wall Street responded enthusiastically; McDonald’s stock gained 4% on the day of the announcement. Greenberg launched a strategy aimed at “recasting the image” of McDonald’s from a stodgy consumer products company to a dynamic global brand (Hill and Jones, 2010, p. C152). Jack Greenberg implemented three ways in order to run the leading fast food restaurant chain - McDonald. First, he decided to hire executives from other firms, second; rather than keeping the uniformity policy, Jack decided to introduce new menu products. And third, he believed that the McDonald’s growth relied on mergers and acquisitions.
New Menu
The idea of introducing “new menu” at McDonald restaurants’ was initiated by Michael Quinlan but was later developed by Jack Greenberg. McDonald’s CEO, Jack Greenberg implemented the new food preparation concept called “just in time” or “made for you”. This new principle was introduced to improve the quality of the new menu food preparation, development of new innovative menu products, and customer experience. By the spring of 2000, the “just in time” concept was installed in nearly 12,500 domestic McDonald restaurants. Since the changeover of the new kitchen installation cost was expensive, the McDonald management decided to pay 50% of the unit cost to their franchisees.
Acquisitions
Next, Jack Greenberg decided to acquire other branded restaurants in the food industry. He envisioned McDonald’s single brand into multiple line of different brands such as: hamburger and chicken under McDonald’s brand Pizza under the Donatos brand, and burritos under the Chipotle brand. From 1998-2000, McDonald acquired Chipotle Mexican Grill chain, Aroma Café of London, Midwestern Donatos Pizza chain, and finally; the biggest acquisition of the era - the Boston Market merger, which gave McDonald the network of 850 restaurants specializing in serving home style meals (Hill and Jones, 2010, p. C153).
Financial Results
Under the leadership of Jack Greenberg, McDonald Corporation had to face negative financial performances in number of different areas such as: the introduction of new menu, acquisitions, and global attack.
First, the concept of “made for you” failed to increase the company’s sales. The principle was too expensive to install and was labor intensive. Rather than “speed up” the process, the concept gave negative image to the company. As per the Fortune magazine in 2002, the McDonald Corporation showed serious problems with customer service. One of the studies by the “Mystery Shoppers” showed that the restaurant management and the employees provided slow and rude service to their customers. Second, the acquired companies did not perform the way it was expected. Unfortunately, one by one; the McDonald Corporation had to sell off all the ventures. Third, the lawsuits and global criticism of McDonald’s hurt the company and its financial growth. The global attack of negative publicity caused the company lose its market share and public image. Hence, in 2002; the company did not show any signs of improvement and the revenue growth declined immensely.
Comeback: Jim Skinner, 2004-Present
McDonald Corporation elected James Cantalupo to succeed Jack Greenberg along with two senior executives; Charles Bell and Jim Skinner. A year later, James Cantalupo died due to heart attack and Charles Bell was appointed as the CEO. Few months later, Bell stepped down due to his illness and company selected Jim Skinner to take over the leadership of McDonald’s in 2004. Jim Skinner started his career with the company flipping hamburgers in 1962; he was a college dropout but was able to climb up the ladder of the corporation over the years. As per the McDonald’s management, Skinner has a very down to earth personality. He believes in open door policy, Skinner is always open to new and innovative ideas. His idea to successful business is to communicate and involve the subordinates as well as peers before making important decisions. In order to make company profitable as well as responsible, Jim Skinner forged a strategic initiative called “Plan to Win”, which is centering on the five basics of an exceptional customer experience – People, Products, Place, Price, and Promotion. This principle has two goals: first, the upgrading of customer service to improve the financial performance of existing restaurants and second, the introduction of nutritional, healthful, and higher quality food choices coupled with the promotion of a “balanced lifestyle”, (Hill and Jones, 2010, p. C155).
Improving Stores’ Operations
In order to improve store’s operations, Skinner used his “Plan to Win” strategy. First he decided to invest internally rather than opening new stores. Skinner focused on designing, redecorating, replacing old amenities, and adding new value systems such as internet, video games, and wide-screen televisions in existing stores. Second, to improve customer service and attract new customers as well as taking care of the existing customers, McDonald management implemented extended hours policy. The company also offered management training classes to employees so that they could provide best customer service. Finally, the corporation invested into diversifying the coffee drinks. McDonald’s marketing department conducted a survey to find out consumer’s coffee preferences and added a new coffee product –McCafe’, which today is competing with Starbucks’ coffee nationwide.
Answering Its Critics
In 2004, the movie “Super Size Me”, created a negative publicity against McDonald. To respond back to the situation, Jim Skinner decided to discontinued “super size” menu from the restaurants and replaced it with healthier food diets. Also, in 2004; the company introduced milkshakes and fruits to kids’ meal. In addition, McDonald’s promoted salads and deli sandwiches. Moreover, in 2005-2006; the company launched “balanced lifestyle”, with the mission to promote McDonald’s healthier quality food.
Furthermore, between 2004-present, McDonald Corporation has been very progressive. McDonald’s strategy of offering healthier products and taking care of their customers is creating a positive impact on the company. The promotion of healthy food and focus on customer service is being implemented in all McDonalds around the globe, which is helping the company gaining customer confidence and revenue growth.
Financial Results
McDonald Corporation announced 10% increase in sales the very first year of Skinner’s leadership. Even during the deepening recession of 2008, the company was able to make profit and surprised its analysts. In 2008, McDonald’s global revenues rose by 5% and its net income tripled, producing a rate of return on sales of 18%. In 2009, whereas most of the restaurants at home as well as internationally were struggling to remain in the business, McDonald Corporation planned to expand its business by opening 650 additional outlets.
McDonald’s Critics
Although McDonald Corporation has been successful from many years, yet the company had to face several lawsuits and critics attacks from a large variety of public interest groups. Unfortunately, McDonald critics contended that the world’s largest fast-food company paid its employees low wages, hired part-time workers, and enforced an aggressive antiunion policy throughout its fast food empire (Hill and Jones, 2010, p. C146). Moreover, the consumer advocates, health officials, and educators had blamed McDonald Corporation for attracting and offering fatty and unhealthy food especially to kids, which was increasing the rate of obesity and causing many other health problems like high blood pressure and high cholesterol. Several critics accused McDonald’s management of not being socially responsible hence filing lawsuits.
From the era of late 1900’s and early 2000’s, the company appeared to have many lawsuits and negative publicity including the “McLibel Trial”, under which the company was accused of selling unhealthy food, exploiting children, mistreating workers, destroying rainforest, and torturing animals, “Jose Bove” case, led by French protestors blaming McDonald’s for undermining traditional farming methods with agribusiness practices, and the “Super size me” movie, which was released and played in movie theatres around the world. The main idea of the movie was to show the side effects of consuming McDonald’s diet. The movie depicted a man getting increasingly sick as he consumed McDonald’s diet for a month (Hill and Jones, 2010, p. C153 and C155). The litigation of all these cases impacted negatively on McDonald’s sales and revenue growth. First time in the history, McDonald Corporation announced its job cuts in 1998.
Recommendations for McDonalds’
Although McDonald Corporation is doing remarkably good nationwide as well as internationally in the fast-food industry but it is my recommendation that the company should focus on some important aspects in order to be competitive in the market such as: offering cost effective healthy meal, implementing child proof play areas, cleanliness, and Wi-Fi technology.
First of all, even though the company is offering healthier meals, but the price needs to be cost effective. Since today consumers have more options in the fast food industry; McDonald management needs to make sure that their prices are as competitive as other food chains. Second, the company needs to make play land child proof. There have been many incidents reported where the child may got hurt or injured due to no railings or carpet in the play area. With that said, the company has been sued several times due to negligence of no child security. Third, cleanliness at McDonalds is a major problem; the management must make sure that the entire site is clean and hygienic including the bathrooms and play areas. And finally, the company needs to install Wi-Fi in all McDonald Corporations in order to compete with its competitor like Burger King.
Conclusion
All in all, McDonald’s corporation is the leading brand name company in the food industry. The birth of McDonald Corporation created a revolution in the fast food market at home as well as globally. In today’s world of globalization and competition, the corporation is doing a marvelous job in keeping their customers, suppliers, and shareholders satisfy while meeting it sales revenue. The strong foundation that Ray Kroc built continues today with McDonald's vision and the commitment of their talented executives to keep the shine on McDonald's Arches for years to come. The company focuses on delivering simple, easy and enjoyable restaurant experiences for customers and creating superior value for shareholders (mcdonalds.com). Starting from the Hamburger University, advertising campaign of corporate mascot, quality customer service, cost cutting technique, global expansion, and introduction of new menu items; to “play to win” strategy, the company have had many successes. Although in the past there have been few negative publicity critics that company had to deal with but today the $15 billion dollar corporation is able to gain customer confidence, consumer praise, and children admiration by offering healthier food choices, good customer service, and innovative products at their stores. McDonald Corporation believes in being socially responsible by giving back to the community and environmentally responsible by eliminating waste and going green.
References
Hill, C., Jones, G. (2010). Strategic Management an Integrated Approach (9th ed.). Printed in
the United States of America: South-Western, Cengage Learning.
Mcdonalds.com. Retrieve August 27, 2010 from www.mcdonalds.com
USAtoday.com. Retrieve August 27, 2010 from http://www.usatoday.com/money/companies/earnings/2010-07-23-mcdonalds_N.htm?csp=obinsite
Wiley.com. Retrieve August 27, 2010 from http://www.wiley.com/legacy/products/subject/business/forbes/kroc.html
Tuesday, November 30, 2010
intel jaspreet
Running head: Case Study Intel Corporation
Case Study: Intel Corporation
ORM 680: Capstone in Strategic Management
Spring Arbor University
Jaspreet Kaur (Jas)
Terry A. O’Connor, Ph.D.
August 22, 2010
Abstract
This paper will discuss the history and development of the Intel Corporation, the characteristics of the microchip industry, the business level strategies including target market and competition; and finally the Intel’s acquisition with McAfee and the recommendations for the company.
Intel Corporation
Introduction
The purpose of this document is to analyze the existence of Intel Corporation. This document will define the history and development of the company. In addition, the paper will analyze the business strategies including target market and competition. And finally, the document will discuss the Intel’s acquisition with McAfee and recommendations for the company.
Intel Corporation is the world’s largest semiconductor makers with $10.8 billion of revenue, $4.0 billion of operating income, and $2.9 billion of net income. Today, the company designs and manufactures computing and communications components such as chipsets, hubs, switches, motherboards, microprocessors, wireless and wired connectivity products, laser printers, flash memory, imaging devices, products for Ethernet networks, storage media, and routers.
History and Development
Intel Corporation began its journey in 1968. The company was founded by two executives from Fairchild Semiconductor (later known as Silicon Valley), Robert Noyce and Gordon Moore. Noyce was the general manager at Fairchild, while Moore was the head of research and development team. During the 1980’s, a young Hungarian immigrant named Andy Grove was hired to run the Intel Corporations. Noyce, Moore, and Grove; were the first three members of the Intel family. At first, Robert Noyce and Gordon Moore decided to name the company “Moore Noyce”, but later it was named “NM Electronics”. Shortly after a year, the company experienced a name changed “Integrated Electronics”, “INTEL” for short.
To startup the new venture in the world of technology, Noyce and Moore approached a venture capitalist Arthur Rock; with a one page business plan. When asked about the business plan both Noyce and Moore replied that they were going to manufacture silicon memory chips for computers and calculators. They knew that if they could build a silicon-based integrated circuit that could function as a memory device, they could speed up computers, making them more powerful. These memory chips were known as DRAM (Hill and Jones, 2010, p. C93).
The Invention of 1103 Memory Chip and ROM
In October of 1970, the 1103 Memory Chip was manufactured. The 1103 memory chip was the revolutionary invention for the computer makers around the globe. This memory chip gave the startup boost to the company. By the end of 1971, 14 out of the world’s 18 leading mainframe computer makers were using the 1103 technology (Hill and Jones, 2010, p. C94).
The Read Only Memory (ROM) was the accidental discovery from 1103 memory chip. While manufacturing the 1103 memory chips, engineers at Intel were running into a problem for example, if an engineer made a mistake in programming the chip, he or she would have to burn another chip, which was a painstaking and time-consuming process (Hill and Jones, 2010, p. C95). Dov Froham, another ex-Fairchild researcher at Intel explored the problem and realized that there could be a potential to design an erasable and rewritten chip out of the 1103 flawless chip by shinning an ultra violet light on them. Fortunately, the idea worked and the ROM was discovered. The discovery of the ROM was a huge success for Intel Corporation. While the other competitors were struggling with the manufacturing problem of 1103, Intel was able to make profit on both the memory chips and had monopoly over ROM for two years.
The Birth of Microprocessor
In the November of 1971, the Intel Corporation invented its third most revolutionary product in the history called 4004 Microprocessor. The microprocessor was born out of an inquiry from a Japanese company. The company asked Intel if it could build a set of eight logic chips to perform arithmetic functions in a calculator it was planning to produce (Hill and Jones, 2010, p. C95). Although Japanese company decided not to build the calculator but Ted Hoff and Federico Faggin still went ahead and finished the project. As per an article in the Electronic News, 4004 microprocessor was the computer on a chip. Later that year, Intel management produced 8008 microprocessor which was the higher version of 4004 microprocessor.
From Personal Computer Revolution to the DRAM Debacle
The mid 1970’s was the era of new personal computer industry. The company named MITS produced the first personal computer and used an Intel 8080 microprocessor which was priced at $360.00 (Hill and Jones, 2010, p. C96). About the same time IBM also offered to purchase Intel’s 8088 microprocessor chip and by 1982, IBM agreed to buy 80286 microprocessor chips for their new PC named AT. Due to the high demand of AT, Intel’s microprocessor’s growth was also rising. By this time 70% of the microprocessors sold to PC manufactures were made by Intel (Hill and Jones, 2010, p. C97). This deal helped tremendously with Intel’s revenue growth.
The 1980’s was the era of disaster for the Intel’s DRAM business. Due to the new entrants from Japan, Intel started to lose DRAM business nationally as well as internationally. Although Intel’s microprocessor business was growing but company was taking a huge hit in the DRAM market. Due to the low DRAM market share, the Intel management had to decide whether to compete in this line or not? Finally, the unfortunate decision was made – Andy Grove and Gordon Moore decided to dissolve the DRAM business market.
The Microprocessor Business from 1985- present
This is the era of Intel’s growth, moving from Chip design to Computer design, acquisitions, new product lines, job cuts, product exited, and last but not the least; the very powerful invention of ATOM.
Research shows that from 1980’s to mid 2000’s, Intel Corporation has spent ample amount of money on designing newer, smaller, and faster chips. As per the data, by the mid 2000’s, the company was spending over $5.5 billion a year on R&D, or 15% of Sales. This spending was divided between chip design and improving manufacturing process (Hill and Jones, 2010, p. C99). In order to be competitive in the industry, Intel Corporation holds hundreds of patents on their products and the processes of manufacturing semiconductors. From the invention of i386 to Pentium, Intel has gained a huge market share.
The Intel Inside campaign of 1991 opened many doors for the company. The main goal of this campaign was to inform the customer that the Intel chip inside the computer would guarantee advanced technology and compatibility of the prior software. The spectacular success of the campaign helped company raised its sales from 60% to 80%. By 1994, some 1200 computer companies had signed on the campaign, adhering “Intel Inside” logo on their products. Because of this success, the Intel Corporation was listed as the third most valuable company on the planet.
Today, in order to quench customer’s thirst and be competitive in the industry, Intel Corporation is continuing developing new technological and advanced products. Company’s success lies in the ability to exceed the expectations of their customers, employees, and stockholders. Intel’s goal is “We are Intel Sponsors of Tomorrow™, not only through our technical innovation, but through our endless efforts in education, environmental sustainability, healthcare, and much, much more. We believe that technology makes life more exciting and can help improve the lives of people around the world. Therein lies the endless opportunity”, (intel.com).
The role of Andy Grove at Intel and his Management Style
Grove was one of the three original Intel family members. He was recruited from Fairchild semiconductors by Noyce and Moore. At Intel, he was appointed as a director of operations with the responsibility of getting products designed and manufactured at lower cost. In 1987, he became the CEO of the company.
Grove was considered to be one of the most effective managers of the late twentieth century. His management style was known for a confrontational “in your face” management style. He was very demanding, detail oriented, and autocratic leader who set high expectations for everyone, including himself. At Intel, he earned himself a nick name “Mr. Clean”. Grove was always looking for ways to drive down the cost and speed up the manufacturing process. He would control managers through a regular budgeting process that required them to make detailed revenue and cost projections. In addition, he would have monthly managers meeting in which the management from various parts of the company was required to do presentation on SWOT analysis. The goal was to get managers to step back and look at bigger picture, and to encourage them to help each other solve problems. During his management role, he pushed HR to institute a standard system of ranking and rating the employees that had four performance categories: “superior”, “exceed expectations”, “meet expectations”, or “does not meet expectations” (Hill and Jones, 2010, p. C94).
The Barrett Era
Craig Barrett started his career with Intel in 1993; he was appointed as the chief operating officer and later in 1998 became the CEO of the company. Barrett era is considered to be the embarrassing and failing era in Intel’s history. Barrett’s tenure as CEO was marked by an aggressive push into new markets (Hill and Jones, 2010, p. C101). By the 1990’s internet started to take center place in the computing industry. Barrett saw the opportunities and decided to push for product diversification in the areas of internet and wireless handsets. Unfortunately, the company had to face several failures and was unable to compete with strong companies such as Texas Instruments and Qualcomm.
During the management of Barrett, the company was experiencing management issues and product delays, which drove some customers to AMD. Because of the poor leadership skills, the company’s sales dropped tremendously. The early 2000’s was reported to be the worse years in the history of Intel.
