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Unraveling the Nuances of Stryker’s Orthopedics Segment

By Sarah Collins

An overview of Stryker’s Othopedics segment

Stryker Corporation’s (SYK) Orthopedics segment contributes around 43% to the total revenues of the company and is the company’s largest segment. It was referred to as the Reconstruction segment before 2014, after which time the segment structure remained largely unchanged after it was renamed to Orthopedics. Stryker’s Orthopedics segment reported an increase of 5.2% in net sales in 2014. This growth was driven primarily by acquisitions and the increased product portfolio of its Trauma and Extremities division.

Key growth drivers of Stryker’s Orthopedics segment

Stryker’s Orthopedics segment of Stryker has a strong market presence in the United States but has significant growth opportunities in Europe and emerging markets. Also, the acquisition of MAKO, the company that developed robotic-arm assisted surgery technology, provides an opportunity to leverage the price benefits of the technology and thus improve margins.

The major factors driving the future growth of Stryker’s Orthopedics segment will be the adoption of robotic-assisted surgery, geographic expansion in Europe driven by the implementation of the Trans-Atlantic operating model, and the entry into emerging markets through Trauson’s mid-tier product segment.

Stryker’s Orthopedics segment competes in a sticky market because hospitals and surgeons do not shift to different brands due to significant switching costs. Significant differences among instruments of different brands require training and efforts to develop relationships with the new sales representatives. Thus, surgeons and hospitals prefer sticking to the same brand for years. This provides a competitive advantage to Stryker, which has a strong market position in the orthopedics market, and should drive the business growth.


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