Chapter 5: Evaluating Firm Strengths and Weaknesses: The Resource-Based View

As indicated by Barney (2011), distinctive competencies are the actions taken or performed by a company that inevitably sets them apart them from the competitors in the market.

Previously mentioned in a prior post, Medtronic has a uniquely placed competency: patents, and lots of them.

Medtronic possesses an immense value in these patents, and what’s more astonishing is how dynamic this portfolio of patents remains to this day. The ability to acquire patents boils down the Medtronic’s precision approach to forecasting and understanding even the most subtle of trends. The large market capitalization translates to a large treasure chest of money stashed away. These funds allow Medtronic to expand product lines or even develop new ones by garnering key patents without reluctance. Medtronic has effectively removed a barrier to entry in the market by throwing mountains of money into research and development, and supply chain analysis.

Medtronic is fully aware that it will require both external and internal resources to create an environment ripe for patent or competition (new entrants/startup) acquisition. The organization is a leading competitor, so why allow stasis when you can be head honcho in the market? 

(United States Securities and Exchange Commission)

Sources:

1. Barney, J.B. (2011). Gaining and Sustaining Competitive Advantage, 4th ed. Prentice Hall: Pearson.

Chapter 4: Evaluating Environmental Opportunities

An emerging industry, as illustrated by Barney, is a "newly created or newly-recreated" industry created by the advancements in technology or the evolution in customer needs and behaviors (Barney, 2011). 

In the last post, we discussed the environmental threats facing Medtronic. Here, let us briefly discuss how they maintain their market leadership.

Medtronic is a OEM in the medical device industry, with products ranging from trocars to regeneration matrices. The healthcare sectors serviced span from neurological to orthopaedic. Somewhat recently, Medtronic has taken a vested interest in the emerging market of MedTech. As a leader in the medical device industry, with a sizable market capitalization, it is paramount Medtronic not lose its focus on differentiation. As an emerging market, MedTech is an area that allows medical device organizations to really outline the future growth in not just product realization but also commercialization. To take initial steps, Medtronic created a new internal infrastructure 6 years ago that would allow further customer interaction and greater facilitation of data. Continued focus on health systems and the emerging MedTech market showed Medtronic delve into key acquisitions to become a more robust player in the market. 

With the fast-paced nature of healthcare and ever-evolving needs, Medtronic pulled one over on its competitors by actively engaging the end users, aka the patients. This collaborative platform garnered an increase in customer satisfaction, well-intentioned and low-cost marketing, and most of all, better utilization of the emerging MedTech sector to create more patient-centric developments.

In their latest attempts to remain atop the market, while creating further avenues of customer-focused product lines, Medtronic acquired Nutrino, in late 2018. This acquisition will allow Medtronic to use the predictive algorithms to better support physicians in their fight against diabetes. In search of continued differentiation, Medtronic hit the jackpot with respect to physician interest and widespread public applicability.

Sources:

1. Barney, J.B. (2011). Gaining and Sustaining Competitive Advantage, 4th ed. Prentice Hall: Pearson.

Chapter 3: Evaluation of Environmental Threats

Medtronic is in the medical device sector which is a vastly emerging market in healthcare. Being a leader in medical devices, it is only natural Medtronic contend with a myriad of business issues, both internal and external.

Michael Porter is a brilliant economist who coined the Earth-shattering paradigm of 5 forces that are essentially deterministic of the competitiveness, or lack thereof, of the firm in question. We will look at the 5 forces as they relate to Medtronic's ability to maintain such a strong foothold in the market, and how they perform such a feat.

THREAT OF ENTRY

Medtronic is a leader in this field because of continued innovation of products suited a more widespread customer base. In addition, acquisition of technologies to bolster both physician and customer augments the established credibility. Medtronic is not the end all, be all. Individuals at other companies or those recognizing a niche gap in the market can capitalize on this opportunity. This new entrant into the market poses a challenge to Medtronic: New player in the market is primed to seize an valuable, though niche, piece of the market, and potentially offer lower cost solutions and more streamlined lead times.