Paul Otellini’s Platform Strategy
In 2005, Paul Otellini took over the responsibility of Intel Corporation and became the CEO. He came up with the idea of reserving the Pentium brand for higher end chips and creating a new brand, Celeron, for lower performance chips aimed at low-cost PCs. Introduced in 2003, the Centrino was a huge hit and helped to pull Intel out of its sales slump. By 2008, Intel was dominating the market for laptop chips with its chipset offerings (Hill and Jones, 2010, p. C102).
Otellini’s platform strategy played a huge role in Intel’s profit margin. His idea of designing separate “platform” for each product made a big difference in company’s growth rate. Otellini announced a sweeping reorganization of Intel, creating separate market focused divisions for mobile computing, corporate computing, home computing, and health care computing. Each division has its own engineering, software, and marketing personnel, and is charged with developing a platform for its target market (Hill and Jones, 2010, p. C102).
The Characteristics of the Microchip Industry
The microchip can be characterized as a small semiconductor which is used to carry out electronic functions in an integrated circuit. The microchip was first invented in 1958, but was commercially made available in1961. The original IC (integrated circuit) had only one transistor, three resistors and one capacitor and was the size of an adult's pinkie finger. Today, an IC is smaller than a penny which can hold 125 million transistors (inventorsabout.com). In early days, the microchip was only used in electronic gadgets such as computers and calculators but today microchip has become part of our daily lives. In today’s advanced world of technology, microchips are being used in cell phones, microwaves, printers, toys, automobiles, and last but not the least in living organisms.
The Business Level Strategies including Competition and Target Market
An organization's core competencies should be focused on satisfying customer needs or preferences in order to achieve above average returns. This is done through Business-level strategies. Business level strategies detail actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets. Business-level strategy is concerned with a firm's position in an industry (Albany.edu). There are four types of business level strategies: Cost Leadership, Focused Cost Leadership, Differentiation, and Focused Differentiation.
Today, Intel Corporation is the world’s largest semiconductor chip makers by revenue (intel.com). The company did not acquire this position by luck, the Intel’s management and executives had to work hard in order to achieve this title. For a company to be successful in the industry they have to differentiate themselves from their competitors.
Intel Corporation’s strategy of providing new innovative products, worldwide acquisitions and mergers, offering great customer service, and focus on their target market allows them to differentiate themselves from the other competitors such as AMD, Texas Instruments, Hitachi Ltd., Nikon Corporations, and Samsung Electronics. As per the yahoo finance report in 2010, Intel Corporation has had the highest revenue growth as compare to the competitors in the industry.
Intel Corporation’s major customers are: Original equipment manufacturers (OEMs) and original design manufacturers (ODMs) who make computer systems, cellular handsets and handheld computing devices, and telecommunications and networking communications equipment; PC and network communications products users (including individuals, large and small businesses, and service providers) who buy PC components and board-level products, as well as Intel’s networking and communications products, through distributor, reseller, retail, and OEM channels throughout the world (intel.com).
Differentiation business strategy
A company pursuing a differentiation business model pursues business-level strategies that allow it to create a unique product, one that customers perceive as different or distinct in some important way (Hill and Jones, 2010, p. 161).
Intel Corporation was born with a goal to create innovative products in the industry of computing and communications. The founders of Intel, Robert Noyce and Gordon Moore; had a mission to design a semiconductor chip and create a revolution in the world of technology. With that said, the company was able to produce a miraculous discovery that no one had imagined before. From the invention of DRAM to the birth of microprocessor, the Intel Corporation was able to monopolize the market.
Today, the Intel Corporation’s goal is to be the preeminent provider of semiconductor chips and platforms for the worldwide digital economy (intel.com). The management is continuously and precisely working hard to accomplish this goal. The company’s focus of producing innovative products by investing large amount of money in research and development, continuously looking ways to improve the manufacturing process, providing technical and educational seminars around the globe, prompt customer service in several languages, and finally, software development resources sets them apart from other competitors in the market. With all these qualities, Intel Corporation is able to gain competitive advantage and customer confidence, which helps the company increase profit revenues.
Intel’s acquisition with McAfee
Recently, Intel Corporation has agreed to acquire McAfee; the antivirus software company. The merger will help bring both the leaders in the technological world together as one power. This acquisition cost Intel Corporation $7 billion dollars. This deal could be a great opportunity for both the companies but would be a huge threat for the competitors. Intel Corporation did not buy McAfee just so they could have in house security built PCs but the main reason is growing industry of wireless network around the globe.
Today, almost every electronic gadget such as computers, calculators, blue ray technology, printers, kitchen appliances, and many more are equipped with wireless network technology. As the network connected industry is growing rapidly, there is a huge security risk as well. With that said, this merger will open up many doors for Intel Corporation as they will be able to provide vast variety of their products with security software integrated in it to the customers.
Moreover, this acquisition will benefit Intel Corporation with a great deal. The company will have a competitive advantage over other competitors in the industry. In addition, this merger will help gain the market share and revenue growth.
Recommendations for Intel
Although, Intel Corporation is doing remarkably good in the area of technology but it is my recommendation that the company should focus on two major aspects first, lowering the price of their products and second, invent products for the medical industry.
First, due to the globalization; today customers have the opportunity to buy their products from anywhere around the globe. For Intel to stay in the business, the company should find ways to lower the price of their products. In order to compete with other businesses in the market, Intel Corporation must develop products that are just not reliable but are also cost effective. Second, today the medical industry is growing rapidly. For companies to survive in the industry, they must come up with a product that can be served in the medical industry. I would advice Intel to design a microchip that could be used in the medical industry to serve the patients with their needs.
Conclusion
All in all, Intel Corporation is the leading semiconductor company in the universe of technology. The company strives to optimize the overall performance improvements of their products by balancing increased performance capabilities with improved energy efficiency. In addition, Intel offers products at various levels of integration, to allow their customers flexibility in creating computing and communications systems (intel.com). The $10.8 billion company was born with a focus to invent microchips but today the company has several product lines such as: microprocessors, chipsets, motherboards, and wireless and wired Ethernet network. Intel Corporation’s business level strategy of designing and manufacturing innovative products helps the company differentiate themselves from the competitors in the industry. And finally, Intel Corporation’s approach to acquire other scientific businesses helps increase the company growth and revenues.
References
Albany.edu. Retrieve August 21, 2010 from http://www.albany.edu/faculty/ja0754/bmgt481/lecture4.html
Hill, C., Jones, G. (2010). Strategic Management an Integrated Approach (9th ed.). Printed in
the United States of America: South-Western, Cengage Learning.
Intel.com. Retrieve August 21, from http://www.intc.com/corpInfo.cfm
Inventors.com. Retrieve August 21, 2010 from http://inventors.about.com/od/istartinventions/a/intergrated_circuit.htm
Yahoo.com. Retrieve August 21, 2010 from www.yahoo.finance.com
Case Study: Intel Corporation
ORM 680: Capstone in Strategic Management
Spring Arbor University
Jaspreet Kaur (Jas)
Terry A. O’Connor, Ph.D.
August 22, 2010
Abstract
This paper will discuss the history and development of the Intel Corporation, the characteristics of the microchip industry, the business level strategies including target market and competition; and finally the Intel’s acquisition with McAfee and the recommendations for the company.
Intel Corporation
Introduction
The purpose of this document is to analyze the existence of Intel Corporation. This document will define the history and development of the company. In addition, the paper will analyze the business strategies including target market and competition. And finally, the document will discuss the Intel’s acquisition with McAfee and recommendations for the company.
Intel Corporation is the world’s largest semiconductor makers with $10.8 billion of revenue, $4.0 billion of operating income, and $2.9 billion of net income. Today, the company designs and manufactures computing and communications components such as chipsets, hubs, switches, motherboards, microprocessors, wireless and wired connectivity products, laser printers, flash memory, imaging devices, products for Ethernet networks, storage media, and routers.
History and Development
Intel Corporation began its journey in 1968. The company was founded by two executives from Fairchild Semiconductor (later known as Silicon Valley), Robert Noyce and Gordon Moore. Noyce was the general manager at Fairchild, while Moore was the head of research and development team. During the 1980’s, a young Hungarian immigrant named Andy Grove was hired to run the Intel Corporations. Noyce, Moore, and Grove; were the first three members of the Intel family. At first, Robert Noyce and Gordon Moore decided to name the company “Moore Noyce”, but later it was named “NM Electronics”. Shortly after a year, the company experienced a name changed “Integrated Electronics”, “INTEL” for short.
To startup the new venture in the world of technology, Noyce and Moore approached a venture capitalist Arthur Rock; with a one page business plan. When asked about the business plan both Noyce and Moore replied that they were going to manufacture silicon memory chips for computers and calculators. They knew that if they could build a silicon-based integrated circuit that could function as a memory device, they could speed up computers, making them more powerful. These memory chips were known as DRAM (Hill and Jones, 2010, p. C93).
The Invention of 1103 Memory Chip and ROM
In October of 1970, the 1103 Memory Chip was manufactured. The 1103 memory chip was the revolutionary invention for the computer makers around the globe. This memory chip gave the startup boost to the company. By the end of 1971, 14 out of the world’s 18 leading mainframe computer makers were using the 1103 technology (Hill and Jones, 2010, p. C94).
The Read Only Memory (ROM) was the accidental discovery from 1103 memory chip. While manufacturing the 1103 memory chips, engineers at Intel were running into a problem for example, if an engineer made a mistake in programming the chip, he or she would have to burn another chip, which was a painstaking and time-consuming process (Hill and Jones, 2010, p. C95). Dov Froham, another ex-Fairchild researcher at Intel explored the problem and realized that there could be a potential to design an erasable and rewritten chip out of the 1103 flawless chip by shinning an ultra violet light on them. Fortunately, the idea worked and the ROM was discovered. The discovery of the ROM was a huge success for Intel Corporation. While the other competitors were struggling with the manufacturing problem of 1103, Intel was able to make profit on both the memory chips and had monopoly over ROM for two years.
The Birth of Microprocessor
In the November of 1971, the Intel Corporation invented its third most revolutionary product in the history called 4004 Microprocessor. The microprocessor was born out of an inquiry from a Japanese company. The company asked Intel if it could build a set of eight logic chips to perform arithmetic functions in a calculator it was planning to produce (Hill and Jones, 2010, p. C95). Although Japanese company decided not to build the calculator but Ted Hoff and Federico Faggin still went ahead and finished the project. As per an article in the Electronic News, 4004 microprocessor was the computer on a chip. Later that year, Intel management produced 8008 microprocessor which was the higher version of 4004 microprocessor.
From Personal Computer Revolution to the DRAM Debacle
The mid 1970’s was the era of new personal computer industry. The company named MITS produced the first personal computer and used an Intel 8080 microprocessor which was priced at $360.00 (Hill and Jones, 2010, p. C96). About the same time IBM also offered to purchase Intel’s 8088 microprocessor chip and by 1982, IBM agreed to buy 80286 microprocessor chips for their new PC named AT. Due to the high demand of AT, Intel’s microprocessor’s growth was also rising. By this time 70% of the microprocessors sold to PC manufactures were made by Intel (Hill and Jones, 2010, p. C97). This deal helped tremendously with Intel’s revenue growth.
The 1980’s was the era of disaster for the Intel’s DRAM business. Due to the new entrants from Japan, Intel started to lose DRAM business nationally as well as internationally. Although Intel’s microprocessor business was growing but company was taking a huge hit in the DRAM market. Due to the low DRAM market share, the Intel management had to decide whether to compete in this line or not? Finally, the unfortunate decision was made – Andy Grove and Gordon Moore decided to dissolve the DRAM business market.
The Microprocessor Business from 1985- present
This is the era of Intel’s growth, moving from Chip design to Computer design, acquisitions, new product lines, job cuts, product exited, and last but not the least; the very powerful invention of ATOM.
Research shows that from 1980’s to mid 2000’s, Intel Corporation has spent ample amount of money on designing newer, smaller, and faster chips. As per the data, by the mid 2000’s, the company was spending over $5.5 billion a year on R&D, or 15% of Sales. This spending was divided between chip design and improving manufacturing process (Hill and Jones, 2010, p. C99). In order to be competitive in the industry, Intel Corporation holds hundreds of patents on their products and the processes of manufacturing semiconductors. From the invention of i386 to Pentium, Intel has gained a huge market share.
The Intel Inside campaign of 1991 opened many doors for the company. The main goal of this campaign was to inform the customer that the Intel chip inside the computer would guarantee advanced technology and compatibility of the prior software. The spectacular success of the campaign helped company raised its sales from 60% to 80%. By 1994, some 1200 computer companies had signed on the campaign, adhering “Intel Inside” logo on their products. Because of this success, the Intel Corporation was listed as the third most valuable company on the planet.
Today, in order to quench customer’s thirst and be competitive in the industry, Intel Corporation is continuing developing new technological and advanced products. Company’s success lies in the ability to exceed the expectations of their customers, employees, and stockholders. Intel’s goal is “We are Intel Sponsors of Tomorrow™, not only through our technical innovation, but through our endless efforts in education, environmental sustainability, healthcare, and much, much more. We believe that technology makes life more exciting and can help improve the lives of people around the world. Therein lies the endless opportunity”, (intel.com).
The role of Andy Grove at Intel and his Management Style
Grove was one of the three original Intel family members. He was recruited from Fairchild semiconductors by Noyce and Moore. At Intel, he was appointed as a director of operations with the responsibility of getting products designed and manufactured at lower cost. In 1987, he became the CEO of the company.
Grove was considered to be one of the most effective managers of the late twentieth century. His management style was known for a confrontational “in your face” management style. He was very demanding, detail oriented, and autocratic leader who set high expectations for everyone, including himself. At Intel, he earned himself a nick name “Mr. Clean”. Grove was always looking for ways to drive down the cost and speed up the manufacturing process. He would control managers through a regular budgeting process that required them to make detailed revenue and cost projections. In addition, he would have monthly managers meeting in which the management from various parts of the company was required to do presentation on SWOT analysis. The goal was to get managers to step back and look at bigger picture, and to encourage them to help each other solve problems. During his management role, he pushed HR to institute a standard system of ranking and rating the employees that had four performance categories: “superior”, “exceed expectations”, “meet expectations”, or “does not meet expectations” (Hill and Jones, 2010, p. C94).
The Barrett Era
Craig Barrett started his career with Intel in 1993; he was appointed as the chief operating officer and later in 1998 became the CEO of the company. Barrett era is considered to be the embarrassing and failing era in Intel’s history. Barrett’s tenure as CEO was marked by an aggressive push into new markets (Hill and Jones, 2010, p. C101). By the 1990’s internet started to take center place in the computing industry. Barrett saw the opportunities and decided to push for product diversification in the areas of internet and wireless handsets. Unfortunately, the company had to face several failures and was unable to compete with strong companies such as Texas Instruments and Qualcomm.
During the management of Barrett, the company was experiencing management issues and product delays, which drove some customers to AMD. Because of the poor leadership skills, the company’s sales dropped tremendously. The early 2000’s was reported to be the worse years in the history of Intel.
Paul Otellini’s Platform Strategy
In 2005, Paul Otellini took over the responsibility of Intel Corporation and became the CEO. He came up with the idea of reserving the Pentium brand for higher end chips and creating a new brand, Celeron, for lower performance chips aimed at low-cost PCs. Introduced in 2003, the Centrino was a huge hit and helped to pull Intel out of its sales slump. By 2008, Intel was dominating the market for laptop chips with its chipset offerings (Hill and Jones, 2010, p. C102).
Otellini’s platform strategy played a huge role in Intel’s profit margin. His idea of designing separate “platform” for each product made a big difference in company’s growth rate. Otellini announced a sweeping reorganization of Intel, creating separate market focused divisions for mobile computing, corporate computing, home computing, and health care computing. Each division has its own engineering, software, and marketing personnel, and is charged with developing a platform for its target market (Hill and Jones, 2010, p. C102).
The Characteristics of the Microchip Industry
The microchip can be characterized as a small semiconductor which is used to carry out electronic functions in an integrated circuit. The microchip was first invented in 1958, but was commercially made available in1961. The original IC (integrated circuit) had only one transistor, three resistors and one capacitor and was the size of an adult's pinkie finger. Today, an IC is smaller than a penny which can hold 125 million transistors (inventorsabout.com). In early days, the microchip was only used in electronic gadgets such as computers and calculators but today microchip has become part of our daily lives. In today’s advanced world of technology, microchips are being used in cell phones, microwaves, printers, toys, automobiles, and last but not the least in living organisms.
The Business Level Strategies including Competition and Target Market
An organization's core competencies should be focused on satisfying customer needs or preferences in order to achieve above average returns. This is done through Business-level strategies. Business level strategies detail actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets. Business-level strategy is concerned with a firm's position in an industry (Albany.edu). There are four types of business level strategies: Cost Leadership, Focused Cost Leadership, Differentiation, and Focused Differentiation.
Today, Intel Corporation is the world’s largest semiconductor chip makers by revenue (intel.com). The company did not acquire this position by luck, the Intel’s management and executives had to work hard in order to achieve this title. For a company to be successful in the industry they have to differentiate themselves from their competitors.
Intel Corporation’s strategy of providing new innovative products, worldwide acquisitions and mergers, offering great customer service, and focus on their target market allows them to differentiate themselves from the other competitors such as AMD, Texas Instruments, Hitachi Ltd., Nikon Corporations, and Samsung Electronics. As per the yahoo finance report in 2010, Intel Corporation has had the highest revenue growth as compare to the competitors in the industry.
Intel Corporation’s major customers are: Original equipment manufacturers (OEMs) and original design manufacturers (ODMs) who make computer systems, cellular handsets and handheld computing devices, and telecommunications and networking communications equipment; PC and network communications products users (including individuals, large and small businesses, and service providers) who buy PC components and board-level products, as well as Intel’s networking and communications products, through distributor, reseller, retail, and OEM channels throughout the world (intel.com).
Differentiation business strategy
A company pursuing a differentiation business model pursues business-level strategies that allow it to create a unique product, one that customers perceive as different or distinct in some important way (Hill and Jones, 2010, p. 161).
