Medtronic’s geographic strategy
Medtronic’s (MDT) growth is driven by three of the company’s core strategies—therapy innovation, globalization, and economic value. The company continues to be committed to expanding its business across geographies and exploring new business models to generate new growth opportunities and diversify its business. The US is the largest market for Medtronic. It accounts for 57% of the company’s total revenue. Emerging market and non-US developed markets account for 30% and 13%, respectively, of the company’s market share.
Emerging market opportunities
Emerging markets is Medtronic’s fastest growing geographical segment. In fiscal 3Q16, emerging markets witnessed ~14% growth. It accounted for ~1.9% of the company’s total revenue growth. Despitethe challenging economic conditions in emerging markets, Medtronic saw consistent double-digit growth from emerging markets over the years. Currently, these markets present ~$5 billion in annual business opportunity.
Strategic initiatives to boost emerging market business
Medtronic aims to capture untapped business opportunities in emerging markets through channel optimization as well as public and private partnerships. Channel optimization initiatives will help accelerate its growth through direct relationships and optimized operations. It presents an opportunity of ~$1.8 billion over the next five years. Medtronic is focusing on China and India for various public and private partnerships. Medtronic entered into a partnership with the Chengdu government in Sichuan Province to manufacture portable hemodialysis equipment. In China, the company grew 14% in fiscal 3Q16. Its growth was driven by strong sales and increased presence across segments. The company grew 19% in the Middle East and Africa. This shows the immense growth potential in these markets.
Emerging markets are being tapped by a number of major players in the medical device industry due to the immense growth potential in these markets. Some of Medtronic’s peers expanding across emerging markets include Abbott Laboratories (ABT), Johnson & Johnson (JNJ), and Becton Dickinson (BDX). For diversified exposure to Medtronic, investors can invest in the Guggenheim S&P 500 Top 50 ETF (XLG). It has an exposure of ~1.3% to the company.