Competitiveness in

the
Orthopedic
Industry
Group 5
Industry Insights porter`s

Bargaining
Bargaining Threat of
Threat of Power of
Power of New
Substitutes the
Supplier Entrants -
High Customer
High Low
Low
 PESTLE
Political No strong support or initiative by government to promote Medical tourism . There are: (a) no
regulations, (ii) taxation anomalies, (c ) bureaucratic roadblocks

Economical - Quality Service at Affordable Cost. Major competitor countries are Malaysia , Thailand and Singapore

Social Medical implants have strong image and considered to be safe

Technology - Under-investment in health infrastructure, poor accessibility, lack of Community

participation, lack of involvement from rural sector, lack of good language translators, and poor airport
facilities

Legal Inadequate insurance cover, underdeveloped insurance market in developing countries ,

insurance frauds and overseas companies refusing reimbursement in some cases

Environment - All the materials used in joint replacement are safe from a medical standpoint. They are highly
biocompatible, and immune to an allergic reaction.
Segmentation of the orthopaedic devices market

Spine
Trauma and
Extremities
Knee
Hip
Foot and Ankle
Industry at a glance
 Industry at a glance
Customized instrumentation offered as a part of the
product (MIS techniques in joint replacement lead to
refinement of instrument and modification of surgical
technique to reduce surgical trauma)
Market share is sticky in the large joint space of the
orthopedic industry (surgeons train on particular brands,
relationships with the sales executives)
High sales expense (30-35% of the revenues)
Current focus on new segments and end to end solutions
 e T h e o r y ?
Gam
Was it right for J&J`s Depuy to acquire
Synths?

As of today should Stryker acquire S&N ?

 Players!
and
their respective market
shares
2011 $40 bn 2013 $43 bn 2016 $45 bn
Market Market Market
Players Players Players
Share Share Share

Strykr 18% J&J `s J&J `s

Depuy 21% Depuy 20%
J&J `s Synthes Synthes
13%
Depuy
Zimmer
Strykr 13% 15%
Zimmer 11% Biomet
Zimmer 10% Strykr 13%
S&N 10.5%
Medtronic 7% S&N 7%
Synthes 9%
Biomet 7% Medtronic 6%
Biomet 8.5%
S&N 7%
Medtronic 7%
Available Startegies

Acquire Do NOT
/ Merge Acquire
/ Merge
 Why Mergers or Acquisitions ?

With modest revenue growth in the medical device market,

perhaps 3 to 4% annually, it should be no surprise that
companies are merging to build revenue growth and present
combined offerings to hospital and physician customers.

Establish broader portfolio of musculoskeletal products,

technologies and services , also a comprehensive portfolio of
innovative solutions with expanded cross-selling opportunities

Combine shared heritage of engineering excellence and material

science expertise
 Why Mergers or Acquisitions ?

Strengthens the Companys competitiveness in $45 billion

musculoskeletal market
Enhances musculoskeletal diversification with strong
scalable platforms in faster growing Sports Medicine,
Extremities and Trauma categories
Provides significant operating efficiencies that benefit all
constituents and address evolving market demands
Bolsters cash flow in support of debt repayment and
dividends
 Game
Assumptions
New market share post Acquisition/Merger is taken as simple
arithmetic Addition of their present market shares

Market Share of company remains same over the years, if

they do not acquire/Merge with any other player
quential Game JnJ`s
Depuy Do
Sy not M
es with nt h
es erge
g
Mer es rs
wit
th
Syn h

Zimmer Zimmer
t
Does no Do e s n o
t
Acquires Acquires
Acquires Biomet Acquires Biomet
Biomet Biomet

Stryker Stryker
Stryker Stryker
Does Does
Do e s Acquire no t Do e s no t
Acquire no t s Acquire Acquire no t A cqu ir e
Acquire
s Acquire S&N s s Acquire s s
S&N 20,15, 20,10, 20,10, S &N S & N
s &N 13,15,
s 13.10, 13,10,
S&N
20,15,
13S&N 20 13 S 13,15,
20 20 13 S& N 20 13
 Strategic Environment - Knee Segment

Players : Pure Strategies Available:

Pricing Strategy
Zimmer-Biomet Product Innovation
Depuy-Synthes Market Penetration
Customer Acquisition
Line Expansion
R&D
Line Extension

Payoffs:

Market Share
Profits
 Knee Segment: Game
Zimmer(1995
tions)
)
si o n (N e xt Gen Solu Zimmer Strategies:
Line Expan Line Expansion( Vanguard)
Line Extension(Persona New
Depuy(199 Version)
7) Lower the Price of Persona
ma
E xp ansion(Sig
Line Depuy-Synthes Strategies:
s)
Solution Customer Service
Zimmer(2006) Maintain Price
Gender
e E xt ension (
Lin
s)
Solution
Depuy-
Synthes(2008)
Zimme Depuy
Line
n( Sigma r Synthes
Extensio Depuy-Synthes
t)
men Zimmer- Biome
Enhance (2013) Biomet(2013)
ansion
t 21%
Line Line Exp
Expansio
n
PERSONA
40
ATTUNE
%
thanks!
Any questions?