Chapter 9: Tacit Collusion - Cooperation to Reduce Competition

To round out our discussion on business strategies, we will briefly take a look at the concept of collusion, and how it relates to Medtronic's business operations.

Barney defines collusion as the act of any number of firms working in concert to align strategic decisions in order to decrease the competition in the respective industry.

As great a corporation Medtronic is and for as long as they have had the market share, their journey is certainly riddled with issues. In 2012, it was reported that Medtronic worked with physicians to edit and modify reports. The studies misrepresented the risks to patients of products used in spinal fusion surgery. 

In late 2016, Medtronic was charged with price fixing in their China division. Medtronic was imposing minimum resale prices for products being distributed. 

In late 2018, it was reported that the Brazilian regulatory bodies are filing charges against Medtronic for alleged collusion with respect to their heart devices. Specifically, Medtronic was engaging with competitors to price fix heart devices to reduce competition in the South American market.

Chapter 8: Flexibility - Real Options Analysis Under Risk and Uncertainty

Without getting too much into the mathematics in the economics of understanding flexibility, options, and even uncertainty, let's briefly discuss Medtronic's market flexibility.

Over the past decade, innovations into the medical device sector have led to greater financial flexibility for Medtronic. It is important to note that the uncertainty indubitably lies within future business acquisitions and market fluctuations; predictive analytics only so much in terms of economic upside AND downside. 

In times of manufacturing uncertainty, Medtronic had to reshuffle internal efforts. In addition, the customer was effectively left hanging in a key market for Medtronic. This opening allowed for competition to command a key sector of the medical device market. However, Medtronic's continued efforts to push the limits of technology to ensure top shelf products for its customers.

One type of flexibility employed by Medtronic is the option to expand. Medtronic operates in the cardiac space. Medtronic created stents, which allowed them to expand further into the cardiac space with more expansion products like balloons and catheters.

There is inherent risk in ALL endeavors. What makes Medtronic successful is its ability to use previous customer data, manufacturing data, and financial reports to make sound decisions in the now and for the future.

https://www.sec.gov/Archives/edgar/data/64670/000095012310040829/c57838dfan14a.htm

Chapter 7: Product Differentiation

Continuing our previous discussion of business strategies, we move into understanding product differentiation and how Medtronic utilizes this concept in day-to-day operations.

Barney states product differentiation, as the term indicates, is the strategic impetus of an organization to acquire new or further competitive advantage in the market by increasing customer or end-user interest and likelihood of paying for a variety of goods and services.

Product differentiation for Medtronic is paramount to stay in business. Without product differentiation as a business strategy, Medtronic would have little to no stake in the medical device market. The continued innovation and differentiation strategies push the limits of what was once inconceivable. For Medtronic, survival is aided through customer loyalty to the brand. So the question now becomes how does Medtronic maintain brand loyalty? 

Solution: Create more complex customer-centric products which puts Medtronic at the front of the line when physicians are looking for a one stop shop solution to help patients. Furthermore, Medtronic can make sure existing products or products flowing through the pipeline maintain not just a high level of quality but also uniqueness in design and multi-functionality that leads physicians and customers to choose Medtronic over the competition. 

Medtronic released a product touted to revolutionize heart monitoring. The product, Reveal LINQ, compared to competition was a heart monitor with a unique feature: it is extremely small. What patient does not want a small heart monitor that can be inserted into the cardiac system?

https://www.medtronic.com/us-en/patients/treatments-therapies/heart-monitors/our-monitors/reveal-linq-icm.html

Chapter 6: Cost Leadership

In the first few blogs, we delved into the Logic of Strategic Analysis, from firm performance and competitive advantage to understanding and analyzing environmental threats. Now, we are going to shift our focus to Business Strategies. 

To kick off this new knowledge foundation, we will begin with a look at Cost Leadership and how that relates to Medtronic's day to day operations.

A key generic business strategy Medtronic employs in the market is cost leadership. Cost leadership characterizes an organization focused on allocating resources to lowering the pertinent direct and indirect economic costs whereby creating sustained competitive advantage in the market. A key to this cost leadership are these economies of scales, which Barney describes as essentially cost savings yielding from varied scaling in the operations or production side of the business. 

Medtronic is well-versed in acquisition of new technologies, but the magnanimous investment into R&D, clinical testing, and actual optimization of production process allows Medtronic to remain THE dominant player in the market.

https://www.simplysafedividends.com/intelligent-income/posts/116-medtronic-a-well-run-dividend-aristocrat-in-healthcare