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Running head: VALUE CHAIN ANALYSIS 1 Value Chain Analysis Module 3: Working Exercise Bianca Huntsman HA616: Healthcare Strategic Management and Marketing Dr. Lee Bewley February 3, 2019

VALUE CHAIN ANALYSIS 2 (Toolshero, 2019) Value Chain The value chain as a strategic thinking map provides the health care strategist with a framework for assessing the internal environment of the organization (Ginter, Duncan, & Swayne, 2013). Medtronic is a massive company with locations established around the world who have encompassed a global market. Porter’s Value Chain Analysis consists of a number of activities, namely primary activities and support activities; Primary activities have an immediate effect on the production, maintenance, sales and support of the products or services to be supplied (Toolshero, 2019). The primary activities consist of: Inbound logistics, Production, Outbound logistics, Marketing and sales, and Service. The support activities consist of: Firms

VALUE CHAIN ANALYSIS 3 framework, Human resource management, Technology development, and Procurement. Above is a snapshot utilizing Toolshero (2019) template, of what relates to each activity within Medtronic. Identifying an organization's internal strengths and internal weaknesses is a challenging yet essential task of health care strategists as they assess the internal environment; However, organizational characteristics that appear to represent key strengths to strategists may have little importance to patients and other stakeholders or may be strengths of competitors (Ginter, Duncan, & Swayne, 2013). This analysis will focus on the Medtronic Diabetes Group to establish a strategic framework to assist in the assessment of the internal organization. Organizational Structure Medtronic consist of an executive leadership team as well as a regional structure intended to drive organizational effectiveness and focus necessary to achieve the company's globalization objectives (Medical Production Outsourcing, 2014). The company consist of four major business groups and four geographic regions. Hooman Hakami was named Executive Vice President and President of Medtronic Diabetes Group in June of 2014 and currently serves as a member of the company’s Executive Committee (Medtronic, 2019). As the President of Medtronic Diabetes Group he is responsible for overall strategic direction as well as operational management within the Diabetic Group that encompasses three global business units. Additionally, Hooman Hakami is responsible for communication with his employees to drive production. Medtronic diabetic management tools demand has increased greatly over the years, and the ability for employees to drive production is of importance. Therefore, communication and direction is much needed between the leadership and employees. Personnel Management

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VALUE CHAIN ANALYSIS 4 Medtronic utilizes codes of ethics such as the AdvaMed Code, and the Eucomed Code not only to ensure customers but employees are taken care of. Medtronic conducts their business with dedication, honesty, integrity and service. demonstrating these values is the most important thing they can do as a business, regardless of their financial position or what their competitors are doing (Medtronic, 2019). Medtronic has built a framework that upholds their value although the ever-changing realm of health care continues. A culture of integrity begins with our leaders, who must serve as models for employees, demonstrating honesty and inspiring accountability (Medtronic, 2019). The code of conduct embedded in Medtronic has created values for all to follow within the company that influence their relationship with their customers. Research and Development Medtronic has a vast department dedicated to Research and Development to include specialist such as: Microbiologist, Veterinarian, Histologist, and Machine Learning and Computer Vision Algorithm Developer to name a few. Medtronic is dedicated to continuous quality improvements that are built into their "Quality Begins With Me" culture (Medtronic, 2019). Additionally, Medtronic realized that technology leadership was a critical lever for capturing market shares (Kash, 2019). Therefore, it is necessary for Medtronic to have sufficient resources available in Research and Development to continue to be one of the leading companies in Medical Technology. Procurement Medtronic is value-based procurement by making purchasing decisions that consider how a product or solution can best deliver the outcomes being measured and reduce the total cost of care — rather than focusing exclusively on purchasing a specific product at the lowest possible price (Medtronic, 2019). The hospitals have relied heavily on professionals in procurement to

VALUE CHAIN ANALYSIS 5 make the necessary decisions. However, healthcare procurement professionals tend to work in isolation from the clinical environment, physically removed from what the hospital is doing (Medtronic, 2019). The focus on cost reduction has clouded the clinical benefits and long-term value that ultimately deprioritized short-term savings. Inbound Logistics Medtronic uses the Global Freight policy for their inbound logistics. The Global Freight policy, Routing Guide, (2019) applies to all shipments in which Medtronic is responsible for the payment of freight charges. Key provisions of the policy include:  Deferred shipping (ground or two-day air) becomes the default method across the company  Priority shipping should be used on an infrequent basis when expedited shipping is necessary to ensure continuity of operations, if business or product quality needs dictate it, or if it provides the lowest total cost of doing business  Only Medtronic preferred transportation and logistics providers will be utilized It is necessary for Medtronic to maintain some oversight to ensure that the suppliers are vigilant to the global demand of Medtronic devices. Production The headquarters of the company’s diabetes business, demand for the MiniMed 670G was at an all-time high; The technology requires a sophisticated sensor that helps control the flow of insulin to the patient, but with an earlier than expected FDA approval, production lines weren’t prepared (Kash, 2002). With such a high demand for diabetic tools production has not

