Product
Differentiation
Medtronic uses a differentiation strategy for its products
and services. The company spends millions of dollars annually on research and
development to create highly innovative products. About innovation and product
development, Medtronic’s annual report states, “Medtronic has traditionally
differentiated its products by generating evidence to demonstrate clinical
value.” The company uses empirical evidence to create products that serve
highly specific medical purposes. Another thing that makes Medtronic products
differentiated is the product features. Medtronic’s products are designed with
features that affect very specific medical outcomes. It is no surprise that product
complexity is another quality that confirms Medtronic’s product differentiation
strategy. One of their new products is a sophisticated synthetic heart valve. Their
website explains the product like this: “The
CoreValve transcatheter aortic valve (TAVR) platform was designed specifically
to meet the clinical needs of patients with severe aortic stenosis at extreme
or high risk for surgical valve replacement.” It even features a self-expanding
frame.
Porter’s Five Forces
Threat of Entry: Competition would take on additional costs
to develop similar products that perform as well and are as reliable as
Medtronic’s products.
Threat of Rivalry: Medtronic’s reputation and product
satisfaction are so strong, potential rivals would have a difficult time
gaining market share because of the highly specialized business that Medtronic
has developed.
Threat of Substitutes: There is a high barrier for
substitutes, due to the extreme expense and sophistication of products. Unlike
other brands with product differentiation, it would be unwise to purchase a substitute
heart valve that is less quality or less technologically advanced than
Medtronic’s product.
Threat of Suppliers: As the price of raw materials for these
specialized parts increases, costs of suppliers may increase. However,
Medtronic has the best product in the business, so customers will alleviate the
price increase because of the need for the product.
Threat of Buyers: The power of buyers is less for companies
with product differentiation strategies because there are fewer (if any alternatives).
For these specific medical devices, customers have no alternative besides
Medtronic’s devices.
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