...Stryker Corporation Case Study Stryker Corporation Case Study Andrew Wyatt Brett Nymeyer Brett Sundberg Josh Ihnen Executive Summary It is 2003 and Stryker Corporation is proposing to build a new facility that would be able to produce a key component (printed circuit boards) in-house instead of outsourcing that activity to suppliers. Currently, Stryker purchases PCBs from a small number of contract manufacturers but recently the suppliers have been underperforming in quality and delivery. The proposed plan would create a high degree of control over this product, ensure quality, and create an economy of scale in the long run. However, this plan also required the most capital outlay in both money and resources. The project would have an initial investment of a new building, capital equipment, and IT infrastructure totaling $6,287,258. However, there would also be cost savings in the long run from decreased purchases from suppliers even after the increased expense of Stryker’s manufacturing costs. To find out if this project offered an adequate return on investment we performed a Net Present Value Analysis and also calculated Internal Rate of Return and Payback Period for years 2003 through 2009. Analysis 1. Does this project make sense? We like the insourcing proposal and think that it makes business sense for several reasons. However, these reasons are based off of the information taken from the case before we analyzed NPV, IRR, or Payback...
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...Stryker Corporation Case Study Andrew Wyatt Brett Nymeyer Brett Sundberg Josh Ihnen Executive Summary It is 2003 and Stryker Corporation is proposing to build a new facility that would be able to produce a key component (printed circuit boards) in-house instead of outsourcing that activity to suppliers. Currently, Stryker purchases PCBs from a small number of contract manufacturers but recently the suppliers have been underperforming in quality and delivery. The proposed plan would create a high degree of control over this product, ensure quality, and create an economy of scale in the long run. However, this plan also required the most capital outlay in both money and resources. The project would have an initial investment of a new building, capital equipment, and IT infrastructure totaling $6,287,258. However, there would also be cost savings in the long run from decreased purchases from suppliers even after the increased expense of Stryker’s manufacturing costs. To find out if this project offered an adequate return on investment we performed a Net Present Value Analysis and also calculated Internal Rate of Return and Payback Period for years 2003 through 2009. Analysis 1. Does this project make sense? We like the insourcing proposal and think that it makes business sense for several reasons. However, these reasons are based off of the information taken from the case before we analyzed NPV, IRR, or Payback Period, so they are...
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...Stryker Corporation is a medical company founded in 1946 by Homer Stryker. It specializes in medical technology and it is headquartered in Kalamazoo, Michigan. This report will be focused Stryker Corporation’s capital budgeting process and identifying some of the strengths and weaknesses that come along with it. The missions of CERs and the capital budgeting at Stryker: Stryker Corporation has had an outstanding growing background since it started. They have a benchmark of 20% growth annually, and one of the reasons the firm has been able to do this is their way of managing their capital budgeting process. Stryker used CERs (Capital Expenditure Requests) in their capital allocation process. These were basically permission forms that were submitted to be filled out by the authorities in order to get allowance to spend a certain amount of money. The mission of the CERs and the capital budgeting process at striker is to standardize and formalize the capital budgeting process. The CERs made it easier for the company to keep track of the expenditures that were made in each division. Thus, the firm was able to support cash flow targets and maintain the 20% growth of the company. The CERs have been shaped by elements of corporate finance theory. The fact that the CERs are made to have a smarter way of managing the expenditures of the company, automatically refers to the principal goal of corporate finance which is to maximize shareholder’s wealth. Since the CERs are helping...
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.... Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2007, 2008 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545- 7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this public ation may be reproduced, stored in a retrieval system, us ed in a spreadsheet, or transmitted in any form or by any meanselectronic, mechani cal, photocopying, recording, or otherwisewithout the permission of Harvard Business School. TIMOTHY A. LUEHRMAN Stryker Corporation: In-sourcing PCBs In late May 2003 executives in Stryker Corp orations Instruments business were actively considering a change in their sourcing strategy fo r printed circuit boards (PCBs), a key electronic component of many of Stryker Instruments medi cal products. Currently, Stryker purchased PCBs from a small number of contract manufacturers. The Instrument s business anticipated spending more than $10 million in each of the next two years on PCBs, an amount that would increase as the Instruments business grew. In re cent years, the performance of some contract manufacturers had been unsatisfactory with respect to quality, delivery and/or responsiveness and Stryker had repeatedly found itself looking for new suppliers. More generally, contract manufacturers tended to operate on thin margins with scant capital...
