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Discussing Stryker’s Expansion and Growth in Emerging Markets

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Stryker’s geographical profile

Stryker (SYK) registered ~$2.8 billion in revenue in 2Q16. Around 72% of its total revenue was generated by its US business, and the remainder came from international sales.

Emerging markets contribute ~7% to Stryker’s total sales. Emerging markets haven’t been performing well for a few quarters now due to tough comps. In 1Q16, emerging market sales witnessed a high single-digit fall, and they saw a similar performance in 2Q16.

In comparison, Stryker’s peers Medtronic (MDT), Abbott Laboratories (ABT), and Smith & Nephew (SNN) generated ~13%, ~50%, and ~15.5% of their total sales from emerging markets, respectively.

Investors interested in gaining exposure to Stryker can invest in the iShares Russell Top 200 Growth ETF (IWY), which holds ~0.49% of its total holdings in SYK.

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Stryker’s emerging market potential and growth initiatives

Stryker has established emerging markets as its long-term priority. The contribution of emerging market sales to the company’s total sales is only around 7% and presents significant growth potential. Stryker plans to approach these markets through its premium segment offerings as well as through low-cost offerings, including a product portfolio of disposables and consumables.

Stryker plans to increase its market share in the emerging markets segment of the medical devices market through more product launches and investments. It sees the huge market base of low-cost products as an under-tapped market. The company aims to expand through acquisitions and localized product launches. The company’s acquisition of Turkey’s Muka, a company that manufactures low-cost hospital beds, is one example

SYK aims to launch its products in other emerging markets soon. The company is also focused on establishing commercial models, a sales force, and the leadership suitable to expand in these markets, taking into consideration their different market dynamics.

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