Mgt_521_Week_6_Paper

Invest in Medtronic Medtronic Inc., was founded in 1949 and has grown into a medical device company that “researches, designs, manufactures, and sells its products to alleviate pain, restore health, and extend lives” (Medtronic, 2011). This company began in a house garage in the United States and now has emerged into a global organization. As a Fortune 500 company, Medtronic is leading with its cutting edge medical technology products. The company's strategic plans and tactics play a positive role within their organization. The overview of Medtronic’s business is divided into six business units that all work together as one to meet the needs of their shareholders in a long-term manner (Medtronic, 2011). Medtronic’s purpose and long-term stability of business growth since 1949 demonstrates strategic initiatives and strong financial strategies needed for investor’s commitment. Analyzing a company’s financial statements is key to investing in stocks that are proven to have a financial return. Medtronic Inc. and Baxter International Inc. are two globally recognized healthcare companies that provide medical devices and supplies to consumers with chronic diseases. Both of the companies share a common strategy of targeting chronic disease groups for their products to be consumed. Their management of chronic disease and innovative therapies have proven that these companies are our leaders in the global markets. Their financial statements are proof of their success in our economy and consumer lives. Medtronic’s experienced $2.80 earnings per share. Baxter International was at $1.18. Medtronic’s profitability was higher allocating more money to each outstanding share than Baxter International in 2011. The P/E ratio was higher for Baxter International. This showed that Baxter International had greater opportunity to earn increased earnings in years to come, compared to what the current situation of earnings per share. Medtronic confirmed in 2011 an 11% return on assets and 21.2% return on equity. Baxter International had an 8.1% return on assets and 21.6% return on equity (Baxter, 2011). Both calculations reveal profitability. Return on assets is a measurement of the efficiency of using assets to turn a profit. Return on equity shows profits generated by stockholders. As a means to adjust to the economic trends Medtronic shows an effort to keep department goals realistic. According to an article by Tom Wilemon, Medtronic's' spinal and cardiac rhythm revenue is slowing down noticeably (Wilemon, 2011). In response to the economic trends of market loss, Medtronic announces to lower the guidance on revenue projected (Wilemon, 2011). The company was projecting 5 - 8 percent growth and lowered the projection to 2 - 5 percent growth in the spinal and cardiac rhythm department. Medtronic has several internal and external stakeholders that continue to drive the business forward. The internal stakeholders consist of healthcare professionals, employees, and consumers (Medtronic, 2011). Medtronic’s internal stakeholders need quality service and medical devices to help fight chronic illnesses. External stakeholders for Medtronic organization are “suppliers, shareholders, government regulators and policy makers, non-government organizations and local communities” (Medtronic, 2011). According to the stakeholders graph on Medtronic's webpage, the global leadership team at Medtronic holds high engagements with their internal and external stakeholders (Medtronic, 2011). External stakeholders need Medtronic to create products that will provide growth in stock shares and meet the policy standard of their consumers while moving the business forward. In a strategy to maintain good standing with stakeholders Medtronic made a choice to lower their guidance. That tactic lowered the profit return for their shareholders but still projected a profit growth, it just wasn't as large as expected. Another stakeholder affected by the lowering of guidance on revenue are the employees. The employee sales goals were adjusted to more reasonable goals for moral motivation. Another strategy that Medtronic could try when adapting to a recession is lowing product prices or selling in bulk. Lowing products prices would could give Medtronic the upper hand over Baxter's similar products. Also by selling products in bulk, Medtronic would get immediate revenue verses individual consumer sales. In addition to Medtronic’s engagement with their stakeholders, they have developed a financial strength internationally through their global markets. According to Medtronic’s most recent financial statement 45% of their revenue is generated from their international markets (Medtronic, 2012). The international sales reported a 6% growth out of a worldwide 7% growth for revenue in quarter three (Medtronic, 2012). The cardiac and vascular group of Medtronic showed a 2% worldwide growth, which 5% of that growth came from the international markets (Medtronic, 2012). The restorative therapy units show similar revenue results to the cardiac department with a worldwide 1% growth and 10% of that worldwide growth was generated for international markets (Medtronic, 2012). Medtronic’s international market and shareholders are what is propelling the company’s growth right now. On the contrary, Medtronic’s press release indicates the U.S. sales are not as strong in growth as their