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...1. (1) Option #3 was for Stryker Instruments to manufacture its own PCBs in its own facility near company headquarters. (2)Benefits for option 3: ● Better control the quality, delivery and cost; ● Maintain the business stability; ● Supply PCBs to other Stryker businesses; ● Be able to implement cost shift and avoid tax; (3) Risks for option 3: ● Carry the inventory; ● Incur large capital outlay and sunk cost; ● Increase headcount, payroll and other expenditures (materials, infrastructure, R&D, maintenance, PP&E and depreciation) of Stryker; ●Bear the risk that the equipment may be outdated; (4) Compared with option #1: ●Benefit: no capital outlay; to some extent can protect future against disruptions with lower cost; flexibility; ●Risk: instability in quality, cost, delivery and responsiveness; Compared with option #2: ●Benefit: can improve quality of the supplies by increasing business with the supplier; ●Risk: the possibility of bankruptcy and weak financial performance of supplier; the sole supplier can strongly affect Stryker’s performance; coordination problem. 2. (1) Followings are the key assumptions of our write up: ● Stryker Instruments incurred all capital expenditures including (construction and improvements, furnishings and non-manufacturing equipment, communication equipment and IT infrastructure and capital equipment) in year 2003, before the implementation...
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...Stryker BUAD 341-0, MWF 1:00PM Isral Hadero 04/28/2014 Table of Contents Introduction 1 Theme 1 History of the Firm 1 Product Line of the Company 3 Industry History and Analysis 4 Major Competitors 4 NAICS Numbers 5 Relative Industry Sales, Returns and Maturity 5 Stock Performance 6 Financial Analysis 7 Ratio Analysis 9 Pro forma 11 Assumption 12 Growth Rate of Sales 12 Asset Acquisition 13 Financing Needs 13 Conclusion 14 Appendices 15 Income Statement 15 Balance Sheet 16 Sources and uses 17 Percentage of Sources and Uses 19 Firm Ratios 21 Industry Ratios 22 Graphs of Ratios 23 Bibliography 26 Introduction This paper contains the financial analysis of Stryker corporation and its major competitors during the past 5 years. Also a 3 year forecast is created to show were the company is heading and changes needed to be made to be more efficient. Theme Time are hard for the medical industry with the global economic crisis and with the announcement of the Affordable Care Act’s medical device excise tax. Stryker corporation has done better than the industry on average sustaining a strong financial while presenting new products in the market. Growth is becoming slow for mature firms but Stryker is making all the right moves to dominate the market. To increase growth the company has shifted its focus on acquisitions. With the acquisition of Trauson, a Chinese leading manufacturer of surgical products...
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...Angelica Acevedo Week 1 - Information Systems Strategy Triangle Step 1: Create lists of case details that fit each side of the triangle. Step 2: Then look at each item and think about how that item affects the other sides of the triangle. Step 3: Take a look at the industry. Make a list of triangle attributes you find. Compare the industry items with the case company items. Step 1: Create lists of case details that fit each side of the triangle. Step 2: Then look at each item and think about how that item affects the other sides of the triangle. Step 3: Take a look at the industry. Make a list of triangle attributes you find. Compare the industry items with the case company items. Information Strategy Information Strategy Organizational Strategy Organizational Strategy Business Strategy Business Strategy Business Strategy Elements | Organizational Strategy Elements | Information Strategy Elements | New collection at start of each season | Changes color, cut, fabrics and other details throughout season | POS terminals not connected store to store or to headquarters | Less IT spending | Tries to understand, through its network of stores, not just what people are buying, but also, what they want to buy. | Use dial up modems to send daily sales and inventory orders | Introduce 11,000 new garments per year | Lead time from inception to delivery, of garment, can be as short as 3 weeks | IT staff of 50 – less than .5% of revenue | | No advertising – used...
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...institutes etc. * Only Basic and Dearness allowance should be considered as wages for the purpose of Gratuity. * Gratuity payment formula: Example: If an employee leave company after 10 years and his last Basic + Dearness allowance is 10000 then his gratuity will be paid as per following formula. (10000/26)*15* 10 Please note that above formula will remain same irrespective of employee working in 5 days a week establishment. FAQ 1: Can an employee claim Gratuity even before completion of 5 years? Yes, An employee can claim gratuity even before completion of 5 years in followings cases: * Death (to his nominees) * Disablement But the quantum of gratuity will be as per act. FAQ 2: Can employer forfeit Gratuity, even if employee has completed 5 years? Yes, employer can forfeit gratuity even if employee has completed 5 years in following cases: * If the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or * If the service of such employee have been terminated for any act which constitutes an offense involving moral turpitude, provided that such offense is committed by him in the course of his employment. Please note that above act should have been committed by employee during his employment. There should be a proper enquiry held after which employee was found guilty for aforesaid act or misconduct. Once proved guilty, employer should issue termination...
