Company Introduction? The reason behind choosing to analyze Elekta is that I am very interested in the medical industry and I am determined to keep developing my competence. Elekta AB develops products in the area of Radiotherapy, Neurosurgery, Brachytherapy and Stereotactic Radiosurgery. Radiotherapy field provides treatment planning, delivery and solution. (Products and Solutions, 2017). Elekta is listed on Nasdaq Stockholm and has 26258 shareholders, 56% of whom are from Sweden. The largest shareholder is Lourent Leksell with 30,6% of the votes.
Elekta sells products on all continents, their biggest market today is USA and China after. Market share regarding linear accelerator orders is an important one, this is the business Elekta gets the highest revenue from and faces hard competition. Linear accelerator orders contain 43% in Asia, 20% America and 55% Europe/Africa out of all orders in the industry of linear accelerators during year 17/18.
Today Elekta’s solutions are present in 6000 different hospitals around the world, delivering treatment to 1.4 million people every year. (Elekta, 2017)Brief history of the company Current State Analysis ? Products/services Elekta’s products will be analysed to see how they were positioned in 2012, now in 2017 and plan to reposition product in 3 years from now 2020. Products will be analysed in categories. Radiotherapy -1, Brachytherapy – 2, Stereotactic Radiosurgery – 3 and Neurosurgery – 4. It is possible to buy different versions in different categories.
Service will always be in demand if the product that they have installed do not get replaced with competitor one.(Elekta Employee, 2017). The services Elekta is offering are updating the software of machinery, educating about product usage, different packages with different levels of service. (Elekta Care Service agreement, 2017). ? Growth patterns During the years Elekta has been growing a lot. Elekta has expanded by acquiring companies, getting a bigger share of the market and minimizing vulnerability. From having a few products to expanding product catalog, becoming more stable and securing themselves, in the case of some products growing weaker. (Elekta Employee, 2017) The company grew rapidly until 2013.
But from 2014 the growth is getting lower and 2017 it even goes down (Elekta AB (publ), 2017). Elekta claims that the reason behind it is flattened out demand (Elekta Employee, 2017). This might be true, but a big change that happened during 2015 could factor in as well.
Elekta started transformation program, the earlier focus was only on expanding (Elekta, 2017). One of the reasons for losing market share could be revolutionary change transformation, when Elekta lost a lot of employees. (Elekta Employee, 2017) And by losing employee you lose knowledge. But if we compare with competitors, Varian, growth has been going worse Figure 1.1. So most likely something has happened that period in the market. One reason could be the fact that biggest markets have been North America and Europe and many hospital there already own those products (Elekta, 2017). So unless you have an update, you can not sell again to the same place.
See figure 1.1 down here for the financial revenue and margin for Elekta and figure 1.2 for Varian. Varian had high margin but lost revenue. Elekta did not lose that much of the revenue but had less margin. But at the last fiscal year Elekta has lost revenue comparing to Varian. ? Generic and development strategies Strategic mission and vision according to (Wit, 2017) will be analysed.
To be able to find out what Elekta Generic and development strategies is. Organizational Purpose Help Clinicians improve patients’ lives.Through what we do and how we work with our customer, we empower those who strive for the best outcomes for their patients, improving quality of life during and after treatment. (Purpose and values, 2017)Organizational Values, Elekta values a) We work as one team, they work collaboratively and together, only this way things can be done for customers and patients. b) We do what we say, they act with accountability and integrity, taking personal and collective responsibility to make right things happening. c) We keep thinking forward, things can always be improved: their innovative spirit and resourcefulness keep them ahead of the game. (Elekta, 2017)Organizational Beliefs. Fight cancer, with safe and effective products.
Focus on business ethics and counteracting corruption. Sustainable purchase with the environment in mind. Human rights and diversity. (Elekta, 2017)Business Definition. A leading innovator in medicine technique, in radiation therapy. Eleka works with different private and public hospitals to cure and help patients. (Elekta, 2017)This is Elekas core and mission to future success.
By investigating more, we can look through the strategic vision to get a better understanding of Elekta’s strategy as a company. To understand envisioned contextual environment PEST will be analysed. Elekta is going to deal with new law, GDPR (GDPR Portal: Site Overview, 2017). Elekta’s cobalt comes from USA (Elekta Employee, 2017). USA products are not allowed to go to countries like Iran, Syria, and etc (Saez, 2017). But cobalt can be bought in other regions.
