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 - – increasing transportation and logistics costs, wage bills are increasing, central banks are concerned over increasing inflation, increasing energy prices, technology disruption, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models,
increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, 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 -
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.
Sustainable margins compare to other players in Finance & Accounting industry
– Stryker Corporation: Capital Budgeting firm has clearly differentiated products in the market place. This has enabled Stryker Procedures to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Stryker Procedures to invest into research and development (R&D) and innovation.
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.
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.
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.
High brand equity
– Stryker Procedures has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Stryker Procedures to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Stryker Procedures is one of the leading recruiters in the industry. Managers in the Stryker Corporation: Capital Budgeting are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Diverse revenue streams
– Stryker Procedures is present in almost all the verticals within the industry. This has provided firm in Stryker Corporation: Capital Budgeting case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Analytics focus
– Stryker Procedures is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Timothy A. Luehrman can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
Low bargaining power of suppliers
– Suppliers of Stryker Procedures in the sector have low bargaining power. Stryker Corporation: Capital Budgeting has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Stryker Procedures to manage not only supply disruptions but also source products at highly competitive prices.
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 -
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Stryker Procedures needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Stryker Procedures supply chain. Even after few cautionary changes mentioned in the HBR case study - Stryker Corporation: Capital Budgeting, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Stryker Procedures vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Timothy A. Luehrman suggests that, Stryker Procedures is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow decision making process
– As mentioned earlier in the report, Stryker Procedures has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Stryker Procedures even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Lack of clear differentiation of Stryker Procedures products
– To increase the profitability and margins on the products, Stryker Procedures needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
High cash cycle compare to competitors
Stryker Procedures has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– It come across in the case study Stryker Corporation: Capital Budgeting that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Stryker Corporation: Capital Budgeting can leverage the sales team experience to cultivate customer relationships as Stryker Procedures is planning to shift buying processes online.
Products dominated business model
– Even though Stryker Procedures has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Stryker Corporation: Capital Budgeting should strive to include more intangible value offerings along with its core products and services.
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 -
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.
Manufacturing automation
– Stryker Procedures can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
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.
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.
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Stryker Procedures to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Leveraging digital technologies
– Stryker Procedures can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
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.
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.
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.
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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Stryker Procedures in the consumer business. Now Stryker Procedures can target international markets with far fewer capital restrictions requirements than the existing system.
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 -
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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Stryker Procedures in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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.
Technology acceleration in Forth Industrial Revolution
– Stryker Procedures has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Stryker Procedures needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
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 .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Stryker Procedures needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Stryker Procedures with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.