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...IRAC Brief – Stryker Corporation and The Securities Exchange Commissions University of Phoenix IRAC Brief – Stryker Corporation and The Securities Exchange Commissions Introduction / Purpose Business managers are faced with challenges of legal risks by conducting domestic and international business transactions. To avoid misleading of accounting principles and fraudulent business practices an organization must retain strong internal controls within their international operations. Stryker Corporation had been recently confronted by Securities and Exchange Commissions and got a direct experience. In the following reflection, Team B applies the IRAC method of case analysis to observe Stryker’s treatment and conduct of violations connected to the Foreign Corrupt Practices Act (FCPA). We will summarize four factors regarding IRAC: 1) issue 2) rule 3) analysis and conclusion. Thorough analysis of the IRAC results will help Team B’s interpretation of the significance of internal controls in handling legal risk in international business transactions. Issue Did “Stryker violated the Foreign Corrupt Practices Act by making $2.2 million in unlawful payments to foreign government officials while describing the payments as legitimate expenses in the company’s books and records?” Did Stryker Corporation demonstrates intentional misrepresentation by failing to plan and preserve an acceptable system of internal accounting controls? Is intentional misrepresentation...
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...HARvAR D I " , srNEss I , . " Tt . W-rEr 5gor6ffi, TIMOTHY A. LUEHRMAN Stryker Corporation: In-sourci In late May 2003 executives in Stryker Corporation component of many of Stryker Instrument,s medica from a small number of contract manufacturers. more than 910 million in each of the next two Instruments business grew. In recent years, been unsatisfactory with respect to quali$ repeatedly found itself looking for new su bankruptcy, a financially weak suppl appearance of several current suppli Stryker Instruments' establish a Stryker was Stryker ucts. Currently, Stryker purchased ts had resolved to address the issue. nt basic sourcing policy for PCBs, but with important tect against future disruptions by acquiring safety stocks of rcing of all electronic assemblies. Option #2 would boost supplier of PCBs and ility for supplying them. The partnership and incriased business from the supplier, further boosting its reliability. Option #3 was for acture its own PCBs in its own facility near company headquarters in such a facility was up and running, as well. PCBs PCBs ments business anticipated spending an amount that would increase as the of some contract manufacfurers had /or responsiveness and Stryker had lly, contract manufacturers tended to were not uncommon/ and even without reliable. Given recent events and the shaky rs studied three options for improving the situation. Option #1...
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...Stryker Corporation: In-sourcing PCBs Stryker Corporation: In-sourcing PCBs Cerutti, Carolina Del Valle Repalde, Angie Samour, Diego Zambrano, Fátima Daniel Ariza Naranjo Evaluación financiera de proyectos UNIVERSIDAD DE LA SABANA ESCUELA INTERNACIONAL DE CIENCIAS ECONÓMICAS Y ADMINISTRATIVAS Chía, Noviembre de 2015 Stryker Case Questions 1. State the business case for option 3, the PCB InSourcing proposal. Option #3 was for Stryker Instruments to manufacture its own PCBs in its own facility near company headquarters in Kalamazoo, Michigan. Once such a facility was up and running, it might be expanded to supply PCBs to other Stryker businesses as well. The requierements to accept this option are the following: - the larget capital outlay of the 3 options - the largest increment in headcount and payroll - it would have to obtain numerous approvals - a new building - a growth in the production volume - new production costs: materials, variable and fixed costs - payment conditions of: 120 days Of all the options this one was the one that promised the highest degree of control over quality and delivery. 2.Use the projections provided in the case to compute incremental cash flows for the PCB project, as well as its NPV, IRR and payback period. The projections in the case shows Instruments’ expected expenditures on PCBs for the year 2004 to the year 2009 under the old sourcing strategy using contract manufacturers....