international sales. William George (2001), former CEO of Medtronic mentioned in an article that long-term growth with shareholders should value the company mission, value the organization, and value adaptable business strategies. Medtronic's overall worldwide sales are still holding strong, but the U.S. is not the anchor to ship. The current CEO of Medtronic Omar Ishrak, stated that he is pleased with all business units strong and consistent revenue growth holding in the upper single digits of 8% ("Medtronic", 2012). Ishrak continued his statement and marked the U.S. cardiac and spinal department as a current challenge (Medtronic, 2012). In attempting to work around Medtronic’s weakness with their U.S. market sales key components need to be address. According to Medtronic’s former CEO William George (2001), a short-term solution will increase result but fail to provide long-term opportunities. Medtronic is not looking for a quick fix to their weakness within U.S. sales, Ishrak wants to keep the U.S. sales stable with key strategies delivered through improving execution, optimizing innovation, and accelerating globalization” (Medtronic, 2012). While Medtronic’s business is aware of their sales weaknesses in the U.S. markets, they are focusing on their key values to deliver long term sustainable company growth. On the other hand, knowledge of a company's strengths and weaknesses can bring forth business opportunities. Medtronic's leadership is aware that their U.S. sales are a weakness and that brings Medtronic the opportunity to change their sales direction. The cardiac and spinal sales departments at Medtronic have room for improvement. Both of those departments within Medtronic are not performing at the same revenue level as Fiscal Year 2011. The cardiac rhythm department sales made $1.192 billion but was still down 2% for Fiscal Year 2011 sales. The sales for the U.S. biologics spinal department are also showing a decline of 20 percent when comparing fiscal year 2011 to 2012 (Medtronic, 2012). Now Medtronic has the opportunity to turn these declines in revenue around while still staying engaged with their shareholders. Medtronic has the opportunity and ability to innovate and launch new products to the business. The cardiac department at Medtronic could have a product awaiting for FDA approval, which would turn the cardiac departments sales back into a stable incline mode. Medtronic's financial statement from February 2012 states that U.S. markets have just received approval to launch their new spinal product (Medtronic, 2012). The spinal product launch may be the opportunity needed to turn Medtronic's U.S. decline in spinal sales around. With sales at a decline in the U.S., Medtronic is maintaining their strategic goals of quality. Author Michael Amdt (2012) says that Medtronic strives to audit every department internally and externally for Quality once a year. When products have defects' the company stands behind their name and takes the proper precautions to recall products and compensate for recalled products. The tactic of auditors to maintain product and consumer quality is terrific. Auditors may be internal and external to collect proper data for different department analysis. Medtronic could not compete with Baxter International, adjust to economic market trends, strategies and implement tactics without the reinforcement of human resource managers. The human resource leaders at Medtronic are responsible for "global talent initiatives, leadership development, diversity, and inclusion, and compensation and benefits oversight" (Medtronic, 2010). In order to achieve the proper guidelines for quality, human resources has to approval of the system plans so that employees, suppliers, and trainers are all able to meet the criteria. At Medtronic human resource manager are the backbones to implementing change for the long term stability of the organization. In a final analysis, Medtronic engages in key values for long-term financial stability and growth. According to William George (2001), Medtronic adapts its strategies without changing their mission or values through capable human resource managers. Their strategies and core values have been evident since the company was founded. Even with the U.S. sales as a weakness, Medtronic's most recent financial statement displayed a worldwide revenue growth of 2%. Ishrak mentions that he is confident in long-term growth and will remain focused on the organization mission, values, and customers (Medtronic, 2012). The company's tactic to stand behind values and quality, makes the company a winner. Medtronic consistently generates steady revenue growth, practices the core values of their mission, responds to economic trends, creates strategies and tactics to follow through with plan, and stays ahead of their competitors. All of those reasons target Medtronic as a prime mutual fund to invest with!! References George, W. W. (2001). Medtronic's chairman William George on how mission-driven companies create long-term shareholder value. The Academy of Management Perspectives, 15(4), 39-47. Retrieved from http://search.proquest.com/docview/210521629'accountid=35812 Medtronic. (2011). Retrieved from http://www.medtronic.com/about- medtronic/business- overview/index.htm Medtronic . (2012). Retrieved from http://wwwp.medtronic.com/Newsroom/NewsReleaseDetails.do'itemId=1329809 249325&lang=en_US