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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

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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

Data provided by: Thomson Financial/First Call


BSX and GDT


Strengths

Global leader

R & D

Abbot Labs

Tracking System

Weaknesses

Product Recall

J & J Deal Break Fee

Debt Load

SWOT Analysis


Opportunities

Patent Protection

Heart Device Market

Demographics

Threats

New drugs

J & J acquisition

SWOT Analysis (cont)


BSX & GDT - Shapiro

  • The availability of economies of scale in production - questionable

  • The possibility of product differentiation

  • Cost advantages - Combined R&D efforts, patent cross sharing

  • Monopolistic access to distribution channels -relationship marketing

  • Protective government regulation - strong regulation of medical products


Porter’s Five Forces of Competitive Position:

Healthcare – Medical Instruments & Supplies

  • 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

  • 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

  • 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


Formulation of Competitive Strategy: Porter ViewA Focus on the External Factors

What economic opportunities are there?(need for medical supplies as population ages)

What do we do well?

Internal Factors

External Factors

Competitive Strategy

What do our customers / regulators expect?(high quality effective devices and supplies)

What is the goal of our management?


Barriers and ProfitabilityA Closer Look at One of Porters Five Forces

Exit Barriers

Low

High

Low, Stable Returns

Low, RiskyReturns

Low

Entry Barriers

High, StableReturns

High, RiskyReturns

High

  • 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

  • Achieved by focus on integration and implementation of Kauppi’s acquisition strategies


BSX Strategies– Kauppi Model

  • Improve or Complete a Product Line

  • Technology – Build or Buy?

  • Capitalize on a Company Strength

    • Past Acquisition Success

    • Focus on Integration


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