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...Case Study of Stryker Corporation 1. (1) Option #3 was for Stryker Instruments to manufacture its own PCBs in its own facility near company headquarters. (2)Benefits for option 3: ● Better control the quality, delivery and cost; ● Maintain the business stability; ● Supply PCBs to other Stryker businesses; ● Be able to implement cost shift and avoid tax; (3) Risks for option 3: ● Carry the inventory; ● Incur large capital outlay and sunk cost; ● Increase headcount, payroll and other expenditures (materials, infrastructure, R&D, maintenance, PP&E and depreciation) of Stryker; ●Bear the risk that the equipment may be outdated; (4) Compared with option #1: ●Benefit: no capital outlay; to some extent can protect future against disruptions with lower cost; flexibility; ●Risk: instability in quality, cost, delivery and responsiveness; Compared with option #2: ●Benefit: can improve quality of the supplies by increasing business with the supplier; ●Risk: the possibility of bankruptcy and weak financial performance of supplier; the sole supplier can strongly affect Stryker’s performance; coordination problem. 2. (1) Followings are the key assumptions of our write up: ● Stryker Instruments incurred all capital expenditures including (construction and improvements, furnishings and non-manufacturing equipment, communication equipment and IT infrastructure and capital equipment)...
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... as well as suggested supplemental readings that may provide a broader conceptual context. Cases form the core of many modules but we also include readings from Harvard Business Review, HBS background notes, and other course materials. Click here to add the full list of materials to your library (you must be logged in as a registered user. Not registered? Sign up now.) 1. Overview of suggested content (HBS case unless otherwise noted) Title Author Product Number Publication Year Pages Teaching Note 1. Time Value of Money Introduction Buying Time (HBS online tutorial) Kaplan 104708 2005 -- -- Alternative: Introduction to Accumulated Value, Present Value, and Internal Rate of Return Hammond 173003 1972 10p -- Valuing Capital Investment Projects Kester 298092 1997 5p 204152 Alternative: Tree Value Ruback 201031 2000 3p 202018 Luehrman 207121 2007 6p 209156 Luehrman & Abelli 4212 2010 8p 4213 Piper & DeVolder 4021 2009 32p 4024 Stafford 202027 2001 6p 202029 2. Exercises 3. Net Present Value Stryker Corp.: In-sourcing PCBs Alternative: New Heritage Doll Company (HBP Brief case) 4. Cash Flow Forecasting Expansion and Risk at Hansson Private Label, Inc.: Evaluating Investment in the Goliath Facility (HBP Brief case) Alternative: Ocean Carriers 5....
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...Stryker Corporation: in-Sourcing Pcbs Stryker Corporation: In-sourcing PCB’s Conclusion: If Stryker consider option 1 and keep safety stock of the electronic board then it will not resolve the problem of quality of input material. It will also increase the cost of inventory which will affect the profitability. But this could resolve the problem of reliable delivery of goods. That is if the supplier is unable to deliver the material in timely manner then they would have enough inventory that they can continue production without any hurdles. If it considers option 2 that is to create partnership with their suppliers then they will be able to receive continuous delivery of goods as well as the supplier will ensure high quality of goods to be delivered. But relying on only one supplier is dangerous if the supplier will be unable to deliver goods due to uncontrollable factors or the partnership will break then they will be in great trouble. It Stryker consider option 3 to manufacture the electronic board internally. They will have a positive NPV of $18.97m due to huge saving in cost of purchasing from contractors. The IRR is far above the 15% discount rate which shows that in case the discount rate reaches at 72% then NPV will be equal to zero. And this is not possible that discount rate reach to 72%. The payback period shows that the investment made in the year 2004 will be recovered in 2 years and 0.6 months, so the return from investment is very high. But the problem is that...
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...Harvard Case Study Stryker Corporation: Capital Budgeting Term Paper Laini Tsang Golden Gate University MS Finance, FI 312 Summer 2013 Stryker’s Capital Budgeting Harvard Case Study Table of Content Case Background and Summary Pharmaceutical Industry’s Landscape Stryker’s New CERS and why it is “painful”? Propositions Conclusions 2 Stryker’s Capital Budgeting Harvard Case Study Case Background and Summary Founded in 1941 in Michigan, Stryker Corporation is a fast-paced company with continuously exceptional growth rates. Over the last 27 years, the company historically increased revenues by 20%. The company’s culture prides itself on service ethics, integrity, innovations, accountability, and customer relationships; it is one of the world’s leading medical technology companies with history of successful stories. Stryker’s products focus on implants for joint replacement, trauma, spinal surgical products, neurologic and endoscopic equipment. The company has well diversified product portfolios with solid fundamentals. Over the years, the company’s accretive mergers and acquisitions brought operational synergies and cost efficiency, strengthening the pipeline with increasing profitability. This paper examines Stryker’s capital budgeting process (CER – Capital Expense Request) and why this process, after its modifications in 2005, had slowed down the company’s internal capital project requests. From the company’s financials, we can see their capital...
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