Stryker Corporation Case
Case Questions:
1. Option #3 suggests Stryker Corporation to build its own facility to manufacture its own PBCs. Under the current situation that some contract manufacturers have weak performance in quality and delivery, the benefits of this option are obvious as following:
First of all, option #3 promised the highest degree of control over quality and delivery, which can solve the major problem that Stryker has faced with recently. On the other hand, self-manufacturing offers an opportunity for Stryker to carry out its own R&D for its specific products. Exclusive products will improve its productivity and competitive advantage in the medical industry, which may offer a chance to hold a larger market share in the medical technology industry. Secondly, since the facility will locate near Stryker’s headquarter, it could decrease both the delivery time and cost from decreasing buying from contract manufactures. Thus, Stryker has no need to hold a large inventory, which can increase its asset liquidity as well as decrease the cost of inventory management. Also, it will decrease the accounts payable because of less purchase from others and reduce the liability pressure. Thirdly, with its own production line, Stryker’s manager and engineers will be more familiar with the products. Therefore, the after-sell service will be improved. This is a good method to improve reputation by retaining customers with satisfactory services. Finally, since the facility may also be offered to other businesses of the company, it will reduce transportation cost for other divisions. Last but not least, this option can make it easier to expand the scale of the company. As the scale expands, the cost will be reduced. Thus, Stryker will make more profit because of its lower cost than other competitors.
However, option #3 also has some risks. First of all, it requires a huge amount of capital investment with uncertain return. The return in the future may not be able to cover the
1. Option #3 suggests Stryker Corporation to build its own facility to manufacture its own PBCs. Under the current situation that some contract manufacturers have weak performance in quality and delivery, the benefits of this option are obvious as following:
First of all, option #3 promised the highest degree of control over quality and delivery, which can solve the major problem that Stryker has faced with recently. On the other hand, self-manufacturing offers an opportunity for Stryker to carry out its own R&D for its specific products. Exclusive products will improve its productivity and competitive advantage in the medical industry, which may offer a chance to hold a larger market share in the medical technology industry. Secondly, since the facility will locate near Stryker’s headquarter, it could decrease both the delivery time and cost from decreasing buying from contract manufactures. Thus, Stryker has no need to hold a large inventory, which can increase its asset liquidity as well as decrease the cost of inventory management. Also, it will decrease the accounts payable because of less purchase from others and reduce the liability pressure. Thirdly, with its own production line, Stryker’s manager and engineers will be more familiar with the products. Therefore, the after-sell service will be improved. This is a good method to improve reputation by retaining customers with satisfactory services. Finally, since the facility may also be offered to other businesses of the company, it will reduce transportation cost for other divisions. Last but not least, this option can make it easier to expand the scale of the company. As the scale expands, the cost will be reduced. Thus, Stryker will make more profit because of its lower cost than other competitors.
However, option #3 also has some risks. First of all, it requires a huge amount of capital investment with uncertain return. The return in the future may not be able to cover the