Summary
Medtronic is a medical technology company founded in 1949 by Palmer Hermunslie and Earl Bakken. The company headquarter is in Dublin, Ireland and operates in 150 countries around the world. The company has gone through several acquisitions to increase its expertise and product. Medtronics made a historic advancement in 2015 when it acquired Covidien one of the largest medical company. The annual revenue of Medtronics is $30.6 billion. The company is made up of four segments comprising restorative therapies, diabetes, cardiac and vascular and minimally invasive therapies. Some of the products made by the company include a battery-operated pacemaker, mechanical heart valve, implantable drug pump, among others. The company started expanding in in the stock exchange market in the 1970s when it extended its operations in New York and later to India and China. The company is governed by a board of directors which is led by Omar Ishrak as the Executive Chairman and the Chairman of the board. The function of the board members is to oversight the management of the company. The board is divided into six committees to enhance its oversight role. The company is headed by Geoffrey Martha who directs the company around Economic Value, Therapy Innovation and Globalization. The international business strategy that Medtronics use in penetrating the foreign market is global strategy. This strategy helps the company enjoy economies of scale and also extend the life cycle of its products. Some of the important macro factors differences between USA and Spain include political, economic, infrastructural and demographic factors. Macro factor similarities between USA and Spain include legal, environmental and technological factors. My business activity in Spain will be setting a centre for distribution, servicing and repair of the medical products in Spain. The mode of entry I have chosen to study to enter Spain is Acquisition mode because it is an easy and cost-effective method of foreign market entry. I chose to pursue entry in Spain’s market because of the gaps in medical products in the country, favourable regional economic integration of EU and positive social factors in the country.
Medtronics into Spain
Medtronics is one of the largest medical companies in the world, operating in 150 countries. It was founded in 1947 and headquartered in Dublin, Ireland. Some of the medical products produced by the company include patient monitoring systems, surgical tools, insulin pumps, cranial and spine robotics and cardiac devices. The products produced by the company treat seventy health conditions. The mission of the company is to alleviate pain, restore health and extend life. Medtronic is a company worth $145 billion generated from selling its medical products worldwide (Nielsen, 2019). It generates a revenue of more than $30 billion from four business segments, including restorative therapies, diabetes, cardiac and vascular and minimally invasive therapies. The annual revenue of Medtronics is $30.6 billion (Nielsen, 2019). The segment of cardiac and vascular is the largest, earning the company revenues worth $11 billion. It is the leading company globally in the area of borne grafts and implants. Medtronics has an employee number of more than 90,000 worldwide. The paper aims at critical analysis of Medtronic into Spain.
Medtronics has grown from a small shop for electronic repair in a garage in Minneapolis to a global leader in medical technology. The company was started as a medical electronics repair business in 1949 by two brothers-in-law Earl Bakken an electrical engineering graduate and Palmer Hermunslie and enterprising engineer. The pair had deep moral purpose and passion for employing their entrepreneurial skills and scientific knowledge to help others. The first office of the company was located in two boxcars used as woodworking and garage shop. In 1950 Bakken and Hermunslie started building customized ‘specials’ for the hospitals around and sold medical equipment for Sarborn Company of Boston. They also delivered some of their equipment’s to the research and medical staff at the University of Minnesota. In 1957 the duo made the first battery-operated pacemaker to help lives of patients undergoing open-heart surgery who suffered or even died when the power went off (Schwalb & Hamani, 2008). They delivered their first battery-operated pacemaker to a surgeon in the University of Minnesota who was concerned about his patients.
By 1967 the company had opened their first international office in Schiphol Airport, Amsterdam then established Medtronic Canada in 1968. Medtronics expanded its product offering globally in the 1970s when their stock started trading on the New York Stock Exchange market. They entered in India, China and other emerging markets and buttressed through the provision of training physicians in the use of their latest technologies. By 1974 they were already serving 70m countries around the world. In 1977 Medtronics introduced mechanical heart valve in the market which later became the first choice to many physicians all over the world. The company expanded into neurostimulation by collaborating with French doctors to develop the first deep brain stimulation system to help in the treatment of movement disorders. Due to increased research and development, Medtronics developed the first implantable drug pump in the early 1990s, opening it up to new markets in the world (Greatbatch & Holmes, 1991). To penetrate deep into the international market, the company expanded its operations to biologic and drug delivery, remote monitoring and diagnostic. At the beginning of the 21st century, the company opened new headquarters in Minnesota and Fridley. In 2001 Medtronics expanded to the diabetes care through the development of a continuous glucose monitor followed by the development of the first remote monitoring system to transfer patient data to authorized doctors in 2002. The company received regulatory approval to sell its Transcatheter pulmonary valve in Europe in 2006 and was approved to sell the same product in the US in 2010. It established a patient care centre in China in 2010 to offer hands-on education to the existing therapies (Schwalb & Hamani, 2008). Metric made a significant milestone in its history by acquiring Covidien in 2015, enabling the company to treat more people in many places globally. The company launched Medtronics Labs in 2016 and continued making cutting edge products like Revo MRI SureScan and Micra through to 2019. In 2020 the company diversified and created an inclusive workforce by creating the role of chief inclusion and diversity officer to accomplish its commitment to equity, diversity and inclusion. Guided by its mission, Medtronics assisted the frontline heroes in fighting the Coronavirus by increasing production of ventilators. Medtronics also developed telehealth and COVID-19 virtual care tools (Allam et al. 2020).
