Assignmnet Question 1: What Business is Medtronic Medtronic in? The Medtronic company's business is medical equipments and services.
What product categories does it compete in? Which categories are growing and by how much(%)? Are any product categories "in trouble"? The product categories are: 1. Cardiac and Vacular Vacular products. The cardiac and varcular products' net sales increased $835 million by 9% compared with FY2015. 2. Minimally Invasive Therapies. The minimally Invasive therapies category has increased $7,176 by 301%. But considering that this product category has newly formed in FY2015 the fourth quarter, quarter, so we can interpret that the targeted net sales for this category in FY2015 might be the same as the Cardiac and Vascular category. Then we can get the increase in $202 million and by 2%, which might be more reasonable. 3. Restorative Therapies. Therapies. This caegory caegory increased $459 million million in total and by 7% as a whole. However, the subcategory product spine and Neuromodulation has decreased by 2% and 3% each. So the two are in trouble. 4. Diabetes Products. Products. This category increased increased $102 million million in total and by 6% relatively.
Who are its customers? There are various types of customers for Medtronic's products and services. 1. For its cardiac and and vacular products, the customers customers include primary primary specialists like electrophysiologists, implanting cardiologists, heart failure specialists, cardiovascular, cardiothorasic, and vascular surgeons and interventional cardiologists cardiologists and radiologists. 2. For its minimally invasive invasive thrapies products, products, the main part of the customers customers are hospitals, physicians' o !ces, and ambulatory care centers, other alternate site healthcare providers. 3. For its restorative restorative therapies and products, products, the customers include include spinal surgeons, neurosurgeons, neurologists, pain management specialists, anesthesiologists, anesthesiologists, orthopedic surgeons, urologists, interventional radiologists, radiologists, and ear, nose, and throat specialists. 4. For its diabetes products, the customers customers are endocrinologists, endocrinologists, diabetologists, diabetologists, and internists.
What is the distribution of its business geographically? In FY2016, the geographically geographically distributed net sales are:
U.S. : $16,422, 57% Non-U.S. : $8,708, 30% Emerging Markets : $3,703, 13%
How does it sell its products? Most of its products and therapies are through direct sales in the U.S and with a combination of direct sales and distributors in the markets outside the U.S area
Who are its key competitors? Its key competitors are Johnson & Johnson, Boston Scientic and St.Jude.
Assignment Question 2: Is its current financial performance(GM and OI) "good"? For MDT FY2016:(in million) GM(%): $19,691(68.3%) OI(%): $5,291 (18.4%) Compettitors
GM(%)
OI(%)
Johnson&Johnson
69.27
27.39
Boston Scientific
71.35
-4.37
St Jude
68.71
18.59
GC Aesthetics
50.69
-81.07
Stryker corp
66.38
18.71
Globus Medical Inc
75.62
31.61
Presbia
-6.54
-11849.67
Trimedyne
33.41
-10.18
Hologic
52.96
14.51
Allergan
68.08
-20
Edward LifeSciences
75.25
24.96
Covidien
59.36
18.69
The Medtronic company can be treasted as well performed for its main market is business market selling hardwarea and services. The General benchmark is respectively 18% and 15%, both are less than its 18.4%. So from this respect, the performance is good. However, from the industry respect, as we choosed several its competitors,the MDT is ranked 6th position, seems not good in the position. But consider that it has acquisized Covidien, so in the long run its OI should keep increasing. And also considered that those competitiors' main business might also not be in the same sector as Medtronic's, so the benchmark
derived merely for its competitiors might not be so reasonably to compare with.
Are GM and OI improving or deteriorating? In absolute terms? In relative(% revenue) terms? The GM increased $5,739 million in absolute terms, but decreased by 0.6% in relative terms. The OI increased $1,525 million in absolute terms but decreased by 0.2% in relative terms. So the GM and OI performance both are deteriorating. However, consider that the acquision of Covidien occured in FY2015, so the segment MIT Group's net sales should be adjusted. If adjuested to $9,361 million, as we cannot adjust the COGS, we can only conjusture that the OI and GM should be improving as the instution for the acquision should be to improve the performce and the absolute GM ad OI are actually increasing.
Which Income statement line items drove the change in relative operating income from FY2015 to FY2016? By how much? From FY2015 to FY2016, the OI% dropped by 0.24%. The factors for this change was drove by: Research and development expense decreased by 0.38% Selling, general, and administrative expense decreased by 1.23% Special charges(gains) net increase by 0.43% Restructuring charges, net decreased by 0.16% Certain litigation charges, net decreased by 0.12% Acquisition-related items decreased by 1.73% Amortization of intangible assets increased by 3.08% Other expense, net decreased by 0.21%
What opportunities & challenges does Medtronic face in accelerating its revenue and profit growth in the future? For the revenue, as Medtronic finished acquision of Covidien, so we can expect the revenue to keep an steady growth rate as there are new markets joining into the blueprint. Also, how to keep the market share and manage to increase the share can be challenging. As we can see from previous questions, the OI% and GM% are deteriorating. If we assume that the acquision should bering benefits and improve Medtronic's performance, then for the FY2016, the company di not perform well. Then the challenge is how to utilize the benefits Covidien can bring to maxmize the revenues and operating income.
Another challenge or opportunity might be how to enlarge its non-domestic market. As we can see from the 10-K, the Non-U.S. market percentage keeps decreasing form 2014 to 2016, so after the acquision, there can be new market for Medtronic to explore in global market. This can also be a challenge in another way. The oprtunity along with the acquision is the leading place in the minimally invasive technology, so Medtronic should keeps reasearch and develop new tech and products in this area to stay in the edge.
