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.
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