VALUE CHAIN ANALYSIS 6 been prepared to keep up. Research and Development plays a big role to keeping production of state of the art tools to keep Medtronic at the forefront of this industry. Outbound Production Medtronic has developed a group dedicated to distribution and outbound production. The group is dedicated to:  Ensures all orders are processed on-time.  Monitor time and attendance  Ensure all work is processed within established timeframes.  Coordinate with other Group to align DC staff to ensure all work is processed within standards.  Knowledge of all essential tasks in area of assignment.  Ensure assigned staff complies with DC and corporate policies (i.e. Safety, product, etc.)  Quality standards are maintained.  Reviews feedback or reports from audits, cycle counts, etc., to look for adverse trends. If performance is outside acceptable parameters, work with Supervisor to develop a plan to improve it.  Short-term planning for area of assignment to include staffing, supplies, transportation, computer access, etc. (Medtronic, 2019). With an immense line of products that Medtronic produces it is essential to the operation that there is a dedicated group to distributed globally. They work closely with the postal service and other delivery methods to ensure proper delivery. Marketing and Sales

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VALUE CHAIN ANALYSIS 7 Medtronic’s promotional activities & branding exercises in its marketing mix include television advertisements, billboards. Its advertisements can be seen in business websites, healthcare websites; so, that they are able to grab the attention of the enterprises looking for such products (Zigu, 2019). This platform provides solutions for those professionals in the healthcare sector to find a solution. Medtronic builds long term relationships to increase customer lifetime value in turn it increases revenue. Service Medtronic provides 24/7 support on products for patient’s inquiry meets quality of the product no matter the situation. This insight provides Medtronic to ensure they continue to develop quality products that assist consumers in quality of life. Medtronic has established a team to contact the patients to inquire about product delivery. Service Solutions by Medtronic provides expert preventive and as-needed maintenance services that are designed to help maintain optimal device performance and reliability, reduce administrative burden and protect customers' investments, enabling the focus to remain on patient care (Medtronic, 2019). Additionally, Medtronic coordinates between insurance and Medtronic provides equipment affordability Weakness Medtronic could be making a lot more money from its diabetes business right now, but executives are confident they can ramp up manufacturing to address a supply shortfall for the Minnesota-run company’s glucose sensors in the coming months (Carlson, 2017). With such high demand Medtronic has been struggling to keep up. Therefore, creating added business with suppliers would increase the accessibility of more material and increase the efficiency from production to customer.

VALUE CHAIN ANALYSIS 8 Strength Medtronic uses the Lean Stigma operations to manage the operations of all groups within the value chain. Medtronic also uses their Resource and Development as a strategy to produce great products for their patients as well as a strong team to deliver and ensure quality products. Close relationship with the manufacturing of raw material, suppliers, and company have created quality products for customers. Medtronic is in the business of making quality products that is used by customers who needs them for quality of life. This is their biggest advantage because people need products, Medtronic has the ability to provide.

VALUE CHAIN ANALYSIS 9 References Carlson, J. (2017, August 23). Growth in diabetes products lags, but Medtronic earnings solid. Retrieved from http://www.startribune.com/medtronic-misses-sales-targets-but-beats- earnings-expectations/441380833/ Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2013). Strategic management of health care organizations . San Francisco, CA: John Wiley et Sons/Jossey-Bass Toolshero. (2019, January 21). Porter's Value Chain Analysis by Michael Porter. Retrieved from https://www.toolshero.com/management/value-chain-analysis-porter/#download Medical Production Outsourcing. (2014). Medtronic Outlines New Management Structure After Covidien Deal Closes. Retrieved from https://www.mpo-mag.com/contents/view_breaking-news/2014-10-10/medtronic- outlines-new-management-structure-after-covidien-deal-closes Medtronic. (2019) Leadership. Retrieved from https://www.medtronic.com/us-en/about/leadership/hooman-hakami.html Medtronic. (2019). Global Business Conduct Standards Policy. Retrieved from https://www.medtronic.com/us-en/about/corporate-governance/global-business-conduct- standards-policy.html Kash, R. (2002). The New Law of Demand and Supply. Retrieved from https://books.google.com/books?id=u6knkzSsRDgC&pg=PT156&lpg=PT156&dq=does Medtronic have sufficient resources available for R&D? &source=bl&ots=CNp0VKG9aB&sig=ACfU3U32dThQdte8ghtI7N5mxm35WNNR1g& hl=en&sa=X&ved=2ahUKEwjw7f7nw5jgAhVnjFQKHS84Cg0Q6AEwA3oECAcQAQ# v=onepage&q=does Medtronic have sufficient resources available for R&D?&f=false

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VALUE CHAIN ANALYSIS 10 Medtronic. (2019). Sr. Principal Microbiologist-Sterilization Consultant in Boulder, Colorado, United States. Retrieved from https://jobs.medtronic.com/jobs/sr-principal- microbiologist-sterilization-consultant-56032 Routing Guide. (2019). Medtronic. Retrieved from http://www.routingguides.com/Medtronic/login.asp Zigu. (2019). Medtronic Marketing Mix (4Ps) Strategy. Retrieved from https://www.mbaskool.com/marketing-mix/products/17061-medtronic.html

HA616_Working Exercise3

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