Intel Corporation was born with a goal to create innovative products in the industry of computing and communications. The founders of Intel, Robert Noyce and Gordon Moore; had a mission to design a semiconductor chip and create a revolution in the world of technology. With that said, the company was able to produce a miraculous discovery that no one had imagined before. From the invention of DRAM to the birth of microprocessor, the Intel Corporation was able to monopolize the market.
Today, the Intel Corporation’s goal is to be the preeminent provider of semiconductor chips and platforms for the worldwide digital economy (intel.com). The management is continuously and precisely working hard to accomplish this goal. The company’s focus of producing innovative products by investing large amount of money in research and development, continuously looking ways to improve the manufacturing process, providing technical and educational seminars around the globe, prompt customer service in several languages, and finally, software development resources sets them apart from other competitors in the market. With all these qualities, Intel Corporation is able to gain competitive advantage and customer confidence, which helps the company increase profit revenues.
Intel’s acquisition with McAfee
Recently, Intel Corporation has agreed to acquire McAfee; the antivirus software company. The merger will help bring both the leaders in the technological world together as one power. This acquisition cost Intel Corporation $7 billion dollars. This deal could be a great opportunity for both the companies but would be a huge threat for the competitors. Intel Corporation did not buy McAfee just so they could have in house security built PCs but the main reason is growing industry of wireless network around the globe.
Today, almost every electronic gadget such as computers, calculators, blue ray technology, printers, kitchen appliances, and many more are equipped with wireless network technology. As the network connected industry is growing rapidly, there is a huge security risk as well. With that said, this merger will open up many doors for Intel Corporation as they will be able to provide vast variety of their products with security software integrated in it to the customers.
Moreover, this acquisition will benefit Intel Corporation with a great deal. The company will have a competitive advantage over other competitors in the industry. In addition, this merger will help gain the market share and revenue growth.
Recommendations for Intel
Although, Intel Corporation is doing remarkably good in the area of technology but it is my recommendation that the company should focus on two major aspects first, lowering the price of their products and second, invent products for the medical industry.
First, due to the globalization; today customers have the opportunity to buy their products from anywhere around the globe. For Intel to stay in the business, the company should find ways to lower the price of their products. In order to compete with other businesses in the market, Intel Corporation must develop products that are just not reliable but are also cost effective. Second, today the medical industry is growing rapidly. For companies to survive in the industry, they must come up with a product that can be served in the medical industry. I would advice Intel to design a microchip that could be used in the medical industry to serve the patients with their needs.
Conclusion
All in all, Intel Corporation is the leading semiconductor company in the universe of technology. The company strives to optimize the overall performance improvements of their products by balancing increased performance capabilities with improved energy efficiency. In addition, Intel offers products at various levels of integration, to allow their customers flexibility in creating computing and communications systems (intel.com). The $10.8 billion company was born with a focus to invent microchips but today the company has several product lines such as: microprocessors, chipsets, motherboards, and wireless and wired Ethernet network. Intel Corporation’s business level strategy of designing and manufacturing innovative products helps the company differentiate themselves from the competitors in the industry. And finally, Intel Corporation’s approach to acquire other scientific businesses helps increase the company growth and revenues.
References
Albany.edu. Retrieve August 21, 2010 from http://www.albany.edu/faculty/ja0754/bmgt481/lecture4.html
Hill, C., Jones, G. (2010). Strategic Management an Integrated Approach (9th ed.). Printed in
the United States of America: South-Western, Cengage Learning.
Intel.com. Retrieve August 21, from http://www.intc.com/corpInfo.cfm
Inventors.com. Retrieve August 21, 2010 from http://inventors.about.com/od/istartinventions/a/intergrated_circuit.htm
Yahoo.com. Retrieve August 21, 2010 from www.yahoo.finance.com
cadbury
Running head: Case Study Cadbury Schweppes: Capturing Confectionery
Case Study: Cadbury Schweppes: Capturing Confectionery
ORM 680: Capstone in Strategic Management
Spring Arbor University
Jaspreet Kaur (Jas)
Terry A. O’Connor, Ph.D.
September 6, 2010
Abstract
Cadbury Schweppes formed its joint venture in 1969. The company went through several mergers and acquisitions from 1969 to 2008, but the company was able to survive and became the global leader in confectionery and soft drink business. In the early stage, the company had to struggle but by the late 1900’s Cadbury Schweppes started to expand its business worldwide. The company had franchises in United States and Europe and acquired various businesses in other parts of the world. By the early 2000’s the company decided to demerger. In 2008, the beverage site of the business (Schweppes) became Dr Pepper Snapple Group and confectionery (Cadbury) was bought by Kraft Foods the very next year.
Cadbury Schweppes: Capturing Confectionery
Introduction
The purpose of this document is to analyze the existence of Cadbury Schweppes. This paper will describe the history and background of the company. In addition, the document will identify and discuss the global initiatives of Cadbury Schweppes. And finally, the document will discuss the recommendations for the corporation.
History and Background
Cadbury Schweppes began its journey in 1969 with the merger of a beverage company started by Jacob Schweppe in 1783 in Geneva, Switzerland and a chocolate business started by John Cadbury in Birmingham, U.K. in 1824 (Hill and Jones, 2010, p. C311). Cadbury Schweppes was the world’s oldest profitable family owned business till the early 2000’s. With origins stretching back over 200 years, Cadbury Schweppes became the international beverage and confectionery company employing over 40,000 people. Working together to create brands people love, company’s portfolio included well-known favorites Cadbury, Schweppes, Dr Pepper, 7 UP, Snapple, Orangina, Hollywood, Stimorol, Trebor and Bassett, enjoyed in almost 200 countries around the world. Cadbury Schweppes was listed in the stock exchange of London (CBRY) and New York (CSG) (victoryseeds.com). In May of 2008, both the Cadbury and Schweppes declared the demerger of the Cadbury Schweppes PLC.
Cadbury, 1824-1969
John Cadbury was the founder of Cadbury chocolates business. In 1824, he opened up his grocery business in Birmingham. The main focus of the business was to market drinking cocoa and chocolate products. By 1847, John Cadbury took on a partnership with his brother Benjamin and began manufacturing cocoa products. Although the concept of their business was new and innovative but unfortunately the profit margin was very low. In 1860, due to declining profit margin; both the brothers decided to dissolve the partnership. As a result, Benjamin left the company; John took retirement, and left the business with his two sons, George and Richard. By 1866, the new Cadbury brothers introduced an improved process for pressing cocoa butter out of the cocoa bean to produce cocoa essence (answers.com). From 1866 – 1964, the company acquired various businesses in the chocolate industry and went globally. In 1964 Cadbury entered the sugar-candy business when it acquired confectioner Pascall Murray and by 1969, the company merged with Schweppes (answers.com).
Schweppes, 1783-1969
Jacob Schweppes, a German born jeweler and an amateur chemist began his company Schweppes in 1783. Through the 1700’s to mid 1800’s Schweppes entered into several joint ventures and mergers. In 1870’s the company introduced tonic water, ginger ale, and lemonade; which was a huge success for Schweppes. The era of 1900’s gave company the strength to expand its business overseas. In 1960, it acquired three makers of jams and jellies: Hartley's, Moorhouse, and Chivers. These acquisitions required substantial reorganization, however, and did not work out very well; by 1964 only Hartley's was turning a profit for its parent company. Nonetheless, Schweppes prospered under Sir Frederick Hooper's guidance. Its annual profits increased nearly sevenfold between 1953 and 1962, from $756,000 to $4.8 million (answers.com). In 1964, Hooper got retired from the company and Harold Watkinson took over the leadership of Schweppes Corporation. In 1969, Schweppes signed an agreement with Cadbury and bought its shares to merge with the company.
Cadbury Schweppes, 1969-2008
The year 1969, brought two companies; Cadbury and Schweppes together to run the soft drink and chocolate business around the globe. Under the agreement, the new company was named “Cadbury Schweppes”. Harold Watkinson was appointed as the CEO and Adrian Cadbury became the deputy chairman of the company. While Schweppes was best known for its mixers, such as tonic water, the firm was the number three competitor in the beverage business after Coca-Cola and PepsiCo. Cadbury was the number four player in the global chocolate business, having exited related businesses such as biscuits (cookies) in a restructuring, in the 1980’s. The company introduced several new brands in the beverage site such as: Canada Dry and Sunkist (1986), Dr. Pepper and Seven-Up (1995), and Orangina (2001), Hawaiian Punch (1999), and Snapple in 2000. In confectionery, the firm acquired non-chocolate businesses such as: Trebor, Bassett, and Hollywood, its first chewing gum acquisition in 2002 (Hill and Jones, 2010, C311). In early 2002, Cadbury Schweppes acquired Danish Company, Dandy; to expand its business into gum market. The company invested $307 million dollars in the acquisition.
From 1969 to 2008, Cadbury Schweppes acquired many beverage and confectionery businesses around the globe. Due to the new and innovative products, the company was able to expand its business and gain customer confidence. The company’s soft drink products became the hit in the market due to the high carbonate as compare to other competitors in the industry. In the confectionery site of the business, Cadbury Schweppes was able to produce variety of chocolates which created a huge demand for their products. The company had both positive and negative experiences throughout these years. Many times company was able to produce profit margin and positive growth rate but there were several incidents where the company was struggling. Finally, in 2008; the company announced its demerger and shocked the management, employees, customers, and shareholders.
Demerger
In 2008, Cadbury Schweppes declared its demerger. The drinks business became Dr. Pepper Snapple Group Inc. and the chocolate and confectionery business was acquired by Kraft Foods the very next year.
Global Initiatives of Cadbury Schweppes
Cadbury Schweppes began to expand its business at international platform by late 1900’s. The company acquired businesses in Europe as well as in United States. In Asia, Cadbury Schweppes was able to develop its business with the help of British Colonies. In 1980’s the company focused on opening and acquiring businesses in both confectionery and soft drink in many nations including France, Australia, Spain, India, United States, and United Kingdom. In United States, the company acquired Peter Paul confectionery business for $58 million and Duffy-Mott, producer of fruit juices for $60 million. Both the companies gave Cadbury Schweppes competitive advantage over other competitors and gave company large amount of candy and soft drink share in the U.S. market. With the continuous growth, the company acquired Chocolat Poulain confectionery for $173.1 million in France and sold its confectionery business to Hershey’s in United States as a franchise.
The acquisition of Adams from Pfizer changed company’s portfolio positively. Cadbury Schweppes became the leader of confectionery business worldwide. The company was able to hold about 26% of chewing gum market share in the global market. The acquisition comprises the principal brands, including Halls, Trident, Dentyne/Dentyne Ice, the "Bubbas", Clorets, Chiclets and Certs, together with other functional confectionery products, manufacturing facilities and international sales, distribution and support networks. As per John Sunderland, CEO of Cadbury Schweppes; Adams gave us confectionery market leadership and a unique portfolio with an offering in every confectionery category. It brought powerful brands, access to new geographies and significant scale in the fastest growing confectionery sectors. Cost and revenue synergies, and the opportunity to drive the business within a global confectionery group, it created significant value for our shareowners”, (victoryseeds.com).
Principal Subsidiaries of Cadbury Schweppes
Schweppes France; Schweppes Spain; Schweppes Belgium; Schweppes Portugual; Cadbury Aguas Minerales (Mexico); Cadbury TreborBasset; Cafe Cadbury; Cadbury France; Hollywood (France); Cadbury Dulciora (Spain); Cadbury Portugal Productors de Confeitaria LSA; Piasten Schokoladenfabrik Hofmann (Germany); Cadbury Wedel (Poland); Cadbury O.O.O. (Russia); Cadbury Netherlands BV; Cadbury Ireland; Dr Pepper/Seven Up, Inc. (U.S.A.); Mott's (U.S.A.); Snapple Beverages Group (U.S.A.); Cadbury Trebor Allan (Canada); Jaret International (U.S.A.); Cadbury Stani (U.S.A.); Cadbury Schweppes Pty Ltd. (Australia); Cadbury Food Co. Ltd. China; Cadbury Food Co. Beijing (China); Trebor Wuxi Confectionery Co. (China); Cadbury Four Seas Co. Ltd. (Hong Kong); PT Cadbury Indonesia; Cadbury Japan Ltd.; Cadbury Confectionery Malaysia Sdn Bhd; Cadbury Confectionery Limited (New Zealand); Cadbury Philippines; Cadbury Singapore PTE Limited; Cadbury Schweppes (South Africa); Bromor Foods (South Africa); Cadbury Kenya; Cadbury Ghana; Cadbury Nigeria; Cadbury Egypt; Cadbury India Ltd (answer.com).
Recommendations for Cadbury Schweppes
Cadbury Schweppes are no longer existed as a joint venture. The Cadbury was bought by Kraft Foods and the Schweppes became Dr Pepper Snapple Group. Although the company does not have combined market name but the consumers still have trust and desire in their products. Since, the company Cadbury Schweppes was in business from several decades; consumers are able to differentiate the taste of their products. With that said, it is my recommendation that both the companies, Kraft Foods and Dr Pepper Snapple Group; should concentrate on keeping the same ingredients in their products so that they don’t lose the existing customer base and in order to attract the new customer base, both the companies should invest in their R&D for better product outcome.
Conclusion
All in all, Cadbury Schweppes was formed with the idea to bring new products in the industry as well as become the global leader in confectionery and soft drink business. The company’s journey began with a merger between Schweppes and Cadbury. Schweppes was best known in the business of soft drinks and the Cadbury was popular for its chocolate business. By 1969, both the company’s decided to merge together to become the global power in confectionery and soft drink industry. Within the few years, the company acquired many businesses around the globe in order to expand its horizons. By the late 1900’s the company had over 26% of market share in the candy industry in United States. Moreover, the company grew tremendously in other parts of the world.
By the 2000’s, Cadbury Schweppes decided to demerge its business line by splitting the beverage and confectionery business. In 2008, the Schweppes became Dr Pepper Snapple Group (DPS) and the Cadbury was bought by Kraft Foods. Overall, today both the DPS and Kraft Foods are one of the favorite food and soft drink companies rated by consumers.
References
Answers.com. Retrieve September 4, 2010 from http://www.answers.com/topic/cadbury-schweppes-plc-adr#Merger_with_Schweppes
Hill, C., Jones, G. (2010). Strategic Management an Integrated Approach (9th ed.). Printed in
the United States of America: South-Western, Cengage Learning.
Victoryseeds.com. Retrieve September 5, 2010 from http://www.victoryseeds.com/candystore/confectioners/pr/pr_cadbury_adams_121702.htm
Case Study: Cadbury Schweppes: Capturing Confectionery
ORM 680: Capstone in Strategic Management
Spring Arbor University
Jaspreet Kaur (Jas)
Terry A. O’Connor, Ph.D.
September 6, 2010
Abstract
Cadbury Schweppes formed its joint venture in 1969. The company went through several mergers and acquisitions from 1969 to 2008, but the company was able to survive and became the global leader in confectionery and soft drink business. In the early stage, the company had to struggle but by the late 1900’s Cadbury Schweppes started to expand its business worldwide. The company had franchises in United States and Europe and acquired various businesses in other parts of the world. By the early 2000’s the company decided to demerger. In 2008, the beverage site of the business (Schweppes) became Dr Pepper Snapple Group and confectionery (Cadbury) was bought by Kraft Foods the very next year.
Cadbury Schweppes: Capturing Confectionery
Introduction
The purpose of this document is to analyze the existence of Cadbury Schweppes. This paper will describe the history and background of the company. In addition, the document will identify and discuss the global initiatives of Cadbury Schweppes. And finally, the document will discuss the recommendations for the corporation.
History and Background
Cadbury Schweppes began its journey in 1969 with the merger of a beverage company started by Jacob Schweppe in 1783 in Geneva, Switzerland and a chocolate business started by John Cadbury in Birmingham, U.K. in 1824 (Hill and Jones, 2010, p. C311). Cadbury Schweppes was the world’s oldest profitable family owned business till the early 2000’s. With origins stretching back over 200 years, Cadbury Schweppes became the international beverage and confectionery company employing over 40,000 people. Working together to create brands people love, company’s portfolio included well-known favorites Cadbury, Schweppes, Dr Pepper, 7 UP, Snapple, Orangina, Hollywood, Stimorol, Trebor and Bassett, enjoyed in almost 200 countries around the world. Cadbury Schweppes was listed in the stock exchange of London (CBRY) and New York (CSG) (victoryseeds.com). In May of 2008, both the Cadbury and Schweppes declared the demerger of the Cadbury Schweppes PLC.
Cadbury, 1824-1969
John Cadbury was the founder of Cadbury chocolates business. In 1824, he opened up his grocery business in Birmingham. The main focus of the business was to market drinking cocoa and chocolate products. By 1847, John Cadbury took on a partnership with his brother Benjamin and began manufacturing cocoa products. Although the concept of their business was new and innovative but unfortunately the profit margin was very low. In 1860, due to declining profit margin; both the brothers decided to dissolve the partnership. As a result, Benjamin left the company; John took retirement, and left the business with his two sons, George and Richard. By 1866, the new Cadbury brothers introduced an improved process for pressing cocoa butter out of the cocoa bean to produce cocoa essence (answers.com). From 1866 – 1964, the company acquired various businesses in the chocolate industry and went globally. In 1964 Cadbury entered the sugar-candy business when it acquired confectioner Pascall Murray and by 1969, the company merged with Schweppes (answers.com).
