Case Study Description of Stryker Corporation: Capital Budgeting
Examines some parts of Stryker Corporation's systems and procedures for approving and authorizing capital spending of many different types, including buildings, machinery, and working capital for existing businesses, as well as transactions with third parties such as acquisitions, joint ventures, and licensing agreements. Set in early 2007, nearly two years after significant modifications in these systems and procedures. Stryker has compiled a remarkable track record of consistently high growth in profitability over more than 20 years. The modifications to its capital budgeting procedures are partly intended to support the company's efforts to continue this success.
Swot Analysis of "Stryker Corporation: Capital Budgeting" written by Timothy A. Luehrman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Stryker Procedures facing as an external strategic factors. Some of the topics covered in Stryker Corporation: Capital Budgeting case study are - Strategic Management Strategies, Budgeting, Costs, Financial analysis and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Stryker Corporation: Capital Budgeting casestudy better are - – supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, increasing transportation and logistics costs, geopolitical disruptions, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings,
technology disruption, there is backlash against globalization, etc
Introduction to SWOT Analysis of Stryker Corporation: Capital Budgeting
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Stryker Corporation: Capital Budgeting case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Stryker Procedures, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Stryker Procedures operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Stryker Corporation: Capital Budgeting can be done for the following purposes –
1. Strategic planning using facts provided in Stryker Corporation: Capital Budgeting case study
2. Improving business portfolio management of Stryker Procedures
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Stryker Procedures
Strengths Stryker Corporation: Capital Budgeting | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Stryker Procedures in Stryker Corporation: Capital Budgeting Harvard Business Review case study are -
Innovation driven organization
– Stryker Procedures is one of the most innovative firm in sector. Manager in Stryker Corporation: Capital Budgeting Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Effective Research and Development (R&D)
– Stryker Procedures has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Stryker Corporation: Capital Budgeting - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Stryker Procedures is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Stryker Procedures is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Stryker Corporation: Capital Budgeting Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Stryker Procedures in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Stryker Procedures digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Stryker Procedures has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Successful track record of launching new products
– Stryker Procedures has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Stryker Procedures has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Strong track record of project management
– Stryker Procedures is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Stryker Procedures are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Operational resilience
– The operational resilience strategy in the Stryker Corporation: Capital Budgeting Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Highly skilled collaborators
– Stryker Procedures has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Stryker Corporation: Capital Budgeting HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Stryker Procedures has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Stryker Corporation: Capital Budgeting Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High switching costs
– The high switching costs that Stryker Procedures has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Weaknesses Stryker Corporation: Capital Budgeting | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Stryker Corporation: Capital Budgeting are -
Interest costs
– Compare to the competition, Stryker Procedures has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Need for greater diversity
– Stryker Procedures has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Stryker Corporation: Capital Budgeting, in the dynamic environment Stryker Procedures has struggled to respond to the nimble upstart competition. Stryker Procedures has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Stryker Procedures is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Stryker Corporation: Capital Budgeting can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Low market penetration in new markets
– Outside its home market of Stryker Procedures, firm in the HBR case study Stryker Corporation: Capital Budgeting needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Stryker Corporation: Capital Budgeting, is just above the industry average. Stryker Procedures needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Skills based hiring
– The stress on hiring functional specialists at Stryker Procedures has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Increasing silos among functional specialists
– The organizational structure of Stryker Procedures is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Stryker Procedures needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Stryker Procedures to focus more on services rather than just following the product oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Stryker Corporation: Capital Budgeting HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Stryker Procedures has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Stryker Corporation: Capital Budgeting HBR case study mentions - Stryker Procedures takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Stryker Corporation: Capital Budgeting, it seems that the employees of Stryker Procedures don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Opportunities Stryker Corporation: Capital Budgeting | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Stryker Corporation: Capital Budgeting are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Stryker Procedures is facing challenges because of the dominance of functional experts in the organization. Stryker Corporation: Capital Budgeting case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Building a culture of innovation
– managers at Stryker Procedures can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Better consumer reach
– The expansion of the 5G network will help Stryker Procedures to increase its market reach. Stryker Procedures will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Stryker Procedures can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Stryker Corporation: Capital Budgeting, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Stryker Procedures can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Learning at scale
– Online learning technologies has now opened space for Stryker Procedures to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Stryker Procedures in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Stryker Procedures to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Stryker Procedures to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Stryker Procedures can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Stryker Procedures can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Stryker Corporation: Capital Budgeting suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Stryker Procedures can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Stryker Procedures can use these opportunities to build new business models that can help the communities that Stryker Procedures operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Creating value in data economy
– The success of analytics program of Stryker Procedures has opened avenues for new revenue streams for the organization in the industry. This can help Stryker Procedures to build a more holistic ecosystem as suggested in the Stryker Corporation: Capital Budgeting case study. Stryker Procedures can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Stryker Corporation: Capital Budgeting External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Stryker Corporation: Capital Budgeting are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Stryker Procedures will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High dependence on third party suppliers
– Stryker Procedures high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Consumer confidence and its impact on Stryker Procedures demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Stryker Procedures can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Stryker Corporation: Capital Budgeting .
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Stryker Procedures can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Stryker Procedures needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Stryker Procedures business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Stryker Procedures
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Stryker Procedures.
Environmental challenges
– Stryker Procedures needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Stryker Procedures can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Shortening product life cycle
– it is one of the major threat that Stryker Procedures is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Stryker Procedures in the Finance & Accounting sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Stryker Procedures can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Stryker Procedures.
Weighted SWOT Analysis of Stryker Corporation: Capital Budgeting Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Stryker Corporation: Capital Budgeting needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Stryker Corporation: Capital Budgeting is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Stryker Corporation: Capital Budgeting is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Stryker Corporation: Capital Budgeting is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Stryker Procedures needs to make to build a sustainable competitive advantage.