Respironics Inc.: Expanding Success BUS470, Business Policy & Strategy Submitted to: Dr. Desmarais December 11, 2010 Vanessa D’Angelo Minushe Mustafaraj Paul Atkinson Jessica Purington Cristina Coppola Rose BarryTABLE OF CONTENTS Executive Summary Macro-Environment Industry Analysis I. Industry Drives II. Five Forces III. Changes to the Industry Structure & Competitive Environment IV. Existing Rivals competitive capabilities Critical Issues the Industry faces Respironics Inc., Competitive Capabilities I. Business Strategy II. Functional area strategies III. Assessment of Respironics Inc.’s Strategic Performance IV. Resources V. Value Chain VI. Assessment of Respironics Inc.’s Financial Performance & Capabilities VII. Strategic Issues Respironics Inc. Faces VIII. Management’s Values IX. Organizational Culture Appendices A. SWOT Matrix B. Stakeholder Matrix C. Financial Ratios D. Financial Trend Graphs E. Budgets & Schedules associated with recommendations F. Responses to questions asked during presentationExecutive Summary Our consulting team completed an analysis of the company: focusing on opportunities and threats, Respironics competitive capabilities, strengths and weaknesses. The analysis has led us to suggest the following recommendations. Each recommendation is followed by supporting persuasive logic regarding the current strategic issues and the steps to expand the overall success of the company. The following recommendations contain the tools needed to take immediate action. We recommend Respironics: 1. Meet with Philips regarding the merger. Depending on the offer given by Philips, Respironics will either accept or decline. After analyzing Respironics’ financial statements, we believe it will be in the best interest of shareholders if the offer meets or exceeds $5 Billion. If Philips does not meet or exceed the figure given, we believe Respironics will prosper as an independent company. Respironics has strengths to defend against competitors. Respironics has $260 Million in cash and marketable securities on hand to pursue new market opportunities, the company also purchases from multiple suppliers. There are opportunities for new industry possibilities as an independent company. 2. Lobby for change against existing Medicare guidelines. Current Medicare guidelines are a threat to Respironics’ sales opportunities in the U.S. Respironics has the capital available to fight this threat by increasing awareness and lobbing for change. We believe the Stardust will sell successfully in the U.S., as it has in France if Medicare reimbursement policies change. Respironics will increase awareness by running commercials on daytime television, educating residents and asking them to petition their political representatives. The commercials will educate individuals on the reimbursement guidelines that are restricting a market for the Stardust in the U.S. and would also describe how the Stardust would result in faster diagnosis and treatment of sleep apnea sufferers. Changing Medicare guidelines will dramatically increase Respironics domestic sales. 3. Pursue international market potential. After the analysis of Respironics strengths and weaknesses, the first implementation step is to align the current sales strategy with the overall business strategy. By opening up more sleep clinics internationally Respironics can retrieve more research on sleep disorders developing internationally, and with the research the research and development (R&D) department can continually introduce new and marketable products toattract new potential customers. Respironics has a broad knowledge of sleep disorders and can start to further educate other countries. In a year’s time Respironics can control 18% more market share raising control to 50% and by end of year 5 control the international market share. 4. Pursue the opportunity of an increased number of individuals with sleeping disorders by utilizing face to face selling. There is a high demand for reliable and portable breathing devices, created by the aging population. We believe Respironics should pursue this opportunity by utilizing face to face selling. In face to face selling sales representatives will add value to customers by highlighting the benefits of Respironics product line. Sales representatives will target this age demographic by visiting retirement communities, hospitals, distribution facilities and sleep clinics. Representatives will hold seminars geared towards educating individuals on the benefits of Respironics breathing devices. The seminars will leave time for representative to talk to individuals one on one to see how Respironics can meet the needs of this demographic. 5. Implement of strong internal and external quality control measures. Product liability suits are a threat to Respironics. Implementing extensive training to all employees in every department will aid in Respironics’ defense against this threat. External measures call for a switch from Demand Flow Technology (DFT) to the 6 Sigma manufacturing. While DFT is working, Senior Consulting strongly believes that this set of quality control and manufacturing management would greatly improve the measures needed to advance in the industry as a top competitor. 6 Sigma follows a strict zero-defect guideline which greatly improves quality and reducing the process variation of production. These changes would provide overall improvements in credibility. 6. Research potential acquisitions to expand their product line. Respironics has capital available to pursue this opportunity and potentially buyout other companies in order to expand and grow. The key is finding a company with the best strategic and financial fit for Respironics. Finding the best strategic fit includes looking at the potential acquisition’s industry and product. Followed by, analyzing the company’s culture and values. Respironics should identify with the potential acquisitions corporate values. When looking for potential acquisitions Respironics should seek companies, who focus on the success and needs of customers, recruit and retain the best employees, empower workers to make decisions and assure social responsibility. The desired outcome is to find a company with expertise in product development in order to add more product lines through potential acquisitions.Macro-Environment In 2006, we saw