Schweppes, 1783-1969
Jacob Schweppes, a German born jeweler and an amateur chemist began his company Schweppes in 1783. Through the 1700’s to mid 1800’s Schweppes entered into several joint ventures and mergers. In 1870’s the company introduced tonic water, ginger ale, and lemonade; which was a huge success for Schweppes. The era of 1900’s gave company the strength to expand its business overseas. In 1960, it acquired three makers of jams and jellies: Hartley's, Moorhouse, and Chivers. These acquisitions required substantial reorganization, however, and did not work out very well; by 1964 only Hartley's was turning a profit for its parent company. Nonetheless, Schweppes prospered under Sir Frederick Hooper's guidance. Its annual profits increased nearly sevenfold between 1953 and 1962, from $756,000 to $4.8 million (answers.com). In 1964, Hooper got retired from the company and Harold Watkinson took over the leadership of Schweppes Corporation. In 1969, Schweppes signed an agreement with Cadbury and bought its shares to merge with the company.
Cadbury Schweppes, 1969-2008
The year 1969, brought two companies; Cadbury and Schweppes together to run the soft drink and chocolate business around the globe. Under the agreement, the new company was named “Cadbury Schweppes”. Harold Watkinson was appointed as the CEO and Adrian Cadbury became the deputy chairman of the company. While Schweppes was best known for its mixers, such as tonic water, the firm was the number three competitor in the beverage business after Coca-Cola and PepsiCo. Cadbury was the number four player in the global chocolate business, having exited related businesses such as biscuits (cookies) in a restructuring, in the 1980’s. The company introduced several new brands in the beverage site such as: Canada Dry and Sunkist (1986), Dr. Pepper and Seven-Up (1995), and Orangina (2001), Hawaiian Punch (1999), and Snapple in 2000. In confectionery, the firm acquired non-chocolate businesses such as: Trebor, Bassett, and Hollywood, its first chewing gum acquisition in 2002 (Hill and Jones, 2010, C311). In early 2002, Cadbury Schweppes acquired Danish Company, Dandy; to expand its business into gum market. The company invested $307 million dollars in the acquisition.
From 1969 to 2008, Cadbury Schweppes acquired many beverage and confectionery businesses around the globe. Due to the new and innovative products, the company was able to expand its business and gain customer confidence. The company’s soft drink products became the hit in the market due to the high carbonate as compare to other competitors in the industry. In the confectionery site of the business, Cadbury Schweppes was able to produce variety of chocolates which created a huge demand for their products. The company had both positive and negative experiences throughout these years. Many times company was able to produce profit margin and positive growth rate but there were several incidents where the company was struggling. Finally, in 2008; the company announced its demerger and shocked the management, employees, customers, and shareholders.
Demerger
In 2008, Cadbury Schweppes declared its demerger. The drinks business became Dr. Pepper Snapple Group Inc. and the chocolate and confectionery business was acquired by Kraft Foods the very next year.
Global Initiatives of Cadbury Schweppes
Cadbury Schweppes began to expand its business at international platform by late 1900’s. The company acquired businesses in Europe as well as in United States. In Asia, Cadbury Schweppes was able to develop its business with the help of British Colonies. In 1980’s the company focused on opening and acquiring businesses in both confectionery and soft drink in many nations including France, Australia, Spain, India, United States, and United Kingdom. In United States, the company acquired Peter Paul confectionery business for $58 million and Duffy-Mott, producer of fruit juices for $60 million. Both the companies gave Cadbury Schweppes competitive advantage over other competitors and gave company large amount of candy and soft drink share in the U.S. market. With the continuous growth, the company acquired Chocolat Poulain confectionery for $173.1 million in France and sold its confectionery business to Hershey’s in United States as a franchise.
The acquisition of Adams from Pfizer changed company’s portfolio positively. Cadbury Schweppes became the leader of confectionery business worldwide. The company was able to hold about 26% of chewing gum market share in the global market. The acquisition comprises the principal brands, including Halls, Trident, Dentyne/Dentyne Ice, the "Bubbas", Clorets, Chiclets and Certs, together with other functional confectionery products, manufacturing facilities and international sales, distribution and support networks. As per John Sunderland, CEO of Cadbury Schweppes; Adams gave us confectionery market leadership and a unique portfolio with an offering in every confectionery category. It brought powerful brands, access to new geographies and significant scale in the fastest growing confectionery sectors. Cost and revenue synergies, and the opportunity to drive the business within a global confectionery group, it created significant value for our shareowners”, (victoryseeds.com).
Principal Subsidiaries of Cadbury Schweppes
Schweppes France; Schweppes Spain; Schweppes Belgium; Schweppes Portugual; Cadbury Aguas Minerales (Mexico); Cadbury TreborBasset; Cafe Cadbury; Cadbury France; Hollywood (France); Cadbury Dulciora (Spain); Cadbury Portugal Productors de Confeitaria LSA; Piasten Schokoladenfabrik Hofmann (Germany); Cadbury Wedel (Poland); Cadbury O.O.O. (Russia); Cadbury Netherlands BV; Cadbury Ireland; Dr Pepper/Seven Up, Inc. (U.S.A.); Mott's (U.S.A.); Snapple Beverages Group (U.S.A.); Cadbury Trebor Allan (Canada); Jaret International (U.S.A.); Cadbury Stani (U.S.A.); Cadbury Schweppes Pty Ltd. (Australia); Cadbury Food Co. Ltd. China; Cadbury Food Co. Beijing (China); Trebor Wuxi Confectionery Co. (China); Cadbury Four Seas Co. Ltd. (Hong Kong); PT Cadbury Indonesia; Cadbury Japan Ltd.; Cadbury Confectionery Malaysia Sdn Bhd; Cadbury Confectionery Limited (New Zealand); Cadbury Philippines; Cadbury Singapore PTE Limited; Cadbury Schweppes (South Africa); Bromor Foods (South Africa); Cadbury Kenya; Cadbury Ghana; Cadbury Nigeria; Cadbury Egypt; Cadbury India Ltd (answer.com).
Recommendations for Cadbury Schweppes
Cadbury Schweppes are no longer existed as a joint venture. The Cadbury was bought by Kraft Foods and the Schweppes became Dr Pepper Snapple Group. Although the company does not have combined market name but the consumers still have trust and desire in their products. Since, the company Cadbury Schweppes was in business from several decades; consumers are able to differentiate the taste of their products. With that said, it is my recommendation that both the companies, Kraft Foods and Dr Pepper Snapple Group; should concentrate on keeping the same ingredients in their products so that they don’t lose the existing customer base and in order to attract the new customer base, both the companies should invest in their R&D for better product outcome.
Conclusion
All in all, Cadbury Schweppes was formed with the idea to bring new products in the industry as well as become the global leader in confectionery and soft drink business. The company’s journey began with a merger between Schweppes and Cadbury. Schweppes was best known in the business of soft drinks and the Cadbury was popular for its chocolate business. By 1969, both the company’s decided to merge together to become the global power in confectionery and soft drink industry. Within the few years, the company acquired many businesses around the globe in order to expand its horizons. By the late 1900’s the company had over 26% of market share in the candy industry in United States. Moreover, the company grew tremendously in other parts of the world.
By the 2000’s, Cadbury Schweppes decided to demerge its business line by splitting the beverage and confectionery business. In 2008, the Schweppes became Dr Pepper Snapple Group (DPS) and the Cadbury was bought by Kraft Foods. Overall, today both the DPS and Kraft Foods are one of the favorite food and soft drink companies rated by consumers.
References
Answers.com. Retrieve September 4, 2010 from http://www.answers.com/topic/cadbury-schweppes-plc-adr#Merger_with_Schweppes
Hill, C., Jones, G. (2010). Strategic Management an Integrated Approach (9th ed.). Printed in
the United States of America: South-Western, Cengage Learning.
Victoryseeds.com. Retrieve September 5, 2010 from http://www.victoryseeds.com/candystore/confectioners/pr/pr_cadbury_adams_121702.htm
Reseach Paper
Running Head: Strategic Management – Stryker
Stryker: Strategic Management
ORM 680: Capstone in Strategic Management
Jaspreet Kaur (Jas)
Spring Arbor University
Terry O’Connor, Ph.D.
September 17, 2010
Table of Contents
Page
Abstract………………………………………………………………………………..3
Module 1………………………………………………………………………………4
Module 2………………………………………………………………………………6
Module 3………………………………………………………………………………18
Module 4………………………………………………………………………...…….21
Module 5………………………………………………………………………………25
Module 6………………………………………………………………………………29
Module 7………………………………………………………………………………32
References…………………………………………………………………………….37
Abstract
Stryker Corporation is the world’s leading medical technology and orthopedic company. The company has an establish brand name in the healthcare industry at home as well as globally. Stryker’s mission is to provide better quality and innovative products to the healthcare providers while enhancing patient care. The company’s products range from hospital beds to orthopedic implants. Today, Stryker Corporation serves hospitals, doctors, and healthcare personnel in over 120 countries. The company is able to compete and increase its profit margin by implementing various positive strategies such as: product differentiation, commitment to quality, excellent customer service, superior innovation, long-term cooperative relationship with customers and suppliers, socially responsible, and last but not the least; Stryker’s vision of making difference in patients’ lives.
Strategic Management Module 1 – Stryker
The purpose of this module is to analyze the existence of Stryker Corporation and the history of the company. In addition, the module will also describe Stryker’s goal, mission, vision, and quality statement.
History of Stryker
The purpose of Stryker’s existence is to provide exceptional results to the patients through innovative products and services around the world. Stryker’s history is rooted in transformation of the medical products that would change people’s lives positively. The spirit of innovation began with Dr. Homer Stryker, the founder of Stryker Corporation. Dr. Stryker began his journey of innovative ideas in the healthcare industry from Kalamazoo, Michigan in 1941. As an orthopedic, Dr. Stryker discovered that some of the medical products used in his field were less effective and were not meeting patients’ needs. He found various aspects of patient care that needed improvement. So he decided to invent new healthcare products which would provide solutions to patient’s needs. His goal was to build medical equipments that would increase the efficiency of the caregiver and reduce the cost of providing treatment. His first innovative device was the Wedge Turning Frame, a mobile hospital bed with a frame that pivoted from side to side. This turning frame, which came to be known in the industry as the "Stryker Frame," allowed doctors to position injured patients as needed while still keeping them immobile (stryker.com).
Dr. Stryker’s vision was to help patients lead healthier, more active lives through products and services that make surgery and recovery simpler, faster and more effective. Today, Stryker Corporation has become a global leader in medical technology with a purpose to serve and improve patients’ live in over 120 countries. Stryker product lines include various powered surgical instruments, orthopedic implants, trauma systems for use in bone repair, endoscopic systems, and patient care and handling equipment such as stretchers and hospital beds (stryker.com).
Stryker’s Goal
Stryker’s goal is “to become a stronger competitor in the global medical marketplace by designing, manufacturing, and distributing products that support physicians and hospitals as they seek to provide”, (stryker.com).
Mission Statement
Stryker’s mission is “to make difference by caring for the caregivers, helping them maintain order in their organizations, and restore health to their patients”, (stryker.com).
Vision Statement
Stryker’s vision is “to be the world’s most admired, fastest growing medical technology company”, (stryker.com). To be competitive in today’s world of globalization, Stryker puts 100% focus on the quality of their products, customers, and employees.
Quality Statement
Stryker’s quality policy is “At Stryker, we put quality first in everything we do. We continually improve our quality systems to develop, produce and market products that meet or exceed the requirements of customers and regulatory agencies around the world”. Stryker plays a major role in being a good corporate citizen. Their social responsibility highlights their commitments to:
· Product quality and innovation,
· Professional medical education,
· Our employees,
· Our communities,
· Our environment, and
· Our culture of ethics and compliance (stryker.com)
At last but not the least, Stryker’s corporate strategy is to attract and retain employees who are self motivated, high performers, and believe in making a difference. In partnership with “The Gallup Organization”, Stryker has developed a selection tool to find the right talent for the company. Stryker believes in hiring and retiring employees. Stryker emphasizes on providing opportunities to their employees and help them advance their career by taking on new responsibilities.
Conclusion
All in all, Stryker Corporation is doing a marvelous job in fulfilling Dr. Stryker’s dream of serving the medical community worldwide by designing, manufacturing, and delivering the innovative products and services. Today, Stryker Corporation has become the global leader in the healthcare industry. The company’s executives, management, and leaders are working diligently to achieve their goal of making difference in the lives of patients’ and their family members by providing them the survival tools. Moreover, Stryker Corporation very much believes in being socially responsible and plays a positive role in community development.
Strategic Management Module 2 – Stryker
The purpose of this module is to analyze the competitive forces in the healthcare industry and how it applies to Stryker by using Porter’s Five Forces Model. Also, this module will highlight the Nature of the competition in the industry. In addition, this document will explain the Life Cycle Stage that Stryker is at and the Implications of the competition.
Five Forces Model
Porter’s Five Forces Model – it is a model that helps analyzing the competitive forces in the industry environment. Managers may also use this model to identify the opportunities and threats that an organization may have from competitors in the industry. There are five forces under Porter’s model: the risk of entry by potential competitors, the intensity of rivalry among established companies within an industry, the bargaining power of buyers, the bargaining power of suppliers, and the closeness of substitutes to an industry’s products (Hill and Jones, 2010, p. 42).
Five Forces Model – Stryker
Stryker is a leading manufacturer of medical equipments that allow hospitals, doctors, caregivers, and surgeons to help patients meet their needs and improve their lives. Stryker's purpose is providing surgeons with advanced tools and techniques that allow them to act early in the process to help reduce patient pain (stryker.com).
The risk of entry by potential competitors
Potential competitors are companies that are not currently competing in an industry but have the capability to do so if they choose. A high risk of entry by potential competitors represents a threat to the profitability of established companies. But if the risk of new entry is low, established companies can take advantage of this opportunity to raise prices and earn greater returns (Hill and Jones, 2010, p. 43).
In today’s world of innovation and technology, healthcare industry is growing rapidly. Companies in the healthcare industry are coming up with new innovative products and services every day. Since the profit margin is high in the healthcare industry, more and more firms are getting attracted to it and would like to be the part of it. Companies around the globe are trying to produce products at low cost that are needed in the healthcare industry. Study shows that average life span has increased in recent years. Since people are able to afford expensive surgical procedures now more than ever before, organizations are willing to do anything to stay in the business.
In order to enter into the competitive market, an organization must have the knowledge of the industry, capital requirements, access to distribution, learning curve, and brand equity. Although there are several firms around the globe that are trying to enter into the market and ready to compete with Stryker but the major drawback is learning and understanding the rules and regulations of the FDA. Since Stryker Corporation has been in the business, it may be easier for them to follow and understand the FDA regulations. Organizations may invest in research and development, marketing, and manufacturing but it is very difficult to get the product approved by the FDA and launch in the market.
The risk of the potential competitor stay in the business is very low in the healthcare industry. Stryker has very strong and loyal customer base at home as well as internationally. They have access to materials and distribution channels. Since, Stryker works very closely with doctors and surgeons; they have the ability to convince the market positively. Stryker’s goal and promise is to make the difference in an individual’s life and provide them the best of the best.
The intensity of rivalry among established firms
Rivalry refers to the competitive struggle between companies in an industry to gain market share from each other. The competitive struggle can be fought using price, product design, direct selling efforts, and after sales and service support (Hill and Jones, 2010, p. 46).
In today’s world of globalization, the competition among organizations is increasing tremendously. Organizations are fighting to be on the top of the industry. Many organizations use various types of gimmicks such as product designing, advertising, sales, cheap labor, and selling techniques to gain the customer confidence and market share. Whereas in the past it was almost impossible to make products or open up business in another country, today because of the technological era and easy access to the information; things have become much easier. Companies today are able to produce high quality products at a very low cost in other nations using their resources. Because of this very reason, competition between organizations has become much tougher. Today, in order to stay in the business with good profit margin; organizations have to come up with new products at low cost.
As per the data, in 2009; in the Orthopedic Implants business segment, Stryker generated 61% of industries’ sales and in the MedSurg Equipment business segment 39%. Geographically, Stryker generated 64% of its sales from United States and 36% internationally (stryker.com).
Stryker has number of competitors in the industry of healthcare products, medical devices, orthopedic and trauma products, reconstructive products, implants, and hospital furniture. On the implants side of the business, Stryker faces competition from firms such as:
· Johnson & Johnson (JNJ) – the world's 2nd largest and most broadly based manufacturer of healthcare products, with a significant share of the consumer, pharmaceutical, medical treatment and diagnostic device markets.
· Zimmer Holdings (ZMH) – leading manufacturer of reconstructive orthopedic implants.
· Medtronic (MDT) – is one of the world's largest medical device companies, with a specialty in cardiac rhythm management.
· Smith & Nephew SNATS (SNN) – a British-based medical devices company with Orthopedics division headquarters in Memphis, TN., with specialty in hip and knee implants and orthopedic trauma products.
· Biomet (BMET) – medical device manufacturer based in Warsaw, IN, specializes in reconstructive products for hips, knees and shoulders, fixation devices, orthopedic support devices, dental implants and operating room supplies.
In the MedSurg segment, Stryker mainly competes with:
· Hillenbrand Industries (HB) (Hill-Rom division) – leading manufacturer of medical technologies and death care products such as burial and cremation caskets.
· STERIS (STE) (Hausted subsidiary) – leading manufacturer of healthcare, life sciences, and sterilization products (wikinvest.com).
Stryker Corporation continuously has to produce new innovative products and services in order to compete with other businesses in the industry at home as well as globally. Stryker’s brand loyalty, quality product, customer satisfaction, and their devotion and promise to make the difference in people’s lives definitely help the company with its continuous growth. These positive factors also encourage the healthcare industry to do business with Stryker.
The bargaining power of buyers
The bargaining power of buyers refers to the ability of buyers to bargain down prices charges by companies in the industry or to raise the cost of companies in the industry by demanding better product quality and price (Hill and Jones, 2010, p. 51).
Since Stryker strives to be the best in making sure that company is providing excellent customer service and innovative products to the doctors and other medical staff; the bargaining power of buyers is very low. Over the years, Stryker was able to build strong customer relationship in both United States as well as oversees. Stryker’s direct customers are the hospitals, doctors, and surgeon who are very loyal to company’s products and services. Stryker’s aim is to create positive impact on patient’s life and to achieve this goal; company spends huge amount of money in research and development of the products.