(Phady, 2017). Another issue is that tungsten is mined in Congo. (Campbell-Dollaghan, 2013) Elekta makes sure that no minerals come from conflict areas. Elekta is very strict against corruption and have policies on how to act against it.(Elekta Employee, 2017) But at the same time they are trading and selling to countries that have problems with corruption, this could cause problems. (Elekta, 2017 and Corruption Perceptions index, 2016).
Elekta has big factory in England and with Brexit officially happening, it is unknown what is going to happen with it. (Brexit negotiations, 2017). Economical factors. Elekta’s EBIT went down during 2014 and kept going down during the last year.
You could see that the economic environment had changed and market did not grow as rapidly as before, it started to flatten out. (Elekta AB (publ), 2017).Social factors, population growths and factors that cause cancer too, that in combination leads to bigger amount of people with cancer.
This adds to Elekta’s good future prospects, with more possibilities and a higher customer demand. (Elekta, 2017) When coming to technology factors competitors have better features. For example, Elekta sold products to Karolinska and they send it back because Elekta’s sales team over-promised, their technology was not the most competitive. (Froste, 2017)Envisioned Industry environment. Five factors will be analysed. Industry competitor, the biggest one is, Varian, competitor to the main product, the market share is equal.
(Elekta, 2017).Depending on a product, suppliers can have high or low bargaining power. (Elekta Employee, 2017). But for Elekta, it is very difficult to change supplier due to government regulation (Medical Devices, 2017). That gives the supplier better bargaining power.New Entrance, is a low threat.
It is very expensive to build medical products and it is very hard to reach economy of scale.Buyer’s power is low and there is almost no alternative, except for the two giant Varian and Elekta. (Elekta, 2017) Substitutes, the tumor can be still operated in some cases, so fiscal operations, ultrasound could possibly replace cancer tumors (Elekta Employee, 2017). Products can be replaced with immunotherapy in the future (Cancer Immunotherapy, 2017).Desired future organizational position.
Elekta’s desire is to be the industry leader, to achieve this they established new cooperation with Philips, that has better MR to create their product unity (Elekta, 2017) There are also strategic partnerships with different hospitals and universities, like Texas MD Anderson Cancer Center that is working on a development project with Philips and Elekta (Elekta and Philips begin installation of MR-guided linear accelerator at The Netherlands Cancer Institute, 2017).So Elekta’s Vision is to be the leading innovator in the radiation therapy industry(Elekta, 2017) SynergiesFrom strategy and developing point, Elekta started transformation program in 2015 called Elekta 2020. This transformation program is a part of the process of creating more synergy effects inside of the company, to become a more global organization (Elekta Employee, 2017).
Synergy by leveraging resources. When resources are needed in the project, they are taken from other business units to be able to prioritize the most strategic project. For example request help from other business units to finish the Unity project. (Elekta employee, 2017). Synergy by aligning positions, the more Elekta works globally, the more bargaining power it has. Procurement team was also expanded to achieve bigger synergy effect. (Elekta employee, 2017)Synergy by integrating value chain activities.
Elekta combining the logistic, warehousing, increasing bargaining power between business units, to use all combined knowledge to its advantage. (Elekta Employee, 2017) ? Marketing strategy Outside-in or inside-outElekta is an outside-in driven company without the expertise from their customer and near collaboration, Elekta could not be as successful as it is. Statements that are close to Elekta are highlighted in green, not close ones are red. Sometimes companies have to balance two option and those cases are marked yellow.Outside-inInside-out1.All decisions start with the market and opportunities for advantageWe will sell to whoever will buy2.Profits are gained through a superior value proposition and leveraging the brand and customer assetsProfits are gained through cost cutting and efficiency improvements. Six sigma, TQM and replicability of processes take priority3.
Customer knowledge is a valuable asset and channels are value-adding partners.Customer data are a control mechanism and channels are conduits4.We know more than our competitorsIf competitors do it, it must be good5.No sacred cows- cannibalize yourselfProtect the cash flow stream6.
Customers buy the expectation of benefitsCustomers buy performance features7.Superior quality is defined by customers as “fitness for use”Quality is conformance to internal standards8.The best ideas come from living with customerCustomer do not know what they want and they can not tell you if they are asked9.Customer loyalty is a key to profitabilityExpanding the customer base is what that mattersAll decisions start with the market. To come up with innovative products Elekta collaborates with institutes and hospitals. (Elekta Employee, 2017). It is important to keep developing high quality products for Elekta to keep high revenue and competitive status, else competitors might take market shares.