Solution? Medtronic has to continue it's broad innovation of new products or improvements of legacy products. The expansion of innovation means an increase in R&D funding. Lastly, if Medtronic can establish economies of scale, then issues of new entrants with lower costs will be no longer.

THREAT OF RIVALRY

Yes, Medtronic, is the leader in the industry, but this goes without saying how intensively competitive the market is. There are many players in the market, and this continued sparring only results in decreased profits. 

Solution? Fortunately, a strength of Medtronic is the great innovation, but now to really align themselves in the market separate of rivals, Medtronic needs to embark on opportunities designed to introduce differentiation in the market. Also, it wouldn't hurt if Medtronic other rivals (big or small) work together on certain projects that target specific portions of the market. It is far easier to come together as a unit and tackle an issue rather than have 10 rivals war it out.

THREAT OF SUBSTITUTES 

Medtronic has a multi-faceted portfolio of products in the medical device market. However, the real threat of substitutes presents itself when another group or organization creates a similar product, but markets it is a far more economical cost. Why create new products when you can create a product very similar to something already in practice, but make and sell it for far lower?

Solution? As brash as it sounds, Medtronic may need to find ways to make it more challenging for physicians and customers to switch away from Medtronic products to a substitute product. Additionally, Medtronic is a market leader in creating and distributing products, however, it is time those products leave the organization backed by service. If Medtronic can offer services in conjunction with products, threat of substitutes is neutralized, AND Medtronic creates differentiation.

THREAT OF POWERFUL SUPPLIERS

In reality, Medtronic would be struggling on a daily basis if there were no raw material suppliers. Neither Medtronic nor contract manufacturers could complete jobs in a timely manner, or at low costs. These raw material vendors have to balance their respective market forces in addition to the fluctuating demand from medical device corporations. This means the material vendors essentially have free reign on prices. 

Solution? Supply chain, supply chain, supply chain. Medtronic must streamline the supply chain, from concept to commercialization of the product(s). In an effort to differentiate in the market, Medtronic should seek primary vendors and new types of materials for products.

THREAT OF POWERFUL BUYERS

What can be said about the buyers that isn't already known? Buyers want a medical device from a trusted organization that backs product efficacy with statistical evidence and successfully proven anecdotes. However, just because buyers want the very best products does not mean they will pay top dollar for it. These consumers expect low-cost offerings; this in turn can create customer (brand) loyalty moving forward.

Solution? In addressing the threat of powerful buyers, Medtronic can combine several approaches from other areas. For example, Medtronic needs to continue innovating to keep physicians and customers interested in the company's growth potential. The continued and sustained growth through differentiation will allow for an increase in the number of customer Medtronic serves.

Chapter 2: Firm Performance and Competitive Advantage

Competitive advantage, as explained by Jay Barney, is the ability of a firm (Medtronic for the purposes of this blog) to create more economic value than rivals (including Stryker, Boston Scientific, etc.).

Medtronic, as a leader in the medical device industry, must find avenues to differentiate product lines and forecasting opportunities to differentiate from the competition. Hence, we will briefly discuss the competitive advantages Medtronic possesses in the market.

Medtronic has maintained a high level of competency in the market courtesy of their unique and aggressive growth strategies. The company is ushering in a new wave of value-based healthcare to create a more robust brand name; increased patient satisfaction and longevity of medical device are intensely sought after outcomes for Medtronic. Furthermore, with the how long Medtronic has been a player in the market, they hold a treasure trove of historical data allowing them to make balanced decisions about legacy or new products. 

Another growth area is through the acquisition, but not of companies with products similar to Medtronic. The company seeks to identify leaders, big and small, in diversified markets like robot-assisted surgical equipment, and buy them out further increasing Medtronic's competitive advantage. The product diversification is bolstered through a practice of sustaining high-margin (hip systems) and low-margin products (surgical stents). Essentially, Medtronic has a financial backup when one sector of their portfolio is not bringing in expected profits.

A quintessential key to Medtronic's growth (and continued innovation) rests within the litany of patents the organization holds. The patents are essentially the keys to market dominance as they create barriers to entry for the competitors, even if ephemeral.

Attaining market competitive advantage through continued product diversification.