Since there is no alternative on the products that Stryker makes, Stryker has the power to set prices of their products. With that said, Stryker management definitely works very hard to satisfy customer’s needs and wants. In order to stay in the business and make profit, Stryker provides exceptional services to its customers such as: reliable product, new product training classes, in house sales team, and 24/7 customer service hotline.
The bargaining power of suppliers
The bargaining power of suppliers refers to the ability of suppliers to raise input prices, or to raise the costs of the industry in other ways, for example, by providing poor-quality inputs or poor service (Hill and Jones, 2010, p. 53).
It could be a threat to an organization, if the bargaining power of suppliers is high in any industry. Powerful suppliers tend to squeeze profit margin from the industry. For example if suppliers are charging high price to the buyers, in order to stay in the business; the buyers are also obligated to charge high prices to their customers. This continues cycle creates negative impact on the industry.
Fortunately, Stryker’s supplier’s bargaining power is not very high. Quality and reliability plays a major role in the healthcare industry and if supplier can provide better quality product with competitive rates, they will gain the power and opportunity to stay in the business for long. There are various reasons that the suppliers bargaining power is moderate in this industry for example: although the demand for aluminum, stainless steel, and cobalt is high but since the companies like Stryker buy their products in very large quantity; the suppliers are able to make profit. Secondly, there are always alternatives available if needed. Another reason is that in today’s world of globalization, companies do not have to rely on one supplier, they can always shop internationally. And lastly, since Stryker has been in the business for so long; they have good understanding and relationship with their suppliers. They both understand the needs of each other.
Threat of substitutes
The products of different businesses or industries that can satisfy similar customer needs can be characterized as threat of substitutes. The existence of close substitutes is a strong competitive threat because this limits the price that companies in one industry can charge for their products (Hill and Jones, 2010, p. 53).
Stryker Corporation is very fortunate that there are no substitutes in the market that can fulfill the demands of healthcare industry. Stryker management takes pride to be the part of this industry. Stryker Corporation works very closely with hospitals, doctors, surgeons, and caregivers to make sure that they are fulfilling their needs for the patients. Even though Stryker does not interact with patients directly, but patients are the number one priority for Stryker. Stryker’s goal is to produce quality products for the patients so that they can live and enjoy healthy lifestyle.
In order to improve patient’s lives, Stryker’s research and development team take suggestions from the people in the healthcare industry to make sure that they are producing the right product for the right situation. Stryker aims to produce safer products and procedures for the patients and their loved ones.
Nature of the competition in the industry
Both the medical and the instrument supply industry in the healthcare department are growing rapidly. The demand for products and services and the nature of the competition is very high in this industry. It is not easy to survive in the industry of healthcare. In order to stay in the business and be competitive in this industry, organizations must have the qualities of a leader.
Stryker is a leader of the health care industry. They did not become one of the leading companies over night. Stryker’s leaders and management had to work hard to be at this position and today the management and the employees at the Stryker Corporation are working even harder to maintain their position in the industry. There are number of strategies that Stryker Corporation follows in order to be the best in the industry such as: providing excellent customer service, working with doctors and surgeons, focusing on product quality, and finally; inventing new products to save people’s lives. Stryker Corporation believes in the moments that matters the most to them like, “At Stryker, we’re present in the moments that matter most – the seconds, minutes and hours in which patient lives are forever changed by the skills and knowledge of caregivers. We are accountable for each one of those moments, and for the ingenuity, efficiency, knowledge and familiarity that drive the frontiers of medicine forward. These are just some of the moments in which we’re there for caregivers and their patients – and just some the ways that define our growth opportunity as an organization”, (stryker.com).
Stages in the Industry Life Cycle
The life cycle stage of an industry is very similar to the life cycle of a living thing. The concept of industry or product life cycle stage is very much borrowed from the biology of living organism. As all living things go through various stages of biology such as birth, growth, maturity, and death; industries and organizations also follow the similar concept which helps identifies the stages of their life cycle. A useful tool for analyzing the effects of industry evolution on competitive forces is the industry life cycle model, which identifies five sequential stages in the evolution of an industry that lead to five distinct kinds of industry environment such as: embryonic, growth, shakeout, mature, and decline (Hill and Jones, 2010, p. 57).
Life Cycle Stage of Stryker
Stryker is one of the world’s leading medical technology companies and is dedicated to helping healthcare professionals perform their jobs more efficiently while enhancing patient care. The Company provides innovative orthopedic implants as well as state-of-the-art medical and surgical equipment to help people lead more active and more satisfying lives (stryker.com).
Under the Industry Life Cycle model, Stryker – a healthcare industry poses a characteristic of Growth industry life cycle stage. In a growth industry, first-time demand is expanding rapidly as many new customers enter the market. An industry grows when customers become familiar with the product; prices fall because experience and economies of scale have been attained, and distribution channels develop (Hill and Jones, 2010, p. 58).
There are various reasons why Stryker belongs to the Growth Industry market:
· Baby boomers – study shows that there is a growing need for orthopedic products in coming years. As baby boomers are retiring; they need knee, hip, spinal, and several other orthopedic replacement products in order to stay active.
· Business leader – Stryker has been in the business from many decades. Stryker management knows medical industry in and out. They are one of the leaders in the orthopedic implants, hospital beds, and other medical technologies.
· FDA regulations – since Stryker has been in the business, they understand the regulations governed by federal and state government. It would be difficult for a new company to enter into the business and understand the FDA requirements, rules, and regulations.
· Design and marketing – Stryker has an excellent strategy of designing and marketing their products. Stryker’s research and development department plays a major role in designing the products as per customer needs. Stryker sales team is committed to customer satisfaction and works very hard to market their product and providing the best customer service to their customers.
During the growth stage, the goal is to gain consumer preference and increase sales. Below is the marketing mix:
· Product – New product features and packaging options; improvement of product quality.
· Price – Maintained at a high level if demand is high, or reduced to capture additional customers.
· Distribution – Distribution becomes more intensive. Trade discounts are minimal if resellers show a strong interest in the product.
· Competitors – Competitors enter the market, often during the later part of the growth stage, there may be price competition and/or increased promotional costs in order to convince consumers that the firm's product is better than that of the competition.
· Promotion – Increased advertising to build brand preference (netmba.com).
Stryker Corporation is a successful industry at its growth stage. Stryker focuses on inventing new products and services to satisfy their customer needs. Stryker’s goal is to develop less complicated but yet more reliable instruments and equipments for surgeons, doctors, caregivers, and patients. Stryker management spends ample amount of money and time in research and development of the products that reflects customer’s needs, demands, and suggestions. Stryker has a strong customer base nationally as well as globally, which helps create positive sales and revenue growth.
Implications of the competition
Although organizations that are in the growth stage have power to make profit and increase growth rate of their products but they also have to face the threat of their competitors in the industry. For example, Stryker’s profit margin has been growing year after year both nationally as well as internationally. Stryker's net sales increased 12.4% to $1,799 million for the first quarter of 2010. International sales were $626 million for the first quarter of 2010, representing an increase of 11.9% (wikinvest.com). But Stryker is not the only business organization in the healthcare industry, corporations like Zimmer, J&J, Biomat, MDT, and many more are in the race too. In order to stay in the business, Stryker has to be competitive and innovative among all the competitors in the industry.
There are several implications now as well in the future that Stryker may have to face in order to be the part of the healthcare industry such as: lower the price of their products, develop and promote new products, capture additional market, attract new customers, meet customer needs, simpler design of the products, and finally; invest in lean manufacturing.
Conclusion
All in all, Stryker Corporation is the leader in the healthcare industry at home as well as globally. In today’s world of competition, technology, and globalization; the company may have to deal with some of the competitive forces in the industry known as Porter’s five forces but Stryker’s growth industry life stage characteristics definitely helps the company with positive growth, revenue increase, and profitability. Stryker Corporation’s policy of product differentiation, quality service, and customer satisfaction plays a huge role in company’s success. Furthermore, although there are few implications of the competition in the industry but overall Stryker Corporation have very strong roots in the medical world of technology.
Strategic Management Module 3 – Stryker
The purpose of this module is to analyze the external environmental forces such as Global, Technological and Demographic and how these forces influence the Stryker Corporation.
Global Forces
Global forces refer to the integration of communities and societies from all over the world. It is a system that allows countries to share their resources with one another in order to grow and be competitive in the world’s platform of business.
In the 21st century era, organizations must reach globally in order to be successful and competitive in the market. Whereas in the past it was almost impossible for an organization to even think about opening up a business in another nation, today globalizations has become a trend for every business. Today, the healthcare industry is at the peak when it comes to globalization. Study shows that people have become very health conscious and want the best medical treatment for themselves and their loved ones.
Stryker, the global leader in the medical technology earns about 36% of their revenues from the international market (stryker.com). Global market is creating a positive impact on today’s healthcare industry and Stryker Corporation is doing a tremendous job in fulfilling the needs of patients around the globe. Although there is a huge competition in the healthcare industry worldwide but the large organizations such as Stryker have the ability and resources to compete on the world’s platform. Company’s innovative products and services, reliability of the products, excellent customer service, and quality products help them compete with the other players in the healthcare industry. Stryker Corporation serves the medical professionals with enhancing patient’s lives in over 120 countries worldwide. The company’s purpose is to make difference in people’s lives positively by providing innovative medical products and services, simplified surgical techniques, and cost-effective solutions to medical professionals around the world.
Technological Forces
Technological forces can make established products obsolete overnight and simultaneously create a host of new product possibilities. Technological change is both creative and destructive (Hill and Jones, 2010, p. 66).
Today we are living in the era of technology. Companies around the globe are investing millions of dollars to produce new products and services. Technological development plays a major role in the healthcare industry. Medical, surgical, and pharmaceutical markets are coming up with new products with a goal to serve the humanity.
Stryker Corporation’s foundation stands on producing innovative and technological products with a purpose to make a positive impact on patients’ lives. The technological force creates a positive effect on Stryker Corporation and the healthcare industry. In today’s technological world, product innovation is a key to differentiate one organization from another in the market. With that said, the company is always trying to put lot of emphasis on developing new and innovative products to satisfy patient’s needs and wants. Stryker management is committed to offering advanced technologies that benefit both surgeons and patients while adding value in ways that have the potential to reduce costs to the healthcare system (stryker.com). Since Stryker Corporation’s growth is very much depending on their new technological products, the management spends tremendous amount of money in researching and developing of those products. The company works very closely with doctors and surgeons to understand their needs and requirements for the surgical procedures. The Stryker’s research and development team takes suggestions from the medical professionals and try to innovate products based on their needs.
Demographic Forces
Demographic forces are outcomes of changes in the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class. Demographic forces present managers with opportunities and threats an can have major implication for organization (Hill and Jones, 2010, p. 66).
The demographic force of the external environment plays a huge role in Stryker’s success. There are two components in the demographic force, the aging baby boomers and the prevalence of obesity; both of these factors create a positive impact on the healthcare industry. First, the baby boomers represent the vast majority of population in the United States and other developed countries around the globe. The expand population of baby boomers will help generate the revenues in the healthcare industry. As this segment of population is approaching to their retirement stage, they will more likely to require joint replacement surgeries such as knee, hip, and spine. Stryker Corporation will greatly benefit from this sector of population as the demand for the orthopedic implants will be rising.
Second, as per the Obesity statistics, about 30% of the population in the United States falls under the chart of obesity. Research shows that increased wait puts stress on joints which creates negative impact on our body. Because of this very reason, over weight individuals loose the strength to walk or perform any daily activities at a very young age. With that said the innovative medical technologies such as hip and knee implants can help satisfy their needs and can make a huge difference in their daily lives. These types of implants are positively affecting the orthopedic implant organizations such as Stryker.
Conclusion
All in all, the external environmental forces such as global, technological, and demographic play an enormous role in Stryker Corporation’s success. Although there is a huge competition in the healthcare industry but the globalization, innovative product strategy, aging baby boomers, and the prevalence of obesity are helping significantly with company’s development and revenue growth.
Strategic Management Module 4 – Stryker
The purpose of this module is to analyze the Functional Level Strategies such as superior quality, superior innovation, and superior responsiveness to customers. In addition this document will also discuss the Business Level Strategies such as differentiation. The focus of this module is to analyze and see how these strategies can be implemented on Stryker Corporation.
Functional Level Strategies
Superior Quality
High quality products are reliable, in the sense that they do the job they were designed for and do it well, and are also perceived by consumers to have superior attributes (Hill and Jones, 2010, p. 124).
Quality is a key to successful business. It is very important for a company to create a quality product in order to grow and stay in the industry. Companies in the medical industry must provide a quality product as they are dealing with patient’s lives.
Stryker Corporation is committed to provide quality products and services to its customers. Manufacturing and delivering high quality products is the way that Stryker is able to gain the competitive advantage in the medical industry. Stryker management works diligently to make sure that every product that comes out of the plant is qualified to perform the job that it is designed for. By providing quality products over 60 years, Stryker Corporation is able to earn customer’s trust. Stryker focuses on the effectiveness, reliability, and safety of the products and effectively meets the FDA requirements. In recent years, the company have adopted a more coordinated global approach to quality and established a corporate-level executive position to lead its efforts in this area. Stryker’s goal is to bring all of their divisions to the same level of quality excellence, so that their products offer the best possible results to the customers and their patients (stryker.com).
Superior Innovation
Innovation can result in new products that better satisfy customer needs, can improve the quality of existing products, or can reduce the cost of making products that customer wants (Hill and Jones, 2010, p. 130).
Innovation is the ultimate factor to company’s revenue growth. By creating innovative products; companies are able to achieve and maintain competitive advantage, profitability, and customer confidence.
Stryker Corporation spends ample amount of time and energy in order to meet customer’s needs. The company spends millions of dollars in research and development of the new products. Stryker’s research and development team is extensively engaged with doctors, physicians, and care givers to understand their needs and expectations in enhancing patient’s outcome. In addition, Stryker’s sales team takes suggestions from the hospitals, doctors, and experts in the medical industry on designing the product that would fit their needs. Moreover, Stryker’s marketing department is heavily involved in conducting customer surveys and feedbacks. The received feedback is used to implement the ideas in innovating new products. Stryker’s ultimate goal is to provide superlative care to the patients around the globe by designing and manufacturing innovative products and services.
Superior Responsiveness to Customer
To achieve responsiveness to customers, a company must give customers what they want, when they want it, and at a price they are willing to pay – so long as the company’s long-term profitability is not compromised in the process (Hill and Jones, 2010, p. 143).
Customers play a huge role in company’s success. For an organization to be successful, they must focus on their customers. The executives, the management, and the employees in an organization should always strive to exceed customer’s expectations.
Stryker Corporation was born with a mission to help patients’ live healthier and active life. Dr. Homer Stryker’s goal was to provide a product which would assist his patients and meet their needs. In order for a company to compete in the market, they must provide quality customer service with effective products and Stryker is doing a tremendous job in meeting customer’s needs. In order to keep effective customer relationship, Stryker management works very closely with doctors, physicians, and medical personnel who assist them with research and development of the new products. In addition, Stryker offers educational and technical support by providing one-on-one training classes, web based seminars, and 24/7 customer service hotline to healthcare professionals which helps improve patients’ outcome around the globe. Moreover, Stryker Corporation plays a major role in supporting the community at home as well as internationally. The company offers product donations and financial contributions to charitable organizations and universities which help them gain customer confidence and loyalty.
Business Level Strategies
Differentiation
A company pursuing a differentiation business model pursues business-level strategies that allow it to create a unique product, one that customers perceive as different or distinct in some important way (Hill and Jones, 2010, p. 161).
The differentiation organizations have the ability to gain competitive advantage for several reasons: first, they are able to satisfy customer needs and expectations. Second, they can charge premium price for their products, and finally; they achieve greater profitability because customers believe in their product and are willing to pay high price.
Stryker Corporation’s goal is to be the leading company in the medical industry. The company’s mission is to design and manufacture products that are not available in the market. In order to increase the revenues and market share, Stryker management is continuously finding ways to differentiate its products and services from the competitors in the industry. Stryker Corporation’s strategy of providing excellent customer service, working with medical personnel and taking their advice in improving and implementing new ideas in product development, spending large amount of money in research and development, and finally, delivering quality products to their customers help the company differentiate themselves from other competitors in the market.
Conclusion
All in all, both the functional level strategies and the business level strategies are very important for the company. Functional level strategies such as: superior quality, superior innovation, and superior responsiveness to customers and business level strategies such as: differentiation plays a huge role in company’s success. Stryker Corporation spends adequate amount of money to differentiate themselves from other competitors by providing excellent customer service, innovative and quality product to their customers.
Strategic Management Module 5 – Stryker
The purpose of this module is to analyze the vertical integration of Stryker. In addition this document will also discuss the Stryker Corporation’s long- term cooperative relationship with its suppliers.
Vertical Integration
A company pursues vertical integration to strengthen the business model of its original or core business and to improve its competitive position. A strategy of vertical integration expands its operations either backward into an industry that produces inputs for the company’s products or forward into an industry that uses, distributes, or sells the company’s products. Vertical integration is based on a company entering industries that add value to its core products because this increases product differentiation and /or lower its cost structure, thus increasing its profitability (Hill and Jones, 2010, p. 293).
In today’s world of technology, the medical industry is growing rapidly. The medical instruments and supplies industry of the healthcare market has become very competitive. It is very important for an organization to have the competitive advantage in order to stay in the business and compete with other competitors in the industry. In order to implement vertical integration strategy, companies can add value to their products, establish their own operations, or acquire other business in the industry. This may help increase the profitability, product differentiation, better product quality, and superior customer service.
Stryker Corporation’s vertical integration strategy
Stryker Corporation poses the qualities of vertical integration strategy. From product designing to customer support, Stryker’s mission is to add value to every single step in the supply chain. Stryker Corporation’s focus of designing new products and manufacturing them to the highest quality standards is the essence of Stryker’s commitment to patients and those who care for them (stryker.com).