The company is governed by a board of directors headed by Omar Ishrak as the Executive Chairman of Medtronic and Chairman of the Board of Directors. The board of directors is made up of 13 members. The board’s primary function is to oversight the organization by overseeing the performance of Medtronic’s management on behalf of the shareholders (George& Kindred, 2013). To represent the shareholder’s interest as the owners of the corporation. Their responsibility in carrying out the oversight function is performing the duty of loyalty and duty of care. The board members are guided by the code of business conduct and ethics as they perform their oversight role. The board of directors are further divided into six committees to form different board committees to enhance their oversight function. The various board committees include the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee, Finance & Financial Risk Committee, Quality Committee, Technology and Value Creation Committee (George& Kindred, 2013). Geoffrey Martha heads the company as the overall chief executive officer. Some of the responsibilities of the CEO is to direct the company around the following three long-term growth strategies: Economic Value, Therapy Innovation and Globalization (George& Kindred, 2013). He also reports to the Medtronics board of directors the progress of the company on a quarterly basis. The various substituents of the company in various countries around the world are governed by global country heads who reports to the CEO at the headquarters. The country chief executive officers form Medtronics executive leaders who spur the mission of the company in various countries around the world. The global country heads govern a team of employees, including doctors, engineers, clinical officers who are under them towards realizing the mission of the company. The priorities of the company include increasing the economic value, improving therapy innovation and increasing globalization of the company and its products.
Medtronics employs global strategy in its international business strategy. The company produces standardized medical products that it distributes worldwide (Nielsen, 2019). All the company products produced at the segments of restorative therapies, diabetes, cardiac and vascular and minimally invasive therapies are the same for all the 150 countries that Medtronics operates in. The only difference in the company products is the slight modification done on the language facet of the medical product (Nielsen, 2019). All the products in the cardio, neuro and general surgery from the company are all of the same standards in all the countries they have been distributed. The company management has employed the global strategy in the international market to give it an advantage in penetrating the global market. It is because of the global strategy of maintaining standard quality globally that made it penetrate China and the Asian countries. The company recently used the same strategy in making ventilators, telehealth and COVID-19 virtual care tools making several countries procure its (Allam et al. 2020). The only difference in the company’s products is the adjustment made on language programming based on the countries of the recipient. The reason why the company selected to go the global strategy way is because the strategy makes it enjoy economies of large scale in the foreign market. The strategy has also helped the company extend its products life cycle by selling its older high-quality products to the less developed countries.
Some of the important macro factor differences between USA and Spain include political factors. The USA is politically stable and peaceful country, whereas Spain has poor political stability hence threatening peace (Rodriguez & Pallas, 008). The other difference is in the economic factors of the two countries. US is the largest economy globally, with a GDP exceeding 16.760 trillion (De Grauwe, 2020). It is also a well-developed nation gathering strength from manufacturing industries and its services. Whereas the economic situation in Spain is unpleasant because of the ten years economic recession the country suffered. The poor economic situation extends to the household level. Spain also has huge deficit making it operate in depts. The next macro factors difference between the USA and Spain is on Values. In the USA, most state laws do not allow open smoking, while in Spain, people smoke freely in the open space (Jareño & Negrut, 2016). Demographic factors are different in the two countries. The US has a high ageing population, while Spain has a high number of youths. Infrastructural factors differ in the two countries with the USA having well-developed infrastructure whereas Spain has fragmented and substandard infrastructural planning.
One of the similarities in the macro factors between the US and Spain is in social factors. The US has one of the best healthcare systems in the world. The country also holds high migrants from Latin America. Similarly, Spain is one of the countries with the best healthcare system in Europe (Jareño & Negrut, 2016). Spain also has a high number of immigrants from East Europe and Latin America. The other similarity is on the technological factor. The US is one of the best countries in innovation and technology in nanotechnology, biotechnology and environmental technology. Spain also has good information technology and is on par with the rest of Europe. It has the best technologies in the computer, good cellular network for mobile phones, medicine and electronic records technologies. Legal rules are strict in both countries. The USA has stringent regulations that affect healthcare businesses such as consumer law, import/export law, discrimination law, and health and safety law, among others (Jareño & Negrut, 2016).