The reason 2014 year have resulted in lower revenue were they have aimed a lot of focus on reducing cost and work more with six sigma etc. (Elekta Employee, 2017) Today both options are very important for Elekta.With no input from customer Elekta will work in blind.(Elekta Employee, 2017).Elekta does not replicate their competitors they always try to make better product (Elekta Employee, 2017).Elekta focuses on cash flow. It is a very important KPI that was under control during recent years.(Elekta employe, 2017)Customer buys performance features, it is all about the technology behind it.
(Elekta Employee, 2017)Customer defines quality for Elekta. But there is also internal quality control team. The customer fitness for use is the most important, but internal definitions and controls also play a role. (Elekta Employee, 2017) This approach influenced Elekta from the start, founder Lars Leksell was working in hospital when he invented machines and products, so collaborating with customer has long history. (Elekta Employee, 2017)Both parts are very important for Elekta.
Existing customers can not be lost to competitors, it will result in market share lost and the competition is high. At the same time taking new market share is crucial. This will establish if the company becomes a leader and big it will grow. (Elekta Employee, 2017)After analysing those points, we can tell that Elekta is an outside-in organization with influences of inside-out.? Situation audit (SWOT), including financial performance SWOT Analysis and solution, W1+S1+O3= To improve the EBIT, there is a strong procurement team, possibility to implement savings opportunities.
W2+S1+O1= Unity is delayed but Elekta has the possibility to redirect resources from different business units to help speed up the process. They have good relationship with the suppliers that will be a benefit for project success. W3+S5+S6= Elekta over promised to Karolinska that resulted in order cancellation and return. Elekta learned a lesson, focus on not overpromising and develop better technology for Unity.T1+O2+S6= Varian has better technology now, but with Unity, Elekta tries to make it a thing of the past.T2+O3= Some countries forbid to use products from the USA. Cobalt comes from the USA originally, that results in need form second source.
T3+S4+S1+O1= The tungsten price is raising and it is mainly mined in Congo. Elekta has invested in their sustainability team to make sure that minerals are coming from approved countries. Procurement is strong as well as the relationships with the suppliers, that gives opportunity to secure minerals delivery, but with the costs of not being able to negotiate the price.
T5= Brexit is a threat for Elekta because it is unclear, how it is going to interfere.T6+S3= This could be both as an issue(Threats and weakens) or benefit depends on how you look at it. Elekta does business in highly corrupt countries, but corruption policy helps to secure the right process.Identifying key strategic problems,Elekta has started to lose market share in China which is an important market that grows fast. Varians and its better technology might one reason and the fact that Elekta sees the USA as the most important market. Elekta has no clear strategy how to fix this, but possible solution might be Unity product, that is technologically superior, but slightly expensive for markets like China. Another solution is to focus on expanding in China.
Elekta is doing business in highly corrupt countries and has a strict policy against any bribes. So it is difficult to succeed under those circumstances. The solution could be to stop any business there. Another solution is to be more strict and make sure everything is transparent. Conclusion and recommendation, Results of Elekta analysis shows that it is a good company that is heading the right direction in many ways.
At the same time Elekta has thought through their mission and vision. I would recommend them to extend their sales team in the Asian region to be more aggressive and secure market share. The Chinese market is growing rapidly in all areas and China is becoming more wealthier. They will be able to afford more expensive products. New technology will be enough in the cases when hospitals only look for the best product.
But for developing countries that might have a budget, Unity might not be an option, so further growth will demand stronger sales team and cost cut.Closing business in highly corrupt countries does not seem like an option for Elekta. So the recommendation would be to make sure that there are no bribes involved in sales and the processes around the sale. Transparency from the customer is a must. Today the company has a big responsibility to make everything goes in the right way through whole chain.
7. SME in the same sector for comparison in Leading and Managing SMEs. C-Rad description.C-Rad is working with cutting-edge solutions ensure exceptionally high precision, safety and efficiency in advance radiation therapy. C-rad has around 40 employee which make them a small cap company. The reason for choosing C-rad is because they are an interesting company that I have followed since 2014 back and forward. At the same time, they are working with Elekta in many cases to provide hospital with products and services.
C-rad can see as a for some smaller products as a competitor as much as mutual friend to create benefits together and reach more customer.