Product Differentiation
First, in order to gain competitive advantage, increase profit margin, and compete with other competitors in the industry; Stryker Corporation focuses on product differentiation. Stryker management spends large amount of money in research and development of the products. The company’s goal is create a product that would help patient’s live healthy life. Stryker management takes pride in designing, developing, and manufacturing of the products for the customers in the medical industry. Stryker’s R&D and Sales team works very closely with doctors and physicians to understand their needs and expectations in serving the patients.
Superior Customer Service
Second, Stryker Corporation is able to add value to their products by providing superior customer service. Apart from researching, designing, implementing, developing, and manufacturing the product; the very important and significant factor of the supply chain is delivering the quality product to the customer. Without the customer support, an organization will not be able to function or gain profit margin. With that said Stryker Corporation focuses on developing excellent customer service, maintaining good relationship with potential and existing customers, and providing the best quality products.
Acquisitions
Finally, Stryker Corporation is able to gain market profit share by acquiring other businesses in the medical industry. For instance, in 2009; the company acquired Ascent Healthcare Solutions, the market leader in the reprocessing and remanufacturing of medical devices in the United States. The same year, Stryker also merged with OtisMed Corporation, a privately held software technology firm. OtisMed will focus on customizable instrumentation that has the potential to complement the many benefits that surgeons and patients realize from our Triathlon Knee System, as well as our other implants. And recently, Stryker Corporation has agreed to acquire Gaymar Industries that specializes in support surface and pressure ulcer management solutions as well as the temperature management segment of the healthcare industry (stryker.com).
Stryker Corporation’s cooperative long-term relationship with suppliers
Stryker Corporation has several long term suppliers who help the company fulfilling customer’s needs and expectations. Stryker’s main suppliers are: master metal, advance manufacturing, national precision, and DVR technology.
Stryker Corporation has established a value-added long term relationship with its suppliers. Stryker’s goal “is to improve the surgical experience by developing instruments that are more reliable, more intuitive and less complicated to use. To accomplish this goal, Stryker seeks close, long-term partnerships with its suppliers. Suppliers are key links in corporation’s supply chain and are partners in assuring customer satisfaction. The company is committed to working with its suppliers to ensure customer satisfaction. Stryker Corporation, along with their suppliers, jointly contributes delivering exceptional results”, (stryker.com).
The Stryker management believes in treating their supplier as “partners”. The corporation provides guidelines and tools to their suppliers so that they could become the part of the organization’s supply chain. Stryker Corporation has realized that in order to be successful in the business world, the company has to create a positive relationship with their suppliers. With that said, the Stryker management has constructed a partnership methodology for their suppliers in order to create a strong foundation. To make the final transaction beneficial, the company’s mission is to set expectations, promote honesty, communicate, and provide support to its suppliers.
Conclusion
All in all, Stryker Corporation believes in the vertical integration strategy. In order to be competitive in the business world, the company focuses on developing its business by product differentiation, superior customer quality, and acquisitions. The corporation spends large amount of money in researching, designing, and implementing of the products. In addition, the company takes pride in providing excellent customer service to their existing and potential customers. Finally, in today’s world of technology; Stryker Corporation is expanding its business and services by acquiring other businesses at home as well as globally. Moreover, the Stryker Corporation has a cooperative long-term relationship with its suppliers. The company’s strategy of treating its supplier as “partners” and building a “supportive” relationship helps Stryker achieving and meeting customer needs.
Strategic Management Module 6 – Stryker
The purpose of this module is to analyze an industry that Stryker Corporation has acquired in last 10 years, identify the rationale for entering the industry, and the strategy that was used to enter the industry. In addition, the document will also describe the rationale for using the strategy and the outcome of acquiring the industry.
In today’s world of competition and globalization it is very important for a company to have technological power in order to compete in the market. In the 21st century era, more and more companies in the healthcare industry are looking ways to differentiate their products by revolutionizing and implementing technological alterations to their products. Companies in the medical industry are either using vertical or horizontal integration strategies to compete in the market. With that said today many organizations are participating in mergers, joint ventures, and acquisitions in order to gain the competitive advantage.
Acquisition
Acquisition are used to pursue vertical integration or diversification when a company lacks the distinctive competencies necessary to compete in a new industry, so it used its financial resources to purchase an establish company that has those competencies (Hill and Jones, 2010, p. 334).
Acquired Industry
In the past decade, Stryker Corporation have merged and acquired various industries both at home as well as internationally in order to gain competitive advantage in the healthcare industry. In February 2005, Stryker Corporation acquired eTrauma.com Corporation. eTrauma, a privately-held developer of software for Picture Archive and Communications Systems (PACS), belongs to a technological industry in the healthcare market. Under the agreement, Florida-based eTrauma Corporation was acquired for $50 million in cash and became a wholly-owned subsidiary of Stryker. Combined with the Stryker Endoscopy imaging business, eTrauma sells its proprietary PACS image management and viewing software, Office PACS(TM), to the orthopedic market with functionality specific to the workflow of orthopedic practices (stryker.com).
Rationale for Entering the Industry
The rapid growth of technology in today’s world has led the companies in the healthcare industry move towards the technological industry. The focus behind acquiring the eTrauma Corporation was the growing demand of imaging in the medical industry. By acquiring eTrauma Corporation, Stryker was able to create a product which would help the company gain profit margin and compete within the industry. The digital imaging and electronic medical records are two of the most exciting and fastest growing markets today, and eTrauma is solidly the U.S. leader in orthopedic PACS due to its singular focus on this specialty. This acquisition allowed Stryker to leverage the extensive relationships with orthopedic surgeons and the digital integration of the endoscopic and image-guided surgery technologies. This combination offered a significant improvement in the capture and transfer of orthopedic patient imaging information (stryker.com).
Related Diversification
Related diversification is a corporate-level strategy that is based on the goal of establishing a business unit in a new industry that is related to a company’s existing business units by some form of commonality or linkage between the value chain functions of the existing and new business units (Hill and Jones, 2010, p. 320).
Strategy used to enter the Industry
Stryker Corporation used related diversification strategy in order to enter the industry of imaging technology. To gain markets’ share in the area of imaging technology, Stryker Corporation acquired eTrauma Corporation so that both the companies may share their resources to design and manufacture a quality innovative product for the consumers in the medical industry. This acquisition helped the company building strong and long-term customer relationship. Moreover, the acquisition helped facilitate Stryker’s mission of providing the best innovative products to the hospitals and doctors in order to create positive difference in patients’ lives.
Rationale for using the Related Diversification strategy
Stryker’s goal of using the related diversification strategy was to gain competitive advantage in the industry by designing and presenting a product that was not available in the market by other competitors. I think that using the related diversification strategy in order to acquire eTrauma Corporation was the best approach for Stryker Corporation because first of all, by sharing resources the company was able to design an innovative product which provided the opportunity to meet customer’s expectations and needs and secondly, the acquisition helped the company achieve customer confidence and gain market share.
The outcome of acquiring the industry
Stryker Imaging (eTrauma) provides medical imaging solution enabling healthcare providers to make more informed medical decisions (stryker.com). The eTrauma addition to Stryker’s family definitely helped increased the profitability. In today’s competitive world, organizations are looking for ways to save time and eliminate extra workforce; the innovation of image and picture communication software created a revolution in the orthopedic market of healthcare industry. With the help of imaging software, now doctors are able to produce high-quality resolution graphics, which are cost effective, faster, and secure. Moreover, the information can be transferred electronically rather than keeping on prints.
Conclusion
All in all, Stryker Corporation; the leader in medical technology has grown tremendously in last 10 years. The company has acquired many businesses and industries in order to help medical staff, serve patients’ needs, gain market share, and customer confidence. In February 2005, Stryker Corporation acquired eTrauma; an imaging developer software company with the idea to design a product for the orthopedic offices. The company used related diversification strategy with the focus to gain technological power and provide an innovative product by sharing resources. The outcome of the acquisition was positive and helped Stryker achieve profitability and market share. Today, the imaging software is being used in the United Sates as well as globally and creating a positive impact in the healthcare industry.
Strategic Management Module 7 – Stryker
The purpose of this module is to analyze the implementing strategy in a single industry such as increase responsiveness to customer groups. In addition, this document will also discuss the implementing strategy across countries such as global standardization strategy and the impact of these strategies on Stryker Corporation.
Implementing Strategy in a Single Industry
To pursue business model successfully, managers must find the right combination of structure, control, and culture that links and combines the competencies in a company’s value chain functions so that it enhances its ability to increase responsiveness to customer groups (Hill and Jones, 2010, p. 404).
An organization must implement organizational designs in order to be successful and profitable in an industry. To gain competitive advantage and profit growth, organizations may execute ideas like increasing responsiveness to customer groups.
Implementing Responsiveness to Customer Groups
For a company pursuing a strategy based on increasing responsiveness to customers, it is vital that the nature and needs of each different customer group be identified. To promote superior responsiveness to customers, a company may design a structure around its customers (Hill and Jones, 2010, pg. 408).
Meeting customer needs, increasing responsiveness to customers, and providing quality customer service are the key factors to a successful business. Companies may differentiate themselves in the industry by keeping positive reputation and providing quality customer service. Responsiveness to customer groups is the key which sets apart Stryker Corporation from other competitors in the industry. Stryker Corporation takes pride in completing and fulfilling customer demands. Stryker management works very diligently to fulfill the needs and expectations of their customers. Stryker’s customers are hospitals, doctors, caregivers, and other medical personnel. The company’s R&D and Sales department works very closely with their customers and takes their advice in order to bring a new product in the market. To be successful in the business, Stryker Corporation has developed a long-term working and professional relationship with their customers by providing various key elements such as: quality customer service, face to face support, on the job training, and good ethical business practice. Stryker Corporation is committed to provide innovative products with reliable and quality customer service to its customers.
Implementing Strategy across Countries
In today’s world, globalization plays a huge role in company’s success and failure. In the 21st century era, more and more companies are participating in globalization strategy. Today, businesses are using globalization strategy in many ways in their organizations such as; some companies are performing manufacturing functions of their products overseas which helps the company save cost on the other hand some companies are selling their products abroad to gain profit margin. Companies may implement strategies like global standardization in order to grow their business at home as well as overseas.
Stryker Corporation is a broadly based, global leader in medical technology that consistently delivers exceptional results. Stryker works with respected medical professionals to advance meaningful innovation reduce health-care costs and improve people's lives (stryker.com).
Implementing a Global Standardization Strategy
Under the global standardization strategy, the company locates its manufacturing and other value chain activities at the global location that will allow it to increase efficiency, quality, and innovation (Hill and Jones, 2010, p. 437).
By implementing the global standardization strategy, the companies are able to perform at a global level. The strategy helps organizations to operate its business in various countries around the globe. In addition, by executing global standardization strategy; companies are able to gain competitive advantage by effectively increasing efficiency, product development, and quality service. Organizations may also expand their business globally by merging, joint venturing, and acquiring other companies in the industry.
Stryker Corporation, the global leader in the healthcare industry participates in the global standardization strategy. From U.S. to pacific, Stryker Corporation is a world known medical technology company in the healthcare industry. In order to increase efficiency, quality, and innovation; the company has divisions such as manufacturing, sales, marketing, and R&D in many parts of the world. Stryker’s headquarter is located in the United States but the company has several offices, locations, plants, and branches across the globe. The global standardization strategy helps Stryker Corporation to compete in the global market and provides the advantage of using foreign skills and capabilities which in return creates a positive impact on the company. Thus, the company is able to increase profit margin and sustainable growth.
Conclusion
All in all, the implementation of both the increase responsiveness to customer groups and the global standardization strategies play a huge role in Stryker Corporation’s success rate. By providing quality, reliable and efficient customer service; Stryker Corporation is able to create a long-term relationship with its customers. The company’s management works very closely with their customers to achieve its goal of making positive impact on patient’s lives. In addition, Stryker Corporation, the global leader in medical technology is also benefiting from its global standardization strategy. The company’s management works together at home as well as abroad to achieve its goal of creating innovative products, providing value, and making difference in the lives of others.
References
Hill, C., Jones, G. (2010). Strategic Management an Integrated Approach (9th ed.). Printed in
the United States of America: South-Western, Cengage Learning.
Nationmaster.com. Retrieve September 15, 2010 from
http://www.nationmaster.com/graph/hea_obe-health-obesity
Netmba.com. Retrieved September 15, 2010 from http://www.netmba.com/marketing/product/lifecycle/
Stryker.com. Retrieved September 15, 2010 from www.stryker.com
Wikinvest.com. Retrieve September 15, 2010 from http://www.wikinvest.com/stock/Stryker_(SYK)?ref=relatedpages
Stryker: Strategic Management
ORM 680: Capstone in Strategic Management
Jaspreet Kaur (Jas)
Spring Arbor University
Terry O’Connor, Ph.D.
September 17, 2010
Table of Contents
Page
Abstract………………………………………………………………………………..3
Module 1………………………………………………………………………………4
Module 2………………………………………………………………………………6
Module 3………………………………………………………………………………18
Module 4………………………………………………………………………...…….21
Module 5………………………………………………………………………………25
Module 6………………………………………………………………………………29
Module 7………………………………………………………………………………32
References…………………………………………………………………………….37
Abstract
Stryker Corporation is the world’s leading medical technology and orthopedic company. The company has an establish brand name in the healthcare industry at home as well as globally. Stryker’s mission is to provide better quality and innovative products to the healthcare providers while enhancing patient care. The company’s products range from hospital beds to orthopedic implants. Today, Stryker Corporation serves hospitals, doctors, and healthcare personnel in over 120 countries. The company is able to compete and increase its profit margin by implementing various positive strategies such as: product differentiation, commitment to quality, excellent customer service, superior innovation, long-term cooperative relationship with customers and suppliers, socially responsible, and last but not the least; Stryker’s vision of making difference in patients’ lives.
Strategic Management Module 1 – Stryker
The purpose of this module is to analyze the existence of Stryker Corporation and the history of the company. In addition, the module will also describe Stryker’s goal, mission, vision, and quality statement.
History of Stryker
The purpose of Stryker’s existence is to provide exceptional results to the patients through innovative products and services around the world. Stryker’s history is rooted in transformation of the medical products that would change people’s lives positively. The spirit of innovation began with Dr. Homer Stryker, the founder of Stryker Corporation. Dr. Stryker began his journey of innovative ideas in the healthcare industry from Kalamazoo, Michigan in 1941. As an orthopedic, Dr. Stryker discovered that some of the medical products used in his field were less effective and were not meeting patients’ needs. He found various aspects of patient care that needed improvement. So he decided to invent new healthcare products which would provide solutions to patient’s needs. His goal was to build medical equipments that would increase the efficiency of the caregiver and reduce the cost of providing treatment. His first innovative device was the Wedge Turning Frame, a mobile hospital bed with a frame that pivoted from side to side. This turning frame, which came to be known in the industry as the "Stryker Frame," allowed doctors to position injured patients as needed while still keeping them immobile (stryker.com).
Dr. Stryker’s vision was to help patients lead healthier, more active lives through products and services that make surgery and recovery simpler, faster and more effective. Today, Stryker Corporation has become a global leader in medical technology with a purpose to serve and improve patients’ live in over 120 countries. Stryker product lines include various powered surgical instruments, orthopedic implants, trauma systems for use in bone repair, endoscopic systems, and patient care and handling equipment such as stretchers and hospital beds (stryker.com).
Stryker’s Goal
Stryker’s goal is “to become a stronger competitor in the global medical marketplace by designing, manufacturing, and distributing products that support physicians and hospitals as they seek to provide”, (stryker.com).
Mission Statement
Stryker’s mission is “to make difference by caring for the caregivers, helping them maintain order in their organizations, and restore health to their patients”, (stryker.com).
Vision Statement
Stryker’s vision is “to be the world’s most admired, fastest growing medical technology company”, (stryker.com). To be competitive in today’s world of globalization, Stryker puts 100% focus on the quality of their products, customers, and employees.
Quality Statement
Stryker’s quality policy is “At Stryker, we put quality first in everything we do. We continually improve our quality systems to develop, produce and market products that meet or exceed the requirements of customers and regulatory agencies around the world”. Stryker plays a major role in being a good corporate citizen. Their social responsibility highlights their commitments to:
· Product quality and innovation,
· Professional medical education,
· Our employees,
· Our communities,
· Our environment, and
· Our culture of ethics and compliance (stryker.com)
At last but not the least, Stryker’s corporate strategy is to attract and retain employees who are self motivated, high performers, and believe in making a difference. In partnership with “The Gallup Organization”, Stryker has developed a selection tool to find the right talent for the company. Stryker believes in hiring and retiring employees. Stryker emphasizes on providing opportunities to their employees and help them advance their career by taking on new responsibilities.
Conclusion
All in all, Stryker Corporation is doing a marvelous job in fulfilling Dr. Stryker’s dream of serving the medical community worldwide by designing, manufacturing, and delivering the innovative products and services. Today, Stryker Corporation has become the global leader in the healthcare industry. The company’s executives, management, and leaders are working diligently to achieve their goal of making difference in the lives of patients’ and their family members by providing them the survival tools. Moreover, Stryker Corporation very much believes in being socially responsible and plays a positive role in community development.
Strategic Management Module 2 – Stryker
The purpose of this module is to analyze the competitive forces in the healthcare industry and how it applies to Stryker by using Porter’s Five Forces Model. Also, this module will highlight the Nature of the competition in the industry. In addition, this document will explain the Life Cycle Stage that Stryker is at and the Implications of the competition.
Five Forces Model
Porter’s Five Forces Model – it is a model that helps analyzing the competitive forces in the industry environment. Managers may also use this model to identify the opportunities and threats that an organization may have from competitors in the industry. There are five forces under Porter’s model: the risk of entry by potential competitors, the intensity of rivalry among established companies within an industry, the bargaining power of buyers, the bargaining power of suppliers, and the closeness of substitutes to an industry’s products (Hill and Jones, 2010, p. 42).
