Boston Scientific Guidant Acquisition Strategy Aaron Black Adam Okurowski Peter Serra Ian Seely Anatoliy Chistov February 13, 2006.
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Boston Scientific Guidant Acquisition Strategy Aaron Black Adam Okurowski Peter Serra Ian Seely Anatoliy Chistov February 13, 2006
Recent Acquisitions Precision Vascular Systems, Inc. April 4, 2004 Advanced Bionics Corporation June 1, 2004 Advanced Stent Technologies, Inc. March 4, 2005 Trivascular, Inc. April 18, 2005 Rubicon Medical Corporation June 14, 2005 Data provided by: Thomson Financial/First Call
Health Care Supplies Sector Peers Market CapPriceP/EEPS Johnson & JohnsonJNJ169.1$56.8016.243.5 MedtronicMDT66.2$54.7026.971.86 GuidantGDT24.4$75.0439.941.85 Boston ScientificBSX17.7$22.2611.881.63 St. Jude MedicalSTJ17.5$48.1631.341.54 Data provided by: Thomson Financial/First Call
BSX & GDT - Shapiro 1. 1. The availability of economies of scale in production - questionable 2. 2. The possibility of product differentiation 3. 3. Cost advantages - Combined R&D efforts, patent cross sharing 4. 4. Monopolistic access to distribution channels - relationship marketing 5. 5. Protective government regulation - strong regulation of medical products
Buyer Power: High – large players Value conscious customers Low frequency of change Specialized purchases Volumes / Quality Lower Budgets / Less Vendors Threat of Substitutes: Alternatives price/quality Market distribution changes Proven technology addresses problem Substitution of need – obsolescence New technology Competitive Rivalry: High concentration of wealth Large industry / high innovation High fixed & variable costs Highly Specialized Products Substitute devices Low cost foreign imports Supplier Power: Powerful brand reputation Global coverage Level of quality Customer relationships fragmented Possibility of forward integration New Market Entrants: VERY high cost of entry Size & scale Learning/ Experience Curve Strong Gov’t Regulation High Specialization / Differentiation Access to distribution channels High R&D Costs Patent Protection Porter’s Five Forces of Competitive Position: Healthcare – Medical Instruments & Supplies
Formulation of Competitive Strategy: Porter View A Focus on the External Factors Competitive Strategy Internal FactorsExternal Factors What do we do well? What is the goal of our management? What economic opportunities are there? (need for medical supplies as population ages) What do our customers / regulators expect? (high quality effective devices and supplies)
Barriers and Profitability A Closer Look at One of Porters Five Forces Entry Barriers Low High Low High Exit Barriers Low, Stable Returns Low, Risky Returns High, Risky Returns High, Stable Returns As is the case with both Boston Scientific and Guidant, substantial economies of scale in production are usually associated with specialized assets – the presence of proprietary technology and patents.
BSX & GDT - Kauppi Model Combined Revenues of BSX & GDT > BSX Revenues + GDT Revenues Combined Revenues of BSX & GDT > BSX Revenues + GDT Revenues Achieved by focus on integration and implementation of Kauppi’s acquisition strategies Achieved by focus on integration and implementation of Kauppi’s acquisition strategies
BSX Strategies– Kauppi Model 1. Improve or Complete a Product Line 2. Technology – Build or Buy? 3. Capitalize on a Company Strength Past Acquisition Success Focus on Integration