Similarly, Spain has strict rules governing the import/export of products and strict data protection laws. The environmental factors are highly regarded in the USA. This is similar to Spain, where the environment is a serious topic, and pollution amounts to fine. Educational factors are also similar in the two countries. The USA has one of the best education systems globally, and so does Spain.
The important potential risks that Medtronics may face while entering Spain include economic factors of the country. The unpleasant economic situation due to the ten years of recession in Spain threatens the location of the business (Bereményi & Carrasco, 2015). The poor economic status of the country extends to the households hence may cause problems in the entry of a new business. The political instability in the country is another potential risk that raises concern on business entry in the country. Legal factor is another potential risk for business entry in Spain. Due to strict rules in medical products import/export, entry of Medtronics in Spain might take a lot of paperwork and several restraints which might not be favourable for business (Lasserre, 2017). Poor infrastructural factors is also a significant potential risk of entry in Spain. Because infrastructure is a major factor that improves business activities, it may be difficult for Medtronics to realize profits with the fragmented and substandard infrastructure in Spain. Environmental factors are one of the critical risk factors to consider while entering the market of Spain. Spain has stringent rules on environmental pollution. Environmental pollution in Spain warrants a hefty fine. It is, therefore, a potential important risk to consider before entering into the medical market by Medtronics.
Some of the important potential advantages that could arise from entry into Spain’s market include good technological infrastructure in Spain. The good cellular network, medical and electronic record system is an advantage to Medtronics in Spain because it will enhance the purchase of Medtronics products like remote monitoring system (Lasserre, 2017). This is so because the device requires an exemplary cellular network and internet to transfer patient data to authorized doctors. Proper technological infrastructure will also increase the purchase of other medical equipment’s that works together with the RMS. Social factors in Spain, like a good healthcare system, is another important potential advantage for Medtronics to enter its market. The government of Spain are great importers of medical products because of the free public healthcare provision (Lasserre, 2017With the high affinity of importation of medical products entering Spain’s market will be an added advantage that would arise in future. Favourable regional economic integration of the EU is another important potential advantage that Medtronics will enjoy after entry into the market (Lasserre, 2017). The favourable economic integration of the EU, coupled with the friendly and strong relationship between the US and Spain, may boost the market for the Medtronics medical products. Spain’s better education system is a potential important advantage that may enhance Medtronic trade in the country. The better education system may improve the procurement of quality medical products from Medtronics for quality results during laboratory experiments. Better education means the presence of many qualified doctor’s to select and use quality medical products, thus a hidden future advantage.
My business activity in Spain will be to set a centre for distribution, service and repair of the medical products produced by the Medtronics. The centre will host medical products from all the segments of the company, including Cardiac & Vascular, Diabetes, Minimally Invasive Therapies, and Restorative Therapies. The centre will act as the central distribution and sales zone in Spain. It will serve as the servicing area of all Medtronics medical products sold in Spain. The office will also have the technical staff to help in the repair services for all the medical equipment’s delivered in Spain upon seeking the service by our esteemed customers. Additionally, it will be from the centre that we will monitor the market of other Southern European countries to buttress further in Europe.
The mode of entry I have chosen to study to enter Spain is Acquisition mode. The first reason why I have chosen Acquisition is to help my company easily enter Spain’s foreign market and to expand Medtronic’s operations in this Country. The mode will help Medtronics enter the foreign market easily because Medtronic will use the personnel already working in the company instead of starting fresh recruitments which would take time (Lorenzen & Mahnke, 2002). Acquisition will also help start medical products business in Spain with a solid base because I will retain the brand name of the company and the intangible assets. Acquisition mode will help me to reduce any excessive competition our company might receive in the market due to excess supply of medical products. The other reason why I have chosen Acquisition mode is to help my company seek economies of scale in the market, diversify and gain greater market share in Spain (Lorenzen & Mahnke, 2002). The mode will also help me examine the laws closely in the medical products sector in Spain. Due to the restrictions, Spain has put on foreign ownership studying this mode will help me strategize before establishing Medtronics distribution and sales centre in Spain. Finally, I have selected acquisition because it is a cost-effective mode and a synergic way of entering a new foreign market.
I recommend pursuing the idea of entering Spain in the medical products market because of the gap in medical products field in Spain making them import most of their medical products from the US and other countries (Ruiz-Castillo, Ley & Izquierdo, 2002). I will also pursue it due to the high demand for medical products by the government of Spain to meet the target of the provision of free healthcare services in public facilities in the country. The entry is also worth pursuing because of the favourable social factors such as a good education system, favourable technological infrastructure that will enhance the purchase and establishment of the medical products. Positive regional economic integration of the EU, the friendship and cordial relationship between Spain and the US is also another factor that will make the business successful and sustainable. I have also chosen to enter the market of Spain through Acquisition mode because it is the easiest, cost-effective and the best diversification method to enter and expand operations of Medtronic as fast as possible. The mode of entry I have selected is one of the best because it will help the company enjoy economies of scale and have a larger market coverage in Spain after a short period of operation.