Five Forces Model – Stryker
Stryker is a leading manufacturer of medical equipments that allow hospitals, doctors, caregivers, and surgeons to help patients meet their needs and improve their lives. Stryker's purpose is providing surgeons with advanced tools and techniques that allow them to act early in the process to help reduce patient pain (stryker.com).
The risk of entry by potential competitors
Potential competitors are companies that are not currently competing in an industry but have the capability to do so if they choose. A high risk of entry by potential competitors represents a threat to the profitability of established companies. But if the risk of new entry is low, established companies can take advantage of this opportunity to raise prices and earn greater returns (Hill and Jones, 2010, p. 43).
In today’s world of innovation and technology, healthcare industry is growing rapidly. Companies in the healthcare industry are coming up with new innovative products and services every day. Since the profit margin is high in the healthcare industry, more and more firms are getting attracted to it and would like to be the part of it. Companies around the globe are trying to produce products at low cost that are needed in the healthcare industry. Study shows that average life span has increased in recent years. Since people are able to afford expensive surgical procedures now more than ever before, organizations are willing to do anything to stay in the business.
In order to enter into the competitive market, an organization must have the knowledge of the industry, capital requirements, access to distribution, learning curve, and brand equity. Although there are several firms around the globe that are trying to enter into the market and ready to compete with Stryker but the major drawback is learning and understanding the rules and regulations of the FDA. Since Stryker Corporation has been in the business, it may be easier for them to follow and understand the FDA regulations. Organizations may invest in research and development, marketing, and manufacturing but it is very difficult to get the product approved by the FDA and launch in the market.
The risk of the potential competitor stay in the business is very low in the healthcare industry. Stryker has very strong and loyal customer base at home as well as internationally. They have access to materials and distribution channels. Since, Stryker works very closely with doctors and surgeons; they have the ability to convince the market positively. Stryker’s goal and promise is to make the difference in an individual’s life and provide them the best of the best.
The intensity of rivalry among established firms
Rivalry refers to the competitive struggle between companies in an industry to gain market share from each other. The competitive struggle can be fought using price, product design, direct selling efforts, and after sales and service support (Hill and Jones, 2010, p. 46).
In today’s world of globalization, the competition among organizations is increasing tremendously. Organizations are fighting to be on the top of the industry. Many organizations use various types of gimmicks such as product designing, advertising, sales, cheap labor, and selling techniques to gain the customer confidence and market share. Whereas in the past it was almost impossible to make products or open up business in another country, today because of the technological era and easy access to the information; things have become much easier. Companies today are able to produce high quality products at a very low cost in other nations using their resources. Because of this very reason, competition between organizations has become much tougher. Today, in order to stay in the business with good profit margin; organizations have to come up with new products at low cost.
As per the data, in 2009; in the Orthopedic Implants business segment, Stryker generated 61% of industries’ sales and in the MedSurg Equipment business segment 39%. Geographically, Stryker generated 64% of its sales from United States and 36% internationally (stryker.com).
Stryker has number of competitors in the industry of healthcare products, medical devices, orthopedic and trauma products, reconstructive products, implants, and hospital furniture. On the implants side of the business, Stryker faces competition from firms such as:
· Johnson & Johnson (JNJ) – the world's 2nd largest and most broadly based manufacturer of healthcare products, with a significant share of the consumer, pharmaceutical, medical treatment and diagnostic device markets.
· Zimmer Holdings (ZMH) – leading manufacturer of reconstructive orthopedic implants.
· Medtronic (MDT) – is one of the world's largest medical device companies, with a specialty in cardiac rhythm management.
· Smith & Nephew SNATS (SNN) – a British-based medical devices company with Orthopedics division headquarters in Memphis, TN., with specialty in hip and knee implants and orthopedic trauma products.
· Biomet (BMET) – medical device manufacturer based in Warsaw, IN, specializes in reconstructive products for hips, knees and shoulders, fixation devices, orthopedic support devices, dental implants and operating room supplies.
In the MedSurg segment, Stryker mainly competes with:
· Hillenbrand Industries (HB) (Hill-Rom division) – leading manufacturer of medical technologies and death care products such as burial and cremation caskets.
· STERIS (STE) (Hausted subsidiary) – leading manufacturer of healthcare, life sciences, and sterilization products (wikinvest.com).
Stryker Corporation continuously has to produce new innovative products and services in order to compete with other businesses in the industry at home as well as globally. Stryker’s brand loyalty, quality product, customer satisfaction, and their devotion and promise to make the difference in people’s lives definitely help the company with its continuous growth. These positive factors also encourage the healthcare industry to do business with Stryker.
The bargaining power of buyers
The bargaining power of buyers refers to the ability of buyers to bargain down prices charges by companies in the industry or to raise the cost of companies in the industry by demanding better product quality and price (Hill and Jones, 2010, p. 51).
Since Stryker strives to be the best in making sure that company is providing excellent customer service and innovative products to the doctors and other medical staff; the bargaining power of buyers is very low. Over the years, Stryker was able to build strong customer relationship in both United States as well as oversees. Stryker’s direct customers are the hospitals, doctors, and surgeon who are very loyal to company’s products and services. Stryker’s aim is to create positive impact on patient’s life and to achieve this goal; company spends huge amount of money in research and development of the products.
Since there is no alternative on the products that Stryker makes, Stryker has the power to set prices of their products. With that said, Stryker management definitely works very hard to satisfy customer’s needs and wants. In order to stay in the business and make profit, Stryker provides exceptional services to its customers such as: reliable product, new product training classes, in house sales team, and 24/7 customer service hotline.
The bargaining power of suppliers
The bargaining power of suppliers refers to the ability of suppliers to raise input prices, or to raise the costs of the industry in other ways, for example, by providing poor-quality inputs or poor service (Hill and Jones, 2010, p. 53).
It could be a threat to an organization, if the bargaining power of suppliers is high in any industry. Powerful suppliers tend to squeeze profit margin from the industry. For example if suppliers are charging high price to the buyers, in order to stay in the business; the buyers are also obligated to charge high prices to their customers. This continues cycle creates negative impact on the industry.
Fortunately, Stryker’s supplier’s bargaining power is not very high. Quality and reliability plays a major role in the healthcare industry and if supplier can provide better quality product with competitive rates, they will gain the power and opportunity to stay in the business for long. There are various reasons that the suppliers bargaining power is moderate in this industry for example: although the demand for aluminum, stainless steel, and cobalt is high but since the companies like Stryker buy their products in very large quantity; the suppliers are able to make profit. Secondly, there are always alternatives available if needed. Another reason is that in today’s world of globalization, companies do not have to rely on one supplier, they can always shop internationally. And lastly, since Stryker has been in the business for so long; they have good understanding and relationship with their suppliers. They both understand the needs of each other.
Threat of substitutes
The products of different businesses or industries that can satisfy similar customer needs can be characterized as threat of substitutes. The existence of close substitutes is a strong competitive threat because this limits the price that companies in one industry can charge for their products (Hill and Jones, 2010, p. 53).
Stryker Corporation is very fortunate that there are no substitutes in the market that can fulfill the demands of healthcare industry. Stryker management takes pride to be the part of this industry. Stryker Corporation works very closely with hospitals, doctors, surgeons, and caregivers to make sure that they are fulfilling their needs for the patients. Even though Stryker does not interact with patients directly, but patients are the number one priority for Stryker. Stryker’s goal is to produce quality products for the patients so that they can live and enjoy healthy lifestyle.
In order to improve patient’s lives, Stryker’s research and development team take suggestions from the people in the healthcare industry to make sure that they are producing the right product for the right situation. Stryker aims to produce safer products and procedures for the patients and their loved ones.
Nature of the competition in the industry
Both the medical and the instrument supply industry in the healthcare department are growing rapidly. The demand for products and services and the nature of the competition is very high in this industry. It is not easy to survive in the industry of healthcare. In order to stay in the business and be competitive in this industry, organizations must have the qualities of a leader.
Stryker is a leader of the health care industry. They did not become one of the leading companies over night. Stryker’s leaders and management had to work hard to be at this position and today the management and the employees at the Stryker Corporation are working even harder to maintain their position in the industry. There are number of strategies that Stryker Corporation follows in order to be the best in the industry such as: providing excellent customer service, working with doctors and surgeons, focusing on product quality, and finally; inventing new products to save people’s lives. Stryker Corporation believes in the moments that matters the most to them like, “At Stryker, we’re present in the moments that matter most – the seconds, minutes and hours in which patient lives are forever changed by the skills and knowledge of caregivers. We are accountable for each one of those moments, and for the ingenuity, efficiency, knowledge and familiarity that drive the frontiers of medicine forward. These are just some of the moments in which we’re there for caregivers and their patients – and just some the ways that define our growth opportunity as an organization”, (stryker.com).
Stages in the Industry Life Cycle
The life cycle stage of an industry is very similar to the life cycle of a living thing. The concept of industry or product life cycle stage is very much borrowed from the biology of living organism. As all living things go through various stages of biology such as birth, growth, maturity, and death; industries and organizations also follow the similar concept which helps identifies the stages of their life cycle. A useful tool for analyzing the effects of industry evolution on competitive forces is the industry life cycle model, which identifies five sequential stages in the evolution of an industry that lead to five distinct kinds of industry environment such as: embryonic, growth, shakeout, mature, and decline (Hill and Jones, 2010, p. 57).
Life Cycle Stage of Stryker
Stryker is one of the world’s leading medical technology companies and is dedicated to helping healthcare professionals perform their jobs more efficiently while enhancing patient care. The Company provides innovative orthopedic implants as well as state-of-the-art medical and surgical equipment to help people lead more active and more satisfying lives (stryker.com).
Under the Industry Life Cycle model, Stryker – a healthcare industry poses a characteristic of Growth industry life cycle stage. In a growth industry, first-time demand is expanding rapidly as many new customers enter the market. An industry grows when customers become familiar with the product; prices fall because experience and economies of scale have been attained, and distribution channels develop (Hill and Jones, 2010, p. 58).
There are various reasons why Stryker belongs to the Growth Industry market:
· Baby boomers – study shows that there is a growing need for orthopedic products in coming years. As baby boomers are retiring; they need knee, hip, spinal, and several other orthopedic replacement products in order to stay active.
· Business leader – Stryker has been in the business from many decades. Stryker management knows medical industry in and out. They are one of the leaders in the orthopedic implants, hospital beds, and other medical technologies.
· FDA regulations – since Stryker has been in the business, they understand the regulations governed by federal and state government. It would be difficult for a new company to enter into the business and understand the FDA requirements, rules, and regulations.
· Design and marketing – Stryker has an excellent strategy of designing and marketing their products. Stryker’s research and development department plays a major role in designing the products as per customer needs. Stryker sales team is committed to customer satisfaction and works very hard to market their product and providing the best customer service to their customers.
During the growth stage, the goal is to gain consumer preference and increase sales. Below is the marketing mix:
· Product – New product features and packaging options; improvement of product quality.
· Price – Maintained at a high level if demand is high, or reduced to capture additional customers.
· Distribution – Distribution becomes more intensive. Trade discounts are minimal if resellers show a strong interest in the product.
· Competitors – Competitors enter the market, often during the later part of the growth stage, there may be price competition and/or increased promotional costs in order to convince consumers that the firm's product is better than that of the competition.
· Promotion – Increased advertising to build brand preference (netmba.com).
Stryker Corporation is a successful industry at its growth stage. Stryker focuses on inventing new products and services to satisfy their customer needs. Stryker’s goal is to develop less complicated but yet more reliable instruments and equipments for surgeons, doctors, caregivers, and patients. Stryker management spends ample amount of money and time in research and development of the products that reflects customer’s needs, demands, and suggestions. Stryker has a strong customer base nationally as well as globally, which helps create positive sales and revenue growth.
Implications of the competition
Although organizations that are in the growth stage have power to make profit and increase growth rate of their products but they also have to face the threat of their competitors in the industry. For example, Stryker’s profit margin has been growing year after year both nationally as well as internationally. Stryker's net sales increased 12.4% to $1,799 million for the first quarter of 2010. International sales were $626 million for the first quarter of 2010, representing an increase of 11.9% (wikinvest.com). But Stryker is not the only business organization in the healthcare industry, corporations like Zimmer, J&J, Biomat, MDT, and many more are in the race too. In order to stay in the business, Stryker has to be competitive and innovative among all the competitors in the industry.
There are several implications now as well in the future that Stryker may have to face in order to be the part of the healthcare industry such as: lower the price of their products, develop and promote new products, capture additional market, attract new customers, meet customer needs, simpler design of the products, and finally; invest in lean manufacturing.
Conclusion
All in all, Stryker Corporation is the leader in the healthcare industry at home as well as globally. In today’s world of competition, technology, and globalization; the company may have to deal with some of the competitive forces in the industry known as Porter’s five forces but Stryker’s growth industry life stage characteristics definitely helps the company with positive growth, revenue increase, and profitability. Stryker Corporation’s policy of product differentiation, quality service, and customer satisfaction plays a huge role in company’s success. Furthermore, although there are few implications of the competition in the industry but overall Stryker Corporation have very strong roots in the medical world of technology.
Strategic Management Module 3 – Stryker
The purpose of this module is to analyze the external environmental forces such as Global, Technological and Demographic and how these forces influence the Stryker Corporation.
Global Forces
Global forces refer to the integration of communities and societies from all over the world. It is a system that allows countries to share their resources with one another in order to grow and be competitive in the world’s platform of business.
In the 21st century era, organizations must reach globally in order to be successful and competitive in the market. Whereas in the past it was almost impossible for an organization to even think about opening up a business in another nation, today globalizations has become a trend for every business. Today, the healthcare industry is at the peak when it comes to globalization. Study shows that people have become very health conscious and want the best medical treatment for themselves and their loved ones.
Stryker, the global leader in the medical technology earns about 36% of their revenues from the international market (stryker.com). Global market is creating a positive impact on today’s healthcare industry and Stryker Corporation is doing a tremendous job in fulfilling the needs of patients around the globe. Although there is a huge competition in the healthcare industry worldwide but the large organizations such as Stryker have the ability and resources to compete on the world’s platform. Company’s innovative products and services, reliability of the products, excellent customer service, and quality products help them compete with the other players in the healthcare industry. Stryker Corporation serves the medical professionals with enhancing patient’s lives in over 120 countries worldwide. The company’s purpose is to make difference in people’s lives positively by providing innovative medical products and services, simplified surgical techniques, and cost-effective solutions to medical professionals around the world.
Technological Forces
Technological forces can make established products obsolete overnight and simultaneously create a host of new product possibilities. Technological change is both creative and destructive (Hill and Jones, 2010, p. 66).
Today we are living in the era of technology. Companies around the globe are investing millions of dollars to produce new products and services. Technological development plays a major role in the healthcare industry. Medical, surgical, and pharmaceutical markets are coming up with new products with a goal to serve the humanity.
Stryker Corporation’s foundation stands on producing innovative and technological products with a purpose to make a positive impact on patients’ lives. The technological force creates a positive effect on Stryker Corporation and the healthcare industry. In today’s technological world, product innovation is a key to differentiate one organization from another in the market. With that said, the company is always trying to put lot of emphasis on developing new and innovative products to satisfy patient’s needs and wants. Stryker management is committed to offering advanced technologies that benefit both surgeons and patients while adding value in ways that have the potential to reduce costs to the healthcare system (stryker.com). Since Stryker Corporation’s growth is very much depending on their new technological products, the management spends tremendous amount of money in researching and developing of those products. The company works very closely with doctors and surgeons to understand their needs and requirements for the surgical procedures. The Stryker’s research and development team takes suggestions from the medical professionals and try to innovate products based on their needs.
Demographic Forces
Demographic forces are outcomes of changes in the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class. Demographic forces present managers with opportunities and threats an can have major implication for organization (Hill and Jones, 2010, p. 66).
The demographic force of the external environment plays a huge role in Stryker’s success. There are two components in the demographic force, the aging baby boomers and the prevalence of obesity; both of these factors create a positive impact on the healthcare industry. First, the baby boomers represent the vast majority of population in the United States and other developed countries around the globe. The expand population of baby boomers will help generate the revenues in the healthcare industry. As this segment of population is approaching to their retirement stage, they will more likely to require joint replacement surgeries such as knee, hip, and spine. Stryker Corporation will greatly benefit from this sector of population as the demand for the orthopedic implants will be rising.
Second, as per the Obesity statistics, about 30% of the population in the United States falls under the chart of obesity. Research shows that increased wait puts stress on joints which creates negative impact on our body. Because of this very reason, over weight individuals loose the strength to walk or perform any daily activities at a very young age. With that said the innovative medical technologies such as hip and knee implants can help satisfy their needs and can make a huge difference in their daily lives. These types of implants are positively affecting the orthopedic implant organizations such as Stryker.
Conclusion
All in all, the external environmental forces such as global, technological, and demographic play an enormous role in Stryker Corporation’s success. Although there is a huge competition in the healthcare industry but the globalization, innovative product strategy, aging baby boomers, and the prevalence of obesity are helping significantly with company’s development and revenue growth.
Strategic Management Module 4 – Stryker
The purpose of this module is to analyze the Functional Level Strategies such as superior quality, superior innovation, and superior responsiveness to customers. In addition this document will also discuss the Business Level Strategies such as differentiation. The focus of this module is to analyze and see how these strategies can be implemented on Stryker Corporation.
Functional Level Strategies
Superior Quality
High quality products are reliable, in the sense that they do the job they were designed for and do it well, and are also perceived by consumers to have superior attributes (Hill and Jones, 2010, p. 124).
Quality is a key to successful business. It is very important for a company to create a quality product in order to grow and stay in the industry. Companies in the medical industry must provide a quality product as they are dealing with patient’s lives.
