240215 RoboTech Case Writeup

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Brigham Young University *

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580

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Medicine

Date

Apr 3, 2024

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docx

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Uploaded by EarlResolveMouse7185

1) With the information available to Chen in 2009, was her decision to invest $45 million to diversify RoboTech into medical robotics appropriate? Why or why not? According to the case, it seems that Chen’s hand was relatively forced – she needed to find a way to expand the business offering into another industry. Other industry incumbents had caught up to the company's technology offering and needed to find a way to lock in profitable contracts again. Does she need to invest in business expansion? Absolutely. Is investing $45 into medical robotics the right move? No. Her semiconductor company catered to the aircraft welding industry. Her company was a semiconductor company. This money would have been better spent on R & D for semiconductors, not a complete pivot into medical devices, especially to enter the U.S. market. Chen would have seen a much higher return if she had invested R & D capital into a market in which she had experience, especially in light of the competitors already in the space, U.S. regulations, and the speed at which technology evolves. 2) How would you evaluate the company's first three years in the US medical device market? What do you think it has done most effectively? Where has it fallen short? RoboTech’s first three years in the US medical device market were effective. The company increased sales by 418% from 2014 to 2016, and it was able to not only maintain but also slightly increase its gross profit margin. Additionally, the company was able to lock in a significant profit in 2015 & 2016. The company effectively met sales goals and reached target sales figures during the first three years of operations. The company used limited resources to build a strong sales team, involve PR, and establish training facilities to work with surgeons. Additionally, the company increased production capacity to meet the sales generated by O’Hanlon’s team. The company needed more foresight regarding healthcare regulations in the United States for the changing external environment. The company was also required to respond to customer demand and orders faster, and the company started to fall behind on order commitments. Additionally, the company waitlisted surgeons to use the training facility, further damaging their reputation. 3) What should Chen do now? How should the company move forward into 2017 and beyond? Which, if any, of the proposed capital investments should it make? Chen should consider the buy-out offers that were previously pitched to the company. The company is already behind the innovation curve compared to Mazor Robotics/Medtronic and Smith & Nephew. Both of these companies have more of a leg-up in terms of technology. By the time Robotech can invest the $85M for additional R&D for the 3rd generation combined machine, Zimmer will be ahead of Robotech by leaps and bounds in the industry. If Chen doesn’t see a buyout as the right fit, I suggest investing the $18M to kick the can down the road.

RoboTech needs to take care of its shareholders – additional R&D investments don’t look like they will yield returns.

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