Stryker Corporation is committed to provide quality products and services to its customers. Manufacturing and delivering high quality products is the way that Stryker is able to gain the competitive advantage in the medical industry. Stryker management works diligently to make sure that every product that comes out of the plant is qualified to perform the job that it is designed for. By providing quality products over 60 years, Stryker Corporation is able to earn customer’s trust. Stryker focuses on the effectiveness, reliability, and safety of the products and effectively meets the FDA requirements. In recent years, the company have adopted a more coordinated global approach to quality and established a corporate-level executive position to lead its efforts in this area. Stryker’s goal is to bring all of their divisions to the same level of quality excellence, so that their products offer the best possible results to the customers and their patients (stryker.com).
Superior Innovation
Innovation can result in new products that better satisfy customer needs, can improve the quality of existing products, or can reduce the cost of making products that customer wants (Hill and Jones, 2010, p. 130).
Innovation is the ultimate factor to company’s revenue growth. By creating innovative products; companies are able to achieve and maintain competitive advantage, profitability, and customer confidence.
Stryker Corporation spends ample amount of time and energy in order to meet customer’s needs. The company spends millions of dollars in research and development of the new products. Stryker’s research and development team is extensively engaged with doctors, physicians, and care givers to understand their needs and expectations in enhancing patient’s outcome. In addition, Stryker’s sales team takes suggestions from the hospitals, doctors, and experts in the medical industry on designing the product that would fit their needs. Moreover, Stryker’s marketing department is heavily involved in conducting customer surveys and feedbacks. The received feedback is used to implement the ideas in innovating new products. Stryker’s ultimate goal is to provide superlative care to the patients around the globe by designing and manufacturing innovative products and services.
Superior Responsiveness to Customer
To achieve responsiveness to customers, a company must give customers what they want, when they want it, and at a price they are willing to pay – so long as the company’s long-term profitability is not compromised in the process (Hill and Jones, 2010, p. 143).
Customers play a huge role in company’s success. For an organization to be successful, they must focus on their customers. The executives, the management, and the employees in an organization should always strive to exceed customer’s expectations.
Stryker Corporation was born with a mission to help patients’ live healthier and active life. Dr. Homer Stryker’s goal was to provide a product which would assist his patients and meet their needs. In order for a company to compete in the market, they must provide quality customer service with effective products and Stryker is doing a tremendous job in meeting customer’s needs. In order to keep effective customer relationship, Stryker management works very closely with doctors, physicians, and medical personnel who assist them with research and development of the new products. In addition, Stryker offers educational and technical support by providing one-on-one training classes, web based seminars, and 24/7 customer service hotline to healthcare professionals which helps improve patients’ outcome around the globe. Moreover, Stryker Corporation plays a major role in supporting the community at home as well as internationally. The company offers product donations and financial contributions to charitable organizations and universities which help them gain customer confidence and loyalty.
Business Level Strategies
Differentiation
A company pursuing a differentiation business model pursues business-level strategies that allow it to create a unique product, one that customers perceive as different or distinct in some important way (Hill and Jones, 2010, p. 161).
The differentiation organizations have the ability to gain competitive advantage for several reasons: first, they are able to satisfy customer needs and expectations. Second, they can charge premium price for their products, and finally; they achieve greater profitability because customers believe in their product and are willing to pay high price.
Stryker Corporation’s goal is to be the leading company in the medical industry. The company’s mission is to design and manufacture products that are not available in the market. In order to increase the revenues and market share, Stryker management is continuously finding ways to differentiate its products and services from the competitors in the industry. Stryker Corporation’s strategy of providing excellent customer service, working with medical personnel and taking their advice in improving and implementing new ideas in product development, spending large amount of money in research and development, and finally, delivering quality products to their customers help the company differentiate themselves from other competitors in the market.
Conclusion
All in all, both the functional level strategies and the business level strategies are very important for the company. Functional level strategies such as: superior quality, superior innovation, and superior responsiveness to customers and business level strategies such as: differentiation plays a huge role in company’s success. Stryker Corporation spends adequate amount of money to differentiate themselves from other competitors by providing excellent customer service, innovative and quality product to their customers.
Strategic Management Module 5 – Stryker
The purpose of this module is to analyze the vertical integration of Stryker. In addition this document will also discuss the Stryker Corporation’s long- term cooperative relationship with its suppliers.
Vertical Integration
A company pursues vertical integration to strengthen the business model of its original or core business and to improve its competitive position. A strategy of vertical integration expands its operations either backward into an industry that produces inputs for the company’s products or forward into an industry that uses, distributes, or sells the company’s products. Vertical integration is based on a company entering industries that add value to its core products because this increases product differentiation and /or lower its cost structure, thus increasing its profitability (Hill and Jones, 2010, p. 293).
In today’s world of technology, the medical industry is growing rapidly. The medical instruments and supplies industry of the healthcare market has become very competitive. It is very important for an organization to have the competitive advantage in order to stay in the business and compete with other competitors in the industry. In order to implement vertical integration strategy, companies can add value to their products, establish their own operations, or acquire other business in the industry. This may help increase the profitability, product differentiation, better product quality, and superior customer service.
Stryker Corporation’s vertical integration strategy
Stryker Corporation poses the qualities of vertical integration strategy. From product designing to customer support, Stryker’s mission is to add value to every single step in the supply chain. Stryker Corporation’s focus of designing new products and manufacturing them to the highest quality standards is the essence of Stryker’s commitment to patients and those who care for them (stryker.com).
Product Differentiation
First, in order to gain competitive advantage, increase profit margin, and compete with other competitors in the industry; Stryker Corporation focuses on product differentiation. Stryker management spends large amount of money in research and development of the products. The company’s goal is create a product that would help patient’s live healthy life. Stryker management takes pride in designing, developing, and manufacturing of the products for the customers in the medical industry. Stryker’s R&D and Sales team works very closely with doctors and physicians to understand their needs and expectations in serving the patients.
Superior Customer Service
Second, Stryker Corporation is able to add value to their products by providing superior customer service. Apart from researching, designing, implementing, developing, and manufacturing the product; the very important and significant factor of the supply chain is delivering the quality product to the customer. Without the customer support, an organization will not be able to function or gain profit margin. With that said Stryker Corporation focuses on developing excellent customer service, maintaining good relationship with potential and existing customers, and providing the best quality products.
Acquisitions
Finally, Stryker Corporation is able to gain market profit share by acquiring other businesses in the medical industry. For instance, in 2009; the company acquired Ascent Healthcare Solutions, the market leader in the reprocessing and remanufacturing of medical devices in the United States. The same year, Stryker also merged with OtisMed Corporation, a privately held software technology firm. OtisMed will focus on customizable instrumentation that has the potential to complement the many benefits that surgeons and patients realize from our Triathlon Knee System, as well as our other implants. And recently, Stryker Corporation has agreed to acquire Gaymar Industries that specializes in support surface and pressure ulcer management solutions as well as the temperature management segment of the healthcare industry (stryker.com).
Stryker Corporation’s cooperative long-term relationship with suppliers
Stryker Corporation has several long term suppliers who help the company fulfilling customer’s needs and expectations. Stryker’s main suppliers are: master metal, advance manufacturing, national precision, and DVR technology.
Stryker Corporation has established a value-added long term relationship with its suppliers. Stryker’s goal “is to improve the surgical experience by developing instruments that are more reliable, more intuitive and less complicated to use. To accomplish this goal, Stryker seeks close, long-term partnerships with its suppliers. Suppliers are key links in corporation’s supply chain and are partners in assuring customer satisfaction. The company is committed to working with its suppliers to ensure customer satisfaction. Stryker Corporation, along with their suppliers, jointly contributes delivering exceptional results”, (stryker.com).
The Stryker management believes in treating their supplier as “partners”. The corporation provides guidelines and tools to their suppliers so that they could become the part of the organization’s supply chain. Stryker Corporation has realized that in order to be successful in the business world, the company has to create a positive relationship with their suppliers. With that said, the Stryker management has constructed a partnership methodology for their suppliers in order to create a strong foundation. To make the final transaction beneficial, the company’s mission is to set expectations, promote honesty, communicate, and provide support to its suppliers.
Conclusion
All in all, Stryker Corporation believes in the vertical integration strategy. In order to be competitive in the business world, the company focuses on developing its business by product differentiation, superior customer quality, and acquisitions. The corporation spends large amount of money in researching, designing, and implementing of the products. In addition, the company takes pride in providing excellent customer service to their existing and potential customers. Finally, in today’s world of technology; Stryker Corporation is expanding its business and services by acquiring other businesses at home as well as globally. Moreover, the Stryker Corporation has a cooperative long-term relationship with its suppliers. The company’s strategy of treating its supplier as “partners” and building a “supportive” relationship helps Stryker achieving and meeting customer needs.
Strategic Management Module 6 – Stryker
The purpose of this module is to analyze an industry that Stryker Corporation has acquired in last 10 years, identify the rationale for entering the industry, and the strategy that was used to enter the industry. In addition, the document will also describe the rationale for using the strategy and the outcome of acquiring the industry.
In today’s world of competition and globalization it is very important for a company to have technological power in order to compete in the market. In the 21st century era, more and more companies in the healthcare industry are looking ways to differentiate their products by revolutionizing and implementing technological alterations to their products. Companies in the medical industry are either using vertical or horizontal integration strategies to compete in the market. With that said today many organizations are participating in mergers, joint ventures, and acquisitions in order to gain the competitive advantage.
Acquisition
Acquisition are used to pursue vertical integration or diversification when a company lacks the distinctive competencies necessary to compete in a new industry, so it used its financial resources to purchase an establish company that has those competencies (Hill and Jones, 2010, p. 334).
Acquired Industry
In the past decade, Stryker Corporation have merged and acquired various industries both at home as well as internationally in order to gain competitive advantage in the healthcare industry. In February 2005, Stryker Corporation acquired eTrauma.com Corporation. eTrauma, a privately-held developer of software for Picture Archive and Communications Systems (PACS), belongs to a technological industry in the healthcare market. Under the agreement, Florida-based eTrauma Corporation was acquired for $50 million in cash and became a wholly-owned subsidiary of Stryker. Combined with the Stryker Endoscopy imaging business, eTrauma sells its proprietary PACS image management and viewing software, Office PACS(TM), to the orthopedic market with functionality specific to the workflow of orthopedic practices (stryker.com).
Rationale for Entering the Industry
The rapid growth of technology in today’s world has led the companies in the healthcare industry move towards the technological industry. The focus behind acquiring the eTrauma Corporation was the growing demand of imaging in the medical industry. By acquiring eTrauma Corporation, Stryker was able to create a product which would help the company gain profit margin and compete within the industry. The digital imaging and electronic medical records are two of the most exciting and fastest growing markets today, and eTrauma is solidly the U.S. leader in orthopedic PACS due to its singular focus on this specialty. This acquisition allowed Stryker to leverage the extensive relationships with orthopedic surgeons and the digital integration of the endoscopic and image-guided surgery technologies. This combination offered a significant improvement in the capture and transfer of orthopedic patient imaging information (stryker.com).
Related Diversification
Related diversification is a corporate-level strategy that is based on the goal of establishing a business unit in a new industry that is related to a company’s existing business units by some form of commonality or linkage between the value chain functions of the existing and new business units (Hill and Jones, 2010, p. 320).
Strategy used to enter the Industry
Stryker Corporation used related diversification strategy in order to enter the industry of imaging technology. To gain markets’ share in the area of imaging technology, Stryker Corporation acquired eTrauma Corporation so that both the companies may share their resources to design and manufacture a quality innovative product for the consumers in the medical industry. This acquisition helped the company building strong and long-term customer relationship. Moreover, the acquisition helped facilitate Stryker’s mission of providing the best innovative products to the hospitals and doctors in order to create positive difference in patients’ lives.
Rationale for using the Related Diversification strategy
Stryker’s goal of using the related diversification strategy was to gain competitive advantage in the industry by designing and presenting a product that was not available in the market by other competitors. I think that using the related diversification strategy in order to acquire eTrauma Corporation was the best approach for Stryker Corporation because first of all, by sharing resources the company was able to design an innovative product which provided the opportunity to meet customer’s expectations and needs and secondly, the acquisition helped the company achieve customer confidence and gain market share.
The outcome of acquiring the industry
Stryker Imaging (eTrauma) provides medical imaging solution enabling healthcare providers to make more informed medical decisions (stryker.com). The eTrauma addition to Stryker’s family definitely helped increased the profitability. In today’s competitive world, organizations are looking for ways to save time and eliminate extra workforce; the innovation of image and picture communication software created a revolution in the orthopedic market of healthcare industry. With the help of imaging software, now doctors are able to produce high-quality resolution graphics, which are cost effective, faster, and secure. Moreover, the information can be transferred electronically rather than keeping on prints.
Conclusion
All in all, Stryker Corporation; the leader in medical technology has grown tremendously in last 10 years. The company has acquired many businesses and industries in order to help medical staff, serve patients’ needs, gain market share, and customer confidence. In February 2005, Stryker Corporation acquired eTrauma; an imaging developer software company with the idea to design a product for the orthopedic offices. The company used related diversification strategy with the focus to gain technological power and provide an innovative product by sharing resources. The outcome of the acquisition was positive and helped Stryker achieve profitability and market share. Today, the imaging software is being used in the United Sates as well as globally and creating a positive impact in the healthcare industry.
Strategic Management Module 7 – Stryker
The purpose of this module is to analyze the implementing strategy in a single industry such as increase responsiveness to customer groups. In addition, this document will also discuss the implementing strategy across countries such as global standardization strategy and the impact of these strategies on Stryker Corporation.
Implementing Strategy in a Single Industry
To pursue business model successfully, managers must find the right combination of structure, control, and culture that links and combines the competencies in a company’s value chain functions so that it enhances its ability to increase responsiveness to customer groups (Hill and Jones, 2010, p. 404).
An organization must implement organizational designs in order to be successful and profitable in an industry. To gain competitive advantage and profit growth, organizations may execute ideas like increasing responsiveness to customer groups.
Implementing Responsiveness to Customer Groups
For a company pursuing a strategy based on increasing responsiveness to customers, it is vital that the nature and needs of each different customer group be identified. To promote superior responsiveness to customers, a company may design a structure around its customers (Hill and Jones, 2010, pg. 408).
Meeting customer needs, increasing responsiveness to customers, and providing quality customer service are the key factors to a successful business. Companies may differentiate themselves in the industry by keeping positive reputation and providing quality customer service. Responsiveness to customer groups is the key which sets apart Stryker Corporation from other competitors in the industry. Stryker Corporation takes pride in completing and fulfilling customer demands. Stryker management works very diligently to fulfill the needs and expectations of their customers. Stryker’s customers are hospitals, doctors, caregivers, and other medical personnel. The company’s R&D and Sales department works very closely with their customers and takes their advice in order to bring a new product in the market. To be successful in the business, Stryker Corporation has developed a long-term working and professional relationship with their customers by providing various key elements such as: quality customer service, face to face support, on the job training, and good ethical business practice. Stryker Corporation is committed to provide innovative products with reliable and quality customer service to its customers.
Implementing Strategy across Countries
In today’s world, globalization plays a huge role in company’s success and failure. In the 21st century era, more and more companies are participating in globalization strategy. Today, businesses are using globalization strategy in many ways in their organizations such as; some companies are performing manufacturing functions of their products overseas which helps the company save cost on the other hand some companies are selling their products abroad to gain profit margin. Companies may implement strategies like global standardization in order to grow their business at home as well as overseas.
Stryker Corporation is a broadly based, global leader in medical technology that consistently delivers exceptional results. Stryker works with respected medical professionals to advance meaningful innovation reduce health-care costs and improve people's lives (stryker.com).
Implementing a Global Standardization Strategy
Under the global standardization strategy, the company locates its manufacturing and other value chain activities at the global location that will allow it to increase efficiency, quality, and innovation (Hill and Jones, 2010, p. 437).
By implementing the global standardization strategy, the companies are able to perform at a global level. The strategy helps organizations to operate its business in various countries around the globe. In addition, by executing global standardization strategy; companies are able to gain competitive advantage by effectively increasing efficiency, product development, and quality service. Organizations may also expand their business globally by merging, joint venturing, and acquiring other companies in the industry.
Stryker Corporation, the global leader in the healthcare industry participates in the global standardization strategy. From U.S. to pacific, Stryker Corporation is a world known medical technology company in the healthcare industry. In order to increase efficiency, quality, and innovation; the company has divisions such as manufacturing, sales, marketing, and R&D in many parts of the world. Stryker’s headquarter is located in the United States but the company has several offices, locations, plants, and branches across the globe. The global standardization strategy helps Stryker Corporation to compete in the global market and provides the advantage of using foreign skills and capabilities which in return creates a positive impact on the company. Thus, the company is able to increase profit margin and sustainable growth.
Conclusion
All in all, the implementation of both the increase responsiveness to customer groups and the global standardization strategies play a huge role in Stryker Corporation’s success rate. By providing quality, reliable and efficient customer service; Stryker Corporation is able to create a long-term relationship with its customers. The company’s management works very closely with their customers to achieve its goal of making positive impact on patient’s lives. In addition, Stryker Corporation, the global leader in medical technology is also benefiting from its global standardization strategy. The company’s management works together at home as well as abroad to achieve its goal of creating innovative products, providing value, and making difference in the lives of others.
References
Hill, C., Jones, G. (2010). Strategic Management an Integrated Approach (9th ed.). Printed in
the United States of America: South-Western, Cengage Learning.
Nationmaster.com. Retrieve September 15, 2010 from
http://www.nationmaster.com/graph/hea_obe-health-obesity
Netmba.com. Retrieved September 15, 2010 from http://www.netmba.com/marketing/product/lifecycle/
Stryker.com. Retrieved September 15, 2010 from www.stryker.com
Wikinvest.com. Retrieve September 15, 2010 from http://www.wikinvest.com/stock/Stryker_(SYK)?ref=relatedpages
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